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MANUFACTURING: SwimmingAgainst the Tide
The state and individual manufacturers must get more flexible if the sector is to survive here
John S. Lapides is president of the United Aluminum Corp. of North Haven and a member of the Manufacturing Alliance of Connecticut.
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Business New Haven
11/15/1999
By: Michael C. Bingham
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What manufacturing trends are you thinking about most lately?
A major trend would be business consolidation on the part of both vendors and customers. Actually, the first trend is 'demand-pull.' Basically, people want to pull things through the system, they don't want to push them through the system, in order to lower inventories. The result is consolidation, because it's more efficient to pull things through fewer vendors and customers than it is [through] more vendors and customers. You're seeing it everywhere: fewer people producing more goods in each factory. I would also mention e-commerce, which is going to change consumer marketing a lot, and already has.
Are there going to be companies like yours in Connecticut in ten years?
The issue is that manufacturing in the U.S. is growing, [but] it's contracting in Connecticut. Why isn't it growing in Connecticut? When [companies] buy another plant and consolidate, why don't they think to consolidate here? Are there too many restrictions on work rules? Are we too inflexible? Do we not want to work hard? Why are people leaving? Or are there structural issues such as taxation? The center of population is the Northeast; this is supposed to be the place to be. As the center of population moves, this is now not as advantaged a place, unless you want exports.
Are we more or less inflexible here than Massachusetts, which still has a pretty strong manufacturing base?
I don't know. Manufacturing here is contracting because the infrastructure is not improving & it is hard to get trucks in and out; it's harder to get people to their jobs. And we're not really that busy [commercially]. There are places in the world that are really busy commercially, which have infrastructure problems, but at least you can say they're busy.
We still don't have huge traffic jams every day; we have small ones. That's probably not true going east over the Q bridge. But we're facing ten years of [bridge] reconstruction, so for ten years things are not going to get better. They're probably going to get worse before they get better.
We're building a mall; we're building another coliseum in Bridgeport that we don't need. I'm not saying that Bridgeport doesn't need it, but certainly the state doesn't need it. We're spending $70 or $80 million [in public subsidy] to build a mall. My question is: If it's such a great idea, why couldn't you do it with less public assistance? And we still have electric lines for the trains that are from 1912. How committed is this state to really addressing its issues?
Where are all the lower-skilled people - who now may be under-employed due to lack of opportunity & going to be employed ten years from now?
There is a trend towards globalization. There's a trend toward lower pricing. You can see it in the price of products when you go to a store. There was an interesting editorial in the Wall Street Journal saying that the government is going to redefine the level of poverty to $19,000 a year from [the current] $16,000. The point the author makes is that you should measure poverty based on consumption, not based on income. And the other point they made was that at the turn of the last century probably 75 percent of the average household income was spent on food and shelter. Now it's down to something like 37 percent. People today have many more material goods. I'm not sure we're wealthier in a spiritual sense, but certainly in a material sense we're wealthier based on that. More families have at least one car, more families have at least one color TV set, have a VCR, which didn't even exist years ago. The fact is, the price of manufacturing goods is coming down worldwide. And those prices are coming down at a faster rate.
Will manufacturing in Connecticut be competitive?
Connecticut is getting more competitive, but we're not getting more competitive as fast as our competitors. The issue really is not just 'Are you improving?', but 'Are you keeping pace with your competition?' It's true in athletics. It's not enough to say, 'I'm competitive on a 1970s basis, or on a 1980's basis.' You have to be competitive in today's environment. By and large America has escaped the high unemployment of Europe. Those rates are in double digits still in a number of countries in Europe. What does America do? Why is America inherently more competitive? Why are we able to employ more people as a percentage of people looking for jobs?
What's the answer?
The answer is that we have more of a competitive model in America. The model is less socially-driven. And the result is more social well being. It's ironic, really. You would have thought that Russia would be the most successful country in the world in terms of social [well-being] because of their social policies, but in fact they were the least successful. If you want more social well-being, you have to have a more competition-driven system.
What about labor force issues? In Connecticut we have two percent unemployment now. How will manufacturers find workers?
I think we still have people here who are good. But we're not the most flexible workforce. This is a powerfully unionized state &emdash everything from private unions in the companies that have gone out of business &emdash and even those that are still in business &emdash to the public employee unions. People accept that as a way of doing business. Part of it is that people don't really understand the issues. The truth is there are a lot of surprising work rules that restrict productivity growth &emdash and a whole governmental system that basically supports that structure. If you want to get elected in this state, you need the backing of the unions. And the great irony, to me, is that the unions have not acted in their own best interests.
What's an example?
Workers compensation has become more competitive. And yet state labor organizations have fought that [reform] bitterly. But by having [workers compensation] rates that are too high, and abuse in the system, in fact they are probably contributing to the contraction of those same jobs. By protecting the individuals involved, in fact they might be putting them out of a job. So there's a certain irony. We want that safety net without the abuse. You have to be very clever in constructing these programs. There are always some tradeoffs, but if it gets too far in one direction, it's going to be a problem.
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