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A New Blueprint – Making the American South’s Manufacturing Sector More
Competit ive by 2030
FoundationfortheAmericanSouth
September2016
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Table of Contents
OVERVIEW 3
MANUFACTURING IN THE AMERICAN SOUTH – TODAY 7
MANUFACTURING IN THE AMERICAN SOUTH – INTO THE FUTURE 12
§ Begin with A Policy Focus on Competitiveness 13 § Use Cluster Practices as the Organizing Principle 14 § Understand, Anticipate and Embrace Change 17 § Ensure a Competitive Business Climate 19 § Enhance Workforce Skills 19 § Promote Innovation 25 § Invest in Infrastructure 28 § Collaborate to Compete 29
COMPETITIVENESS AND RECOMMENDATIONS FOR THE FUTURE 30
Researched and written by Ted Abernathy - Economic Leadership LLC, Raleigh, North Carolina
Contributors to this document include:
Diane Duff, Former Executive Director - Southern Governors Association
Michael Galiazzo, President - Regional Manufacturing Institute of Maryland
Ray McCarty, President & CEO – Associated Industries of Missouri
Rebecca R. McPhail, President - West Virginia Manufacturers Association
Brett A. Vassey, President & CEO - Virginia Manufacturers Association
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OVERVIEW Inthe1950smanyoftoday’sbabyboomerswatchedtheirparentsandgrandparentsgetupeachdayandgotoworkinfactories,makingthethingsthatbuiltprosperityandsupportedfamilies.IntheAmericanSouth,textilemillsandfurniturefactoriesfueledcommunitygrowthandprovidedthewagesandthewealththatboughthomesandsentmillionsinthenextgenerationtocollege.Today,weliveintimesofrapidchange.Lookingbackisnostalgicbutbylookingforwardcanstrengthenourfuture.
ManufacturingisimportanttoAmerica.Italwayshasbeen.ManufacturingisevenmoreimportanttomanyofthestatesintheAmericanSouth.Thesearecommonlyheldbeliefs,butglobalizationandrapidtechnologicaltransformationhascreatednewheadwindsforpolicymakersandelectedofficialsastheytrytosupportfuturemanufacturing.Overthepasthalfcentury,asservice-sectorjobshavegrown,manufacturingemploymenthasdeclinedandtraditionalindustrieshavebeenreplacedwithnewadvancedindustryclusters.Remaininggloballycompetitivedemandsrelentlessanalysisandnewthinking.
By2030,atypicalmanufacturingenterprisewillhavemorehighlyskilledworkers,moresophisticatedautomation,requiremoreadvancedinfrastructure,anddependonnewinnovationsandnewglobalmarketstosucceed.Thingsthatarenotyetconceivedofwillbeproducedinplacesthatcannotcurrentlycompete.Someplaceswillemergeasthebestdestinationformanufacturingandotherplaceswillseemanufacturingjobsdisappear. Thequestioniswhatcanourpolicymakersdotoimprovetheregion’slong-termmanufacturingcompetitiveness.
InSeptember2013,theFoundationfortheAmericanSouthattheSouthernGovernorsAssociation(SGA)beganexploringpossibilitiesfordevelopingaregionalmanufacturingstrategy.SGAhadundertakenavarietyofmanufacturingprojects,whichwerealreadycontributingtotheideathatsucharegionalstrategywouldbevaluabletosupportand
“Americanmanufacturing
wasthebedrockofa
centuryofAmerican
prosperityandsecurity.”
Make:AnAmericanManufacturingMovementTheCouncilonCompetitivenessandtheU.S.ManufacturingCompetitivenessInitiative,
2011
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acceleratethegrowthofthisimportantsector.TheprojectwassupportedwithagrantfromtheU.S.EconomicDevelopmentAdministration.
Theprojectfocusedondatacollectionandanalysis,andcollaboration,andincluded:
§ Creatingadiscussionandcollaborationgroupoftheregion’smanufacturingleaderstoidentifyprioritiesandconcerns;
§ AdeepdatadiveassessingmanufacturingintheAmericanSouth;§ ThereleaseandpromotionofInnovationU2.0,acompilationofuniversitybest
practicesforinstigatingtechnologicalinnovation,entrepreneurshipandbusinesspartnerships;
§ AnInnovationU2.0conferencetoreleasethefindings,followedbyanissueforumontheroleofhighereducationaspartofSGA’s2014annualmeetinginLittleRock,Arkansas;
§ DevelopmentofinformationdemonstratingtheimportanceofR&Dtothecontinuedsuccessofmanufacturingsub-sectors;particularlysmallandmediumsizedbusinesses;
§ Developmentofa“SouthernRegionalManufacturingIndex”toaggregatecomplexdataandallowmulti-factorcompetitiveanalysisbyindividualstateleaders;and
§ Aliteraturereviewtoinformthedevelopmentofasetofbestpracticerecommendationsinkeyareastoimprovemanufacturingcompetitiveness.
TheSouthernGovernors’2013AnnualReport,AdvancedManufacturingintheAmericanSouth,statesthat,“Thestartingpointforanaccelerationofadvancedmanufacturingdevelopmentshouldbeastrategicplanthatplacesadvancedmanufacturingwithinthestate’sbroadercontextofeconomicdevelopment.Regionalism,high-levelpolicycoordinationacrosseconomicdevelopmentfacilitatorsandtheaccountabilityinresourceuseareamongtheimportantprinciplesthatshouldguidepolicy.”Thistraditional,Governor-ledapproachcanstillbeaneffectivewaytostrengthenmanufacturing,butduringthecourseofthiseffort,basedonconversationswithGovernors,policyadvisors,sectororganizationleaders,andbusinesses,itbecameclearthatadifferentmethodmighthavebroaderimpact.
Multi-stateregionalcollaborationtodayischallenging,andnewapproachesareneeded.OrganizationsliketheSouthernGovernorsAssociationandtheSouthernGrowthPoliciesBoardthatoncecreatedtheopportunityforregularnonpartisandialogue,asharedvisionfortheregionanda“go-to”placeforbestpracticesarenolongerinoperation.PolicydeliberationsarenotjustheldinGovernors’officesorthecommitteeroomsoflegislatures,buthappentodayinachangingidealandscape.Policythink-tanks,businessgroupsandprivatelyfundedfoundationsareallmoreactiveandsophisticatedatcontributingideasandwheedlinginfluence.
Manyemergingeconomicdevelopmentideasbeginatthemetropolitanorregional(multi-county)level,oftencrossingstatelines.Somewheretodayagroupofpeopleororganizationsiscreatinganewapproachtoanemergingissue.Thismodelisneithertop-down,norisit
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traditionalgrassroots,butratheranetworkedapproachofthinkersanddoersacrosssectorsthatareseizingtheopportunitytocollaborateandaddressaneed.
Todaythealmostinstantaneousdemocratizationofideasandinformationthroughgovernmenttransparency,socialmediaandelectronicpublicationsallowsmorepeopleandinstitutionstoengageinboththedeliberationofpolicy,andtheimplementationofconcepts.Bestpracticescanbeeasilydisseminatedand,ifdeemedworthy,scaledbythepublicorprivatesector.PolicyDarwinismquicklyweedsouttheconceptsthatunderperform.Partnershipsbetweengovernments,nonprofitsandbusinessescanemergequicklyandorganically.Thefuelforfuturecollaborationsislessaboutinstitutionsandepisodicopportunitiesandmoreaboutideas,content,connectivity,action,andaboveall,results.
Justasmanyreportsrecognizethatmanufacturinghaschanged,somustourstrategicapproachtopolicy.Aregionalmanufacturingstrategyisnotjustareportordocumentwithalistofspecificactionsthateachstategovernmentshouldimplementordictatetoothers.Itmustcontainwell-reasonedideasthatcanbeeasilyadaptedandscaledtothespecificneedsofstatesandcommunitiesacrosstheSouth.Oldhierarchical,staticorsiloedapproachesarebeingsupplantedbynetworked,dynamicanddigitizeddesigns.
Withthesechangesinmind,andthemultitudeofexistingresearchaboutbestpracticestoencouragemanufacturing,thisdocumentisaninformationframeworkorblueprinttoenableefficientcollaborationandimmediateaction.Itraisesideasandexploreswaystomeasurecompetitiveness.Anewblueprintiscraftedbyaggregatingtheresearchandtherecommendationsfrommanyrecentreports
Thefoundationforthisreport’spolicyrecommendationsbeginsandbuildsfromtheSGA’sAdvancedManufacturingintheAmericanSouthreport.AlthoughoriginallytargetedtoGovernors,therecommendationsresonatewithabroadrangeofpolicyactivists.TheresearchyieldedthefollowingStatepolicyprinciples:
§ UtilizeStrategicPlanningtoproperlyallocateresourcesandcoordinateactions.Requiremeasurablegoalsandahigh-levelpolicychampiontohelpsecureresults.Clustersshouldbeidentifiedandincludedasacorecomponentofthestrategicplan.
§ FocusonRegionalismandRegion-BasedEconomicGrowth.Clustersincludefirmsandemployeesthatcrossthetraditionalboundariesofcities,countiesandstates.Regionsareoftenstrongerthantheircomponentjurisdictionsandincludeawidearrayofstakeholderswhocanbenefitfromacommonefforttopromoteindustrialdevelopment.
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§ EmbracePolicyCoordinationtofacilitatehorizontalandverticalstructuresingovernment.Well-definedpolicycoordinationinturnsupportspolicyaccountability.
§ EncourageAccountabilitywithquantifiablemetrics.§ PursuePartnershipsandCollaborationengagingmultiplepublicandprivate
organizationsandindividuals.§ EncourageCompetitiontogainresourceefficiency.§ PromoteValue-Added,NotSimplyLowCosts.Focusonthebuildingofincomeand
wealthforresidents.Thekeystopromotingvalue-addedaretoinvestinproductivity-enhancingassets,includingworkersandinfrastructure,andtorecruitfirmsthatofferthepromiseofhighearnings,highlevelsofcapitalinvestment,andanactiveR&Dagenda.
§ BuildonExistingStrengthstoseebetterandfasterresults.§ SupportAutonomyandDecentralizationtocustomizetheeffortstomeetlocalmarket
demandsandneeds.§ EnsureaCultureofAdaptabilityandFlexibilitytopositionforinevitableandrapid
change.
ParticipantsinthisSGAprojectconcludedthattargetedindustrialrecruitment,acluster-basedfocusonpublicinfrastructure,technologyresearchanddevelopment,incentives,entrepreneurship,andeducationandhumancapital“offerthegreatestpromiseofgrowthinadvancedmanufacturing.”
SGAemphasizedcontinuousmeasurement,regionalism,andafocusonvalue-added.Italsoraisedtheneedtobeflexibleandquicklyadaptable.
Basedonthesepreviousfindings,andthoseofmanyotherstudies,thisreviewfocusesonandoffersrecommendationsforimprovingmanufacturingcompetitivenessinabroadsense,withspecificemphasisonbusinessclimate,workforce,
innovation,andinfrastructure.Whiletherearemanyotherimportantfactors,thesearecommontoalmostallbest-thinkingliteraturetoday,andreflecttheinputfromthemanufacturinggroupsthathavecontributedthroughoutthisprocess.
ThesefourfocusareasalsoreflectthosethatmanyprivatesectorChambersofCommerceandassociationshaveincludedintheirstrategiccompetitivenessplansinrecentyears.Asanexample,theNorthCarolinaChamber’sVision2030includesfourpillars:Education&Talent
ManufacturingCompebbveness
Workforce
Infrastructure
BusinessClimate
Innovabon
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Supply,CompetitiveBusinessClimate,Infrastructure&GrowthLeadership,andEntrepreneurship&Innovation.Aligningthepublicandprivatestrategiceffortsisacommonwaytoaccelerateactivityandmaximizeresults.Increasedbusinessengagementtodevelopandimplementpolicyisstronglyrecommended.
MANUFACTURING IN THE AMERICAN SOUTH - TODAY Despiteacontinuousbarrageofeditorialsandarticlesbemoaningthedeathofmanufacturing,theUnitedStatesremainsoneofthemostcompetitivecountriesforgoodsproduction.Inits2016study,GlobalManufacturingCompetitiveIndex,Deloitte ToucheTohmatsuLimitedandtheU.S.CouncilonCompetitivenessconcludedthattheUnitedStates,ChinaandGermanycontinuetobethetopcountriesintheworldformanufacturingandwillremainsointhecomingyears.ThestudypredictsthattheUnitedStates,currentlyrankedsecond,willretakethetopspotby2020.
Thechartbelowshowsthosefactorsthatdriveourcountry’scompetitivenessandthefactorsthatwereusedtomeasuretheUnitedStatesagainstothercountries.Basedonthereport’sCEOSurvey,ourstrengthsareinnovationpolicyandinfrastructure,physicalinfrastructure,talentandthelegalandregulatoryenvironment.Ourweakestareawasincostcompetitiveness.
GlobalCEOSurvey:DriversofGlobalManufacturingCompetitiveness
Source:DeloitteToucheTohmatsuLimitedandU.S.CouncilonCompetitiveness,2016GlobalManufacturingCompetitivenessIndex
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Concernaboutthefutureofmanufacturingdatesbackseveraldecades.Almost30yearsago,StephenCohenandJohnZysman,intheirbook,ManufacturingMatters,discussedwhattheynamedthemythofthepost-industrialeconomy.Theywroteaboutthevalueofmanufacturingtoaneconomy,evenasthateconomywitnessedchange,andconcluded,“Thetransitionweareexperiencingisnotoutofindustryintoservice,butfromonekindofindustrialsocietytoanother.”Theyalsobelievedthatpublicpolicywouldplayamajorroleinourabilitytocompeteagainstothercountries.
Itdoesnottakeacrystalballtoknowthatthemanufacturingsectorwillcontinuetoexperiencerapidchange.Today,asbooksandreportsannouncethecomingofIndustry4.0,newconcerniswidespread.ThefuturefateofAmericanmanufacturingisacommondiscussioninbusinessboardroomsandatpoliticalevents.InTheIndustriesoftheFuture,AlexRossconcludes,“innovationandglobalizationhavecreatedopportunitythelikesofwhichhaveneverbeforeexisted”.Anotherofthispastyear’smosttalked-aboutbooks,MartinFord’sRiseoftheRobots,hasasubtitlethatcapturestheothersideofthediscussion,“TechnologyandtheThreatofaJoblessFuture.”
Muchofthepublicpolicyangsthasignoredmanufacturingoutputnumbers.Today,accordingtotheFederalReserve,andinspiteofthedoomsdayprophets,U.S.factoriesproducetwiceasmuchtheydidinthemid-1980s.Weknowthatoutputisonlyhalfofthestory.Weproducethosegoodswithone-thirdfewerworkers.Between1990andtheendof2015manufacturingemploymentintheUnitedStatesdroppedfrom17.8millionjobsto12.3million.Joblossesfromtechnologicalgains,globaloutsourcingandforeigncompetitionhavecostmillionstheirlivelihoodandcostmanysoutherncommunitiestheireconomicengines.
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Source:BLS.govQuarterlyCensusofEmploymentandWages
WhiletheU.S.continuestoproducecloseto20%ofallproductsworldwide,thatstatisticprovidesnocomforttoplacesthathavesufferedthelossofbusinessesandjobs.Boarded-upfactoriesinsoutherncitiesandsmalltownsareadailyreminderoftheirbygoneeconomicfoundations.TheAmericanSouthhasexperiencedsignificantlosses;nevertheless,manufacturingremainscriticaltotheregion’seconomicfutureandweneedtomaximizeitspotentialtosupportfuturegrowth.
Whilethelossofmanufacturingjobsduringtherecessionwassevere,since2010whentherecoverybegan,manufacturinghassteadilyaddedjobswiththestatesoftheAmericanSouthgrowingjobsfasterthantherestofthecountry.
AnnualManufacturingJobChanges2010-2015 2010 2011 2012 2013 2014 2015SouthernStates -3.7% 1.6% 1.8% 1.0% 1.7% 1.3%Non-SouthernStates -2.2% 2.0% 1.7% 0.6% 1.2% 1.0%UnitedStates -2.7% 1.9% 1.7% 0.8% 1.3% 1.1%Source:BLS.govQuarterlyCensusofEmploymentandWages
MANUFACTURINGJOBS-AVERAGEANNUALQCEW
2010 2015 changeinjobs %changeinjobs
AL 236,324 257,811 21,487 9.1%AR 160,091 154,865 (5,226) -3.3%FL 307,499 342,457 34,958 11.4%GA 343,111 375,838 32,727 9.5%
6,086,2454,347,055
17,797,353
12,290,293
-2,000,0004,000,0006,000,0008,000,00010,000,00012,000,00014,000,00016,000,00018,000,00020,000,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
ManufacturingJobsintheUnitedStatesandtheAmericanSouth1990-2015
South US
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KY 209,130 241,319 32,189 15.4%LA 137,283 143,720 6,437 4.7%MD 114,873 103,773 (11,100) -9.7%MS 135,956 141,622 5,666 4.2%MO 243,034 261,316 18,282 7.5%NC 431,545 460,883 29,338 6.8%OK 122,799 136,906 14,107 11.5%SC 207,803 235,824 28,021 13.5%TN 298,327 332,381 34,054 11.4%TX 810,160 878,009 67,849 8.4%VA 229,867 232,667 2,800 1.2%WV 49,075 47,664 (1,411) -2.9%Source:BLS.govQuarterlyCensusofEmploymentandWages
ThirteenofthesixteenstatesintheAmericanSouthhaveexperiencedgrowthandcollectivelytheregionhasnettedover300,000newmanufacturingjobs.
Source:BEA.govRegionalEconomicAccounts
11.9%
17.1%
14.5%
5.1%
10.8%
19.3% 19.4%
5.5%
15.2%
12.8%
19.6%
9.0%
16.6%16.2%
13.1%
8.6%9.5%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
USA AL AR FL GA KY LA MD MS MO NC OK SC TN TX VA WV
SouthernStatesManufacturingasaShareofGSP2015
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Source:BLS.govQuarterlyCensusofEmploymentandWages
AsthepreviouschartsshowthenumberofjobsorpercentageofstateGDPfrommanufacturingvariesgreatlyamongsouthernstates.Butindustrysectorsaretransformingandproductioncontinuestomove,soeverystatehastheopportunitytoexpandmanufacturinginthefuture.Becauseofthewell-documentedpublicbenefitsofmanufacturing,includingincreasedtaxbase,highermultiplierimpactsandhigherwages,policymakersoftentargettheindustryintheireconomicdevelopmentstrategies.
“AccordingtoU.S.Executives,favorableUSpolicies
centeredonsustainabilitytechnologytransfer,monetarycontrol,scienceandinnovation,foreign
directinvestment,intellectualpropertyprotection,
andsafetyandhealthregulationshelpcreatea
competitiveadvantagefortheirbusinesses.Onthe
otherhand,USexecutivesidentifiedpolicies
aroundcorporatetaxrates,healthcarepolicies,
laborandtaxationofforeignearningsasa
disadvantageformanufacturersintheUnited
States.”
2016GlobalManufacturing-CompetitivenessIndex,Deloitte
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
ManufacturingEmploymentByStateAmericanSouth1990-2015
AL AR FL GA KY LA MD MSMO NC OK SC TN TX VA WV
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Asthemanufacturingsectorcontinuestoevolve,theshifttohighervalueadvancedindustriesisincreasingthecompetitivenessofmoredevelopedplaces.TheDeloittereportconcludesthattalent,costcompetitiveness,productivity,andsuppliernetworksarethemostimportantfactors,inthatorder.
MANUFACTURING IN THE AMERICAN SOUTH – INTO THE FUTURE Remainingcompetitivebeginswithanticipatingthefutureneedsofmanufacturingcompaniesandforsomeplaces,arecalibrationofpublicpolicy.KPMG,inGlobalManufacturingOutlook:PreparingforBattle:ManufacturersGetReadyforTransformation2015,states“Constantdisruption,risingpricingpressures,volatileinputcosts,intensecompetitionandcontinuousinnovationhaveallforcedmanufacturerstorethinktheirbusinessmodelsandlong-termgrowthplans.”Policymakersneedtounderstandtheimplicationsofthesechangesandadjusttheirapproachaccordingly.
RobAtkinson,presidentoftheInformationTechnologyandInnovationFoundation,inthereportMeasuringUp,laysoutonevisionofchangingmanufacturingbusinessmodels:
NewvsOldManufacturingBusinessModels
Issue Old New
______________________________________________________________________________
Scopeofcompetition National Global
Organizationalform Hierarchical Networked
ProductionSystem Massproduction Flexibleproduction
Keyfactorofproduction Capital/Labor Innovation/Ideas
Keytechnologicaldriver Mechanization Digitization
Competitiveadvantage Economiesofscale Innovationquality
Relationshipsoffirms Go-it-alone Collaboration
Skills Job-specific Broadandchanging
Workforce Organizationalman “Intrapreneur”
NatureofEmployment Secure Risky
Thespeedoftechnologicalchange,therisingskillexpectationsofacompany’sworkforceandglobalcompetitionwithimmediateaccesstoideashasnecessitatedthesechanges.In
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aggregate,thesechangesportendaneedforpolicymakingthatisquicklyadaptable,futurefocusedandthatisinconstantdiscussionswithindustryleaders.
AccordingtotheInternationalEconomicDevelopmentCouncil(IEDC),“Manufacturingcompetitivenessrequiresseriousinvestmentinresearchanddevelopment.Onlybyconstantlyimprovingproductsandproductiontechniquescanmanufacturersstaygloballycompetitive.Companiescannolongeroperateentiresupplychains,conductallresearchanddevelopmentin-houseorcontractwithfirmsonlyintheirregion.”
IEDChashighlightedwhatitbelievesplacesneedtoprioritizetosupportnewmanufacturing.
§ “Buildingaqualityworkforce§ Cultivatinginnovationcapacity§ Supportingmanufacturingentrepreneurship§ Forgingglobalnetworks§ Goinggreenasmajormanufacturersaggressivelypursueenergyandwastereductions.
Corporatedecision-makersareincreasinglyevaluatinglocationsontheseterms.”
Dozensofothersstudiesoverthepastdecadegenerallyagreeonthekeyareasoffocustosupportmanufacturing.Theyprovidethefoundationfordevelopingintentionalstateorregionalaction.IftheUnitedStatesandtheAmericanSouthwanttocompetefornew
manufacturing,weneedtomaintainourbusinesscompetitiveness,educateandtrainour
citizenswithnewandhigherskills,enhanceourinfrastructurewithanemphasisondigital,
andimprovetheflowofnewideasandinnovations.Thesectionsthatfollowareachecklist
forimprovedmanufacturingcompetitiveness.
✓ Begin with A Policy Focus on Competitiveness Thequesttobemorecompetitivecanbeallconsuming,butwhatdoesitreallymean?InSouthernstates,understandingcompetitivenessiseasy:justputitintofootballorbasketballjargon.EveryKentuckyfanknowsthecompetitivestrengthsoftheirguardplaywhentheyplayNorthCarolina.InAlabama,eventhecasualfancandiscusswheretheyhaveacompetitivematchupadvantagewhentheyplayFloridaorTennessee.Therearewholetelevisionnetworksthatspendhourseachdaydiscussingstrengths,weaknessesandthreats.
“Manufacturinghasbeentransformed.Ifa
manufacturingworkerorplantownerfrom
1960weretransportedtothepresent,heor
shewouldrecognizelittleinthemodernworld
ofmanufacturing.Manufacturinghasbecomea
highlytechnical,innovative,dynamicand
networkedindustry”
IEDC-EconomicDevelopmentResearchPartnersJobsintheMaking:EconomicStrategiestoGrowManufacturing,2011
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Translatingthatgeneralunderstandingofcompetitivenesstomanufacturingisagoodwaytobeginastrategicdiscussion.Simply,whereareourcurrentadvantages,whatareourcompetition’sstrengthsandweaknesses,andwhatdoweneedtoimprovetowin?
TheGlobalCompetitivenessReportoftheWorldEconomicForumdefinescompetitivenessas"thesetofinstitutions,policies,andfactorsthatdeterminethelevelofproductivityofacountry".ThegoalforthestatesoftheAmericanSouthistostayfocusedonthefutureneedsofmanufacturingcompaniesandtotakespecificactionsthatimprovemeasurablecompetitiveness.Justassportsfocusongameplansandspecifictypesofoffensesanddefenses,amanufacturingstrategymuststartwithaspecificapproach.Ifweassumethatindividualplayershavestrengthsandweaknesses,wecanalsobegintounderstandthatthesameistrueforplaces.Justasacoachmustunderstandindividualassetsandliabilitiesandthendevelopanoverallgameplan,somustpolicymakersbeginwithaplanthatrecognizestheircompetitivereality.
✓ Use Cluster Practices as the Organizing Principle Astateandregionalclusterapproachprovidesaframeworkandtheorganizingprinciplesforactionsaswellasideasforspecificactions.
SinceDr.MichaelPorterofHarvardUniversitybeganspreadingthewordaboutthecompetitiveimplicationsofclustersinthe1990sithasbeenoneofthefeweconomicdevelopmentprinciplesthathasremainedrelevant,supportedandyetattimesfrustrating.Inthefaceofheightenedcompetition,clusterscreateacompetitiveorproductiveadvantage.AsdefinedintheNationalGovernorsAssociation(NGA)andtheU.S.CouncilonCompetitivenessreport,Cluster-BasedStrategiesforGrowingStateEconomies,“aclusterisagroupoffirms,relatedeconomicactors,andinstitutionsthatarelocatednearoneanotherandthatdrawproductiveadvantagefromtheirmutualproximityandconnections.”
Manystatesandregionshaveused“advancedmanufacturing”asatargetedcluster.TheBrookingsInstitutionhasevencreatedaspecificmethodologytoidentifythethirty-plusmanufacturingsubsectorsthattheyconsideradvanced.Butwhilegeneralstrategiescansupportallmanufacturing,morespecificsupportandinvestmentisbettersuitedforindividualsectors.
TheNGAhasbeenpublishingclusterreportsfor15yearsthatsuggeststatestrategiestobuildstrongerclustersandcreateadvantagesthatextendbeyondlowcosts.Their2002report,AGovernor’sGuidetoCluster-BasedEconomicDevelopment,discussedthehardandsoftbenefits
“Competitivenessisaneconomy’sabilitytoproducegoodsandservicesthatmeetthetestofinternationalmarketswhileits
citizensearnastandardoflivingthatisbothrisingandsustainableover
thelongrun.”
EconomistHowardRosen
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fromclustering.“Hardbenefitsaregainedfrommoreefficientbusinesstransactions,wiserinvestments,andreducedexpenditures…Softbenefitsarederivedfromlearningbenchmarkingandsharingthatexpandsknowledgeandleadstoinnovation,imitationandimprovement.”
Morespecifically,thereportclearlyshowshowthecompetitiveadvantagesareattained.
HardBenefitsofClusters
Asset Benefits
Localsupplychains Designefficiencies
Specializedworkforce Higherproductivity
Specializedservices Fasterandeasieraccess
Choicesofinputs Lowercosts,higherquality
Rangeoffirms Jointventures,networkopportunities
SoftBenefitsofClusters
Asset Benefits
Association Collectivevision,planninginfluence
Trust Inter-firmcollaborationandnetworks
Learning(1) Technologytransferandinnovation
Learning(2) Tacitknowledgeandknow-how
Informallabormarket Efficiencies,careerladders
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Forstatesthathaveprioritizedclusterstrategiesintheireconomicdevelopmentapproachthequestionhaslongbeen,whatspecificallydowedotohavethemostefficientimpact?AgaintheNGAandtheU.S.CouncilonCompetitiveness,inCluster-basedStrategiesforGrowingStateEconomies,madesixspecificrecommendationsforpolicymakers.
1) “Establishasolidfoundation:Everyclusterhassomefundamentalneedsthatarenotclusterspecificbutthataffecttheabilityofclusterstosucceed.Theseincludetheregion’seducationalassets,physicalinfrastructure,attractivenesstocreativetalent,andcapacityforaligningtheeffortsofregionaleducational,workforceandeconomicinstitutions.
2) Buildrelationships:Interfirmcollaborationfacilitateslearningandtheaggregationofintangibleassets,especiallythetacitknowledgethatresideswithincompanyemployeesandpractices.Stateleaderscanhelpbyconveningaclusterleadershipcouncilandsupportingclusterassociations.
3) Deepenskillsandtalent:Bynature,clustersattractandenhancetalent,butgovernmentcanreinforcethistendencybycreatingclusterhubsatcommunitycolleges,fosteringcluster-focusedprofessionalsciencemaster’sprogramsatnearbyuniversities,encouragecluster-trainingconsortia,andencouragingcluster-basedcareeradvancementpaths.
4) Aligninnovationinvestments:Statescanrealizehigherreturnsintheirinvestmentsinresearchanddevelopment(R&D)centersofexcellence,andbusinessinnovationbyfocusingonclusters.
5) Accelerateentrepreneurship:Talentandresearcharenecessary,butittakesentrepreneurshiptotranslategoodideasintosuccessfulproductsandservices.Governorscanpromoteentrepreneurshipbysupportingnetworks,creatingcluster-focusedincubators,organizingsmallbusiness
GrowingStateEconomiesTwelveActions
1) Createacompetitivetaxand
regulatoryenvironment
2) Putentrepreneurialactivityatthe
topofthestateagenda
3) Distinguishamongdifferentkinds
ofentrepreneursandbusinesses
4) Castawidenet
5) Teachentrepreneurshipskillsand
attitudesatalleducationallevels
6) Buildastart-upenvironmentand
culture
7) Findhigh-growthcompaniesand
helpthem
8) Getyourentrepreneurstogive
back
9) Helpcompaniesopendoorsto
newglobalcustomers
10) Rewardstrongtiesbetween
universities,companiesand
entrepreneurs
11) Buildinnovationclusters
12) Buildecosystemsnotprograms
TheNationalGovernorsAssociation-GrowingStateEconomies,2012
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centersaroundclusterexpertise,andencouragingentrepreneurshipeducationprogramsinhighschoolsandpostsecondaryinstitutions.
6) Openglobalpriorities:Successfulclustersextendtheirnetworkstodistantcompetitors,vendorsandinstitutions.Governmentcanhelpbysupportingparticipationininternationalconferences,tradeshows,andstudytours;byprovidingexportassistance;andbyestablishingcluster-basedlearningexchanges.”
✓ Understand, Anticipate and Embrace Change Advancedmanufacturing,thepathtoIndustry4.0andstrengtheningthemanufacturingecosystemintheAmericanSouth,requiresaconsistentefforttobothfollowtrendsandalsotoanticipatethefuture.Overthenext15years,nooneknowswhetherartificialintelligence,additive
manufacturing,autonomousvehicles,theInternetofThings,orvirtualrealitywillhavethemostimpactonmanufacturers.Eachwillalmostcertainlybringdisruptionandchangetothoseindustriesthatweclassifyas“advancedmanufacturing.”Manyoftheproductsandprocessesthatwecallnewandadvancedtodaywillbeobsoleteandforgottenby2030.
InPwC’sreport,HowtoDriveInnovationandBusinessGrowth,innovationsarecategorizedas:
§ IncrementalInnovationsmakesmallchangestoacompany’sexistingtechnologiesandbusinessmodels.
§ BreakthroughInnovationsmakesignificantchangestoeitherthetechnologyorbusinessmodel,producingsignificantgrowth.
§ RadicalInnovations,whichtakeplacemorerarely,combinetechnologyandbusinessmodelinnovationtocreatemajornewindustrieswithexponentialgrowth.
Radicalinnovationsareoftenrapid,followincrementalinnovationsandcantakeyearstodevelop.Butifrecenthistoryisanypredictor,weareenteringatimewhereradicalinnovationsmaybecomemorecommonplace.
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JusttenyearsagotherewerenoiPhones,Facebook,Twitter,YouTube,UberorPandora.Itdoesnottakemuchimaginationtoenvisiona2030manufacturingplantwhereuniqueproductionspecificsareelectronicallycontrolledbythecustomer,wherevirtualrealitytrainsandretrainsworkersdaily,wheredronesareamajorcomponentofdeliveryinfrastructureandwhereproductioniscompletelymobile,movesoftenandfollowsthebestbusinessenvironment.
Thefirstthreeindustrialrevolutionsweredrivenbymechanizationandtheavailabilityofpower,assemblylineorganizationofproduction,andfinallycomputerizedautomation.Industry4.0wasfirstdefinedbytheGermangovernmentandrefers,inpart,tothenewabilityforinformationinteractionbetweentheproductionsystemsandtheproductsinvolved.Rapidtransformationcreatesrealcomplicationsforpolicymakers.
Dowemakerulesandmakeinvestmentsforthosethingsthatarecertaintodayordowetrytoanticipatewhatwillbeneededinthefuture?Byinjectinganticipationinthedecisionprocessweriskwasteandconstituentridicule.Butifwewaitfornewsectorstobefullyrealized,itisunlikelythatwewillbeonboardsoonenoughtocapturetherewards.Thefollowingfourareasofpolicyfocusbusinessclimate,workforceskills,
infrastructureandinnovation-whilesubjecttochange,
willremainthefoundationforacompetitiveplaceforthe
foreseeablefuture.Byfocusingonpolicyflexibilityand
continuouscompetitiveanalysis,decisionmakerscan
increasetheirimpact.
Asstatescompeteformanufacturingjobs,competitivenesshasbecomemorethanjustanexistingstrongmanufacturingpresence.Anenvironmentthatsupportsmanufacturingbusinessesacrossavarietyofneedsisnecessarytostandoutagainstthecompetition.EverystateintheAmericanSouthhasmanufacturingjobs.Thesectorsdifferandstate’sstrengthsandweaknessesareverydifferent,butinallcasesgoodpolicyshouldbesupportedbyrelevantinformation.
Everyweekadifferentrankingsarticle,indexorsetofnumbersisreleasedandeithercelebratedorlamented.Thespecificfactorsthatinfluenceanindividualinvestmentdecisionisparticulartoabusiness,butifweknowgenerallywhatisimportanttomanufacturers,itispossibletoaggregatefactorsandbetterunderstandastate’scompetitiveness.Asapartofthisproject,wedevelopedacompetitivenessindextohelpguidepolicydiscussionsineachofthestates.
TopFactorsforCompaniesConsideringNewInvestment
1) Availabilityofskilledlabor
2) Highwayaccessibility
3) QualityofLife
4) Occupancyorconstructioncosts
5) Availabilityofbuildings
6) Laborcosts
7) Corporatetaxrate
8) Proximitytomajormarkets
9) State&LocalIncentives
10) Energyavailabilityandcosts
11) Taxexemptions
12) Expeditedor“fasttrack”permitting
Source:AreaDevelopment30thAnnualSurveyofCorporateExecutives,March2016
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✓ Ensure a Competitive Business Climate Annuallyforthepast30yearsAreaDevelopmentmagazinehassurveyedcorporateexecutivesandsiteselectionconsultantstodeterminethetop10to15factorsthattheybelievearemostimportantforcorporateinvestmentdecisions.Thecorporatetaxrate,stateandlocalincentives,taxexemptionsandfasttrackpermittingareregularlyamongthemostimportantfactors.
Astate’soverallbusinessclimateisaproductofmanyfactorsincludingworkforcetalent,infrastructureandinnovationthatwillbediscussedinthenextthreesections.Apartfromthoseareasthecostsofdoingbusiness,taxandincentivepolicies,theregulatorysituationandtheconsistencyandfairnessofthestatelegalsystemsappeartobethemostoftencited.
TheHeritageFoundationsummarizes,“Economicresearchhasempiricallydemonstratedthatapositivebusinessenvironmentfostersenterprisedevelopmentandoveralleconomicgrowth.Determiningwhatconstitutesapositivebusinessenvironmentdependswidelyonfactorsoftenoutsidetheinfluenceoftheaveragebusinessowner.Thewiderangeoffactorsaffectingbusinessenvironmentsincludescommerciallaw,soundpublicinstitutions,opentradepolicy,infrastructure,technologyandothers.”
Forpolicymakers,ensuringthebestbusinessclimateisoftencomplicatedbytradeoffs.Regulationsversussafety,incentingsomecompaniesandnotothers,andfairnessinregulationaretypicaldiscussions.Inherently,developingstrategiesisaboutmakingchoices.Whatmaybethebestandobviouschoiceforsomeplaceswillbeanonstarterforothers.Oneoftheclearoutcomesfromthedataanalysisisthatthereisnoonewayforastatetobecompetitive.Whenweanalyzedandrankedsouthernstates,nonethatwereratedamongtheleadersinoverallmanufacturingstrengthwasratedinthetop10statesonallfactors.
Eachyearmanygroupsproducerankingsofthebeststatesforbusinessorforbusinessclimate.Whilenosinglestudyoffersanindisputableassessment,togethertheyprovidestatesanunderstandingofhowtheirstrengthsandweaknessesareviewed.Theyalsocontributetotheoverallbrandorimageofthestateamongdecisionmakers.
✓ Enhance Workforce Skills Amongbusinessgroups,tradeassociations,economicdevelopersandelectedofficials,thepolicyconundrumof2016isthemillionsofpeoplethatneedagoodjobandbusiness’loudlamentthattheycannotfindqualifiedworkers.Thisyearnootherpublicpolicyissueismorediscussedorbemoaned.
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U.S.manufacturersconsistentlysaythattheyhavetroublefindingworkers.TheManufacturingInstituteandDeloitteConsultingestimatethatnearly70%offirmswillexperience“moderatetosevereshortage”ofqualifiedworkersand84%believethatthereisatalentshortage.
Overcomingperceptionisoneissuethatmustbeaddressed.SME,anorganizationthatservesthemanufacturingindustry,releasedastudyin2016thatshowsthatmanyparentsviewmanufacturingasoutdated,dirty,notexcitingorchallengingandnotwell-paying.JeffreyKrause,CEOofSMEsaid,“Aseriousmisconceptionisthatmanufacturingisdirty,darkordangerous;andisn’tseenasanoptimalcareerchoice.Therealityisfarfromthat.”ThereportconcludesthattheaverageU.S.manufacturingworkermakes$77,506ayear.
Findingworkerswiththerightskillsisanotherareawherewecanmakeprogress.TheManufacturingInstituteandDeloitteConsultingreport,TheSkillsGapinManufacturingin2015andBeyond,statesthat“Overthenextdecade,nearlythreeandhalfmillionmanufacturingjobslikelyneedtobefilledandtheskillsgapisexpectedtoresultintwomillionofthosejobs
“Investmentsinaninnovativeeconomywillpayoffonlyifabaseofmiddle-skilledtalentisinplacetomeetprojecteddemandforskillsinnewinnovativeindustries.”
DrivingInnovationfromTheMiddle,SGA2011
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goingunfilled.Anestimated2.7millionjobsarelikelytobeneededasaresultofretirementsoftheexistingworkforce,while700,000arelikelytobecreatedduetonaturalbusinessgrowth.”Theskillshighlightedasmostdeficientincludetechnology/computer,problemsolving,basictechnicaltrainingandmath.
TheNationalAssociationofManufacturershasexaminedhowtoovercomethisskillsgap,suggestingthataunifiedvoicetoalignstakeholderscanbuildanewsystemtodelivermid-skilledmanufacturingtalent.InSGA’sDrivingInnovationfromtheMiddle-MiddleSkillJobsintheAmericanSouth’sEconomy,recommendationsincludedsectorpartnerships,establishingcareerpathwaysandcountingmiddle-skillcredentials.
Governorswereencouragedto:
§ Setaboldgoalforthenumberofresidentstobetrainedwithmarket-readyskills§ Changetheperceptionofmiddle-skilljobs;§ Makesurethattrainingdollarsgotowardin-demandcredentialsalignedwithrealjobs;§ Ensurethatcommunitycollegesandpublicuniversitiesarefillingthegaps;§ EngageyourWorkforceInvestmentBoards;and§ Conveneindustryleadersinapartnershiptargetingopenmiddle-skillpositions.
Specificsectorstrategiesalmostalwaysincluderecommendationstoaddressworkforceissues.TheNationalGovernorsAssociation’sCenterforBestPracticesreport,StateSectorStrategies:ComingofAge-ImplicationsforStateWorkforcePolicymakers,foundthatmanyofthenation’sstateshaveengagedinsectorstrategiestomeetidentifiedbusinessneeds.
“EightAreasforStateAction-AStateSectorStrategyFramework
1. CreateaSectorStrategyCommitteethatincludesrepresentativescriticaltothestateeconomy;leadershipfromkeypublicsystemssuchasworkforce,highereducation,economicdevelopment,andemploymentsupportservices;andlegislativemembers.
2. AlignPoliciesAcrossSystems.Justasittakespracticalcoordinationamongworkforce,education,andeconomicdevelopmentprogramstocreateasuccessfulpartnership,ittakespolicycoordinationatthestateleveltoremovebarriersandalignstrategiessothatthelocalstakeholderscanworkbettertogether.
3. CultivateBusinessChampionstopromoteasectorstrategyapproachwithotheremployers,industryassociationsandlegislators.
4. BuildLegislativeSupporttosecurefundingtosupportsectorpartnerships.5. ProvideGoodDataandIndustryExpertisetolocalstakeholderssothattheycanmake
gooddecisionsaboutindustries,occupations,workerpopulations,andregionallabormarkets.
“Thereisnogoodjobtodaythatdoesnotrequiremoreandbettereducationtogetit,holdit,or
advanceinit.”
ThomasFriedman
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6. FindandLeverageFundingtoSupportOn-the-GroundImplementation.Sectorpartnershipsneeddedicatedstafftocoordinateandfacilitate.Creatingsuchstafftakestimeandresources.
7. ProvideTrainingandCapacityBuildingforLocalPrograms.8. DevelopaSharedMessage,TrackOutcomes,andShareSuccessBroadly.Messaging
campaignscanhelpvariousconstituentsandstakeholdersunderstandthatsectorstrategiesarea“newwayofdoingbusiness,”notjustanotherprogram.Statescanbeespeciallyimportantinhelpinglocalpartnershipsmeasureandtracktheirimpactonworkersandemployers.”
“Technologicalunemployment"isanotheroftoday'shottesteconomictopics.What'sdrivingitandhowcanpublicpolicyaddressit?Fromautomation,tonewapps,toadvancesinrobotics,toemergingAI,disruptivetechnologiesarecurrentlychangingthemixofjobsavailableintheAmericanworkplace.In1930,whenJohnMaynardKeynesfirstcoinedthephrasetechnologicalunemploymenthepredictedthatby2030technologicaladvanceswouldallowtheaverageworkweektobereducedto15hours.AlthoughtheaveragehoursthatatypicalAmericanemployeeworkseachyearhasdroppeddramaticallyinthelast85years,Keynes’utopianoutlookisgenerallydisplacedbyconcernsaboutmassunemployment.Somepredictionssuggestthatasmanyas30%ofcurrentjobswillbecomeobsoleteinjustadecadeortwo.Technology-drivenproductivityadvanceshavealwaysraisedconcernsaboutrisingunemploymentandunderemployment.TheLudditeshavecriedwolfmanytimesinthepast.Isthistimedifferentoristhisjustonemoresetofadvancementswherejobsareeliminatedandthenreplacedwithnewjobsthatrequiregreaterskillsandpaygreaterwages?In2014,theSGAlookedcloselyatthepotentialimpactsoftechnologicalunemploymentonsouthernstates.Dr.MichaelWaldenofNorthCarolinaStateUniversityledadiscussionattheannualmeetinganddatawasdevelopedshowingthattheimpactswouldbefelt.AnexcerptfromDr.Walden’supcomingbooksummarizesthefindingswell.“Alargenumberoflowerandmiddle-payingoccupationsfacesignificantdownsizing,whilemanyhigher-payingoccupationsaremuchsaferfromtechnologicalencroachment.”Somesouthernstateshavebegunthetransitiontomoreadvancedmanufacturing,whileothersstillhavemanycitizensworkingin
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lessskilledandmoreroutinemanufacturing.Thesestateswillbemoreseverelyimpactedbychange.Thetalentbarforasuccessfulmanufacturingworkerisclearlyrising.Highschoolgraduationwasrarelyaprerequisiteforthetextilemill,buttoday’smanufacturingjobsoftenrequirecertificationandskillsearnedafterahighschooldiploma.Howdowebridgethegapbetweenthesouthernworkforce’scurrentskillsandwhatittakestobesuccessfulinthecomingyears?The2013ReportontheFutureoftheSouth,ReimaginingWorkforceDevelopment,researchedbytheSouthernGrowthPoliciesBoard,presentedthreebroadrecommendationsaskeytoourfuturesuccess.Borrowingfromthethree“Rs”thathavehistoricallybeencentraltooureducationsystem,weneedto:
1) Re-imagine Readiness Manysaythatwehavelostastrongconnectionbetweeneducationandjobs;thateducationneedstoberecoupledwithworkinamoresystemicway.
Key Actions:
• Strengthentheconnectionsbetweeneducationandjobskills• Re-thinkcredentialsandtheirvalueintheworkplace• Givestudentsmoreexposuretotheworldofwork• Scale technology so that every student can benefit from a high quality,
personalizedlearningexperience
2) Re-engage Adult Learners and Disconnected Youth Morethantwo-thirdsoftheworkforcein2020andnearlyhalfoftheworkforcein2030arealreadyworkingtoday.Atthesametime,morethanoneinsevenyoungpeoplearedisconnectedfromthefoundationsforfuturesuccess—neitherworkingnorinschool.Weneedtore-engagebothadultsandyouthintheeducationsystemtocontinuouslyupdatetheirskillsinordertomeetourneedforatalentedworkforceinthefuture.
Key Actions:
• Targetworkerswithsomecredits,butnodegreeorcredential• Helpdislocatedworkersrejointheworkforce• Recoverdisconnectedyouth
3) Re-align Relationships and Resources Weneedtobetteraligneducation,workforceandeconomicdevelopmentassetstocreateclearpathwaysandsmoothtransitionsthatwillfacilitatelifelonglearning.
Key Actions:
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• Create continuity in education and workforce development from earlychildhoodthroughcareer
• Alignandtrackdataacrosstheeducationalandworkforcepipeline• Engagebusinessesinameaningfulway
Tobetterengagingbusinessthepublicsectorneedstotakeademand-drivenapproach,focusingontheissuesoftheemployer.Byfocusingonthedemandsofbusiness,thisapproachallowslocalcitizensandworkforceserviceproviderstorecognizetheopportunitiesthatexistforfutureemploymentandwhatspecificskillsarenecessarytotakeadvantageofthoseopportunities.
Someofthekeycomponentsofademand-drivenworkforcedevelopmentsysteminclude:
▪ Formalconnectionsamongemployers,unions,educators,government,not-for-profitserviceproviders,andcitizensinthelabormarkettoidentify,anticipateandrespondtotrainingandeducationneeds;
▪ Up-to-dateandeasilyaccessiblelabormarketinformation▪ Jobplacement,retentionandsupportservicesthatimproveaccesstoemploymentand
helpbothemployersandemployees▪ Themeanstocertifyandquantifyknowledgeandskillsgainedoutsidetheformal
educationsystemthatareacceptedbyemployers
Traditionallyworkforcedevelopmentprogramsfocusontheneedsofcitizenslookingforajob.Workforceproviderscreatetrainingopportunitiestoimproveskillsandthenactas“connectors”toidentifyopportunitiesandmatchthejobseekerwiththejobs.
Byalsofocusingonthedemandside,thepublicworkforcesystemcanadvanceitsknowledgeaboutthejobsandskillsthatareneededandcanworkwithbusinessestohelpthemfindtheemployeestheyneed.
Supply-Side
Citizenslookingforgoodjobs
Demand-Side
Employerslookingforgoodlabor
WorkforceSystem
Organizationsthatimproveskills,provideinformationorconnections
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✓ Promote Innovation Rapidchangepredeterminesthatinnovationwillfuelgrowthandthatplacesthatembraceandsupportinnovationwillbenefit.Policiesthatsupportinnovationhavebeenanothermuch-publishedtopicoverthepastdecade.
ThePewCenterontheStatesandtheNationalGovernorsAssociationidentifiedaframeworkforinnovation,andtheirresearchsuggestedthatwhenthesecomponentswerepresentinnovationwasmorelikely:
§ Expertise-newdiscoveries,newknowledgeandnewinsightcomesfrompeoplewiththenecessaryresources
§ Interactionbetweensectorsandindividuals§ Diversityofthought§ Application-commercialization
In2015,theWhiteHousereleasedanationalstrategywithpoliciestheyfeltwouldincreaseinnovationandserveasaguidetotargetfederalfunding.Inthereport,AStrategyforAmericanInnovation-NationalEconomicCouncilandtheOfficeofScienceandTechnologyPolicy,October2015,aseriesofinnovationbuildingblockswerediscussed.Theyincluded:
Experbse
Diversity
Applicabon
Interacbon
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§ Makingworld-leadinginvestmentsinfundamentalresearch§ Boostingaccesstohigh-qualitySTEMeducation§ ClearingapathforimmigrantstohelppropeltheInnovationEconomy§ Buildingaleading21stcenturyphysicalinfrastructure§ Buildinganext-generationdigitalinfrastructure§ Fuelingtheengineofprivate-sectorinnovationbystrengtheningtheResearchand
ExperimentationTaxCreditviabroadening,extending,andmakingthecreditpermanent;supportinginnovativeentrepreneurs;commercializingfederally-fundedresearch;andhelpingAmericanbusinessescompeteabroad
§ Crowdsourcing§ Supportforadvancedmanufacturing
andnewbreakthroughtechnologies
PreviousresearchfromtheSouthernGrowthPoliciesBoardrecommendedthatastronginnovation-focusedstatewould:
1) Buildagovernancestructurecompetitivelypositionedontaxes,regulation,andleadership.
2) Conductaregulatoryaudittoidentifyimpedimentstobusinessinnovation.
3) Promoteaculturethatsupportsentrepreneurship,creativity,risk,andchange.4) Continuouslymonitorchangingeconomicconditionswithbroadlydistributed
feedback,includingbenchmarkingagainstcompetitors.5) Monitorandengagenewglobalmarketsandshiftingprioritiesfordirectforeign
investmentandexportpromotion.6) Maintainconsistentorganizationalcapacitywithresponsibilitytocreate
innovation-basedjobsandcompanies.7) Establishanadvisorygroupforscienceand
technology,withrepresentativesfromgovernment,educationandtheprivatesector,toadvisethegovernorandlegislators.
Amajorcomponentofthiseffortwastolookattheroleofuniversitiesininnovationandthetransitioningeconomy.The2014releaseofInnovationU2.0:ReinventingUniversityRolesinaKnowledgeEconomy(InnovationU2.0),byLouisG.TornatzkyandElaineC.Rideoutofferedareadybasetounderstanduniversityparticipationinsupportofadvancedmanufacturing.Thebook
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describeshowtechnologicalinnovation,entrepreneurshipandbusinesspartnershipshappenincarefullyselectedcasesamplesoftwelvemajorU.S.universitiesandincludesdozensofexamplesofbestpractices,policiesandprogramsthatarerelatedtotechnologicalinnovation,industryandcommunityengagement,andthecommercializationofinventions.
AlthoughU.S.universitiesexcelateducationandresearch,manyuniversitieshavealsofocusedonimpactingregionalandnationaleconomies.Suchcommercializationandindustry-partneredresearcheffortsenhancetheuniversities’othermissions.Sincethecreation,distributionandultimateutilizationofknowledgearethecornerstonesoftheinnovation-basedeconomy,universitiescanplayacentralroleineconomicadvancement.
Theeconomic-impactbehaviorsoftwelvebestpracticeuniversitiesdescribedinInnovationU2.0demonstratehowuniversitiescanadvancetheirwidereconomies.Someofthepolicyinsightsfromtheauthorscaninformdecisionsonthepromotionofinnovativeadvancemanufacturing.
§ Theforceforcommercializationmustcomefromthetopleadershipoftheuniversity.
§ Priorengagementwiththeprivatesectorcanbeanadditionalusefulcriterionforthehiringofuniversitypresidents.
§ Senioruniversitymanagementwithsuccessfulengagementofbusinesscanenhanceaculturalshifttowardsentrepreneurshipandrisk-taking.
§ Bestpracticesuniversitiesoftenincludeinteractionswithindustryandcommercializationactivitiesasoneofthekeycomponentsinfacultyhiringandadvancementdecisions.
§ Commercializationisonlyonemechanismofbusinessengagement.Cooperativeresearchprojects,ifartfullycrafted,benefituniversities,studentsandbusinesses.
§ Modeluniversitiesoftenrestructuredisciplinesandresearchintonew,morefunctionalunits.
§ Acentralpointofcontact,forindustrylookingforuniversityinventionorresearch,isahallmarkofsuccessfuluniversities.
§ Programsforstudententrepreneurship,curricularexpansion,co-curricularandextra-curricularsystemsthatworktogetherforallstudentsyieldresults.
§ Mostsuccessfuluniversitiessponsorincubatorsoracceleratorsforstudentandfacultystartups.
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✓ Invest in Infrastructure The2016IEDCEconomicDevelopmentResearchPartnersreport,CriticalCondition:InfrastructureforEconomicDevelopment,definesinfrastructureas“thephysicalcomponentsofinterrelatedsystemsprovidingcommoditiesandservicesessentialtoenable,sustain,orenhancesocietallivingconditions.”EconomicinfrastructureisdefinedbyscholarJohanFourieas,“infrastructurethatpromoteseconomicactivitysuchasroads,highways,railroads,airports,seaports,electricity,telecommunications,watersupplyandsanitation”.
ThisreportandmanyothershavesoundedalarmsabouttheriskofadeclininginfrastructureinAmerica.“HistoricalevidencesuggeststhattheastonishingeconomicdevelopmentthattheUnitedStatesexperiencedoverthepasttwocenturieswasmadepossiblebythehighqualityinfrastructurethenationhadtheforesighttoinvestin.”Butthenationalinfrastructuretoday,“facesseriouschallengesthatdeserveurgentattention.”
Infrastructurehasalwaysbeenimportantforcorporateinvestmentdecisions.KPMG’sreport,BridgingtheGlobalInfrastructureGap,reportsthatonly14%ofseniorexecutivesbelievethatcurrentinfrastructureis“completelyadequate”,while90%saythat“thequalityandavailabilityofinfrastructuredirectlyaffectswheretheylocateandexpandbusinessoperations.”
GlobalrankingssuchasthosebytheWorldEconomicForumandnationalassessmentssuchasthosefromtheAmericanSocietyofCivilEngineerswarnthatwhatwasonceaclearcompetitiveadvantagefortheUnitedStatesislesssotoday.InvestmentsinpublicinfrastructurearefallingandtheAmericanSocietyofCivilEngineersestimatesitwilltakeover$3.5trillioninnewinvestmenttobringthenation’sinfrastructureintogoodrepair.Withoutgoodinfrastructurejobgrowthwanesandinvestmentsflowtoopportunitieselsewhere.
Thefederalgovernmentisexacerbatingtheproblem.
“Despitethefactthatinfrastructureisacritical
partofdailylifeforAmericans,the
infrastructuredeficitintheUnitedStatesgrowswitheachpassingday.”PayingforLocalInfrastructureina
NewEraofFederalism
NationalLeagueofCities
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Atthebeginningofthelastcenturythefederalgovernmentwasthemajorplayerprovidinginfrastructure.TheFederalHighwayActof1916createdafundingmodelwherethefederalgovernmentpaidfortheconstructionofnewroads,andstateandlocalgovernmentsmaintainedthem.Similararrangementshelpedsmallcommunitiesbuildwaterandsewersystems.DuringtheGreatDepression,theWorksProgressAdministration(WPA)putpeoplebacktoworkbuildinghundredsofthousandsofmilesofroads,thousandsofbridgesandiconicprojectssuchastheGoldenGateBridgeandtheHooverDam.TheAmericanSouthishometoseveralofthebusiestairportsandseaportsinthecountry.Interstatehighwayscrisscrosstheregionandtheavailabilityofwaterandenergyhavelongbeenadvantagesformanufacturers.AccordingtotheCenterforBudgetandPolicyPriorities,stateandlocalgovernmentsaccountfornearly75%ofpublicinfrastructurespending(thisparticularreportcountseducationbuildingininfrastructure).
Globaltradehasgrown,andtobecompetitiveU.S.companiesneedtoefficientlymovegoods.Moreoftentodaytheirbusinessmodelisbuiltonjust-in-timedelivery.Businesstravelisincreasing.Powergenerationanddistributionistransforming.Finally,thedigitalrevolutiondependsoncellularandbroadbandnetworksthatconnectusall.Strategictradeoffsarevexingpolicymakersastheyseeknewrevenuesourcesforimprovingandextendinginfrastructure.Userfees,tollroads,revisedgastaxmodels,I-banks,andpublic-privatepartnershipsaredebatedanddiscussedassolutions,butmanystatesfacecomplexoppositiontoeveryalternative.
IEDC’sCriticalCondition-InfrastructureforEconomicDevelopmentrecommendsthateconomicdevelopers:
§ “Participateinlocal,regional,andstateinfrastructureplanning§ Educatecommunityleadersontheimportanceofinfrastructuretocompetitiveness§ Takeactiononthesechallengesbyworkingwithlawmakersandbusinessleaders§ Analyzehownationalchallengeswillmanifestthemselvesintheircommunities§ Supportfinancingofinfrastructureconstructionandmaintenanceatboththelocaland
statelevel.”
Infrastructurecompetitivenesswillbedeterminedbyacombinationoffuturefundingfromfederal,stateandlocalsources.Whilethiscomplicatestheprocessofcollaboration,itissimilartobusinessclimate,workforceskillsandinnovation,eachwithmultiplefundersandactors.
✓ Collaborate to Compete Aswashighlightedearlierinthispaper,collaborationishard.Ahyper-politicizedpolicyenvironment,special-interestinfluenceandascarcityofresourcescombinetomakeworkingtogethertoimprovegeneralcompetitivenessataskforonlytheardentfew.Despitethe
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difficulties,bestpracticeresearchsuggeststhatcollaborative,multi-sector,often,bipartisanapproachesmustbedeveloped.
TheU.S.CouncilonCompetitiveness’2010report,Collaboration,examinedhowcollaborationamongregionalactorsworkedbest.Theyfoundthat:
§ “Lesssuccessfulregions…seemtolacktheabilitytothink,planandactregionally§ Regardlessofwhetheraregioncanbringtherightpeopletothetableordevelopa
strategicplan,thetruetestiswhethertheregioncanacteffectively§ Thekeytocreatingcollaborationiseffectiveregionalleadership§ Thestructuresaremorefrequentlynetworkedthanformalized§ Leadersneedtobebridgebuilders,boundarycrossers,andconveners”
DespiterecentdecisionstoclosesomeoftheSouth’straditionalcollaborativeconveners(SouthernGovernorsAssociationandSouthernGrowthPoliciesBoard),theabilityforsouthernstatestoworktogetherremainscritical.Newopportunitiesfortheregion’sresearchuniversitiestocollaborateonmultistateclusterssuchasautomotive,aerospaceandenergywillbeneededtoadvanceinnovation.Infrastructurebyitsnatureconnectsplacestoopportunities.Understandingwhichpracticesarebestcanallowstatestoreacttochangeandimplementnewprogramsfaster.
Movingforward,thekeytocollaborationwillbeforstatesandcommunitiestopartnerandengagewiththeprivatesectorandwithnonprofitsthatspecializeinspecificcompetitiveissues.BusinessandmanufacturinggroupshavearobustinfrastructuretoworktogetherthroughtheNationalAssociationofManufacturers,theU.S.ChamberofCommerceandtheAssociationofChamberofCommerceExecutives.TheNationalSkillsCoalition,theSouthernRegionalEducationBoardandtheSoutheastEmploymentandTrainingAssociationeachoffersaplatformforideaexchangesoncriticalworkforceissues.
UNDERSTANDING THE AMERICAN SOUTH’S MANUFACTURING COMPETITIVENESS AND RECOMMENDATIONS FOR THE FUTURE Althoughverydifferentfromstatetostate,amanufacturingcompetitivenessanalysis(providedinaseparatereport)oftheregionshowsthatmostofthestatesenjoyanexcellentbusinessclimateandthepresenceofstronguniversitiescommittedtotechnologytransfer.Thisprovidesasolidfoundationformanufacturingsuccess.Asthesectorcontinuestoevolve,agreaterfocusonhigherskillsforworkersandincreasedinnovationisneeded.Infrastructure,whilecurrentlyacompetitiveadvantage,willneedaggressiveimprovementstomaintainthatpositioninthecomingyears.
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SWOT Analysis of the South’s Manufacturing Competitiveness Strengths Weaknesses
• Strongexistingmanufacturingpresence
• Strongmanufacturingoutputandindustryhealth
• Excellentbusinessclimate(lowwages,lowtaxes)
• Universityresearchandtechnologytransfer
• Sloweroveralleconomicgrowth• Lowlevelsofinnovationfunding• Largeramountsofpeoplenotinthe
laborforce• Difficultlegalclimate• Lowerinvestmentinhighway
infrastructurefromstategovernments
Opportunities Threats • Continuetoleverageuniversitiesto
growtechnologysectorandattractinnovationassets
• WorkforcedevelopmentimprovementscouldstrengthentheSouth’scompetitiveness
• Withworkforcedevelopment,opportunityexiststoattractmoreadvancedhigh-techmanufacturingwithlowerwagesandlowenergycosts.
• Workforceagingoutandregionlessabletoattractmillennialworkers
• Deterioratinghighwayinfrastructure• Lackofinnovationassetscontributesto
slowgrowthinadvancedmanufacturingintheregion
Overall Strategic Checklist to Strengthen Manufacturing in the American South
• BeginwithAPolicyFocusonCompebbveness
• UseClusterPracbcesastheOrganizingPrinciple
• Understand,AnbcipateandEmbraceChange
• EnsureaCompebbveBusinessClimate
• EnhanceWorkforceSkills
• PromoteInnovabon
• InvestinInfrastructure • CollaboratetoCompete
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25 Policy Recommendations to Strengthen Manufacturing
Overall 1) Utilizestrategicplanningatthestateandregionallevel2) Focusonregionalism3) Embracepolicycoordination4) Encourageaccountability5) Pursuepartnershipsandcollaboration6) Encouragecompetition7) Promotevalue-added,notsimplylowcosts8) Buildonexistingstrengths9) Supportautonomyanddecentralization10) Ensureacultureofadaptabilityandflexibility
For Business Climate 11) Buildagovernancestructurecompetitivelypositionedontaxes,regulation,legal
environmentandleadership.12) Promotetransparencyandcontinuousmonitoring
For Workforce
13) Re-imaginereadinessbystrengtheningtheconnectionsbetweeneducationandjobskills,rethinkingcredentialsandgivingstudentsmoreexposuretowork.
14) Re-engageadultlearnersanddisconnectedyouthbytargetingassistancetoworkerswithsomecreditsbutnodegreeorcredential,todislocatedworkersandyouth
15) Re-alignrelationshipsandresourcesbycreatinglifelongcontinuityineducationandworkforcedevelopment
16) Focusonmiddleskilljobsbychangingthepublicperception17) Engagebusinessesinameaningfulway
For Innovation 18) Increaseaccesstohigh-qualitySTEMeducation19) Buildaleading21stcenturyphysicalinfrastructureincludingdigital20) Promoteaculturethatsupportsentrepreneurship,creativity,risk,andchange.21) Monitorandengagenewglobalmarketsandshiftingprioritiesfordirectforeign
investmentandexportpromotion.22) Engageexpertisefromeducationandtheprivatesectortoembracescienceand
technologychanges23) Encourageandrewarduniversityleadershiptobuildbusinesspartnershipsto
commercializenewideas
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Infrastructure 24) Supportexistingandinnovativefinancingoptionsforinfrastructureconstructionand
maintenanceatboththelocalandstatelevel25) Expanddigitalinfrastructurebroadlytocreatenewopportunities