State settles for luring low-wage jobs

So many people need jobs that officials are compromising on state standards.

Staff WriterSeptember 19, 2010 

  • 7,342

    New jobs announced by Gov. Bev Perdue's office in 2009 and 2010 that pay below the county average

    70

    Comparable figure

    for 2007 and 2008

  • North Carolina's state economic incentives require companies to meet job creation and investment measurements to qualify for the funds. The following companies were awarded grants this year for creating jobs that are expected to pay below the average for the host county. The salaries indicated are averages for each company. The incentives listed are only those offered by the state.

    Company, industry

    Incentives

    Jobs

    Avg. pay

    County average

    ACW Technology,

    electronics

    up to $50,000

    155

    $33,457

    $57,772 (Durham)

    Pierre Foods, meats and frozen sandwiches

    up to $600,000

    500

    $26,467

    $32,500 (Catawba)

    Harvest Time Bread, baker

    up to $100,000

    38

    $25,790

    $28,392 (Surry)

    Hewitt Associates, human resources consultant

    up to $4 million

    463

    $43,600

    $48,776 (Mecklenburg)

    Albaad USA, wet wipes

    up to $350,000

    95

    $21,820

    $30,474 (Rockingham)

    United Furniture Industries NC

    up to $125,000

    150

    $29,032

    $29,640 (Davidson)

    Greiner Bio-One North America, medical devices

    up to $100,000

    51

    $28,000

    $33,020 (Union)

    MasterBrand Cabinets

    up to $200,000

    334

    $25,787

    $28,704 (Lenoir)

    Advanced Textile Solutions, military apparel and aircraft seats

    up to $127,000

    127

    $19,111

    $28,340 (Caldwell)

    WhiteRidge Plastics,

    plastic parts

    up to $45,000

    55

    $21,867

    $30,472 (Rockingham)

    IBM, software and services

    up to $7.79 million

    600

    $50,000

    $57,772 (Durham)

    C.M.I. Enterprises, automotive fabric and trim materials

    up to $33,000

    53

    $22,528

    $26,624 (Rutherford)

    Becton, Dickinson and Co., medical devices

    up to $600,000

    187

    $28,771

    $31,408 (Johnston)

    Ethan Allen Operations, furniture

    up to $270,000

    90

    $26,645

    $27,768 (McDowell)

    Caterpillar, construction equipment

    up to $4.06 million

    485

    $35,602

    $36,504 (Lee)

    Medicago, vaccines

    up to $128,000

    85

    $50,229

    $57,772 (Durham)

    Kleen Tech, environmental cleaning

    up to $54,000

    30

    $25,884

    $28,964 (Burke)

    Baltek, wood materials

    up to $204,000

    68

    $37,817

    $38,116 (Guilford)

As the economic downturn has dragged on and unemployment rates have remained high in many parts of the state, a degree of desperation has begun to take hold among state and local officials charged with putting people back to work.

Standards for evaluating new economic development projects are being lowered, and corporate incentives are being awarded to companies that wouldn't receive them in better times.

About a third of the jobs announcements made by Gov. Bev Perdue's office this year have involved companies that pay wages below the average for the county receiving the business, including a handful that came nowhere near that mark.

That's up from about 20 percent for all of 2009. By comparison, in 2007 and 2008, just one such announcement was made by Gov. Mike Easley's office.

In May, the state gave incentives to a company paying less than $20,000 a year, not including benefits.

This trend is adding another layer of debate to a practice - corporate incentives - that already has its fair share of critics.

It's also raising questions about whether state and local officials, in their rush to put people back to work, are setting a precedent that could depress wages and damage the economy for years to come.

State officials acknowledge that standards have been loosened but say the change is temporary and necessary.

"It is a function of the economy and that every job right now is precious," said Keith Crisco, the state's secretary of commerce. "It was precious before, but it's even more precious today."

Crisco said the state looks at a number of factors when evaluating a project, including wages, and has turned down several this year that didn't measure up.

The 'downward race'

Critics of some of these deals, however, say that if taxpayer money is involved, the company should be required to meet certain minimum standards, whether it be wages, health insurance or some other measurement.

"Otherwise, essentially, all you're doing is taking taxpayer money to subsidize low-wage jobs that may not help a family really make ends meet," said John Quinterno, principal for South by North Strategies, a Chapel Hill research firm specializing in economic and social policy. "Is that what we want public policy to do? It becomes this sort of downward race, and we're constantly ratcheting the standards down."

Most economists predict that wage growth will be modest in the coming years except for in a handful of industries.

Among the problems facing the labor market today is that the recession has shown that the country has a mismatch between the skills of people who are unemployed and the skills required to do the higher-paying jobs being created, said Michael Walden, an economist with N.C. State.

For the wider economy, which relies heavily on consumer spending, the longer wages remain depressed, the longer it will take to recover.

"If consumers aren't spending at normal rates, the economy's not going to grow at normal rates," Walden said.

Stagnating wages

Even before the recession, wages in many sectors of North Carolina's economy had stagnated. That was particularly true in manufacturing, where companies have increasingly found themselves competing with cheap labor in China and elsewhere.

The median hourly wage for workers in the state was $14.95 in 2009, or just 60 cents higher than it was in 2000, according to the Economic Policy Institute in Raleigh.

The recession has accelerated that trend, even in the Triangle where there is a much higher percentage of high-skilled workers and jobs. Wake, Durham and Johnston counties all saw their residents' personal incomes decline from 2007 to 2008.

The average annual wage in the Raleigh-Cary area was $43,370 in May 2009, slightly below the national average, according to the Bureau of Labor Statistics. In Durham, the average was $50,480.

Judging a job simply based on the wages it pays has become increasingly difficult in today's economy, as is evidenced by the case of ACW Technology, a British contract manufacturer that makes printed circuit boards and other electronic systems.

Cary officials declined to offer the company incentives, citing worries about lowering the town's median salary, which is just under $47,000.

Durham had no such worries.

The city of Durham and the state awarded ACW $120,000 in incentives in January after the company said it would open a manufacturing plant and create 155 jobs. The average annual wage for the jobs is $33,457, well below Durham County's average of $57,772.

Any job is a good job

ACW has since received more than 500 résumés and hired 29 people, among them Latisha Williams of Raleigh.

In January, Williams was laid off from Flextronics, another contract manufacturer that has been closing U.S. manufacturing plants and moving production to the Far East. She had been working as a temporary employee with no benefits for nearly two years.

"I'm not making nearly what I was making at Flextronics, but I can support my daughter, and I have full benefits," Williams, 28, said of her new job. "You can't complain. It's a job."

Other ACW hires expressed similar sentiments - they were happy to take a lower salary in exchange for more job security and a good benefits package.

Crisco noted that the state isn't in a position to demand that a company pay significantly more than what the going rate is in its industry.

Complicating matters is the fact that while few jobs have been created in recent years, those that are being created tend to be concentrated in low-paying industries.

According to a recent report by the National Employment Law Project, about a third of the jobs the country lost during 2008 and 2009 occurred in industries that pay below $15 an hour. This year, those same industries have accounted for 76 percent of the new jobs created.

Rockingham's choice

Rockingham County, along the Virginia border about 110 miles northwest of Raleigh, has been the site of two incentives grants this year where companies are paying less than $22,000, not including benefits. The Rockingham County average is $30,474.

The county had for years insisted on only offering incentives to companies that exceeded or came close to the county average, said Graham Pervier, president of the Rockingham County Partnership for Economic & Tourism Development.

But Rockingham's unemployment rate was above 12.5 percent in April and May when the projects were announced. The county has seen a number of its manufacturing plants close in recent years, including a Hanesbrand yarn plant in Eden that employed 600 people.

"The situation got pretty dreadful the last couple of years," Pervier said.

The situation is similar in Caldwell County, where state and local officials awarded incentives to a company that is paying $19,111, which is nearly $10,000 below the county average.

It's hard to say no

Caldwell County, about 200 miles west of Wake County, has been bleeding jobs in furniture manufacturing for years. It had a 16.3 percent jobless rate, one of the highest in the state, when the incentives deal was announced in March.

The company that received the incentives, Advance Textile Solutions, makes military apparel and seat cushions. It took over a factory that had recently shut down and hired back many of the workers at similar wages, said Harry Whalen, executive director of the Caldwell County Economic Development Commission.

Whalen said that in this economic environment, it's difficult to say no to companies.

"The great buffalo hunt's over, and it's been replaced with communities competing for fewer projects," he said. "The driver here is that unemployment rate. Now we want good jobs, but we're also here to get people back to work in some capacity."

Quinterno said he worries that economic development officials always seem to find a way to say why a project is unique and necessary. Over time, he said, those unique situations become the norm.

Crisco said the state needs jobs, even at the risk of setting a bad precedent.

"As long as we are aware of that and conscious of it and we understand that when things get better we've got to go back to our old standard, we'll be OK," he said. "The risk of not doing it and not addressing unemployment is greater."

david.bracken@newsobserver.com or 919-829-4548

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