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Doeringer: decline in manufacturing in Massachusetts no cause for alarm

By Brian Fitzgerald

It's no secret that manufacturing is in decline in Massachusetts, and has been for decades. Will the current recession sound the death knell for this once-strong work sector in the state? Peter Doeringer says no. In fact, the CAS economics professor argues that shedding some traditional manufacturing jobs is not necessarily a bad thing.

	Peter Doeringer Photo by Kalman Zabarsky

"A sort of Darwinian process takes place during a recession," says Doeringer. "It triggers decisions that should have been made earlier -- but weren't -- during the more prosperous periods that preceded the recession." He asserts that in manufacturing, there are bound to be some falling stars during bad economic times. But there are also some shining stars. "When we come out of a recession, the economy is actually stronger in many ways than it was going into a recession, because the weakest companies are gone," he says.

The successful companies today will evolve and even reinvent themselves to evolve with the marketplace. "For example, companies that produced computer hardware will start producing computer software," says Doeringer.

In addition, Doeringer says that the Massachusetts economy will fill the manufacturing void by relying more heavily on high-paying jobs such as software development and consulting services. "Manufacturing is declining, and the decline is likely to continue," he says. "But there is a close substitute for manufacturing that is growing in high-tech areas."

There was a time when Massachusetts was a manufacturing hub. The town of Westfield was the buggy whip capital of the world. The country's largest maker of brooms was in Hadley. And the city of Brockton had a vibrant shoe industry. But by 1930 many factories had moved to southern states, and more jobs were lost during the Great Depression. In the early 1940s, Massachusetts saw an upturn in manufacturing as a result of increased wartime production. At the end of World War II, most of the state's jobs were still in this field. By the 1960s, however, other sectors grew as manufacturing declined. Factory jobs in the state peaked at 676,000, or 24 percent of the workforce, in 1984.

Manufacturing still made up 20 percent of the Massachusetts workforce in 1989 after the state's last recession. Since then, however, more jobs have been lost. As of November 2001, only 13 percent of the state's workforce was in manufacturing.

The electronics industry along Route 128, long dubbed "America's Technology Highway," helped offset the postwar decline in textile manufacturing, but it has also shared in the tech sector's economic woes the past two years. Cisco Systems, the giant network equipment maker, recently laid off 375 employees. Intel, the giant chip maker, postponed plans last year to invest nearly $1 billion more in its plant in Hudson, Mass.

However, high-tech manufacturing is still making it in Massachusetts: Microsoft recently proceeded with plans to move into new regional headquarters on Route 128 in Waltham.

Doeringer points out that according to the Progressive Policy Institute in Washington, D.C., Massachusetts has been the most successful state in the country in adapting to the so-called new economy of the 21st century. "The old definition of manufacturing is not as sharp as it used to be," says Doeringer. "In the areas of information technology and biotechnology, research laboratories are doing a lot of prototype manufacturing that might have been previously listed as manufacturing employment, but are now counted as service employment."

Also, a recent report from the Federal Reserve Bank in Boston says that the state's more diverse economy, now less reliant on traditional manufacturing -- which is vulnerable during recessions -- will help it better weather future economic downturns. "Overall," states the report, "the New England economy has mirrored the U.S. trend in shifting away from reliance on manufacturing as the dominant job-producing sector, in favor of service industries." While its manufacturing sector has shrunk, New England has experienced relatively rapid growth in services, which accounted for only 12 percent of employment in both the region and the nation in the 1950s.

"Today, service industries have expanded to about 33 percent of New England's jobs," writes economist Yolanda Kodrzycki, assistant vice president of the Federal Reserve Bank in Boston, in another report.
"Employment-wise, Massachusetts used to look very different from the rest of the United States in terms of its mix of manufacturing, services, construction, finance, trade, and so forth," says Doeringer. "But we're beginning to look less different. What that means is that in the future we are likely to experience the ups and downs of the economy much more like the U.S. does, rather than being more volatile. Massachusetts is falling in line with the rest of the country."

29 March 2002
Boston University
Office of University Relations