Costly Labor Proposals, Fiscal Uncertainty Dampen Manufacturing Potential

Connecticut’s manufacturing sector has enormous potential from the dual superdrivers of commercial jet engines and nuclear submarines.
Other sectors, like fuel cells and medical devices, show great promise too.
Of course, a high and rising dollar compared to most major foreign currencies has saddled our exports with serious cost disadvantages.
It’s a great time to be a tourist in Europe, but if you’re a manufacturer selling to Belgium, you have a 20% cost disadvantage due to a higher dollar and lower euro.
A new U.S. Census Bureau report finds that Connecticut had one of the 6th sharpest manufacturing contractions in 2014, a 3.3% jobs decline versus a U.S. decline of 0.6%.
Why has Connecticut’s manufacturing workforce gotten smaller even as its sales over the same period rose by 2%? Certainly, increased productivity is part of the equation.
But that leaves other questions.
Why, for example, is Connecticut trailing the U.S., including neighbors like Rhode Island and New York, who face the same exporting obstacles we do but have lost fewer manufacturing jobs?
The answer might have something to do with in-state costs—and uncertainty about those costs.
S-corps and family businesses—which comprise a vast number of small and midsize manufacturing firms—are still feeling the impact of state tax hits from 2011.
Connecticut’s costly labor laws and health mandates also make it difficult to compete with other states.
And the state’s fiscal crisis and threat of additional labor law changes have a chilling effect on business investment here as well.
Even if the worst new proposals are not enacted into law, the mere prospect gives business leaders pause at investing and creating jobs here.