Louisiana does a fairly decent job at moving goods. But the state plays a lesser role when it comes to making them, according to a new study looking at manufacturing in all 50 states.
Louisiana earned a C in manufacturing on the 2012 Manufacturing and Logistics National Report put out by Ball State University’s Center for Business and Economic Research. The study shows how each state ranks among its peers in several areas of the economy that underlie the success of manufacturing and logistics. Specific measures include manufacturing and logistics industry health; human capital; cost of worker benefits; diversification of the industries; state-level productivity and innovation; expected fiscal liability; tax climate; and global reach.
These are good categories to look at when evaluating a state’s manufacturing climate, said Stephen Moret, secretary of the Louisiana Economic Development Department. However, the metrics measured within these categories didn’t always make sense, he added.
“I think the report includes most of the categories of evaluation that make sense, but many of the specific metrics that they utilize have little relevance to site selection consultants and corporate executives,” Moret remarked.
He pointed out study criteria such as the wage differences between manufacturing jobs and other workers or the per capita number of patents issued annually aren’t always on par with, say, electricity rates when companies consider a new manufacturing site.
The report also gave the state a C for tax climate, which Moret also found puzzling. In the past several years, Louisiana has crafted numerous tax breaks for businesses. In fact, a 2012 study by the Tax Foundation, known as Location Matters, ranked Louisiana as the No. 1 state in the country when it comes to measuring the actual tax burden for new manufacturing operations.
“There were some good parts,” Moret said of the Ball State report card, “but there were some serious flaws too.”
In other rankings, Louisiana earned a B in logistics. At the same time — like many of its neighbors across the South — the state scored an F when looking at “human capital.” That’s a ranking of educational attainment at the high school and collegiate level, the first-year retention rate of adults in community and technical colleges, the number of associates degrees awarded annually on a per capita basis and the share of adults enrolled in adult basic education.
“Where I do agree with the report is the area where they point out we have the biggest need for improvement is human capital,” Moret said. “I agree with that. And I think several of the measures they looked at actually did make sense.
“In general, we do have a lot of work to do to improve the overall education level of high school graduation rates, including the number of our workforce who have at least a community college or technical college credential,” Moret added.
The state earned a B when evaluating its “global reach,” and a D in “productivity and innovation,” which looks at the presence of high-tech and research-driven manufacturing.
Michael Hicks, director of the Center for Business and Economic Research, said manufacturing roared back in many states in the past year, but he anticipates a slowdown as worker productivity gains outstrip demand.
“In the short run, the trend will be exacerbated by the very high probability of a U.S. recession in 2012-13,” Hicks said in a statement.
“The rapidly slowing European, Chinese, Indian and Brazilian economies will place heavy pressure on firms to maintain their exports. A marked decline in U.S. exports is already in progress, and alone will deepen a slowdown already being felt across much of the country. The uncertainty surrounding financial markets will be with us for many months, depressing investment and new hiring,” he said.