PART 2:
Ohio Manufacturing:
Is There a Future?
By Robert R. Ebert, Ph.D.
Buckhorn Professor of Economics
In the June 2006 issue of Business and Economy, the article on United States manufacturing industries concluded with: “A reasonable guess is that it [the United States economy] will provide the investment… business incentives, and regulatory environment that will propel… manufacturing output and productivity… upward well into the 21st century.” In this issue we examine whether Ohio and, specifically, Northeast Ohio, have an opportunity to participate in growth
in the manufacturing sector.
Manufacturing in Ohio –A Profile
As a proportion of the Ohio work force, manufacturing has been declining since at least the early 1990s. From nearly a quarter of the state's work force in 1993, manufacturing accounted for less that
18 percent of Ohio workers in 2004, the last year for which complete data are available (see Table 1). The
decline in manufacturing employment has been particularly pronounced since the year 2000. Nearly five percent of manufacturing jobs were lost in Ohio during the 2000-2004 period. The decline in manufacturing in Northeast Ohio has been especially severe. Over the past dozen years, there has been a nine percent decline in the number of manufacturing firms in Northeast Ohio with most of the decline occurring since 2000. Manufacturing employment in Northeast Ohio has dropped by over 26 percent since 1993 including by nearly a fifth since 2000. (See Tables 2 and 3 for a breakdown of data by counties in Northeast Ohio.) Yet, the Northeast Ohio (NEO) region is a vital part of both the state and national economies. The area is sometimes referred to as the gateway to America's manufacturing heartland. The manufacturing region encompassing Cleveland, Akron, Youngstown and Pittsburgh is the fifth largest market in the United States. Furthermore, half of Ohio's economic base is in NEO (NEOTEC).
The Future
Is it all doom and gloom for the Ohio manufacturing sector? The short answer is – not necessarily. While it is unlikely that manufacturing in Ohio and NEO will return to the glory days of steel, autos and heavy industry such as rubber and metal working in the mid 20th century, there are opportunities and sectors for growth. Those opportunities are most likely going to be in emerging industries employing 21st century technologies and requiring a labor force capable of meeting the challenge of a new era in the United States and Ohio manufacturing sectors.
Advanced manufacturing such as in medical manufacturing plus building on the already significant strength of the region in polymers and plastics will provide focus for the manufacturing future of the region. The Polymer and plastics industry alone employs 142,000 people in 2,800 Ohio firms. About half of those firms and 30 percent of the employment in the polymers and plastic sector are in NEO (Team Ohio).
However, even as the region looks forward to growth in the high tech sectors, the traditional manufacturing industries are still important and vital to the state and NEO (Team Ohio). Overall, throughout the state, Census Bureau data show that over 700 firms and 145,000 people are employed in the transportation equipment sector (which includes the auto industry). Another nearly 22,000 individuals are employed in iron and steel and steel products manufacturing. In the machinery manufacturing sector, over 77,000 people have jobs in over 1,900 firms (CBP).
Policy and the Road Ahead
Ohio and the NEO region face the challenge of assuring the health of traditional manufacturing industries while also promoting the development of leading edge industries that are likely to see growth in the 21st century. Fortunately, in facing this challenge, the state and the NEO region in particular are endowed with significant infrastructure assets; access to Lake Erie, significant interstate highway and rail transportation systems, outstanding medical facilities, excellent institutions of higher education, and a trained and skilled workforce. But, there is no single “silver bullet” that will lead to success. A number of significant public and private initiatives already are underway. A sampling of these includes:
• The Manufacturing Advocacy and Growth Network (MAGNET), which is a NEO consortium of business firms, educational institutions, Federal Reserve Bank of Cleveland and a number of chambers of commerce. It seeks to advance the Global Roadmap for Manufacturing program. The Roadmap aims to serve as an advocate for manufacturing to promote innovation, productivity and education in the region.
• Governor Bob Taft initiated the Third Frontier Project in 2002. It is a ten-year $1.6 billion project with the objective of building world class research capabilities, supporting early stage capital formation and the development of new products, aiding financing and advance manufacturing technologies to help existing 6 industries be more productive. As of the end of 2005, the Third Frontier Project had awarded $301 million to support projects consistent with its objective (The Ohio 3rd).
• The Ohio Economic Development Division, a state agency, assists in administering The Third Frontier initiative. In addition, it assists new entrepreneurs as well as large corporations with low interest loans, grants, bonds, and state and local tax initiatives and employee training and infrastructure development.
The state and NEO region have the infrastructure, industrial base and educational potential to achieve continued success in the manufacturing sector in the 21st century. Over time, that success will play out in the evolution of Ohio in new directions from the traditional heavy industries that made Ohio a 20th century manufacturing power. However, those traditional industries continue to provide a solid, although at times declining, base from which to leverage the region's assets in the future. Important to the success of this evolution will be the willingness of business, governmental, labor and academic institutions and stakeholders to work on coordinated efforts to advance the state and Northeast Ohio region.
Works Cited
(CBP) County Business Patterns. U.S Bureau of the Census. 1993, 1994, 2000, 2004. Washington,
D.C.: U.S. Government Printing Office.
NEOTEC. Northeast Ohio Trade and Economic Consortium.
“Welcome to NEOTEC.” Accessed at http://www.neotec.org on 8/17/2006.
Team Ohio. “Redis NEO. GIS.” Accessed at http://www.teamohio.org/Content/Industriedmanufacturing.asp
on 8/29/2006.
MAGNET. “This is MAGNET: FAQ's.” accessed at http://www.magnetwork.org/Magnet/faqs.htm on 8/29/2006.
“The Ohio 3rd Frontier Project.” Accessed at http://www.thirdfrontier.com/overview.asp on 8/17/2006.
Ohio Department of Development (ODD). “Did You Know?” accessed at http://www.odod.state.oh.us/EconomicDevelopment.htm on 8/17/2006.
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