CHARLES TOWN – The important step West Virginia can take to improve its economic outlook is to better educate its work force.
[cleeng_content id="438917140" description="Read it now!" price="0.49" t="article"]That’s the conclusion by the author of a nationwide report published by the Center for Economic and Business Research at Ball State University on the relative competitiveness of the 50 states in manufacturing.
The 2013 manufacturing and logistics scorecard gave the state a middling C overall. The score represents where manufacturing is now and where analysts believe it is headed in the future, said the economist Michael Hicks, the lead author of the study.
Hicks said it is important to understand that the letter grade only reflects the relative competitiveness of West Virginia. The center has been publishing the scorecard since 2009.
“There is not an objective standard,” he said. “You are rated against other states in these areas. Manufacturing is certainly the one kind of job that states are most active in trying to compete for. What we are trying for is a relative measure, not an absolute measure.”
The study points to a number of bright spots in the state’s manufacturing outlook.
West Virginia received a B in “Global Reach,” a score meant to reflect health and robustness of its exports.
“A state that looks good in global reach doesn’t just export to one market. They export to a lot of different continents,” Hicks says. “Manufactured goods in West Virginia, probably primary metals, are being widely distributed.”
Having robust export relationships helps to shield the state from regional economic stress.
“It makes you far less sensitive to a downturn in one market. That is particularly important right now because Europe has been in a six-quarter recession,” Hicks says. “If you have a lot of export markets, you are less likely to be impacted by a downturn in China or India.”
Hicks said growing exports other than coal will help to buffer the state’s economy against price shocks.
“If commodity prices in coal drop, West Virginia traditionally gets pummeled economically,” Hicks says. “A diverse, exporting manufacturing base provides more stability to the overall economy.”
Census bureau data show that the state has seen robust growth in a number of manufactured exports, including aircraft parts, engines, chemicals, aluminum and artificial joints.
Hicks said the state’s tax climate, which received a ‘C’ rating, is also solid for manufacturers.
“This is a pretty big improvement,” Hicks says. “If we had done this study a couple of decades ago, West Virginia would probably not get a ‘C.’ A number of reforms that have taken place, dating back to the Underwood administration, have improved the tax climate.”
“Overall it is pretty solid. That ‘C’ range is a good place for West Virginia to be.”
The state also received a solid score in logistics industry health, but Hicks said better transportation infrastructure is still needed.
“You guys have a ton of transportation infrastructure,” Hicks says, “but movement isn’t as solid as it could be, given the geographic location of the state.”
In its ranking for human capital, which measures the competitiveness of the work force, the state failed resoundingly, however. The most important factor, Hicks says, is the level of educational attainment.
“There continues to be a very painful legacy of poor performance,” he said. “Manufacturers care a great deal about human capital because technology is advancing quickly in manufacturing. Today, the sweet spot for manufacturing is an associate degree in a manufacturing technology or a certificate in manufacturing operations and technology.”
“West Virginia just does not do well in these areas,” he said. “It is an area of abiding concern, and will become more and more important to manufacturers.”
Hicks notes that the problem is not a lack of access to professional and vocational programs, but a simple failure to produce enough graduates.
“West Virginia is abundantly endowed with secondary education programs – both four-year and two-year,” he says. “The problem is getting people through the programs in big enough numbers.”
Failure to address this problem, Hicks argues, will not only keep West Virginia from attracting new manufacturing jobs but could permanently erode the state’s existing manufacturing base as technology continues to advance and the work force ages.
“The average manufacturing worker in the state is probably in his mid-50s,” he said. “You can expect an acceleration of job turnover in the next decade that is going to put a lot more pressure on your work force.”
He said a decreased tax burden, paying off liability gaps and making the legal system more pro-business could make the state more attractive. But increasing educational attainment is the single most important factor.
“The far more important factor is human capital – really stepping up the quality of schools. That is just a long, hard struggle that West Virginia is going to have to engage in,” he said.
The state also received an ‘F’ in its liability rating, but, Hicks noted, the most recent data available for that score comes from 2011, prior to the reforms enacted in employee post-employment benefits.[/cleeng_content]