Despite gains, report says industry still struggling

Rhode Island should be attracting a substantial amount of research and development, considering its mostly urban environment, good public and private universities and its human capital, says Michael Hicks, director of Ball State University’s Center for Business and Economic Research, which last month released its 2014 Manufacturing and Logistics Report.
But Rhode Island received generally poor grades in most of nine categories, scoring above a “C” only in sector diversification, earning a “B.” Some state manufacturing leaders expressed surprise at the overall poor showing.
While Rhode Island maintained its place as average in human capital, the state earned an “F” in the logistics category in the Ball State report. The study measured not only the capacity to move goods, but to store, inventory and manage the distribution and processing of manufactured goods. The study measured logistics-industry income as a share of total state income, and the employment per capita in the logistics industry. The study also covered commodity-flows data by rail and road, and spending per capita on highway construction.
“The ‘F’ in logistics surprised me,” said Bill McCourt, executive director of the Rhode Island Manufacturers Association. “We have the port, we have rail, we have highway access, we have a lot of supply-chain capabilities, and Quonset does a great job.”
Another area that McCourt said didn’t seem to match his knowledge of what’s going on in the state was the ‘F’ grade in global reach, which is down from the state’s “D” in that category in 2013.
The study based global reach on export-related measure per capita of exported manufacturing goods, the growth of manufacturing exports and foreign direct investment. “As far as export capabilities, I’ve been working with the Chafee Center for International Business, and I couldn’t understand that ‘F’ in global reach,” said McCourt.
“When reports like this come out, they’re helpful to reflect on, but they seldom come as a complete surprise to the people involved,” said McCourt.
“We need to do a deeper dive into this report and understand some of the factors they’re using and see whether or not we agree, and perhaps talk with the people who did the report,” he said.
“We understand that reports like this are out there for public information and there are companies looking to grow their businesses, and they look at reports like this,” he said.
“We’ve got enough bright people in Rhode Island that we don’t sit around with our heads in the sand,” said McCourt.
Hicks, however, sees a disconnect between the state’s “C-minus” grade in human capital, which is based on many segments of education and training, and its “D” grade in productivity and innovation. The study rated productivity and innovation based on the value of manufactured goods per worker, access to inventions and innovations, and number of patents issued annually per capita.
“It’s surprising for a small state with a ‘C-minus’ in human capital to have a ‘D’ in productivity,” said Hicks.
The “tax climate is probably scaring away R&D investments,” he said.
Rhode Island has received an “F” in the category of tax climate in the Ball State study every year from 2009 through 2014.
States that have high taxes can often balance that with other elements attractive to business, including high-quality educational systems and good infrastructure, such as roads, rail service and public transportation, in addition to lifestyle amenities such as public parks, said Hicks. “You can look at places like Boston. There are a lot of good schools and great public infrastructure,” he said.
Northern Virginia is another region attractive to business, he said.
“The high taxes don’t matter so much to manufacturers if there are qualities to offset the disincentive of a high tax climate,” said Hicks.
Rhode Island has gotten a “C-minus” in the human-capital category for the past three years.
“We think the “C” in the report is appropriate for human capital, which we define, pertaining to manufacturing, as the availability of a skilled workforce,” said Ruth Gobeille, spokeswoman for Polaris MEP, a nonprofit that provides programs to improve and grow Rhode Island’s manufacturing industry.
While workforce is one of several areas of focus for Polaris, it is a key segment because the organization is the manufacturing-industry partner for the Governor’s Workforce Board.
Gobeille points to the forward movement of the manufacturing sector, with developments such as the state’s Manufacturing Industry Partnership established in November 2013 to address workforce needs of manufacturers, determine specific skills gaps and examine pipelines and strategies for filling in those gaps.
“We’re not going along with blinders on in manufacturing,” she said. “The industry realizes there’s a problem and educators realize there’s a challenge, and we’re working together to overcome those challenges.”
She points to a major development in filling in the skills gaps – the state’s first registered apprenticeship program in manufacturing, the Computer Numerically Controlled Machinist Apprenticeship, which was approved in May, funded by the Governor’s Workforce Board. •

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