Donald Fry: State task force: Manufacturing is making a comeback
By Donald C. Fry
For years, experts have been conceding the demise of U.S. manufacturing, lamenting that it's a victim of overseas low-wage labor and the seemingly inevitable conversion of our nation into largely a service economy.
Is manufacturing really dead in America? Not yet, says a recent state task force report on industrial job creation.
The report, delivered to Governor Martin O'Malley and state lawmakers in June, notes that the U.S. manufacturing industry is making a comeback and that, among other things, Baltimore County is exceptionally well-positioned in Maryland for industrial growth.
"The county has a host of attractive locations that could be marketed as areas of opportunity for industrial businesses," the report notes, citing the Sparrows Point steel mill site as particularly ripe for exploiting its high value as a potential location for a manufacturing rebound in the county.
Created by the Maryland General Assembly in 2011 and chaired by Dominick Murray, deputy secretary of the Maryland Department of Business and Economic Development, the task force promotes the importance of enacting policies aimed at nurturing a resurging industrial sector in our state.
A number of factors are leveling the playing field for the United States with international competitors such as China, including the devalued dollar, rising wage rates in China and increased shipping costs from abroad, notes the state's Task Force on Industrial Job Creation in Baltimore County.
It cites a 2011 finding by the Boston Consulting Group that between two million and three million jobs could be created in the United States by 2015 as American companies "re-shore" jobs by moving them back from China alone.
Already, there are fledgling signs of a manufacturing rebound in America. Last year, 120,000 factory jobs were added in the United States, making it the first year since 1998 that the United States has registered a year-over-year overall increase in manufacturing employment, notes the task force report .
In Maryland, there is a similar glimmer of hope in the Baltimore region, where almost 30,000 manufacturing jobs have evaporated in the last 10 years - 60 percent of the state's entire manufacturing jobs lost during that time.
The hemorrhaging of jobs in the region slowed to a trickle in 2010. Then, in 2011, the region actually registered a net gain of 300 manufacturing jobs, according to preliminary data from the U.S. Bureau of Labor Statistics. It might not sound like much, but it's the first year so far in the 21st century that manufacturing jobs increased in the Baltimore region.
Baltimore County has some significant natural competitive advantages, including transportation and export access, robust research and development capabilities, technology know-how and extensive distribution networks to serve demand from east coast population centers, according to the task force report. The same can be said for the entire region.
The report makes 38 recommendations for measures to address a number of challenges the county, region and state must overcome in order to take advantage of the opportunities presented for Maryland by a resurging U.S. manufacturing sector.
"Industry is poised to make a comeback locally if the right policies are pursued," the report states. "Policies must ensure that the state and county remain competitive, in the long term, with other states."
The report's recommendations cite two key issues - workforce development and the state's regulatory process - that are also among the eight core pillars for economic growth and job creation compiled by business leaders and economic development experts during a year-long series of focus groups and feedback sessions conducted by the Greater Baltimore Committee in 2010. The core pillars are included in the GBC report, "Gaining a Competitive Edge."
Addressing the labor force challenge is important because the scarcity of skilled machinists, operators, craft workers and technicians is among top issues impacting manufacturers, according to the report. Such jobs pay almost 54 percent more than other non-farm jobs, the task force report noted.
Its recommendations to develop a skilled industrial labor force include:
• Restore funding for the state's Partnership for Workforce Quality program and the Maryland Industrial Training Program. General Assembly funding reductions for the Partnership for Workforce Quality program, designed to upgrade the skills of a company's existing employees, will leave program funds "essentially depleted" after 2013. The Maryland Industrial Training Program, a key business attraction tool that provided participating industrial companies with up to 50 percent of new employee recruitment costs, has not been funded by state lawmakers since FY 2009, according to the report.
• Establish a manufacturing advisory council within the public school system. While existing efforts focus on science, technology, engineering and math skills that require college degrees, there is even greater demand among industrial businesses for skilled technicians, craft and trade workers that do not require a degree, the task force notes.
• Place an industrial business ombudsman in the state's Department of Education. The ombudsman should promote industrial business involvement in curriculum development and creating internships for students and teachers.
• Broaden use of the skilled trades training center at Sparrows Point. Approach new owners of Sparrows Point steel mill and the Steelworkers Union to allow third parties to be able to use the mill site's training center, which is one of the best training facilities on the East Coast for skilled trades.
In introducing its recommendations for "enhancing" the state's regulatory environment, the task force report notes industrial businesses often cite difficulties with permitting and regulatory processes as a key barrier to business growth.
But "it is not generally a particular permit or regulation that businesses find onerous, but an overall dissatisfaction with the process," the report states. "As many industrial businesses are small, they lack the manpower to engage with the regulatory process."
Recommendations to address regulatory challenges include:
• Add business-climate staff to the state's Maryland Made Easy initiative. These staffers would be "devoted to the ongoing improvement of Maryland's business climate." Maryland Made Easy would be the designated venue for cross-agency responses to business concerns regarding permitting and regulations.
• Expedite designation of new locations to place harbor dredge. A number of business growth opportunities could be made possible if more sites were made available to place dredge materials from private industrial sites, the task force report notes. It cites one ship-repair company that could double its workforce if it could dredge a particular location to allow for larger ships. The project is stalled because of limited available dredge deposit sites.
The report also suggests the state and county work with new owners of Sparrows Point and the federal government to remediate environmental conditions at the Coke Point portion of the site so that it could be used for placement of dredge.
• Include an advisor from DBED on the General Assembly's Joint Committee on Administration, Executive and Legislative Review. The advisor, who could be the DBED secretary or a designee, would serve as the voice of business on this important committee, which has oversight for state regulations, policies and procedures.
Sparrows Point also figures into business attraction recommendations made by the task force. It suggests the county and state work with new owners of the property to create a leasing and redevelopment process for underutilized parcels.
A succession of different Sparrows Point owners over the last several years has cleaned up or cleared a number of buildings, opening up unutilized acres for development "while the vacant buildings could be leased to other industrial businesses," the report states. It notes interest in such leases has been expressed by businesses including diesel engine builders, railroad suppliers, ship builders, trucking firms and manufacturers of cranes and cargo containers.
Other business development suggestions include recommendations to incorporate a "business concierge" service into DBED, develop a resource guidebook for industrial businesses, and maintain funding for DBED industrial financing programs.
The task force also recommends the county and state work to change public misperceptions about manufacturing. Noting that "the public is largely unaware of the resurgence of industry," it urges Baltimore County and DBED to publicize industrial success stories "to reflect opportunities for younger workers in a growth industry."
While the task force focused primarily on opportunities for industrial growth in Baltimore County - the Maryland jurisdiction with the largest industrial base - its recommendations for promoting industrial growth have statewide relevance.
The report should serve as the starting point for the work of the new Maryland Advisory Commission on Manufacturing Competitiveness that was appointed by Governor O'Malley and began meeting on July 17.
The report reminds us that the core element of any strong economy is a business sector that makes things.