Q&A: The Strengths and Weaknesses of Manufacturing in New Hampshire

February 6, 2012 | 2:28 PM

By Amanda Loder

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What we’ve seen since President Barack Obama’s State of the Union address has been a series of press events at various factories (including a vice presidential visit to Albany Engineered Composites in Rochester) and media stories touching on the state of American Manufacturing. It’s part of the president’s latest jobs initiative that focuses on reviving the manufacturing sector.

Given this sector’s importance in New Hampshire, from historic mills to high-tech components assembly, we’ve decided to dig deeper into what manufacturing means to the state.  Our plan over the next week or so is to give you a potpourri of news, data, and opinions tied to fabrication in New Hampshire.

And in that spirit, we kick-off with our Q&A of Fred Kocher.  He’s president of the New Hampshire High Tech Council.  A significant number of the council’s member businesses are manufacturers, which means Kocher is plugged-in to the strengths–and weaknesses–of this sector in the Granite State.

Q: For somebody who maybe isn’t familiar with the state’s manufacturing sector, could you describe what it looks like from a bird’s-eye view?

A: Manufacturing in New Hampshire, by research done just a year ago, has four times the economic impact of any other economic sector in New Hampshire, and that includes tourism, which is a big piece of our economy…And that manufacturing ranges from companies that make items for the Defense Department, including BAE Systems, one of our biggest companies in New Hampshire, all the way down to software companies which are included in the manufacturing definition of “advanced manufacturing.”  I’m talking about advanced manufacturing because that is the sector in NH that really is leading this economy back out of the recession.  Let me give you some tech facts, which includes a lot of the advanced manufacturing.  Nine percent of the workforce in New Hampshire produces about 25 percent of the Gross State Product (GSP).  And the majority of that comes from manufacturing.  There are about 3,700 tech businesses in New Hampshire, 80,000 tech jobs.  The average salary’s about $81,000 a year.

Q: When you’re talking about these manufacturing jobs, it sounds like you’re talking about more than one kind of job, because when I think of manufacturing, I tend to think of people who are machining the parts, they’re taping the boxes, and they’re doing the sort of day-in, day-out, work-a-day stuff on the floor.  Is that what you’re describing when you’re talking about manufacturing jobs in this state?

A: That’s part of it.  But that’s a small part.  And the part of manufacturing, in terms of jobs, that is really in demand right now are the highly skilled workers.  Engineers —electrical engineers in particular are in short supply.   But they’re also programmers, quality control type people, people who have basic math acumen, those who can read a blueprint, those who do product assembly, those who you can use an auto-CAD, electronic board assembly, computer skills, drafters, but increasingly, people on the manufacturing floor that can just solve problems.

Q: When we’re talking about the sheer quantity of manufacturing jobs, what are we talking about in terms of numbers?

A: There are CEO’s tearing their hair out looking for engineers.  I just did an interview with the Commissioner of Employment Security here in New Hampshire, Tara Reardon, and she said she can place every engineer that applies for a job, and then some.  There just aren’t enough engineers.  So what do companies do?  They do one of two things.  Besides training people in their own facility.  They keep their older employees on, rather than letting them retire.  What they’ll do is give them flex-hours, and may allow them to work part-time, but they need the skill of the older workers who would normally retire.  The other thing that they do is try to get engineers from overseas, from India and Germany and other countries in the world.  The problem is, there are not enough H1-B visas to allow them to pull in the number of people they need…The one opportunity for, say, a lower-skilled employee, is that he or she can get higher skills in some companies by the very training programs those companies have undertaken to elevate their own employees in terms of their skill set.  Not all companies do that, but more and more are facing the fact that they have to.

Q: But when we’re talking about all these positions that are open, are we talking about potentially a thousand factory openings, or 500 openings?  Do you have a ballpark?

A: I don’t know the number.  But let me answer that in a couple ways.  We lost a thousand manufacturing jobs in New Hampshire in 2010, roughly around a thousand.  Now the economy’s starting to come back.  There was just an announcement recently that the manufacturing sector in the country has picked up.  So some of those jobs are going to come back.  But, even with that loss, there are more jobs available in the manufacturing sector in New Hampshire than there are people to fill them.  That is good news and bad news.  They have to find the employees.  But the jobs are there.

Q: NH has this vaunted, educated workforce, why can’t we find these people in NH?

A: There are not enough of them going into the field, first of all, into the engineering, into the technology [curricula], and so we’re not having enough graduate.  That’s it pure and simple.  And it’s not indigenous to New Hampshire.  I mean, that’s true across the country, more or less.  But there are efforts underway in this state, by business leaders and education leaders, to deal with that.  They’re not going to have results overnight, but over the next five, six, seven years, there will be results.

Q: To which efforts are you referring?

A: There’s a program called the State Scholars program, which operates in the secondary schools and high schools.  This program looks at students that are college-bound, or those that are trying to decide if they want to be college-bound or not, and bringing the business community into the schools to work with the teachers and the principals to [create incentives for] these students to go to college, and to work with the teachers to help make the curriculum more rigorous and relevant to what they’re going to face in college and what they’re going to face in the real world.  This program is now in 50 high schools in New Hampshire, and it’s expanding.

Q: How do community colleges tie into this effort?

A: They’re key.  Because community colleges, for the most part in NH, are overloaded with students right now for one reason:  it’s affordable.  A lot of students that can’t afford a four-year college now are going to community colleges.  And community colleges in New Hampshire are ramping-up their [curricula].  In particular…the community college system in New Hampshire just received a multi-million dollar grant from the federal government to train students in the manufacturing skills.  So that is, that bodes well for the manufacturing sector in New Hampshire.

Q: Manufacturing has been a running theme of in both the State of the Union and the State of the State addresses.  From where you’re sitting, what, if anything, do you think the government can do to alleviate the situation right now with manufacturing?

A: The only thing they can do is create an atmosphere, through the tax policies that they have, and through incentive grants like the one I mentioned to the community colleges here in New Hampshire to train students in various manufacturing skills.  But the tax code and trade missions overseas that are led by the Commerce Department, those are very helpful to companies in making connections overseas to do business.  And of course, the economy itself.  Getting the economy under control.  Because the one thing that CEO’s of manufacturing companies and any business right now are concerned about is the lack of the ability to know where this economy is going.  You can’t plan a company and its sales and its revenue targets with the uncertainty that now exists in this economy.

Q: When you talk about changing the tax code, are there specific things that would be helpful to manufacturers here?

A: Well, in New Hampshire, there’s a bill before the legislature now…on increasing the research and development tax credit against the Business Profits Tax and the Business Enterprise Tax.  There’s a cap on that tax credit right now of $1 million.  There’s a bill sponsored by Senator Odell that would raise it to $2 million.  Why?  Because the applications for that tax credit have exceeded that $2 million mark already…That is a very key item here in NH that would provide an incentive, frankly, for companies to invest in research and development, which frankly leads to new products, and creates jobs to make those products.

Q: And when you look at manufacturing in NH, what is your biggest concern, right now, for that sector of the economy?

A: Two concerns.  The first one is the cut in defense, at the federal level.  This economy of ours, roughly, four, five percent of the Gross State Product (GSP) in New Hampshire is tied to defense work by New Hampshire companies.  And with the cuts in the defense budget, we’re going to see that drop, and that’s going to hurt a number of companies in the state…And I understand why that’s being done.  But nonetheless, some of the companies that are in the defense sector have put on hold, at least for the moment, some of their growth plans, because of the uncertainty of that budget…The other concern…There are a number of companies in New Hampshire, when they get to the third or fourth stage of growth*, they are bought and frankly, there’s a company right now in Keene that has just been bought, and they’re closing it down, and all of those people are going to lose their jobs.  That’s probably my biggest concern, that even when companies are successful in New Hampshire, and they get to that third or fourth level, a bigger company buys them, whether it be a foreign company or a domestic company, and they close it down and move the functions and the jobs elsewhere.

* A fourth stage of growth is when a company has really succeeded and is prime to be bought.