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Precision area of production contributes to nearly 12 percent of the state's economic activity

BY MARC BUSSANICH

NEWJERSEYNEWSROOM.COM

The "Great Recession" seems to be bottoming out, at least that's what some businesses executives and economists are saying lately. But even when economic turmoil gives way to recovery, finding steady and gainful employment is no easy task. "We don't make anything in this country anymore," is a common refrain among the working population.

Indeed, a drive through many of New Jersey urban areas reveals old abandoned buildings that used to house many different types of manufacturers. Five years ago, auto production ceased in New Jersey when Ford and General Motors closed assembly plants in Edison and Linden, respectively.

Surprisingly, however, there are still approximately 300,000 manufacturing jobs in New Jersey, according to Philip Kirschner, president of the Trenton-based New Jersey Business & Industry Association (NJBIA), an employer association that represents 22,000 New Jersey businesses and facilitates exchanges between businesses and state agencies such as the New Jersey Economic Development Authority. "Traditional manufacturing in New Jersey, the mass production of goods, has been steadily going overseas for the past 30 years. But ‘precision manufacturing,' also known as ‘value-added' or ‘specialty manufacturing' excels in New Jersey," noted Kirschner.

Kirschner noted that precision manufacturing contributes to roughly 9% of employment and 12% of economic activity in New Jersey. In addition, another 200,000 jobs in the state rely on precision manufacturers such as suppliers, trucking companies and service professionals, i.e., accountants and lawyers. This is good news for New Jersey's working population, as the average annual salary in the sector is $53,000, which Kirschner said is 21% higher than the state's average salary.

Precision manufacturing differs from traditional manufacturing in that smaller, more expensive quantities are produced. For example, the Accurate Box Company in Passaic specializes in manufacturing corrugated boxes with color graphics for a range of consumer goods, such as Mr. Clean, Ziploc tabletops and Quaker oatmeal. The Falstrom Company, also Passaic-based, manufactures custom metal enclosures for the military that must cut metals at 1/100th of an inch or else the part is useless. And the Cardolite Corporation in Newark extracts oil from cashew nuts to produce resins applied to automobile brake linings.

Like any business sector, New Jersey's precision manufacturers face challenges. According to Kirschner, one challenge is the high cost of doing business in New Jersey.

"Energy, health insurance and labor costs are high in New Jersey. Also, the tax structure in New Jersey has not always been business friendly," said Kirschner, who cited that before Governor Corzine repealed the Alternative Minimum Assessment (AMA), employers' sales were taxed, regardless if the company was or was not profitable.

In addition, a "very technical tax that was onerous to business," which only New Jersey and West Virginia enforced, was also repealed. The Throw Rule contributed to "New Jersey businesses being taxed more than businesses in other states," said Kirschner.

Clifford F. Lindholm III, president and CEO of the Falstrom Company, also noted that "New Jersey imposes a lot of fees on businesses." He cited the Paid Family Leave law that increases employees' payroll taxes beginning January 1, 2009 (The law stipulates that all eligible New Jersey employees, starting on July 1, can receive up to six weeks of paid leave from their employers for child rearing or elderly care.).

Lindholm also said New Jersey has many environmental regulations, and health insurance is more expensive than in other states. "Insurers in the state have to mandate certain types of coverage in their policies, which increases the overall costs."

But despite the seemingly high cost of doing business in New Jersey, precision manufacturing "excels in New Jersey" for different reasons. Kirschner said that New Jersey does a very good job in crafting economic packages, e.g. tax incentives and job training programs, for prospective and existing manufacturers. Also, "New Jersey has a proven history of producing specific products very well," said Kirschner. In addition, grants are available.

The Business Employment Incentive Program (BEIP) provides "grants to businesses looking to expand or relocate while creating jobs in the Garden State," according to the NJ Business Portal Web site: www.state.nj.us/njbusiness.

Lindholm added that Falstrom has remained in New Jersey because it has been able to optimize its 100,000 square feet of manufacturing space for a number of different applications over the years. Being located near major highways and an airport, as well as access to a great labor pool and state aid are also important.

Interestingly, Kirschner said that manufacturers are informing NJBIA that they are facing a labor shortage. "A lot of parents are insulted when high school guidance counselors persuade their children to pursue manufacturing occupations. He added, "Everyone can go to college, but not everyone stays in college."

Kirschner stressed that manufacturing today is different from yesteryear's mass production. "The days of mindlessly stamping out a product are long gone in New Jersey. Workers who are not technically and computer trained will have difficulty finding employment with today's precision manufacturers," said Kirschner.

To that end, New Jersey precision manufacturers team up with vocational and technical schools to provide training to high school students, who also intern at some companies. The Falstrom Company employs 50 workers, many of whom are first-generation immigrants. "The primary job category is welders, but the company also employs skilled painters and punch pressers [cutting material on a punch press] who earn an average wage of between $20 to $22 per hour, which is a living wage," said Lindholm.

Falstrom has not hired any recent new employees, but Lindholm said the company may as a result of the new Invest NJ Program, which provides $3,000 grants to businesses for each new job created and retained for one year. He also said that the company is seeking to take advantage of government aid for capital purchases defined in the American Recovery and Reinvestment Act to offset a $30,000 purchase for a new energy-efficient air compressor.