Manufacturing is Neither Understood Nor Appreciated
By Jack Healy, Director, Manufacturing Advancement Center, [email protected]
Since I plan on spending some of my time in the future, I recently attended the New England Economic Partnership meeting (www.neepecon.org) for their semi-annual analysis of current New England economics and prognostications of the future. Not surprisingly, it was announced that the New England economy is now stuck in low gear. Growing at an average of 3.1% per year, we trail the national average of 4.3% by nearly 40%. What did surprise me was how little attention was given to the difficulties of the manufacturing sector, other than an overall statement that New England manufacturing employment is best characterized as declining at a lesser rate than the national manufacturing employment levels. This is not much of an achievement given that none of our industries were wiped out in hurricanes, nor were they greatly affected by either the Boeing strike or the great automotive manufacturing bust. If none of those things had happened at the national level, New England manufacturers may well have exceeded the decline rate of national employment.
Coming away from the conference, I wondered how much the forecasters know or really understand about manufacturing? Like the water in Heraclitus’ river, manufacturing is always changing and evolving. If you try to predict the future based on the past, you may well be mistaken, for very few companies are the same as they were even five years ago. The forecasted annual rate of manufacturing employment decline (0.4%), as shown below, elicited no discussion.
Total Manufacturing Employment Forecast
Annual Growth Rate
1994-1999 (%)
1999-2004 (%)
2004-2009 (%)
All N.E. States
-0.6
-4.6
-0.4
Connecticut
-1.1
-3.8
-0.5
Maine
-0.7
-4.8
-0.7
Massachusetts
-0.6
-5.0
-0.3
New Hampshire
-1.4
-4.5
-0.1
Rhode Island
-2.6
-4.6
-1.2
Vermont
-2.3
-4.0
-0.5
Forecasted manufacturing employment declines (2004-2009) are somewhat benign when compared to the past five year period of 1999-2004. The challenge is to make these numbers relevant by understanding what the forecasted employment levels will produce for this same period. The numbers seem to reflect changes in staffing due to productivity improvements within static industries. But what makes anyone believe that an industry could or would be static?
Dr. Evan S. Dobelle, President of the New England Board of Higher Education and the conference keynote speaker, made these numbers more real when he stated that China has committed to producing 30 million college graduates per year for the next 10 years. The fact that two thirds of China’s current graduates have technical degrees (vs 30% for the US) means we will be facing approximately 200 million new engineers over 10 years. Mr. Dobelle went on to state, "The Silicon Valleys and the (Route) 128’s are not going to be in the United States 10 years from now." This is quite a sobering statement, especially when coming from someone who presides over the world’s highest density of knowledge. New England includes 270 colleges, and computers and electronics are our largest manufacturing industry code and exported product.
Both Mr. Dobelle and the other conference presenters appear resigned to the fact that manufacturing is declining or is moving to China and that there is not much that can be done. This is similar to the past Cassandra chorus of journalists, politicians, and consultants who proclaimed for the past quarter of a century that the Japanese and the Germans would dominate the future of manufacturing. Fortunately, that did not happen. Our manufacturing output is still the largest and most productive in the world, providing the basis for our country’s higher standard of living.
But few people outside of the manufacturing community understand or are interested in how complex and varied manufacturing is in New England. The theorists who loudly proclaim that we can only retain small, high value manufacturing niches have not visited such commodity manufacturers as Gillette Razor Blades (Boston), New Balance Footwear (Lawrence), Norton/St. Gobain Abrasives (Worcester), Hyde Tools (Southbridge), or Hasbro Toys (Springfield), just to name a few. These large manufacturers, employing thousands, are examples of best practices in manufacturing. We are grateful to have them as history has shown that mediocre manufacturers in New England, whether they are large commodity producers or small value added shops, will not survive.
Manufacturing is not very visible for the average citizen and for critics as few manufacturers make products that are purchased directly by the consumer. Instead, most manufacturers make components for or supply services to other manufacturers who sell to other manufacturers or to consumers. In New England, the manufacturing community represents over $73 billion dollars in Direct Gross State Product. But when you factor in all of the indirect jobs that support manufacturing — trucking, warehousing, export, and services — you have a total industry sector whose contribution in taxes to the states is significant. This is not a sector that we can afford to have at risk.
This economic multiplier can be readily illustrated in the MassMEP Economic Impacts for the past year. MassMEP clients have reported that they:
Created or retained 1,008 jobs that otherwise would not have existed
Increased and retained $78.4 million in sales
Spent $12.9 million in new capital investments
Experienced $14.7 million in cost savings
The sum of these direct effects, when added to indirect effects, project that the same manufacturing enterprises were responsible for:
Creating or retaining 2,287 jobs that paid a total of $113.2 million in employee wages and benefits
Increasing or retaining economic output worth $370.1 million
Contributing or retaining $184.1 million of gross state product
Generating or retaining $12.8 million in State and local taxes
This Economic Multiplier Effect was utilized during the recent Base Realignment and Closure (BRAC) hearings, a process by which the Department of Defense evaluates it’s current Base Structure to more effectively and efficiently support their mission. The BRAC was successful in galvanizing all of New England to examine the economic impacts of the various military bases located in their respective states. For the most part, the states were very successful in making their arguments and many of the bases previously identified for closing will remain open.
Seizing upon this new found appreciation for understanding economic impact, both on a direct and indirect basis, this may be a good time to hold BRAC-type hearings within the states to identify the contribution that manufacturing makes to our economy. Doing this might finally generate the proper level of concern for manufacturing declines.
