Skip tax cuts and invest in industry-specific supply chains to grow manufacturing
In a Washington Post column last week, economists Jared Bernstein and Somin Park cited the work of Tim Bartik, who outlined what he called the “three habits of highly successful manufacturing-intensive communities,” including:
- Customized services for small- and medium-sized manufacturers help them to overcome financing and information barriers, improve their technology and product design, and link them up to global supply chains;
- Infrastructure and land-use investment includes improving the transportation infrastructure and other services associated with a neighborhood’s land to make it more attractive for business development;
- Life-cycle skill development, including high-quality child care, high-quality preschool, K-12 education, college scholarships, and adult job training. Bartik finds that “better skills for local workers help attract and grow higher-wage jobs.”
The upshot of Bartik’s analysis is that the standard playbook economic developers use to recruit and retain manufacturing companies — usually a mix of tax cuts and business incentives — today lacks in comparison to the benefit of investments in targeted services and strategies. Build a supply chain, and manufacturers will come.
A lesson from the regional markets we report on is that better yet, build an industry-tailored ecosystem.
Here’s why. If today your community lacks a capable base of precision contract manufacturers and engineering and design services, but boasts a rich farm and ag supply chain and concentration of outdoor and lifestyle assets, a deliberate effort to recruit and nurture natural food and craft beverage companies makes more sense than developing an aerospace cluster. Both are manufacturing. Both are increasingly attractive as communities seek more light industry. But one provides a more direct line to a thriving maker economy.
An investment strategy for communities might begin with an assessment of current business assets and capabilities, including:
- Current number of related industry OEMs and brands
- Workforce: state of the current employment pool including demographics
- Sourcing: availability or access to raw materials, technology, design and engineering assets and related industry expertise
- Manufacturing: availability of related fabrication, forging, assembly, contract manufacturing services, packaging
- Logistics: shipping, transportation, and related services
- Educational opportunities in support of industry development
- Lifestyle and recreation attributes
It follows that cities and communities can then assess how well-matched target industries are to local and regional business assets, whether steps can be take to address supply-chain gaps, or whether a pivot to better-matched manufacturing industries might be a better plan.
How to fill the gaps? Over the next 12 months, CompanyWeek will be active in working with both companies and communities to develop more robust industry blueprints for the development of manufacturing supply chains. We’re certainly not alone in seeking to foster more manufacturing-intensive communities.
Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.