The Manufacturing Alliance of Connecticut released the results of a survey last week that showed Connecticut manufacturers predict a bleak outlook for the state’s economy and the health of their industries.
Manufacturing has quickly become the focus of economists and politicians throughout the country, citing the industry as a crucial component of making a successful comeback from the recession.
When the New England Economic Partnership released an economic forecast three weeks ago, the Connecticut Business and Industry Association said that NEEP had good reason for focusing on manufacturing.
“When you have a service-based economy, you’re not really generation anything new. It’s just money trading hands,” said Joseph Brennan, Executive Vice President of Policy for the CBIA, adding that this is why a healthy manufacturing industry, where thing are created rather than traded, is an essential component of overall economic health.
In March, Manufacturing Alliance of Connecticut President Frank Johnson set about conducting a survey of Connecticut’s manufacturers to “learn more about how [they] are faring and what challenges they face.”
Johnson said what he found surprised him.
Of the 204 respondents, about 86 percent said economic conditions are “fair” or “poor,” and 69 percent said they thought conditions would either stay the same or get worse.
What was even more surprising to Johnson was the number of manufacturers who said they’ve been tempted to expand or relocate to other states, and most cited “government attitude” as the reason.
“A lot of people who watch what the General Assembly does and what they consider see that [during] every legislative session they bring up issues like rolling back workers’ compensation, raising health care costs, raising the minimum wage,” Johnson said. “It’s a continuing practice of the General Assembly to increase costs on businesses.”
According to the survey, a majority of Connecticut manufacturers report having been recruited to relocate or expand to other states, and half say they have considered doing so. The top five states recruiting Connecticut manufacturers are: North Carolina, South Carolina, Virginia, Florida, and Georgia.
South Carolina, North Carolina, Florida, Texas, and Virginia are some of the states manufacturers have considered for relocation or expansion. Twenty-five percent cited government attitude as their main reason to flee, followed by 24 percent who cited operating costs and 16 percent who cited tax structure.
NEEP reported last month that about 2,600 jobs were lost in the state’s manufacturing industry last year. MAC’s survey indicated downsizing has occurred as a result of overhead costs, particularly increased healthcare costs for employees.
Gordon Rubber, a small company in Derby, Conn., employs 25 people and its president, Jay Mazur, said he has seen health insurance costs skyrocket.
“I’m a small business with a limited amount of money to take on the risk [of health costs],” Mazur said. “I’ve seen increases in general insurance, real estate insurance, property taxes . . . but the health insurance is ratcheting up at a much faster rate than the others.”
Mazur said energy costs also have been an issue. Although he said he is happy to have his electricity provided by natural gas, which can undercut the price of oil-produced electricity by as much as half, he still has seen rate increases. And, because Connecticut has to import most of its natural gas supply, Mazur said he loses some of that economic advantage.
But Mazur said he believes Connecticut’s biggest problem is its fiscal state.
“[Connecticut] has to get its fiscal house in order if it wants to create an environment here where people invest in the state, and, despite some minor steps [by the government] here and there, I just don’t see it.”
The products that Gordon Rubber manufactures are often sold to other manufacturing companies to be used as components in machines. And as companies have relocated out of Connecticut, Mazur said more and more of his business goes out of state as well.
“There used to be a company right down the road we did business with,” Mazur said, but they recently relocated. “Now I’m dealing with purchasing agents in California rather than in Watertown. Distance is never an advantage.”
But Mazur did not say government or inter-state competition was the reason for a recent downsizing at Gordon Rubber. Rather, Mazur said he couldn’t find enough new hires that were willing to put in the time to be trained or who would be reliable employees.
It’s a common problem in the industry. Employees working for a manufacturers do need certain trained skills, but the problem is multifaceted, Johnson said. Either the company isn’t willing to do the training themselves and has a hard time finding pre-qualified applicants from the few community colleges in the state that offer the training they’re looking for, or the company is willing to train but has trouble finding reliable employees.
“Part of it is lack of skills. Part of it is that they can’t find people with the right work ethic,” Johnson said. “There’s a drop-off between the people who apply and people who pass pre-employment drug tests.”
This speaks to the survey’s finding that 78 percent of Connecticut manufacturers have had difficulty finding qualified employees. At the same time, 58 percent said they hadn’t taken advantage of state hiring programs, which help pay employees to train for at least the first six months.
Companies are not necessarily looking for employees with a college degree, but want employees with problem-solving skills and a science and technology background, who will show up to work every day, Johnson said.
Last week when U.S. Sen. Chris Murphy announced his plans to launch a compact to guide Connecticut’s congressional delegation on policies to bolster the state’s manufacturing industry, John Harrity of the Connecticut State Council of Machinists said part of the problem is that manufacturing isn’t marketed as a viable job opportunity to those who are qualified.
“These are good jobs that pay better than average and kids can make a career out of these jobs,” Harrity said.
The state’s manufacturing industry received criticism for being “stagnant,” when the modern world is constantly driven by new technological developments. But Johnson said this argument doesn’t hold any water.
“We still have a lot of companies that are technical and innovative,” Johnson said. “They’re constantly reinventing themselves, constantly looking for new and better technologies and ways to increase productivity. I don’t think we’ve become stale, opportunities are just harder to find.”
Johnson added that plans like Malloy’s Next Generation Connecticut, which passed the General Assembly last week and authorizes the investment $1.5 billion in state bonds for the University of Connecticut. The funds will be geared toward providing more science, technology, engineering, and mathematics (STEM) opportunities.
Johnson said students who will be educated under UConn’s new STEM programs will hopefully fill the need for mechanical and design engineers in manufacturing that can be involved in the research that keeps the state’s manufacturing industry moving forward.