Manufacturing is key to regional recovery

Two recent reports shine the spotlight on manufacturing as a base for regional development and offer fresh strategies to build a stronger manufacturing base going forward. Both see a strong future in manufacturing in the U.S.–if federal and state policies realign their current focus.

In “Accelerating Advanced Manufacturing with New Research Centers,” BRR Network member Howard Wial and his colleagues at the Brookings Institution provide a roadmap for how states might better position themselves to be in the vanguard of “new” manufacturing. In their view, state and metro area efforts are not focused on what would be most helpful for manufacturers, which is helping them develop or apply more advanced technologies. This is particularly relevant for  small and medium-sized businesses in the manufacturing supply chain.

“U.S. manufacturing has been in decline for years, but we should not treat continued decline as inevitable,” Howard Wial, BRR member and fellow at the Brookings’ Metropolitan Policy Program, noted in a press release. “Manufacturing still produces the bulk of our exports. It is still key to innovation. It still provides high-wage jobs. Our task now is to play to our strengths and provide the tools and investments manufacturers need.”

To bolster manufacturing, states should:

  • Reconfigure financial incentives to support existing manufacturing.
  • Help small and mid-sized firms in the manufacturing chain adopt new technologies
  • Combine engineering research with education for businesses on how to adopt new technologies.

In but one example, many manufacturing industries have long supply chains, where layers of specialized firms provide components for a finished product. As the Brooking report notes, “Over the last few decades, suppliers, often small or medium-sized, have become responsible for designing and making much of the content of manufactured goods. Consequently, innovation in U.S. manufacturing depends increasingly on the capabilities of these firms. Yet most of them do little or no formal R&D and cannot easily take advantage of university-based R&D. Unlike many European countries, the United States has few institutions that help coordinate upgrading of suppliers, and few state efforts fill this gap.”

To spark this process, states should create manufacturing centers for research and education, Wial argues. The centers, located in metro areas, can do much more in terms of building a sustainable manufacturing base than incentives and business-attraction strategies. They can help develop and spread manufacturing technologies and foster relationships between goods producers and their suppliers. The centers can also solve generic technical and management problems in one or more industries.

For example, new technologies can improve production, and it would seem logical that there are some problems that are widely shared, despite the type of manufacturing one does. Yet there is little research on which problems matter to a wide range of manufacturers–not just within one industry. There is also little understanding of how workflow and other organizational management issues might change once technological advances are adopted. Some organizations in the U.S. are trying to tackle these issues, but they typically focus on technological breakthroughs by industry, not across industries. (For a good example in Europe, see Germany’s 59 Fraunhofer Institutes.) Manufacturing centers could tackle these issues.

The centers could also do research that both advances knowledge and is of practical use in the near term. For example, the centers could delve into the chemical properties of new, lightweight materials that could aid in reducing energy use.  The precise research focus would vary from state to state, building on the existing economic development strengths of regional industry clusters within the state.

While the Brookings paper focuses on the local role in bolstering manufacturing, a second paper, Nisha Mistry and Joan Byron of the Urban Institute looks at the federal role. The paper focuses on small manufacturing—the cabinet makers or the computer components manufacturers —and their importance to urban economies.  In 2007, the report notes, “of the approximately 51,000 manufacturers in the United States employing fewer than 20 people, more than a third were located in the nation’s 10 largest cities.”

Yet despite their importance to families and regions, the federal government clings to an “outdated perceptions about the ‘how, what, and where’ of American manufacturing.” As a result, the vital role of small manufacturing is overlooked “and at worst undermined (if inadvertently) by policies and programs that may have been adopted to achieve other local development ends.”

The Federal Role in Supporting Urban Manufacturing” offers several examples of how the federal role could be improved. To start, it says, federal policies could help these manufacturers form clusters, whose collective insights and skills can spark synergy and innovation in training, research, and export strategies.

In addition, the federal government can ensure that the small manufacturers have the space, infrastructure, and technical assistance they need. The joint $75 million initiative of the departments of Housing and Urban Development and Transportation is an example of a forward-looking policy. It funds “localized planning activities that integrate transportation, housing, and economic development.” Under that banner, planning for the reduction of conflict between freight facilities and residential areas is an eligible activity.

Despite the losses in manufacturing between 2000 and 2009, even this comparatively diminished manufacturing sector accounts for the bulk of U.S. exports, notes the Brookings report. It is key to innovation and provides many high-wage jobs for less educated workers. (Seven in ten U.S. workers do not have a bachelor’s degree.) Therefore, a focus on manufacturing remains critical to an economic recovery that can help lift the futures of America’s families, and position the U.S. as a leader in innovation.

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