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Why Manufacturing Still Matters in Cities

A new report shows that 80 percent of manufacturing jobs are located in metropolitan areas.

Image
Reuters

Since 1977, manufacturing's share of the American economy decreased every year except two. Still, manufacturing plays an important role in metropolitan economies.

According to a new report from the Brookings Institution, manufacturing is a major economic sector for more metropolitan areas today than it was three decades ago. 

The Washington-based independent think tank found that a large majority of manufacturing jobs (particularly the most high-tech ones) are found in metropolitan areas. Last year, about 80 percent of manufacturing jobs were located in metros. About 79 percent of the higher paying, high-tech manufacturing jobs and 95 percent of the very high-tech manufacturing jobs were located in metros.

(Click on the map for the interactive version)

The map above shows which cities with one million people or more have the largest numbers of manufacturing jobs. If you click on the map you can see how different cities compare in their share of manufacturing jobs, and their share of high-tech manufacturing jobs.

As with other job sectors, innovation in manufacturing happens when companies and workers are clustered close together. Geography is important to manufacturing jobs, just as much as it is for a tech start-up. As the report points out:

American manufacturing is highly geographically differentiated; the world of manufacturing is not “flat.” Both clustering and diversity matter for manufacturing. Metropolitan manufacturing specializations, while sometimes subtle, are far from random. In most metropolitan areas manufacturing follows one or more of a few identifiable patterns of industry clustering, while in nearly all the others manufacturing is made up of a diverse combination of industry specializations.

So how should local governments encourage manufacturing clustering and innovation in their metropolitan regions? The report looks at three approaches to encourage clustering of manufacturing jobs and innovation in metropolitan areas.

One solution, according to the report, is to set up government grants for organized cluster programs:

Specific manufacturing industries and groups of interconnected industries are more likely to be located in some metropolitan areas than in others. However, the firms in a cluster face common problems, such as worker training, that they cannot solve individually. Government grants could help those firms come together, along with supporting institutions such as community colleges, universities, industry associations, and unions, to identify and solve those problems.70 Those grants should be offered on a competitive basis to self-organized groups of firms and supporting institutions.

Additionally, removing subsidies that provoke businesses to move away from the city is encouraged:

[T]here are several feasible ways in which these state subsidies (and their local-level counterparts) can be restricted. Business location incentive programs should consider the productivity and environmental impacts of location subsidies. State incentive programs, which favor the construction of new plants, disproportionately assist companies that locate in outlying and nonmetropolitan counties. These programs should instead give preference to metropolitan and especially central-county locations.

And while manufacturing might not be as sexy, or bring in as much money as commercial and residential buildings, the report says that cities shouldn't "zone out" manufacturers:

Some central cities seeking to maximize property tax receipts have used zoning to discourage manufacturers from locating within their boundaries, preferring residential and commercial buildings, which generate more property tax revenue per acre. Local governments should not “zone out” manufacturers, who disproportionately provide high-wage jobs for workers who would otherwise earn low wages. Because manufacturing creates benefits for the national economy that are not confined within the borders of local jurisdictions, federal and state governments should provide financial incentives to encourage local governments to use their zoning power to include manufacturing.

The scope of the manufacturing industry varies across American metros. Brookings put together manufacturing profiles of the largest 100 metros. You can explore them here.

Top image: Reuters/Brian Snyder

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