All posts by Zack Hutchins

My views on the skills gap

Guest Author: David William Davis

I became involved in workforce development out of necessity, with a little help from both near (my 80-year-old father) and far (across the Atlantic Ocean).

One night in 2007, shortly after I had joined Simmons as President and COO, I was working late and called my dad looking for a bit of sympathy. Woe is me, skilled employees are retiring right and left, I can’t find any machine tool assemblers, computer numeric controlled (CNC) machinists, on and on. You can picture my Dad if you think of Wilford Brimley—kind of gruff, but a heart of gold. He was a successful manufacturing entrepreneur in Detroit selling CNC machine systems to BMW, Toyota, Fiat, Ford, all the big auto companies. Allowing you to sit back and complain was not his style. He listened for a bit, then simply said, “So, what did you do today about fixing the problem?” Later that night I tried the same sympathy ploy with my wife and got much the same reaction—but she added that I should already know the solution, using lessons learned from her home country, Germany.

Across the USA there is a skills shortage spanning a wide range of industries for such jobs as lab technicians, machinists, industrial maintenance technicians, automotive technicians, plumbers, and electricians. We have reached a point where key manufacturing technologies cannot be deployed, due to a lack of people to program, operate, and maintain computerized industrial equipment. Most of these jobs do not require a four-year degree at an expensive university. A two-year associate degree will do just fine, and it makes an excellent stepping stone to further education at the bachelor’s level if the student so desires.

When I first joined Simmons, the management team performed a SWOT analysis (examining our Strengths, Weaknesses, Opportunities and Threats), and the top weakness we identified was a workforce shortage, accompanied by a high rate of expected retirements. Another top weakness had to do with the company’s bestselling product, a special machine that customers drive their locomotives onto to re-profile the wheels—a process critical to maintaining safe, efficient train operations. The consumable tooling for this machine is analogous to razor blades in that it provides frequent, repeat sales revenue. Rather than control this supply chain, however, our company had long ago subcontracted the consumable tooling work to other suppliers.

Our top opportunities were essentially the flipside of these weaknesses.  Like us, our customers were experiencing the ‘gray tsunami’ and were suffering from bottlenecks caused by a lack of talent to operate and maintain key equipment. The opportunity was to respond to our customers’ dilemma by offering more comprehensive maintenance services utilizing our own labor.  As for the ‘razor blades’ for the re-profiling machine, bringing this work back in house would not only improve profitability but would also restore our company’s control over the design/manufacture process, thereby enabling us to provide a higher quality product more cost-effectively. But manufacturing these cutter bodies and blades required 5-axis computer-controlled machinery that would need to be purchased, programmed, operated, and maintained. We barely had enough machinists to handle the current workload, let alone venture into even more labor-intensive and complex products and services.

How to establish and maintain a continuous supply of talent?  To find the answer, I looked to Simmons’ sister companies in Germany. There, a centuries-old system, sustained by uninterrupted government investment, provides education, vocational skills, and job opportunities for young people. German industrial firms of all sizes and in a variety of precision engineering/manufacturing industries—from automotive to medical devices, aerospace to manufacturing equipment—provide ‘dual track’ apprenticeship slots, whereby students take classes at the local Berufsschule (vocational school) while simultaneously working at the company. This starts in the equivalent of 10th grade and, depending on the program, runs for 3-4 years. Mature, dependable, and well-educated students graduate into a full-time position. This system, combined with a culture driven to produce high-value, high-quality goods, allowed Germany to create the workforce pipeline that we were lacking at our upstate New York facility.

Inspired by this model, we contacted Professor David Larkin at Hudson Valley Community College’s Advanced Manufacturing Technology program and told him about our need for qualified personnel to operate the state-of-the-art 5-axis CNC machinery. Together, we developed a corporate sponsorship program at HVCC that works like this:  Each year, Simmons pays two students’ tuition on a sliding scale from 50 to 100 percent, depending on academic performance.  We provide them with part-time employment during the semester, full-time employment in the summer between their first and second year, and, upon graduation, a full-time job with another two years of on-the-job training. Over the past decade, we have sponsored 20 students with tremendous success, creating a ‘virtuous circle’ where well-skilled employees are always pushing the envelope, making our products better and better.

HVCC is looking to double the size of its Advanced Manufacturing program, and the demand for similar partnerships is growing. New York State and the federal government should jump on this opportunity and do all they can to fund successful employer-education partnerships—not only in the Capital Region, but throughout New York and the entire nation. In America, we talk about how our people are our greatest asset, but great assets require investment and maintenance. Germany walks the talk. Investing in us, our human capital, is the only way we will grow this economy sustainably while ensuring a wider group of our citizens participate in its benefits. Warren Buffett, America’s most famous billionaire investor, once said, “Invest in as much of yourself as you can. You are your own biggest asset by far.” Seems like perfect advice for our policymakers.

David William Davis, today’s guest author, is the President and COO of Simmons Machine Tool Corporation. To learn more about David, and SMT, please visit their website: http://smtgroup.com/.

Chief Judge retains state’s commitment to Commercial Division

Regular readers of this space will know The Business Council is a big fan of the Commercial Division of the state court system. For a primer on the Commercial Division, please revisit our blog post from February of last year.

At the time of our previous post, the new Chief Judge of New York State, Janet DiFiore, had just been confirmed to the position. Well, we are happy to report that over a year into her tenure, Chief Judge DiFiore has not only retained the state court system’s commitment to the Commercial Division, she has enhanced it.

Just read these quotes from Chief Judge DiFiore in a recent update to the Commercial Division video highlighted in the link above:

  • “New York State is the center of finance and commerce for the entire country, and even much of the globe, and along with that world class status comes a world class court — the Commercial Division of the New York State Supreme Court…The Commercial Division is a model for the way we want all of our courts, civil and criminal, to function.”
  • “The goal and mission throughout our court system is excellence.  It is vitally important for New York to maintain a cost-effective and consistent forum for complex business litigation.”
  • “The Commercial Division is a model for the nation.  A forum comprised of dedicated, informed judges who are provided with the resources to handle complex business disputes efficiently, effectively, consistently, and above all, fairly.  I’m committed to ensuring that the Commercial Division remains a crown jewel in the New York State Court System.”

The video is available on several sites, including the court system’s YouTube channel. A full transcript is available on the court system’s website.

Hammond gets it right

The Empire Center’s Bill Hammond has a terrific OpEd in today’s NY Post that echoes a message we’ve been saying for years: mainly, that New York has a problem with health taxes. From the OpEd:

“The habit hooked the state government 20 years ago this month, when the Health Care Reform Act took effect…

Over the 12 years from 2000 through 2011, lawmakers either hiked the HCRA taxes or created new ones 14 times — causing annual receipts to almost triple. The addiction had taken hold.

Including the nation’s heaviest state tax on cigarettes, HCRA now brings in $5.5 billion per year, making it the third-largest tax in the nation’s highest-taxed state.

Insidiously, the surcharges on health insurance are collected in ways that hide them from public view. Yet they add as much as 6.2 percent to a typical New York City resident’s insurance costs, compounding the pain of high premiums and deductibles.

One of the surcharges, known as the “covered lives assessment,” varies wildly from one part of the state to another. In 2016, it ranged from $10.24 per year in the Utica-Watertown region to $202.82 in New York City, a difference of 1,880 percent.”

The OpEd goes on from there, and we encourage to read it in full: http://nypost.com/2017/01/12/new-york-is-addicted-to-health-taxes/.

The Business Council will release our own legislative agenda next week, and you can be sure we will have more to say on HCRA when we do.

Gordon speaks out on Indian Point closure

Marsha Gordon, president and CEO of The Business Council of Westchester, and member of our board, wrote an excellent OpEd in the Journal News which highlights the impact of the impending closure of Indian Point Energy Center and recognizes the plant’s owner, Entergy, for their significant contributions to the community.

From the OpEd:

“As we have long stated, the power generated at Indian Point has played a direct role in stabilizing electricity costs in Westchester and the State of New York.  We have repeatedly called for the plants to be relicensed, a process that has been unnecessarily dragged out for 15 years and counting.  We are disappointed that this lack of action, coupled with the related massive legal costs, has contributed to the decision to shut down the facility.

We recognize that for some members of the community and a number of elected officials, the announcement is good news. Unfortunately, the shutdown poses an entirely new set of questions with no certain answers, including the loss of nearly 1,000 high-paying private-sector jobs and massive tax losses to the local community and school district.

Gov. Cuomo has repeatedly called for the plant’s closure.  We wait to learn how he intends to deal with the prospect of increased electric rates, the reliability of electric supply for Westchester, the Hudson Valley region and New York City, and the myriad of environmental and other issues the shutdown inevitably will bring.

We thank Entergy for its generosity and support of countless community groups, non-profit organizations and families across the area.  In short, Entergy has consistently displayed the best of corporate citizenship.”

We whole-heartedly agree with the sentiments expressed by Ms. Gordon. Entergy is a longtime and valued member of our own organization, and we look forward to continuing that relationship.

In response to news of the closure, Entergy sent the following message to shareholders, we encourage you to click the link and read it: http://www.bcnys.org/inside/energy/2017/Entergy-Message-to-Stakeholders-Indian-Point.pdf.

The story of Richard Katzman

For those who are unaware, or simply don’t remember, Richard Katzman was the CEO of Kaz Inc., once a major Columbia County employer. Way back in 2005 Richard Katzman–in a fit of extreme anti-development NIMBY-ism that’s become all too common– cheered when a plan to create a $300 million cement plant in Greenport was blocked by New York’s secretary of state, Randy Daniels. At the time, The Albany Business Review quoted Mr. Katzman as saying he was “delighted” by the decision. Mr. Katzman went on to say, “”My feeling and the feeling of other business people in the community is that this project was so out of scale with the existing mix of businesses and industries in the area that it would seriously hurt the quality of life and therefore hurt all our businesses.”

Mr. Katzman’s joy became all the more ironic when just three years later he announced his company was shutting down it’s manufacturing in Hudson, eliminating 300 jobs along the way. In announcing the closure, Mr. Katzman’s “delight” went away, instead he said this was a “hard decision” and “we’re not the bad guys here.”  To add insult to injury, press reports at the time noted that Kaz’ manufacturing activity would be taken over by a Spokane, Washington-based business that “does the majority of its manufacturing in Mexico.”

So, why are we bringing this up now? Well, we couldn’t help but notice that incoming Senate Minority Leader Chuck Schumer held a news conference in Hudson touting a new development plan for the still vacant former Kaz Inc. site. That’s right, nearly a decade later, Mr. Kaz’s property that he was at one time “delighted” to protect, has been left to rot since he moved on to greener pastures. Unfortunately, stories like these are all too common in New York State.

IBM CEO urges focus on “new collar” jobs

Ginni Rommety, the CEO of IBM (a member of The Business Council) is out with a new opinion piece in the USA Today urging U.S. policy makers to focus on policy decisions that will help prepare today’s youth for tomorrow’s jobs. In the piece, which you can read in full here, Ms. Rometty specifically cites the P-TECH model as one to follow. We here at The Business Council have made no secret of our affinity for this program. If you’re unfamiliar, here is Ms. Rommety’s decription:

“But in many other cases, new collar jobs may not require a traditional college degree. In fact, at a number of IBM’s locations spread across the United States, as many as one-third of employees don’t have a four-year degree. What matters most is that these employees – with jobs such as cloud computing technicians and services delivery specialists – have relevant skills, often obtained through vocational training.

Indeed, skills matter for all of these new positions, even if they are not always acquired in traditional ways. That is why IBM designed a new educational model that many other companies have embraced – six-year public high schools combining a relevant traditional curriculum with necessary skills from community colleges, mentoring and real-world job experience. The first of these schools – called Pathways in Technology Early College High School, or P-TECH – opened five years ago in Brooklyn. It has achieved graduation rates and successful job placement that rival elite private schools, with 35% of students from the first class graduating one to two years ahead of schedule with both high school diplomas and two-year college degrees.

There will soon be 100 schools of this kind. Governors and mayors from across the political spectrum have become champions for this new approach, and at IBM, we have committed to work with states to open at least 20 more P-TECH schools in the next year.”

Ms. Rommety closes by saying that the onus should not fall on lawmakers alone. It is incumbent on stakeholders from across the public and private spectrum to work on developing curriculum and strategies that harness the potential of these “new collar” jobs and ensure our children and grandchildren acquire the skills necessary to fill these needs

New poll shows widespread support for ride-hailing

A new poll, sponsored by the ride-hailing industry, shows 80 percent of people living outside of New York City support the legalization of services like Uber and Lyft. The poll found support remained consistent across political parties and different regions of the state. Residents of Westchester and Rockland counties had the highest support, approaching 90 percent. In the polling industry, they call those “Mother Theresa” numbers.

Support for ride-hailing has always been high. A Siena poll from earlier this year found nearly 70 percent of all New Yorkers supported legalization.

The Business Council of New York State, and our president, Heather C. Briccetti, have been extremely vocal in our support for the legislation. It was one of our top legislative priorities last year and will remain at the top of our list for 2017. But, what are the chances of it actually passing? That remains to be seen. Governor Cuomo and key members of his staff have been outspoken in their support, and leading members of the state Legislature have also said they would like to see it passed. Unfortunately, certain special interests are opposed to the bill as currently structured.

We remain hopeful the legislation will get approved next year and will do all we can to support its passage. Meanwhile, Uber recently relaunched an online petition aimed at showing the widespread support for ride-hailing. You can sign that petition here.

Former lawmaker gets it right

Have you seen former state Assemblyman and Suffolk County Executive Steve Levy’s OpEd in today’s Times Union?

It should be required reading for all state lawmakers. In the piece Mr. Levy lays out a list of policy initiatives that, if enacted, would reduce state and local government costs; provide the local government mandate relief promised, but never delivered, as part of the real property tax cap; and provide tax relief for employers and residents alike. Taken together, they would greatly improve the business climate of New York State. If many of these look familiar, it’s because we have been talking about them for years.

You can read the full OpEd here, but we’ve included a portion of it below.

  1. Enact pension reform by installing a 401(k) –type defined contribution pension for new public sector employees, as opposed to the present defined benefit pension, which keeps taxpayers on the hook for a guaranteed rate of return.
  2. Cap mandatory arbitration awards that have propelled law enforcement salaries over the $200,000 mark.
  3. Eliminate overtime from being factored into the base of a pension for all employee tiers. This practice has allowed for pensions to be dramatically inflated. Six-figure pensions are now quite common.
  4. End the Triborough Amendment that provides for automatic step salary increases in the public sector, even after a contract has expired.
  5. Control Medicaid benefits in New York to levels no greater than required by the federal government. New York taxpayers expend more than a billion dollars above the standards established by the Feds. For instance, while the Feds allow Medicaid to be made available to legal immigrants here more than five years, New York voluntarily waived the five-year threshold.
  6. End the Wicks Law. This relic from the early 1900s was originally enacted as a way to supposedly counter fraud in the letting of contracts. Instead of allowing the general contractor on public works projects to choose certain sub-contractors, the Wicks Law mandates that the subs be hired through a bidding process outside the control of the general contractor. It has been estimated by numerous budget experts that the law increases by up to 30 percent the cost of constructing public buildings in the state.
  7. End the Scaffold Law that holds building owners liable for accidents occurring at their construction sites even though they might not have been negligent in any way. Any employee contributory negligence is discounted. New York is the only state that has such absolute liability.
  8. End disability abuse that allows for some workers to get 3/4 of their pay tax-free if injured on the job. This has resulted in some employees (mostly in law enforcement) getting more staying home than if they are actually working, thereby eroding incentive to get back to work. Also end the “presumption” that heart and lung ailments are necessarily job related.
  9. End sick day abuse. Some local governments allow for employees to cash out huge amounts of unused sick days upon retirement. Some Long Island police, for example, get 26 sick days a year, and many of those not used can be banked for payment upon retirement. The employee is paid for the day at the salary rate he or she has in the last year of service. This has led to some employees getting severance packages of almost a half-million dollars. The New York City policy for sick days of “use it or lose it” should apply.
  10. End 20-year retirements. While the idea of allowing “20 years and out” policies in New York may have in the past been palatable, it is hard to justify such a policy with folks living so much longer today. By the time an officer age 23 reaches 83, the taxpayer could be funding one active and three retired officers (through their pensions) for that one position. It is simply unsustainable.

PPI Series: Business and Higher Education Leaders Support College- and Career-Ready Standards to Boost New York’s Economy

PPI Common Core: Here to Stay?

Part six of an ongoing series on higher standards in New York State

By themselves, new education standards cannot solve New York’s skills gap or remedial education epidemic, but they are an important piece of the puzzle.  Here’s how it works:  With clearer standards to guide educators, a higher percentage of high schoolers should graduate with the knowledge and skills they need to succeed in college, and fewer of them should require remedial courses.  A reduction in the need for remediation should increase college attainment rates.  Economists have shown that higher levels of college attainment lead to a more productive workforce.  College-educated workers earn higher wages, which enables them to contribute more in tax revenue and rely less on state assistance programs.

Figure 4. Theory of Action

New York’s neighbor to the east, Massachusetts, provides a convincing case study of how raising standards is an important step to improving educational outcomes and economic productivity.  In the early 1990s, a group called the Massachusetts Business Alliance for Education issued a report that became the blueprint for a bipartisan reform bill.  The reform package included three main components:  (1) More money to urban schools and pre-Kindergarten programs; (2) ambitious academic standards; and (3) a new set of testing requirements, including high school exit exams (analogous to New York’s Regents Exams), known collectively as the Massachusetts Comprehensive Assessment System (MCAS).   When the MCAS was first administered in 1998, students in urban schools performed terribly.  Improvement was so slow at first that researchers thought the reforms had failed, but State Superintendent David Driscoll insisted on staying the course.

Over the next ten years, Massachusetts became the envy of the nation for its education outcomes.  In 2005, Massachusetts scored at the top of all four categories measured by the National Assessment of Educational Progress (4th and 8th grade ELA and math).  In 2008, Massachusetts 8th graders tied for first in the world in science on the Trends in International Mathematics and Science Study exam.  From 2002 to 2009, NAEP scores for Massachusetts African-Americans and Hispanics on the 4th and 8th grade ELA improved faster than those of white students.  If Massachusetts were a country, its 2009 PISA scores would place it in the top ten, with countries like Singapore, Korea, and Finland.  Economic outcomes have improved as well.  The share of adults with a college degree has grown more in Massachusetts than in any other state, and worker productivity has grown more quickly in Massachusetts than in all but two other states.

If our policymakers wish to replicate Massachusetts’ outstanding educational trajectory, they will have to resist political opposition to tougher standards and tests, continue to gather high-quality data via standardized tests and other means, and throw their strong support behind policies that have the best chance of improving student outcomes.  Understanding this, New York’s business and higher education leaders—from IBM’s Stanley Litow and Xerox’s Ursula Burns, to SUNY Chancellor Nancy Zimpher and CUNY Chancellor James B. Milliken—have been vocal supporters of the Common Core standards, vigorously urging their colleagues, policymakers, and the public to see them through to full implementation.

Please click here to read part five in this ongoing series.

Biopharmaceutical sector provides outsized economic benefit

PhRMA is out with a study that shows the biopharmaceutical sector has an enormously positive impact on job creation and economic growth in New York State. According to a newly released report, the sector provides more than 50,000 direct jobs and nearly 200,000 in additional jobs are supported by the sector. These jobs range in industry from science, to management, to architecture and engineering, to transportation, and more.

Those jobs account for more than $19B in wages to New York State residents. That income translates to roughly $4.5B in tax revenue for the state and federal government.

Beyond that, between director and indirect output, the goods and services produced by the sector generates a combined $74.1B in economic activity. That equals roughly $182,000 in economic output per employee, a truly astounding figure.

The full PhRMA report can be accessed here. A copy of the New York economic impact is posted below.

Biopharmaceutical sector provides economic benefit