Part III

Adapting and
Gearing Up
in the Heartland

In 1979, the Pirates won the World Series, and the Steelers won the Super Bowl. But after that, the lights went out in Pittsburgh.

US manufacturing during the decade that followed lost more than a million jobs, or about 7 percent of the sector’s workforce, and for a long time, many communities in the industrial heartland responded by doubling down on manufacturing, working to persuade existing manufacturers to stay and new companies to move in. Particularly hard hit, Pittsburgh didn’t really have that option. Unlike other communities whose manufacturing industries were more diversified, Pittsburgh’s was so concentrated in steel that when much of the steel business moved south or to other countries (more on that in Part I of this series), Pittsburgh’s manufacturing sector was left with less to rebuild from.

Today, the city’s football team retains the Steelers name, reminiscent of Pittsburgh’s past, but its economy is now much more diversified. The city is known for its higher education institutions (Carnegie Mellon, for example, is a leader in artificial intelligence), world-renowned health care providers (e.g., UPMC), and tech (like the city’s local Google hub).

Entrance of a medical building at the UPMC Oakland campus. Group of people at Carnegie Mellon University. Pittsburgh skyscrapers, old and new.

Majestic Lane, deputy chief of staff and chief equity officer for Mayor William Peduto, attributes Pittsburgh’s ability to diversify and recover to the collaboration and action of local leaders who chose to support sectors that would “stop the bleeding”: education, healthcare, technology, and finance. And the hemorrhage appears to have stopped—or at least slowed dramatically. Though the region’s per capita income fell below the nation’s average during the 1980s, when steel collapsed, it rebounded by the beginning of the 1990s and was about 4 percent higher than the national average by 2016, a Cleveland Fed Rust and Renewal report found. Plus, Pittsburgh’s metropolitan statistical area has enjoyed growth in its number of young, educated workers.

So, it seems, from the ashes of its former steel dominance, an increasingly global, prosperous, and resilient Pittsburgh is rising.

There are many upsides to Pittsburgh’s industry diversification. Today, businesses, restaurants, and stores are opening; neighborhoods are repopulating; and philanthropy is helping to create a social safety net.

Full citation: Steven Ruggles, Sarah Flood, Ronald Goeken, Josiah Grover, Erin Meyer, Jose Pacas and Matthew Sobek. IPUMS USA: Version 9.0 [dataset]. Minneapolis, MN: IPUMS, 2019. https://doi.org/10.18128/D010.V9.0

Despite the city’s growing prosperity, significant challenges persist: The city’s new economy is not equitably distributing opportunity. “The manufacturing economy was something that truly could lift all boats during its heyday,” Lane says. It offered family-sustaining incomes. Black neighborhoods, among them the city’s Hill District and Homewood, flourished as manufacturing grew. Today, some populations, including black people, working- and lower-middle-class white people, and immigrants and refugees, don’t have the education or the access to opportunity (both jobs and the “high-opportunity neighborhoods” where residents have access to transit and other amenities) needed to participate fully in Pittsburgh’s growing education, healthcare, and tech sectors. That’s led to rising racial disparities in income and quality of life.

A study in 2018 affirms that the decline in US manufacturing jobs disproportionately affects less-educated and black workers, and it finds that the decline has widened racial gaps in health, marriage, and family formation in addition to income and employment.

Unrelated to race, one thing communities across the industrial heartland have in common is lower education levels. It’s an inheritance of their manufacturing-intensive past, says Joel Elvery, a policy economist with the Cleveland Fed.

“During the period when manufacturing was so strong, the incentive to get education after high school was limited,” Elvery says. “In 1968, it was easier than it is today to find jobs that paid well and gave you a middle-class lifestyle straight out of high school. That set up these communities for having difficulty recovering once they lost manufacturing. The industries that have really been growing tend to require a more educated workforce, and it’s not easy to flip that switch.”

Pittsburgh must figure out how to make it so the new economy lifts all boats.

Pittsburgh must figure out how to make it so the new economy lifts all boats. A community’s ability to bounce back from economic shocks and structural change is tied to its people as much as to its location, Lane says. “For folks who may have been left in multiple generations of disinvestment, one still has to see those citizens as assets,” he says. “If not, everyone pays. The people there will be the future of the region.”

Invest in training, Lane urges. Invest in pre-kindergarten. Invest in anti-poverty solutions. Invest in financial education. “Workforce development and education and health and wellness: You have to do them through policy, you have to do them through budgets, you have to do them through partnerships,” Lane says.

Different places, different
approaches

Change to the manufacturing sector has been wide-reaching and painful at times, and change will continue. But the future is bright for US manufacturing and the people and places invested in it. Technological advances have driven productivity up to unprecedented levels—though researcher Susan Houseman’s work found that a large part of that productivity growth happened in just one sector, computer and electronic products manufacturing. Omit that sector, and the rise in manufacturing’s productivity trends much slower. Retirements are opening up jobs. And come what continued technological change may, people say the sector will continue to need people to do its work.

Full citation: Federal Reserve Bank of Cleveland calculations from Bureau of Economic Analysis, Gross Domestic Product by Industry and US Bureau of Labor Statistics, All Employees, Manufacturing [MANEMP] retrieved from Haver Analytics.

“The US is a huge market for manufactured goods,” and the companies producing goods often want facilities close to market, says Tim Bartik, senior economist with the W.E. Upjohn Institute for Employment Research in Kalamazoo, Michigan. Those places that possess the supply chain necessary for manufacturing have a weighty advantage. Building the capacity to do the work doesn’t depend on just one firm choosing to locate or expand in a community, Bartik says. It has to do with a whole complex of firms and whether or not they’re competitive.

“It is not the case that you are doomed if you have a history in manufacturing,” he says. “You can’t give a roadmap and say, ‘Do x, y, and z, and be successful.’ I don’t think every community should do exactly the same thing. You have to deal with your historic realities and what your assets are. You have to deal with the reality of a changing economy. What I want to push is [that] local communities are not powerless here. They don’t set the exchange rate or trade policy, but they can do things.”

Whereas Pittsburgh diversified away from manufacturing and reaped success in doing so, other communities, such as Grand Rapids, Michigan, diversified and invested heavily to grow manufacturing. Today, the portion of Grand Rapids’ jobs that are manufacturing jobs is about twice the national average.

For one, people in Grand Rapids paid to establish a branch office of the state’s Manufacturing Extension Partnership. Investing in business incubators and job training programs like those through community colleges and the Manufacturing Extension Partnership can be attractive to small and medium-sized manufacturers, which are numerous and may not have dedicated training staff, Bartik says. He also points to the way Grand Rapids leaders engaged in so-called cluster meetings with employers.

“If you want to help local manufacturers, you better be talking with them,” Bartik says. “What common problems do they face? Maybe they have some regulatory issue, maybe the way a training program is organized doesn’t suit their needs. Maybe you can collectively come up with a solution to that problem.”

That’s what the manufacturers of the Mahoning Valley Manufacturers Coalition did in coming together, even with competitors, to assess how well the training programs available in the eastern Ohio region aligned with the skills people need to start and build manufacturing careers.

The coalition members uncovered gaps and misalignments among programs, says Jessica Borza, executive director of the coalition, a Youngstown nonprofit working to attract more people to manufacturing careers. A person trained in manufacturing in Trumbull County should bring to a plant what a person trained in Mahoning County does, and so on, she explains. When manufacturers identified the types of skills they needed, education and training partners across the valley responded, comparing curricula and creating a common one, Borza says. That was an early win, both for trainees and the employers hungry to hire them.

We want to continue to invest in the workers of this community.

“We want to continue to invest in the workers of this community,” Borza says. “We want manufacturers to have the most highly skilled employees so manufacturers can produce at a level that will keep customers and continue to grow manufacturing in the valley.”

The Mahoning Valley Manufacturers Coalition has consulted on, to date, three apprenticeship programs established over three years for machining, industrial maintenance, and welder fitter, the last added in fall 2018. (The coalition convened its members to discuss a fourth one for automation and robotics in late 2019.) Four career and technical centers spread across the region provide the training, and all work with colleges to ensure, through credentials and agreements that match coursework between schools, that it’s an option for students to keep working toward an associate or bachelor’s degree, should they desire it. It’s one way community leaders are working together to build bridges to careers in manufacturing.

Still, a challenge persisted: Improving the available training didn’t expand the pool of workers. So the coalition has engaged community-based organizations such as Goodwill and the Mahoning Youngstown Community Action Partnership to reach populations it didn’t see applying for manufacturing jobs or who were applying but didn’t possess the skills needed.

Program directors are learning about barriers to employment, too. The local WorkAdvance program, for example, helps people prepare for and enter jobs in selected sectors, including manufacturing. The lack of pay for people while they trained dampened interest, but local companies saw value in the program and started paying trainees. The program also now explicitly promotes the specific companies and jobs involved.

“‘Lots of manufacturers want to hire you’ was too nebulous,” Borza says. “If you’re somebody who’s thinking about making a shift in your job and have a family to feed, you’re not going to take that risk without understanding more specifically what we’re talking about. We’re starting to understand the information and the types of programming individuals need to make manufacturing jobs more accessible to them, and manufacturers are understanding they need to invest in some of these.”

Borza's dedication to this work is personal.

Borza’s dedication to this work is personal. Her dad, Jeff Martin, worked for most of his adult life for the steel industry right across the Ohio state line in Midland, Pennsylvania. When he passed away in 2014, he left to Borza one item in particular, a lunch pail—oval, sturdy, made of steel. The pail initially belonged to her grandfather, who also made a living in steel. Inside that three-compartment pail, Martin carried his lunch to work every day. Borza remembers how her father would bring it home.

“He took pride in the fact that that manufacturing job paid for my prom dress, paid for my wedding dress,” she says. “He knew the work I was doing, and he was so proud that I was continuing to introduce young people to these careers. He thought it was important for people to understand that manufacturing was an opportunity to consider.”

Not long ago, she lent the lunch pail to her sister, who was going through a difficult time, to motivate her, to remind her that Dad would be proud of her and that the sisters have it in their genes to stick it out, to be resilient.

“She better give it back,” Borza laughs.

Jessica Borza and her father, Jeff Martin, on her wedding day. A father–daughter picture. A snapshot from family day at Allegheny Ludlum, where Jeff Martin was proud to have relatives, including Jessica Borza’s nephew, Tyler (in the hardhat), tour the facility for which Martin worked.

Companies
take action

The future of manufacturing hinges not only on what communities like Pittsburgh and Grand Rapids and Youngstown do, but also on what companies and people do.

Bruce Hendrick has spent his career in manufacturing, working first for a global corporation and next for a fifth-generation, family-run business. Today he is owner and chief executive officer of RBB, a Wooster, Ohio, manufacturer where he’s worked for two decades. Manufacturing, he says, has a long shadow of toxicity regarding the way leaders and workers interact. “Management thinks employees don’t care and aren’t responsible for our business results, and employees walk around thinking, ‘These guys don’t care about their people. I’m replaceable,’” Hendrick says. But “it’s a lot better than it used to be.”

The home of RBB, a Wooster, Ohio, manufacturer. RBB moved to 1909 Old Mansfield Road in June 2018. It’s the third location for the company since its founding in 1973. People visiting RBB, a manufacturer in Wooster, can see the company’s founders, a brief history, and its logos on the front lobby wall. RBB owner and chief executive officer Bruce Hendrick owns another company called Building Trust, designed to help businesses do just that. A timeline spans the wall of a large meeting room inside Wooster manufacturer RBB, visualizing milestones such as the company’s founding, new leadership, newspaper clippings, and awards.

To Hendrick, if it’s hard to find people to fill manufacturing jobs (and Part II of this series describes that it is for many manufacturers today), companies must do their utmost to keep the people they have. Employees grappling with stressors such as the need to care for children and elders, unreliable transportation, and addiction often leave or lose jobs, and the cost of such turnover is always understated, he says. “The cost of lost knowledge that wasn’t transferred before people left, plus the lost momentum, there are all kinds of uncaptured costs that a company bears.” Workplace culture is critical to retention, he stresses.

One successful program later, Hendrick is confident RBB, which assembles printed circuit boards and industrial control panels, has developed practical approaches for supporting employees, should they need support, and he’s also seeing those approaches rolled out elsewhere.

If it’s hard to find people to fill manufacturing jobs, companies must do their utmost to keep the people they have.

Beginning in September 2018, RBB piloted a Workplace Connections program in which an outside nonprofit resource coordinator has confidential discussions with employees about any nonwork-related challenges and needs they have and makes phone calls on the spot to providers of support. RBB employees have used the program for assistance relating to rent, vehicles, financial planning, and childcare. “People gut through problems that they don’t need to,” Hendrick says. “If you’ve got employees going through a crisis, it may affect their focus, their attendance, their work’s quality because they’re not paying attention to the details.

“A lot of these nonprofit agencies are more than happy to help, but the people who are employed don’t realize they qualify for the help, and by the time they get home, these agencies have packed up for the day,” Hendrick adds. “So I’m bringing the help into the building.”

He’s not the only one: Another Wooster-area manufacturer began making providers of support available to its employees, too, in mid-2019. And Hendrick has heard others in town are asking to pilot Workplace Connections for their people, too. Investing in people’s professional and personal needs is not only financially smart, Hendrick says, “it’s humanly smart. It will come back to us in spades.” He’s talking intangible returns such as worker loyalty.

It is vital for manufacturers today and into the future to build workplace cultures where people can count on each other and where people are trained and empowered to do more than one thing, Hendrick says.

Cross-training employees as much as possible is one way manufacturers can afford their workers desired stability.

In the “glory days,” manufacturing workers may have had one very specific job to do, says Borza of the Mahoning Valley Manufacturers Coalition. Now, because companies are leaner, there’s not as much room for that, she says. At a time when attracting talent is top of mind for manufacturers, cross-training employees as much as possible is one way manufacturers can afford their workers desired stability, plus more varied, interesting work and higher pay.

Committing to the workforce

Borza sees such cross-training of employees happening at a steady clip across the nearly 50 companies that are members of the Mahoning Valley Manufacturers Coalition. “I’ve heard companies say they no longer simply lay off their employees when things soften up, that if employees also have maintenance skills, they’ll have them do preventative maintenance on their machines, they’ll have them paint,” she says. So even if and when business slows, a manufacturer’s workers can stay employed if they have a variety of skills.

Bruce Hendrick and other RBB leaders run their company in much the same way. They call it “swarming.” Since RBB specializes in small-batch orders, when a new order for, say, 500 circuit boards comes in, employees “swarm” to whatever station is necessary and do what they can to get it made quickly. “If you’ve got a dozen things you can do and you can do them all well, we can’t possibly get along without you,” Hendrick says. “There’s real job security in that. Those manufacturers that can succeed today, with threats from every angle, are the ones that are nimble, and the ones that are nimble make use of the talent of everybody in the building.”

Transparency is another must for manufacturers going forward, say Hendrick and others. Inside RBB, a dashboard, posted daily for all to see, shows how much product shipped the day before, how much money RBB made, and whether it will make money in the given month. If the company achieves a certain profit threshold, profits above it are split between employees and the company. It’s one approach for addressing the trust Hendrick says can be severely lacking in manufacturing. “That level of transparency tells everyone in the business, ‘I’m an adult. I’m a businessperson. Everybody is counting on me to get this car on the road, and there’s something in it for me if we can get these numbers where they belong.’”

“You can’t manage...
with 1950s
attitudes”

Manufacturers need to understand the people they’re employing, says David Megenhardt, executive director of Cleveland-based United Labor Agency, which helps people who’ve been laid off or who find themselves underemployed to find work. (Megenhardt is also a member of the Cleveland Fed’s board of directors.) For those employing many lower-wage, entry-level workers, location is important.

Where jobs are and where populations are have to be considerations,” he says, citing reports about how much access to jobs public transit riders actually have in Allegheny County and Northeast Ohio. “If I place a facility in a relatively affluent suburb, where are my workers going to come from? If the people who would work there are 20 miles and three bus rides away, then it’s the wrong place to put the facility.

“Understand how much on the edge people can be, and maybe be more flexible,” Megenhardt urges. “Employers can be real hard and say, ‘These are the rules, if you’re late three times, I’m going to fire you.’ Or they can understand and have a dialogue with the employee: ‘If you’re going to be late, you need to tell me.’”

There’s one story Betty J. Holnapy tells to students and managers often. Formerly a career coach with Towards Employment, a Cleveland-based workforce training provider, and now a workforce development specialist with OhioMeansJobs in Lorain County, Holnapy, years ago, was an 18-year-old single mother inspecting an onslaught of rubber parts with other women inside a rubber products factory on Cleveland’s East Side. They’d measure the circumference of the parts’ holes, and those that didn’t measure up were thrown into the “bad box.” None of them knew what the little mushroom-shaped parts were.

“Jim,” she recounts saying to their boss, “Can I ask you a question?” His reply wore the gruffness customary inside factories then: “If I answer you a question, will you get back to work?” “What are these things?” she wanted to know.

She returned to the picnic table with a “Guess what we’re making?” Once home, she led her dad to their washing machine and pointed out the stoppers that kept the lid from slamming. She felt pride. After that, the rate at which the women were inspecting climbed by so much that the boss told Holnapy to keep on asking questions.

Why do you think we produced more? Holnapy asks today of her students. “Because we knew what we were making,” she answers. “It made us feel important. It motivated us.”

Improving workplace culture and attracting and retaining workers could begin with a tweak to the way some managers approach employees, asserts Holnapy, who estimates she coached 200 manufacturing workers from 2014 to 2016. She remembers how one supervisor’s eyes widened incredulously when he recounted to Holnapy how his employee had complained that he talked to that employee in sharp tones, and Holnapy replied, “Well, what are you going to do about that?”

“You’re the sender of a message and a leader,” she told the supervisor. “It’s your job to adjust the message that you’re sending so you can get what you need from your line staff. You can’t manage millennials with 1950s attitudes. You can’t yell at people.”

Relationships are important to [millennials]. They watch how people say things.

Millennials, she explains, don’t need people for information; theirs is the first generation for which, if they have questions, they can consult the little computers in their pockets. She’s created a whole training module on managing millennials. Relationships are important to them. They watch how people say things. They want information up front. Company leaders, she says, would do well to take younger workers under their wing.

“A lot of folks don’t want to put that work into it,” Holnapy says. “They want people to do what they’re asked to do without asking any questions. You don’t have that luxury anymore. If you want people who know technology, you need to be accepting and flexible about the way they like to be led.”

Eyes toward
the future

David Evans knows his Dayton, Ohio, company, TESSEC LLC, has work to do in training workers on new technologies. Today, the precision machining company does subtractive manufacturing, which involves machines’ taking raw material (say, a block of metal) and cutting and drilling it down to whatever final product a customer has ordered. But the future of manufacturing, Evans asserts, involves additive manufacturing, in which, instead of whittling away material to create a part someone has ordered, machines build layer upon layer in order to produce a part.

When the cost of the machines necessary for additive manufacturing and the speed at which additive manufacturing can be done become more competitive with the cost and speed of traditional subtractive manufacturing, Evans predicts the tide will turn.

The rise of additive manufacturing will spell even more change, says Evans, also a member of the Cleveland Fed’s Cincinnati Branch board of directors, which regularly informs the Fed about the state of industry and the region the Cleveland Fed serves. Machines that create parts layer by layer don’t need multiple workers manning them, putting pieces of material in place and telling machines where the materials are and what the machines must do. Rather, additive manufacturing machines can be turned on and left to work with minimal or even no real-time direction from people.

Evans’s TESSEC has dabbled in additive manufacturing, but Evans hasn’t taken the plunge in investing in new tools and machines. “Our people would happily learn these higher-end technologies, but we’re trying to make parts and get those out the door,” he says. “It’s like in any environment: You react to the market. Orders come in and instead of planning for the future, you turn your attention to satisfying today’s needs. The challenge for leaders is to keep looking toward the future.”

The push-button jobs will go away. But you can't do it all electronically.

Evans sees the need for workers to learn to link robotics to machining (as other businesses have, yielding the machining of hundreds of pieces without a person’s touch) and the need to recruit younger people to the field so they can learn from workers who’ve been on the job so long they know when something is amiss with a machine without even looking—they can just hear it.

Would companies like TESSEC be training people for manufacturing jobs that will eventually disappear? The answer, from many, is no.

“I’ve told my people internally this: The push-button jobs will go away,” Evans says. “But you can’t do it all electronically. You can’t do everything through a computer. I don’t think that will change. There will always be things that I think you’re going to have to step back and put your hands on to figure out. You’re going to need people to find solutions and be creative in solving problems.”

If more people develop an array of skills, and if employees and company leaders work better and more flexibly together, more of the manufacturing world will prove resilient when, not if, the business changes unpredictably, RBB’s Bruce Hendrick says.

“Regardless of the organization, it’s always been true that if the people are enthused and have some autonomy over their environment and feel like they’re connected to each other and they win or lose together, they can overcome any challenge there is,” he says.

“A lot of organizations wonder, what’s the payoff for having this culture? Why spend this time, money, and effort for this transparency and training and relationship stuff? Why don’t we focus on what we’re making and do those things?” Hendrick notes. “For those organizations, my response is don’t do it, stay focused, and pray your people don’t leave you. For other organizations that do see the value in it, let’s share best practices. Even really good employers have blind spots around how we treat people.”

Explore the full "Manufacturing under Pressure" series.



Opportunities for people who want to work; the resilience of communities, particularly low- and moderate-income places; and economic growth, fueled by sectors such as manufacturing, are critical to the Federal Reserve’s mission. It’s the reason the Cleveland Fed monitors the economy and its impacts on people and communities via data and conversations with people in the community.

“We learn from things that are going on in our region, and that makes it possible for the Fed to make monetary policy that responds to local realities,” says Mark Schweitzer, Cleveland Fed senior vice president.

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