by Matt MacVey
President Obama said in this year’s state of the union address that the U.S. has “the chance, right now, to beat other countries in the race for the next wave of high-tech manufacturing jobs.”
The Obama administration has plans for seven manufacturing hubs across the country. These are part of an Obama administration strategy to keep U.S. manufacturing globally competitive. President Obama on Feb 25, 2014 announced that a consortium of more than 60 industry and academic partners, to be headquartered in Chicago, had won a Department of Defense tech hub competition for $70 million in matching funds. Researchers at the hub will focus on reducing the time it takes from a products conception to its coming en masse off of the assembly line.
The Digital Manufacturing and Design Innovation Institute planned for Chicago is led by UI Labs. UI Labs is an Illinois nonprofit started in 2013 to foster collaboration between universities and industry.
The pilot program for the manufacturing network started in Youngstown, Ohio in 2012. That project, which focuses on 3-D printing, currently has 22 projects underway.
The Federal government and the manufacturing industry are hoping that this network of manufacturing tech hubs will address two problems facing the U.S. manufacturing industry, a lack of skilled workers to fill manufacturing jobs and the need to stay competitive with manufacturers around the world. But there is a question about the part of the promise relating to jobs.
There will have to be significant workforce development before workers can fill many new high-tech manufacturing jobs. A 2012 study from Deloitte found that there were 600,000 manufacturing jobs unfilled because workers with the appropriate skills were not available. Factories have found new efficiency by automating repetitive tasks and asking for more skill-intensive work from their employees.
As manufacturing employment has grown, employers have found it increasingly difficult to find prospective hires with the right training. Gardner Carrick, Vice President of Strategic Initiatives at the Manufacturing Institute, has talked to companies about the hiring challenges they are facing. “We’ve heard from companies all across the country, particularly as it relates to production,” said Carrick.
The Manufacturing Institute, the non-profit partner organization to the National Association of Manufacturers, is working as part of the Digital Manufacturing and Design Innovation Institute to create a curriculum to teach high-tech manufacturing skills to students at community colleges and in associate’s degree programs across the U.S.
One of the inspirations for the manufacturing innovation network comes from the 67 Fraunhofer Research and Innovation centers in Germany, a key rival for the U.S. in high-tech manufacturing. The Fraunhofer model, started in 1973, and apprenticeship programs have kept manufacturing as an important job provider in Germany even as automation changed the industry.
Automation and offshoring led to a large decline in factory jobs in the decade leading up to the recession. Starting from 17.5 million jobs in May 1998, American employment in manufacturing shrank nearly every month down to 11.5 million jobs in February 2010. That drop followed more than 30 years of manufacturing employment that averaged 17.5 million from 1966 through 1998. Job numbers did bounce up and down quite a few times over that period.
The last few years have shown some job growth in manufacturing. Manufacturing employment has increased in 37 of the 39 months since bottoming out at a less than 11.5 million jobs in February 2010.
The manufacturing sector is too small to make an impact on overall U.S. employment. In April 2014, manufacturing represented 12 million of America’s 138 million nonfarm jobs. Manufacturing is an important part of the economy, but its employment numbers are too small to have an effect on the overall U.S. job situation. Even if manufacturing jobs were to increase by 10 percent over a year, the total U.S. employment would see an increase of less than one percent.
Although the employment numbers may not significantly affect the U.S. economy, the characteristics of the new high-tech manufacturing jobs may have more of an impact. The wages of the new manufacturing jobs are different than for many of those were lost in the 1998 to 2010 decline. Most of the truly low-skill jobs were lost to automation. A machine operator today is paid $15 an hour, someone that can maintain a machine is paid $20 an hour, and someone that can program a machine can make more than $30 an hour. In April 2014 the average wage for durable goods manufacturing was $26.04 an hour. That’s more than 7 percent higher than the average U.S. wage of $24.31 an hour.
Gardner Carrick said that the availability of an appropriately skilled workforce figures heavily in a company’s selection of new plant locations. So, as labor costs start to rise in China and other overseas production centers, companies will look favorably upon the high-tech manufacturing training that will come from programs like these.
One of the companies participating in the project is Oregon-based Autodesk, which develops engineering and manufacturing design software. “What comes out of this institute is expected to impact the entire nation,” said Diego Tamburini, an industry strategist at Autodesk, “and potentially create hundreds of thousands of jobs.”
The full time staff of the Chicago tech hub will consist of a small team of researchers and administrators. Most of the work on the projects will take place off site at research and development facilities and university research centers. Most of the contribution from the partners on these projects will come from time donated and equipment used as part of the research. The Chicago team will study issues in the digital supply chain and in product development. When they find a problem, they will put out a project call, basically a request for proposals, to industry and academic consortiums to propose teams to work on the issue.
General Electric, Procter & Gamble, Caterpillar, and Boeing, some of the nation’s largest manufacturers, are part of the 41 companies, 23 universities, and nine industry organizations that comprise the consortium for the winning Chicago project. The partner organizations have committed more than $250 million in time and other resources to the Digital Manufacturing and Design Innovation Institute.
One of the gaps that this project will fill is the stage between the generation of new technology and the production of that technology. Scott Deutsch of the National Center for Defense Manufacturing and Machining said that the U.S. is very good at developing new technology and at bringing products to market. The part of the process that the U.S. could improve is in finding the appropriate application for new technology.
Government investment in manufacturing was dealt a blow when Solyndra, which had received more than $500 million in loan guarantees from the Department of Energy, filed for bankruptcy in 2011. Many pundits interpreted this failure as evidence that the government should not use money to support innovation because they are not well to sense what companies will succeed.
However, the tech hub model is quite different from the Solyndra story. This is not investment in a startup. The companies involved in Digital Manufacturing and Design Innovation Institute have all been solvent for a long time. Although the solutions developed by the project could help new businesses too, this project is focused on keeping the manufacturing industry as a whole competitive. The companies and institutions involved will have skin in the game too. They will invest money in the projects to match the contribution from government funding.
The collaboration between private and public funding is a key part of the tech hub model. Jacob Goodwin said that the scope of the project will be open to “take on projects that are no one company’s mission.”
The Digital Manufacturing and Design Innovation Institute is currently signing contracts with all of the companies and organizations that committed to the project during the bidding process. The first project call is expected to go out this summer.