Maine is missing out on the nationwide expansion in manufacturing

By Wickham Skinner | Aug 03, 2010
Wickham Skinner

We now manufacture more in this country than ever in our history. U.S. manufacturing has been vibrant with productivity gains and our factories' output has risen 12 percent in five years. U.S. manufacturing is on a roll!

But manufacturing is not rolling in Maine. Maine is not aboard the nationwide manufacturing bandwagon. We are missing out on the benefits of adding jobs in this traditionally high wage sector of the economy for Maine's industries are not growing as they are elsewhere. On the contrary, in the last five years the number of manufacturing jobs in Maine has declined by 9,400, a drop of 16 percent.

In sharp contrast, after a 10 year decline of 29 percent, due largely to extraordinary improvements in productivity, nationwide factory employment has recently been rising. Durable goods production has risen 25 percent and non-durable goods by 8 percent in five years. In Maine, comparable data shows drops of 15 and 14 percent, respectively.

Manufacturing's vibrant success elsewhere has produced a 79 percent increase in U.S. exports in five years. While the media writes about outsourcing and imports, 44 of the 97 major U.S. industries are now net exporters. Further, weekly earnings of manufacturing employees have grown far faster than inflation, at about 3.5 percent a year.

For the country as a whole, manufacturing accounts for 14 percent of the Gross Domestic Product. In Maine, it is 2 percent lower and we are falling further behind as manufacturing grows more important elsewhere while shrinking here.

What is wrong? Why are we missing out on the benefits of the strong and growing manufacturing sector being realized all across America? What might we learn from the rest of the nation?

I suggest that there are five key attributes characterizing the current resurgence of U.S. manufacturing, which appear to be missing or weak in Maine:

1. Results are very industry specific. Certain industries are strong and others are weak. This is evident in the split of manufacturing into net importers and net exporters.

The largest industries in foreign trade are:


Importers
1. Apparel                            $45 billion     
2. Household Goods             40 
3. Pharmaceuticals               38
4. TV/VCR                            35
5. Computer Accessories     29
6. computers                        24
7. Textiles                             23
8. Toys, sporting goods        22
9. Furniture                          18
10. Telecommunications      12



Exporters
Semiconductors                  $24 billion
Aircraft                                 17
Plastics                                17
Chemicals                            13
Gemstones                           12
Organic Chemical                11
Aircraft parts                        11
Newsprint                              9
Aircraft engines                    7
Excavators                            6

 

 

With the exception of semiconductors, shipbuilding, and transportation equipment, Maine has not been in many strong industries. Our biggest industries have been paper, which as a commodity has been hurt by imports; wood products; and textiles and leather, all declining. Those sectors have been labor intensive and generally unable to compete well in foreign trade and, hence, have become another of the net importers. One clear lesson is that if your company cannot export, its market will likely be cut down by imports.

The sectors which have been successful elsewhere are featured by high-tech, advanced engineering, and frequently are producers of capital goods.

2. The production of durables, which are generally high tech, with a high engineering content, has fared much better than that of non-durables, which are generally more labor intensive. Maine has depended too much on non-durables production, but our durables have also declined.

3. Massive increases in productivity have led U.S. industry to its present successes. Maine's production expressed as gross product per worker is 28 percent lower than the average in the rest of the country. Our products tend to be cheaper, our processes less automated, and production runs generally shorter.

4. Nationwide, companies and industries that have been prospering have consistently invested in advanced product and process technologies. The result is increased marketability of products, strategic capabilities of unique production processes, and steady improvements both in costs and quality.

5. Across the country there is evidence that excellence in manufacturing management is a key factor in successful competition. Changes in management concepts and techniques are coming thick and fast. The old ways of managing are frequently inadequate.

Elsewhere, engineering and management professional schools' graduates have been a valuable, even essential element in industrial success. The importance of higher education programs is growing, but except for our outstanding engineering school in Orono, we have very limited graduate offerings in operations management in Maine.

To summarize, we are losing out on the resurgence of the manufacturing sector of the U.S. economy because we are in the wrong industries, we make too few high-tech, exportable products, we lag in accomplishing the productivity gains achieved elsewhere, we suffer from a lack of product and process investment, and have been limited in the availability of well-trained professional managers.

These are difficult, "chicken and egg" types of problems, all intertwined, dynamic and serious. But, clearly, new investments are needed to get the state into higher tech, durable product industries so that it can become competitive in productivity, products and processes.

Government can certainly help by improving the tax and regulatory environment so as to attract rather than repel private investors.

One key to attracting investors is to capitalize on Maine's special advantages. For example, we have consistent wind velocities, which arguably are the best in the country. And in this context new technologies for new industries could trigger major investment.

For example, the ocean energy, wind power, and alternate energy source innovations being developed now by private investors with research and development led by the engineers and scientists at the University of Maine could be exactly such a dynamic new force.

We now have models throughout the nation which demonstrate the growing strength and capacity of the manufacturing sector and its contributions to the economy. This environment has created potentials for Maine manufacturing which are unprecedented. Do we have leaders who can execute this turnaround?

Wickham Skinner, an emeritus professor at Harvard Business School, served as president of the Natural Resources Council of Maine and the Farnsworth Art Museum and as a Bath Iron Works director and a trustee of the University of Maine system. He lives in Tenants Harbor and continues to write books and articles about manufacturing and productivity.

 

Comments (1)
Posted by: Richard Anderson | Mar 25, 2011 10:01

Wick,

What a compelling argument you make. That US manufacturing is growing and that we are net exporters in many areas is a message lost in all the sound bites decrying outsourcing and importing. Thanks for helping to bring this important information to the light of day.

I would welcome learning of some of the models for growing a state's manufacturing sector. I suspect you know of some and could help inspire leadership.

 



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