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Factory jobs unlikely to return to 1990s levels
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Robots are part of Twin City Die Castings Company's response to low-wage competitors in China. (MPR Photo/Bill Catlin)
Manufacturing was one of the bright spots in Minnesota's economy during the 1990s, but employment in the high-paying industry has fallen dramatically. Minnesota has lost nearly 52,000 factory jobs since 2000. In the last few months the manufacturing sector in Minnesota has begun a slow rebound, but experts say global competition and higher productivity mean many factory jobs are gone for good.

St. Paul, Minn. — A year ago, machinist Francis Schroeder of Champlin had been out of work for almost two years. Then in June, as the state's job market hit bottom, he found a temporary position. That became a full-time job in September.

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Image Francis Schroeder found work after software training

"I was very, very happy to have an offer put on the table for me. So, it didn't take me long to decide whether to take it or not," says Schroeder.

While out of work, Schroeder got training in engineering software, which he says helped him land his job as a standards analyst at a Twin Cities defense contractor.

"Without the education, without that little certificate, I don't think it would have come to pass," he says.

Schroeder's experience reflects the changes in the manufacturing industry. After shedding more than 50,000 jobs since 2000, Minnesota manufacturers are starting to hire again. But rising productivity and competition from lower-wage countries like China have taken many factory jobs -- probably for good. For those that remain, there's a premium on training and education.

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Image Doug Harmon says competition from China cost about 100 jobs

At the Minneapolis factory of Twin City Die Castings Company an array of machines compress molten aluminum into a variety of parts like snowmobile crankcases and lens mounts for projection screen TVs. Human workers do many jobs, but not all.

Robots and other uses of automation are part of a broad cost cutting program to help the company survive a major decline in business. Like many manufacturing executives, Vice President Doug Harmon blames competition from China.

"Over the last five or six years, we've lost approximately $30 million in sales to large corporations who have taken their product over to China. And the impact on our employment picture has been approximately 100 jobs from about 335 to about 235," says Harmon.

His brother, Steve, the company's CEO, says automation is eliminating entry-level jobs, and helping the company remain profitable. But as those jobs are cut, he says the company needs people with the skills to program the robots.

"Someone that can run a robot and a casting machine and program things, they're not necessarily competing with an entry level person in China," Harmon says. "But someone who just steps up to a machine tool, loads a part in it, hits a button, and takes it out, that's an entry-level job that's competing with 15-cent-an-hour wages."

Someone who just steps up to a machine tool, loads a part in it, hits a button, and takes it out, that's an entry level job that's competing with 15 cent an hour wages.
- Steve Harmon, CEO Twin City Die Castings Co.

Harmon laments the loss of lower-skill jobs, but says the jobs that remain require technical skills and pay better.

State Economist Tom Stinson says it's clear that low-skill manufacturing jobs won't last forever in Minnesota. That's a big change from the 1990s when Minnesota added nearly 60,000 factory jobs. But now Stinson says competition from regions with lower wages and rising ability is just too great.

"More and more those manufacturing jobs that people with a relatively limited education were able to make a good living at are going to be disappearing," Stinson says.

Minnesota has lost 52,000 manufacturing jobs since mid-2000. According to state projections, the state's economy will regain all but 9,300 of those jobs by 2010. But Stinson says achieving that forecast will be a real challenge.

"I hope that we gain back all the manufacturing jobs that we lost over the next few years. Certainly gaining back all but 9,000 would be good, but there aren't any guarantees. This is going to be very difficult. The global environment is much tougher than it was even 10 years ago," says Stinson.

Minnesota manufacturers have added 2,700 jobs since June. Though small in number, that gain continues a trend of Minnesota's manufacturing industry outpacing the sector nationally.

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Image Medical technology preserves jobs

Some of the projected rebound will come from one of Minnesota's strongest sectors, medical device manufacturing. Medical technology companies are forecast to add more than 5,000 jobs by 2010. Some non-medical companies are shifting their operations to take advantage of that strength. Mike Glynn of ICM Plastics in Rogers Minnesota says medical and dental related contracts have grown to 20 percent of sales as the company tries to offset non-medical business lost to Mexico and Asia.

"We have been able to avoid many of the layoffs and reductions in force that our competitors have suffered because of the fact that we've been able to capture new health care and medical related business, and keep those people working on new programs," says Glynn.

According to officials at the trade association Medical Alley, big medical device firms like Medtronic, Boston Scientific, and Guidant are expected to add thousands of jobs in Minnesota in coming years. Medical Alley officials say the industry's average wage is $55,000.

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Image Minnesota's standard of living is at risk

But that's not enough, according to Fred Zimmerman is a professor of manufacturing at the University of St.Thomas in the Twin Cities. "Clearly one of Minnesota's great strengths is medical technology. However, what I fear is that we are thinking that's sufficient. It's excellent that we have it. It's not sufficient, because we need more jobs of that caliber," says Zimmerman.

In Minnesota, he sees too few of companies working on emerging technologies such as hydrogen fuel cells. Abroad he sees tough competition with hundreds of millions of young people coming into the workforce in China and India.

"Their educational standards are increasing; there's a lot of technology over there. They have the benefit of producing a lot of products already that they're exporting," Zimmerman says. "So I think in the long term, we have many things that we have to fix if we expect to sustain the standard of living as Minnesota has known it."

To others the trends are less ominous. Wells Fargo Chief Economist Sung Won Sohn says it's unfair to blame China for all of manufacturing's ills. He says many U.S. jobs depend on customers there.

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Image China gets more than its share of blame

"China is the fastest growing market for us. In fact our exports to china has been growing at the rate of 20 to 25 percent, and I don't see that anywhere else in the world," says Sohn.

Steve Hine, research director of the Minnesota Department of Employment and Economic Development, says the economy is shifting from reliance on manufacturing to service industries, many of which are high paying.

"Much as the shift away from agriculture into manufacturing a hundred years ago was a difficult transition, but one that enhanced our standard of living, we would expect to see the transition from manufacturing to some of these high-skilled and high-paying sectors also do the same," says Hine.

State Economist Tom Stinson agrees Minnesota's economy will increasingly rely on services. And he says the state's economy will remain strong even if manufacturing languishes.

"It's not that the wheels are going to fall off the Minnesota economy. But we have to be prepared," says Stinson. "That [change] is going to be particularly difficult for people who don't have the skills to make the transition to a more high tech, service-based economy."

Stinson says Minnesota needs to focus on protecting its historic advantage, a well-educated, productive workforce.

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