Manufacturing Challenges & Opportunities

Manufacturing has become one of New Jersey’s fastest rising sectors, growing 5.6% annually since 2018 and contributing more than $54 billion (about 10%) to the state’s economy last year. And, while factories are concentrated in the state’s most populous cities, including Paterson, Newark, Jersey City and Elizabeth, production is spread across all 21 counties and includes more than 11,000 companies and 250,000 employees.

However, these positive numbers are cast upon a backdrop of continuing challenges for the sector.

There are issues with the supply chain – made all the more glaring by COVID-19 – as well as rising interest rates, inflation, a possible recession, and difficulty competing against China in microelectronics and other areas. Underscoring all of this are complex and longstanding workforce shortages, which can be traced to a culture that has long steered young people away from industrial careers in favor of a college degree path.

“We’ve allowed the pipeline to dry up and dissipate, and it’s led to approximately 40,000 open jobs in manufacturing in New Jersey right now,” says John Kennedy, CEO of the New Jersey Manufacturing Extension Program (NJMEP), a non-profit organization dedicated to improving the profitability and competitiveness of New Jersey manufacturers.

According to Paul Schindel, manager of the New Jersey & Eastern Pennsylvania Chapter of the National Tooling and Machining Association (NTMA-NJPA), COVID-19 did little to slow down manufacturing in New Jersey and, in fact, shone a spotlight on the dire need for workers. “Everyone is looking for additional employees, and everyone has more work than they can do. Our members have all of these orders and don’t have enough people and hours in day to run the equipment and deliver the parts,” he says.

To address this growing need for skilled manufacturing employees, organizations like the New Jersey Business & Industry Association (NJBIA), NJMEP and NTMA have been working with legislators, chambers of commerce, and higher education institutions to get more talent into the pipeline. For example, the New Jersey Community College Consortium for Workforce and Economic Development has introduced a Manufacturing and Supply Chain Management track that includes registered apprenticeships and internships that can lead to permanent positions.

There are also a variety of apprenticeship bills pending in the Senate Budget and Appropriations Committee focused on helping transition more students into skilled labor positions, and the Manufacturing in Higher Education Act, which requires state entities to promote career pathways to students and provides assistance to the manufacturing industry, unanimously passed in the New Jersey State Senate in June.

“This fall, we plan to work with our partners in the Assembly to hopefully get the bill across the finish line and take a major step toward addressing this long-standing need,” says Senator Mike Testa, co-chair of the New Jersey Manufacturing Legislative Caucus, which is also trying to pass a bill to expand manufacturing eligibility for tax credits and help businesses improve their indoor air quality. “The goal is to remove the red tape, the barriers to entry and the barriers to success.”

The CHIPS Act

On August 9, President Biden signed the CHIPS Act, a bill that includes more than $52 billion for US companies producing computer chips, as well as billions more in tax credits to spark investment in chip manufacturing. It also provides tens of billions of dollars to fund scientific research and development and to increase innovation and development of other US technologies.

“New Jersey is already a powerful tech and manufacturing hub,” says Senator Linda R. Greenstein, also a co-chair of the New Jersey Legislative Manufacturing Caucus. “Incentives provided through the CHIPS Act are likely to strengthen this position by stimulating the manufacturing industry in the state. This could also help address supply chain issues that have been stymieing the deployment of solar electrical generation projects across the state.”

In 1990, the US produced 37% of the world’s computer chips; now that number stands at just 12%, with 75% of global semiconductor manufacturing capacity concentrated in China and East Asia.

Negative Factors

Rising interest rates – a reaction to inflation, which has been at its fastest pace since 1981 – have also been a concern for manufacturers, as they make it more expensive to borrow money, and those increases are inevitably passed on to consumers.

That’s why shoring up the manufacturing sector is so important, Kennedy says, adding, “I believe most countries that have solid manufacturing are able to recover from recessions much better.”

Also impacting the industry is New Jersey’s Environmental Justice Law, which requires the New Jersey Department of Environmental Protection (DEP) to evaluate environmental and public health stressors, created by certain manufacturing facilities, on overburdened communities (defined as those where at least 35% of households qualify as low-income, 40% of residents identify as minority, and 40% of households have limited English proficiency). These stressors are largely related to air and water pollution and have been linked to asthma, cancer, elevated blood lead levels, cardiovascular disease, and developmental problems.

The law, the first of its kind in the US, was enacted in June, but will not take effect until the regulations are in place – probably later this year or in early 2023. It will target companies with major air permits: there are about 200 in the state, and a large subset of those are in overburdened communities, according to Ray Cantor, deputy chief government affairs officer for the NJBIA.

“There are a number of provisions in the proposed regulation we think are very concerning, and we fear they’re not only going to result in businesses not considering New Jersey for a location or a business expansion, but may drive existing companies out of state,” he says.

The Positive News

While New Jersey manufacturing faces real challenges, there are also many organizations working to make it more efficient and competitive. Gov. Phil Murphy’s Fiscal Year 2023 Appropriations Act includes $37 million to grow and strengthen New Jersey’s manufacturing sector.

With the average full-time manufacturing job paying over $94,000 a year, Testa says the industry – once the backbone of New Jersey’s economy – can be brought back to the forefront.