The Economy & You #44: Manufacturing & Logistics – How Does WI Rate
The automobile and trucking industries have long been fixtures of our state economy. Manufacturing and logistics are two industries that are seen as an integral part of our state’s and our nation’s economic resurgence. Conexus Indiana with the assistance of the Center for Business and Economic Research at Ball State University has issued its 2012 Manufacturing + Logistics National Report.
The report attempts to compare how each state ranks among other states in areas of the economy related to manufacturing and logistics. Specific measures include: manufacturing and logistics industry health; human capital; cost of worker benefits; industry diversification; productivity and innovation at the state level; tax climate, expected fiscal liability; and global reach.
Wisconsin ranks well with regards to the health of its manufacturing sector. The strength of manufacturing is not dependent upon local demand, but site location depends on strong local factors such as the quality and availability of labor, access to innovative technologies, a strong transportation system, and the cost of doing business. Manufacturing is important because of the family supporting wages it generates, but also for the multiplier effect that I described in a previous article. The report measured total income earned by manufacturing employees, manufacturing wages and the share of manufacturing employment per capita.
Without a strong logistics industry, manufacturing and the production of commodity goods (e.g. agriculture and mining) would be severely limited. Still, logistics is more than the transportation of goods; it is also storage of inventories and the processing of orders of goods. Wisconsin received a letter grade of B-. The report measured the share of logistics income compared to total state income, logistics employment per capita, and per capita spending on transportation infrastructure.
Wisconsin is well known for its educational system and consequently received a B in the area of human capital. The report examined educational attainment, the number of college degrees awarded per capita and retention rates for adults enrolled in community and technical colleges.
Worker Benefit Costs
Non-wage labor costs are becoming an important component of total business costs. These costs include health insurance, workers compensation, retirement costs, etc. CBER measured these benefit costs as a share of worker costs. The cost of worker benefits is the area in which Wisconsin rated the lowest with a D-. A variety of factors can go into the higher benefit costs including age of the worker (older workers typically cost more), the performance of the industry or company (successful firms tend to reward their employees), as well as employee contracts that stipulate employee benefits.
Wisconsin has been regarding for many years as a high tax state. This report does nothing to change that perception as it gave Wisconsin a D+ regarding tax climate. Using Internal Revenue Service data related to corporate, income, sales, property and unemployment insurance taxes, Wisconsin is seen as a liability to business determining whether to locate in a particular state.
Expected Liability Gap
This new category shows Wisconsin’s strength regarding future liabilities. Wisconsin received an A for its commitment to fund its future pension obligations and infrastructure improvements. Unfunded liabilities are a good indicator of a state that will need to raise future tax revenues to meet their debt obligations. We have been recognized nationally for being the only state with a fully funded state pension system.
International trade is strong measure of a state’s competitiveness in the production and transport of goods. Wisconsin received a C in global reach when examining exports of manufactured goods per capita, growth in manufactured exports and foreign direct investment. This grade does not appear to factor in agricultural exports which are an important part of our state economy.
Industry diversification is a double-edged sword for states. States with a concentration in a specific manufacturing sector are susceptible to booms and busts of business cycles. Diversification helps to lessen the chance of those ups and downs. Wisconsin rated a C in sector diversification when CBER examined the total share of each manufacturing sector within each state to calculate its manufacturing concentration.
Productivity and Innovation
Worker productivity and access to innovation are important to the long-term health of an industry. Studying research and development expenditures, the number of patents issued per capita, and growth in manufacturing productivity help to create a picture of how states compare regarding productivity and innovation. Wisconsin received a grade of C.
The categories chosen for this report were seen to be likely factors that would be used by site selection experts when assisting manufacturing and logistics firms in location decisions. There are many manufacturing and logistics companies located in our state. Some have a national and international presence. As a state we must remain dedicated to supporting these industries to ensure they remain an important part of our state’s economy.
- Texas receives “C” in manufacturing (mysanantonio.com)
- California gets a ‘C’ in manufacturing (utsandiego.com)
- Iowa receives A in manufacturing from Ball State (thegazette.com)