From the Desk of Jack Healy
Staying Power: The Future of Manufacturing in Massachusetts
By Jack Healy, Director, MassMEP
Globalization has introduced major changes to our economy such that the public has a confused economic view of what's going on, especially with respect to manufacturing. This situation prompted the Commonwealth of Massachusetts to commission Northeastern University's Center for Urban and Regional Policy to undertake a study of our state's manufacturing sector – Staying Power: The Future of Manufacturing in Massachusetts.
The purpose of this report is to provide information "on what is still being produced in Massachusetts, where it is being produced, the challenges facing manufacturers in their attempts to sustain or expand their in–state operations, and, perhaps most important of all, what the state may do to support this sector to assure that it continues to provide a large number of good jobs at good pay for Massachusetts men and women."
While all of the study's findings are directly related to Massachusetts, there are lessons for manufacturing communities in adjacent states as well.
The study's primary author, Professor Barry Bluestone, was effusive in his findings, noting that manufacturing in Massachusetts "is not an industrial sector that is hemorrhaging, disappearing, or dying -- but a sector that has weathered many a storm and now has the technological prowess, efficiency, and product to provide good and effective employment opportunities well into the future."
Manufacturing is Here to Stay
The primary finding of this study, contrary to the widespread opinion of the general public, is that manufacturing is here to stay. In Massachusetts, manufacturing output has been growing across the state for the past decade. In fact, manufacturing output has risen 32% and now represents 13.3% of state product as compared to 10.9% in 1999. The manufacturing sector is the second largest contributor to the state's GDP, and has been so for the past 10 years.
Real Output and Productivity in Massachusetts – All Industries vs. Manufacturing (1997-2006) - PDF
This extraordinary performance has been primarily due to phenomenal growth in manufacturing productivity, which grew 4 to 5 times faster than other state industries such as services, healthcare, etc. As shown in Table 1, Massachusetts's manufacturing's rate of productivity improvement also compares extremely favorably to US manufacturing as a whole.
Between 1997 and 2006, real GDP originating in the US manufacturing sector increased by 30% in contrast to a 60% percent increase for the Commonwealth's manufacturers.
Because of job reductions, manufacturing has been painted with the negative image of an industry in decline. Yet the manufacturing industry is one of constant change. Many of the changes we've seen would best be termed "creative destruction" in other businesses. But in the end, as this study shows, such change has resulted in an unacknowledged process that has produced more technically proficient and productive manufacturing companies.
This process of change is amply illustrated in the Evergreen Solar story. Evergreen Solar was one of the state's 419 new manufacturing start ups in 1997, establishing a pilot production plant to validate their proprietary silicon string ribbon production process. Evergreen Solar's technology uses less silicon and simpler techniques that lower costs and improve performance. Over the years, the company continued growing, establishing production facilities in Marlboro and Devens, MA.
Recently, Evergreen Solar announced that they signed a new long-term contract with the largest Photovoltaic distributor in the world for $1.2 billion dollars worth of product. This order brings the company's total contractual backlog to nearly $3 billion. Three billion dollars is larger than many entire national industries and Evergreen Solar, like many of our newest companies, is not your father's manufacturer.
Need 100,000 Replacement Workers
The changes in manufacturing capabilities demonstrated by Evergreen Solar signal not only a renewal in manufacturing but a demand for generating a new workforce. The Staying Power study indicates that "manufacturing employers will need to hire more than 100,000 replacement workers over the next decade," even if total employment drops from its current levels. This is needed simply to sustain the existing manufacturing base and does not project training needs for new technology jobs such as solar energy.
Approximately 49% of the firms surveyed stated that they experienced a substantial increase in their use of new technologies. The challenge of meeting such demands is formidable and, as we have previously written, is compounded by the fact that the labor force is shrinking and is becoming much less interested in what they perceive as a declining sector. Even though they offer family-sustaining jobs that pay twice the average salary of the service sector, manufacturers still needs to overcome a declining image that has been in the public's mind for many years. Quinsigamond Community College has written a timely article on this subject, relative to the current misconceptions, and what employers can do about it.
The critical importance of the workforce is highlighted in study findings that "regardless of the industry size of the firm or the location within the state, manufacturing executives were nearly unanimous in their claim that the quality of their workforce was vital to the success of their firms."
The Staying Power study indicates that the primary attributes that keep firms in the Commonwealth are the strong work ethic and the availability of an appropriately skilled workforce. If this is the case, then we need to make a significant effort to consider the vocational/technical high schools when planning for economic development strategies.
Manufacturing is Expanding
With respect to economic development, 55% of the surveyed firms indicated that they expect to expand production and 30% of these expect to require more space. Ninety percent of the manufacturers surveyed expect to grow employment. This shows an optimism for the future that can only be dispelled by the lack of qualified candidates for future employment.
The study concludes that "these companies continue focusing on their core competencies and outsourcing functions that they can purchase for less than they can produce in house; introducing ever higher standards of Lean production and continuous improvement; while intensifying the application of new technology."
This is good news, but don't expect to see this story in the newspapers. It's too bad, but unless the public image of manufacturing changes, we will not draw flies, much less the new people who are so critical to our future.
Generating the new workforce that will replace the hardworking, entrepreneurial people who have built this economy will be one of the biggest challenges facing all of who work in manufacturing.
Increasing Public Awareness
The need to improve communication between manufacturers and vocational schools (49%) was a key finding in the survey, as well as respect for the industry as a whole. The lack of public awareness of the benefits of a career in manufacturing puts manufacturing companies at a disadvantage when recruiting a new workforce.
How do you overcome this perception? Work with your local community colleges to ensure the curriculum is conducive to your industry and that the workforce is aware of your industry. Contact your local legislators and invite them in for a tour of the company. Contact your local paper when you have a success and work with them to fill their pipeline for local stories.
If we all work together to fill the pipeline, manufacturing will truly have Staying Power.