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Not Your Father's Factory Job: Manufacturing and Economic Development

May 2011

Teresa Cheeks Wilson: Welcome to the Federal Reserve Bank of Atlanta's Economic Development podcast series. I'm Teresa Cheeks Wilson with the Federal Reserve Bank of St. Louis's Memphis branch.

The manufacturing sector has experienced a significant decline in employment levels over the last two decades but remains a key source of jobs in the United States. Changes in technology and increasing globalization have transformed how we view modern manufacturing jobs, as well as the strategies we should use to recruit and retain manufacturers in our communities. To adapt to this changing environment, traditional approaches to workforce development must also change to better meet the demands of manufacturers now and in the future.

photo of Jay MoonToday, we are speaking with Jay Moon, president and CEO of the Mississippi Manufacturers Association. This group provides a broad range of services to more than 2,000 manufacturers and their suppliers. Mr. Moon has more than 25 years of successful economic development experience, including serving as the deputy director and the director for international development with the Mississippi Development Authority. Mr. Moon also serves as vice chair of the International Economic Development Council.

Mr. Moon, thank you for joining me today.

Jay Moon: Well, thank you for the opportunity.

Wilson: Manufacturing has long been viewed as a critical industry for economic development. We hear about the multiplier effects of manufacturing jobs. Why are manufacturing jobs so important relative to other jobs, and what is a multiplier effect?

Moon: Manufacturing represents $4.4 trillion in sales in the United States. It is far and away the largest income generator of any sector in the economy. And still, even with the reductions, we are fourth in overall employment.

Manufacturing creates wealth. Many services that we hear about—the rise of the service economy—simply move existing wealth around, but manufacturing brings in new revenues into communities and states. Manufacturing salaries are generally higher than comparable salaries in the services community. Therefore, it generates more income and has a greater ripple effect. Generally, benefits are better. It's manufacturers that produce the equipment that our armed forces use. The middle class was largely—and has been largely composed since World War II—of those who are engaged in manufacturing.

Another issue I think that's important is the area of innovation. Two-thirds of all research and development that is done in this country is done by manufacturers or for manufacturers. And as Andy Grove, one of the founders of Intel, said, "It's hard to innovate if you don't make." It's very important that we be able to innovate to ensure that we have a very strong economy.

Now, you also asked me about the multiplier effect. The multiplier effect simply means that for every one job that is created directly in manufacturing, another three to four jobs are also created to support that job. Those could be jobs in transportation, packaging, accounting, legal—a wide variety of different jobs that were also created in order to support that manufacturing industry. So, it not only does all the great things I mentioned before about salaries and benefits for those who are directly engaged in manufacturing, but it also helps to create many more great jobs in our economy.

Wilson: Over the last two decades, we've witnessed a decline in U.S. manufacturing employment, while at the same time production has continued to grow because of the increase in advanced manufacturing. What is "advanced manufacturing," and do you see it as a potential source of new jobs for the overall economy?

Moon: If we look at advanced manufacturing, it's a combination of the use of technology, a higher skilled workforce, greater efficiencies—all of that to produce a higher level of productivity. A lot of those new levels of efficiency that I mentioned can involve just-in-time manufacturing, LEAN manufacturing, cutting costs, and ensuring that our manufacturers are competitive in a global marketplace, and also to ensure that they can meet the demands of the consumers because demands are changing very rapidly in this global marketplace, and we have to be able to respond to those demands in an efficient way, but also in a very quick way. That's where we are going in the United States today. We're not going to have the kind of manufacturing that we used to have. We are going to be almost completely engaged in advanced manufacturing.

Wilson: Access to a skilled workforce is critical to most industries. This has become increasingly true for manufacturing, as its procedures become more and more sophisticated. What educational expectations do manufacturers have for their workforce now and in the future?

Moon: We recently [gave] a survey to our manufacturers and asked them what kinds of educational and workforce skills are they projecting three and five years out. They said that they're going to be looking at a high-performance workforce, a workforce that has a greater level of skills to be able to operate the more sophisticated types of machinery that are now being used in the manufacturing process. They're going to be looking for individuals who can come to work and work in teams, work with groups to solve problems and to innovate. And I think one of the critical issues that we're going to have is ensuring that more and more of our young men and women actually graduate from high school and then go on to a community college. We have two major automotive assembly facilities here in Mississippi, both Nissan and Toyota, and you cannot even get a job or apply for a job there unless you have a high school degree. They're looking for individuals who want to take pride in their work, individuals that show up on time, individuals that are drug- and alcohol-free—things that we think are basic, but in many cases are difficult to find in the workforce today. It's going to be incumbent upon us to increase the ability of our community colleges to work more effectively with business and industry in order to provide those kinds of skilled employees for the workforce of the future.

Wilson: Mississippi, like many southern states, has challenges in its K-12 educational system. Employers and site-selection professionals are well aware of how standardized test scores and high school completion rates compare. Given these challenges, what can economic developers and other community leaders do to ensure that employers can find the workforce that they need in their local communities?

Moon: They're going to have to work very closely with business to determine what their needs are, then help to translate those needs back to community colleges, back to the K-12 educational system so that they understand exactly what business and industry are looking for in terms of the training that's needed. We're going to have to work with our high school students to suggest to them that there are great jobs in manufacturing. We filmed the kinds of businesses that are out that are offering great jobs to try to ensure that high school students understand that there are opportunities out there. Local developers can do labor surveys so that they can demonstrate to business and industry that in fact they have available labor and what kind of skill levels they might have. They need to work with their job centers that provide information on job availability and skills to the business community. They need to encourage industrial leaders to visit the schools, and, in reverse, they need to encourage teachers to go out and visit businesses and see how manufacturing is done so that they can translate that back into their lesson plans. Also, we need to encourage our manufacturers to offer internships and apprenticeships so that we can draw more young men and women into the manufacturing environment so they can see what kinds of opportunities might be out there.

Wilson: Manufacturers have long relied on technical and vocational colleges to develop their workforce pipeline. How have changes in the industry changed the relationship between technical and vocational colleges and manufacturers? What changes do you expect in the future?

Moon: Community colleges are going to play an increasing role in providing the workforce of the future. The needs of industry are rapid. When they need a welder, when they need an industrial maintenance person, they need them right now. They don't need them six months or a year from now. And so they're going to have to be more adaptive in terms of their course offerings, they're going to have to change some of their scheduling, it's going to have to be more compressed to meet the needs of business and industry, particularly industrial needs. So they're going to have to change the way that they currently do their academic enrollment. It's going to have to change for business needs.

More and more community colleges are moving towards certified national training standards. It ensures that a certain level of training, say for a welder or an industrial maintenance person, that training is done the same way from one community college to another, from one state to another, and there are many benefits to that. One, the standardized training has ensured that it meets national standards that are set out there by business and industry cooperating with the community colleges. Secondly, it provides portability for the individual so that if they get trained in Mississippi they can take that certificate to Missouri or California or Michigan, and they will know exactly when they get there what kind of training they have had. And then it provides for a constant level of upgrade because you are improving the training because it resonates with the business and industry who are coming back and saying, "Well, we need to improve this area, or that area."

We need more and more young men and women graduating from high school, or those that come back and get their GED, so that they can move on to community college. There are many community colleges working very closely with the business community, with the manufacturing community to provide those kinds of skill sets that are in demand out there. And where that is being done, it's very effective. It meets the needs of both the students, the schools and the private sector, and that is a very good operative model that more and more community colleges, I think, will be looking at in the future.

Wilson: Mr. Moon, thank you for joining us today.

Moon: Well, it's been my great pleasure. Thank you for having me.

Wilson: This concludes our podcast. We've been speaking with Mr. Jay Moon, president and CEO of the Mississippi Manufacturers Association. For more podcasts on this topic and others, please visit the Atlanta Fed's website at www.frbatlanta.org. If you have comments or questions, please e-mail podcast@frbatlanta.org.

Thanks for listening.

To learn more about the Dream It. Do It. Campaign, a program to address the growing shortage of talent and skilled workers in U.S. manufacturing, visit www.dreamit-doit.com.