RHODE ISLAND MUST FIND
ITS ECONOMIC NICHE

The Providence Journal, Commentary Page, January, 1999

In the Sunday Opinion Page in the December 27 Money & Business section, David Baum wrote an excellent article detailing the feasibility of Rhode Island having a niche in engineered products. Engineered products are goods produced with unique features for each purchaser, which is the basis for their value added. To survive in this market, firms must be able to quickly translate new or improved designs into products, which requires substantial expertise in the area economists refer to as "flexible production."

As Mr. Baum notes, Rhode Island has history on its side: inventions and innovations have been essential to the success of its manufacturing sector throughout Rhode Island's history. He stated that: " 'Yankee Ingenuity' has evolved from a highly educated work force, close relationships with customers, and the independent spirit of New England craftsmen."

So much for history. Rhode Island's manufacturing sector finds itself trapped somewhere between its solid past and the elusive future defined by technology and worker skills that Mr. Baum alludes to. I have now become convinced that as of 1996, Rhode Island's manufacturing sector as a whole was non-competitive. What do I base this on? Recently released data indicate that for 1996, Rhode Island had the third lowest value added per manufacturing employee in the Unites States. Add to this the fact that in 1996, exports of manufacturing goods from Rhode Island were in their second consecutive year of decline, and the basis for my conclusion emerges. The good news, however, is that while this conclusion might be true for manufacturing as a whole, it not true for a number of our existing firms. The list of success stories in Rhode Island, manufacturing firms that have done everything right, is both long and distinguished. It is this dichotomy between the "haves" and "have nots" that is causing us problems. And, perhaps the best news of late for Rhode Island is that 1996 has ended.

The greatest problem confronting Rhode Island, which has persisted for over a decade, is that we have yet to define our economic niche in the information age. Should you ask an elected official what that niche is, the typically response is little more than we are doing a little of this, a little of that, etc. The problem is that such responses are anything but systematic. They reflect what has sadly become the "state of the art" in fiscal policy here -- piecemeal policy. This failure to tie the various pieces together has resulted in a number of inconsistencies that limit our ability to achieve the bright future we all desire.

Perhaps the best example of this concerns the glaring educational deficiencies in Rhode Island's public educational quality. Manufacturing today requires that workers be adept at measurement, the use of computers, problem solving, communication, and working in groups. And, as production technology expands, workers must continually be retrained. This is the basis for the concept of "lifetime learning." While we want world-class manufacturing here, our policy makers have continually overlooked the necessary condition for accomplishing this: quality education that on-the-job training can build upon. Permit me to engage in a bit of transitivity to explain this: US students lag international students in terms of educational quality; Rhode Island students badly lag US student attainment; therefore educational quality in Rhode Island badly lags that of international students. So much for the large-scale introduction of world-class production here.

What are the implications of these educational deficiencies for our manufacturing sector? The cost of workers here, in spite of relatively low manufacturing wages, is high. Are firms indifferent to interviewing three or thirty persons before a suitably qualified person can be hired? I don't think so. And, since training builds upon the basic skills workers acquired during their formal education, augmenting this base is more costly the greater are the educational deficiencies persons bring to the job market. In light of this, is it really a surprise that manufacturing employment in Rhode Island has declined every year since 1984? By failing to pursue educational quality improvements in a far less laid-back manner, we have essentially been punishing manufacturing firms in this state! This is just one illustration of how expensive piecemeal policy has been for Rhode Island.

Interestingly, though, a substantial number of Rhode Island residents possess the requisite skills for our manufacturing sector to expand. Sadly, many of these persons found it necessary to accept jobs in Massachusetts during the last few years. This trend gives new meaning to the phrase "brain drain."

Until our educational deficiencies have been eliminated, the goal of attaining a stable manufacturing job base will prove to be illusive. The new manufacturing "reality," of continual downsizing and the need to incorporate labor-saving technology into production, will require continual expansion by existing firms or the emergence of new firms here. Absent the highly trained workforce Mr. Baum alludes to, recently enacted tax incentives that are touted as evidence of how competitive our economic climate is will have a limited effect at best in reducing the high cost of doing business here.

This, of course, condemns Mr. Baum's vision for an engineered-products niche here to nothing more than a fond wish. Any state that "celebrates" the fact that 40 percent of its tenth graders can now read on level is doomed to mediocrity in the information age.

Where's Samuel Slater when we really need him?

by Leonard Lardaro