SOUTHERN INDIANA — Despite what you may have heard, manufacturing is doing just fine in Indiana and the United States as a whole — in terms of output, anyway.
National manufacturing production was at one of its highest points ever in 2015 — even when adjusted for inflation, according to the Board of Governors of the Federal Reserve System. Similarly, Indiana’s manufacturing GDP was at it highest in 2015 since at least 1997 — making up 30 percent of the state’s total GDP, according to the Bureau of Economic Analysis.
Despite this, the country has lost 7 million manufacturing jobs since employment peaked in 1979. Indiana also had fewer manufacturing jobs in 2014 — with 349,425 workers — than it had seen in the pre-recession years.
That, says Michael Hicks, is due to automation.
Hicks is the director of the Center for Business and Economic Research at Ball State University. His center’s 2015 study, authored by him and Srikant Devaraj, estimates that 88 percent of the United State’s lost manufacturing jobs are due to the replacement of humans by technology.
“That sounds quite accurate, actually,” said Uric Dufrene, the Sanders Chair in Business at Indiana University Southeast.
Trade, another oft-cited reason for fewer manufacturing jobs, has resulted in the loss of many — especially in the textiles industry — but Hicks and other economists such as Dufrene say automation has overshadowed the effects of a more global economy.
It’s not expected to get much better, either, with a 2015 study from the Boston Consulting Group predicting that 1.2 million advanced robots will be introduced to American industry by 2025 as prices for the technology lower. Of course, automation isn’t just about robots. It presents itself in subtler ways, too. Radio frequency identification, for example, cuts down on the number of people needed to find parts in a warehouse, Hicks said.
Automation in Southern Indiana
So how is automation affecting manufacturers in Clark and Floyd counties, where 17 percent of all jobs in the area stem from their business?
Dufrene’s answer to that question is that automation is probably not affecting a lot right now — in terms of overall employment, that is.
The area is seeing a boom in manufacturing because of places like River Ridge Commerce Center, where there’s 6,000 acres of land set aside just for industry. Dufrene thinks incoming manufacturers will make up for whatever jobs are lost to technology.
Hicks has a different point of view. While he said Southern Indiana is an attractive place to locate a factory, he believes that the area will eventually begin to follow the national employment trends.
At some point, even Dufrene says that's possible — maybe when River Ridge is fully developed.
“It’s hard to go out that far,” he said.
Automation has, however, affected the types of manufacturing jobs that are available in Southern Indiana.
A different kind of factory worker
Bob Owings is the owner of Owings Patterns in Sellersburg and the chairman of One Southern Indiana’s Metro Manufacturing Alliance.
When his father started the business over 40 years ago, pattern making was a much different industry than it is today. Much of the work was done by hand and took hours.
As technology evolved, so has Owings Patterns.
Now, the business’ employees design plastic molds on computer software, another worker programs a machine to create that mold, and even more employees, called CNC operators, control those machines with their own computer.
Robots might have replaced some manufacturing jobs, Owings admits, but not all of them.
“There’s 15 people designing that robot,” he said. “There’s another guy programming that robot. There’s two or three guys maintaining that robot. And oh, there’s still a guy operating that robot. So really automation may have created five to seven jobs. It creates a different type of job.”
Hicks agrees that some jobs are being created by new manufacturing technology. Many of those jobs, however, require extra education. The days of low-skilled workers making a middle-class salary?
They’re “done with,” he said.
That doesn’t mean there are people lining up to take those jobs — even though the average one in Clark, Crawford, Floyd, Harrison, Scott and Washington counties pays $65,398.
Manufacturers in the area have reported problems to 1si with finding the skilled employees they need to fill their jobs. There are several programs and groups in the area dedicated to filling this gap.
Region 10 WorkOne and Ivy Tech in Sellersburg work together on manufacturing education programs for adults. Prosser Career Education Center in New Albany also has manufacturing classes for both high school students and adults.
Finally, Greater Clark County Schools was recently designated a Ford Next Generation Learning community, meaning all students’ curriculums will eventually be designed around careers that might include manufacturing. The school system is also the “fiscal agent” for a $7.7 million grant from the DWD for Clark, Floyd and Harrison county high schools that involves preparing more students for manufacturing careers.
Tying everything together is 1si, which hired a director of talent and workforce development in January to be the employer voice for the area’s initiatives.
Hicks is skeptical of most workforce development initiatives. Too often, he said, they’re focused on employers' immediate needs. The jobs that need filled now could be obsolete in a few years.
It’s better to teach students how to be adaptable, Hicks said. Dufrene added to that argument, saying that investing in a strong K-12 system and a basic STEM education is important, too.
The shiny side of automation
Automation, for all its affect on the labor market, isn’t necessarily a bad thing, Hicks said.
For one, it helps businesses like Owings Patterns thrive.
“We have been required to embrace technology and automation to increase our efficiencies,” Owings said. “We expand our business and expand our opportunities by using technology and automation.”
And in the case of Owings Patterns, that has meant hiring more people. Twenty-five years ago, the business had five employees. Now, it has 25.
No one should want factories to be the way they were in the “old days,” anyway, Hicks said. With higher skilled employees comes better pay and better working conditions.
“We are not afraid of automation,” Owings said.