Smart Manufacturing &High Technology NH’s Leading Economic Sector

Dennis DelayEconomist, NHCPPSDecember 2011

“…to raise new ideas and improve policy debates through quality information and analysis on issues shaping New Hampshire’s future.”

Only 4 economic sectors generate material wealth

• Agriculture• is limited by natural resources.

• Mining• is also limited by natural resources.

• Construction• is not easily transferable across national and international

borders.

• Manufacturing• is not limited by natural resources, and

• is transferable across national and international borders.

Other sectors of the economy do create wealth, but don’t produce material wealth

• Real Estate• is dominated by imputed and actual rental income

on property.

• Health Care and Social Assistance• relies on the material wealth creating sectors, while

improving our longevity and overall quality of life.

• Retail Trade• also relies on the goods created in the material

wealth creating sectors.

Manufacturing is important to NH

New Hampshire Total Compensation Paid by Selected Industries(Thousands of Dollars)

$-

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Manufacturing + High Tech

Healthcare

Retail Trade

Finance

Construction

Education

Real Estate

Source: US Bureau of Economic Analysis

SMHT employers provide high wage jobs for NH workers

New Hampshire Compensation per Employee for Selected Industries

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Finance

HealthcareEducation

Real Estate

Construction

Retail Trade

Manufacturing + High Tech

Source: US Bureau of Economic Analysis

Top export industry in terms of employment - tourism second

Source: INHS Tourism Satellite Account FY2010

NH Direct Export Employment FY 2010

Manufacturing, 65,842

Travel & Tourism, 54,393

Education, HealthCare, 35,290

Retail Trade, 23,203

Other Services, 21,171

Transport, Wholesale Trade,

20,155

Construction, 18,069

Fin, Ins, Real Est, 13,132

Agriculture, Mining, Forestry, 3,523

Utilities/Information, 8,209

Higher wages support GSP from sales outside of the state

Source: INHS Tourism Satellite Account FY2010

GSP Supported by Sales Outside of New Hampshire, 2010, Billions of $

$5.2

$3.6

$3.6

$3.3

$3.1

$2.2

$1.9

$19.0

Manufacturing

Transport, WholesaleTrade

Travel & Tourism

Education, HealthCare

Utilities/Information

Retail Trade

Other Services

Construction

Manufacturing is 5 Times Largerthan Tourism

NH Manufacturing - support for public services

NH Manufacturers paid over $100 million in combined State BPT and BET in FY2008.

Manufacturers also pay state and local property taxes, unemployment insurance taxes, etc.

100 new manufacturing jobs in NH results in an additional 66 indirect and induced jobs in the rest of the NH economy, and adds (per year) • $9 million in earnings.

• $17 million in Gross Domestic Product (GDP).

• Generates $1.0 million in state and local tax revenue.

Source: Connect New England Model, 2011 update

Manufacturing Economic Multiplier

Increase in New Hampshire Personal Income from Adding 100 Jobs in:

$13,400,690

$6,748,506

$3,850,114

Manufacturing Healthcare Tourism

Source: Connect Northern New England Economic Scenario Model, 2011

NH SMHT BIA Online Survey

Membership of the Business and Industry Association and High Technology Council, specifically those members who have been identified as SMHT companies.

Respondents ranked the competitive pressures they operate under, in particular when considering continuing or increasing production at a NH-based facility.

Ranked the importance of factors on a scale of 1 to 5 (1=low importance to 5=high importance).

NH SMHT under pressure

Important Factors Considered in an Expansion Decision

85%

73%69% 69%

65%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

HealthCare Costs Regulation, includingenvironmental

compliance and laborregulations

Energy costs Cost of labor, adjustedfor skill level and

educational attainment

State Business Taxes

Pe

rce

nt

Co

nsi

de

ring

Me

diu

m t

o H

igh

Im

po

rta

nce

NH SMHT legislative priorities

Most Important Legislative Initiatives

73%

65%62%

50% 50%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Reducing the BPT taxrate

Preserving the BETcredit applied against

the BPT

Reducing the BET taxrate

Increased state R&Dtax credit

Improving netoperating loss carry-forward provisions

Pe

rce

nt

Co

nsi

de

ring

Me

diu

m t

o H

igh

Im

po

rta

nce

NH SMHT policy priorities

Most Important Policy Initiatives

81%

65%

50%46%

31%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Lowering health carecosts

Lowering energy costs Improving workforcetraining, including

partnerships betweensecondary and post-

secondary schools andyour business

Lowering propertytaxes

Improving the statehigh speed

telecommunications(broadband)infrastructure

Per

cent

Con

side

ring

Med

ium

to

Hig

h Im

por

tanc

e

NH Manufacturing competes nationally and globally

Globalization, offshoring and outsourcing, the rapid pace of technological change, and rising costs of healthcare and other labor costs all have a more profound impact on manufacturing than on any other industry.

Consider globalization – the average school administrator or housing professional probably does not think much about the Far East. But because state-of-the-art manufacturing facilities are now operating in China and elsewhere in the world, NH’s local manufacturers have to stay current with the latest technological advances just to stay in the game.

NH competes with the world on wages

Hourly Compensation (Wages plus Benefits)

$28.92$30.79

$27.16 $27.69 $26.75

$3.91

$0.91 $1.47 $1.46

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

NH VA NC SC TX

Mex

icoIn

dia

China

Mala

ysia

NH competes with the world on energy prices

Industrial Electricity Prices in Cents per KWH

12.5

6.9 6.45.8

6.7

12.6

18.0

11.0

7.4

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

NH VA NC SC TX Mexico India China Malaysia

NH competes with the world on healthcare costs

Healthcare Expenditures per Person 2008

$8,235

$7,128 $7,379 $7,359

$6,545

$852

$40 $143 $307

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

NH VA NC SC TX

Mex

icoIn

dia

China

Mala

ysia

NH competes with the world on corporate taxes

Corporate Income Tax Rates (%)

35 35 35 35 3528

34

25 25

0.0

7.16.08.5

5.0

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00

NH VA NC SC TX

Mex

icoIn

dia

China

Mala

ysia

State RatesCountry Rates

How can State policy encourage SMHT?

Healthcare policy• Costs most significant competitive pressure for SMHT

Encourage workforce development and education• Human capital is a key determinant to economic prosperity

Invest in infrastructure• Effective use of state resources

Tax policy• Business tax credits do foster targeted activity

20

“…to raise new ideas and improve policy debates through quality information and analysis on issues shaping New Hampshire’s future.”

Board of DirectorsTodd I. Selig, Chair

David Alukonis

Michael Buckley

William H. Dunlap

Sheila T. Francoeur

Stephen Reno

Stuart V. Smith, Jr.

Donna Sytek

Brian F. Walsh

Kimon S. Zachos

Martin L. Gross, Chair Emeritus

John D. Crosier, Sr., Emeritus

New Hampshire Center New Hampshire Center for Public Policy Studiesfor Public Policy Studies

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