Industry Clusters 101

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Industry Clusters 101
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The federal Workforce Investment Act (WIA) passed
in 1998 established local Workforce Investment
Boards (WIBs) with memberships of local business
leaders, educational institution administrators,
labor leaders, and economic developers. The
WIBs mission is to plan, manage, coordinate, and
administer a local workforce development system.
The customized system since developed is unique
to Orange County and relies on local industry
growth patterns, training and education
providers, and the dynamics of the local
workforce. To create this local workforce
development system, the Orange County Workforce
Investment Board (OCWIB) conducted an extensive
investigation into the local business dynamics,
and the state of the art research into economic
and workforce planning http//www.ocwib.org/lmi/su
rvey/index.asp As a result of these efforts, the
OCWIB adopted the use of Industry Clusters as the
basis for Orange Countys workforce development
system.
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What are Industry Clusters?
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Clusters are geographic concentrations of
interconnected companies, specialized suppliers,
service providers, and associated institutions in
a particular field that are present in a nation
or region. Clusters drive wealth creation in a
region, primarily through export of goods and
services. Clusters create a commercial magnet
that attracts customers, investment, a skilled
workforce and a specialized infrastructure.
Firms within clusters may be cooperative or
competitive. Each members competitive position
depends on one, some or all of the other members.
Clusters include both high and low-value added
employment.
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How do Clusters relate to workforce development?
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Dr. Michael Porter of the Harvard Business School
popularized the concept of industry clusters in
Competitive Advantages of Nations (1990). Porter
claimed that the competitiveness of a region is
based on the competitiveness of the industries,
which is enhanced if an industry is embedded in a
deep network. He also said that clusters could
provide a pipeline of skilled workers. There are
sources for skill upgrades and incumbent worker
training. They can act as intermediaries for
skill alliances, networks and representatives of
expertise and information that can be shared
between firms. There are three types of clusters
industry based, firms with (1) similar skill
requirements (2) value chain, firms that are
part of the same value (product) chain, and (3)
innovation clusters, firms that exchange key
information leading to technological advances and
competitive improvements.
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What are the advantages of using the cluster
approach?
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• The cluster approach offers a more efficient and
  effective way to deliver programs and services to
  industry
• Clusters can help establish priorities for
  training programs
• Training can be delivered to a group of
  businesses with similar workforce needs
• Training can be delivered in specific geographic
  areas where demand exists
• Collaboration between industry, education and
  government to address recruitment, training and
  skill shortages
• Organized clusters can provide cues to students
  and current employees on future employment
  options.

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Why use a Cluster focus in Orange County?
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• The firms in the 10 selected Industry Clusters
  represent approximately 37 of all jobs in Orange
  County according to the 2004 State of the County
  Workforce report based upon a study conducted by
  the Orange County Business Council (OCBC) and
  Godbe Research Business Services Cluster,
  Biomedical Cluster, Computer Software Cluster.
• Clustered firms represent growth parts of Orange
  County labor market.
• Projected employment growth
• Firms in clusters 5.1
• Firms not in clusters -9.1

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How to read Orange Countys Clusters Table

• The column labeled Employment is the number
  of individuals employed in that respective
  cluster within Orange County.
• The Multiplier column indicates the number of
  jobs that support (either directly or indirectly)
  the employee in that cluster occupation. For
  example, for every computer software employee in
  the County, approximately 2 jobs (1.98) are
  employed in the County to support that
  individual.
• The Output column indicates the productive
  output each worker in the respective cluster
  generates annually. For example, 10 workers in
  the Business and Professional Services Cluster,
  on average, would generate 751,610 in output
  annually for their respective employer. (10 x
  75,161)

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Orange Countys Clusters
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Tourism The Tourism Cluster is made up of firms
that provide and arrange a wide array of
amusement, recreation, and visitor services.
These include hotels and motels, restaurants,
travel agencies, and car rental companies. The
Tourism industry hires more employees than any of
the other clusters, with a significant portion of
employees hired on a part-time or temporary
basis. Some of the occupations included in this
cluster are Amusement/Recreation Attendants,
Cashiers, Guards/Watch Guards, Waiters and
Waitresses, Food Preparation Workers, Restaurant
Cooks, Food Service and Lodging Managers,
Bartenders, and Maid and Housekeeping
Cleaners. Business Professional Services The
Business Professional Services Cluster is made
up of firms that provide a wide array of services
to the business community including management,
legal, architectural, accounting and personnel
supply services. Some of the occupations
included in this cluster are Financial Managers,
Accountants and Auditors, Account Collectors,
Accounting Clerks, Administrative Services
Managers, Employment Interviewers,
Drafters/Computer Assisted Drafters, Systems
Analysts, Sales Agents, Telemarketers and
Solicitors, Paralegal Personnel, and Legal
Secretaries. Defense Aerospace The Defense
Aerospace Cluster is made up of firms that are
primarily engaged in manufacturing or assembling
aircraft, ships, and defense-related products.
Some of the occupations included in this cluster
are General Machinists, Sheet Metal Mechanics and
Welders, Assemblers and Fabricators, Electrical
and Electronic Engineers, General Maintenance
Repairers, Computer Engineers and Programmers,
and Inspectors and Testers.
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Health Services The Health Services Cluster is
made up of firms that provide medical and
health-related services to the public through
hospitals and other medical facilities. Some of
the occupations included in this cluster are
Registered Nurses, Certified Nursing Aides,
Licensed Vocational Nurses, Certified Home Health
Aides, Medical Assistants, and Occupational
Therapists. Construction The Construction
Industry Cluster is made up of firms that build,
repair, and demolish building throughout Orange
County as well as those firms that specialize in
a specific part of that process. Some of the
occupations included in this cluster are
Carpenters, Drywall Installers and Tapers,
Plumbers, Pipefitters and Steamfitters,
Electricians, Cement Masons, Painters and
Paperhangers, Operating Engineers or Construction
Machine Operators, Construction Managers, and
Roofers. Energy Environment The Energy
Environment Cluster is an emerging cluster that
is primarily engaged in developing and
manufacturing products with applications in
energy distribution and environmental services.
Some of the occupations included in this cluster
are Environmental Analysts Health Specialists,
Refuse Collectors, Electric and Electronic
Engineers, and Instrumentation and Calibration
Technicians. Communications The Communications
Cluster is primarily made up of firms that
research and manufacture communications related
products. The cluster also includes firms that
provide point-to-point communications services
such as cellular phones and pagers. Occupations
included in this cluster include Production
Inspectors Testers and Graders, Electrical and
Electronic Equipment Assemblers.
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Computer Hardware The Computer Hardware Cluster
is made up of firms that manufacture and assemble
electronic components and computer products. The
cluster emphasizes high technology and
computer-related products and their input
components. Some of the occupations included in
this cluster are Electrical Engineers, Electrical
Technologists, Electrical Technicians, Electrical
Assemblers, Sales Engineers, Sales
Representatives, ASIC Engineers, and Facility or
Quality Control Managers. Computer Software The
Computer Software Cluster is made up of firms
that provide computer and software-related
services. The services include computer
programming, prepackaged software, and software
development. Some of the occupations included in
this cluster are Software Engineers, Systems
Administrators/Database Administrators, Customer
Support Specialists, Project Managers, Technical
Writers, Sales Representatives, Inspectors
Testers, and Quality Assurance Auditors, and
Network Systems Administrators. Biomedical The
Biomedical cluster is a knowledge intensive
industry that is made up of firms that research,
manufacture, or process biological, chemical, and
medical products, including medical and
industrial chemicals and their preparations.
Some of the occupations included in this cluster
are Chemists, Chemical Technicians, Optical Goods
Workers, Biological Scientists, Physical
Scientists, Production Inspectors Testers and
Graders, Medical and Clinical Lab Technologists,
and Quality Assurance Auditors. This cluster is
projected to have the highest overall growth
rate.
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Client needs of the OCWIB
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The OCWIB has multiple clients, high-tech
businesses, high-skilled workers, service-sector
businesses, and entry-level workers. Skills in
high-tech cluster occupations often require high
levels of education, training of persons to
Bachelors degree level or higher, and continuing
education for currently employed persons. These
high value occupations also have shown labor
shortages, and training in high-tech, high skill
occupations has a large potential for value added
to businesses and to the Countys economy. The
needs of businesses are most acute in the
technology clusters, especially computer software
and communications. Both clusters have shown
signs of labor shortages (unusually rapid wage
and employment growth in recent years) and both
clusters have been heavy users of H1-B visas
(define status). Both clusters project future
employment growth. The needs of entry-level
jobseekers often require immediate job placement.
The skill levels are lower and many entry-level
jobs are in the service sector. These positions
have lower wages and low wage growth. The County
currently generates a large and steady supply of
entry-level jobs. Service clusters have large
employment, with many jobs that show high
turnover. Evidence suggests no labor supply
problems at the entry level in these
service-sector clusters. The risk is that jobs
in these clusters will not provide the wage
growth needed for the high cost of living in
Orange County. The service sector clusters
include Health Services, Tourism, Construction,
and some occupations in Business Professional
Services.
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Cluster Focused Career Progression Strategy
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The needs of the clients are multi-faceted and
require a cluster-focused and career
ladder/progression perspective that targets
occupational ladders. In order to meet the
high-tech needs of business and the wage growth
needs of job seekers, demand driven training can
provide the necessary skills to advance both
within and across industry clusters. Many
occupations are interchangeable between clusters
such as Salespersons and Computer Support
Specialists. Career ladders offer employees
opportunities to advance either within a chosen
field or within a specific industry. Banquet
Food Servers can move to Restaurant Cooks and on
up to Head Cooks/Chefs with training and /or
experience. The OCWIB produces an annual Demand
Cluster Occupation list, which is based upon
cluster research, Employment Development
Department projections and local business input.
This list is the basis upon which schools create
training curriculums school counselors provide
guidance in career planning and job seekers are
encouraged to explore. Continuous improvement in
the workforce system for Orange County is the
primary goal of the OCWIB. Industry Cluster
focus has been the foundation for that goal
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Industry Cluster Links
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Harvard Business School, Clusters and Cluster
Development http//www.isc.hbs.edu/econ-clusters
.htm Universities and the Development of
Industry Clusters, Economic Development
Administration, U.S. Department of Commerce,
Carnegie Mellon University, Center for Economic
Development, http//www.eda.gov/ImageCache/EDAPubl
ic/documents/pdfdocs/ucluster2004_2epdf/v1/ucluste
r2004.pdf (Large document, slow to load) New
Solutions for a New Economic Environment,
Southern California Association of Governments,
1998, pgs 39-41 http//www.eda.gov/ImageCache/EDA
Public/documents/pdfdocs/ucluster2004_2epdf/v1/ucl
uster2004.pdf (Large document, slow to load)
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Bibliography
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• Harvard Business School, Institute for Strategy
  and Competiveness
• Louisiana Economic Development, Louisiana.gov,
• OCBC, Godbe Research, 2004, sponsored by the
  OCWIB
• OCBC, Godbe Research, 2004, projected for year
  2004.
• EDD, OCBC analysis, 2004
• Godbe Survey of Employers, OCWIB, June 2002

http//data.isc.hbs.edu/isc/index.jsp
http//www.lded.state.la.us/industry/
http//www.ocwib.org/lmi/indicator/index.asp
http//www.ocwib.org/lmi/indicator/index.asp
http//www.ocwib.org/lmi/indicator/index.asp
http//www.ocwib.org/lmi/survey/index.asp