State’s manufacturing, logistics sectors face weakness in workforce quality

Indiana must do a better job of preparing workers for the increasingly complex jobs in the state’s manufacturing and logistics industries, according to business and education experts during the unveiling Friday of a report on the health of the sectors.

The 2017 Manufacturing and Logistics Report Card gives Indiana “A” grades for the overall health of its manufacturing and logistics sectors—but only a “C” in the category of human capital, which measures high-school, college and adult basic education attainment.

The state’s human capital rating has moved between "D" and "C" grades since 2009, when the annual report was established.

“We’re stuck at average,” said Michael Hicks, professor of economics and director of the Center of Business and Economic Research at Ball State University. Ball State produced the report for Conexus, an Indianapolis-based organization that promotes the state’s advanced manufacturing and logistics industries. 

The report was presented Friday morning during the annual "State of Manufacturing & Logistics" event at the Marriott Indianapolis. Hicks was among several speakers and panelists at Friday’s event, which was presented by Conexus and the Indianapolis Business Journal.

Indiana is in the bottom 20 percent of all states when it comes to the percentage of residents who have earned a bachelor’s degree, Hicks said, and the state also needs to do better at helping workers upgrade their skills during their careers.

Indiana’s mediocre human capital standing, Hicks told the crowd, is “the most limiting factor, not only to your individual business success but also the state’s economy over the next decade or two.”

The state’s human capital challenges also came up during a panel discussion preceding Hicks’ talk.

“More adults have to get more education, or we’re not going to get where we need to be,” said panelist Joe Loughrey, chairman of Batesville-based manufacturer Hillenbrand Inc. Loughrey is also the chairman of the Lumina Foundation for Education.

Loughrey said Indiana contains “a lot of great islands of excellence” with regards to workforce development, but those efforts need to be strengthened and better coordinated. Loughrey said he wants to see more support from both Gov. Eric Holcomb’s office and the Indiana Legislature.

Another panelist, Ivy Tech Community College President Sue Ellspermann, also highlighted the need for schools and employers to work together. 

Ellspermann, who served as Indiana Lieutenant Governor under former Gov. Mike Pence, said Ivy Tech is doing a better job of aligning its programs with industry demand. But, she added, the statewide community college system needs employers’ help in recruiting more students.

“We can’t do it alone as Ivy Tech or any other higher education institution. We need industry support,” Ellspermann told the group.

Looking at Indiana’s other grades on the Manufacturing & Logistics Report Card:

— The state earned “A” grades for both tax climate and global reach. 

— Indiana earned “B” grades in worker benefit costs and in productivity and innovation.

— The state earned a "B-minus" for its expected fiscal liability gap for state and local government pension and healthcare funding.

— In the category of sector diversification, the state earned a grade of “C.”

Business leaders care about manufacturing because it represents such a large part of Indiana’s economy.

According to the National Association of Manufacturers, a Washington-based trade group, Indiana’s manufacturing output in 2015 totaled $100 billion, which represented 30 percent of that year’s gross state product.

Manufacturing is also an important source of Hoosier employment. The National Association of Manufacturers says Indiana topped the nation in 2015 with regards to the percentage of its workforce employed in manufacturing. That percentage was 17 percent, nearly double the national average of 9 percent.

According to the U.S. Bureau of Labor Statistics, an estimated 526,000 Hoosiers were working in manufacturing in April. Since 1990, that number has been as high as 672,000 (in December 1999) and as low as 429,000 (in July 2009).