Maine manufacturing gets poor marks in national study; workforce the sole bright spot

Posted June 19, 2013, at 7:46 p.m.

Maine’s manufacturing industry received lukewarm marks in an annual scorecard that uses several metrics, including productivity, workforce, tax climate and worker benefit costs. The state’s logistics sector fared even worse.

The overall health of Maine’s manufacturing industry received a “C”, while the logistics industry received a “D-”, according to the 2013 Manufacturing and Logistics National Report, which is compiled annually by the Center for Business and Economic Research at Ball State University in Muncie, Ind.

Maine’s highest score was a “B-” in “human capital,” which is measured with data on the educational level and, in some cases, health of a state’s workforce. Maine’s lowest score was an “F” in “worker benefit costs,” which incorporates data on health care and workers’ compensation costs.

“The purpose of this study is to let policy makers understand what are the characteristics within a state that may contribute or detract from a manufacturer expanding or locating to a state,” Michael Hicks, director of the Ball State business center, and the report’s author, told the Bangor Daily News.

Lisa Martin, executive director for the Manufacturers Association of Maine, wasn’t surprised by Maine’s score. But she wasn’t thrilled either.

“I remember when I was in school and I got a C,” she said. “Was I really happy with that? No. Was I devastated? No. But it let me know where I could do better. And we can do better. It’s up to our organization and others like us to start changing that perception.”

National reports such as this one are important, she said, because they offer a “benchmark or litmus test” to measure improvement.

Speaking of improvement, Maine saw its grade rise in only one metric between the 2012 and 2013 report: In the area of “tax climate” the state’s grade went from a “D” to a “D+”.

That slight increase was most likely because of tax cuts Gov. Paul LePage pushed through in 2011, Hicks said.

Maine lost ground, however, in the areas of “expected liability gap,” which went from a “D” to a “D-”, and “productivity and innovation,” which went from a “D+” to a “D-”. The latter drop was because of lower relative growth in value-added manufacturing, Hicks said.

“Some of it is clearly recession-related,” Hicks said Wednesday. “States with a lot of high value-added manufacturing were clobbered by the recession.”

In Maine, papermaking and transportation products, which is most likely Maine’s precision manufacturers that produce parts for the aerospace industry, took a hit, Hicks said.

John Butera, chief economic advisor for Gov. LePage, wasn’t familiar with this particular report before this week, but told the Bangor Daily News that the administration does pay attention to such scorecards.

“It provides a broad perspective on one thing we’re trying to improve, which is competitiveness,” Butera said. “These aren’t gospel, but it’s important to know where we stand and it’s important to know what people are looking at.’’

The scorecard reinforced some of the goals that the LePage administration has set, Butera said. He pointed to the areas of tax climate and worker benefit costs.

“Those are things we can to some extent control with policy,” Butera said. “We need to make sure we’re always thinking, when we put forward a piece of legislation or are looking at rulemaking, ‘Does this make Maine more competitive when it comes to attracting investment?’”

While Hicks describes Maine’s score as “middle of the road,” the state’s results do offer some good news, he said.

Metrics such as “global reach” (Maine received a “D”) and “sector diversification” (Maine received a “C”) are designed to measure the state of the industry today, Hicks said.

“The other factors — human capital, tax costs, expected liability costs and productivity and innovation — are really designed to be metrics of how manufacturing might change in the coming decade,” he said.

Hicks said “human capital,” in which Maine got a “B-”, is the state’s greatest strength, and will be the factor offering the biggest incentive for manufacturers looking to expand or relocate.

Regionally, Hicks said, “Maine and New Hampshire have become very attractive to manufacturing expansion, while Rhode Island and Vermont have created a policy environment which acts to discourage manufacturing firms.”

Massachusetts continues to be a draw for high-tech manufacturing firms looking to benefit from the Boston area’s university-based research and development opportunities.

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