Rust Belt bias flunks the 2017 Manufacturing and Logistics National Report Card

Last year, the 2016 Manufacturing and Logistics National Report Card from Ball State University in Indiana raised eyebrows in Colorado's manufacturing community when we reported the state was given a D. The bad grade provoked well-intentioned efforts to assess the state's manufacturing shortcomings.

This year, our footprint has expanded west to include California and makes for an even larger data set to parse. Here's the 2017 Manufacturing and Logistics National Report Card grades for California, Colorado, and Utah, the states where CompanyWeek now publishes.

There's a lot to unpack here.

By the looks of things, the only subsector grade saving California from Colorado's ignominious D in overall Industry Health is a A in Productivity and Innovation.

But in other states, including many in the Rust Belt, it doesn't appear the overall grade correlates at all with subsector scores.

Consider Michigan:

Michigan's A grade in overall ealth, without an A in the other categories, is a headscratcher. Likewise, Utah would appear to have earned a high overall grade.

The explanation seems to be that per-capita employment is weighted more heavily. According to the Report, Michigan's manufacturing employment is 11.7 percent of the state economy, a high number compared with most states. The Report Card notes that 5 percent of Colorado employment, and 8 percent in California and Utah, is in manufacturing.

Is Michigan's sector -- or that of Indiana, Kentucky, Iowa, and South Carolina, other states with A grades for industry health -- in better shape than California or Colorado's because it has more jobs?

Maybe, but here's why that's a tough argument to make.

Manufacturing jobs have steadily decreased as a percentage of overall U.S. employment. Per-capita employment seems a dated metric; it's yesterday's measure of industry health.

That's not to say workforce doesn't matter. The opposite. Human Capital is the study's most important metric. The lack of skilled labor is manufacturing's biggest challenge -- nationwide.

Today's healthiest manufacturing economies are focused on developing the right workforce. What's appealing to manufacturing companies is a future workforce flashing STEM skills. States experiencing a net in-migration of young talent, in economies with a rich R&D backdrop, is also a plus. Michigan's D in Human Capital is telling, as is Kentucky's D and South Carolina's F.

Other criteria in the Report Card are important in the future. Sector diversification is manufacturing's new calling card. Want to begin to solve manufacturing's labor problem? Showcase its growth industries -- beer and distilling, natural and organic good, technology-fueled fabrication in aerospace, and the outdoor industry -- that appeal to a new generation. They're the growth industries of the manufacturing economies in the West.

Global Reach is today a two-way street. Exports are only one side of the global manufacturing coin. Reshoring -- shortening supply chains -- is the flip side, and states developing manufacturing infrastructure to accommodate brands wanting domestic manufacturing will thrive.

Michigan's recovery, with automotive manufacturing at the center, has been startling. It's a testament to the power of industry innovation and deliberate economic development efforts to reimagine manufacturing in a key industry. Other states, like Tennessee (overall health: B+), are led by energetic and capable manufacturing leaders intent on bring new ideas to their communities.

But today manufacturing health will follow economies where talent enables innovation and communities understand the value of manufacturing jobs. If Michigan and other Rust Belt states leverage their manufacturing legacy to recruit a new generation of STEM-inspired employees to manufacture a widening portfolio of industry products, an A will be well-earned.

Otherwise, the centers of modern U.S. manufacturing will tilt toward R&D-inspired, entrepreneurial economies also benefitting from an influx of talent and money.

The race is on, and more than good grades are in the balance.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.