Indiana scores an A when it comes to manufacturing, logistics

Topic: Miller College of Business

July 30, 2008

Indiana is the sixth best state for manufacturing and logistics in the country, say two new reports from Ball State University. And Hoosiers can expect stable employment in the sector, along with rising wages.

"Indiana is one of the best places for manufacturing in the nation," said Michael Hicks, director of Ball State's Bureau of Business Research (BBR). "In recent years, state leadership has developed policies to attract and retain these industries. Our neighboring states have not been able to keep up with us in this regard."

In the 2008 National Manufacturing and Logistics Report Card, Indiana is listed behind Missouri, Utah, Florida, Alabama and North Dakota.

Each state receives an A ranking as a result of overall placements in 20 categories, including property taxes, sales taxes, unemployment insurance, corporate taxes, crime and percentage of the population who are college graduates.

At the bottom of the list with Fs were New York, Kentucky, New Jersey, Vermont, Rhode Island, Maine and West Virginia.

Healthy industries

Hicks goes into details about production-based industries in the 2008 State of the Industry Report, pointing out that manufacturing and logistics industries in most of the nation — and, particularly in Indiana where state and local governments are mostly pro-business — are actually expanding despite a general belief these sectors are declining.

"The condition of manufacturing and logistics, nationwide and here in Indiana, remains remarkably misunderstood," he said. "Despite record production levels, expanded investment and growth in both wages and productivity, the shrinking or static demand for workers results in a mistaken caricature of these industries as dying. Nothing could be further from the truth."

The 2008 State of the Industry Report found that 2007 was a record year for American manufacturers with inflation-adjusted values higher than in any previous year. Nationally, growth in the production of goods continues to be robust. Even in the final quarter of 2007, as the national economy slowed, industrial production rose at an annual rate of 2.8 percent.

The report also found that workers have enjoyed wage growth over the past decade. In inflation-adjusted dollars, wages rose 26 percent over the decade ending in the fourth quarter of 2007.

Manufacturing employment in the U.S. peaked in the late 1970s with more than 19.5 million manufacturing workers. That figure has declined to roughly 13.8 million as of early 2008.

Hicks points out that these job losses are overwhelmingly due to increasing productivity in manufacturing operations and the continuing trend of larger firms to outsource for non-core operations. Together, these two factors have led to a smaller, more productive and better paid labor force, which is more concentrated on the production aspects within manufacturing firms.

Indiana is a manufacturing intensive state

Hicks said Indiana is the nation's most manufacturing intensive state, with about a third of goods and services produced from that sector.

"The state also enjoys extensive rail and road networks and access to the inland waterway system on both the Ohio River and Lake Michigan," Hicks said. "This means that manufacturing firms hire workers and produce goods in every county."

Despite a decrease in manufacturing jobs in the last few years, manufacturing employment in Indiana has been more stable than in the nation as a whole. This is due to the relatively "high productivity of Indiana manufacturing workers, the excellent logistics sector and the attractive business climate," he said.

The 2008 State of the Industry Report also found that Hoosier manufacturing firms are outperforming the nation's industrial stock indices, and manufacturing and logistics productivity growth remains strong.

These reports are sponsored by Conexus Indiana, a new initiative created to capitalize on emerging opportunities in advanced manufacturing and logistics, aligning resources and expertise to make Indiana a leader in these industries. They are posted on the BBR's Web site at www.bsu.edu/bbr under Current Studies and Publications.

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