Severity of long-term manufacturing job losses depends on location, industry

Topic: Miller College of Business

August 26, 2010

Finding work in Indiana's manufacturing plants was tough even before the recent Great Recession wiped out thousands of jobs, but some parts of the state have fared better than others, a new study from Ball State University reveals.

Indiana's Manufacturing Employment Trends, from Ball State's Center for Business and Economic Development (CBER), finds that from 1973 to 2007, counties suffering the most job losses were clustered in east central and northwest Indiana. 

The top 10 counties for job losses included Lake, Marion, Madison, Allen, Vanderburgh, Grant, Howard, Delaware, St. Joseph and LaPorte. These areas suffered heavy job losses and plant closings because of a heavy concentration of facilities focusing on machinery, electronics, computers, electrical appliances and auto components, according to the study.

Meanwhile, the state's northeastern counties experienced expansion in both employment and number of business establishments during the same time period due to having production facilities focusing on transportation equipment and fabricated metal products. These include Elkhart, Kosciusko, Dubois, Noble, Johnson, Dekalb, Lagrange, Steuben and Hamilton counties.

Advances in technology that reduce the need for large numbers of employees combined with an increase in competition have challenged all manufacturing sectors for decades, said Srikant Devaraj, CBER senior research associate and author of the study. CBER is the research arm of the Miller College of Business (MCOB).

"The productivity of manufacturing workers in the United States grew by 104.76 percent from 1987 to 2009, while employment decreased by 32.5 percent during this period, indicating that fewer workers were needed to produce the same level of output," he said. "Unless demand grows at roughly as the same rate as productivity, job losses within a particular industry are inevitable."

Devaraj also pointed out that changing consumer tastes for some products and loss of customers also account for some job losses.

Additionally, the study found that from 1973-2007:
·       Indiana reached a highpoint in manufacturing in the late 1970s when employee levels surpassed 750,000, but the number of jobs has fallen to slightly more than 550,000 in recent years.
·       Elkhart County gained the most new jobs as 22,626 positions were added, primarily in the transportation industry.
·       Lake County led the state in job losses with the elimination of 67,558 employees, mostly in the metal sector.

The size of Indiana's manufacturing operations also has changed over the years. The percentage of establishments employing 1 to 19 employees increased from 48.9 percent to 59.1 percent. This jump in small organizations could be attributed to downsizing or an increase in the number of small startup companies every year between 1973 and 2007, the study found. 

For most manufacturing sectors, large establishments with 250 or more employees have decreased in number and the proportion of small companies (less than 50 employees) have increased.

"It is evident from these trends that gains in employment in one manufacturing sector did not offset the losses in other manufacturing sectors for most Indiana counties," Devaraj said. "The size of manufacturing establishments has a shifted from large establishments to a larger number of smaller establishments. This trend has the potential to add stability to the employment base and tax base of communities."

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