Carrier, UTEC move to Mexico part of Indiana’s long-term decline in manufacturing

March 24, 2016 in News by RBN

via: Indy Star

There’s no denying that manufacturing is a crucial part of Indiana’s economy – it leads the U.S. in manufacturing jobs – but one galling fact is clear: The industry that allowed the middle class to earn a superior standard of living is in decline.

The outsourcing of 2,100 Hoosier jobs to Mexico by Carrier and United Technologies Electronic Controls follows a longstanding trend of manufacturing jobs disappearing across Indiana. According to data from the U.S. Bureau of Economic Analysis, Indiana lost 235,058, or 31 percent, of its manufacturing job base from 1969 to 2014.

“It’s like the movie Gone with the Wind: It’s the demise of a whole way of life,” said David Audretsch, an economic development expert at Indiana University. “Depending on the community, you can see this devastation wrought not just on individuals and their families, but the whole community.”

Manufacturing, a once-booming industry at the heart of the Midwest, always will be a part of the U.S. economy. However, its role will continue to shrink, economic experts said. That will be especially true for Indiana, whose gross state product comprised of more than 30 percent manufacturing, again ranking it first in the country.

As the industry continues to contract, it will take good-paying jobs with it. The average annual compensation for manufacturing workers in Indiana is $73,485. The top paid manufacturing employees of all states live in Massachusetts, earning $99,242 a year.

One of the chief reasons the industry has taken such a sharp turn in the last 40 years is the fact that American manufacturers became better at producing goods, said Michael Hicks, an economic expert at Ball State University. Jobs that used to require four people on a line might now only need one, he said.

Advances in technology and materials have allowed manufacturers to do a great deal more with less, Hicks said.

“We have fewer manufacturing jobs in Indiana and the U.S. as a whole than we did in 1970, and the reason we do is because we are very good at manufacturing,” Hicks said. “The loss of manufacturing jobs is really driven by breathtaking productivity gains.

“Just a minor amount of loss is due to trade.”

In fact, nine out of 10 manufacturing jobs are lost due to productivity increases, Hicks said. Only one in 10 is lost because of trade, he added.

Carrier and UTEC, both branches of Hartford, Conn.-based United Technologies Corp,, cited  cost effectiveness and pressures driven by new regulatory requirements as their reasons for moving to Mexico.

Chuck Jones, present of Steelworkers Union Local 1999, which represents the Carrier workers who will lose their jobs, said Carrier’s Mexican employees will be paid a base wage of $3 an hour.

About 75 percent of Carrier’s Indianapolis workers earn $26 an hour, or about $55,000 a year. They can earn more than $70,000 a year with overtime included in their pay. The remaining 25 percent, who were hired in under a second-tier wage, earn about $14 an hour, or $30,000 a year.

Carrier, which opened its Indianapolis facility in the early 1950s, would not say how much money the company will save by moving production to Monterrey, Mexico. It also would not answer questions about the output of its factory.

Jones said he’s going to talk with Mayor Joe Hogsett and other officials Friday to discuss how to help the displaced employees. The mayor and state are assembling a variety of resources to aid the workers.

To help diversify Indiana’s economy, the state is encouraging growth in life sciences, technology and agribusiness, said Abby Gras, a spokeswoman for the Indiana Economic Development Corporation.

“The latest study from the IU Business Research Center notes economic impact of the life sciences industry at $62 billion, which is up from $59 billion in 2013,” she said. “The tech industry in central Indiana grew by 17 percent from 2009 to 2014 – a growth rate more than double all other occupations during the same time period.”

Although Carrier and UTEC’s decision to eliminate most of its Indiana workforce is a gut-punch, it’s a sign of the times, Audretsch said. Although it’s not likely that many other manufacturers will leave the U.S., they will continue to streamline their operations, he said.

“It was a matter of time. We’ve seen the writing on the wall for this kind of change for decades and decades,” Audretsch said. “I don’t want to put blame on individuals, companies, or policymakers, but people should have been aware.

“It’s a lot like smoking: You shouldn’t be surprised when you get cancer. We’ve known these are very high-risk jobs because they aren’t sustainable.”