Chicago’s Promise as a Manufacturing Policy Leader

Editor’s Note: In tandem with his newly released paper, “Locating Chicago Manufacturing: The Geography of Production in Metropolitan Chicago”, Howard Wial examines Chicago’s manufacturing economy, specifically its strengths, weaknesses, and distribution. Wial also discusses Chicago’s past and current manufacturing strategies, which lead the nation.

A handful of states and major metropolitan areas have become seedbeds for local and regional public and public-private strategies to strengthen American manufacturing.  Initiatives are planned or underway in Massachusetts (at the state level), Baltimore, northeast Ohio, Louisville and Lexington (KY), and Newark (NJ).  The public-private National Additive Manufacturing Innovation Institute, run by a regional consortium and based in Youngstown, OH, is the first member of President Obama’s proposed National Network for Manufacturing Innovation.

The national leader of the current generation of manufacturing strategies, though, is metropolitan Chicago.  Chicago is home to the Austin Polytechnical Academy (one of the nation’s leading manufacturing-focused public high schools), the Chicago Manufacturing Renaissance Council (a public-private partnership that has been influential in shaping city policy on manufacturing), the advanced manufacturing component of the Plan for Economic Growth and Jobs (an initiative of World Business Chicago, the city’s nonprofit economic development arm), and the University of Illinois’ proposed Illinois Manufacturing Lab (intended to give local manufacturers access to computer simulation, workforce training, and faculty resources to help them become more productive and competitive).

As I note in the Center for Urban Economic Development’s new briefing paper “Locating Chicago Manufacturing: The Geography of Production in Metropolitan Chicago,” Chicago’s leading position in the current generation of regional manufacturing strategies makes eminent sense.

• In 2011, metropolitan Chicago had about 411,000 manufacturing jobs, more than any other U.S. metropolitan area except Los Angeles.
• Manufacturing is an economic specialization of the Chicago area.  About 9.5 percent of the area’s jobs are in manufacturing, compared to 8.5 percent nationwide.
• The Chicago area specializes in 11 different major manufacturing industries, ranging from printing to fabricated metals to machinery to pharmaceuticals.        
• Even though Chicago lost 32 percent of its manufacturing jobs between 2001 and 2010, it is more specialized in manufacturing now than it was a decade ago.  The percentage of its jobs that are in manufacturing was 1.11 times the national percentage in 2011, up from 1.08 in 2001.
• From early 2010 through the fall of 2012, Chicago manufacturing employment grew by 5 percent, compared with 4 percent nationwide.
• In 2011, average annual earnings were 16 percent higher in manufacturing jobs than in all jobs in the metropolitan area.  

In its report on Chicago manufacturing, released this morning, the Chicago Metropolitan Agency for Planning underscored the metropolitan area’s advantages as a manufacturing hub.

Yet with all these advantages in manufacturing, why does Chicago need manufacturing strategies at all?  One obvious reason is that, as in other parts of the country that have experienced manufacturing job growth since early 2010, that growth is just a drop in the bucket compared to the previous decade’s losses.  Other important issues that Chicago manufacturing strategy needs to address include:

• Technology.  Chicago specializes in pharmaceutical manufacturing and in a range of moderately high technology industries (non-pharmaceutical chemicals, electrical equipment and appliances, machinery, and petroleum and coal products).  Yet the region lost jobs in very high technology industries (a category that includes pharmaceuticals) during the last two years, while the nation as a whole gained them.  The Chicago area gained jobs in moderately high technology industries, but not as rapidly as the entire United States.  The most promising routes forward for Chicago are to strengthen existing industry specializations with new technologies, build new industries out of those specializations, and support high-wage, high-skill production in all industries.
• Decentralization.  During the last decade, the city of Chicago and Cook County lost manufacturing jobs more rapidly than most outlying counties in the metropolitan area.  Yet Cook, the metropolitan area’s central county, still has nearly half of all Chicago-area manufacturing jobs.  In manufacturing, as in many other industries, density means higher productivity.  Numerous executives and analysts have underscored the importance of the many benefits that flow from the presence of a dense and regional industrial commons.  Therefore, Chicago-area manufacturing policy should preserve and promote dense agglomerations of manufacturing jobs and try, if possible, to offset the incentives that led manufacturing to decentralize.

In the 1980s, the city of Chicago pioneered local manufacturing strategy by creating planned manufacturing districts, a zoning tool subsequently copied by other cities seeking to preserve manufacturing jobs.  Thirty years later, metropolitan Chicago is once again poised to lead in addressing today’s regional manufacturing challenge: to spur a more productive, more innovative, and growing manufacturing sector as a contributor to a strong metropolitan economy.