THE BLOG

Detroit South: What the South Is (and Isn't) Doing for Auto Manufacturing

05/21/2015 06:19 pm ET | Updated May 20, 2016

If you picked up the USA Today last week, you may have noticed that international auto manufacturer Volvo has announced plans to build a new plant in South Carolina. This fall, the company will bring its very first facility to North America. South Carolina has become a leader in the emerging auto manufacturing economy, and they're to be lauded for their success in attracting jobs to their state, including BMW and Boeing.

The article, though, and the larger phenomenon beg the question: why South Carolina? Is there anything magical about the Palmetto State when compared to regional job competitors Georgia, Tennessee, Alabama, or even Mississippi?

Over the last few decades, the massive growth in the economies (and populations) in some Southern states has been termed "The New South," and the growth of large investments states are making in luring auto manufacturers has led to another moniker: Detroit South. Alabama has Mercedes-Benz (DDIAF), Honda (HMC), and Hyundai (HYMTF), while Tennessee has Nissan (NSANY), Volkswagen (VLKAY) and General Motors (GM). Kentucky boasts large plants for Ford (F), Chevrolet, and Toyota (TM). Georgia has lured Kia (KIMTF), and now South Carolina adds to its BMW (BMW.F) cred with Volvo (VOLVY).

My home state, Mississippi, was able to land both Nissan and Toyota under the two previous governors (full disclosure: I was one of them). These are huge economic development projects that promote a sense of pride and accomplishment from citizens who enjoy working good-paying jobs for these corporations in their back yards.

When auto manufacturers built new plants in the South, their leaders examined several factors to determine which potential site offered the most benefit to the company. Many of the states mentioned above have similarities in geography, politics and demographics. So how did they decide? The answer is simple if you look at the USA Today article.

Volvo named several reasons why they chose South Carolina: they were impressed by a well-trained labor force and aggressive education efforts for research and development by state universities, as well as the affordable cost of living, and proximity to international ports. Also worth noting is the state's transportation and distribution infrastructure that already exists thanks to Boeing (BA) and BMW.

Many of these factors can be - and have been - replicated across the South, but one stands out that puts South Carolina and a handful of other states in contrast with most of the region: a well-trained labor force.

When states invest in education and workforce training, it is an investment that pays dividends over time. South Carolina spends over $11,000 a year on K-12 students compared to a state like Mississippi, which is closer to $9,000. A $2,000 difference per pupil doesn't sound like much, but over the course of 13 years, this increased investment of around 20% per student on education can have a significant impact on a child's life and his or her future career. South Carolina also invests in early childhood education by offering Pre-K - an area where many other Southern states lag woefully behind.

Economic development success stories abound throughout the Southeast. States from Virginia to Florida and North Carolina to Arkansas have seen an economic renaissance. But the pockets of stagnation demonstrate the importance of education in the workforce.

West Virginia ranked 47th in educational attainment and is one of the few states in the Southeast that has lost out on the trend of Detroit's southern migration. Not coincidentally, West Virginia also ranks last in workforce participation.

Louisiana was on the forefront of southern auto manufacturing when General Motors opened a manufacturing plant in Shreveport in 1981. After decades of low educational attainment - largely a product of low education funding - that GM plant survived the auto crisis of 2008, only to be closed in 2012.

Early investments in education have life-long impacts well beyond an extra thousand bucks per year for primary and secondary education. According to researchers, "The foundations of brain architecture, and subsequent lifelong developmental potential, are laid down in a child's early years." Early educational experiences are the fundamentals upon which success in later schooling and employment depend.

Instead of throwing tens of thousands of dollars per person to retrain adults to be a productive workforce, they could be spending pennies on the dollar to educate them while they are young and send them down the road to later educational successes - and higher earning potential.

Each of these states have the electric power capacity manufacturers covet. Mississippi has rail for transporting and waterways for shipping. Louisiana boasts two of the largest ports in the world, while West Virginia's highways and rail systems were a passion of the late-Sen. Robert Byrd - who invested billions on the state's infrastructure. All three have an abundance of land for development, and state incentive packages to compete with their neighbors.

In sum, these states have just about everything, structurally speaking, that manufacturers look for in a new location, except for that one thing they look for most: a well-trained labor force. This is the real investment that moves states like Mississippi and others forward, and without it, we will continue to lag behind the rest of the country in good-paying jobs.