U.S. manufacturing jobs fading away fast

By Barbara Hagenbaugh, USA TODAY
ROCHESTER, N.Y. — Charles Seitz remembers when Rochester was a bustling manufacturing town. Now, all the 58-year-old unemployed engineer sees is a landscape of empty buildings.

“There’s nothing made here anymore,” the former Eastman Kodak employee says, his eyes welling with tears as he talks about his struggle to find a new job. “Wealth is really created by making things. I still adhere to that.”

It’s a situation that’s been playing out across the country for decades but has received increased attention in recent years.

Fifty years ago, a third of U.S. employees worked in factories, making everything from clothing to lipstick to cars. Today, a little more than one-tenth of the nation’s 131 million workers are employed by manufacturing firms. Four-fifths are in services.

The decline in manufacturing jobs has swiftly accelerated since the beginning of 2000. Since then, more than 1.9 million factory jobs have been cut — about 10% of the sector’s workforce. During the same period, the number of jobs outside manufacturing has risen close to 2%.

Many of the factory jobs are being cut as companies respond to a sharp rise in global competition. Unable to raise prices — and often forced to cut them — companies must find any way they can to reduce costs and hang onto profits.

Jobs are increasingly being moved abroad as companies take advantage of lower labor costs and position themselves to sell products to a growing — and promising — market abroad. Economy.com, an economic consulting firm in West Chester, Pa., estimates 1.3 million manufacturing jobs have been moved abroad since the beginning of 1992 — the bulk coming in the last three years. Most of those jobs have gone to Mexico and East Asia.

Last month, film giant Eastman Kodak — the largest employer in Rochester and the central focus of the community since the company was founded by George Eastman in 1888 — announced it was shutting down an area plant and laying off the 500 employees who make single-use, sometimes called “throw-away,” cameras. The work will now be done in China or Mexico, two countries where the company already has operations.

The movement of jobs to other countries angers Seitz the most.

“The United States got to where it is today by making things,” he says. “People are suffering, and communities are suffering.”

Four years ago, the materials engineer was laid off after 26 years at Kodak. It was right before Christmas, and he was two months away from being eligible for full retirement benefits.

Seitz’s father had worked as a toolmaker at Bausch & Lomb, another major Rochester employer. After leaving Kodak, Seitz found work at another manufacturer, but was laid off after 11/2 years. He’s since worked a bit for his son-in-law’s plumbing business and is now collecting unemployment benefits .

Fearing for his job, Bill Williams, 56, took a buyout package from Kodak in January after 27 years with the company.

“I don’t see much future in manufacturing,” says Williams, who started out mopping floors and later ran a machine that coated film. “It’s too easy for them to move their plants overseas.”

Changing, not dying

Many in manufacturing disagree that the sector is dying. They say it’s just changing. The sector’s output grew for a decade through 2000 before weakening during the economic downturn in 2001 that swept across the economy but hit the manufacturing sector hardest.

And economists say the change in manufacturing, albeit painful, is healthy for the sector and for the overall economy in the long run.

“It’s good for us to displace low-wage, manual kinds of labor with higher-skill, higher-tech, higher-education-content labor,” says Federal Reserve Bank of St. Louis President William Poole, who compares what’s happening with the decline in agricultural employment of the early 20th century.

“It’s an ongoing process, but it obviously means that people who fall behind in the accumulation of skills find their incomes advance more slowly, and they suffer a greater risk of unemployment,” he says.

The Manufacturers Alliance, an Arlington, Va.-based group that represents mostly large manufacturers across the USA, is publishing a book next year: U.S. Manufacturing: The Engine for Growth in a Global Economy. They argue the sector has strong footing.

“Our economy is flexible enough, inventive enough, that we’ll find a way to keep a vibrant manufacturing sector,” Manufacturers Alliance President Thomas Duesterberg says.

What the future looks like, according to the group, economists and other industry watchers:

    * High technology. Companies will constantly be coming up with new products and new high-tech ways to cut costs, with U.S. manufacturers leading the way. Budgets will intensely be geared toward research and development, a trend already underway.

At Kodak, a machine now mixes filmmaking ingredients with precision. Ten years ago, it took 14 workers to do the job — in the dark — a repetitive process asking for on-the-job injuries and mistakes.

Few workers are seen at all in “Building 38,” which employs the highest level of technology at Kodak Park — a sprawling 1,300-acre, 170-building complex dotted by smoke stacks. Most of the people who are there watch computer screens and closed-circuit TV monitors behind protective goggles in control rooms.

    * Development in the USA. Most of the innovation will still happen at home, taking advantage of the nation’s highly skilled and educated workforce.
    * Production abroad. Actual production of those products will likely happen in other countries. That’s not just to take advantage of the lower labor costs but also to position products in global markets. For example, many U.S. companies are making or preparing to make products in China, because they expect increased demand for consumer goods in the quickly developing country as well as in other parts of Asia. Making the products closer to the point of sale reduces transportation costs.
    * Fewer U.S. factory workers. Many economists believe most of the manufacturing jobs that have been lost are gone for good, especially repetitive work on the factory floor. More job losses in the sector can be expected.
    * Cooperation. To quickly build technology, U.S. companies will team up to do research. Kodak, copier giant Xerox and Corning, a fiber-optics company two hours south of Rochester, along with government and area universities, are raising $300 million to build a research center that will focus on “photonics” (technology that harnesses light) and microsystems. Planners see the center as developing technology that can be used in several fields, including medical care.
    * Constant education. To keep up with the rapidly evolving technology, workers will need to hit the books. “You’re going to go to college the rest of your life,” says R. Thomas Flynn, president of Monroe Community College in Rochester. In the past five years, the college’s program that provides training for companies’ employees, laid-off workers and those trying to learn a specific skill has doubled to 20,000 students a year.

At Kodak Park, Charles Brown, head of global manufacturing, continues to work on ways to make Kodak’s operation leaner. Two-and-a-half years ago, the company began a campaign to boost productivity after seeing growth in output-per-hour level off in the late 1990s, when most companies were seeing the opposite. Since then, productivity growth has skyrocketed and inventory levels have been greatly reduced.

Brown says his work in reducing waste, as he puts it, is not done.

“There was a beginning, but there isn’t an end,” he says.

Job cuts announced

In the past 20 years, the Rochester area has lost one-third of its manufacturing jobs. Currently, approximately 101,000 workers are in manufacturing, less than one-fifth of the total workforce.

Kodak alone has slashed its local workforce by nearly two-thirds in the past two decades, to 23,000. In 1982, 13.7% of area workers worked at Kodak. That’s down to 4.2% this year, according to the Center for Governmental Research, a non-profit consulting firm for state and local governments in Rochester.

Wednesday, Xerox announced plans to cut another 165 area workers, bringing the company’s layoffs in the region to more than 1,000 in the last few months. Those who are being laid off aren’t just on the assembly line. Managers, marketing executives and finance officers with high salaries are also finding themselves out.

Lois Niland lost her marketing job at Xerox late last month on a day that 530 workers at the company were let go. “It felt like you’ve been hit in the gut,” says Niland, 50, who has both an undergraduate degree and an MBA from Cornell. Still, she’s optimistic and is thinking about starting a new company.

As the number of manufacturing jobs has declined, entrepreneurs have helped keep the local economy afloat. In the last 20 years, the number of jobs in the economy has jumped nearly 30%. Until the recent surge in manufacturing job losses, the area’s unemployment rate was below the national average.

“It’s hard to make the case that the economy’s in really bad shape,” says Kent Gardner, director of economic research at the Center for Governmental Research.

As in other parts of the country, most job gains have been in the service sector. Today, a third of Rochester’s workers are employed in education, health care, check processing and other service fields. Biotechnology is also emerging as a key sector. The University of Rochester is the second-largest employer in the metropolitan area. And thousands of small start-up companies have emerged.

Many local manufacturers, including Kodak and Xerox, offer employees large severance packages, including money for retraining and job-search help, assisting workers as they make the transition into new careers.

‘Lifetime job’

For some, seeing a way of life disappear is too hard to swallow.

In Rochester, generations have worked in manufacturing, many families for the same employer. The thought of being laid off rarely crossed people’s minds. Companies were paternalistic, offering generous pay, pensions and health benefits.

“You could almost count on a lifetime job,” Mayor William Johnson says.

Johnson and other residents still reminisce about “Kodak bonus day,” a once-a-year event when the company handed out checks to employees, from janitors to management. Checks weren’t tiny — many totaled thousands of dollars. Local businesses, including auto dealers and appliance retailers, stayed open late as workers cashed checks and put money into the local economy.

“It was a holiday in this town,” Johnson says.

Cab driver Joe Territo, 64, says in those days, “The company was dedicated to the employee, the employee was dedicated to the company.”

Territo’s story is typical of many in Rochester. His father worked for manufacturer General Dynamics for 40 years. After Territo got out of high school, his dad got him a job in the stock room. He rose to production supervisor but was laid off after working there for 11 years.

He then went to Xerox, where he worked for 13 years until being laid off in 1982. At that point, he was 44, and turned his part-time gig as a cab driver into a full-time job — a job the chatty man, who shows clients pictures of his kids and grandchildren, loves.

None of Territo’s four kids is in the manufacturing sector: hairdresser, FedEx courier, photographer and hospital admitting clerk. He says they made the right choice.

“The industry just isn’t what it was years ago,” he says while maneuvering the snow-covered streets of Rochester.

Contributing: Barbie Hansen and Rochester Democrat and Chronicle