Ohio ‘Under Siege’ As Jobs Disappear

Steve Bennish, Ken McCall and Tim Tresslar, Springfield News-Sun DAYTON — Since 2000, Ohio’s total annual private payroll dropped by $22 billion when adjusted for inflation, a devastating economic implosion that hit every aspect of Ohio’s economy — from grocery stores, restaurants and retail to government budgets and beyond. As one telling indicator, the Ohio Department of Education said the proportion of youngsters receiving federally subsidized school lunches has reached a record high of four for every 10 students. “It’s not a bright picture right now,” said Roger Blair who lost his manufacturing
job, as did his wife Cheryl,
when Siemens Energy & Automation closed plants in Urbana and Bellefontaine in 2009 and exported the jobs to Mexico. Roger is working again, but the Logan County family’s income has been cut in half and will drop further when Cheryl’s unemployment benefits run out. “I don’t have any benefits,” said Roger of his job working as a contractor. “I don’t have insurance, no type of future benefits, either.” The vanishing wages that the Blairs and countless other Ohio families are experiencing come as legions of manufacturing and other higher wage jobs disappear amid accelerating global trade and enormous international trade deficits. Those deficits punished Ohio, where manufacturing has long undergirded the state’s economic might and provided entry to the middle class. The question is, what can Ohio do to get out of the hole? In his state budget, Gov. John Kasich unveiled concepts he says are designed to make Ohio more competitive, including reducing the size of government and tax burdens on businesses and individuals. But the reasons for the lost wages and the 600,000 jobs they represent may go beyond what a governor alone can do to rebuild Ohio. Interviews with business executives, labor experts and international economists as well as U.S. Senators Rob Portman and Sherrod Brown show widespread agreement that Ohio has been forced to operate on a tilted playing field. And it’s not getting any better. Consider the U.S. experience with China. The U.S.-China trade deficit was $273 billion in 2010, up from about $226.9 billion in 2009. (The figure is the difference between what we import from China versus what we export there.) A trade deficit means that rather than producing goods or commodities we use every day here in the United States — supporting U.S. jobs — they are imported. Driving the lopsided trade is that the Chinese value their currency far below its true value, under-pricing U.S. goods. And that’s not all. Protracted trade disputes that threaten even more local jobs have ensnared key Miami Valley industrial employers such as NewPage and AK Steel. “I have told one Chinese delegation after another that we don’t like the fact that you manipulate your currency,” Kasich said in his State of the State address. “And it will stop.” But neither Congress nor President Obama, appears poised to right a regime that’s erased huge swaths of the U.S. economy — especially in the industrial Midwest — stifled job growth and clobbered state and local finances. Brown, a Democrat who voted against numerous trade deals, including the North American Free Trade Agreement, or NAFTA, said he is not anti-trade. “I want more trade,” he said. “I just want it under rules that are fair to workers in all countries. Other countries practice trade according to their national interest. We practice trade according to an economics textbook that’s 20 years out of date.” Portman, a Republican who served as United States Trade Representative under George W. Bush, said China should be labeled a currency manipulator, which could trigger sanctions. But the U.S. Treasury on Feb. 4, declined to cite China as a manipulator, a mistake in Portman’s view. “It is real and it does affect Ohio manufacturers,” Portman said. “The currency is undervalued by 25 to 50 percent. It does affect our ability to export fairly.” A query to the U.S. Treasury Department was referred to Secretary of the Treasury Timothy Geithner’s statement on March 31 that cited concern over “weaknesses and inconsistencies in the approaches that govern exchange rate policy.” He added that the U.S. has “been engaged in a careful multilateral effort” to mitigate sources of future economic imbalances. “We hope to see it gain more traction over time,” Geithner said. Meanwhile, the number of employers are declining. In Montgomery County, private sector employers — defined as any company with a payroll — shrank from 10,105 in 2000 to 8,851 in 2010. Statewide, the total slumped from 241,062 to 215,406 — a drop of 25,656 companies. In a decade, the average private sector wage in Ohio has risen from $32,245 to about $40,000, but when inflation is factored in, the increase vanishes. The largest payroll losses were in manufacturing, which plummeted 36 percent, driving other sectors lower. A standout exception is an economic sector with heavy taxpayer support: health care and social assistance, which grew by 21 percent. However, those jobs don’t pay as well. Cleveland-based economist George Zeller calculates the net statewide annual Ohio payroll loss at around 10 percent. “That’s phenomenal,” said Zeller, an independent economic analyst and former professor at Wittenberg University in Springfield. “A lot of that was in Dayton.” While there have been gains of late — the number of workers unemployed in Ohio in February was 542,000, down from 551,000 in January — the losses in the past decade have been vast. Private employment remains dominant and would be key to reviving Ohio. As of February, there were about 5 million non-agricultural employees in Ohio. About 780,000 of those worked for local, state and federal government including school teachers and university employees, the Ohio Department of Job and Family Services said. “Everywhere you look Ohio is under siege,” Gov. Kasich said in an interview. “We are trying to mitigate the loss of companies all over the state.” A structural change? Most of the counties in the Miami Valley had deep payroll drops during the decade: Clark, $482 million; Miami, $328 million; Darke, $89 million; Champaign, $75 million; and Preble, $40 million. Butler, Warren and Greene counties all gained, but not nearly enough to overcome the losses. Butler added $350 million, Warren $582 million and Greene, which hosts a growing Wright-Patterson Air Force Base, $322 million, according to the data from the state. All but 17 of 88 counties in Ohio showed inflation-adjusted private payroll drops during the decade. The size of the losses are so vast that economists say this period represents a structural change in the economy, making the Great Recession the most serious economic episode since World War II. Ohio is left with a smaller industrial base from which to recover, although it could with re-industrialization achieve significant recapture of lost jobs and incomes, experts say. Robert Premus, a professor specializing in international economics at Wright State University’s Raj Soin College of Business, said American consumers’ love of cheap imports combined with aggressive foreign import policies employed by nations such as China “did a lot to destroy our manufacturing base. As a nation, we wanted to give China a boost to raise their economic status in the world,” he said. “We lost a heck of a lot of jobs. Wall Street loved the idea of these trade deficits because it was generating lots of activity on Wall Street. The Chinese were accumulating cash, using cash to buy our bonds and securities and not our goods. Wall Street deals in securities, not in goods.” Eric Burkland, president of the 1,600-member Ohio Manufacturers’ Association, said adding value to raw products, such as during the manufacturing process, is still key to prosperity. “Every other country in the globe has made manufacturing the center of their economic strategy,” he said. “The rest of the world realizes it and has acted on it. And this country has not.” Foreign trade agreements do benefit some employers, particularly multinational companies with global reach. Portman draws on export data and Ohio companies such as Procter & Gamble that depend on exports when he argues for aggressively expanding trade agreements to other nations. Ohio exported $41.4 billion in merchandise in 2010, state data shows, with machinery, vehicles and aircraft leading the list. Ohio ranks as the eighth-largest exporting state, down from the number seven spot in 2009. The total is up from $38 billion in 2006. In other words, Ohio gained about $3 billion in exports since 2006. However, private employers since 2000 have shed about seven times that much in annual payroll alone. Clearly not everybody is benefiting, and it isn’t just undercutting old industry. It threatens the kind of emerging industries embraced by politicians on both sides of the aisle. “I’ve been worried for a long time that pretty much the majority of manufacturing infrastructure in the USA is moving to China,” said Mark Scheutz, 
CEO of the Mount 
Vernon, Ohio, renewable energy company, Replex Plastics, which won a $1.2 million grant last year from the Ohio Third Frontier Program for a breakthrough solar power product. “While my company is holding its own and even exporting a little bit to China, we see it all around us. The devastating thing is that when our customers move their factories to China, we may or may not retain their business; they will likely source some or all of their components locally over there instead of here.” Growing trade deficits with China lost or displaced 2.4 million U.S. jobs between 2001 and 2008, according to the Economic Policy Institute, a Washington, D.C., think-tank that focuses on middle-class workers. The Ohio loss was pegged at 91,800. Chinese government data say 55 percent of what that nation exports is from foreign-owned plants located in that country. The EPI’s Robert Scott said 102,700 jobs could have been supported in Ohio if the U.S. had balanced trade with China, and 49,886 more jobs could have been preserved through balanced trade among the NAFTA countries Canada and Mexico. “Lately, when the President has talked about jobs and trade, he mentions the jobs associated with exports but ignores those lost due to growing imports,” Scott said. “It’s like watching baseball, but only counting runs scored by the home team — lots of fun, but it won’t tell you anything about who is ahead.” Daniel Ikenson of the Cato Institute, which promotes limited government and free markets, said manufacturing has continued to grow in terms of exports, revenue and return on investment — measurements he said matter most. In terms of job growth, though, the industrial sector has been declining for decades, said Ikenson, associate director of Cato’s Center for Trade Policy Studies. “The one metric that matters most politically is jobs,” he said, adding that increased productivity has caused the nation to shed manufacturing jobs. Domestic manufacturers “may bring back some good-paying American jobs,” Ikenson said, “but not in the volume that once existed.” A window into the world of lost jobs Ohio keeps no complete figures, nor has it commissioned a study that could comprehensively determine job losses from trade agreements, off-shoring, outsourcing or even automation. An examination of information filed with the U.S. Department of Labor found the government verifies that tens of thousands of Ohio workers were displaced over the last decade because of foreign trade and outsourcing. The Economic Policy Institute says even that figure represents only a fraction of those who lost their jobs to foreign imports. Since 2002, close to 136,000 Ohio workers have applied for Trade Adjustment Assistance from the Labor Department, with 94,000 getting certified, the Daily News examination found. Dayton ranked third among cities for the most workers seeking assistance, while five of the top 15 cities came from the eight-county Dayton region. TAA benefits include job training, income support, and job search allowances. Delphi had more workers qualifying than any other company, and the next three employers were also from the automotive industry: General Motors Corp., International Truck and Chrysler. Almost 19,000 workers from the four automotive companies qualified for assistance. The petitions to the Labor Department for TAA assistance provide a window into that world of lost jobs. Anthem Insurance Companies in Mason gave this description for laying off three employees in August 2010: “Transactional work will be transferred to an outsourced vendor in a foreign country, to reduce administrative expenses, improve productivity and increase quality.” The outsourcing company, StarTek, USA, also outsourced some of its employees. “All of the work from this work group is being moved to the Philippines,” wrote a StarTek official last July about 30 affected workers in Mansfield. “As a result, these employees will be laid off unless other suitable positions can be found.” One of the cruelest cuts came from JPMorgan Chase and Company, in a petition filed Dec. 27 that has not yet been resolved. “Services are being outsourced to a foreign country, and we were required to train them to do our jobs,” wrote a former bank employee. Jon Clark, publisher of Plant Closing News, a bimonthly published in Texas that documents industrial plant closures, said Ohio led the nation in industrialization and now is leading in dismantling that economy. His publication has documented 10,000 U.S. plant closures, a figure he estimates is about half the real number. Ohio shuttered 500 plants in the decade, including giants like Ford’s Lorain Assembly Plant, Clark said. “If you can shut a plant down and you put 1,000 out of work because it boosts the bottom line, Wall Street rewards you,” Clark said. “But those people now go on welfare or can’t pay their bills. It’s a terrible, terrible problem in this country. Nobody is counting the cost and damage it has done to this country.” Dissent grows Complaints about an unfair trade pattern aren’t just coming from those representing workers. One of the most vocal critics is General Electric boss Jeffrey Immelt. GE has lately been criticized for its aggressive tax strategies which led to no federal tax bill for 2010. But GE, which ranks fourth on the Fortune 500 list of largest U.S. companies, also just announced it will build the nation’s largest solar panel factory, creating manufacturing jobs in the United States. In a speech last September, Immelt said the U.S. for three decades followed a misguided notion that services — not manufacturing — represented the future. “It was just wrong,” Immelt said. “It was stupid. It was insane.” Added GE spokesman Peter O’Toole: “Why don’t we get back to making things here? One of the big ways to get out of this mess is exports. We are getting our asses kicked competitively because other countries are making the things we used to make here and selling them back to us.” Intel founder Andy Grove, in an article for Bloomberg BusinessWeek, said job growth will continue to founder if the country keeps “plowing capital into young companies that build their factories elsewhere. “You could say, as many do, that shipping jobs overseas is no big deal because the high-value work — and much of the profits — remain in the U.S.,” Grove wrote. “But what kind of a society are we going to have if it consists of highly paid people doing high-value-added work—and masses of unemployed?” Offshoring also can cause long-term harm, according to Grove, when industrial “eco-systems” needed to foster development are lost. For example, he said, when the U.S. lost the manufacturing of consumer electronics it also sacrificed its expertise in battery making, a key component of renewable energy development. Grove’s remedies include imposing an extra tax on products from off-shored labor, and depositing the tax proceeds into a fund available to companies scaling up U.S. operations. Kevin L. Kearns, president of the U.S. Business and Industry Council, a Washington, D.C.-based lobbying group for 1,500 smaller manufacturers and family-owned companies, said “pervasive” predatory practices used by U.S. trade competitors lured away capital and jobs for reasons “having nothing to do with free-market forces or underlying competitiveness.” To balance the landscape, he called for imposing a trade agreement moratorium, forcing state and local governments to adhere to “Buy-American” provisions, and enacting border-adjustment taxes on all U.S. imports. Portman said taking a harder line with China can help manufacturing recover. “Those who say our manufacturing days are behind us are wrong. We can come back,” he said. “That is the point I try to make with policy makers and Treasury. Don’t give up on U.S. manufacturing. It’s the backbone of the U.S. economy and certainly the backbone of the Ohio economy.” Adjusting 
to lower wages For numerous families throughout the Miami Valley, the slide in payroll earnings has meant a lifestyle-changing transition. Phil Maffett learned that the hard way. The 
48-year-old former General Motors Corp. Moraine assembly worker lost his job of 13 years when the plant closed in 2008. Federal assistance helped him obtain a two-year degree from Sinclair Community College in electronics engineering tech, and he got a job as a technician for Mound Laser and Photonics in Miamisburg machining small medical devices. He likes the job, but said his starting wage was roughly half of what he earned at GM. “I needed to go to school to learn something that would pay me well enough to pay the bills I had and to keep my house,” he said. Mike Richardson, 42, of Tipp City, a former forklift operator and union representative at Delphi in Vandalia, also retrained at Sinclair. He now works as an administrator for Choices in Community Living, a nonprofit that cares for the adult disabled, and is within $5,000 of his old salary. “Considering how the industry was going and the loss of jobs in the communities, I’m just lucky and fortunate,” he said. Roger and Cheryl Blair haven’t been so fortunate. In March 2009, Siemens Energy & Automation Inc., a subsidiary of German company Siemens AG, said it would close its circuit-breaker plant in Urbana by July of that year, wiping out 174 jobs, including Blair’s position as a quality manager. A spokesman said the economic downturn was a primary reason for the closure, but production was transferred to Monterrey, Mexico. The plant, which once operated as Bulldog Electric before it was acquired by the global firm, had been around since the early 1950s. Cheryl worked as an assembler at the company’s Bellefontaine plant, and was one of 434 workers let go on Jan. 5, 2009. She has yet to find work, and her unemployment is running out. “We used to be able to take vacations and trips,” said Roger, who has a master’s degree in business administration and is currently working as a contractor with an electronics firm. “Those are eliminated. I was planning for retirement, and the door slams in your face.” Read original post here.