Officials in Virginia and Maryland probably won't be happy with the latest rankings in Grant Thornton's 11th annual manufacturing climate study, but the comparison of states may not be the most important feature of the 1990 edition.
This year's Grant Thornton study may be one of the more useful in the series in terms of assessing not just the manufacturing climates of states and regions but in projecting dramatic changes in economic conditions. Those changes likely will have a dramatic affect on manufacturers and other business groups over the next 20 years.
By focusing on expected shifts in the economy and alerting states and manufacturers to challenges they are likely to face during the next two decades, Grant Thornton this year has produced a product that is much more significant than the mere rankings of the states according to the perceived business climate.
Maryland's economy performed relatively well in 1989 and manufacturers had a good year, with stable employment and no major layoffs, according to Grant Thornton. Yet Maryland fell from 11th in 1988 to 16th last year in the rankings of states with "low manufacturing intensity."
Virginia, which has what a Grant Thornton official calls "many of the qualities that are conducive to successful manufacturing," dropped from second to sixth among states with "high manufacturing intensity."
The rankings are perhaps useful to some manufacturers who use them to gauge the so-called climate for their sector in various states. But the relative importance of the 1989 rankings pale when weighed against Grant Thornton's assessment of challenges that face manufacturers as domestic and international developments reshape the national economy.
If there is a theme to the 1990 Grant Thornton study, it is this: American manufacturers face major domestic challenges.
Implicit in that conclusion is that state officials also are likely to face new challenges as dramatic shifts in the work force and population affect the economy.
Virginia's drop in the rankings for 1989 is hardly cause for alarm in the state. Clearly, however, Grant Thornton's discussion of trends in the work force is bound to be of interest in the Old Dominion.
It already is, in fact, judging by Gov. L. Douglas Wilder's remarks last week to delegates at the Virginia AFL-CIO convention.
"If we are going to continue to have a promising picture for future economic growth, then we must look to a tomorrow in which the commonwealth is a multi-industry state ... built on a sound foundation of capable workers," Wilder told delegates attending the union's convention in Norfolk.
"If we are to succeed in ameliorating the unemployment problems that Virginia does have, we have to work all that much harder to assure business that Virginia can train its people to perform new jobs," Wilder said in a speech that he gave, coincidentally, on the very day that Grant Thornton's manufacturing climate study was released.
Significantly, Wilder's comments go to the heart of manufacturers' concerns reflected in the study.
Manufacturers are asked by Grant Thornton each year to rank the states on several factors that affect business. This year, says Grant Thornton, there was a dramatic rise in the importance of a state's education system to manufacturers.
In 1988, manufacturers ranked education eighth among their concerns. Last year education ranked second only to wages.
"Manufacturers are feeling the pinch of educational systems that produce workers who can neither read, write nor perform simple arithmetic," Grant Thornton reported.
Deterioration in the education and abilities of the work force is occurring at the same time that American industry will need more highly skilled workers than ever, said the Chicago-based accounting and business consulting firm.
"Clearly, in their relations with their workers, employers will have to be more flexible and use more insight than ever," says Grant Thornton. "They will have to adapt their operations to the needs of poorly educated workers."
The demand for low-skilled labor in the United States, meanwhile, will continue to decrease as more jobs requiring few skills move overseas, the study forecasts.
Citing projections previously reported by the Bureau of Labor Statistics, Grant Thornton notes that, by the year 2000, the U.S. economy will have generated 21 million new jobs.
But, says Grant Thornton, employers over the next 20 years will face major challenges in dealing with the manufacturing work force.
As previously reported, makeup of the work force is undergoing significant changes. It will be older and consist of more minorities and women.
The latter is expected to comprise 47 percent of the work force, while minorities are expected to fill more than 18 percent of the new jobs that will be added to the economy.
But a large percentage of new workers will be poorly educated, according to Grant Thornton, which cites projections showing that, by the turn of the century, 40 percent of the incoming work force will be functionally illiterate.
Those are sobering statistics, to be sure.
But just as alarming, "the engineering and scientific staff needed by industry will simply not be there," according to Grant Thornton.
It bases that projection in part on a National Science Foundation study showing that the number of persons who graduate with scientific and engineering degrees in 1996 will fall short of demand by 45,000.
So what should state officials and manufacturers -- and all employers, for that matter -- make of the new Grant Thornton manufacturing climates study? They should consider its contents in terms of the issues addressed by Wilder in his remarks last week to AFL-CIO members.