Manufacturing: Making a Comeback in New York

A briefing paper prepared for New York State Manufacturing Week, May 8 - 15, 1998

After decades of humiliating decline, New York State's manufacturing sector is at last making its comeback. It's a comeback based on world-class competitiveness — and on public policies that are changing for the better.

To keep up the momentum, the manufacturing community proposes a 1998 agenda that will help ensure continued, stronger growth. The agenda focuses on six key issue areas:

Tax cuts to create jobs

The Governor and the Legislature have a solid record to build on:

Cut corporate tax rates; strengthen incentives for growth

New York's buisness income tax rate of 9% is higher than in 37 other states—and higher than our personal income tax rate. Other states, meanwhile, are competing aggressively for the jobs we need in New York.

A tax-reform package this year will strengthen the incentive for manufacturers to grow in New York—and strengthen the business climate in which they operate. We recommend this program:

On average, manufacturing wages are 33% higher than in retailing, and 11% higher than in services.

Manufacturing provides 15% of jobs nationwide — and 11% of total jobs in New York State.

Upstate, its share of jobs is 16%.

Civil justice reform

The climate of excess litigation and unpredictable damage awards is driving up costs for manufacturers, stifling innovation, and hurting our state's competitiveness.

Set sensible limits on lawsuits and damage awards

More than 20 other states have adopted major tort reform measures in the last five years. The list includes Ohio, Illinois, Florida and New Jersey.

New York should join this movement, by adopting reforms that:

New York State has 40% more lawyers today than it did just 10 years ago. Tort filings in New York have increased 58% in roughly the same period.

Personal injury auto accidents dropped, but the number of auto-accident lawsuits went up.

Unemployment compensation

Although the rate of unemployment in New York has been dropping steadily, many employers are paying significantly more for unemployment compensation insurance than are their competitors in other states. Our tax tables are outdated—and we have inadequate safeguards to ensure the eligibility of claimants:

Reform the tax tables; strengthen the safeguards

Reform of the system must start with an effort to widen the differential between the highest- and lowest-taxed employers:

In addition, to ensure that benefits are collected only by those eligible, New York should adopt a wage reporting system. We are now one of only two states that do not have some form of wage reporting.

Overall, New York's Unemployment Insurance system costs employers $2.5 billion annually.

Among all the states, New York currently has the smallest differential in UI rates between the highest- and lowest-taxed employers.

Workers' compensation

Two years ago, the Governor and the Legislature took a solid first step towards reforming New York's excessively burdensome workers' compensation system. Aaverage rates paid by employers have dropped 25 percent. But much remains to be done:

Limit scheduled awards; adopt medical guidelines

New York State still has many reasonable opportunities to reduce the cost of workers' comp for employers—without jeopardizing the benefits workers need. A cost-cutting reform program could include:

The manufacturing sector in the United States is more productive overall than in any competing country—including Germany and Japan.

And manufacturing productivity in New York, in turn, is 19% above the U.S. average.

Reducing energy costs

New York is making progress in reducing the cost of energy for manufacturers—which has been, and remains, a significant competitive disadvantage for our state.

Allocate more power; cut taxes; secure financing

Despite the progress we have made, overall electric rates for industrial users in New York remain more than 50% higher than the national average.

It's time to take the next steps in reducing this cost, and in positioning New York to compete for the manufacturing jobs of the future:

Manufacturing accounts for 31% of total economic activity in the United States.

Every 10 jobs at manufacturing companies generate another 6 jobs in other sectors, such as raw materials and services.

Workforce development

Manufacturers across New York State report that they are having difficulty finding the skilled workers they need. In some regions—such as Rochester—employers have had to search out-of-state.

This is a national phenomenon. Other states that are major competitors of New York are meeting this problem head-on. States such as North Carolina, Ohio and Virginia have comprehensive programs to train and upgrade the skills of manufacturing workers.

Yet in New York, there is no program that employers can access that is dedicated to worker training.

Get serious about an employer-oriented job-training effort

To meet the needs of its workers and its employers—and to beat the competition—New York needs to work quickly to develop an employer-oriented job-training program.

New York should create a dedicated program within Empire State Development to train and upgrade worker skills. It should be:

Some leaders in the Legislature are already advocating such an approach. Others have proposed a tax credit for small businesses that invest in training. Manufacturers in New York want to work with allies of the business community in the Legislature to develop a comprehensive solution.

60% of manufacturers report that current workers lack basic math skills.

73% of manufacturers say that employees' skill deficiencies are making it harder to improve productivity and/or upgrade technology.