ALBANYManufacturing remains an essential foundation of New York's economy, especially upstate, where half of all jobs depend on manufacturing, a new report concludes.
The study, The Key to the Upstate Economy? Manufacturing - Still, also concluded that new government policies to enhance competitiveness of traditional and high-tech manufacturers would make New York more prosperous. The report was published today by The Public Policy Institute of New York State, the research affiliate of The Business Council. The full report can be found at www.ppinys.org/reports/2002/manuf2002.pdf.
State government policies over the last decade have made New York's manufacturing sector more competitive. In the last year, both New York and the upstate region in particular outperformed the nation.
More policy changes are needed to help New York manufacturers compete, the report concluded. Policy changes that could help manufacturing include further tax reductions, increased electricity capacity, workers' comp reforms, and other steps to ease the costs of job creation in New York.
Why manufacturing still matters: Recent struggles for the nation's manufacturing sector have prompted some politicians and corporate critics to resurrect arguments that New York's manufacturing sector is dead, and the economy must "move on."
But manufacturing remains "the center of opportunity for millions of New Yorkers," especially upstate, the report said. In larger cities, such as Rochester and Schenectady, and smaller communities, such as McConnellsville (Oneida County) and Ticonderoga (Essex County), the manufacturing employers such as GE, Eastman Kodak, Harden Furniture, and International Paper offer a number of powerful economic benefits:
. Manufacturers directly employed 805,200 New Yorkers as of June 2002 -- more than 11 percent of all private-sector jobs in the state, the report noted. Upstate, manufacturing jobs were 17 percent of all private-sector jobs, or one of every six. That's more than the nation as a whole, in which 15.2 percent of non-government jobs are in manufacturing.
. Manufacturers create spin-off jobs with contractors that provide direct services to manufacturers, and services provided to manufacturers and their workers in the retail, service-sector, and not-for-profit sectors. The Governor's Office of Economic Affairs estimates that each manufacturing jobs creates 2.67 other jobs in supplier firms, in companies that sell goods or services to workers and their families, and in government, the report noted. Using this multiplier, the report estimated that upstate has 1,583,238 jobs that rely on manufacturing - 49.6 percent of all upstate jobs.
. Manufacturing jobs tend to pay more, and come with more generous benefits, than jobs in other sectors. For example, in auto manufacturing, which remains the most important sector in the economy in western New York, workers earn an average of $1,063 per week, according to state Labor Department figures.
Manufacturing jobs are considered especially valuable to an economy because they import wealth from around the country and the world, the report noted.
"Manufacturers export goods from their home area, and import the wealth earned by the sales," the report said. "A local hospital, by contrast, may have as many employees as the local manufacturer, but the money they have to spend in the community comes almost entirely from the local community."
Citing U.S. Census Bureau data, the report showed that manufacturing in New York led to $85 billion in net new wealth in New York in 2000.
How manufacturing in New York lags the nation: Manufacturing in New York is faring better than it was 10 years ago, but still lags the nation's manufacturing sector, the report said. In a five-year period ending in June 2002, manufacturing jobs declined nationally by 10 percent -- and, in New York, by 13 percent.
That is much better than the performance of the state's manufacturing sector in the recession of the early 1990s, and Albany's efforts to improve the state's business climate deserve credit, the report noted. In the most recent year, New York has continued to lose manufacturing jobs, but at a slow pace than the nation.
To improve New York's competitive position further, the state can and should enact more policy changes to make the state's business climate most hospitable to manufacturing. Specifically, the report recommended that state lawmakers:
. Eliminate or reduce the state's alternative minimum tax, which limits the effectiveness of New York's investment tax credit in encouraging manufacturers and securities firms to make capital investments in the state.
. Adopt the single-sales factor method of apportioning corporate income for state tax purposes. This would lead to an additional 32,000 manufacturing jobs in the state, with an overall employment increase of more than 130,000, according to a report by two economists in a 2001 report by The Public Policy Institute.
. Enact additional cost-cutting reforms to workers' compensation, the costs of which remain 27.7 percent higher than the national average according to the most recent available figures.
. Continue efforts to reduce energy costs, which is especially important in manufacturing because manufacturing processes tend to be energy-intensive. In particular, the paper noted, the state must site new electricity-generating facilities to help reduce electricity costs further and ensure an adequate supply of power.
. Develop new approaches to economic-development programs to help existing New York businesses compete. The programs are necessary to complement successful state programs designed to attract new businesses from out of state and to encourage expansions of existing businesses.
. Enact brownfield reform to encourage redevelopment of abandoned sites -- specifically, by giving parties that redevelop sites relief from liability for contamination they didn't cause, and by enacting clean-up standards that reflect the intended use of a site.
. Create new state efforts to promote the importance of manufacturing to discourage not-in-my-backyard opposition to many proposed manufacturing facilities, and efforts to promote the advantages of careers in manufacturing in the state's vocational education and workforce training programs.
. Reject efforts by organized labor to enact policies that would increase employers' costs of job creation without any cost-cutting reforms to offset the increased costs.
"Clearly, manufacturing still matters in New York. And the way that this state treats manufacturers - in its tax policy, business regulations, and siting decisions - matters as well," the report said.
"New York manufacturers are proving it's still possible to make it in the Empire State. With the right policies from Albany and from local governments, they will continue doing so for a long time to come."
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