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Low Grades on 'Human Capital'

Alabama’s manufacturing and logistics report card arrived in June, and — while we didn’t really ace any of the subjects — we at least got solid Bs in sector diversification and global reach. We flat out flunked human capital, lowest grade in the class. Again.

The 2014 Manufacturing and Logistics Report Card, an in-depth analysis from Ball State University’s Center for Business and Economic Research, grades all 50 states on an array of manufacturing metrics.

“Alabama’s grade improved from “D” to “C-” in productivity and innovation category, owing to an increase in manufacturing productivity,” according to CBER Director Michael Hicks. “Human capital continues to plague Alabama, with a solid F ranking, and in last place overall.”

No factor matters more to businesses than the quality and availability of labor, according to the National Center for Educational Statistics. Workers are the source of most innovation and process improvements that distinguish successful firms from those that are not successful. Human capital (especially the quality of educational background) is the most important factor in firm location decisions, according to the report.

To its credit, Alabama has now put in place programs in which some state colleges work with companies like Toyota Motor Manufacturing Alabama to train young workers while they’re still in school.

Global reach measures the state’s amount of international trade, in both imports and exports; Alabama scored well there. As is often pointed out, the state’s tax burden is low, allowing for a lower cost of business.

The report categories were chosen as those most likely to be considered by site selection experts for manufacturing and logistics firms, and by the prevailing economic research on growth. CBER prepared the report at the request of Conexus Indiana, the state’s advanced manufacturing initiative. The full national report, and the companion policy brief, “Manufacturing and Labor Market Frictions,” can be found online at conexus.cberdata.org.

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