1. NJ MANUFACTURING COMPETITIVENESS

2. …evidence suggests strongly that physical production activities account for a diminishing share of the final value of manufactured products, with service-related inputs such as research, product design, and marketing becoming more important. Further, the production of many goods is dispersed across multiple locations along global supply chains, making it difficult to determine where value is added. Such shifts pose a challenge to efforts to capture economic value by promoting goods production in the United States. http://forbes.house.gov/uploadedfiles/crs_-_hollowing_out_in_u_s__manufacturing.pdf Proximity to market, value chain for US manufacturing

3. DriversDriver Score, 1–10 10 high, 1 low Talent-driven innovation9.22 Cost of labor and materials7.67 Energy costs and policies7.31 Economic, trade, financial, and tax systems7.26 Infrastructure quality7.15 Gov’t investment in manufacturing and innovation6.62 Legal and regulatory system6.48 Supplier network5.91 Local business dynamics4.01 Health care1.81 Drivers of Manufacturing Competitiveness (US) Source: Deloitte and US Council on Competitiveness 2010 Global Manufacturing Competitiveness Index.

4. States’ Competitiveness OverallState Cost of Business WorkforceQuality of LifeEconomy Infrastructure & Transp. Technology & Innovation Education Business Friendliness Access to Capital Cost of Living 1 Texas28735512261283 16 Tennessee27114812425416292 4 North Carolina21326311191381821 28 Massachusetts49321121457329141 40 California482320433033343146 14 Indiana162640111823255377 17 Wisconsin154314346201027 23 25 Ohio6494431101623371715 30 Pennsylvania41483326355730632 41 New Jersey4328203941134481145 Education: measures of K-12 education including test scores, class size and spending; considered the number of higher education institutions in each state. Workforce: education level of their workforce, as well as the numbers of available workers; union membership. While organized labor contends that a union workforce is a quality workforce, that argument, more often than not, doesn’t resonate with business. We also looked at the relative success of each state’s worker training programs in placing their participants in jobs. Tech & Innovation: support for innovation, the number of patents issued to their residents, and the deployment of broadband services. We also considered federal health and science research grants to the states. CNBC Business Rankings 2012

5. http://www.edweek.org/ew/qc/2012/16src.h31.html?intc=EW-QC12-LFTNAV

6. …but NJ outmigration after high school Total freshman enrollment in NJ institutions Migration of students Out of stateInto state Net California116,25221,99713,502-8,495 Massachusetts50,54017,83224,7266,894 Indiana45,9134,80213,3868,584 Pennsylvania86,83316,06730,40814,341 South Carolina22,0952,4147,8375,423 Tennessee29,3515,4287,3411,913 New Jersey26,22331,5104,167-27,343 Source: National Center for Education Statistics http://nces.ed.gov/programs/digest/d10/tables/dt10_232.asp

7. …and low capacity and higher ed spending Demand and Capacity to Serve College-Bound Students Net out-migration (loss) of high school graduates attending college1st Public four-year college/university enrollment (capacity) per capita (1,000 residents)47th Public four-year college/university capacity per 100 public high school graduates49th Number of institutions of higher education (59)28th Projected change AY 2005-2018 in number of all high school graduates: NJ 8.9% US 7.9% State and Local Spending on Education K-12 spending per pupil2nd Higher education spending per capita31st Higher education spending as percent of general spending38th Higher education spending per $1,000 personal income42nd Percentage increases in appropriations for higher education, FY 2006-FY 201142nd

8. IMPLICATIONS: Lower value-add/production worker Lower ratio of managers: production workers Fewer professional staff Less R&D Less investment in capital upgrades Less training Lower wages OEM primary customer OEM supply chains shift starting in ‘80s US manufacturing loses 1 million jobs. 2.5M (large firms) 1.2M (small firms)  89% of NJ’s manufacturing establishments employ 49 or fewer workers (2010)  33% of NJ’s manufacturing employees work in establishments larger than 500 employees (2010)

9. Business-funded R&D strong in NJ, but… Performer:FederalFFRDCsBusinessR&D intensityc FundingAllGDP Statesource:R&DFederalTotal GDPrankPercentRank Maryland16,6058,6215234,333280,509155.923 Massachusetts20,09089164115,028363,064135.534 New Jersey 20,7136797819,054 484,33274.287 Pennsylvania13,068313819,735546,14562.3919 U.S. totalg403,04029,83914,835290,68114,269,835na2.82na Science and Engineering Indicators 2012 NJ R&D Federal Contracts (2011): $7.3 Billion Lockheed Martin $2.3 billion Mantech, SAIC www.usinnovation.org

10. Impact of HQ strength, hollowing out of production in NJ Know-how and innovation based in production “design based production” coupling physical production and design

11. ROA Performance Trends for Top and Bottom Quartiles of US Manufacturing Sectors (1965-2010)

12. Long-term Topple Rate Trends by US Manufacturing Sector (1965-2010)

13. Current NJ export profile is 93 percent of New Jersey exporters are small businesses (2009) New Jersey Manufacturers Are Engaged in Exporting around the World Top five U.S. export markets: 40 percent of New Jersey exports (2010). Canada (20%), South Korea (6%), Mexico (5%), Japan (5%) and Germany (5%). Manufactured Goods Exports, 2010 (billions) $28.5 Total Jobs in all Sectors Supported by Manufactured Goods Exports 139,400 Export Share of Manufacturing Jobs 18% 2003-2010 Growth of Manufactured Goods Exports 87% Small businesses as Percentage of NJ Exporters, 200993% http://www.nam.org/~/media/1DCE95B956204B28A19B814C36A538CE.ashx

14. ..but not aligned with growth in middle class consumption (2000-2050)

15. Foreign Direct Investment

16. New Jersey facts (2012) www.usinnovation.org NJ R&D Federal Contracts (2011): $7.3 Billion – Lockheed Martin $2.3 billion – Mantech, SAIC