On March 12, 2018, The Century Foundation’s Bernard L. Schwartz Rediscovering Government Initiative convened the third in a series of summits aimed at charting a path toward reinvigorating manufacturing in America’s industrial heartland. The summit was opened by an important question posed by TCF senior fellow Jeff Madrick: what kind of intentional policies can be developed that can create a high-wage society when so many businesses have built their businesses on a low-wage model? The events—first in Washington, D.C., then in Pittsburgh, PA, most recently in Cleveland, OH, and forthcoming in Chicago—are intended to be listening sessions to determine the challenges and best practices in states that have a deep history of manufacturing, and are part of the Rediscovering Government Initiative’s High Wage America project.
The Importance of Supply Chains
As part of the event, Michael Shields of Policy Matters Ohio presented the findings of a major report that detailed the policies that have led to a decline of manufacturing in Ohio, as well as policies that can help manufacturing in the state bounce back. Like much of the industrial heartland, Ohio’s manufacturing sector has decreased significantly since 1990. The state has lost more than 396,000 manufacturing jobs, or from 22.7 percent of all jobs in 1990 to 12.7 percent in 2016. Even so, manufacturing in Ohio still commands a median wage of $59,000, which is $11,000 higher than all other sectors combined. This is due in large part to the significantly higher union density in the manufacturing sector, with Ohio’s manufacturing workers 41 percent more likely to belong to a union than workers in other industries. Union leaders, like United Steelworkers’ Ohio director Dave McCall, were a key part of the summit’s discussions and its multifaceted agenda, all geared toward promoting a more efficient and sustainable sector. The reasons for why such a revitalization is necessary are clear: decline in manufacturing has led to a significant statewide decrease in the median wage.
Despite this downturn, Ohio remains third in the nation for the size of its manufacturing workforce—behind the much larger states of California and Texas—with the sector employing twice the national average of workers
Despite this downturn, Ohio remains third in the nation for the size of its manufacturing workforce—behind the much larger states of California and Texas—with the sector employing twice the national average of workers. Corporate revenues in the manufacturing sector were at $106 billion in 2016, which represents a 24.5-percent increase from 2009, the worst year of the Great Recession. Shields’s report shows that Ohio has robust supply-chain manufacturing, finding that “Ohio has three times the national average of foundries, metalworks, forges, rubberworks, and steel products plants.” Ohio also retains “a substantial share of high-paying manufacturing jobs in advanced, capital-intensive industries, especially in building transportation equipment such as car and aerospace parts.”
Case Western Reserve professor and former chief economist at the U.S. Department of Commerce Susan Helper built on the arguments of the report by suggesting that more attention needs to be paid to supply chains. Her research has found that two-thirds of manufacturing costs are in supply chains, compared to only 8 percent in production labor. This is in line with a seminal investigation by the New York Times on why the United States lost out to China for manufacturing the iPhone. It found that “For technology companies, the cost of labor is minimal compared with the expense of buying parts and managing supply chains that bring together components and services from hundreds of companies.” Therefore, more efficient supply chains can mitigate costs for American manufacturers and make them more competitive with foreign competition. Disinvestment in supply chains has stemmed from market failures, such as corporate fear of free-ridership, which occurs if a firm’s investment in a supplier also assists their competition, and internal corporate silos that compete. This means that there needs to be more government intervention, both in terms of its purchasing power as a market participant and its policies.
With regards to supply chains, Shields recommended policies that would help develop “robust industrial commons—the set of shared resources that manufacturing firms and workforce both can draw on to thrive in a changing economy.” Such industrial commons already exist on a small scale, such as the Manufacturing Extension Partnerships (MEPs), which connect small firms with engineers, train workers, and provide firms with access to capital infrastructure; Ohio’s Edison Technology Centers, which promote process innovation and the commercialization of new technologies; and America Makes, one of fourteen new federally-funded manufacturing innovation hubs. Professor Helper argued that far more investment needs to be made in these programs to help support small manufacturing, which gets little attention, but is responsible for 40 percent of the jobs in the sector.
Harvesting Local Natural Energy
Supply chains, both existing and emerging, are at the heart of the Cleveland-based Lake Erie Energy Development Corporation’s (LEEDCo) Icebreaker Project. LEEDCo was founded as a public–private partnership founded by the Cleveland Foundation that focuses on energy and manufacturing. LEEDCo president Dr. Lorry Wagner described how LEEDCo aims to harness the immense manufacturing and energy potential of offshore wind. Technology that capitalizes on this natural resource is being used on every continent, and in Europe has created more than 100,000 jobs and a quarter-trillion-dollar industry. Despite the potential of the technology, Dr. Wagner explained that “No one wants to hear about Europe. This is to show it can work here.”
LEEDCo started the Icebreaker Wind Farm—a project with six turbines designed to demonstrate how to develop the technology for stateside use, and to illustrate that the benefits are as predicted. They have worked to develop a state supply chain, holding supply-chain open houses and engaging with a wide variety of local corporations. The result has been that over 370 Ohio companies signed up to be part of the supply chain in this new industry. LEEDCo anticipates that the Icebreaker Wind project alone will create over 500 jobs and $168 million in local economic impact in northeast Ohio, while laying the foundation of an industry and supply chains will create 8,000 good-paying manufacturing jobs in the region and create nearly $14 billion dollars in profit by 2030. Despite these promising figures, LEEDCo has received no state funding to further the project, which is indicative of how innovative and promising manufacturing technology can still power through and flourish despite suffering from a lack of public investment.
Furthermore, public opinion has been shown to be in favor of the development of this offshore wind technology. Over the past year, the Ohio Power Sitting Board (OPSB) solicited public comments concerning the project, and of the 900 comments received, 800 were in favor. Wind power activist Sarah Taylor analyzed these public comments and found that over half of the comments in support of the project came from members of building trade unions, such as the International Brotherhood of Electrical Workers and the Carpenters and Ironworkers unions. “From their words, one can see their emphasis on economic development and the associated job growth that would take place. However, in addition, many of their submissions also point out that Cleveland could once again play a leadership role in making use of our natural resources.”
Increasing manufacturing and creating jobs is only one piece of the puzzle; another significant issue is developing a skilled workforce that has real access to manufacturing jobs. Shields’ report suggested several important policy solutions to this issue. First, he argued that the current model of having communities compete for firms with lavish tax giveaways “turns markets on their heads.” Instead, Ohio should direct state pension funds to “invest in entities that grow jobs in Ohio communities,” in the ways that Heartland Capital Strategies and the AFL-CIO Housing Investment Trust have been doing. In addition, Ohio should increase funding for workforce development and direct federal Workforce Innovation and Opportunity Act (WIOA) funding to target the expansion of apprenticeships. The state should also adopt a program similar to Pennsylvania’s Steel Valley Authority’s Strategic Early Warning Network (SEWN), a layoff aversion program that has been found to save more than 1,000 jobs annually at a relatively low cost.
Job Placement and Skills Training
Bishara Addison of the Cleveland-based non-profit organization Towards Employment also focused on job placement and discussed her organization’s work around programs for individuals that have various barriers to employment, including criminal records, lack of various forms of literacy, and skills gaps. To illustrate the extent of these barriers, Addison cited data from several years ago, data which revealed that one in five Ohioans had a criminal record, and noted that the figure has likely increased with the opioid epidemic that has hit the state. Therefore Towards Employment focuses on “high-touch” recruitment, which means meeting people where they are, both geographically and in their specific needs. For that reason, the organization emphasizes encouraging employers to partner with community-based partners.
In order to address these major barriers, Towards Employment has participated in WorkAdvance, an evidence-based program that combines elements of sector-based initiatives, training, placement, and post-employment retention and advancement support to place workers in manufacturing and health care jobs. WorkAdvance starts with intensive screening procedures that looks not only at education, literacy, and numeracy, but also at subjective staff assessments of applicants’ barriers to employment, attitudes, and motivation to persevere. WorkAdvance participants were paired with career coaches because their research showed that individuals with career coaches were ten times more likely to advance in the manufacturing sector. The result was that participants were nearly four times as likely to receive occupational skills training, 49 percent more likely to work in the targeted sectors of health care and manufacturing, and had a 14-to-22-percent increase in earnings.
Ideas first discussed in the October 2017 Pittsburgh event concerning the problems that the state of Pennsylvania has faced because of deindustrialization, and the programs that have worked in bringing back manufacturing there, were further discussed in Cleveland. These included experiences with MEPs, layoff aversion programs, and strategic impact investment by union pension funds and philanthropic organizations. As discussed in Pittsburgh, states in the heartland have been ahead of the federal government on industrial policy. States such as Pennsylvania, Ohio, Illinois, and others have created and built upon programs that have stemmed deindustrialization and have maintained their core manufacturing sectors. One of the goals of the TCF Rediscovering Government Initiative is to better understand what works, what can be scaled up, and what can be tried elsewhere.
Changing Our National Narrative about Manufacturing Jobs
Ohio senator Sherrod Brown delivered the keynote address, where he spoke about the importance of enforcing trade policies, protecting collective bargaining rights and fighting so-called “right to work,” and raising the minimum wage while also encouraging employers to pay higher wages. Senator Brown also discussed the importance of changing the narrative surrounding manufacturing. He recounted a story from several years prior when President Obama’s manufacturing czar, Ron Bloom, met with him and several other senators. Bloom explained to the group of senators that everyone says they want more manufacturing in this country, but no one wants their kid to do it. Bloom told them that we all know how important manufacturing is to the country and to the states that so many of the senators in the room hailed from. But until something is done to encourage children, students, and workers to take the steps necessary to enter manufacturing, it won’t come back.
Senator Brown explained that his mission, ever since he heard Ron Bloom discuss manufacturing, was to figure out how we can change that perception around the industry. He discussed the importance of getting more Ohioans interested in manufacturing jobs, in coordination with the need to create more of those jobs. As part of this campaign, it is imperative that manufacturing jobs keep the high wages they have traditionally had. He added that this means there has to be increased support for unions and the rights to bargain collectively.
When they hear of manufacturing, people too often think of dirty, dusty jobs. This is reinforced every time people refer to the region as the “Rust Belt,” which evokes the image of old and rusty factories. However, ArcelorMittal, which is located only a few miles from where the summit took place, is the first integrated steel mill where one person-hour creates one ton of steel. It is a state-of-the-art facility that is anything but rusty, where steelworkers are highly skilled, represented by a union, and have strong wages and benefits. Senator Brown explained that part of the fight to bring back manufacturing is to replace the vision too many have of manufacturing plants with ones like Ohio’s ArcelorMittal.
As The Century Foundation reflects on the our visits to Pittsburgh and Cleveland, we find that there are major differences between these two proud cities just a two-hour drive apart, and that much has changed in the past decades when it comes to the role of traditional industries like steel and automotives. What these cities have in common, though, is a belief that manufacturing is still a critical part of their region’s economy, and that both are looking not to a nostalgic past of good jobs for the white working class but to a high-tech, more inclusive, high-wage future. The summit series continues, rolling into Chicago on June 6, where we will learn many more new things about the industry, but we are sure to find a similar passion for the industry’s future.