Arizona Needs to Improve Its Human Capital, Report Shows

Arizona’s manufacturing sector is being slowed by a lack of human capital, according to a new report from Ball State University. The 2014 Manufacturing and Logistics Report, prepared by Ball State’s Center for Business and Economic Research (CBER) for Conexus Indiana — the state’s advanced manufacturing initiative — shows how each state ranks among its peers in several areas of the economy that underlie the success of manufacturing and logistics. These specific measures include the health of the manufacturing and logistics industries, the state of human capital, the cost of worker benefits, diversification of the industries, state-level productivity and innovation, expected fiscal liability, the state tax climate and global reach.

Michael Hicks, director of CBER, says, “Arizona maintained a ‘C’ grade in the manufacturing industry category and improved its diversification grade from ‘F’ to ‘D.’ The state’s ‘D’ in human capital continues to make it a not especially attractive location for business.”

Arizona received the following grades:
Manufacturing: C
Logistics: C-
Human Capital: F
Worker Benefit Costs: B-
Tax Climate: B
Expected Liability Gap: D+
Global Reach: D-
Sector Diversification: D
Productivity and Innovation: C

Along with the full national report is the companion policy brief, “Manufacturing and Labor Market Frictions.”

The categories in this report 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. Each category included multiple variables for each state that were aggregated and then ranked 1st through 50th, with 1st being the most desirable. Within each category, the lowest aggregate score assigned provided the overall rank. Grades were assigned A through F using a normal distribution of grades commonly known as a bell curve.

For a local look at what’s happening in the manufacturing industry, please see the cover story in the June 2014 issue, “Arizona Manufacturing: Its Success Is Economic Prosperity.”