EDC’s need to put aside competitive differences and collaborate to pool resources
Texas Border Business –
While there is a great deal of discussion about bringing manufacturing jobs back to the USA, we have seen only modest employment growth in this sector across the country. There are factors in China that equalize some of the costs, such as rising labor rates, skilled labor shortages, theft of intellectual property, quality issues, inventory and transportation costs.
In Texas we have some tremendous advantages over much of the rest of the USA. Our abundance of low cost natural gas drives low electricity rates and low raw materials costs for the chemical and plastics industries. Our status as a right-to-work state means we have reasonable labor rates.
Here in the RGV, we have all of these plus an even better resource: our proximity to Mexico. While we will never see the return of the huge numbers of low to middle-skilled assembly jobs due to the lower labor costs in Mexico, we do have an opportunity to develop our region as a supplier base to the huge manufacturing industry in Mexico. Some EDCS have been recruiting suppliers to our region for years, promoting security on this side of the river, our reasonable labor costs, low utility rates, and the quality infrastructure found in the RGV.
There are several barriers to capitalizing fully on this strategy: perceptions about violence in the region, availability of a skilled workforce, and the high risk a company takes when they invest in a new facility to service one primary customer.
In the aftermath of the 2008 recession, we lost over a dozen manufacturing plants in a two-year period here. The downturn was the trigger, but the difference between the survivors and those who folded was often how well diversified the company’s customer base was. Most of those that failed were depending on a single primary customer in Mexico for their business.
I hear from many Maquila managers that they are putting tremendous pressure on their suppliers to set up operations here. I know of two companies who have over 200 different manufacturers between them that they are asking to relocate closer to their México operations. Most of the new plants we have seen come to the area located here because they were “encouraged” to do so by their customer. The suppliers, on the other hand, are reluctant to take the risk to serve only one customer.
If we are going to capitalize on this opportunity, three things need to happen:
RSTEC, the Rio South Texas economic council, was formed to recruit relocation prospects to our region. The perception that our streets are dangerous and crime is rampant here has become a barrier to recruitment, so RSTEC has invested in a national marketing campaign to counter some of the negative stereotypes the national media has directed at our area. The rest of the nation needs to understand that we do not have machine gun fights going on in our streets and that our crime rates here are much lower than most MSA’s our size.
Our industry must work together to find a way to offer a compelling case to our young people as to why they should choose to work in the manufacturing sector. The South Texas Manufacturing Association (STMA), with the help of our regional workforce boards, is gathering employment, wage, and benefit data to share with area Independent School Districts (ISD) and colleges to encourage more bright young people to enter the widely diversified manufacturing sector. Our industry cannot continue to keep our heads down and quietly make widgets, and then wonder why we cannot find the talent we need. Plenty of other sectors are getting all the headlines!
Our area EDC’s need to put aside their competitive differences and collaborate to pool resources and information to help identify the aggregate needs of the region’s Maquila industry for component manufacturers and suppliers, do targeted outreach to encourage them to relocate here, and assist them by providing leads to identify potential new customers in México. New customer leads; joint ventures, or other partnership arrangements could be the difference in helping a company locate to our area instead of staying where they are. I know that several of the larger area EDC’s have been pursuing these strategies individually, but there needs to be more regional collaboration. The recently formed United Brownsville organization was created to do that if I understand their mission correctly. They have correctly identified the opportunity, now there is a need to get the “regional collaboration part” up and running.
The South Texas Manufacturers Association (STMA) is working with our Workforce Solutions boards, education community, RSTEC, NAAMREI, and area EDC’s to support any and all regional collaboration efforts that are underway. This may be the only shot we have at truly growing the number of manufacturing jobs here, and we need to capitalize on the opportunity by working together to help our region.
Of course we should continue to develop healthcare, education, and other already-growing sectors, but if we do it right, over the next ten years we can diversify our own economy and add a lot of new, high skilled, high paying manufacturing jobs to benefit all cities in the region.
Mike Willis has been Executive Director of the South Texas Manufacturers Association since 2003. He also serves as the Vice President of the Office for Business Partnerships at Workforce Solutions, the regional Workforce Development Board serving Willacy, Starr, and Hidalgo Counties in South Texas. You can reach him at MikeW@WFSolutions.org TBB
