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Report: People problems persist in manufacturing, logistics

June 14, 2013

Indiana’s manufacturing and logistics sectors are undoubtedly strong, but work-force quality issues continue to nag the state, according to an industry report card released Friday morning.

Both manufacturing and logistics received A grades for overall industry health in the study from the Center for Business and Economic Research at Ball State University and industry promotional group Conexus Indiana. It was released Friday morning at IBJ's annual The State of Manufacturing & Logistics event.

However, the state—where one in six workers has a job in manufacturing—continued to struggle in the human capital category. Its grade slipped to a D this year, from a C- in 2012’s report card.

The area has been a concern for years in the otherwise promising manufacturing and logistics industries, as they have struggled to find qualified workers amid recovery and rehiring.

Michael Hicks, director of the Ball State research center, said this year’s grade drop was mostly because of a “statistical anomaly.”

Researchers assess the human capital grade based on the number of people graduating with associate degrees in the state. Enrollment in two-year programs spiked from mid-2007 to mid-2009 as factories laid off workers, who found they needed better educations to snag new jobs.

Those community college enrollees graduated from the education pipeline from 2009 to 2011, when the human capital grade peaked. With relatively fewer graduates to count more recently, the grade has slipped.

“We’re looking at the end of the cohort that went in during the recession,” Hicks said.

Still, Indiana at its best earned only a C in human capital in 2011, before grades slid to a C- last year and D this year.

High-paying factory jobs demanding few skills and little education have become a distant memory. Many companies have either cut those jobs outright or moved them overseas, where labor is cheaper.

Today, manufacturers and logistics companies scour for job candidates with at least a certification or associate's degree.

The Manufacturing Institute, an industry think tank in Washington, D.C., projected the skills gap—the number of jobs companies said they had but could not fill—at 600,000 positions nationwide in 2011. That was the year Indiana’s labor market was supposedly at its best.

Friday’s report still had plenty of bright points, despite the one low score. Human capital was the only grade out of nine to receive a D, and there were no F's.

Out of nine Midwestern states also graded, Indiana was the only one to receive A's in both manufacturing and logistics overall performance. Tax climate and global reach also earned A's.

Another exception would be productivity and innovation, which dropped a full letter grade to a C+ this year from a B+ in 2012.

Again, Hicks attributed the drop to a statistical anomaly tied to the recession. The report card measures productivity and innovation over five years; the spread studied this year was 2007 through 2011. Previous reports captured automotive production peaks from before the recession, while this year’s research has the entire slump in its figures.

In more recent years, productivity and innovation have begun to spike as manufacturing processes have become more technologically advanced and labor costs have decreased.

“If that’s the case, if sustained in the long run, what it’s likely to mean is that Indiana’s … manufacturing is going to see production growth,” Hicks said.

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