New manufacturing report finds sector stabilizing, potential for growth after economic downturn

Boston – A new report card finds the Massachusetts manufacturing sector has stabilized after contracting in the economic downturn, and could even grow in the coming decade, according to researchers from Northeastern University.

The report, “Staying Power II: A Report Card on Manufacturing in Massachusetts 2012” was released at a special “Understanding Boston” forum at AccuRounds, a precision manufacturer in Avon, Massachusetts. It was prepared by Barry Bluestone and a team of researchers from the Kitty and Michael Dukakis Center for Urban and Regional Policy at Northeastern University. Bluestone and his team first examined the sector more than four years ago in the first Staying Power report.

“Manufacturing in Massachusetts has survived the Great Recession and, if anything, appears to be in a better position today than in 2007 to prosper in the future,” Bluestone concludes in the report.

The new report surveys manufacturers on their expectations for hiring and business expansion through 2018, asks manufacturers the factors that keep them in Massachusetts and would be most likely to force them to leave, and examines the critical need for workforce training to support business growth.

“This report is an in-depth look at a critical time in the life of the manufacturing sector in Massachusetts,” said Pamela Goldberg, the CEO of the Massachusetts Technology Collaborative, which funded much of the research and supports the Commonwealth’s Advanced Manufacturing Collaborative. “This analysis provides valuable insight that will inform our work fostering economic growth across the Commonwealth.”
“The findings are encouraging, but there is much work to be done,” said Paul S. Grogan, President and CEO of the Boston Foundation, which sponsored the report release event and the report’s publication. “Firms still note a lack of qualified skilled personnel – we have an opportunity to strengthen our community colleges and other institutions to train that workforce. It is an opportunity we cannot forsake.”

The Boston Foundation also sponsored Bluestone’s first “Staying Power” report, which was released in 2008.

“We are encouraged to see signs that the Massachusetts manufacturing sector is more upbeat and ready to invest than it has been in years,” said Jerry Sargent, President of RBS Citizens and Citizens Bank, Massachusetts. “This research also highlights an opportunity for the business community, policy makers and educators to develop an approach to job training and education that can meet the manufacturing industry’s growing demand for skilled workers.”

The Greater Boston Manufacturing Partnership also sponsored the report. “This reports highlights the great opportunities in manufacturing that exist today, and in the future,” stated Michael Tamasi, Chairman of the GBMP.    “Our core purpose is to be a leading contributor in strengthening industry and increasing employment opportunities.  We are excited to continue our contribution to this manufacturing renaissance.”

After Dr. Bluestone’s presentation, Massachusetts Governor Deval Patrick and Lt. Governor Timothy Murray were featured speakers, discussing the efforts of the state’s Advanced Manufacturing Collaborative to address the issues and perhaps incorporate some of the ideas suggested within the report.

A sector stabilized

Researchers found that after declining at a rate where “the last manufacturing job in the state would disappear sometime in 2019,” until October 2009, the sector has stabilized over the past two and a half years, with the number of manufacturing firms rising for the first time in at least a decade in 2011.

The Northeastern team projects that the number of manufacturing jobs will fall by less than 2,000 per year between now and 2018, leaving nearly 239,000 manufacturing workers in Massachusetts in 2018, down from about 250,000 today. “If the national and international economy proves stronger and/or Massachusetts manufacturers become even more adept at competing nationally and internationally, total employment may even be higher by the end of this decade than we have projected,” Bluestone adds.

The team also investigated the broad range of firms that comprise the sector, with a vast range in the level of technology needed by the manufacturer, and a strong representation of more traditional manufacturers – many of whom may have upgraded their technology to compete more effectively. The report found more than 6 in 10 manufacturing workers in the state work at firms that employ more than 100 people. But those large firms represent just 7 percent of manufacturers. The vast majority of firms – more than 70 percent, had fewer than 20 employees.

Maintaining a high wage

For workers at those firms that were able to survive the economic downturn, manufacturing jobs are a means to a self-sustaining wage. In fact, the sector’s average annual wage of more than $75,000 is a higher wage than in such sectors as construction, real estate, education, healthcare and government. They also remain more accessible to workers with less formal education – just one-in-five jobs in the sector require a 4-year degree. Many others are “middle skill” jobs that require more than a high school diploma but less than a college degree, but the majority (71%) had no formal education requirement beyond a high school degree.

Reasons to stay, reasons to leave

The Bay State’s manufacturers say the work ethic of Massachusetts workers is their top reason for staying in the state. More than half said work ethic was a very important or extremely important factor in that decision. Other factors included inertia, at number two, and the current and future availability of skilled workers. Proximity to current and future customers, quality of life, access to transportation for shipping/commuting, government incentives and the opportunity for physical expansion rounded out the Top 10.

But there was a clear number one when it came to reasons why employers might leave. More than 84 percent said the high cost of health insurance coverage for employees was a very important or extremely important reason they might contemplate leaving. Workers compensation costs, high taxes and fees, unemployment insurance costs and environmental regulations were the other top 5 reasons to contemplate leaving. Energy costs, labor costs, potential conflicts with Trade Unions, time to obtain licenses and permits and future availability of skilled labor rounded out the top 10 possible reasons to leave.

Finding a skilled workforce to replace aging workers

The need for skilled workers will become even more critical in coming years, Bluestone notes. In 2012, 43 percent of firms surveyed expressed substantial difficulty in finding skilled craftsmen, and a quarter worry about the ability to hire R&D manufacturing specialists.

More openings are on the way, as well. As of 2010, an estimated 54 percent of manufacturing workers were older than 45 – a percentage nine points higher than in all other industries. Because of this, researchers estimate 95,000 to 100,000 job vacancies could appear over the next decade.

To find this workforce, manufacturers turn to the state’s vocational and technical schools. Nearly four in ten said voc/tech schools were very or extremely important to training their future workers. Twenty-two percent noted the importance of traditional high schools and 18 percent cited state four-year colleges and universities. Somewhat surprisingly, only one-in-eight firms considered community colleges an important workforce developer, and just 3 percent said the state’s Workforce Investment Boards were very important when it comes to training workers for future vacancies.

Capital not a hurdle – so far

Researchers found concerns over the availability of capital were not evident among the surveyed firms. Sixty percent said commercial banks were important for their capital needs, and 83 percent had used commercial banks to provide funds for their operations. Nearly half of all firms (and 55 percent of small ones) said personal savings and credit cards were critical sources for capitalizing their companies.

But more than one in five (22%) said they were concerned or extremely concerned that financing would be a barrier for growth.

Manufacturers dipped into a number of state-supplied grants and opportunities, as well, ranging from workforce training grants to investment tax credits.

Businesses were also investing in their futures with new manufacturing equipment (83%), education and training for workers, and new hires to increase production. They also looked to work smarter, with the introduction of performance improvement programs, expanded sales offices and other strategies among the most often mentioned.

A sector looking to grow

One fifth of all firms believed they would be competing with more U.S. competitors in the near future, while 37 percent worried about international competition. But even so, a full 70 percent expect to increase the size of their workforce by 2017, with just five percent expecting a small workforce in five years’ time. That 70 percent is 10 points higher than in the survey five years ago.

“Given these survey results, the projection for employment we presented earlier in this summary may indeed prove to be too conservative. It is possible, if these firms’ expectations bear out, that by 2017 we may have a larger manufacturing workforce in Massachusetts than we do today”  Bluestone concludes.

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ABOUT THE SPONSORS

The Boston Foundation, Greater Boston’s community foundation, is one of the oldest and largest community foundations in the nation, with net assets of $850 million. In 2011, the Foundation and its donors made almost $78 million in grants to nonprofit organizations and received gifts of $81 million. The Foundation is made up of some 850 separate charitable funds established by donors either for the general benefit of the community or for special purposes. The Boston Foundation also serves as a major civic leader, provider of information, convener and sponsor of special initiatives designed to address the community’s and region’s most pressing challenges.

In 2012, the Boston Foundation and The Philanthropic Initiative (TPI) merged, with TPI operating as a distinct unit of the Boston Foundation. TPI pioneered the field of strategic philanthropic advising over 20 years ago and remains a national leader today. Through its consulting services and its work to advance the broader field of strategic philanthropy, TPI has influenced billions of dollars of giving worldwide. TPI’s Center for Global Philanthropy promotes international giving from the U.S. and local philanthropy around the world. For more information about the Boston Foundation and TPI, visit www.tbf.org or call 617-338-1700.

The Massachusetts Technology Collaborative is the leading engine for driving innovation throughout the Commonwealth. An economic development organization, MassTech convenes leaders across industry, academia, and government to accelerate innovation, technology development, and economic growth. Through its Innovation Institute and its major divisions, the Massachusetts e-Health Institute and Massachusetts Broadband Institute, MassTech brings together leaders to advance technology-based solutions to strengthen our regional economies, foster new industries, expand high-speed Internet access, and support health-related technology adoption.

It is the mission of Greater Boston Manufacturing Partnership (GBMP), as a nonprofit organization, to sustain a strong and vibrant regional economy by improving the operational profitability and competitiveness of existing and emerging manufacturing organizations, large and small, through training in lean and continuous improvement principles. By promoting successful implementation, GBMP will help perpetuate a positive future for the region’s industry. Our vision is to be a leading contributor in strengthening the manufacturing sector and increasing employment opportunities in the Northeast. GBMP’s values include True North Orientation, Experience, Mutual Respect, Professionalism, Collaboration and Community Service.

Citizens Bank is a division of RBS Citizens, N.A., operating its seven-state branch network in Connecticut, Delaware, Massachusetts, New Hampshire, New York, Rhode Island and Vermont. It has 254 branches and 758 ATMs in Massachusetts.
 
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The Kitty and Michael Dukakis Center for Urban and Regional Policy at Northeastern University conducts interdisciplinary research, in collaboration with civic leaders and scholars both within and beyond Northeastern University, to identify and implement real solutions to the critical challenges facing urban areas throughout Greater Boston, the Commonwealth of Massachusetts, and the nation. Founded in 1999 as a “think and do” tank, the Dukakis Center’s collaborative research and problem-solving model applies powerful data analysis, a bevy of multidisciplinary research and evaluation techniques, and a policy-driven perspective to address a wide range of issues facing cities and towns. These include affordable housing, local economic development, workforce development, transportation, public finance, and environmental sustainability. The staff of the Dukakis Center works to catalyze broad-based efforts to solve urban problems, acting as both a convener and a trusted and committed partner to local, state, and national agencies and organizations. The Center is housed within Northeastern University’s innovative School of Public Policy and Urban Affairs.