Why Manufacturing Still Matters

On May 13, ‘Manufacturing Day in Holyoke,’ the Greater Holyoke Chamber of Commerce, the mayor’s Industrial Advisory Committee, and Associated Industries of Massachusetts recognized nine local manufacturers, each more than 100 years old. This celebration is a reminder that manufacturing remains a pillar of our economy and a vital step on the ladder of social mobility.

Manufacturing does matter — for Holyoke, for Massachusetts, and for the nation. Manufacturing is evolving, and despite fierce competition both domestically and abroad (and often a lack of appreciation by government at all levels), the state’s manufacturing sector is competitive, and in some sectors growing.

The Mass. Manufacturing Extension Partnership (MassMEP) notes that Census Bureau figures reveal a startling change: for the first time in the state’s history, small manufacturing enterprises (SMEs) are employing more people than the larger firms of more than 500 employees. In 2002, manufacturing establishments operated by companies employing 500 or more had 167,433 employees in Massachusetts, while SMEs employed 162,917; by 2006, employment by larger manufacturers declined 24% to 127,364, while employment by SMEs declined by less than 10% to 147,816.

The numbers of establishments tell the same story: large employers declined from 738 in 2002 to 624 in 2006, but SMEs remained steady at just under 7,000. As a recent report from Northeastern University, Staying Power: The Future of Manufacturing in Massachusetts, notes, “it is remarkable, given the situation facing manufacturing across the U.S., that Massachusetts still sustains a manufacturing base that employs nearly 300,000 people.”

So much has public opinion lost sight of the contributions made by manufacturers, however, that few in government, education, or the population at large are aware that the manufacturing sector is the largest contributor to the Massachusetts Gross State Product (GSP). As the financial-services bubble deflates, we should understand that making products produces real wealth, and recognize that we still manufacture many things in the Bay State.

In 2007, the manufacturing sector in Massachusetts contributed $42 billion to the GSP (13.7%), as compared to real estate, rental, leasing ($40 billion), professional and technical services ($35 billion), finance and insurance ($34 billion), and health care and services ($25 billion).

Manufacturing, moreover, has a large multiplier effect, creating economic activity and jobs in other segments of the economy. Without manufacturing, the Massachusetts economy would be about 40% smaller, we would all be poorer, and many of us would be out of jobs — or out of the state.

We all know about the problems of the automobile industry, and the current economic downturn has hit most industries hard, but some manufacturing sectors are actually growing in Massachusetts, including pharmaceuticals with 2008 gross sales of $5.9 billion, navigation measuring and control instruments at $8.8 billion, and medical equipment and supplies at $3.6 billion. And since 2001, there has been growth in several other sectors, including food manufacturing, beverages, plastics, and machinery.

Massachusetts SMEs have remained vibrant and competitive although our state ranks in the bottom 10 in perceived economic climate, according to the Gallup Poll, and fourth-worst in cost of doing business, in the Milken Institute’s index.

Some of our economic disadvantages are natural; many are self-imposed. To put Massachusetts in a position to generate new jobs when the current recession abates, lawmakers should review every single Massachusetts-only cost of doing business, law, or regulation. They should focus on advancing not only new industries and emerging technologies, but established ones as well. And they should shape policy to encourage graduation from research and development to full-scale manufacturing here in our state. Such an agenda will help ensure the Commonwealth’s economic future for all of our residents.

Meanwhile, let’s tip our hats and congratulate the nine Holyoke manufacturers who have made it in Massachusetts for more than 100 years! v

John Regan is executive vice president of government affairs at Associated Industries of Massachusetts, an employer association of 6,500 Bay State employers. Doris Ransford is president of the Greater Holyoke Chamber of Commerce.

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