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Obama manufacturing hubs face uphill struggle to create jobs

3D printers of all shapes and sizes fill the studios at America Makes, the National Additive Manufacturing Innovation Institute in Youngstow
3D printers of all shapes and sizes fill the studios at America Makes, the National Additive Manufacturing Innovation Institute in Youngstow

By Julia Edwards and Jason Lange

YOUNGSTOWN, Ohio/WASHINGTON (Reuters) - Along the banks of the Mahoning River in the struggling Ohio steel town of Youngstown sits a once-abandoned furniture warehouse that has been converted into a sleek new laboratory.

Inside is a Silicon Valley-style workspace complete with open meeting areas and colorful stools. Several 3-D printers hum in the background, while engineers type computer codes that tell the machines how to create objects by layering materials.

The lab, called America Makes, is the first in a series of so-called "manufacturing innovation hubs" that President Barack Obama has launched with the promise that they could revitalize America's industrial sector and spur jobs growth in downtrodden communities like Youngstown. Seven more hubs are planned by the end of the year, including projects in Chicago, Detroit and Raleigh, North Carolina, that will follow the Youngstown model of bringing together businesses, non-profits and universities to pursue technological breakthroughs.

But after more than a year of operation, the Youngstown hub underscores the challenges facing Obama's goal of ensuring "a steady stream of good jobs into the 21st century," as he put it in remarks at a White House event last month.

One of the biggest challenges is the nature of factory innovation itself, which often reduces, rather than bolsters, the need for workers who aren't very skilled. That means the manufacturing initiative could help create jobs for people with highly specialized skills, such as engineers, but it may do far less to help people struggling to find work after the shuttering of local steel mills.

Three-D printers, the focus of the Youngstown project, are an example of this. Once they are programmed and loaded with raw materials, they work their magic with nary a human hand. If they are ever widely adopted, researchers say a big reason will be that they use less labor than traditional manufacturing.

"A lot of the equipment can be run automatically, so it is less labor demanding," said Don Li, senior manager of process modeling at RTI International Metals, a Pittsburgh-based titanium manufacturer working on an America Makes project.

MULTIPLIER

Former White House economic adviser Gene Sperling, who conceived the administration's manufacturing initiative, said the White House was focused on the "spillover impact" from new manufacturing projects, which also create jobs at suppliers. "When you look at manufacturing and the jobs it provides in the supply chain and in communities, these are middle class, high-skill jobs," he said.

Research by Enrico Moretti, an economist at the University of California, Berkeley, has found that each factory job on average supports 1.6 additional jobs outside manufacturing. A job in a high-tech industry can support even more outside employment because high wages for engineers and programmers can spur more spending at restaurants, stores and other businesses.

When Obama first proposed the manufacturing initiative, he asked Congress for $1 billion for 15 centers but the request has gone nowhere amid Washington's political gridlock so he is funding the projects through existing budgets. Ultimately, he would like to set up 45 centers around the country.

The Department of Defense, which is contributing the federal funding to the Youngstown initiative, believes its demand for high-tech goods will help the broader economy, said Elana Broitman, acting deputy assistant secretary of defense for manufacturing and industrial base policy.

The Youngstown hub is still in its very early stages but so far, at least, there are no obvious signs of a wider impact. About 29,600 people held factory jobs in the Youngstown metro area in January, the latest month for which data are available. That's actually slightly lower than the number of manufacturing jobs there when the administration awarded the hub to Youngstown in August 2012 and when it opened its doors that October. Total employment in the area was flat in 2013, while it grew nationwide.

Of six organizations in Youngstown and Cleveland - the nearest major city in the state - working on America Makes projects, none has made new hires for the work. But the non-profit managing the initiative, the National Center for Defense Manufacturing and Machining, has added 10 employees to run the lab and oversee the application process, said executive director Ralph Resnick.

Asked whether the administration had set goals for job creation at the manufacturing hubs, White House spokesman Robert Whithorne declined to say, noting that the hubs "are just getting started." He said there was a lot of interest among manufacturers in joining the hubs, showing the potential to create jobs.

DECADES OF JOB LOSSES

To understand the harsh reality of factory job losses in Youngstown and other once-thriving communities along America's Rust Belt, one needs only to follow the Mahoning River upstream from America Makes to see how that theme has played out.

About 15 miles north in Lordstown, Ohio, a General Motors assembly plant has cut its workforce to 4,500 from 13,000 over the last 30 years. Further north in Warren, the sound of wrecking balls demolishing the area's last major steel mill echoes across the water.

Lloyd Carmichael, 57, was one of 1,100 workers who lost his job in June 2012 after RG Steel declared bankruptcy. He is now learning to be a carpenter but expects to be earning about half of his previous salary.

"When you look in this area for industrial jobs, there's nothing," Carmichael said.

After rising for decades, U.S. factory jobs peaked in 1979, and then declined due to technological advances and foreign competition. The decline accelerated after Washington lifted trade barriers to China following its entry into the World Trade Organization in 2001.

Obama and other Democrats have long sought to ensure that their economic message resonates with blue-collar workers like Carmichael. But Republicans have seized on the economy's sluggish recovery from the Great Recession to try to court workers in states like Ohio that are closely divided between Democrats and Republicans.

Wrestling with how to spur faster economic growth in the summer of 2011, Obama asked White House aide Sperling for a list of policy ideas. Sperling looked abroad for models of success.

Manufacturing's share of total U.S. jobs stood at just below 10 percent, half its level thirty years earlier. Americans seemed to be losing ground to other countries. In Germany, a rich nation that specialized in making high-precision goods, about 20 percent of workers still clocked in at factories.

Sperling drew inspiration from Germany's Fraunhofer Institutes, which bring together universities, companies and government to turn scientific knowledge into practical applications. Obama liked this idea.

For the Youngstown project, the administration organized a competition to win $30 million in federal money. The money is then allocated to research projects led by partners in the consortium, who must match the federal funds and explain how their project might benefit government agencies.

Current projects range from a cooling system for satellites to repairing aging metal casts, without which legacy equipment like B-52 bombers could be retired. Researchers are also toying with printing a light-weight prototype of a drone.

Ashley Martof, an intern at America Makes, is studying 3-D printing as an industrial engineering major at Youngstown State University. Her friends and family tell her she is wasting her time because manufacturing jobs have dwindled.

"I tell them there will not be as much need for the working class, but there will be more engineers," Martof said.

The availability of such jobs probably won't do anything to help people like Dennis Church, 60, who is retraining for a maintenance job after 31 years at RG Steel.

"Those are tech jobs," Church said. "My personality is more hands on."

(Reporting By Julia Edwards and Jason Lange; Editing by Caren Bohan and Martin Howell)

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