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Massachusetts Defense Industry Grows Amid Economic Changes

Posted by Rick Lord on Dec 6, 2010 9:49:00 AM

The success of the defense industry in Massachusetts during the past two decades is one of the great untold stories of the commonwealth’s economic history.

As the overall economy has struggled in the face of two recessions and fundamental industry shifts, Massachusetts defense contractors have quietly tripled the value of their contracts to $15.6 billion. They have almost doubled their employment rolls to 115,563 people and increased their overall economic output by 146.2 percent. Defense contracts support businesses large and small, as well as many of our state’s higher education institutions – including the University of Massachusetts system.

HomelandSecurityThe impressive numbers come from a report released this morning by Associated Industries of Massachusetts and the UMass Donahue Institute called The Defense Industry in Massachusetts: Current Profile and Economic Significance.

Massachusetts currently ranks fifth nationally in Department of Defense contract awards and seventh in contracts from the Department of Homeland Security. Payroll generated by Bay State defense companies, from giant first-tier suppliers to smaller manufacturers up and down the supply chain, now stands at a record $8.93 billion. The industry generates more than $3 billion in tax revenue for local, state and federal governments struggling with fiscal emergencies.

Eighty-five percent of all federal contracts with Massachusetts companies are for defense-related activities.

And the best is yet to come.

Massachusetts specializes in the kind of research and technology related products and services that are expected to be the lynchpin of defense spending in the future. Nine of the top 10 products sold to defense agencies are related to technology and research; almost $2 billion in Fiscal Year 2009 contracts were awarded to colleges and universities.   The Department of Defense confirms in its 2010 Quadrennial Defense Review that future priorities and initiatives will lean heavily on technology advancements and research and development.

Innovation may insulate the Massachusetts defense industry in the long term if lawmakers decide to move forward with the deep reductions in overall defense spending outlined recently by President Barack Obama’s bipartisan commission on reducing the national debt. The economics of defense and federal budgets underscore the importance of continued support among employers for improvements in science, technology, engineering and mathematics education both in public schools and on the college and university level.

Federal priorities for defense and homeland security bode well for a commonwealth with a history of technological innovation, outstanding public schools, well-trained workers and the best research universities in the world.

The report shows that a defense industry that has been vital to the Massachusetts economy will become even more so in the years ahead. For AIM, the voice of Massachusetts employers for 95 years, and the University of Massachusetts, the potential growth of the defense industry represents the kind of economic development that will rebuild our economy. The formula for success is simple: cutting-edge producers of world-class technologies and services providing stable, well-paid jobs for the people of our commonwealth. 

Topics: Defense Industry, Associated Industries of Massachusetts, AIM, Massachusetts economy, Manufacturing

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