In terms of weathering The Great Recession, Massachusetts has been more fortunate than many other states. We were spared, of course, by having lost so much of our manufacturing base decades ago, and by not having had anything resembling a crazed building boom. There’s something to be said for living in a non-Go-Go kind of place.
That said, life hasn’t been all that easy for blue collar workers who never made the transition to higher skilled professions in industries that have been doing okay, like technology.
So, when we do have some decently paid manufacturing jobs as part of our mix, there’s always something feel good about it.
Thus, we rejoiced when Evergreen Solar, maker of solar panels, invested (with the help of $43M from the Commonwealth of Massachusetts) in a factory built on the site of the old Fort Devens. The factory employed 800, whose jobs, after less than three years, are now gone with the wind.
That wind took the jobs to China.
And not just because the average factory worker makes a whopping $300 a month, compared to Massachusetts’ average factory pay of $5,400. This amount sounds absolutely tycoonish, but we’ve long shed all our really low skilled factory jobs in textiles, shoes, plastic toys, etc., and instead focused on more technical, higher skilled production jobs, mostly in smaller shops.
Evergreen’s ability to compete had been compromised because the price for solar panels has gone down.
No surprise here: products do tend to get commoditized, and we all get to have more stuff, cheaper. (A decidedly mixed blessing, of course.)
But Evergreen’s CEO, Michael El-Hillow, lays at least part of the blame for those 800 pink slips on the extensive subsidies that manufacturers get from the Chinese government, which has prompted Evergreen to close down its factory in Massachusetts, and move all production to its facility in China. (This facility is supposedly built on a site which “municipal police had used…for mass executions into the 1980s.” Nice tidbit, that.)
Here’s what we’re up against:
Evergreen, with help from its partners — the Wuhan municipal government and the Hubei provincial government — borrowed two-thirds of the cost of its Wuhan factory from two Chinese banks, at an interest rate that under certain conditions could go as low as 4.8 percent, Mr. El-Hillow said in August. Best of all, no principal payments or interest payments will be due until the end of the loan in 2015.
By contrast, a $21 million grant from Massachusetts covered 5 percent of the cost of the Devens factory, and the company had to borrow the rest from banks, Mr. El-Hillow said.
I dunno.
We seem to keep trying to convince ourselves that economic redemption of the job creating kind will come in on the big green wave of demand for non-fossil fuel based energy.
Doesn’t sound like that’s going to happen any time soon.
If we can’t keep the dirty old manufacturing jobs, and we can’t keep the cool new green manufacturing jobs, just what is it that Americans who are never going to be nano-scientists, genome mappers, or (blecchhh) investment bankers actually going to do to make a living?
Nothing that hasn’t been said before, but the end of those 800 Evergreen jobs got me thinking about it again.
Living in interesting times is scary, no?
Source for this post: NY Times.
6 comments:
You said the Evergreen Solar factor was subsidized to the tune of $43 million by the taxpayers of MA. The Boston Globe and other sources claim the figure was $58 million.
Whatever the exact number it makes management sound foolish whining that the Chinese government is helping their competitors. Even if we wasted only $43MM on these clowns, divide that by 800 jobs and it works out to $53,750 per person, or about $27,000 per worker for each of the two years they had their jobs.
Wouldn't the state have been better off if we just plain gave 800 random blue collar workers $53,750 each? Or 8000 of them $5,375? Or put that money into industrial arts training in schools so we would turn out high school graduates with the skills, such as operating NC machine tools, that unsubsidized factories willingly hire?
When the state tries to pick winners and subsidize them, that is a recipe for corruption. The winners usually are those who figure out how best to secretly bribe those influencing the decision. Even if they weren't corrupt, the idea that politicians, who can't figure out how to properly run what they do control--state government--can figure out which businesses will profitably use taxpayer subsidies, is not one that makes much sense.
Rick - That did seem like an awful lot of money for 800 jobs for two years. And, as you say, the money would have been better spent (especially in retrospect)on training workers to fill jobs that there is a need for. But the question remains: how do you compete against China when they do subsidize their industries?
The main subsidy you have to compete against, when you are competing against China, is that country's extreme poverty allows the workers there to improve their lot despite earning what we think is minuscule pay. That is in the process of solving itself over time as they become richer.
In the meantime, to succeed manufacturing in the US you have to pick your products carefully. Is the product something that the Chinese can make as well as we can, and the customers are very price sensitive (Evergreen solar panels come to mind)? Then let them have it. Is the product something that we can make better, people are willing to pay for quality, the prime market is in the US and transportation costs are significant, the customers want customization and quick delivery, etc.? Then we have an edge, and can keep the edge.
I'll add one comment to my earlier harangue: When the $58 million subsidy to Evergreen was announced, the politicians all patted themselves on the back about the 800 jobs they were supposedly creating. Suppose the taxpayers of MA had that $58MM in their pockets instead, and either saved it, paid down debt, or spent it on things THEY wanted rather than what the politicians chose: how many jobs would have been created then? I say, over time (to reflect the fact that money you save today is there for you to spend tomorrow), a lot more than 800 jobs.
You're right, of course, which brings up another couple of questions. a) Would smaller manufacturing outfits - doing the high quality, customized work - produce enough reasonably-paid jobs to sustain the number of workers we have in the our economy, or do we just devolve into having a larger, marginal working class; b) Is there any reason in this day and age to maintain a certain manufacturing base for security reasons. (Solar panels doesn't seem to be in this category...)
Just because a product can be manufactured in China does not mean the quality of it will be nearly as good. I can guarantee you that the panels that come out of Evergreen when they start making them in China will not be as good, even though it is the same company making them. The biggest problem is that people in the US accept inferior products made in China because they are cheaper rather than buying something made in the US and paying more for better quality.
I agree with "anonymous." The quality of a lot of Chinese goods is pretty bad, and that is one of the edges that US manufacturers have, at least now. Chinese quality may eventually catch up, as the example of Japan shows. In the early 1950s, the term "made in Japan" was an insult, meaning a product whose design and quality were inferior; thirty years later people started buying Toyotas and Hondas because they were designed and built so much better than American cars.
As to Maureen's question whether small, high quality manufacturing outfits can take up the employment slack created by the loss of large mass production factories, I think the answer is yes, it is possible, but not ordained. The US doesn't have a monopoly anymore on non-bombed factories, as was the case after WW2, so we can't count on everyone buying our products no matter how overpriced and badly made they were. We have a lot of edges, we can do it, but it will take work and brains on the part of both management and labor.
Also remember that if a laid off factory worker can get a good job outside a factory, that's OK too. I don't think Google has a factory anywhere, but the wealth it has created for its owners, management and employees creates buying power that raises employment in seemingly unconnected areas, jobs that wouldn't exist here if Google had grown up in some other country.
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