Manufacturing in Ohio: World-class and under- appreciated by all but the market Edward W. Hill The Urban Center Levin College of Urban Affairs Cleveland State University

Levin College of Urban Affairs, Cleveland State University 2 Public policy and manufacturing in Ohio: The Challenge The challenge of the “new economy” and “high tech” is to understand it—to get it right Public policy is currently getting it wrong What is the reality of technology, its impact on production, and its impact on incomes in Ohio?

Levin College of Urban Affairs, Cleveland State University 3 Real Per Capita Income in 1998 Dollars Period 1 Period 2Period 3Period 4Period 5

Levin College of Urban Affairs, Cleveland State University 4 Real Per Capita Income Relative to the US Average Period 1Period 2Period 3Period 4Period 5

Levin College of Urban Affairs, Cleveland State University 5 What Does High Tech Mean? Two popular meanings IT, computers, software and and bio-pharmaceuticals New products There is confusion between the technological content of products and new products

Levin College of Urban Affairs, Cleveland State University 6 What Does High Tech Mean? Bureau of Labor Statistics: Those industries with high demands for technologically specialized labor Bureau of Labor Statistics definition R & D workers per 1,000 workers  US average is 3 per 1,000 Technologically oriented workers per 1,000  US average is 38 per 1,000

Levin College of Urban Affairs, Cleveland State University 7 BLS: 10 Technology-Intensive Industries (At least 5 times US average) Industrial chemicals Drugs Computer and office equipment Communications equipment Electronic components Aerospace Search and navigation equipment Measuring and control devices Computer and data processing services Research and development testing services

Levin College of Urban Affairs, Cleveland State University 8 BLS: 18 Technology Industries (2 times US average, but less than 5 times the average) Plastics materials & synthetics Soaps, cleaners & toilet goods Paint & allied products Agricultural chemicals Miscellaneous chemical processes Petroleum refining Ordnance & accessories Engines & turbines Construction & related machinery Special industrial machinery General industrial machinery Electric distribution equip Household audio & video equip Motor vehicles & equipment Medical equipment, instruments & supplies Photographic equipment & supplies Engineering & architectural services Management & public relations services

Levin College of Urban Affairs, Cleveland State University 9 The Specialization of Central Cities in Technologically Intensive Employment Source: U.S. Department of Housing and Urban Development, SOCCDS

Levin College of Urban Affairs, Cleveland State University 10 Ohio’s Technologically Intensive Employment

Levin College of Urban Affairs, Cleveland State University 11 High Technology or Technology- Intensive Production “Business-to-business trade isn’t growing up in high-tech centers like Silicon Valley; it’s developing in industrial hubs like Cleveland and Detroit. As B2B trade expands, there will be a flight of talent and venture capital money to support these efforts, leaving the coasts feeling a bit of frost—while middle America experiences the Internet boom in 2001.” --Forrester Research, February 2000

Levin College of Urban Affairs, Cleveland State University 12 Composition of Employment in Ohio

Levin College of Urban Affairs, Cleveland State University 13 Employment Growth: The Wrong Measure for Ohio

Levin College of Urban Affairs, Cleveland State University 14 The Role of Manufacturing in Ohio’s Economic Growth

Levin College of Urban Affairs, Cleveland State University 15 Real Gross Metropolitan Product for the Cleveland-Akron CMSA (1992 dollars) Period 3Period 4Period 5Period 2

Levin College of Urban Affairs, Cleveland State University 16 Ohio’s Real Productivity

Levin College of Urban Affairs, Cleveland State University 17 Five Parts to the Production Process 1. Headquarters 2. Research, design, development, & deployment 3. Production or procurement 4. Marketing, sales, and service 5. Distribution or logistics

Levin College of Urban Affairs, Cleveland State University 18 Product Life Cycle Incubation Infant Take-off Maturity Stable maturity Restructured Decline

Levin College of Urban Affairs, Cleveland State University 19 Looking at the Cycle Time Profit Sales Output decline maturitytake-offincubation infant restructured

Levin College of Urban Affairs, Cleveland State University 20 Interaction with regional economies: Application of Technologies

Levin College of Urban Affairs, Cleveland State University 21 Interaction with regional economies: Labor Demand (occupational)

Levin College of Urban Affairs, Cleveland State University 22 Three Public Policy Issues The role of software and information technology in the economy Land assembly and renewal Business taxes

Levin College of Urban Affairs, Cleveland State University 23 Three Public Policy Issues Four Facets of Information Technology 1. Economic development infrastructure 2. Ubiquitous software & network applications 3. Applying IT to existing products 4. Export products: competitive advantage Example: factory automation systems

Levin College of Urban Affairs, Cleveland State University 24 Three Public Policy Issues Land as Competitive Infrastructure all costs are per acre Land assembly & clearance Greenfield: $25,000 - $50,000 Reused land: $200,000 - $300,000 Cost differential: $150,000 - $275,000 Annualized profit differential At a 15% rate of return $22,500 - $41,250 per acre

Levin College of Urban Affairs, Cleveland State University 25 Estimated Tangible Personal Property and Corporate Franchise Tax Revenues for Each $1,000 of Gross State Product in 1996 Agriculture$ 1.40 Mining$31.20 Construction$ 4.30 Manufacturing$15.80 Transportation & Public Utilities$ 4.50 Wholesale trade$10.00 Retail trade$10.80 FIRE$ 2.80 Services$ 3.70 Average$ 9.40

Levin College of Urban Affairs, Cleveland State University 26 Manufacturing in Northeast Ohio It’s all about products World-class and under- appreciated by all but the market

Levin College of Urban Affairs, Cleveland State University 27 The 12 Comparison CMSAs Chicago-Gary- Kenosha Cincinnati-Hamilton Dallas-Fort Worth Denver-Boulder Detroit-Ann Arbor- Flint Houston-Galveston Miami-Ft Lauderdale Milwaukee-Racine Philadelphia- Wilmington-Atlantic City Portland-Salem San Francisco- Oakland-San Jose Seattle-Tacoma- Bremerton