The Pilot Editorial

Thursday, July 24, 2003

Maquiladoras hurting Iowa

Out in the Storm Lake industrial park, there's a nice spec building that's done nothing but collect dust for several years, despite strong and consistent efforts by the Storm Lake Area Development Group to attract good new companies to the area.

During the same period, about 10 entire new industrial parks and hundreds of industries have exploded across the border in Reynosa, Mexico. And yet, needy expats from Mexico flock to Storm Lake in search of better jobs, better futures and better schooling.

Perhaps that doesn't make good sense, but it isn't so hard to figure out when you begin to look at the numbers.

Workers in the Mexican plants operated by U.S. companies get paid about $2.60 per hour, including all the "benefits," such as they are. In the midwestern U.S., the same companies would have to pay an average of $15 or more per hour in wages, insurance, retirement programs, government withholdings and so on.

So it really is all about the Benjamins. It certainly isn't a great love for its workers that makes companies flee Iowa for Reynosa. The product isn't better, and those old axioms about companies looking for places with great schools, nice streets and well-cared-for natural resources is thoroughly disproven.

Iowa-born Maytag has already moved two parts plants to Reynosa, and will soon move its Galesburg refrigerator factory operations there, too. The company, a classic American nameplate, has, according to one union spokesperson and former Maytag worker, "sold the soul of their name to the lowest bidder."

One can well argue for the necessity of such a move. Maytag quarterly earnings had plunged, and hundreds of jobs have been eliminated in the stagnant U.S. economy.

Such companies will benefit from labor costs that in this country would be considered slavery. I wonder, however, if consumers will see any of the savings. If wage costs are cut to less than a fifth with Mexico workers, will a $2,000 fridge now cost us under 400 bucks? Don't hold your breath...

It isn't just Maytag, of course. In Reynosa alone, there are about 204 companies that have already made their exodus from the U.S. to grab up poverty-stricken available workers. Whirlpool, Black and Decker and many other "All-American" names now go by another name, "maquiladoras" - the Spanish term for companies from outside Mexico that are taking advantage of special government programs offering cheap taxes, comparatively little business regulation, and low-cost labor.

Iowa Workforce Development officials figure Iowa has lost close to 1,500 or more jobs just since 1999 to factory foreign relocations.

Storm Lake has its fair share or better of economic development arrows in its municipal quiver. It does have strong infrastructure, good schools and higher education, a high quality of living, available sites, progressive local governments willing to do their share to help new companies get settled, the ability to attract workforce with a strong work ethic from a considerable area.

Not so long ago, our biggest problem was a shortcoming in four-lane transportation for industry. Now, with the outlook finally, FINALLY, perhaps is looking up for Highway 20 completion, the competitive challenge changes for Iowa cities.

We can compete with other communities anywhere. But how do we compete against a seemingly unlimited supply of people who will work for $2.60 an hour with almost no benefits?

Perhaps consumers will eventually come to recognize and demand products made in our own country. Perhaps the government will get wise to the exodus and adopt regulation making it less attractive for factories to jump the border. Or perhaps the other countries will realize the companies are using them and will eventually start to demand more taxes and minimum wages for their workers as well.

In the meantime, places like Storm Lake have realized that mining for big factories isn't the way to do business anymore. We have to incubate new business, look to assist expansion of our existing local companies, aim at entrepreneurial development.

That isn't all bad, folks. Our employment is strong and steady, averages wages pretty good. We don't need the smokestacks. And for more than a few immigrants from south of the border who should know, life looks better in Storm Lake, no matter how many American companies throw up factories in Mexico.