The Rust Belt States are Doing Better Than You Think

If you followed last year’s election, then you will probably think the Rust Belt has been turned into this vast wasteland of industrial decay and rampant opioid abuse.  However, the truth could not be further from this dystopian worldview.  Granted some places are still struggling – Flint, Michigan is still waiting for drinkable water.  But the reality is that the Rust Belt is doing better than you think.

While the days of massive manufacturing plants employing tens of thousands of workers are [probably] long gone; manufacturing remains alive and well in the U.S.   The challenge is that today’s manufacturing is a combination of automation and ‘advanced manufacturing’ – which links technology with the things we use every day.  

photo: photologue_np via Flickr

Examples of this include the increased use of IoT (Internet of Things) and 3D printing in manufacturing as both advancements allow a machine operator to essentially monitor the process from anywhere in the world.  

Now, this is not to say that some jobs will be easily replaced by robots or can be complete remotely but these advancements have impacted the skills required by today’s manufacturing companies.  And this has had an inordinate impact on low-skilled workers; many of whom cannot be easily retrained.

The result has been a persistent skills gap.  One which makes it harder for manufacturing companies to find the workers they need to fill jobs today and this helps to create the perception that manufacturing is struggling.   For example, unemployment is at or near record lows, but the labor force has shrunk in recent years.  Meanwhile, wage growth and productivity have stalled even though increased automation should help to push productivity to higher levels.

Another conundrum is the fact that automation costs money.  In some cases, millions of dollars and the high cost of automating production lines has effectively kept many small and mid-sized manufacturers on the sidelines.

It is not all gloom and doom.  Cities throughout the Rust Belt are leading a technology revolution which will have tremendous impact on our lives soon.  Consider the automotive industry.  Advances in battery storage and autonomous vehicles are being pushed by many companies throughout the region.

photo Discovery Channel

This helps to buttress an entire manufacturing ecosystem which stretches from Pennsylvania to Minnesota.   For example, Carnegie Melon University in Pittsburgh is largely considered one of the primary research centers for Artificial Intelligence (AI) and this helps to drive several companies in the surrounding area.

The leadership in this area has also grabbed the attention of companies like Ford and Uber who have set up research facilities in Pittsburgh.  But this is not the only thing to focus on in the region.  Capital Midwest is a venture capital fund focusing on investments in advanced manufacturing companies in the Rust Belt.

To date, the fund has invested in close to 20 companies, most with operations in Wisconsin, and this has helped to increase the manufacturing prowess of one of the most dynamic states in the country.

Even with the good news, the fact is that business is difficult even when times are good.  While the number of companies closing has closed since the height of the recession, the reality is that companies continue filing bankruptcy in Wisconsin and elsewhere.

But even something as traumatic as bankruptcy offers the opportunity for reinvention and this may well be the strength of the Rust Belt and the people that live there.  After all, these states were built by millions of immigrants who came to the U.S. with the hopes of building a better life.

One example of this is Iowa, which has become a hub for high-tech companies seeking respite from the high costs of doing business in California, Massachusetts, and elsewhere.  The state has been able to attract companies such as GoDaddy, Dwolla, and Social Money.  These Silicon Prairie companies are helping to redefine the region and in the process, are provide jobs and opportunities to a new generation of Rust Belt residents.

The Rust Belt is not dying.  If anything, it is kicking off the rust to become the focal point for the ‘Fourth Industrial Revolution’.  So, don’t believe the hype, America is still home to the greatest workers and companies on earth.

Author: Ravi Kumarr Gupta