Industrial Flight: Assessing the Damage and Planning Recovery

Overview

• What People are Saying about Industrial Flight

• Hallmarks of Industrial Flight• Mature Industries vs.

Emerging Industries• Global Competition in a

Regional Model• User Considerations• Assessing the Damage• Planning Recovery• Coming Up Next Time

What People are Saying about Industrial Flight

John McCain- “The jobs that are leaving the state of Michigan have left and are not coming back. We are going to try to create new jobs.”

Barack Obama- “What I said was that NAFTA and other trade deals can be beneficial to the United States because I believe every U.S. worker is as productive as any worker around the world, and we can compete with anybody.”

Hillary Clinton on NAFTA- “It's been good for some areas, bad for others.”

Hallmarks of Industrial Flight

• Decline of an industry (often manufacturing in the United States)

• Not immediately replaced by a new Industry

• Negative effects of the decline ripple through other sectors of the local economy

Mature Industries vs. Emerging Industries

• Where are the Jobs?

• Risk Differential

• Income Differential

• Cost/Benefits associated with both

Global Competition in a Regional Model

• Regions are competing in a Global Market

• Capital Flows and Differing Regulations

• Movement of Industry

User Considerations

• What are the experiences of your organizations?

• What are the Pros/Cons of focusing on a Mature Industry vs. an Emerging Industry?

Assessing the Damage with Policy Insight

• Industry Flees…– A Loss of 500 Motor

Vehicle Parts Manufacturing Jobs in Western New York

– Effects on the Local Economy

• Output• Demand• Income• Employment

Planning Recovery (1)

Building from the Ashes• There has been a loss of jobs and to

recover a completely new industry is attracted to an area– Pros: Industry is fresh, generally

provides high wages and growth– Cons: Emerging industries usually

small, often utilize highly specialized labor and other inputs

• Example: New York loses 500 Industrial/ Manufacturing Jobs, but they attract a new bio-tech firm providing 400 Jobs

Planning Recovery (2)

Bringing Them Home• Attract back a mature industry or an

industry that utilizes leftover human capital– Pro: Uses existing skilled labor and

infrastructure– Con: Difficult to do, can depend

upon exogenous factors (e.g. FX rates)

• Example: Michigan loses auto industry jobs but either the American automakers regain high competitiveness or attract some other heavy industry to the area

Planning Recovery (3)

Mixing New and Old• Attract a New Industry with a

complementary manufacturing sector– Pros: Helps spur future growth and

incomes while still utilizing extant resources

– Cons: Tough to find industries with strong innovation – quality manufacture connection. Can the attendees think of any?

• Example: Attract Bio-tech to your area, and attract Pharmaceutical Manufacturing

Coming Up Next Time

Moving the Masses: The Economic Impact of Migration