Articles

Houston manufacturing has the wind at its back. Are storm clouds gathering?

By Bart Taylor, GHMA

Consider why Houston is America’s most desirable destination to locate or relocate manufacturing:

Now consider why companies might choose to go elsewhere – or consider relocating: 

Texas ranks 8th in the US in average manufacturing wages, or, as I wrote in a previous column: “The company it keeps in the top 10 have a reputation for being higher-cost states to do business”:

Wage growth in Texas is all about its changing industry makeup. Industry employment in Houston is dominated by fabricated metal products and equipment manufacturing, mainly on behalf of oil and gas customers. For that reason, wages in Houston are moderate compared with other southwest states. Even then, average wages are Top 10-ish:

Texas Manufacturing Industry Wages

And with more "advanced manufacturing" jobs coming to Greater Houston, average wages are poised to rise. Good for the pharma, electronics, aerospace and semiconductor labor markets; challenging for current Houston manufacturers competing for the limited amount of talent to go around.

Technology is a game-changer – for Houston manufacturers as much as any. Or, as AI summed up for me, US manufacturing is  “navigating significant challenges that require adaptation and technological innovation to sustain growth.” 

The rate of technology adoption is a difficult statistic to quantify, but generally correlates with the type of manufacturing, and industry. But to remain competitive, anywhere, manufacturers of every stripe must continue to find ways to invest in new equipment – and expertise. In the future, companies will also be answering to customers: automation will be a requirement, not a luxury.

It’s fascinating to come across manufacturers that are crossing the tech divide – in the same building. We witnessed one example in a GHMA site tour at Star Precision. CEO Akil Umatiya would gladly give you a personal tour if you asked. It’s worth it.

Houston is the place where products get made – in part, because of the sheer size of its manufacturing ecosystem. 

It's also important that OEMs, brands, and product manufacturers can find what they're looking for, and in Houston, it can be a challenge. Better supplier mapping and sourcing will help. To be fair, "supply-chain management" is a work in progress across the US -- not just in Houston. And despite investments in digital tools and a national effort to connect buyers and suppliers, one "model" has yet to emerge that's proven to be a game-changer. 

Communities able to match capabilities with demand will benefit. In the competition for business, smaller is sometimes better. Improving the connectedness, and transparency, of Houston manufacturing will go a long way.

Roughly four million Texans – more than in any state except Florida – may see their health-care premiums increase at the end of 2025 as current ACA parameters change. The financial burden will certainly put added pressure on small and midsized manufacturers that today, largely share the health-care expense burden with employees.

Houston has also been spared, thus far, the extreme disruptions facing other regional outposts where immigrant populations are heavily relied upon – like California’s agricultural communities. But let’s call it like it is: US immigration policy is broken, and until it’s reformed in meaningful bipartisan ways, business stands to suffer.

Food manufacturing is Texas' second largest industrial base of manufacturing employees, and Houston’s fourth largest, meaning that Texas’ leading manufacturing ecosystem looks up to other outposts when it comes to food manufacturing.

Houston’s bluechip food and beverage brands and co-mans are noteworthy – from Saint Arnold Brewing to Goya Foods to Consolidated Mills.

But look around Texas and notwithstanding the COVID slowdown, food and beverage is a growth sector that bleeds innovation and attracts a new generation of manufacturing employees. 

Houston’s epicurean chops are well established. Competing with Austin's entrepreneurial food and beverage cluster and DFW’s impressive bluechip roster, among others, for F&B manufacturing jobs and influence, should be a priority.  

Bart Taylor is executive director of the Greater Houston Manufacturing Association. Reach him at [email protected].