URI's Mazze on Economic Forecast: Two Steps Forward, One Step Back

URI's Mazze on Economic Forecast: Two Steps Forward, One Step Back

Today, URI Professor of Business Administration Edward Mazze will unveil his annual state-of-the-state report, "The Rhode Island Economic Outlook and Forecast: Reexamining the Manufacturing Sector" at the New England Economic Partnership Spring 2013 Economic Outlook Conference" -- and while the "long term outlook is good", Mazze says that new economic development initiatives will have little impact the state does not increase its investment in promoting Rhode Island as a place to do business.

"If I had to give this report an alternative title, I would call it One Step Forward, Two Steps Back," said Mazze. "I've been doing this report since 2005, and while this is the first forecast since the recession that's shown a little bit of growth, our state still has a poor reputation dealing with business -- businesses stay away, or don't want to grow and develop here."

Mazze continued, "People might say that I haven't had a new idea in years, but since I've started doing the reports, Rhode Island still struggles to compete regionally, and still continues to have one of the highest unemployment rates in the country. We have no real economic development strategy."

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The report, which Mazze co-authored along with URI Associate Professor of Economics Edinaldo Tebaldi, makes the claim that the geographic location of Rhode Island places the state in a strong position to grow its manufacturing sector. "Manufacturing was one of the major economic sectors that played an important part in the growth of the U.S. economy after the 2007 recession. This did not happen in Rhode Island," Mazze and Tebaldi write.

"To make Rhode Island a center for manufacturing will require raising the skill level of the work age population as well as have a more business-friendly entrepreneurial environment," conclude the URI professors.

Mazze on Manufacturing and Development

The report beings by stating that while Rhode Island still lags behind the other states in New England when looking at major economic indicators as gross state produce and the unemployment rate, the state gained some strength in 2013.

Seven of the state's thirteen employment sectors experienced growth in 2013, including manufacturing, which added 400 new jobs.

"We've dropped from over 50,000 manufacturing jobs here in the state in 2007 to just over 40,000 in 2013," said Mazze. "Even with the decline, manufacturing represents 9% of all jobs in the state."

According to the report, the average wage of a job in manufacturing was $66,629 in 2011 as compared to the average wage with all other jobs at $46,375.

"Manufacturing today is more automated, so while we're not going to see the potential for huge gains in employment in the sector, it still is a major component of our economy," said Mazze. "The future of manufacturing demands a more skilled workforce. Compared to other states however, we've got the smallest percentage of employees in manufacturing with college degrees."

In the report, Mazze asserts that states with a focused approach to revitalizing manufacturing, and who are willing to make the investment in leadership, time, and financial resources have been able to retain and grow their manufacturing businesses, and have been able to attract foreign manufacturers and American companies who are re-shoring their manufacturing and bringing it back to the United States by offering incentives.

"There will always be debate about the inherent nature of incentives, but the fact of the matter is that the states that offer incentives for business development are the ones that are most successful," said Mazze. "If states don't compete to attract and retain business, companies will locate, or re-locate, elsewhere."

Steps to Succeed

Mazze writes in the report that the General Assembly is considering a number of initiatives to support manufacturing, but that they "might not be enough to create the jobs needed to revitalize manufacturing."

Incentives detailed in the report include Innovate RI to provide technical assistance to small companies to compete for federal grants and matching grants and loans, manufacturing internships and apprentices to allow students to train during school hours in approved programs, and Capital Expansion Manufacturing Jobs Credits, to allow companies to make major capital investments to be paid back a portion through credits on new jobs.

"We've got opportunities here that we're not capitalizing on," said Mazze. "We should be a leader in marine industries based on our location. We should be better established as a distribution center -- we've got an airport, port, rail, and a highway system that lends itself to this."

Mazze was critical of the state's recent economic development strategies, however. "We tend to go for the latest fad, the supposed "big win", said Mazze. "Just look at 38 Studios. I'm not against things like the Knowledge District, but we've got an existing infrastructure that we're not promoting here."

"We need to keep our best and brightest here however. Our success -- and demise -- are directly related to the growth of Massachusetts and Connecticut. We will continue to lose workers to them if we don't compete," Mazze said.

Rhode Island Manufacturers Take Stock -- and Look Ahead

This week, the Rhode Island Manufacturing Renaissance Project release initial findings of their Rhode Island Manufacturing 1000 (MFG 1000) along with a comprehensive program and recommendations for manufacturing expansion and job growth in the state.

The project is a joint effort between the Rhode Island Manufacturers Association, Bryant University’s John H. Chafee Center for International Business, the Rhode Island Economic Development Corporation, and the Rhode Island Manufacturing Extension Services.

According to Bill McCourt with RIMA, the MFG 1000 survey was created to help identify and clearly define the capabilities of manufacturing companies in Rhode Island.

"The initial findings of the MFG 1000 survey found that more than 80 percent of respondents plan to add employees in the next three years, with more than 85 percent of those looking for entry level production or machine operator employees," said McCourt.

"The tide is turning and the U.S. is entering a phase of great opportunity for manufacturing renewal and growth. As our initial figures show, Rhode Island manufacturers are eager to be a part of that growth but they need help.”

McCourt added, “Not only do we need to find ways to help them grow, but we need to provide an environment where entrepreneurs want to start and grow their businesses here and more manufacturers want to return to Rhode Island and stay here.”

In addition, the Renaissance Project also released a new report entitled, “Addressing Perceptions and Realities: The Rhode Island Manufacturing Renewal and Growth Program," which offers an analysis about Rhode Island’s current manufacturing landscape compared to the national manufacturing environment and makes several recommendations that the state should pursue to grow more manufacturing jobs and manufacturing companies.  Citing that "the state has gone from having one of the highest concentrations of manufacturing to below the national average in just twenty years, there must be a sense of urgency and prioritization."

The Renaissance Project report states that "Rhode Island should also look to grow exports. Rhode Island’s ports offer a unique advantage to exporters and training and support programs must be funded to help spur international trade opportunities. Leveraging the new MFG 1000 survey and finding a way to support the maintenance and upkeep the new manufacturing database is also essential."

McCourt, speaking with GoLocal this week, said there is "a lot of optimism, and positive energy -- and renewed energy among leadership to further manufacturing."

"We're encouraged and excited to work with [new EDC Director Marcel] Valois," said McCourt. "He gets it."