Is Virginia positioning itself to gain the most from the predicted “manufacturing renaissance” coming to the United States? If today’s news is any indicator, New Jersey’s loss is Virginia’s gain… and here’s a hint as to why:
The 101 unionized employees and 14 non-union workers in Clifton will be laid off starting on July 15, and the closing will be completed in December, the company told the New Jersey Department of Labor and Workforce Development on Monday. Clifton officials said the company has been in the city since 1989.
Ouch. Score three points for Virginia’s right to work laws. Governor McDonnell had some good things to say as well, and you can note just the tiniest hit of conceit from the New Jersey side of the fence on losing out to southern Virginia:
Governor Bob McDonnell said Virginia was in competition with North and South Carolina and Mississippi for the project, which is Home Care Industries’ first in Virginia.
The state awarded about $1.2 million in tax breaks and grants for training and development, including money from a fund set up to help areas hit by the decline of the tobacco industry, said Suzanne West, spokesman for the Virginia Economic Development Partnership. Mecklenburg County, where the company is building, added another $150,000, she said.
McDonnell has placed a high priority on job creation and economic development, especially in struggling parts of the state, West said.
“Southern Virginia is on the rebound,” McDonnell said, announcing the awards. “Home Care Industries’ new manufacturing and distribution operation is further positive news for this region.”
So is Mecklenburg and the southern part of Virginia on a rebound? Not quite yet, but as the price of doing business overseas and the pitfalls of outsourcing . From the UK Economist:
The year 2015 is not far off. Factories take time to build, and can carry on cranking out widgets for years. So firms planning today for production tomorrow are increasingly looking close to home. BCG lists several examples of companies that have already brought plants and jobs back to America. Caterpillar, a maker of vehicles that dig, pull or plough, is shifting some of its excavator production from abroad to Texas. Sauder, an American furniture-maker, is moving production back home from low-wage countries. NCR has returned production of cash machines to Georgia (the American state, not the country that is occasionally invaded by Russia). Wham-O last year restored half of its Frisbee and Hula Hoop production to America from China and Mexico.
BCG predicts a “manufacturing renaissance” in America. There are reasons to be sceptical. The surge of manufacturing output in the past year or so has largely been about recovering ground lost during the downturn. Moreover, some of the new factories in America have been wooed by subsidies that may soon dry up. But still, the new economics of labour arbitrage will make a difference.
Rather than a stampede of plants coming home, “higher wages in China may cause some firms that were going to scale back in the US to keep their options open by continuing to operate a plant in America,” says Gary Pisano of Harvard Business School. The announcement on May 10th by General Motors (GM) that it will invest $2 billion to add up to 4,000 jobs at 17 American plants supports Mr Pisano’s point. GM is probably not creating many new jobs but keeping in America jobs that it might otherwise have exported.
The equation is quite simple. Virginia has the infrastructure, the roads, and the vision to bring back manufacturing jobs to the United States. As energy costs rise and the value of the Chinese renminbi continues to soar, the pitfalls of moving those jobs overseas becomes more and more apparent as time wears on.
…and it will be right to work states that have the upper hand in this renaissance.
McDonnell’s emphasis on revitalizing Virginia’s manufacturing base coupled with incentives is reading the economic tea leaves, putting the Commonwealth on the cusp of this “manufacturing renaissance” engaging the very sorts of industries that made Virginia a manufacturing powerhouse some years ago.
Update: Jim Hoeft caught up with Lt. Gov. Bill Bolling for a short interveiw after a job creation forum hosted by House Majority Leader Eric Cantor to discuss how Virginia continues to grow as a business friendly state and why international trips to places like Asia are important.
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