Insight: Alabama’s failed job strategy
by Wayne Flynt
Special to The Star
Feb 09, 2014 | 13434 views |  0 comments | 45 45 recommendations | email to a friend | print
Titus Howard, of Birmingham, pulls plastic from fields as he tries his hand at field work in Steele. Howard took on the job in 2011 after migrant workers fled the area because of Alabama’s immigration law. Photo: The Associated Press
Titus Howard, of Birmingham, pulls plastic from fields as he tries his hand at field work in Steele. Howard took on the job in 2011 after migrant workers fled the area because of Alabama’s immigration law. Photo: The Associated Press
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After the “Conservative Democratic Party” “redeemed” Alabama from “black Reconstruction” in 1875, the state followed a straight-line strategy of economic development for nearly 150 years. Keep taxes low. Keep labor unions out. Don’t regulate business. Control labor. If necessary to provide adequate cheap labor, impress citizens into the horrific convict lease system. Don’t worry about educating the masses. Recruit low-wage, low-skill industry that will move plants to the lowest-cost production site. After 1900, sweeten the pot with tax incentives, rebates and job training.

What follows is not a commentary on the Bentley administration. All governors, whether conservative or moderate, Democrat or Republican, have worshipped the same development god. Government officials published the strategy in brochures, promised it to enquiring companies and bragged about it to Alabama voters

At first, the strategy made a certain kind of sense in a state that had prohibited literacy by law between 1833 and 1865 for 46 percent of its population. After that, the state’s low property taxes strangled public schools, especially those enrolling blacks. One piece of Southern white-folk wisdom warned that “education ruins a good field hand and trains up a candidate for the state penitentiary.” Ambitious poor whites and blacks who abandoned cotton fields for coal mining and steel-making jobs in Birmingham and learned industrial skills often lit out for West Virginia, Pittsburgh, Chicago or Detroit, where they could vote, join unions, earn more and provide their children a better life.

But from the perspective of 2014, how did this strategy work? If you believe corporate-development groups and annual reports of the Alabama Development Office and the Alabama Department of Economic and Community Affairs, just fine. Pollina Corporate, a brokerage and consulting firm, listed Alabama fifth among the top 10 “pro-business states” in 2004. In 2013, Area Development Online ranked Alabama third for its labor climate. Site Selection magazine regularly lists the state as one of the top venues in America for locating a new factory. News from the ADO and ADECA is always upbeat because the heads of those agencies have been appointed by governors, and their primary function is to assist them in re-election campaigns, or if they do not run again, spruce up their historical legacy.

Clever people can also manipulate facts. For instance, if an industry announces it will open a plant employing 500 workers, agency computers added 500 new jobs for the year. No matter that site preparation might take two years before any permanent employee operated equipment. By the time the factory opened (think Thyssen-Krupp near Mobile), the steel market may have changed, fewer workers may be needed or a different owner may have purchased the factory. In the case of a Canadian free-wheeling entrepreneur now under indictment, his business gobbled up Alabama tax incentives to build a plant but never hired employees to make the rolling stock promised in the deal. As troubling as changing conditions and unethical businessmen, statistical sleight-of-hand (list new jobs without subtracting old jobs lost) is just as bad.

Read the annual number of new jobs announced by two governors between 2000 and 2010 and you will cheer them. Look back from 2014 and learn that Alabama lost nearly 100,000 manufacturing jobs (one-third of the total) during that decade, and you are not so sure.

The answer is complex. Baby-boomers retired and companies replaced them with technology. Companies took tax incentives and rebates, then departed for the Caribbean, Latin America or Asia when Alabama turned off the spigot. Industries (notably apparel and textile) that closed or “outsourced” employed tens of thousands of low-wage, semi-skilled, poorly educated workers, while new auto factories that replaced them required fewer, better educated employees. Add the new and subtract the old, and you often have a net loss of jobs.

To find a different take on our “success,” read Census data and information from the Bureau of Labor Statistics, one of those federal agencies Alabamians love to hate but which provide factual data without a political agenda. If Alabama’s 150-year-old economic development strategy worked, surely we would know it by now. Yet the new technological, global economy that we have entered is moving much faster than Alabama’s skill sets and education, threatening to strand us in the backwaters of a vast economic sea.

Here is some evidence. In March 2004, 1,876,600 Alabamians had jobs. By October 2013, nine years later, Alabama had gained only 9,000 jobs. In 2011, Alabama’s gross domestic product (all goods and services produced) fell by 0.8 percent, the third-worst performance of any state. On Dec. 27, 2013, the Bureau of Labor Statistics listed Alabama 49th in job creation for the year. What follows is a sample of headlines from AL.com’s business news: “Alabama ranked 47th in high-skill, high salary, knowledge based economy” (November 2011); “Alabama is a low-wage trap” (August 2012); “State economy ranked worst in Southeast” (October 2012); “Alabama behind U.S., southern states in Census Growth Estimates”(August 2012); “State lags both in quantity, quality of new positions created” (September 2013); “South Carolina passes Alabama in total jobs” (January 2014).

A Georgetown University study found that Alabama relies too heavily on low-skill, low-wage jobs: 47 percent of our jobs require only high school or less. By 2020, the study estimated that 53 percent of these jobs will require a college degree (compared to 65 percent nationally). Among 17 Southern and border states, plus the District of Columbia, Alabama ranked third in jobs for high-school dropouts and 15th in jobs requiring college degrees.

Yet, we persist in illusions. When competing for 8,000 new high-skill jobs in a Boeing factory, our congressional delegation dipped into our 150-year-old development strategy one more time: “We … hope you will remember that North Alabama’s hospitable business environment includes decades of high-tech aerospace expertise, low taxation and cost-of-living, a rational regulatory regime, right-to-work laws, low utility rates and excellent infrastructure.”

If we have been correct for the past century and a half, why did Boeing locate its facility in Seattle, one of the highest taxed, most unionized, environmentally regulated, politically liberal, culturally and ethnically diverse, religiously tolerant and well educated places in the nation? Subtract another 35,000 jobs that UAB and University of Alabama economists say would have resulted from Medicaid expansion, and it’s obvious that Alabama principles have Alabama consequences.

Wayne Flynt is Distinguished University Professor Emeritus at Auburn University.
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Insight: Alabama’s failed job strategy by Wayne Flynt
Special to The Star

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