Rhode Island third most-costly state for manufacturers, says UConn study

RHODE ISLAND IS THE third most-costly state in the nation for manufacturers, according to a new study released by the University of Connecticut, with $1 worth of manufactured goods costing 93 cents on average to produce. For a larger version of this image, CLICK HERE.
Posted 9/10/10

STORRS, Conn. – Rhode Island is the third most-costly state in the nation for manufacturers, according to a new study released by the University of Connecticut that focuses on debunking the belief that Connecticut is an expensive place for manufacturers to do business.

“The November election will bring a new round of claims about Connecticut’s high wages, exorbitant rents, burdensome taxes, overall lack of competitiveness and resulting job losses,” said authors Subhash Ray, Lei Chen and Dennis Heffley. “Such claims have become so common that many voters accept the mantra of Connecticut’s ‘unfriendly’ business environment as fact. Yet, data from the 2007 Economic Census paint quite a different picture of the state’s economic competitiveness in manufacturing.”

While the study’s findings may be good news for the Nutmeg State (it ranked 43rd on the list), Rhode Island came in third place for costliness to manufacturers. A dollar’s worth of manufactured goods costs 93 cents in the Ocean State, 13.7 cents more than the national average.

Vermont took the No. 1 spot for expensiveness, coming in at 95.9 cents, and New Hampshire followed in second place at 93.5 cents.

By comparison, Connecticut placed 43rd with 79.3 cent costs for a dollar’s worth of manufactured goods. Other key Northeast states include Massachusetts at No. 28, New Jersey at No. 21 and New York, which was highlighted as a low-cost state for manufacturers, which came in at No. 46 with costs at 78.1 cents.

Nationally, Arizona (No. 2), Virginia (No. 3) and North Carolina (No. 4) were among the least expensive states for manufacturers. Oregon was the least expensive, registering 70.6 cent costs per dollar of manufactured goods.

“The analysis makes it quite clear that a high average wage does not necessarily imply high production costs. In fact, the calculated unit cost of manufacturing output is essentially uncorrelated with the average hourly wage of production workers,” the study concluded, adding that Connecticut’s flat corporate income tax rate of 7.5 percent is lower than its neighbors, including Rhode Island’s 9.0 percent rate, Massachusetts at 8.5 percent and New York with a 7.1 percent rate.

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Connecticut? Low cost? Puuhhhleeeez. This self-serving 'study' should be perforated and put in the men's room. Here is the link to it:

Friday, September 10, 2010 | Report this

Do go to the study article at website above. Some good insights, such as: different companies in different states have different cost structures, and some in New England have successfully enhanced their productivity to need fewer high cost production factors -- and so ranked high in this study.

But a key weakness with their method: it does not account for some states having more industries with high profit margins -- at least not that I noticed in speed reading their professorial jargon.

For example CT rates well in their study in part due to firms like United Technologies that have high value products and profit margins which compensate for high costs. Likewise Oregon (eg Hewlett Packard, Intel). RI is not so fortunate with its abundance of low tech firms -- and so ranks unfavorably in this kind of study.

Wednesday, September 15, 2010 | Report this
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