Labor Productivity in Eries Manufacturing Industries

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Labor Productivityin Eries Manufacturing
Industries

• Dr. James A. Kurre
• The Economic Research Institute of ErieSam and
  Irene Black School of Business
• Penn State Behrend
• For the
• 6th Annual ERIE Conference
• August 14, 2007

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Thanks!
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Labor Productivity

• Labor Productivity
• Value Added per hour of labor
• Total Value Added / Total Hours Worked
• by Production workers
• Data come from the Census of Manufactures,
  every five years.

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U.S. Erie Productivity Gap
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2002 Manufacturing Productivity

• U.S. Productivity 92.30 per hour worked
• Erie Productivity 71.20
• 77.1 of the U.S. average
• 22.9 below the U.S. average
• 249 of 359 Metro Areas

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Metro Manufacturing Productivity

• Calculated labor productivity
• for 359 Metro Areas (MAs)
• Highest 385.38 Iowa City, IA
• Average MA 93.38
• U.S. Average 92.30
• Lowest 20.26 Jacksonville, NC

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Key Question Why?

• What causes the variation across MAs?
• The suspects
• -education of the workforce
• -capital stock
• -scale of the metro area (economies of scale)
• -innovation (patents)
• -IT usage

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The Data

• We had full data for 272 MAs for the analysis.
• -75 of U.S. population
• (91 of metro area population)
• -71 of U.S. manufacturing employment
• (90 of metro area mfg empt)

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Variables Explored

• Education
• - of population with bachelors degree
• or higher
• Capital equipment
• -investment per worker in 2002
• Scale
• -Agglomeration population
• -Economies of scale mfg employment

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Variables Explored, cont.

• New Technology
• -patents issued (1999)
• Information Technology
• - of total employment in three IT
• occupational levels (high skill,
• moderate skill, low skill)

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Results

• Education
• Positive, stat sig, R2 about 6
• Capital investment
• Positive, consistently significant. R2 at about
  the 8-9 level
• Scale
• Population not stat sig
• Mfg empt stat sig, quadratic, R2 lt2

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Results, cont.

• Patents
• Positive, stat sig, R2 about 6-7
• IT Occupations
• Total IT stat sig, positive, R2 about 6
• High skill stat sig, positive, R2 about 6
• Moderate skill stat sig, positive, R2 about 4
• Low skill not significant

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Results, cont.

• Best model
• -Capital stock investment per worker
• -High-skill IT occupations
• Together they explain about 15 of the variation
  across metro areas in manufacturing productivity

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Conclusions

• To improve local productivity
• -Capital Investment
• -IT-- especially high-skill IT
• -Innovation patents
• -Education
• Minor manufacturing scale

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