Manufacturing Stimulus and its Spillover Effects on the Service Sector

Recent Colorado legislation stimulating the manufacturing industry will benefit service oriented firms as well as manufacturing firms.

On May 18, 2015 the Colorado Legislature passed HB-1274 to propel Colorado’s manufacturing industry.  The bill creates a manufacturing “Career Pathway,” the goal of which is to prepare students to a full occupational proficiency after completion of the program. “Career Pathways is defined as a series of connected education and training strategies and support services that enable individuals to secure skills and then obtain employment in a specific occupational area.” In addition to the creation of the manufacturing pathway, there are plans to implement this strategy in construction, information technology, and health care industries. Furthermore, this manufacturing tailored bill is not the first of its kind for Colorado.

In fact, in 2013 the legislature approved the Advanced Industries Acceleration Act, which is a grant program designed to facilitate growth and collaboration within multiple industries, including advanced manufacturing. Days later, the governor approved the Advanced Industries Export Acceleration Program which focuses its efforts on buttressing the Colorado export economy. The Export Acceleration Program provides grants to multiple industries, also including advanced manufacturing. These three programs show the legislature’s serious interest in a strong manufacturing sector.

Colorado’s recent efforts to stimulate its manufacturing sector bode well for a strong regional economy as a whole as well as the manufacturing sector itself. This legislation is not working to create just a few jobs, it is focused on creating a manufacturing mecca. Because of the legislature’s interest in creating job educated individuals through collaboration of businesses and learning institutions, along with their export and growth initiatives, Colorado as a global manufacturing hub is entirely possible.  Colorado is already home to a diverse manufacturing industry, including manufacturing of advanced materials such as: electronics and consumer products, clean energy systems, aerospace vehicles (3rd in the country), and medical devices. In all, 5,900 manufacturing firms and more than 132,800 employees work and live in Colorado. Though Colorado only ranks 32d among the states in manufacturing numbers, this metric will likely change with the interest of the legislature. Colorado as a global manufacturing hub is on the horizon.

The manufacturing stimulus is expected to bring growth to the service sector. Because of the manufacturing sector’s usage of local goods and services to do business, manufacturing has a large indirect employment multiplier. Due to the large employment multiplier effect, this commitment to manufacturing stimulus should fall well on service sector ears. Through Nicholas Kaldor’s research, we have learned that growth, even long term, is investment driven. The stimulus, given the presence of the manufacturing employment multiplier, through growth in manufacturing will act as an investment into the service sector and will produce long term growth for the sector.

In time, if this legislative commitment stays strong, Colorado law firms will likely see more manufacturing work. Further, firms working with sectors that provide inputs to manufacturing such as energy and natural resources, construction, accounting, and engineering, will also experience increases in work volume due to the legislative interest.

Sources:

Harald Hageman & Stephen Seiter, Growth Productivity, and Emp’t Consequences of the New Information and Commc’n Tech.s in Germany and the U.S. 101 (2004).

H.B. 1275, 70th Gen. Assemb., 1st Reg. Sess. (Colo. 2015).

H.B. 1193, 69th Gen. Assemb., 1st Reg. Sess. (Colo. 2013).

H.B. 1001, 69th Gen. Assemb., 1st Reg. Sess. (Colo. 2013).

Advanced Manufacturing, Colorado Office of Economic Development and International Trade, http://www.advancecolorado.com/key-industries/advanced-manufacturing.

EPI: Manufacturing Jobs Pay Well, The Colorado Springs Business Journal (Jan. 27, 2015), http://www.csbj.com/2015/01/27/epi-manufacturing-jobs-pay-well/

Brian Lewandowski, Colorado’s Manufacturing Employment Growth Third-Fastest Nationally in Dec. Jobs Report, Company Week (Feb. 3, 2015, 01:32 pm), http://companyweek.com/articles/colorados-manufacturing-employment-rebounded-at-a-top-10-pace-in-december-j.

Robert E. Scott, The Manufacturing Footprint and the Importance of U.S. Manufacturing Jobs, Economic Policy Institute (Jan. 22, 2015), http://www.epi.org/publication/the-manufacturing-footprint-and-the-importance-of-u-s-manufacturing-jobs/.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s