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Developing Idaho Part 3: Manufacturing 2.0

We have discussed tax cuts and local option taxes, all in the name of economic growth and attracting business to the state. I can’t help but recall a City Club of Boise luncheon discussion from the spring of 2010. The topic was, “Has Boise Lost its Steam?” The panelist, Nancy Napier, a professor at Boise State University and Bob Lokken, the CEO of White Cloud Analytics, answered the question in the affirmative, but it’s not as depressing as it sounds, I promise.

The academic and the entrepreneur urged us to not just rely on outside businesses as a way to save the state; instead, they encouraged us to focus on and reshape what our state does internally to compete globally. We must save ourselves, they seemed to say. Relying on outside employers would be like waiting for knights in white satin, but never actually reaching the end (some of you will get that joke).

For an updated outlook on Idaho and its future, I sat down with Bob Lokken to discuss the future of doing business in Idaho. He made it clear from the outset that Idaho needs a highly skilled workforce to compete. While it’s true that the state has a cheap labor force compared to our neighbors, Lokken offered a viewpoint not usually heard: “Idaho doesn’t want to compete by wages. It could, but it wouldn’t be competing with other states, it would be competing with China and India. We’re not going to win that battle.”

According to BVEP’s 2009 Leadership Conference, Boise’s relatively cheap cost of labor is an asset to the area, but not for Lokken. “I pay my employees very well, but I can’t get employees I need to run my business in Boise.”

For Lokken, the reduction of the corporate tax rate is a chance to evaluate what the state can do internally and structurally to secure its future: “It all depends on what type of jobs we’re bringing in. We don’t need jobs that recycle money, we need jobs that export products and bring in outside money.”

As he sees it we need a pipeline of talent, especially at the post-secondary level.

He’s not alone. Recent Aspen Institute fellow and state representative Brian Cronin observes, “We need to spend more time doing economic gardening, rather than chasing down outsiders. Part of that means providing an educated and qualified workforce. It’s not an achievement gap, it’s a resource gap.”

Lokken recounts how he and others lobbied to get the Computer Science program at Boise State switched from the math to the engineering department almost a decade ago. He then laments that they have not increased the faculty size and now turn down graduate students, which according to Associate Professor Amit Jain, the Graduate Program Coordinator for the Department of Computer Science, is absolutely true. What’s more, the Computer Science department informed me that all their undergraduates secure jobs quickly after graduation!

As I see it, the future of competition is who can out-innovate ideas. Lokken paints a picture that requires a new type of engineer for a new type of manufacturing. I call it Manufacturing 2.0, or software manufacturing. The race for more scientists and engineers will focus less on hardware and more on software.

Dave Quintana with Acquity Group, an IT consulting company, informed me that their Boise office is rapidly expanding, but having trouble finding qualified Java developers and senior front end developers. He said the same of his former employer, Bodybuilding.com. Like Lokken, Quintana mentioned that these jobs pay well, but without the right education pipeline and training, it’s hard to find people. Quintana added, “I’ve often thought software development is the new manufacturing.”

He’s right. But it remains on us as a state to develop that kind of talent needed for the Manufacturing 2.0. Sure businesses want cheap labor, but as Lokken said, they can go to China or India for that. What businesses need is highly skilled labor that can think critically and innovate better than anyone else in the country.

Producing that type of talent both spawns development within the state and attracts outside business, which is a foundation of economic development.

To that end I urge that the state increase funding to Boise State for the specific purpose of buying top tier faculty from other universities. If we attract faculty, and give them free reign to establish a PhD program and expand the sciences, then we’ll create the type of environment that venture capital firms enjoying circling around.

Despite these trends, the Chamber’s focus is solar/alternative energy, manufacturing, health sciences, professional services. Software and computing products are just above wineries on the Leadership Conference list.

Sure, anyone will say that Idaho welcomes any job creators that want to come, but structurally we can be doing more to attract certain types of employers. Idaho has the ability to become a leader in the manufacturing 2.0 world, but it requires investments.

To be clear, I’m not claiming that traditional manufacturing models are obsolete. Rather, I am urging Boise and Idaho to remain on the cutting edge, which requires structural investment. Certainly traditional manufacturing would help increase state revenue through sales to outside states, but wages will tend to be higher for those in Manufacturing 2.0.

There’s no easy fix. The corporate tax reduction, if passed, would take approximately ten years before arriving at the 4.9 percent rate. Ten years is about the same amount of time it would take establish new PhD programs, raise funds, and graduate a successful workforce (give or take a few years). The fact is that increasing funds to build a program and decreasing the tax rate are both long-term solutions.

If Idaho wants to establish itself as a national force, if BSU wants to be a top-tier research university, if we want to thrive, it will take time, money, patience and the willingness to spend more here, cut more there.

A tax reduction may signal that Idaho is open for business, but will it attract the companies we want? Will it bring the jobs we need; do we have the labor force to fill highly skilled jobs? If we can cut the tax rate without offsetting other needs, then let’s do it. But this Fields of Dream approach of if you cut it, they will come is either too bold or too risky depending on your viewpoint. I say too risky.

Let’s get the Legislature to allow for communities other than resort towns to pass local option taxation. Let’s expand the number of PhD programs at Boise State. Let’s lead the nation into the modern era of manufacturing.

You can reach Tucker at tslosburg@gmail.com or follow him on twitter @tuckslos.

About Tucker Slosburg

One comment

  1. Idaho simply cannot lower income taxes on businesses or individuals, without seriously disabling the hidden subsidies granted to the dominant rural, religious, and agricultural groups in the state. To do so would mean a spike in either property or sales taxes, and that’s politically unacceptable. The breathtakingly obvious conclusion is that these groups couldn’t give a whit of concern if the state’s urban and tech economy continues to crater.

    The ONLY THING that will change this is a truthful and accurate legislative redistricting map that genuinely reflects the state’s 70-80% urban population. But already those aforementioned groups have gamed that process for their own jaded and cynical purposes.