SalemNews.com, Salem, MA

October 4, 2012

Column: Manufacturing matters

By Richard Lord
The Salem News

---- — Tomorrow is the first national Manufacturing Day, reminding us that the United States still leads the world in production of manufactured goods, and that the manufacturing sector is at the core of our economy.

Manufacturing activity is coming back from the recession, and may also be coming back from overseas. The 2012 U.S. Re-shoring Survey by the MIT Forum for Supply Chain Innovation finds that manufacturers are reconsidering their supply chain strategies due to higher labor costs in developing countries, energy costs and political stability issues, as well as time-to-market concerns. Re-shoring — bringing manufacturing back to the U.S. — is under consideration by a significant number of firms, and some, including auto parts and electrical equipment manufacturers, have moved operations back. The survey finds that federal and state policies, including corporate tax rates, have a major impact on decisions to move or stay.

Here in Massachusetts, “manufacturing is alive and well, and has a healthy future,” according to a recent report, “Staying Power II: A Report Card on Manufacturing in Massachusetts,” by professor Barry Bluestone and his team at Northeastern University.

Some of its key findings about Massachusetts manufacturing today:

Manufacturing employment has stabilized after a sharp decline in the recession

Manufacturing is the state’s six-largest employment sector — and the second-largest (after health care) in terms of payroll

Manufacturing’s share of gross state product has risen for the past two years, to 12.2 percent

The number of manufacturing firms actually increased in 2011, for the first time in decades

Manufacturing is more technologically intense than ever; in 1970 employment in low-tech sectors was twice that in high-tech, in 2006 they were equal, and by 2010 high-tech was 27 percent larger

Most Massachusetts manufacturing companies are small, and most are family-owned

The manufacturing workforce is more diverse than the overall state workforce

Although most jobs in manufacturing are now “white collar,” only about one position in five requires a college degree

While cost issues and global competition are challenges, the study finds, the skills and work ethic of the state’s workforce are powerful reasons to stay in Massachusetts. But employers are already experiencing difficulty in hiring skilled workers, and an upcoming wave of retirements will create up to 100,000 job vacancies over the next 10 years. The 70 percent of manufacturing firms foreseeing expansion of employment in the state over the next five years must face up to this “recruitment challenge” by focusing on workforce development and promoting manufacturing careers.

In this election year, candidates across the country, from President Obama and Governor Romney on down, have jumped onto the manufacturing bandwagon. Beacon Hill has cut the corporate excise tax, passed bills to control medical and energy costs, strengthened the Workforce Training Fund Program and the community colleges, and created the industry-led Massachusetts Advanced Manufacturing Collaborative. Nationally, however, the reality has been not bipartisan consensus but partisan deadlock.

If Congress really cares about manufacturing, there are issues that demand immediate action. Most urgent is heading off about $500 billion in tax increases that will hit the U.S. economy on January 1, along with huge automatic spending cuts. The top tax rate on dividends will almost triple, the top tax rate on capital gains will increase by more than half, and many small and mid-size manufacturers will see their top marginal tax rate rise, because nearly 70 percent of manufacturers file taxes at individual rates. The Research and Development tax credit expired for the 15th time at the end of 2011. And the U.S. corporate tax rate is the highest in the developed world. Action in other areas is equally vital, if less pressing; for example, the future of workforce development programs, largely shaped by federal policy, remains up in the air.

America’s manufacturing sector, historically the backbone of our economy and of upward mobility in our society, is entering a period of renewed opportunity. We need congressional action, now, to ensure that future expansion takes place here rather that abroad.

Richard Lord is president and CEO of Associated Industries of Massachusetts headquartered in Boston.