Report compares CR, Waterloo recoveries from manufacturing losses

By Dave DeWitte

The list of manufacturers that have closed in the Corridor over the past few decades is a long one.

Rath Packing, Goss Graphic Systems, Terex Cedarapids, Farmstead, FMC, Midland Forge and Harnischfeger are only a few of the many names rarely spoken in the Corridor anymore. Each plant closing rewrote the careers of hundreds of employees, and etched away some of the economic vitality of the region.

It’s a story that’s been repeated across the Great Lakes region, where industrial jobs are down by 50 percent since 1969. The region suffered so many factory closings in the 1980s that it became known as the Rust Belt.

Iowa’s industrial cities were left with similarly tough choices, such as what to do with vacant industrial sites and where to turn in order to replace the lost income, tax base and supply demands of the closing industries.

More than four decades after the trend began, it’s now clear that some cities in Iowa and elsewhere are adapting to the challenges of industrial decline better than others.

The Industrial Cities Initiative, an ongoing study by the Federal Reserve Bank of Chicago, examined 10 of the cities in its five-state region with 50,000 people or more that have sustained major losses in manufacturing.

As part of the study, in-depth profiles of the 10 cities were released by the Chicago Fed in June. The profiles compare how the cities are recovering in terms of population, household income, unemployment and other measures to how they would be expected to recover based on the number of manufacturing jobs they lost. It found stark differences in how cities are responding to the challenges.

Cedar Rapids was highlighted as a “resurgent city.” Measures of well-being, such as graduation rates, population and income, have fared better in these cities than predicted, based on the factor of jobs lost. Fort Wayne, Ind.; Grand Rapids, Mich. and Green Bay, Wis., also are in the resurgent category.

At the other end of the spectrum are Gary, Ind., and Pontiac, Mich., categorized as “overwhelmed” cities. With sharp declines in population and household income, they’ve fared even worse than the losses in manufacturing jobs would predict.

In between are four other cities that are neither sinking nor racing ahead. Waterloo, along with Racine Wis., is categorized as a “fading city,” based on both smaller declines in manufacturing and measures of well-being than the trend would predict.

The Chicago exurbs of Aurora and Joliet, Ill., are tagged as  “transforming” cities, with improvements in measures of well-being despite relatively larger declines in manufacturing employment.

Jeremiah Boyle, the project manager for the Fed study, said industry shifts and factory closings were telling most industrial Midwestern cities that they needed to diversify their economies at least 30 years ago, but differences in their pursuit of and success in reaching that goal remain clear.

One of the more dramatic findings of the report was that the communities with the greatest job creation didn’t necessarily see the broadest improvement in measures of well-being.

“In some cases, the cities with the highest job creation also had highest increases in poverty and highest increases in crime rate,” Mr. Boyle said. Job creation may at times mask an underlying hollowing out in the economy, such as fewer jobs that offer benefits and a living wage, or jobs that benefit only a certain educated segment of the community, Mr. Boyle noted.

Indeed, all jobs are not created equal. In a profile of Cedar Rapids, the study noted that the largest single employment category by jobs is “food services and drinking places,” with nearly 8,000 employed. The category has the lowest hourly median wage of any occupational category, so rapid growth in such jobs might not be matched by improvements in overall well-being.

Mr. Boyle said the Fed wants to present its findings in the communities that were studied in order to engage leaders to see where they want the project to go next. A meeting is tentatively scheduled for Nov. 6 in Cedar Rapids.

Workforce development seems to be one area where the cities see potential benefit in sharing knowledge, Mr. Boyle said. They want to find answers to questions such as how to get young people interested in manufacturing careers again, and how to get more of their young people to complete two- and four-year degree programs.

Another area of interest is how to make sure economic development programs are inclusive, so that all segments of the population benefit.

Iowa cities react

Waterloo Mayor Buck Clark took issue with the study’s classification of Waterloo as a “fading city” that remains heavily reliant on a single industrial employer, John Deere.

“Certainly we rely heavily on John Deere. Manufacturing is a big part of our community and our economic community. We have done amazing things here to augment our manufacturing industry with tech industry,” said Mr. Clark. He called the fading city label “disconcerting.”

The report’s profile of Waterloo noted that jobs in the surrounding county are concentrated in machinery manufacturing, the category that includes most of John Deere’s workers. Yet employment growth in that industry is projected to remain flat.

The report’s findings took on added significance last month when Deere announced plans to lay off 460 workers in Waterloo due to the slowdown in agricultural equipment sales.

Mr. Clark also thought that the report, in noting weakness in the city’s high school graduation rate, might not be up to date with the Waterloo school system’s progress in that category, although he acknowledged that Waterloo has lagged neighboring Cedar Falls.

“So many of the things they mention are exactly what we are doing,” Mr. Clark said, when told of the economic development strategies outlined in the report. He cited leadership training initiatives in Waterloo schools as one example of how the community is preparing a better workforce for employers.

The Cedar Rapids Metro Economic Alliance was pleased with the praise Cedar Rapids received in the Fed report for its regional approach, unified leadership and workforce development system that is closely aligned with the needs of employers. The report also called attention to the above-average level of citizens who have college degrees or some college completion, and high school graduation rate.

“We noted the importance of leadership and having a shared vision,” wrote Dennis Jordan, vice president of economic development for the alliance, in an e-mail. “It reinforced the importance of thinking regionally and globally as Iowa’s Creative Corridor.”

The alliance is mindful of the importance of being inclusive and welcoming to all members of the community, Mr. Jordan noted.

The report found that Cedar Rapids is 88 percent white, and highlighted large income and poverty rate discrepancies between whites and minorities. Fed researchers also reported a level of concern among larger businesses in Cedar Rapids that have diverse workforces as to whether their minority employees feel comfortable living in the community.

The Greater Cedar Valley Economic Alliance & Chamber did not respond to a CBJ inquiry about the report. The report said the group is among those working toward a more regionalist approach to economic challenges in the region, but cited a number of barriers to regionalism that came up in interviews with local leaders, such as a tendency among local communities to compete with each other for jobs rather than cooperate to attract businesses.

Mr. Boyle said the findings in the city profiles were intended as observations gathered from interviews rather than conclusions. He said the cities are on a continuum of progress in adjusting to the manufacturing job losses, except Gary and Pontiac, which he described as “outliers.”

As its steelmaking industry fell into decline, Gary lost more than 50 percent of its population from 1970 through 2010. Pontiac’s population plummeted 30 percent as its auto industry faded and the city’s government, struggling to fund its operations and debt, went into receivership in 2009.

“They stayed in the end with what turned out to be a dying industry,” said Mr. Boyle.