Making It Here: The Future of Manufacturing in New York City

Report - July 2016

Making It Here: The Future of Manufacturing in New York City

A new wave of modern manufacturing companies are adding jobs across New York City, breathing new life into a sector that had been left for dead. Three of the city's manufacturing fields are particularly well positioned for growth in the years ahead: 3D printing, metal and wood fabrication, and food.

by Charles Euchner

Tags: economic growth economic opportunity manufacturing middle class jobs project entrepreneurship tech

The following are the recommendations from Making It Here.

Read the full report (PDF).

The new wave of manufacturing in New York City looks very different than its predecessors. Old-style manufacturing produced goods in mass quantities for sale at low prices. But technology and globalization have pushed mass production out of the city. In its place, a smaller and more inventive manufacturing scene is growing, creating a dizzying variety of products in smaller batches for more discerning consumers.

The initial successes of manufacturing’s new wave hold promise not just for creating thousands of new jobs, but also for incubating companies that take advantage of New York’s growing diversity, exceptional creative industries, boutique financiers, and strategic location. To support and expand the new manufacturing, policymakers should focus on the demands of the twenty-first century rather than attempt to recover a lost age.

Refocus New York City’s industrial strategy on the kinds of manufacturers poised to grow here.
If the future of manufacturing in New York City lies in small-scale companies making niche products, then city and state economic development officials should refocus its industrial toolkit to target these kinds of businesses. For example, the average manufacturing company in the city today has 13.1 employees, down from 17.4 employees in 2000. In Brooklyn, the average manufacturer has twelve workers. Unfortunately, city and state industrial programs are not always aimed at businesses of these sizes. Although city and state economic development agencies both have important programs to support local manufacturers, more could be done to reorient their industrial strategies to support small makers and manufacturers.

Revise the state’s Excelsior Jobs Program to support small manufacturers.
In 2010, New York State replaced the much-maligned Empire Zone tax incentive program with the Excelsior Jobs Program, which is more focused on supporting high-growth companies in manufacturing, tech, biotech, and clean-tech. Although the switch made sense in most respects, the Excelsior program has one huge downside: its requirements put city manufacturers at a big disadvantage.

Unlike the Empire Zones program, Excelsior requires participating manufacturing companies to create ten new jobs to qualify for tax credits. But most new manufacturing companies in the city cannot project that many new jobs at once. Even established manufacturers would struggle to qualify for the program. Excelsior’s quarterly report for September 2015, for example, shows 753 companies that qualify for Excelsior benefits; only 133 are from the city, and of those only 30 are manufacturing companies.

Develop a scale-up strategy for city manufacturers.
In recent years, scores of new makers and manufacturers set up shop in the five boroughs. Today, there is a tremendous opportunity to help some of these entrepreneurial businesses, many of which have fewer than ten employees, to expand to a level where they have 15, 25, or even 50 employees. Growing beyond the start-up stage will not only increase the overall number of jobs, it will widen the opportunities for middle-income positions that are accessible to workers from low-income backgrounds.

A scale-up strategy should include new and expanded programs to help small manufacturers export their products to new markets, including cities in the United States with similar population dynamics to New York, as well as markets overseas. A support program could also target makers who primarily sell their products at food markets and street fairs by providing technical assistance and financing support to help them open permanent facilities or simply scale up their operations.

Pair local manufacturers with New York–based industrial designers and engineers.
The nation’s largest manufacturers typically have in-house industrial design and operations teams that
help streamline and improve their production and distribution processes. But few of New York City’s small manufacturers take advantage of industrial designers and engineers in this way. Given that so many manufacturers in the city operate on razor-thin profit margins and face increasingly intense competition, overlooking the opportunity to tap existing resources is a missed opportunity. These companies could greatly benefit from design-focused efforts to improve efficiency and productivity.

City economic development officials should consider launching a new program that pairs local manufacturers with New York-based industrial designers and engineers. Such a program would take advantage of the city’s large and growing population of designers, and could be developed in partnership with the local chapter of the Industrial Design Society of America and design universities such as Pratt, School of Vision Arts, Parsons School of Design, Fashion Institute of Technology, and New York Institute of Technology, as well as the industrial engineering departments at Columbia University and New York University.

Invest in intermediaries that help strengthen local manufacturers.
In addition to design and engineering services, low-margin manufacturers could greatly benefit from technical assistance in areas such as technology, management, and logistics. The city already has an organization with this mission: the Industrial and Technology Assistance Corporation (ITAC). ITAC provides below-market consulting assistance to help companies create a growth plan, invest in innovative technologies, find reliable workers, improve the work culture, manage the supply chain for costs and agility, and use financing wisely.

The services ITAC offers are arguably more important than ever, given that the city’s manufacturing sector is showing more promise than at any time in decades, but its funding has been cut in recent months. In January 2016, the state announced a 54 percent cut in its contribution to ITAC. After the cuts, the state now provides $166 per manufacturer in the city, compared with $800 per company statewide, according to Crain’s New York. This disinvestment is a blow to New York’s resurgent manufacturers.

Zeynep Ton of the Massachusetts Institute of Technology argues that most companies are rife with inefficiencies that erode their competitive edge. By optimizing operations manufacturers can significantly increase their margins with little additional investment. To boost manufacturing in the city, the state and city should restore ITAC’s funding or create new providers of subsidized consulting to meet the needs of companies with growth potential

Expand and improve job training programs that help New Yorkers develop the advanced skills needed by today’s manufacturing firms.
Manufacturing has long provided opportunities for low-income New Yorkers with limited educational credentials or language skills to access decent paying jobs with career ladders. But many of the jobs being added in the sector today, in fields such as 3D printing and metal fabrication, require an advanced level of skills that many New Yorkers from low-income backgrounds are missing.

To ensure that a diverse mix of New Yorkers can access jobs in the sector—and that the city’s manufacturing companies can find the skilled workers they need to grow—city and state economic development should invest in new and expanded workforce development programs. Policymakers should support workforce training programs whose curricula are informed by strong connections to employers in the field and programs that teach both soft skills and technical skills for jobs in specific sectors. In particular, these programs should expand on the intensive training centers established in recent years at industrial campuses such as the Brooklyn Navy Yard, Industry City, Brooklyn Army Terminal, and Liberty View Plaza.

To its credit, the de Blasio administration has already taken some important steps, including the creation of a new Workforce1 Industrial and Transportation Career (ITC) Center at the Brooklyn Army Terminal in Sunset Park. But policymakers should seize opportunities to expand these training initiatives and create similar workforce development programs at manufacturing hubs in other boroughs.

Build new career and technical programs that teach advanced manufacturing skills.
New York City should create and support hands-on training programs that prepare young people for careers in advanced manufacturing. Many school districts  in upstate New York offer technical education programs that train students for these jobs. For instance, a precision machining training program in Sullivan County trains students “to design, create, and machine creations using computers and high tech tools.” Class topics include shop math, precision measurement, blueprint reading, shop safety, bench tool skills, and layout skills. Then students learn how to use factory-level machines, often under the guidance of employees from local manufacturers. They also work in internships or apprenticeships with local companies.

New York City could benefit from programs like these that have strong buy-in from local manufacturers and teach young people in-demand skills that are portable in today’s technology-driven economy. One such program is on the way. The city’s Department of Education (DOE) is working with the Brooklyn Navy Yard to develop a promising model for job training called the STEAM Center. STEAM—Science, Technology, Engineering, Arts, and Math—will offer students from eight city schools hands-on learning and work-based opportunities at the Navy Yard. STEAM is developing advisory groups for six industry sectors: culinary arts, systems technology, computer science, structural engineering, engineering, and media design. The program will also provide after-school programs and professional development for teachers.

Pooling students from several schools into different programs, according to Navy Yard CEO David Ehrenberg, allows “better and more intensive resources” than school-based programs. “A lot of kids will graduate high school with a credential which will allow them to enter the workforce at a totally different level than a standard high school degree or one of the current CTE credential, which is improperly conceived for today’s industry,” says Ehrenberg.

Local educators and economic development officials should continue to support the development of the program at the Navy Yard, measure its outcomes, and consider the potential to replicate the model at other manufacturing campuses in the five boroughs. DOE and the Navy Yard should also commit to keeping open the STEAM center in the evenings, so that adults looking to upgrade their skills can take advantage of the facility’s equipment and teaching opportunities when high school students are not using it.

Expose students to new technologies.
City schools should introduce new technologies to students as early as middle school. Jack Plunkett of Plunkett Research argues: “Policymakers should show people that additive manufacturing can make a real difference. That means boosting education and training—skills like CAD-CAM and hands-on work. If you visit college libraries like Purdue University, they have two, three 3D printers in the library. College kids on well-funded campuses are getting their hands on it, so it’s not intimidating to them. I would make the experience possible all the way down to junior high school.”

To encourage skills development for all ages, the city might consider giving all learners a skills dossier— an electronic record that documents the skills students have demonstrated in classroom and on-the-job work. This dossier, which can be maintained by smartphone and via web-based apps, could help people share their abilities with employers throughout their careers. It could also indicate what new skills people need to learn to advance to new positions. With appropriate privacy filters, the dossier could be connected to the city’s municipal ID card.

City officials should offer platforms for employers to connect existing training programs and dossiers to companies searching for labor. By working with online jobs databases such as Indeed or Monster, the city can ensure that companies and workers find each other.

Clear unnecessary barriers to manufacturing.
New York’s multigenerational web of rules and codes makes navigating the city’s regulatory hurdles a difficult process. The de Blasio administration should establish a citywide commission, with members from all manufacturing sectors, to identify ways to eliminate and streamline unnecessary and duplicative regulations, particularly those that undermine start-ups and the scaling of enterprises both old and new. The commission should identify regulations that impose unnecessary costs and delays and propose specific ways to streamline and simplify processes for building facilities; installing power, water, heat, and other systems; investing in capital equipment; getting products to market; protecting the environment; and safeguarding workers’ health and rights.

The commission should undertake detailed analyses of the value chains for manufacturing businesses to identify the bottlenecks that undermine competitiveness. The successful effort to modernize New Jersey’s housing rehabilitation subcode offers a good model for this difficult work. Over several years, the state’s code officials conferred with a wide range of stakeholders to develop simplified guidelines that did not undermine health or safety. The changes opened long-dormant buildings to a wide range of new uses, boosting local businesses and tax rolls.

Use cutting-edge manufacturing processes to upgrade New York’s aging infrastructure.
New York City and regional authorities spend billions every year on infrastructure. To strengthen New York manufacturers, public agencies should identify companies that can play roles in updating buildings and infrastructure to meet new standards for resiliency, safety, security, environmental impact, and Internet connectivity.

“Look at the transportation infrastructure,” says Michael Simas, executive vice president of the Partnership for New York City. “You can 3D print a piece of pipe, and that’s an opportunity we can do locally. It’s an endless task to take care of our city. If we can 3D print a part for an airplane, we can 3D print a part for a transit system. If we can do that in the Navy Yard, we can create lots of jobs. Think of all the infrastructure that can be in play—the MTA, the Port Authority. If we can use drones to paint the George Washington Bridge, that makes maintenance better and safer and could create new kinds of jobs.”

New York and regional authorities should maintain a comprehensive database of production and maintenance projects, with detailed specifications and scopes of work. State, city, and regional officials should reach out to New York manufacturers—from 3D printing to engineering and design to metalworking—to determine what roles they can play in this ongoing work. These public entities should also sponsor regular “Rebuilding New York” events to detail the long-term process of updating and retrofitting the city, and identify ways that private property owners and facility managers can use New York manufacturers to maintain and improve their properties.

 < 1 2