"Radical Shifts Take Hold in U.S. Manufacturing", so read the February 3, 2023 headline in the Wall Street Journal, in which describes the changes taking place in various manufacturing sectors. Click here to read the full article
This article noted that “the overall U.S. Industrial Capacity declined by an estimated 1% in 2009. The largest year –to-year decrease on record.” People are starting to put it together that the loss of firms has a relationship to the loss of jobs, which now has everyone’s attention. A recent article in “Manufacturing News and Technology” ably described this changing demographic occurring within Manufacturing with a single headline:
“In Last 10 Years, More Than One-Third Of Largest U.S. Factories Have Closed Their Door”
The article went on to report that “the total number of manufacturing plants in the United States declined by 42,404 from the first quarter of 2001 to the first quarter of 2009, a decline of 10.6%. But the biggest percentage drop in factories occurred among the largest establishments.’ The number of large manufacturers (over 500 employees) declined by 38% from 2001 to 2009. This decline in the number of large plants was accompanied by the loss of 1,992,000 jobs. The result of this shift found that anyone working in large manufacturing plants nationwide had a better than a one in three chance of losing their job, over the past decade.
Unfortunately, the Massachusetts experience through the five year period of 2001 – 2006, for which we have state wide data, significantly exceeds the national numbers with a loss of 14.8% of all its manufacturing firms. Conversely the losses of large Massachusetts manufacturing firms employees through 2006 at 22% was significantly lower than the national loss number of 38%. However the large Massachusetts manufacturers accounted for approximately two thirds of the state’s manufacturing job loss during this period. Similarly, employees in large Massachusetts manufacturing firms had close to a forty percent chance in losing their job over this five year period. Incredibly, working for a large manufacturer at the beginning of this decade was a desirable not only because of compensation, but that of training and permanency. However large manufacturers both in Massachusetts as well as across country have exercised a wide variety options in their quest to improve their operating efficiencies, resulting in the overall downsizing within both the large and small manufacturing communities producing a completely new manufacturing landscape with 92 % of the manufacturing firms operating with less than 100 employees.
The recent study (Reexamining of Advanced Manufacturing ) undertaken by the New England Council and Deloitte Consulting LLC, that manufacturing in New England and particularly in Massachusetts, is for the most part Advanced Manufacturing and that the needs of this new and growing community are very different than that of what could be termed as traditional manufacturing.
This evolution of large manufacturing firms is completely out of sync with the current growth of Advanced Manufacturing throughout New England . As indicated in the New England Council/ Deloitte Report that “Advanced Manufacturing has reversed the decline associated with traditional manufacturing.” As described in this report, Advanced Manufacturing consists of firms with highly skilled and compensated work force where innovative and complex products are the norm, requires engineers , business developers, entrepreneurs, scientists , machinists and other experienced professionals that can collaborate and wrap their creative powers around innovative customer solutions. As noted in this New England Council study “Existing (economic) policies in support of this industry often take a passive approach, centered around tax credits rather than providing the services many firms , particularly smaller firms , need to modernize operations and build capacity necessary for innovation.”
In support of the New England Council study’s needs, as described above, the Massachusetts Manufacturing Partnership’s (MassMEP) “NEXT GENERATION MANUFACTUER SYSTEMS” are meeting such needs, as MassMEP has generated approximately $ 110 million dollars in sales volumes , for 180 clients, during the worst year since the great depression. The outcomes of this work validated by an independent third party evaluator, concludes that as a result of their relationship with MassMEP these clients have:
Created 213 jobs that otherwise would not have existed
Retained 709 jobs that otherwise would not have existed
Increased and retained $ 109.7 million in sales
Expended $ 41.1 million in new investments
Realized $ 33.2 million dollars in cost savings
The creation of close to 1,000 jobs could never be realized without the additional sales achievement for those firms. Few businesses can add personnel without developing corresponding incremental sales to pay for them. This direct cause and effect theorem while readily understandable, seems to become somewhat lost when it comes to economic policy development, which is fixated in promoting tax credits as the solution for increasing employment.
At a time of sharply decreased tax revenues, the MassMEP’s Next Generation Manufacturer Systems in the previously described as outcomes have successfully bolstered state and local revenues during this period by $ 28.7 million. The impact results illustrate the challenges that lawmakers and state policy makers face in tough economic times. When recessions hit, state revenues decline and lawmakers who face difficult budget cuts tend to ignore the needs of the firms who generate the jobs and subsequently income that supports the state. This is why the attention that the recent Massachusetts State stimulus initiated by the Governor Patrick, that starts to address the needs of the employers, with respect to controlling Health Care costs and unemployment insurance, is a most welcome change. Continuing to ignore the needs of the manufacturing enterprises, big and small will continue to generate the same cause and effect cycle in which the large manufacturers who can exercise changes in their production locations will continue to leave the state , and the small manufacturing enterprises who support them, and who cannot reposition their firms in new markets, will subsequently decline as well.
The MassMEP is fortunate in that we can help manufacturers identify growth opportunities, upgrade employee skills, improve production efficiencies, cut energy costs, improve supply chain performance and enhance customer satisfaction. Tough times winnow out the competition, but they can also propel growth. Manufacturers interested in implementing their own stimulus program can do so by contacting Mike Prior at 508-831-7020 or [email protected].
