Mass. Industry Leader Says Manufacturing at Center of Recession

		Andre Mayer, Senior Vice President of the Associated Industries of Massachusetts, spoke to MassNews on Beacon Hill before he and his colleagues briefed legislators on the plight of industry in the current economy. With its 7500 member businesses, the group started in 1915 as a manufacturers association, but changed their charter in 1988 to reflect the businesses of today as employment in the manufacturing sector declined.
A.I.M.'s Senior Vice President of Communications and Research, Andre Mayer, briefs legislators on state's economic outlook.

Mayer: "While we're all very aware of the bursting of the dot.com bubble, the stock market bubble, the effect of 9-11 and so on, this seems to be turning into a real recession.
"It turns out on closer examination that manufacturing is really at the center of this recession, even more than the last one when everybody was very focused on the computer industry and the defense industry.

Mayer: We've had a very severe loss of jobs. More than that, we really have a recession that is caused by lack of business investment in capital equipment. That's mostly what we make here in Massachusetts.

MassNews: What can we do about it?

Mayer: It's very important for the Commonwealth going forward, to be thinking about this as the kind of recession they've seen before. Even though we got into it a different way, the way out is going to be similar to what has worked in the past in our view.

That does include making sure that the manufacturing sector in Massachusetts gets back on track, remains competitive and is able to bring back the kinds of jobs that manufacturing offers, which is really the best kinds of jobs available to non-college educated people, and therefore vitally important in terms of the latter's social mobility.

Mayer: When times are good, the problem we have here is a cost problem. This is a high cost area. So we have to run faster and faster in order to stay ahead, because we have to be competitive now in a global economy where anybody can do manufacturing up to a point.
We have to have the very best products, the very latest products; we have to be constantly retooling, constantly coming out with something new.

Mayer: We are talking largely non-wage costs - health insurance, workers compensation, unemployment insurance, and then just the general cost of doing business here. It's expensive to build a factory here compared to somewhere else because of real estate costs, regulatory burdens and so on.

Those costs hurt businesses, particularly during the recovery period. After hard times, companies are looking at new investments, and where do they go? They are likely to go to the place where they get the quickest return on their investment in many cases.

Historically, where Massachusetts loses ground tends to be not so much on the downside of the recession but during the recovery period, where we tend to lag.

By contrast, very interesting, New Hampshire, which is right next door and largely in Greater Boston, with a much lower cost structure, tends to bounce back from recessions much faster than Massachusetts. So that's almost the laboratory test.

We are going to be talking here about the need to take seriously those non-wage costs as a burden on industry, as something that really does make a competitive difference.
We are also going to be talking about the need to preserve certain incentives and tax measures that were put in during the last recession largely in order to promote that recovery. We want to emphasize that those measures remain valuable now and should not be done away with.

During his presentation to legislators, Mayer showed how investment in manufacturing has been dropping since even before the recession began, while consumer spending remained high, helped by low interest rates.

"That's what we mean," he said, "when we say this is an investment led recession. Ordinarily recessions are caused by declines in consumer spending. Then business decides 'there is no market out there, we are going to cut production, cut production.' In this case it is the other way around. Consumers are spending but business is not."