Small Manufacturers--Good for the Economy.

• Author: Kearns, Monica

State legislatures are working to improve conditions for small manufacturers, who employ nearly 12 million Americans.

The word "manufacturing" conjures images of giant assembly lines operated by scores of workers. But more than 98 percent of U.S. manufacturers are small plants with fewer than 500 employees, according to the National Institute of Standards and Technology.

The 385,000 small- to medium-sized manufacturers nationwide employ nearly 12 million Americans, about double the number working at large plants. And while jobs at large manufacturers have declined over the past three decades, small manufacturers added 1.7 million jobs between 1967 and 1992. Those jobs were high-skill and high-wage, with workers making on average nearly twice what those in the retail sector earn.

Overall, manufacturing remains a solid source of economic output, despite the fact that the economy is gravitating toward service industries. The $3.7 trillion manufacturing sector has held steady at about 17 percent of U.S. gross domestic product throughout the 1990s, according to the U.S. Department of Commerce. The sheer numbers and job growth associated with small plants means that their success has tremendous bearing on the future of the manufacturing sector.

STATES CAN BOOST DEVELOPMENT

Because of the important role small manufacturers play in the economy, state legislatures are working to help them. Productivity is the top concern, according to Carol Lessure of the Modernization Forum, an association for those involved in technical assistance for small manufacturing businesses. More specifically, small firms lack the information and financing needed for investing in new technologies, updating business practices, developing workforces and obtaining outside expertise.

Productivity, measured in output per work hour, is rising at large plants because they can afford to buy new technology. They also are sending assembly processes and research and development to smaller firms. The small manufacturers must in turn solve their own modernization problems--a battle they are losing currently as evidenced by falling productivity rates.

Ohio Senator Charles Horn is trying to get states to think collaboratively about helping small firms with modernization. "Industries cross state boundaries, so we need to share resources and work together on developing technology processes," he said. He is leading an effort to encourage Midwestern federal laboratories, research universities and private labs to share their knowledge with regional businesses.

One example of this is the Wright Technology...