From the Desk of Jack Healy, Viewpoints on the State of Manufacturing
Policy Matters
“If a policy does not make us more globally competitive, than why are we even talking about it?” Tom Murphy , Executive V.P. of Manufacturing and Wholesale Distribution at RSM McGladrey.
The preceding statement was made as a result of findings in the RSM McGladrey’s Fifth Annual survey of Manufacturers and Wholesale Distributors, in relation to the unprecedented level of business concerns on the effect of currents legislative issues. Even though many of these bills (noted in table below) have not been enacted, the prospect of a future changes is having an immediate and direct effect on the pace of the current economic recovery. The extremely high levels of concerns (as indicated below) has an obvious effect on a manager’s ability to evaluate risk and to make the subsequent thoughtful investments in people, technology and capital equipment.
Business Leaders Levels of Concerns as reported in the RSM McGladrey Fifth Annual Survey*
Pending Legislative
Level of Concern
Health Care Reform
93%
Additional Regulatory Requirements
89%
Energy Policy
81%
Employee Free Choice Act
81%
Cap and Trade
79%
Smaller manufacturers (employers under 500 employees) who represent 99% of the manufacturers in Massachusetts usually face such significant concerns with a level of general indecision. As such, the detrimental effect does not only include investments and expenditures but it will also affect purchase services in that such purchases will be held to a minimum until the manufacturers can predict what will be the regulatory requirements. In general, smaller manufacturing enterprises lack needed internal resources thus are forced to outsource much of their needed services such as financial , accounting and engineering , all of this will have a negative economic effect on the community at large if the resources should be reduced.
The McGladrey survey findings, if applied to Massachusetts’ manufacturers and assuming a general level of 50% being concerned translates to approximately 3,800 manufacturing enterprises would not be well disposed to make investments in growth until they had further clarification on the pending policies. Such sizeable level of indecision brings us back to Mr. Murphy’s opening statement where he questions as to why isn’t the government on the side of business in this new Global Economic War. One possible reason could be the education of legislators.
In a recent letter to the Wall Street Journal it was noted that former Senator George C. McGovern, an amiable and frequent visitor to Massachusetts, purchased and operated a 150 room Inn in a neighboring state that subsequently went bankrupt. While the good senator attributed the failure of his business in part to the cost and difficulties of compliance with Federal , State and Local regulations, as well as dealing with frivolous lawsuits. Senator McGovern stated, “I also wish, that during the years I was in public office that I had this first-hand experience about the issues that people face everyday – that Knowledge would have made me a better senator and a more understanding presidential contender.”
Anyone who feels that it would be fortunate for the economy as a whole, if such knowledge could be provided to all our legislators, will appreciate the new Economic Development legislation recently passed in Massachusetts. While there was a myriad of changes in this legislation, including a number of sections that not only dealt with the strengthening of small business legislation impacts, but specific sections that promoted a culture of entrepreneurship by requiring “an analysis of whether the proposed regulation is likely to deter or encourage the formation of new business in the commonwealth.” There are also sections that require administrative agencies to consider various methods of reducing the costs on small business by “establishing less stringent compliance or reporting requirements “ and require that the least costly method to be used as long as it can be used consistently with the purpose of the statue under which the regulation is being promulgated. Finally, the new legislation also includes a section that requires a rolling review of existing legislation to determine whether they should be repealed or amended in light of these requirements.
In their blog to thank the Legislature for the economic bill that was passed, Brian Gilmore, Executive V.P. of the Associated Industries of Massachusetts (AIM) noted that the automatic sunset provision on state regulations along with the business impact regulations contained in the bill will all contribute to helping the economy to recover the jobs lost during the past recession. Mr. Gilmore noted “that the work of the legislature during the next legislative secession and possibly for the next year will need to be focused on jobs, and legislation that does not support the competitiveness of our state is counterproductive to this goal.” Amen
“If a policy does not make us more globally competitive, than why are we even talking about it?” Tom Murphy , Executive V.P. of Manufacturing and Wholesale Distribution at RSM McGladrey.