You can find the video below, or you can click here to watch it. For more info, email Josh Stevenson.

Illustration by Mark Beauchamp

By Scott Sheely, Executive Director
Lancaster County Workforce Investment Board

Background

For many years employment in US manufacturing has been in sharp decline. Domestic manufacturers have scaled back, outsourced, or just plain closed down. As a result, US manufacturing has become the “less desirable” industry sector for many workforce boards, economic developers, training providers, and workers themselves. However, in recent times a number of various factors (technology improvements, “inshoring,” and a weak dollar, among others) have changed the face of domestic manufacturing, making it more profitable and productive. As a result, in some regions manufacturers are looking to hire and are having great difficulty finding good potential employees—even amidst high unemployment. This seems to indicate that while the general operations of many manufacturers have changed, the approach to training has not.

This is the situation in south central Pennsylvania, where, despite the recession, our manufacturing sector, which is represented by food processors, packagers, printers, wood products firms, and even biotech has remained very productive and in constant need of qualified employees.

So, as workforce developers, how can we get ourselves up-to-date and assist our ever-changing manufacturing sector? As a general rule, I have found that it’s a relatively simple process. First, be very familiar with the needs, wants, and activities of local industry and second, develop training that directly addresses their needs.

With this in mind, I want to talk a little bit more about how the Lancaster County Workforce Investment Board has been working to address the broad needs of our local manufacturing companies. The results of our efforts have led to significant improvements in the quality and the transferability of skills of our workforce, the satisfaction of our industries with the people we train, and the effectiveness of our investment of public money. I believe our findings could be particularly relevant and useful to many other communities struggling to know what to do about manufacturing.

Why Manufacturing?

Before I get to that, some of you might be wondering, “Why should we continue to focus on manufacturing?”

Here are a few reasons:

• First, these industries are often the source of what I like to call “gold-collar jobs,” which are generally higher-skill, higher-wage, and high-demand occupations.

• Second, these jobs tend to have high “ripple” or multiplier effects. Manufacturing is such a unique industry because it’s almost entirely an export industry. Its products/services are shipped to other regions, states and nations, and when that happens, money from those areas comes back into the local community. This is very important to the local economy because the outside dollars will be spent by the manufacturers on supplies, services, and wages that will drive employment in many other sectors—places like doctors’ offices, grocery stores, and city hall.

• Finally, while it’s true that domestic manufacturing is scaling back on workers, it’s also true that the industry as a whole is becoming more efficient. This means that while employers might need fewer employees, the ones they keep will generally be responsible for more and as a result will be in much higher demand.

The big point here is that if we want to make the wisest investments in training that will lead to greater community prosperity, we need to focus on those sectors that drive money into the community, provide good employment, and are being demanded by the larger economy (i.e., sectors that export goods). Manufacturing is one of those region-driving sectors.

Finding and Understanding the Key Skill Sets

So to really help our local manufacturers we needed to get a better understanding of their skills needs. After many conversations, we generally found that they need people who are “broader-based,” with more troubleshooting abilities. This was interesting because it goes beyond the scope of more traditional machine operators or industrial maintenance occupations.  So we determined that manufacturers overwhelmingly need a skill set that can both service and maintain the increasingly sophisticated automated equipment that is driving domestic manufacturing.

Our research led us to a skill set called “mechatronics,” which has become a generally accepted occupation in Europe and is growing in recognition here in the states. So what is mechatronics? According to Keith Campbell, Project Manager for the Mid-Atlantic Mechatronics Advisory Committee and the Industrial Maintenance Center of Pennsylvania, mechatronics is “. . . the synergistic application of mechanical engineering, electrical engineering, control engineering, and computer science to make useful products.” Mechatronics effectively expands the traditional skill sets of mechanical and electrical engineering found in industrial maintenance to include more high-tech skills commonly associated with electronics and computer networking.

We were very pleased to find this, but realized it would need to be refined to address the specific needs of our local employers. This refining involved three key steps.

First, we needed to understand how and why mechatronics was originally developed. While the Europeans coined the term, training for mechatronics in the United States has several origins. First, several years ago Amatrol, an Indiana-based curriculum development company, in partnership with the US Department of Labor and Midwestern companies, pioneered the development of an “Advanced Manufacturing Integrated System Technology” certificate to better address the skills needs of domestic manufacturers. The program was first implemented as a certificate and is now offered at more than a dozen Midwestern community colleges and several in Pennsylvania.

Next, we took this knowledge of how mechatronics was currently being used and meshed it with what we were learning locally. First, only a small percentage of the manufacturer’s employees actually find their way to the job through formal education. Most follow a career path from machine operator or an alternative path out of manufacturing trades such as millwright, machinist, or welder.  Second, local manufacturers were needing workers with more of a “systems view” into solving problems—essentially a multi-skilled problem-solver who could handle the four or more individual disciplines often needed to solve complicated machine operations problems and, in the process, reduce downtime, and increase productivity.

Finally, we took this info and worked with Reading Area Community College (RACC) to develop an associate’s degree in Mechatronics Engineering Technology (MET), one of the first of its kind in the United States. The new degree used the Advanced Manufacturing Integrated System Technology certificate as its credential and the Amatrol online curriculum as its base with a little additional region-specific content. Since we created the program, John DeVere, Dean of Workforce and Economic Development at RACC, has also developed a way to give academic credit for training that begins in the non-credit workforce education world for incumbent workers, dislocated workers, or emerging workers, and the Berks and Lancaster County Workforce Investment Boards have also created a consortium of 35-plus industry partners and secured funding to provide the training to incumbent employees at participating companies.

The Result

Since the program was implemented three years ago, 250-plus incumbent workers have been trained. We currently have about 35 dislocated workers enrolled in the program. The actual training is provided via online instruction and is followed by practice and evaluation in fully-equipped simulation laboratories at RACC and the Lancaster County Career and Technology Center.  Students from local high schools may also start the program in their senior year, using the articulations with RACC to get advanced standing at the community college. Finally, for the past year we have been using our ARRA funds to provide this in-demand training to a substantial number of dislocated workers.

Can it be Replicated?

As more and more people have become familiar with our success, many have asked if the program could be replicated. For help with this, we reached out to the Packaging Machinery Manufacturers Institute (PMMI). As an industry, packaging is one of the highest-volume users of automated equipment in the nation. PMMI was interested in our offer and helped to organized a meeting in Indiana to bring educators from Pennsylvania, Minnesota, Wisconsin, Indiana, and North Carolina together to identify latest skills needs for the automation industries.

After the input was collected, PMMI and the Industrial Maintenance Training Center of Pennsylvania began working with the US Department of Labor to build a Mechatronics Competency Model as a part of the Competency Model Clearinghouse. That model defines competencies from basic skills in manufacturing to much more specific occupational skills such as mechatronics. It was approved and added to the Clearinghouse earlier in 2009.  See http://www.careeronestop.org/competencymodel/ for more information.

In the midst of all this, we realized that the mechatronics engineering technologist occupation had yet to be defined in the Standard Occupational Classification (SOC) system. So we contacted the Department of Labor and the folks who run O*NET, which is an occupational database operated by the US Department of Labor, to see what we could do to further inform their research and get this occupation officially recognized.

To build our case, we turned to Economic Modeling Specialists Inc. (EMSI), which helped to develop a definition of an MET. EMSI used information derived from existing profiles for industrial machinery mechanics, machinists, and electrical and electronic repairers of commercial and industrial equipment, and built a profile that includes mechanical, engineering, electronics, and information technology knowledge; troubleshooting, installation, repairing, and complex problem-solving skills; and abilities to visualize, communicate orally and in written form, and reason in complex situations. We think that this definition has really hit the nail on the head and are now in the process of validating the definition with industry experts.

In the process, one of our colleagues in Colorado noticed that the knowledge, skills, and abilities seemed to have a lot of similarities with other occupations—careers related to industrial maintenance, renewable energy, industrial operations technology, water quality management, and environmental engineering. We agreed and had EMSI compare the competencies of METs with more than 25 careers in these other industries.

What we found verified our gut feeling. The competencies of virtually every occupation were at least 80% compatible with the competencies of an MET.

Why is Mechatronics so Important?

We believe these findings are very significant for a number of reasons.

• First, the training for METs has a very high degree of skill compatibility to a large and expanding pool of occupations in various fields (including green). This is very encouraging given the need to retrain and advise incumbents, dislocated workers, and new workers about solid job opportunities in tough economic times.

• Second, the overlap of skills means that the curricula developed in our education and training could be used in multiple career paths and to support a wide range of occupations related to manufacturing industries. This means more career mobility for the trainees as they complete training.

• Finally, because these data help educational programs address multiple career paths at the same time, workforce and education professionals can be much more sophisticated about how we talk with the users and potential users of education and training so that programs and skills are tweaked to meet the specific needs of regional industry.

With the help of EMSI, we have been able to add substantial depth to the work that we are doing in mechatronics. Our new understanding will allow us to use significant parts of the curriculum that we put into place over the last several years to develop new career paths leading to “gold-collar” jobs in our regional economy.

Illustration: Mechatronics Techs and Renewable Energy

To illustrate the value of a mechatronics tech’s skill level, the graphic provides a skills comparison between mechatronics techs (the colored bars) and a group of potential renewable energy occupations (HVAC, electricians, construction managers). For the most part the skills areas are highly compatible. The largest gaps mainly seem to be in the soft areas (management, customer service, oral and written expression), which would probably relate to the business aspect of the occupations. A large gap in the building and construction area makes sense.

For more information, email Scott Sheely or call him at 717-735-0333.

As part of their efforts they have taken part in job fairs to share information about new regional programs and data on the local labor market and career opportunities.

At a recent job fair, Ohio Skills Bank found that there was a lot of demand for in-depth regional data geared toward jobseekers. Tom Prendergast, a researcher and grant writer at Mansfield’s North Central State College, was involved with distributing the data and observed that, “. . . people are eager to know what they need to do to get into new jobs. They are interested in what the data is telling them.”

So how can you present labor market and jobs information to jobseekers?

• First, when determining what sort of information would be most helpful to the jobseekers you need to know what industry sectors currently have the highest unemployment. Ohio Skills Bank determined that many of the job losses in the region were attributable to the downsizing and expected closure of a General Motors plant.

• As a result, they turned to EMSI’s labor market tools to produce handouts detailing the most current labor market relative to the manufacturing sector and occupations that require a bachelor’s degree or associate’s degree.

• Finally, for each report OSB focused on the occupations with the highest number of annual openings (new plus replacement jobs) that fell within an hour’s commute of Mansfield.

Tom Prendergast felt that the reports were very well received, and commented, “I heard one person say data like this gives people hope. This helps combat the saying that no jobs are out there.”

Although manufacturing has been heavily affected by the recession, regional practitioners didn’t want to push jobseekers completely away from this sector. Manufacturing, in particular, has shown quite a bit of need for industrial maintenance. “In our region, industrial maintenance continues to be a strong area,” Prendergast said. “And EMSI’s data basically pointed that out — that there continues to be a demand for industrial maintenance, whether that’s maintenance repair workers, millwrights or other similar occupations.”

For the three reports OSB produced as job-fair handouts, click the links below: 

Manufacturing-related occupations

Occupations requiring a bachelor’s degree

Occupations requiring an associate’s degree

And for more on OSB in north central Ohio, click here. 

When these resources are in a local planner’s toolbox, the region will be more prepared and ready to act when the inevitable happens.  Instead of being afraid of economic change, communities should seek to use it to their advantage. They can take encouragement from other communities that turned seeming impossible situations into great opportunities to transform the shape and character of their local economy and workforce.

To learn more, check out the following case studies:
1. Iowa town reshapes its economy with data-focused plan
2. Threats of job loss lead to innovation in south central PA

Finally, when working on regional strategies, always remember the old adage, “What’s good for the goose isn’t always good for the gander.” It is all too common for regional workforce and economic development strategies to be based on anecdotes, trendy issues, or vague terminology. This means that it is vitally important to know and understand your region, which means really understanding what the data is telling you.

In this case “the data” is information about your region’s employers (trends and stats related to industries) and people (trends and stats related to your region’s occupations, demographics, education, and skills).  This will ultimately help you make better decisions and avoid derailing your current efforts for the newest trends, which ultimately might be the wrong thing for your region to chase. Conversely, the data can also reveal that the current hot trend is something that your region could certainly chase. A lot of communities have begun to capitalize on the “green jobs” issue  because they already have a good industry and occupation mix that can adjust itself to this need.

If you have any questions or would like additional help crafting a strategy for your region please contact us. Rob Sentz (rob@economicmodeling.com), 866.999.3674.

Data & Methodology

Background on Occupational Compatibility

Occupation compatibility, or the similarity between two occupation’s competencies, is another term that is crucial for interpreting career transitions. This report calculates the compatibility of two occupations by comparing their O*NET skill and knowledge profiles, which contain two scores for each competency element (e.g., Mechanical knowledge): the attainment level and the importance level. Our algorithm uses the differences between competency levels, weighted by importance levels, to determine how compatible two occupations are. Several assumptions are made in calculating compatibility:

The desirability of transitioning workers from one occupation to another decreases exponentially as the distance increases between a source occupation’s O*NET score in one category and the target occupation’s score in that category.
Over-qualification is just as much of a problem as under-qualification for a worker moving from one job to another.

The compatibility formula first adds up squared differences in every competency category and weights each difference according to its importance to the target occupation’s job requirements. This number we might call “competency divergence.” Only occupations with a divergence in the lowest quartile are considered compatible, and the maximum divergence number in this group is used to create the scale of the compatibility index, which is a number from 0 (not compatible) to 100 (perfectly compatible).

Key Terms

Replacement Jobs

The number of job openings (over a given timeframe) expected in an occupation as the result of turnover—e.g., employees changing occupations, retiring, etc., based on national per-occupation averages. It is derived by multiplying estimated annual turnover by the number of years in the given timeframe.

Standard Occupational Classification (SOC) Code

The federal system of classifying occupations using six-digit codes. See www.bls.gov/soc/.

North American Industry Classification System (NAICS)

A system of classifying North American industries using six-digit codes.

EMSI Staffing Pattern

A staffing pattern is a way of showing what percentage of jobs in a given industry are in a specific occupation. For example, a (simplified) staffing pattern for the industry “Hospitals” might show that 10% of jobs in the hospitals industry are occupied by surgeons, 15% by general practitioners, 20% by nurses, 5% by information technology support staff, 5% by janitors, 1% by chief executives, and so on. EMSI uses regionalized staffing patterns that are available by Occupational Employment Statistics (OES) region.

Worker Adjustment and Retraining Notification Act

WARN offers protection to workers, their families and communities by requiring employers to provide notice 60 days in advance of covered plant closings and covered mass layoffs. This notice must be provided to either affected workers or their representatives (e.g., a labor union); to the State dislocated worker unit; and to the appropriate unit of local government.

Job Projections

Employment projections of growth or decline are not equivalent to labor market “supply” or “demand.” They are based on past trends and economists’ consensus about the near future, and cannot account for unexpected regional or national events that may affect employment. Full supply/demand analysis requires local knowledge such as can be obtained by surveying employers and job seekers.

Now we’ll walk through how you can use data to transition workers into other compatible occupations.  For the sake of simplicity, we will use job losses recorded under the Worker Adjustment and Retraining Notifications (WARNs) issued for north central Ohio since 2006.  Some WARN notices list specific job titles, and many give the total number of workers being laid off.  However, in many cases WARN notices and other layoff announcements do not identify specific occupation data.  In order to get around this you can use regionalized staffing patterns.  In this case we used the Economic Forecaster module to quickly derive staffing patterns, which are used to understand what jobs might be lost.

Once the occupations have been identified we can use O*NET occupation definitions  to determine how workers can switch to new careers while carrying over the maximum amount of their current skills.  In this case we used EMSI’s Career Pathways module, which blends O*NET data with labor market data to rank the relative compatibility of occupations. The goal is to pinpoint the top occupations that have similar knowledge, skills, and abilities, and are therefore the best candidates for career transition.

A Quick Word About O*NET

The value of the O*NET data, as it is implemented in EMSI’s Career Pathways tool, is that you can:

1.    Quickly see compatible knowledge and skill sets (competencies) for the top occupations most impacted by job losses,
2.    Generate suggested transition areas based on the availability of work in other industries employing workers in the same occupational category (e.g. a team assembler moving from the household appliance industry to the wood product industry),
3.    Understand if the wages of the compatible occupations are competitive,
4.    Understand if the educational attainment of the compatible occupations are above, below, or equal to the occupation they currently have. This will indicate what training would be needed to take on the new occupation.

The following example illustrates how this works.

Example of Worker Transition Analysis

In this example we look at how Team assemblers are projected to change in north central Ohio and where potential dislocated workers can be re-employed.

Occupation: Team assemblers (SOC 51-2092)

O*Net definition: Work as part of a team having responsibility for assembling an entire product or component of a product. Team assemblers can perform all tasks conducted by the team in the assembly process and rotate through all or most of them rather than being assigned to a specific task on a permanent basis. May participate in making management decisions affecting the work. Team leaders who work as part of the team should be included.

Alternative Job Titles: Assembler, Assembly Line Machine Operator, Assembly Operator, Assembly Line Worker, Assembly Associate, Certified Composites Technician (CCT), Operator Technician, Production Line Worker, Assembly Inspector, Assembly Technician

Overview

According to WARN notices, 110 Team assemblers were laid off in this region from 2006 and 2007. Prior to notification, the Team assembler occupation had been projected to need 51 new and 721 replacement positions between 2007 and 2012, which indicates there may be other potential employment opportunities within this occupation. (Note the tremendous need for replacements over the new job creation.)

1. Industry Transitions

When trying to find new employment, the best place to start is to see if another industry has demand for the occupation.  Regional staffing patterns and industry projections show that other regional industries not only employ team assemblers, but they are also projected to add new positions. The following industries provide potential employment opportunities based on the fact that they also employ a lot of Team assemblers:

• Agriculture, construction, and mining machinery manufacturing, NAICS 333100 (327 positions in 2007, projected to add 49 new positions by 2012);
• Household appliance manufacturing, NAICS 335200 (1,111 positions in 2007, projected to add 116 new positions by 2012)
• Other wood product manufacturing, NAICS 321900 (163 positions in 2007, projected to add 5 new positions by 2012).

2. Career Transitions

If none of the previous options work, or if more options are needed, you can look at different industries where team assemblers can be re-employed based on compatibility, demand, and earnings.

Option 1: Solderers and Brazers (51-4121.07)

This occupation employs 1,328 workers and is projected to require 223 new and replacement workers by 2012.  It also has an average wage of $18.32/hour, which is higher than team assemblers.  Employment in this occupation is projected to increase 6% by 2012, which is higher than the state average for this occupation.

Key knowledge and skill similarities include:
•    Intermediate levels of mechanical knowledge and production & processing knowledge
•    Intermediate levels of monitoring, quality control analysis and learning strategies and manual dexterity skills

The focus occupation may require additional training in these key knowledge and skill areas in order to make the transition:
•    Knowledge of computers & electronics, and English
•    Skills in reading comprehension and time management

Top host industries for this occupation are:
•    Agriculture, construction, and mining machinery manufacturing (NAICS 333100),
•    Motor vehicle body and trailer manufacturing (NAICS 336200), and
•    Motor vehicle parts manufacturing (NAICS 336300).

Summary

This example immediately presents itself as a very viable option. The demand for more workers exists (223 new workers), the wages are better, and the jobs are very compatible.

Option 2: Sawing Machine Setters, Operators, and Tenders, Wood (51-7041.00)

This occupation employs 142 workers and will require up to 24 new and replacement workers by 2012.  It also has an average wage of $15.41/hour which is slightly less than team assemblers.  Employment in this occupation is projected to increase 7% by 2012, which is almost the same rate as the state.

Key knowledge and skill similarities include:
•    Intermediate levels of mathematics knowledge and production & processing knowledge.
•    Intermediate and advanced levels of quality control analysis skills, operation monitoring skills, and equipment selection skills.

The focus occupation may require additional training in these key knowledge and skill areas in order to make the transition:
•    mechanical knowledge,
•    repairing skills, and
•    equipment maintenance.

The top host industries for this occupation based on employment size and growth include
•    Other wood product manufacturing (321900),
•    Veneer, plywood, and engineered wood product manufacturing (321200), and
•    Household and institutional furniture manufacturing (337120).

Summary

Based on the wages, this option is not as good as the previous example. However, regionally wages can fluctuate quite a bit, so it would be good to run this analysis more locally to find how much these workers could actually make.

Option 3: Helpers—Production Workers (51-9198.00)

This occupation employs 1,964 workers and will require up to 283 new and replacement workers by 2012.  It also has an average wage of $14.38/hour, which is lower than team assemblers.  Employment in this occupation is projected to outpace the state, growing 2% by 2012.

Key knowledge and skill similarities include:
•    Intermediate levels of public safety & security, and English language knowledge.
•    Intermediate and advanced levels of equipment selection skills, learning strategy skills, and quality control analysis skills.

The top host industries for this occupation are:
•    Motor vehicle parts manufacturing (336300),
•    Converted paper product manufacturing (322200), and
•    Bakeries and tortilla manufacturing (311800).

Summary

This option is also not as good based on the wages, but could still provide good employment to interested workers.

More Resources

Read about how others are using this data in their own communities:

1. Dave Morris, Michigan Economic Development Corp.
2. Jeremy Minikel, Michican Works!

For the final section of the White Paper, click here.

In the news we often only hear about an industry’s growth or decline, which is measured by the number of new jobs or a loss of total jobs. There is hardly ever anything about the turnover rates (or replacement jobs) within those industries, which can create tremendous employment needs despite overall growth or decline. The important thing about replace-ment jobs is that the total number of workers that need to be “replaced” in any given industry on an annual basis can actually exceed total job growth.  This is particularly true in industries like manufacturing, rail transport, or utilities, which might have such high rates of turnover or retirements that they actually face worker shortages despite being in decline.  This is certainly the case in many parts of the US, including north central Ohio.

Here is a table showing the national outlook (2002-2008) for occupations that have had very high rates of replacement jobs.  This analysis was generated using EMSI’s Economic Forecaster module, which provides a detailed breakdown of every industry and occupation in the US.

Notice how the need for new jobs (1.3 million over 6 years) was less than the total number of replacements needed (nearly 2.1 million). In addition, many of these jobs have fairly respectable wages, and (with the exception of computer systems analysts and registered nurses) do not need a lot of training. As a result, these jobs could be good opportunities for those looking for immediate work and don’t have a lot of time or money to go back to school.

Remember, these job openings are not due to overall economic growth but to normal turnover in the workforce, including retirement. Even in industries experiencing total employment decline, like manufacturing or construction, replacement jobs are often plentiful.

Summary

Despite the media’s focus on job growth (which is important), it is critical to consider the replacement needs of a given occupational or industry sector. “High-growth” occupations do not always include “high-demand” occupations. Moreover, high-growth areas are often the first to be hit in an economic downturn, while replacement needs continue to hold steady in other areas that may show stable or declining total employment numbers.
We encourage you to look at replacement numbers for your region as a way to discover more opportunities for unemployed or underemployed workers.

More Resources

For more on replacement jobs see this link.

Read about how understanding retirements is good for worker recruitment from Brian Kelsey of Civic Analytics.

For the next section of the White Paper, click here.

When an employer announces a closure or layoff, the community’s first response should be to assess the total potential impact. It is important to realize that the loss of one company and even a relatively small number of jobs can have a fairly dramatic effect on the community. In Table 1 we have removed 100 jobs from the automotive manufacturing sector (specifically, NAICS 336332: Other motor vehicle electric equipment manufacturing) in one local area to illustrate how a change in that industry affects other parts of the economy.

The results, which were quickly generated using EMSI’s Economic Impact module,  provide data on the potential “direct” and “indirect” impacts of losing 100 jobs. In this case the loss of 100 jobs creates a ripple effect of an additional 128 jobs in manufacturing and other seemingly non-related industry sectors.

The Direct Effects

What are direct effects? The direct effects are fairly easy to understand. The loss of 100 jobs has an initial impact of putting 100 people out of a job, and creates the loss of all of their income and spending on the region.

The Indirect and Induced Effects

What are indirect/induced effects? When a business scales back or people lose their jobs, this spills over into the rest of the local economy.  First, there will likely be losses in the upstream supplier businesses that served the employer being analyzed. Next, people who lose their jobs will change their spending habits. This means they will likely have less money to spend at the doctor’s office, the grocery store, the local car dealer, and so on. They may also leave the area, taking their buying power with them.

In our example, the areas hit hardest because of indirect effects are: Manufacturing (another 20 jobs will be lost in manufacturing as a result of the first 100), Retail trade (21 jobs), Other services, except public administration (15 jobs), Health care and social assistance (13 jobs), and Government (12 jobs).

Summary

Job losses like this are obviously not good news for the community. However, if regional planners understand and harness this information they will have a very useful source of information at their disposal.  Everyone from community colleges who need to know about the community’s training needs, chambers of commerce who need to understand how the business community will be affected, economic development groups who need to retain or recruit companies, and workforce boards who need to connect workers and businesses can use this information as credible source to understand what jobs will be affected and who might be in need of help.

More Resources

Read about how others use economic impact analysis in their own communities:

1. Jay Hardin, Workforce Alliance Inc, Palm Beach, FL

Read more about economic impact analysis from EMSI’s Senior Economist, Hank Robison.

1. The Common Pitfalls of Economic Impact Analysis
2. Who’s Afraid of IO?

For the next section of the White Paper, click here.

Whether it’s a college developing a new  program, a workforce board transitioning workers to new higher paying occupations, or an economic development council trying to attract a new company – they all need to justify their decisions based on the potential regional impact.

This can be a tall order, especially when staff, time, and money are limited. Many organizations will simply give up at the very thought of trying to come up with those figures, especially at the local level.

Now, colleges, workforce boards and economic development councils need fear not.

With advances in computer technology and data availability access to applied regional input-output modeling that can help estimate the impact of regional changes is readily available. Such analysis could only be dreamed of just 10 years ago.  So why are so many reluctant to make use of this powerful, well recognized tool?

Undoubtedly, much of this has to do with the textbook image of input-output as a complex accounting system requiring advanced mathematics and massive data to apply.  Applied input-output modeling programs as well have a reputation of being difficult to understand and operate, and this must scare off some.  And finally, the difficulty of applied programs has been aggravated by a lack of user support on the part of the input-output software vendors.

We start with a brief review of input-output fundamentals.  We turn next to a short list of the issues addressed with input-output: “Why you need input-output.”  We conclude with a practical look at how to take advantage of recent advances and build your own input-output model and analysis.

WHAT IS INPUT-OUTPUT?

Input-output models are constructed on a platform of data indicating interconnectedness of the industries, households and government entities that occupy a given geographic space.  Its name stems from the fact that a portion of the output (i.e., sales) of one industry will appear as the input (i.e., purchases) of other industries.

With origins in the 19th century and before, input-output modeling has roots as old as any in contemporary economics.  It was not until the mid-20th century, however, that input-output appeared in a form specifically tailored to many of the most pressing real world planning issues, and Russian born American economist Wassily Leontief was awarded the Nobel Prize in Economics (1973) for developing that uniquely applicable form.

In the early days, until the early 1960s, only largest of nations could afford the main-frame computing power needed to house and operate an adequately detailed input-output model: the first U.S. input-output model was constructed to address the industrial planning issues raised by World War II.  By the late 1970s and 1980s, applied input-output was routinely available at the state-level.  Today even a small rural community can afford a computationally powerful input-output model.

WHY YOU NEED INPUT-OUTPUT ANALYSIS

According to the classic definition, the process of economic development planning has two parts: 1) formulate goals and 2) assess the effectiveness of alternative policy actions in achieving those goals.  No wonder at input-output’s popularity: it directly addresses both parts.

Economic development goals are formed in terms of the basic descriptive categories conveyed in the region’s input-output model.  Common goals for economic development might include, for example, increasing earnings per worker, increasing economic diversity, substituting local for imported goods, expanding various industry clusters, attracting quality of life migrants, and so on.  The current state, or baseline, of each of these measures is contained within the input-output model.  Development planners can thus use the model in a diagnostic exercise, to indicate areas where the economy might benefit from improvements, and conversely, areas were additional attention is likely to be of less importance.

With development goals in place, input-output is used to identify the best approach for their attainment.  Suppose for example there are competing uses for some parcel of industrial land, and suppose also that among community development goals is utilization of some underemployed community resource, perhaps a group of idled occupations.  The input-output model is used to simulate in turn each of the alternative uses and among its many indicators; the impact of each use on the target occupations is examined.  Alternative uses of existing resources, the impact of departing industries, the impacts of new industries, these are but a few of the policy issues addressed by a regional input-output model.

HOW TO USE INPUT-OUTPUT

An applied regional input-output model is available from a number of sources, the leading ones being Economic Modeling Specialists, Inc. (the “EI Model,” see: economicmodeling.com), The Minnesota IMPLAN Group (the “IMPLAN Model,” see: implan.com), Regional Economic Modeling Inc. (the “REMI Model,” see: remi.com), and the U.S. Department of Commerce, Bureau of Economic Analysis (the “RIMSII,” see: bea.gov).  The features of these modeling alternatives vary considerably and while it is certainly a worthwhile endeavor, cataloguing these differences is beyond the scope of the present paper.  We rely instead chiefly on access and use of the EMSI EI Model.

The general steps involved in using a regional input-output model for policy analysis are:

1.  First, regional input-output models convey a tremendous amount of baseline information right out of the box. So in the first step of the process, the model’s base data are useful for informing the policy discussion.  As a result, policy makers might want to focus on the current occupational make-up of the region’s workforce, the relative magnitude of residents’ outside versus inside incomes, the importance of trade center industries, the leading industry clusters, and so on.

2.  The next step, which often poses a stumbling block for many, is to translate the policy issue into associated direct effects.  The policy issue might be the impacts of constructing a new building, and their may be interest in the economic impacts during the project’s construction phase.  EMSI’s way of defeating this hurdle is two-pronged.

a.  To begin with, EMSI makes every effort to maintain an up-to-date set of users’ manuals and website FAQs covering much of needed direction.

b.  Second, EMSI maintains a team of knowledgeable economic analysts (the most extensive customer service department in the industry) ready to provide over the phone hands-on assistance and direction with modeling issues.

3.  In the third step, the direct effects are entered into the regional input-output model.  This is fundamentally a mechanical procedure the ease of which hinges of the relative user-friendliness of the modeling software.  The EMSI EI model is web-based and specifically tailored to ease the burdens of the user.

4.  Finally, with direct effects entered, the model quickly produces the total impact of the modeled policy alternative.  For the most part this is a straightforward exercise.  The model will show the change, positive or negative, in regional jobs and earnings by industry (with detail down to the 6-digit NAICS code level).

For more questions about input/output modeling or to see a demonstration of EMSI’s Economic Impact module please contact us.

Located in the southeastern part of the state, Richland, Kennewick, and Pasco (a.k.a the Tri-Cities) have mushroomed nearly 20 percent over the last eight years and boast a current population of 234,000. However, as is always the case with rapid growth, there is one issue: The area’s booming population base has few available avenues to earn four-year degrees without traveling out of the region, thus limiting the ability for many residents to ascend on the career ladder.

As a result, Columbia Basin College offered a solution.

Read the full case study (PDF): Community college lands 4-year program using data-driven approach

Download the PDF: CBJTG guide

Update: EMSI has produced a video tutorial to assist in the CBJTG application process. This brief screencast shows how grants writers can use EMSI’s data analysis to identify high-growth/high-demand industries and occupations in their region, find economic impacts of regional industries, and access occupational competencies.

Watch the CBJTG video tutorial

EMSI is also offering free program justification reports to EMSI clients and other interested education professionals. This report is designed to integrate and analyze data from multiple sources to help educational institutions discover regional labor market needs for certain postsecondary programs of study. The overall goal is to help a college align program offerings to the economy and labor market of its service region. To do this, the report selects a set of focus occupations, determines the regional job outlook for them, and compares this to the number of recent graduates in related programs at regional educational institutions.For more information, contact us at 866.999.3674.

Download the sample report in PDF format