Editorial: Evaluating incentives

Manufacturing is an important and viable sector of Maine’s economy.

Study today’s successful players and one discovers that an exciting and fast-paced evolution is unfolding.

Manufacturing ranks number 7 among the highest paying industries for Maine workers and manufacturers employ 52,900 workers in Maine.

That is significantly less than the 70,300 employed in 2001 or 56,700 employed in 2008. The great recession washed away scores of Maine manufacturers and the jobs they supported. Many of those former going concerns were barely hanging on before the recession hit.

The manufacturers operating today include post-recession survivors, businesses relocating to Maine and newly established in-state start-ups. Those that succeed and thrive do so as a result of their commitment to stay zealously connected with the marketplace they serve. They continually improve and upgrade their products and services, adapting to changing market demands.

The most successful manufacturers embrace new automation, contract globally for talent and outsource production to reach critical scale while concurrently recruiting in-state and investing to enhance the skills of the Maine workforce so that they lock in the capacity to deliver at the highest level.

Examples of manufacturing specialties stepping up to the challenge include advanced materials, environmental technology, agriculture, food and beverage, marine construction, paper and wood products, renewable energy, animal and life sciences and biosciences.

Would Maine’s manufacturing sector fail “but for” the array of publicly funded state government programs designed to support and incentivize investment in manufacturing? State incentives designed to benefit investment and support manufacturing cover the landscape from workforce training to tax credits and exemptions, loans and direct taxpayer-funded grants.

The Maine Legislature and executive departments have devoted considerable resources over the last few years in an effort to measure the effectiveness of tax-supported incentives. So far, though, there’s no definitive answer to the “but for” question. Even so, policy makers should consider the following when targeting public investment to spur manufacturing.

Let private banks do what banks do, lend money to credit-worthy businesses. The state should target its investment to bridge the risk that commercial lenders must avoid. When investing in R&D (research and development), help the manufacturer move forward to commercialization of the product.

The success of any tax exemption, credit or incentive program is hinged not only on how it is structured, but also on how it is rolled out, funded and promoted. If the tool is underutilized, obsolete or poorly designed, it should be improved or repealed. Trial and error is an economic fact of life.

One program may be a proven winner, but be so poorly funded that it lacks impact while another may have ample funds but is an economic dud. Eliminate the poor performer and transfer resources to the winner.

Finally, never adopt an economic incentive with a gun held to your head.

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