CT Manufacturing Shows "Creative Destruction"

Dec 13, 2012

The Malloy administration has made a big commitment to nurture manufacturing in Connecticut, despite the fall off in employment in the sector over a period of decades. Are they right to place so much faith in making things here?  A new analysis attempts to answer that question.

The Naugatuck River Valley is one of the great seats of Connecticut’s manufacturing history. And Bill Purcell, president of the Valley Chamber of Commerce says that’s still relevant today.

“It’s in our genes, it’s in the water, it’s in our blood. This has been a great manufacturing center, and certainly one that has changed and evolved, as we have across this country.”

But manufacturing’s evolution has involved a lot of pain. Where once in the late sixties, almost half a million workers were employed in manufacturing, about a third of the workforce, now that’s down to less than 200,000, or ten percent. Steven Lanza is an economist at the University of Connecticut.

“What you often miss sometimes is the relative importance of manufacturing. The number of jobs has dropped, and yet, the sector of manufacturing still remains dynamic and contributes so much to the value of output in this state.”

In fact, according to Lanza’s analysis in the quarterly publication The Connecticut Economy, last year manufacturing was responsible for more than a quarter of the state’s increase in real output – second only to the financial services industry. That’s been achieved by workers who’ve seen a 134 percent increase in productivity in the last twenty years. And Lanza says there’s another vital factor here.

“What’s really striking in Connecticut, in the manufacturing sector, is you see that churn, you see that creative destruction happening at the level of the small and mid-size companies.”

Churn, the opening and closing of companies, the turnover of jobs and the sweeping away of old technologies to be replaced by newer ones, is indicative, says Lanza of a vital, dynamic industry. His review of the data shows that even while it has contracted, Connecticut’s manufacturing industry has become increasingly high tech, its workers have become better compensated, and its employment has become more concentrated in small and mid-size firms – those companies that are most likely to be characterized by churn, or creative destruction.

This is Lex Products, based in Shelton, in the heart of the Valley. This company makes portable electrical distribution products for industry and the military. CEO and Founder Bob Luther says innovation keeps his company alive here.

“If you want to build something in Connecticut that is just a ‘me too’ product, that can be built somewhere else, you’re not going to be successful.”

For the first ten years of its history, Lex was primarily a cable manufacturer. Then after spending time in Europe, Bob Luther introduced the first rubber cased electrical distribution box into the US and it proved to be a breakthrough product. The company now employs 185 people in two sites in Connecticut and another in California, and is still claiming new patents on its developing product line.

“It has to be an innovation that translates into something useful for a customer. And we actually start with that aspect – what do the customers need – and then try to put the benefits into the product. It’s what we see as our take on innovation.”

Steven Lanza says Luther is a prime example of the type of dynamism that must be fostered, if manufacturing is to survive here.

“Having left the state, gone to work elsewhere, coming up with this lightbulb idea for a new product and technology, coming back to Connecticut and introducing that product, and employing now hundreds of workers in Connecticut, because of that idea.”

Connecticut’s manufacturing sector is small compared to other states with significant industries, but Lanza says it punches above its weight. His ranking of states based on the quality and contribution of their manufacturing shows Connecticut sixth in the nation.

For WNPR, I'm Harriet Jones.