In the past four years, Colorado Springs has lost more than 5,000 manufacturing jobs, which doesn’t include the 4,000 jobs lost in the high-tech industry.
Colorado has lost about 50,000 manufacturing jobs during the same period. Since 1999, 2.7 million additional manufacturing jobs have been lost in the United States.
The average salary in the manufacturing sector is $54,000, which is 18 percent more than the national average.
JoAnn Miabella Galvan, who provided the above statistics in coordination with the Colorado Springs Manufacturer’s Task Force, understands the overall economic impact regarding the downfall of manufacturing in the United States.
Galvan is a consultant who works with the Greater Colorado Springs Economic Development Corp. and a former vice-president at Compaq Computers (she was in charge of the company’s manufacturing functions). After several manufacturing plants in the Springs closed, the EDC and others in the industry created a task force in January 2003 to review the reasons for the losses and determine ways to recoup those losses.
The EDC kicked off the task force, but it is an independent entity comprised of manufacturers, including Tony Fagnant, president of Qualtek Manufacturing Inc., and others, such as George Boutin, the executive director of the Colorado Springs Office of International Affairs. At a Sept. 13 meeting, task force members unanimously agreed that, despite other concerns like taxes, such as the business personal property tax; health care costs; workers compensation and unemployment compensation costs; the No. 1 reason manufacturing has sustained losses is because of offshoring, the practice of sending jobs outside the United States to countries such as Mexico and China.
However, task force members concurred that the globalization of the work force is not going away any time soon.
Many small-to-medium size manufacturers have paid a hefty price for keeping a profitable bottom line: cutting costs. According to a task force summary, companies can replace an $80,000 U.S. programmer with a $20,000 Indian programmer, and manufacturing job differences are even greater.
The summary included this statement: “Columnist James K. Glassman writes that a Dobbs Rogue Fund (assessment) of 216 firms that moved jobs overseas had an amazing 72 percent return over 12 months.”
The displaced American workers are paying a price as well. Those workers may be finding new jobs, but their pay is about 13 percent lower.
Manufacturing encompasses everything from electronics to medical to household goods to automotive. Galvan said many of the products are moved offshore when the commodity is produced in mass quantities. Even though the mass- manufacturing overseas movement is not new to the United States, she said it used to be cyclical, and new products would keep manufacturing in the forefront of the economy.
However, that is changing as intellectual properties move offshore as well, Galvan said.
Companies are moving research and development overseas, which means that growth is stifled in the high-paying job market. And, if other countries are developing products, the United States could lose its competitive edge.
The task force summary noted that U.S. services exports increased by 19 percent while imports grew by 49 percent. The U.S. service imports-to-exports percentage increased from 64 percent in 1997 to 81 percent in 2003. Federal policies reward offshoring, according to the report.
“U.S. investment tax credits subsidize companies, but, when those companies offshore manufacturing, the United States does not fully profit from the investment. Offshoring advocates believe in protectionism, protection of private capital and intellectual property, but not in protecting the social capital built up in the U.S. over hundreds of years.”
The task force members mentioned that U.S. Bureau of Labor Statistics projects eight of the top-12 new jobs include health care-related occupations such as home health aides, medical assistants, fitness trainers and aerobics instructors – not exactly high-paying jobs. Task force members stated that “one in every 10 jobs at American technology vendors or service providers will move overseas by the end of 2004, and, by 2008, one-quarter of all traditional information technology jobs will be in emerging market nations.”
“When companies are moving manufacturing to China, you start eroding the industry in the U.S and creating long-term impacts,” Galvan said. “At what point do you hold an alliance to your home country and your hometown?”
Fagnant said offshoring generates a ripple effect throughout the manufacturing industry and the economy as a whole. Manufacturing is based on tiers, and, when a tier-one company sends its manufacturing overseas, a tier-two or tier-three company that has been making parts for the tier-one company loses because the company offshoring normally uses suppliers that are based in the same country.
Some of Fagnant’s employees have trained for as long as seven years, and, if the jobs go away, so will the workers.
However, what happens if a war breaks out in one of those countries or something else happens and the jobs have to come back, asked Darl Hartnett, strategic account manager for the manufacturing segment of the Colorado Springs Utilities Department.
Task force members agreed there would be no skilled workers to pick up the pieces.
Communities are recognizing how important the manufacturing infrastructure is to the economy, said Dave Anderson, former owner of Skyline Electronics. “The issue is whether we have tradable goods,” Anderson said. “We need to captivate innovating concepts and continue to develop intellectual property. Other economies have faced these issues, and we need to band together and establish communication and cross fertilization so manufacturers can compete.
“We have to work collectively to get larger jobs and build on each other’s strengths.
“Industries such as the hand tool-industry are gone, so we need to redevelop our products and determine our true intellectual property.”
“We have to look for markets overseas to sell our products as well,” Boutin said.
“Manufacturing cannot rely on an attitude change within the federal government.”
John Connor of CMI Enterprises Inc. said the focus of the task force is not to avoid globalization or insulate from it – the purpose is to make certain that innovation remains in this country before “we are at the mercy of other people in other countries.” Connor cited a quote by Ben Franklin: “If we don’t hang together, we will hang separately.”
Fagnant said that there is no stopping the global economy. “We do, however, need to understand how to manage ourselves and keep the United States in a viable economic state.”
The task force is seeking ways to assist, maintain and grow the manufacturing industry in Colorado. The CSBJ will look at how the task force is doing that and the effects on education and the workforce next week.