Economic development…are we speaking the right language?
Each August I make a trek to Sacramento, California to teach a three hour class to fellow Chamber peers from around the West on how we as chambers can strengthen our local economies. I enjoy the exercise because it forces me to do some research, catch up on my reading of the topic and it actually makes me pull my head out of day to day matters to see what is happening in this important area. As a result I learn as much as my captive audience does…maybe even more.
Last month I discussed the global economy. Coincidentally I had the opportunity to review a trade publication article on “re-shoring” this past week. Factories in the United States have added 250,000 new jobs since 2010 according to Susan Christopherson, an economic geographer with Cornell University. It is the first sustained job growth in manufacturing since 1997 and happened as companies were reevaluating their transportation costs, quality of products and lower labor costs.
By some estimates this small trend could be expanded to generate up to 800,000 jobs in new or returning jobs in the future. There is particular interest in focusing on what are considered “middle technology” industries. Automotive parts, transportation equipment, appliance manufacturing and fabricated materials are all considered middle technology industries. These industries have been the most vulnerable to international competition, but they also are looking for more locations closer to their markets.
But in order to capture or “recapture” these industries we need to be strategic in our thinking and address some major barriers to this resurgence in manufacturing including health care costs in order to make labor costs more competitive. And, small and medium-size manufacturers need to be supported to build stronger supply chains and to help these companies develop global markets for their products.
Health care costs are often viewed as a consumer issue. The reality is that it is businesses that pay for part or all of the health insurance premiums of 80% of this country’s workforce. And, they are the ones who have borne the brunt of the rising costs of health care since some bright young MBA in the 1940s decided to marry health insurance and wages into a benefits package to attract skilled workers.
But businesses have not been actively engaged in the conversations about what comes next with health care in the United States. They are confused about what it will look like and many are ready to be fined rather than see additional double digit premium increases as health care providers and the government try to sort out the new system and how to subsidize coverage for the poor and elderly. This is particularly true of the small manufacturing companies we have in the Grand Valley. It will be difficult to address this barrier but we must try and we must have the business voice in any discussions about moving forward into the brave new world of Obamacare.
Our small existing manufacturing firms must also be supported as they build stronger supply chains and develop global markets. A case in point that is very real for the Grand Valley is the current lack of certain certified specialty processing locally. Advanced manufacturing produces parts and pieces that must be coated via processes such as anodizing or a chemical film application. And because these parts are then sold to other manufacturing companies or assembled into larger products there has been a growth in both environmental compliance standards and the need for outside certifications as to the quality of the process.
Many of our current “middle technology” manufacturing firms locally are forced to ship products to Denver or Phoenix for this kind of processing because the local capacity is limited and/or lacks the needed certifications. Obviously that drives up costs, lengthens order fulfillment times and puts our companies at a cost disadvantage in competing globally. If we can help our local companies address this “gap” in our local supply chain we can help them be more successful. If they are more successful we know they will ultimately be able to grow and add employment.
This specialty process need is something that we local economic developers have known about for the past decade.
Yet, our current local economic tool chest has used the measurement of job creation in terms of incentives and assistance rather than focusing our efforts on our own “product development” as a community and helping companies shorten the supply chain or find other ways to be more competitive.
I would challenge that we have not been speaking the right language as we look at how to increase manufacturing jobs in Mesa County. We need to go deeper than jobs…we need to look at hands on help with the barriers to growth that our industries are dealing with including health care costs and supply chains. It is harder to do but it also effects systemic change that leads to a much more robust and sustainable economy.