Impact of Offshoring on Spokane Jobs
July 23, 2010 Leave a comment
From the 1980s to the early 1990s, manufacturers sought areas with a lower cost of business (namely wages), which made communities like Spokane a good area to locate satellite manufacturing facilities. This later became known as “inshoring” (rather than moving jobs offshore, we moved them to cheaper areas within the United States). These manufacturing businesses also brought high skilled engineering and marketing work forces.
In the 1990s, off shoring was growing rapidly. These companies now found it cheaper to move out of Spokane to off shore locations. Agilent moved its manufacturing to Ireland and Malaysia and the last bit of Agilent in Spokane – firmware (embedded software) is moving to Korea. ISC/Getronics, I believe, moved much to Ireland and India and other locations (Getronics, a.k.a. Wang/Olivetti as it changed hands – once had over 1,000 workers – and one unconfirmed report that put it at 2,000 workers here, is no longer in Spokane). Software Spectrum moved its work to India. Telect, which once had 1,200 workers, moved its manufacturing to Mexico (leaving 80 as of April 2011). In fact, 70% of these jobs were moved off shore – and out of Spokane.
Update July 29th, 2010: Clearwater Paper of Lewiston is laying off seven accounting staff and replacing them with new workers in India. The offshoring created by post year 2000 recessions will continue to wreak havoc on employment in the formerly low cost/low wage inland communities.
Initially, Spokane benefited from in shoring but lost out when in-shoring became off-shoring. The new (and just closed) Cascade Aerospace airliner maintenance facility and the aircraft painting facility at Geiger Field, are examples of in shoring. They will stay as long as it is cost competitive to do that work here. As Littleton, CO found, small towns seek outside firms to establish operations locally but all such firms eventually leave the area as the decision is based solely on costs. When some where else becomes cheaper and practical, they will move.
Spokane’s recent comparative advantages had been the availability of a low cost blue collar work force, and aluminum resources (bauxite, cheap hydro electricity) and related metal working. The aluminum industry was lost due to the existing plants being old and far less efficient than the newest plants built overseas, and a crippling union strike. (Or may be not – years before the plants were closed, Kaiser said they were the amongst the most efficient in the world – go figure?)
Spokane’s comparative advantage is over sized health care facilities serving a broad region. As we put more resources in to X (health care), we have fewer resources for Y (everything else). What I mean by that is Spokane does not have the size and scope necessary to support multiple high skill industries. Health care is the future of Spokane, by decree – and Spokane is not going to achieve much success in other fields like high tech.
“By decree” refers to Washington State’s industrial clustering policy. By law, Spokane has been identified as a “regional health care delivery services” cluster.
In “Mystery for the White House: Where Did the Jobs Go?” the NY Times wonders why no one can figure out what has happened to the jobs.
Spokane might provide a clue – they’ve moved off to cheaper locations in other countries. Off shoring is the elephant in the room that everyone manages to ignore.