NJ Manufacturing Leaders React to Outsourcing Crisis, Outline Strategy to Create Jobs

Morris Plains, NJ – The Associated Press reports that the United States lost 8 million manufacturing jobs since mid-1979. In New Jersey alone, there were over 270,000 more manufacturing jobs in 1990 than there are now. One of the biggest contributors to these eye-popping statistics: outsourcing. The Department of Labor and Forrester Research Inc. predict that by 2015, over 3.3 million jobs will have moved overseas. Bob Loderstedt, President of New Jersey Manufacturing Extension Program, Inc. (NJMEP), and state workforce experts outline how the outsourcing trend occurred, the economical and societal impact it has on New Jersey and the strategy needed to bring back jobs.

“Outsourcing is a serious issue that affects our state’s economy,” says Loderstedt. “You always read outsourcing stories about economists discussing the loss of American jobs, painting a discouraging picture for our economic future. What you don’t hear is the voice of New Jersey’s manufacturers and their strategy for creating jobs and building a stronger economy.”

Loderstedt emphasizes the importance of strategy because he believes that the lack of a clear manufacturing agenda is what led to the outsourcing predicament in the first place. He states that New Jersey undervalued the manufacturing sector by not investing more in manufacturing effectiveness.

“While we were focusing on developing high-skilled positions in service based industries, our foreign competitors focused on making products,” says Loderstedt. “They invested significant resources into manufacturing and were able to catch up to us pretty quickly.”

Dr. Henry Plotkin, the former Executive Director of the State Employment and Training Commission (SETC) and author of New Jersey In Transition – The Crisis of the Workforce, agrees with Loderstedt.

“We have paid a terrible price for not having a comprehensive manufacturing strategy in place. There should have always been a clear national and statewide agenda on how to maximize manufacturing growth,” says Plotkin. “We over-invested in services, the financial industry for example, but you can’t be a nation that doesn’t make things. Americans have the best ideas, but we’ve shipped them abroad, weakening us economically.”

Dr. Donald Sebastian, Senior Vice President for Research & Development at New Jersey Institute of Technology (NJIT), former Chairman of the R&D Council of New Jersey and founder of NJMEP, echoes Loderstedt’s and Plotkin’s assertions.

“When it comes down to it, Americans found it too easy to outsource. We preserved only our high-end executive jobs because we didn’t have an agenda to maintain a core competency in manufacturing – but that competency is critical to success in the marketplace,” says Sebastian. “A perfect example is the automobile industry; foreign competitors invested in manufacturing effectiveness to create reliable, affordable cars. After they mastered the production, they had the profit margins to change their car styles to suit American tastes and unexpectedly took over not only the high-volume family car market, but the upscale luxury and performance segment.”

While many economists hail an emphasis on high-valued positions to solidify America’s position as a world leader, Loderstedt stresses that this one-track-mind is detrimental to the state’s workforce.

“It’s simply unrealistic to believe that everyone can be in a high-valued position. You need a range of jobs to give people options and drive motivation for growth,” says Loderstedt. “If you only have high-valued work, you are going to be left with a large quantity of people that are left permanently unemployed. It will boil down to an extreme ‘rich versus poor’ society, creating a welfare-state.”

Plotkin concurs and states, “The distribution of wealth is reverting back to the late 1920’s. You need a full spectrum of jobs because if people feel they have no chance of improving their skills and moving up in the workforce, then they’re not even going to try. We need a semi-skilled route to upward mobility which the manufacturing sector provides.”

He recounts a quote from Andy Grove, former CEO of Intel, in the article “How to Make an American Job Before It’s Too Late” to emphasize his point. Grove stated, “You could say, as many do, that shipping jobs overseas is no big deal because the high-value work — and much of the profits — remain in the U.S. That may well be so. But what kind of a society are we going to have if it consists of highly paid people doing high-value-added work — and masses of unemployed?”

Sebastian further explains, “The mentality that a service economy represents a superior model is crippling us. We are led to believe that everyone will enjoy an executive position, but by losing the know-how derived from actually making things, we have traded high-paying jobs with good benefits in the production sector for headcount in retail, seasonal and public sector jobs. We also have lost the leverage unique to manufacturing, where every job produces four more in the private sector.”

Frank Wyckoff, Chairman of NJMEP’s Board of Trustees, agrees and says, “By creating only a society of high-end jobs, we’re losing sight of our American principles. This county was built on the notion that anyone can move up with hard work and dedication. If we don’t have any form of benchmark as motivation, we lose that part of our cultural values. A high-end job may not be the best job for everyone.”

Loderstedt deems this as a crucial, yet overlooked topic in the outsourcing debate. While the continuous outsourcing trend looks bleak, he believes that manufacturing success is essential to revitalizing New Jersey’s job picture. He cites Department of Labor studies which demonstrate that every manufacturing job creates at least an additional four jobs for the economy. Two key issues to Loderstedt’s strategy for a manufacturing resurgence are communication and drive.

“We need to get the word out there to the public that this lack of manufacturing focus has serious long-term implications for New Jersey’s economy,” says Loderstedt. “Business leaders, government officials and the people of our state read the articles and know that something needs to be done, but they already feel like the fight is over and don’t do anything about it. As a state, we need to establish clear manufacturing goals and get people to support our agenda.”

To create more awareness about New Jersey manufacturers, Loderstedt’s NJMEP launched a “Made In New Jersey” campaign to showcase the contributions of state manufacturers. NJMEP dedicates a section of its website called “Made In New Jersey” to products manufactured locally. The organization also created Facebook and LinkedIn groups called “Made In New Jersey” to serve as “Virtual Resource Centers” to discuss how manufacturers can become more profitable, productive and globally competitive.

Sebastian agrees with Loderstedt’s point and says, “We need to change public perception and tell people what’s really going on. Having been to China, I can tell you there’s this artificial impression that their success is based entirely on low-cost labor. This is no longer true; they have modern production facilities that are all highly automated and efficiently run, making the cost of labor a small contributor to the total cost of goods. Where they now excel is in the cooperative effort of business, government and universities to accelerate time to market. We need to do the same and grow this sector.”

Wyckoff adds that part of reinforcing this message is to emphasize the value of American products. “We need to move away from buying commoditized goods based on price. Americans manufacture high quality products, saving us money in the long-run,” he says.

Plotkin urges for more support from state politicians and business leaders. He believes that if we target economic guidelines to help manufacturers, our economy would strengthen.

“We need to restructure our tax policies, help subsidize manufacturers to employ more people and give grants to entrepreneurs to promote new business growth,” says Plotkin. “New Jersey also needs to fix its regulatory environment; it takes so long to implement rules in our state.”

Loderstedt also puts a major emphasis on workforce training. “If individuals are given the right guidance, we can create a more sophisticated manufacturing system while still being realistic with our diversely skilled workforce,” he says. He further believes if we educate the manufacturers of tomorrow by making investments in math and science, we can build a more long-term sustainable manufacturing-based environment.

“America has the talent and ability to rebuild this sector,” adds Loderstedt. “Right now, we are still the No. 1 manufacturing country in the world, out-producing China by more than 40%. Imagine what we could accomplish economically by developing more effective manufacturing objectives. At the end of the day, it’s all about jobs jobs jobs; and that’s exactly what manufacturing can bring back to our state if we emphasize this message.”

Do you have an opinion about Outsourcing and the impact it has on New Jersey manufacturing? Share your thoughts on the Discussion Board in the “Made In New Jersey” LinkedIn Group by clicking here.