State gets a ‘B’ for manufacturing

Grades mixed on national report card

Wisconsin received some letter grades that might worry parents on a school report card, but overall, the state’s manufacturing sector didn’t fare poorly in a new national ranking.

Wisconsin didn’t receive any “A” or “F” grades, but instead got four “B’s” and five “C’s” in the 2017 Manufacturing & Logistics report released Tuesday from Ball State University in Muncie, Ind.

Wisconsin received a “B” in overall manufacturing industry health, down from a “B+” a year ago, followed by a “B” in logistics industry health, a “B+” in human capital and a “B” in expected fiscal liability gaps.

The state couldn’t escape those pesky “C” grades, however, including “C-” grades in productivity and innovation, worker benefit costs, and the tax climate. The state was rated at “C+” in global reach and sector diversification.

In overall manufacturing industry health, Wisconsin didn’t fare as well as Indiana, Iowa, Michigan, Kentucky or South Carolina, which received “A’s” in that category.

With its strong automotive industry, including foreign car makers, Indiana has an advantage over Wisconsin. It also has an advantage, geographically, of being a crossroads state for the nation, said Douglas Fisher, who teaches supply-chain management at Marquette University.

“Unless we can overcome geography, Indiana may have the luck of location,” Fisher said.

Wisconsin fared much better than Alaska, Hawaii, Nevada and New Mexico, which received “F” grades in overall manufacturing industry health.

The latter states just aren’t into manufacturing, said Michael Hicks, director of Ball State’s Center for Business and Economic Research.

“Wisconsin, which is one of the most manufacturing-intensive states, has done well,”

Hicks said.

This is the 10th year Ball State has done its manufacturing report card showing how each state compares with its peers in areas such as human capital, productivity and innovation.

The annual study uses data from a variety of sources, including census figures, the U.S. Bureau of Economic Analysis and the U.S. Department of Commerce. Grades are based on a series of variables within each of nine categories, with each state receiving a ranking from one to 50.

“Our study doesn’t try to satisfy any particular interest. I am just trying to get as close to the truth as I can,” Hicks said.

If there’s one subject of most importance on the report card, it would probably be “human capital,” where Wisconsin received a “B+” grade.

“No factor matters more to businesses than the quality and availability of labor. Workers represent the largest single cost of doing business, but more importantly, they are the source of most innovation and process improvements that distinguish successful firms from those that aren’t successful,” the report said.

However, other subjects, where Wisconsin received “C” grades, also are important. The state has seen a couple of slow years in gross domestic product growth, Hicks said, and he believes Wisconsin’s manufacturing base isn’t diverse enough.

Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce, said he doesn’t necessarily agree with everything in the report card, but he views it as a useful tool.

“I am pleased to see that we are running a “B+” in human capital. I think it’s the most important indicator, and Wisconsin

ranks very strongly,” Sheehy said.

“I think the other message here is, while this is an important ranking against our peers in the U.S., we recognize that Wisconsin is in a global game. We not only have to fare well in the U.S., but we are really looking broader than that because the competition is global,” he added.

Wisconsin’s manufacturers lost 3,784 jobs from December 2015 to December 2016, a drop of 0.8% in the state’s manufacturing headcount and a steeper decline than the national average in the sector, according to data released this spring.

Yet even as the number of manufacturing jobs has fallen, many companies say they’re having a hard time filling positions that increasingly call for advanced skills.

Kurt Bauer, executive director of Wisconsin Manufacturers & Commerce, said some of his members aren’t bidding for new contracts because they might not have the necessary labor.

“Either they don’t have the workers, and they can’t find people for a second or third shift, or they can’t mandate overtime like they used to because they lose workers when they do it,” Bauer said.

The state’s labor shortage is getting worse, according to a new survey done by Wisconsin Manufacturers & Commerce.

Despite optimism about the economy, 77% of the employers surveyed said they had trouble finding workers, up from 70% a year ago and 53% in the summer of 2014.

Not surprisingly, 44% said labor availability was their top concern, up from 30% only six months ago. Health care costs and excessive regulations were a distant second and third on the list of concerns, at 12% and 11%, respectively.

“The economy can’t stay strong if labor availability is weak,” Bauer said.