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International giants look to Bay State for brainpower

But workers fear high costs may drive them away

Massachusetts: Nice place to think. But you wouldn't want to meet a big payroll there.

Put starkly, that's how the state often is seen by the growing number of corporate giants based elsewhere that have expanded into Massachusetts in recent years, many by acquisition, and now rank among the Bay State's biggest employers.

In industries as diverse as banking and software, consumer products, and biotechnology, the state has become a magnet for businesses craving brainpower, highly educated product developers, and wealth managers.

But Massachusetts is not a place many companies want to set up assembly lines or operate call centers in. And while freshly minted graduates of its medical and engineering schools find themselves in demand, along with high-end knowledge employees, much of the rest of the Massachusetts labor force -- from unskilled workers to software developers to middle managers -- lives in lingering fear of jobs being shipped off to lower-cost locales.

For more than a decade, research and development, investment management, and specialized production in fields like defense and pharmaceuticals have assumed growing importance as engines of the state economy. That trend only accelerated with the recent takeover wave that engulfed such iconic brand names as Gillette, Fleet, and John Hancock.

''It's really changed the world in which we all live and work," said Andre Mayer, senior vice president at Associated Industries of Massachusetts, the state's biggest business lobbying group. ''It's put a premium on transferable skills, higher education, and mobility. Your company is likely to go, and you can go with it or stay here and do something else."

Staying put these days often means working for a company based in New York, Charlotte, N.C., Cincinnati, or Silicon Valley, Calif. This year's Globe 100 ranking of the top-performing Bay State businesses evaluates for the first time a cluster of employers that occupies a far more significant place on the state's economic landscape than it did when the first Globe 100 was published back in 1989: companies headquartered elsewhere.

Of the top 100 employers in Massachusetts, nearly 40 percent are based outside the state. Many are here to innovate or recruit technology talent. Companies ranging from Novartis AG in pharmaceuticals to Schlumberger Ltd. in energy services to IBM Corp. in computer software have planted substantial research and development operations here. One top draw: proximity to the leading-edge academic and medical research labs of the state's universities and hospitals.

''Boston has some of the best medical centers in the world," said Christopher Perley, managing director of the 1,700-person Wyeth pharmaceuticals manufacturing campus in Andover, whose work the Madison, N.J., company has aligned closely with its 900-employee Cambridge research lab. ''You have a lot of the discovery happening here in the biotechnology field, so the industry wants to stay close to that," Perley said.

Others have invested in operations that take advantage of the state workforce's core strengths. Bank of America Corp., after acquiring FleetBoston Financial Corp. in 2004, based its wealth management division in Boston's Financial District, an internationally recognized hive of mutual fund and money management talent. Intel Corp. bought the former Digital Equipment Corp. computer chip site in Hudson in 1998, and has since poured more than $2 billion into upgrading the 2,400-worker plant.

After swallowing Gillette Co. last year, Procter & Gamble Co. promised to invest $200 million in Gillette's state-of-the-art blades and razors plant in South Boston. And the consumer products goliath is engaged in talks with Massachusetts General Hospital and Harvard Medical School labs about participating in skin care research projects.

The state's high costs aren't lost on corporate decision-makers, but they are not always a deterrent. ''It is, in many ways, the price of doing business," said Frank S. Walsh, the executive vice president and head of research for Wyeth.

But just as shoemakers, auto assemblers, and shipyards did in the last century, newer industries have shifted Massachusetts jobs steadily to cheaper locations elsewhere in this one.

While creating more than 800 jobs in Boston and Waltham, nearly half in wealth management, Bank of America has cut about 1,500 others, many of them overlapping managerial and administrative positions. More than 400 former Gillette jobs have been cut since the Procter & Gamble deal was unveiled last year, not all merger-related.

Computer pioneer Digital employed about 11,900 workers in Massachusetts in 1998 when it was sold to Compaq Computer Corp., which was bought subsequently by Hewlett-Packard Development Co. Today's HP workforce in the state? Barely 2,500.

''Most of the core manufacturing is tending to move to offshore locations," acknowledged Dave Booth, the Marlborough-based senior vice president and US country manager for Hewlett-Packard. Even some of Digital's research operations have been consolidated elsewhere, though HP still does significant product development here.

Compared to the United States, the average worker in metropolitan Boston is much likelier to be a skilled professional or manager, and much less likely to be a factory worker, truck driver, or blue-collar technician, the latest available Bureau of Labor Statistics data show. For example, 4.4 percent of Boston workers hold ''computer and mathematical" jobs, compared to 2.3 percent nationally. Life, physical, and social sciences employ 1.6 percent of Boston workers, 0.9 percent nationally.

But while 7.9 percent of Americans work in what the bureau calls ''production," encompassing a range of manufacturing and assembly jobs, just 4.4 percent do locally.

Massachusetts workers also tend to get paid much more, even compared to other Americans in the same industry. As of November 2004, the last comprehensive study, average metro Boston wages were 31 percent higher than the US average. That reflects the state's overall higher share of better-wage occupations and higher cost of living. But within specific industries, Boston-area workers make well above the national average -- 17.5 percent more than the national average for computer jobs, and 19 percent more for business and financial operations jobs.

Some have begun to worry about an emerging economy of fund managers, burger-flippers -- and little in between. ''It's hard to see how that can be sustained," said Alan Clayton-Matthews, associate professor of public policy at the University of Massachusetts in Boston. ''As higher-income residents bid up the cost of housing, where is everyone else going to live?"

But business and government officials say they believe attracting new high-tech industries will create jobs at all income levels and that middle-income workers can be retrained for higher-wage jobs. ''If we build a base around skills, there'll be plenty of opportunities," said Christopher R. Anderson, president of the Massachusetts High Technology Council in Waltham.

Massachusetts has managed to preserve manufacturing jobs that are specialized, require sophisticated production skills, or relate to defense. In addition to Gillette's high-tech shaving products plant in South Boston and Wyeth's Andover ''biopharma" plant, which makes recombinant protein drugs, General Electric Co. maintains a large Lynn military helicopter engine plant. ''It's a skill-set issue, and the infrastructure's obviously there," said Deirdre Latour, a GE spokeswoman in Fairfield, Conn.

Out-of-state technology giants like IBM, Microsoft Corp., and Computer Associates International Inc. have been shopping for software companies in Massachusetts. After buying Lotus Development Corp. in 1997, IBM has picked up a half-dozen others: Informix Software Inc., Rational Software Corp., Ascential Software Corp., Data Power Technology Inc., iPhrase Systems Inc., and Bowstreet Inc. The takeovers have lifted IBM's state employment to more than 5,000.

''As we acquire these companies, there's no intent to leave the state," said Sean Rush, a Waltham-based IBM general manager. ''Harvard and MIT are important connect points for us in terms of our research and development activity. It's important for us to cross-pollinate, and see what the best and the brightest technology talent is doing."

Anne Finucane, the Bank of America Northeast region president and its global chief of marketing and corporate affairs, said Massachusetts has plenty of economic strengths to draw on.

Referring to the wealth management staff in Boston, Finucane said, ''Once you create that kind of nucleus, other kinds of opportunities present themselves." The bank also has since added a call center in Dorchester and expanded a business credit office in Waltham, representing nearly 400 new jobs combined.

For the acquirers, Massachusetts is viewed as a state rich in talent and assets, if pricey -- and maybe more than a little sensitive about its pride. ''We covet a lot of things your Boston region has," said Charlotte Otto, global external relations officer for Procter & Gamble, who is organizing a visit to Boston by Cincinnati-area executives this fall. ''We're aware of the hand-wringing in Boston over all of these acquisitions. But it can be either a trauma or a catalyst. You can look back and bemoan your losses, or look forward at the opportunity to build on your strengths."

Robert Weisman can be reached at weisman@globe.com.

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