President Obama Proposes a Shot in the Arm to Cluster Manufacturing

January 29, 2014
By: Tracey E. Schelmetic

Ask anyone what’s wrong with the economy, and they are likely to have different answers, largely depending on that person’s brand of politics. Most people, regardless of party affiliation, would probably agree that a major component of the country’s ills today is the lack of decent paying manufacturing jobs.

The U.S. was once an economic powerhouse when it came to manufacturing. From automobiles to footwear and everything in between, the nation’s manufacturing base offered jobs with fair wages and benefits to Americans who had only high school diplomas. Beginning in the 1970s, however, Americans watched in consternation as manufacturing companies began offshoring manufacturing in search of cheaper labor rates.

While some companies have brought manufacturing back to U.S. shores (a process called “reshoring”) either out of patriotism, for production quality reasons or because labor advantages in Asia and Mexico have begun to erode, too many jobs, particularly in the high-tech sector, remain abroad.

Last night, President Obama, in a somewhat beleaguered State of the Union address, proposed the creation of six new “technology hubs” that could help bring manufacturing jobs back to U.S. shores.

"We also have the chance, right now, to beat other countries in the race for the next wave of high-tech manufacturing jobs," said the president. He cited two existing hubs, one in Raleigh, North Carolina and another in Youngstown, Ohio, which have "connected businesses to research universities that can help America lead the world in advanced technologies," he said.

Manufacturing hubs, also called “cluster manufacturing,” are a compelling idea. A “business cluster” refers to city or county that is home to many companies operating within the same industry. The term was popularized by Harvard professor Michael Porter in his 1990 book, “The Competitive Advantage of Nations,” in which he describes how businesses can gain an edge by concentrating their resources in one area. Toledo, Ohio, for example, has become a manufacturing hub for the solar panel industry, thanks to the proximity of the University of Toledo’s Wright Center for Photovoltaics Innovation and Commercialization. By focusing a single industry within a certain geographic area, the players in that industry can take advantage of close proximity to raw materials, machinery or parts; academic or laboratory resources; specialized maintenance services; graduating talent and business partners. Youngstown, Ohio, mentioned in the president’s speech, is a hub for the 3-D printing industry.

"A once-shuttered warehouse is now a state-of-the art lab where new workers are mastering the 3D printing that has the potential to revolutionize the way we make almost everything," said Obama in a speech last year. "There's no reason this can't happen in other towns."

The goal is a noble one. Cluster manufacturing can boost innovation while keeping costs down (less need for long-distance shipping plus the ability to recruit the necessary talent locally). While the president did not go into specifics about how the federal government can encourage the formation and flourishing of these six hubs, it’s probable that a plan may be forthcoming from the White House soon.

Edited by Cassandra Tucker