The final nail in the coffin of the printing industry's advanced technology center was driven last week when Waukesha County Technical College (WCTC) ended its relationship with the Institute on Graphics and Imaging just 2 ½ years after it began. The $4 million publicly funded building will no longer be a printing industry research and technology center. It will now house regular WCTC classes and services.
The failure of this taxpayer funded facility to generate economic growth, research and development, job creation or training should be a warning to those who have uncritically supported the M7 Water Council's water cluster initiative.
The rhetoric and promises of printing and water cluster advocates are startling similar. Wisconsin is alleged to house a vibrant cluster of printing and water technology companies. Industry success requires public investments in R and D to support these firms. The result: Southeastern Wisconsin will become another Silicon Valley.
In both cases, the drive for public investment has been championed by industry CEOs, justified by industry financed studies and uncritically supported by the local media.
In 2004 the Milwaukee Business Journal, for example, enthusiastically proclaimed:"Wisconsin's printing cluster leaders continue to support a move to make the area the 'Silicon Valley of printing.' The centerpiece of that plan calls for a 27,000-square-foot applied technology center at WCTC...The proposed center...would serve as the hub for a printing industry cluster...."
The printing technology center was first proposed in language that parallels the rhetoric of today's water cluster advocates in the Wisconsin Printing Industry Cluster report to the state's Economic Summit III in 2002:
“With high-pay jobs, several market- leading companies, significant private sector R&D, and a steady supply of skilled workers from technical and baccalaureate colleges, the Printing Cluster is well positioned to continue as a major driver of the Wisconsin economy.”
The Council’s recommendation mirrored the M7 Water Council's push for UWM's fresh water research to be industry focused: "“Since the presence of R&D units is critical for the success of any knowledge-based industry, one of the colleges or universities should establish an R&D capability."
"...The Printing and Graphic Design Center, which is staffed by WCTC and UW-Stout, is one logical site for an applied R&D center."
The Printing Industry Cluster like water cluster advocates also argued that establishing a publicly funded research and development technology center would help attract additional R and D activity to the state. “PIW (Printing Industries of Wisconsin) and its members should lure the R&D operations of printing trade associations to Wisconsin...These R&D operations could obtain critical mass if combined with a college technical capability and support from private companies in R&D consortiums."
One of the printing industry cheerleaders was Milwaukee Journal Sentinel weekly business columnist John Torinus who also owns Serigraph, a West Bend printing company. He championed the center as "infrastructure …established to support the (printing) cluster.” Torinus, in a column that sounds errily similar to current promises by water cluster advocate and Badger Meter CEO, Rich Meeusen, even promoted the notion “that our growing muscle in the industry cluster could result in Wisconsin becoming ‘the Silicon Valley of printing.’"
The failure of the printing clusters' advanced technology center is a warning that policy makers should not rely on industry financed research and CEO anecdotes to develop economic development policy.
CEOs and business association spokesman have good reasons to try to externalize the costs of their firms' and sector's technology development, research and training. Most importantly it reduces their costs and increases profits. But it violates the fundamentals of market economics. Without significant skin in the game, business leaders have no incentive to minimize risky investments.
Industry financed research is unreliable. For generations the tobacco industry funded studies that denied any link between smoking, cancer and heart disease. Oil companies have financed climate change denial research in order to defeat legislation designed to reduce fossil fuel consumption. Industry financed research promoting sectoral strategies raises similar conflict of interest issues. Before public dollars are invested in a particular industry, citizens should insist the analysis and strategies be validated by independent research.
None of this means that UWM's efforts to establish a School of Fresh Water Sciences is misguided. Given the college's proximity to Lake Michigan, the importance of the Great Lakes, UWM's leadership in fresh water science and the wide range of fresh water scientific and policy issues, the School of Fresh Water is an important initiative. Nor is it an argument against developing a coherent and strategic industrial policy.
The demise of the printing industry's advanced technology center is a warning that policy makers should not allow private firms or the corporate community to define the School of Fresh Water Sciences' research agenda and scope of inquiry. That is the responsibility of the Fresh Water school's faculty and staff. And it is a warning to all of us to examine any industry spokeman's claim that taxpayer assistance is all that is needed to create another Silicon Valley.
Showing posts with label economic development. Show all posts
Showing posts with label economic development. Show all posts
Thursday, December 17, 2009
Tuesday, December 1, 2009
Wave district proposal is bad economics
Badger Meter CEO Richard Meeusen recently proposed that the city offer water free to firms that relocate to the area. The concept has been endorsed by the Milwaukee Journal Sentinel editorial board and Milwaukee Mayor Tom Barrett. According to the Wall Street Journal the city is preparing an application for the Wisconsin Public Service Commission that would offer reduced water rates for up to five years to businesses that bring in at least 25 jobs.
This is very bad idea based on a fundamental misunderstanding of economic principles.
Proponents of “wave districts” are right that Milwaukee has a competitive advantage in reliable water. It’s the result of the city’s location and years of public investment. Climate change is making Milwaukee’s water even more valuable as UWM economics professor and department chair, William L. Holahan, has documented in his paper, "Reliable Water Supply: Milwaukee's Comparative Advantage."
Milwaukee’s competitive advantage in water makes it attractive to businesses that need reliable sources of water such as bottling plants that are relocating from cities in the southeast and southwest that are plagued by water shortages.
But if Milwaukee truly has a competitive advantage in water reliability, there is no reason to reduce its price or give it away. No business firm would cut its price in response to increased competitive advantage. In fact, it is standard for business firms to raise their prices, not reduce them, when their competition is "drying up." Badger Meter certainly wouldn’t cut its prices if a major competitor went under. So why should the city of Milwaukee?
Rather than providing water hungry-firms with windfall profits by cutting the city’s nationally low water rates to zero, Milwaukee should use its competitive advantage in reliable water to attract water hungry-firms and invest the revenue generated through increased sales of water in other public goods that benefit all of the city’s citizens and businesses, like our schools, employment and training programs, parks, transportation and communications infrastructure, or in property tax relief.
The economic attractiveness of the city depends on its quality of life, its schools, parks, streets, public health, safety and tax rates among other things. Milwaukee badly needs revenue to invest in these attractors in no small part because shared revenue from the state has declined by almost 25% over the past decade.
The Milwaukee Water Works is an asset of the city, paid for by rate-payers, and its value must be maximized for the benefit of the city, its residents and employers. Proper pricing and investment of water revenue is a key to maximizing the value of the city’s competitive advantage in water reliability. Establishing “wave districts” will not contribute to this objective or enhance the city’s competitiveness.
This is very bad idea based on a fundamental misunderstanding of economic principles.
Proponents of “wave districts” are right that Milwaukee has a competitive advantage in reliable water. It’s the result of the city’s location and years of public investment. Climate change is making Milwaukee’s water even more valuable as UWM economics professor and department chair, William L. Holahan, has documented in his paper, "Reliable Water Supply: Milwaukee's Comparative Advantage."
Milwaukee’s competitive advantage in water makes it attractive to businesses that need reliable sources of water such as bottling plants that are relocating from cities in the southeast and southwest that are plagued by water shortages.
But if Milwaukee truly has a competitive advantage in water reliability, there is no reason to reduce its price or give it away. No business firm would cut its price in response to increased competitive advantage. In fact, it is standard for business firms to raise their prices, not reduce them, when their competition is "drying up." Badger Meter certainly wouldn’t cut its prices if a major competitor went under. So why should the city of Milwaukee?
Rather than providing water hungry-firms with windfall profits by cutting the city’s nationally low water rates to zero, Milwaukee should use its competitive advantage in reliable water to attract water hungry-firms and invest the revenue generated through increased sales of water in other public goods that benefit all of the city’s citizens and businesses, like our schools, employment and training programs, parks, transportation and communications infrastructure, or in property tax relief.
The economic attractiveness of the city depends on its quality of life, its schools, parks, streets, public health, safety and tax rates among other things. Milwaukee badly needs revenue to invest in these attractors in no small part because shared revenue from the state has declined by almost 25% over the past decade.
The Milwaukee Water Works is an asset of the city, paid for by rate-payers, and its value must be maximized for the benefit of the city, its residents and employers. Proper pricing and investment of water revenue is a key to maximizing the value of the city’s competitive advantage in water reliability. Establishing “wave districts” will not contribute to this objective or enhance the city’s competitiveness.
Friday, July 24, 2009
School of Freshwater Sciences should stimulate revitalization
The Journal Sentinel editorial board continues to shill for locating the UWM School of Freshwater Sciences on prime Lake Michigan shoreline between Discovery World and the Milwaukee Art Museum.
By equating support for the Lake Michigan site with support for the research facility the editorial board is misrepresenting this important locational discussion.
At the Board of Harbor Commissioners public hearing opponents of the former Pieces of Eight location (who numbered supporters by more than 2 to 1) were clear that they supported UWM's effort to establish a School of Freshwater Sciences. Their opposition was to locating the proposed 50 thousand square foot building on prime lakefront property.
Alderman Tony Zielinski was particularly eloquent in suggesting that UWM and the Commission be more strategic in their location of the new school, urging that the investment be used to help revitalize a less pristine waterfront area south of downtown.
Proponents of the Pieces of Eight site like Badger Meter Honcho Rich Meeussen argue that other cities closely tied to a specific industry all boast bricks-and-mortar structures to denote their status. He told a meeting of area business executives that Paris has the Louvre Museum as the centerpiece for art, New York City has the Broadway theater district as the focus of its theater business and Nashville can point to the Grand Ole Opry as the home of country music.
There are more than a few problems with this position.
Milwaukee's identity is not defined by ties to water companies as Meeusen argues. Our commercial identity remains more closely associated with beer, Harley Davidson motorcycles, advanced manufacturing and our now defunct hometown airline. Our city's baseball team is not named the Badger Meters or even the Lake Perch, but the Brewers!
Following Meeusen's logic we would absurdly urge MillerCoors or at least one of our signature microbreweries to relocate to the lakefront.
Meeusen's proposition that the community lacks a signature building is also dead wrong. The Art Museaum designed by the internationally renowned Santiago Calatrava is that signature building. It provides Milwaukee with a soaring aesthetic identity that promotes both the city and Lake Michgan. Locating a 50,000 square foot building near it would, as others have pointed out, detract from its unique relationship to the lake, sky and shore.
Meeusen has been honest that he wants the prime lakefront property location to hawk his firm's meters to out of town corporate clients. What better site than Milwaukee's lakefront with the signature Calatrava as background?
But that ignores two crucial questions. First, should the lakefront be devoted to marketing a private firm's products? The answer is obviously no which is why Meeusen has tied his wagon to the public mission of the UWM School of Freshwater Sciences.
But that raises the second question-does UWM need a 50,000 square foot building if its goal is to conduct fresh water research and graduate education. The answer is a resounding no. That's why half the facility is designed for water product displays.
Meeusen dubious goal is to use the state's bonding authority to subsidize the sale of his firm's merchandise. Public use and control of lakefront property should not be sacrificed for that narrow private objective. Nor should the public's bonding authority be devoted to boast Badger Meter's share price.
Support for a School of Freshwater Sciences does not dictate support for the former Pieces of Eight property. The question the public needs to ask and UWM needs to respond to is where will Milwaukee get the biggest bang for its School of Freshwater Sciences investment buck?
Twice in recent years the City has allowed narrow business interests to dictate public investments that undermined their catalytic economic impact. Miller Park was built in a isolated concrete jungle off I-94 rather than downtown. Other cities like Cleveland and Baltimore more wisely located new stadiums downtown to capture the ancillary economic benefits. More recently UWM made the decision to locate its new engineering building in Wawautosa minimizing the regional economic development benefits of this investment.
Once again the community has the opportunity to maximize the economic gains from a public investment. The School of Freshwater Sciences should not be located on prime lakefront property that already has two signature developments. It should be built on a river or lakefront location where it will stimulate community revitalization and commercial activity as it pursues its important mission of educating a new generation of freshwater scientists and engages in freshwater research.
By equating support for the Lake Michigan site with support for the research facility the editorial board is misrepresenting this important locational discussion.
At the Board of Harbor Commissioners public hearing opponents of the former Pieces of Eight location (who numbered supporters by more than 2 to 1) were clear that they supported UWM's effort to establish a School of Freshwater Sciences. Their opposition was to locating the proposed 50 thousand square foot building on prime lakefront property.
Alderman Tony Zielinski was particularly eloquent in suggesting that UWM and the Commission be more strategic in their location of the new school, urging that the investment be used to help revitalize a less pristine waterfront area south of downtown.
Proponents of the Pieces of Eight site like Badger Meter Honcho Rich Meeussen argue that other cities closely tied to a specific industry all boast bricks-and-mortar structures to denote their status. He told a meeting of area business executives that Paris has the Louvre Museum as the centerpiece for art, New York City has the Broadway theater district as the focus of its theater business and Nashville can point to the Grand Ole Opry as the home of country music.
There are more than a few problems with this position.
Milwaukee's identity is not defined by ties to water companies as Meeusen argues. Our commercial identity remains more closely associated with beer, Harley Davidson motorcycles, advanced manufacturing and our now defunct hometown airline. Our city's baseball team is not named the Badger Meters or even the Lake Perch, but the Brewers!
Following Meeusen's logic we would absurdly urge MillerCoors or at least one of our signature microbreweries to relocate to the lakefront.
Meeusen's proposition that the community lacks a signature building is also dead wrong. The Art Museaum designed by the internationally renowned Santiago Calatrava is that signature building. It provides Milwaukee with a soaring aesthetic identity that promotes both the city and Lake Michgan. Locating a 50,000 square foot building near it would, as others have pointed out, detract from its unique relationship to the lake, sky and shore.
Meeusen has been honest that he wants the prime lakefront property location to hawk his firm's meters to out of town corporate clients. What better site than Milwaukee's lakefront with the signature Calatrava as background?
But that ignores two crucial questions. First, should the lakefront be devoted to marketing a private firm's products? The answer is obviously no which is why Meeusen has tied his wagon to the public mission of the UWM School of Freshwater Sciences.
But that raises the second question-does UWM need a 50,000 square foot building if its goal is to conduct fresh water research and graduate education. The answer is a resounding no. That's why half the facility is designed for water product displays.
Meeusen dubious goal is to use the state's bonding authority to subsidize the sale of his firm's merchandise. Public use and control of lakefront property should not be sacrificed for that narrow private objective. Nor should the public's bonding authority be devoted to boast Badger Meter's share price.
Support for a School of Freshwater Sciences does not dictate support for the former Pieces of Eight property. The question the public needs to ask and UWM needs to respond to is where will Milwaukee get the biggest bang for its School of Freshwater Sciences investment buck?
Twice in recent years the City has allowed narrow business interests to dictate public investments that undermined their catalytic economic impact. Miller Park was built in a isolated concrete jungle off I-94 rather than downtown. Other cities like Cleveland and Baltimore more wisely located new stadiums downtown to capture the ancillary economic benefits. More recently UWM made the decision to locate its new engineering building in Wawautosa minimizing the regional economic development benefits of this investment.
Once again the community has the opportunity to maximize the economic gains from a public investment. The School of Freshwater Sciences should not be located on prime lakefront property that already has two signature developments. It should be built on a river or lakefront location where it will stimulate community revitalization and commercial activity as it pursues its important mission of educating a new generation of freshwater scientists and engages in freshwater research.
Thursday, January 29, 2009
Is Milwaukee developer buying opposition to local hiring and fair wages?
Word out of City Hall is that Richard Lincoln, VP of the Mandel Group, a wealthy and politically connected Milwaukee development firm, has been making the rounds lobbying against the proposed MORE Ordinance that would require hiring and contracting standards for development projects that receive $1 million or more in city financial assistance.
The idea that the citizens of Milwaukee have the right to expect that taxpayer subsidized projects employ local residents and meet certain wage standards is know as “community benefits.”
It’s not too hard to see why the Mandel Group is working so hard against community benefits (they have 5 lobbyists registered to work on it).
Mandel has received millions of dollars in public aid for several projects, from Library Hill a decade ago to the North End project currently under construction, and they want to keep it that way. Of course they don't want to come out and admit how profitable it been to be drinking from the public trough. So they are circulating a short paper by Mark Eppli, chair of the Real Estate Department at Marquette University, in their effort to discredit prevailing wage standard requirement legislation.
Eppli’s “paper” is a selective and superficial look at a handful of construction projects that doesn’t meet the rigor of an introductory economics course. The assertions that prevailing wage standards for construction workers contribute to unreasonably high project costs and exclude minority workers are not drawn from the data in the work that Eppli cites.
Beyond the bad science, there is at least the appearance that Eppli’s “paper” is research for hire.
Eppli runs Marquette’s ACRE program designed to attract more minorities into the real estate profession. The Mandel Group is the primary financial sponsor of the ACRE program. City leaders should be asking is this research for hire, with a foregone conclusion designed to satisfy a major funder?
The major source of the data that Eppli uses in his paper is Cross Management Services. Cross Management is a firm that monitors Disadvantaged Business Enterprise contracting requirements on construction projects that is frequently retained by the Mandel Group. Cross Management has a direct financial interest in providing data that supports Mandel’s opposition to community standards legislation. You simply don’t bite the hand that feeds you.
Common Council members should reject this “research” for the propaganda it is.
Whether it is federal stimulus funding or City of Milwaukee TIF money, taxpayers and city leaders have a right to expect that taxpayer supported projects hire local residents, build real career pathways, pay prevailing wages and contribute to long-lasting economic development outcomes for workers and the entire community.
For decades the city has subsidized private developments assuming that the benefits would trickle down to employees and Milwaukee's neighborhoods. Milwaukee's nationally high poverty rates (7th) and the alarming rate of African American male unemployment (46%) demonstrate the failure of this approach.
Big developers have had their way with TIF for the past decades. It's time for them to accept hiring and wage standards as part of any taxpayer supported deal. Otherwise they’re free to forgo the public money. If Mandel Group really wants to aid minority workers in the City, then pay them the prevailing wage for construction employment!
The standards contained in the MORE Ordinance are a step in this direction.
The idea that the citizens of Milwaukee have the right to expect that taxpayer subsidized projects employ local residents and meet certain wage standards is know as “community benefits.”
It’s not too hard to see why the Mandel Group is working so hard against community benefits (they have 5 lobbyists registered to work on it).
Mandel has received millions of dollars in public aid for several projects, from Library Hill a decade ago to the North End project currently under construction, and they want to keep it that way. Of course they don't want to come out and admit how profitable it been to be drinking from the public trough. So they are circulating a short paper by Mark Eppli, chair of the Real Estate Department at Marquette University, in their effort to discredit prevailing wage standard requirement legislation.
Eppli’s “paper” is a selective and superficial look at a handful of construction projects that doesn’t meet the rigor of an introductory economics course. The assertions that prevailing wage standards for construction workers contribute to unreasonably high project costs and exclude minority workers are not drawn from the data in the work that Eppli cites.
Beyond the bad science, there is at least the appearance that Eppli’s “paper” is research for hire.
Eppli runs Marquette’s ACRE program designed to attract more minorities into the real estate profession. The Mandel Group is the primary financial sponsor of the ACRE program. City leaders should be asking is this research for hire, with a foregone conclusion designed to satisfy a major funder?
The major source of the data that Eppli uses in his paper is Cross Management Services. Cross Management is a firm that monitors Disadvantaged Business Enterprise contracting requirements on construction projects that is frequently retained by the Mandel Group. Cross Management has a direct financial interest in providing data that supports Mandel’s opposition to community standards legislation. You simply don’t bite the hand that feeds you.
Common Council members should reject this “research” for the propaganda it is.
Whether it is federal stimulus funding or City of Milwaukee TIF money, taxpayers and city leaders have a right to expect that taxpayer supported projects hire local residents, build real career pathways, pay prevailing wages and contribute to long-lasting economic development outcomes for workers and the entire community.
For decades the city has subsidized private developments assuming that the benefits would trickle down to employees and Milwaukee's neighborhoods. Milwaukee's nationally high poverty rates (7th) and the alarming rate of African American male unemployment (46%) demonstrate the failure of this approach.
Big developers have had their way with TIF for the past decades. It's time for them to accept hiring and wage standards as part of any taxpayer supported deal. Otherwise they’re free to forgo the public money. If Mandel Group really wants to aid minority workers in the City, then pay them the prevailing wage for construction employment!
The standards contained in the MORE Ordinance are a step in this direction.
Sunday, June 29, 2008
Does the Yi trade doom Milwaukee?
The Yi Jianlian experiment is over in Milwaukee, just one year in the making.
The seven footer from China, the cornerstone of the Milwaukee Metropolitan Chamber of Commerce's (MMAC) "China policy," has been traded to the New Jersey Nets!
It was only a year ago that MMAC's China Business Council Co-chair, Bob Craft, CEO of a Milwaukee based private equity firm offering residency rights for dollars, said: This is a massive opportunity – people have no clue what will hit us. There is so much work for anyone in this community that has an interest in China. They’re already (Wisconsin’s) third-largest business partner. I don’t know what path it will take, but it will be big.”
John Schmidt, the Milwaukee Journal Sentinel's economics writer was equally effusive:"To a handful of Milwaukee entrepreneurs, Yi's rock-star status back home amounts to a potential gold mine...
Yi's arrival provides a fresh opportunity to make Milwaukee a more globalized city, one that draws international residents, investment and culture. In May, the Department of Homeland Security approved southeastern Wisconsin as a special economic zone that offers coveted U.S. residency rights to qualified foreign investors." I'm going to package the opportunity," said Bob Kraft...."
Amid all of the cheerleading, and growth of business with China, neither the MMAC nor Schmidt ever mentioned that China's sales to the state (imports) were growing much faster than our exports.. The result of this trade imbalance - Wisconsin lost 39,668 jobs, 1.43% of total employment, between 1989 and 2003.
Now that the Bucks have shipped Yi out of town in much the same way that Milwaukee's corporate leaders have shipped thousands of manufacturing jobs to China and other low-wage havens, what will become of the MMAC's China-based development policy?
Are the city's hopes for investment, increased international residents and culture over?
Or was the euphoria over Yi's signing just another example of corporate Milwaukee's promotion of hype over real economic development strategy?
Fear not. The Bucks second round draft choice is the 6-foot-8 forward Luc Richard Mbah a Moute from Yaounde, Cameroon. The 21-year-old Mbah a Moute is a prince. His father is a king! Talk about prestigious international residents!
Maybe Kraft will offer residency to Cameroonian monarchs if they cough up $500,000?
Milwaukee's corporate titans may find the Cameroon an attractive place to invest. Average wages are 45 cents a day, even less than China's. At those wages, Harley won't sell many motorcycles. But then, that's not really what the global labor arbitrage is about.
The seven footer from China, the cornerstone of the Milwaukee Metropolitan Chamber of Commerce's (MMAC) "China policy," has been traded to the New Jersey Nets!
It was only a year ago that MMAC's China Business Council Co-chair, Bob Craft, CEO of a Milwaukee based private equity firm offering residency rights for dollars, said: This is a massive opportunity – people have no clue what will hit us. There is so much work for anyone in this community that has an interest in China. They’re already (Wisconsin’s) third-largest business partner. I don’t know what path it will take, but it will be big.”
John Schmidt, the Milwaukee Journal Sentinel's economics writer was equally effusive:"To a handful of Milwaukee entrepreneurs, Yi's rock-star status back home amounts to a potential gold mine...
Yi's arrival provides a fresh opportunity to make Milwaukee a more globalized city, one that draws international residents, investment and culture. In May, the Department of Homeland Security approved southeastern Wisconsin as a special economic zone that offers coveted U.S. residency rights to qualified foreign investors." I'm going to package the opportunity," said Bob Kraft...."
Amid all of the cheerleading, and growth of business with China, neither the MMAC nor Schmidt ever mentioned that China's sales to the state (imports) were growing much faster than our exports.. The result of this trade imbalance - Wisconsin lost 39,668 jobs, 1.43% of total employment, between 1989 and 2003.
Now that the Bucks have shipped Yi out of town in much the same way that Milwaukee's corporate leaders have shipped thousands of manufacturing jobs to China and other low-wage havens, what will become of the MMAC's China-based development policy?
Are the city's hopes for investment, increased international residents and culture over?
Or was the euphoria over Yi's signing just another example of corporate Milwaukee's promotion of hype over real economic development strategy?
Fear not. The Bucks second round draft choice is the 6-foot-8 forward Luc Richard Mbah a Moute from Yaounde, Cameroon. The 21-year-old Mbah a Moute is a prince. His father is a king! Talk about prestigious international residents!
Maybe Kraft will offer residency to Cameroonian monarchs if they cough up $500,000?
Milwaukee's corporate titans may find the Cameroon an attractive place to invest. Average wages are 45 cents a day, even less than China's. At those wages, Harley won't sell many motorcycles. But then, that's not really what the global labor arbitrage is about.
Wednesday, March 26, 2008
Bowling Congress' departure suggests need for targeted development
Two weeks ago the U.S. Bowling Congress (USBC) announced that it will move its national headquarters and 190 jobs from Greendale to Arlington, Texas.
The decision was made despite concerted efforts by the Milwaukee 7 and state officials to keep the Congress in Milwaukee. Even Sports Illustrated columnist Frank Deford joined the effort writing that Milwaukee and bowling go together like baseball and crackerjacks.
Once the decision to relocate was announced, the usual cast of market fundamentalists used the decision to attack Milwaukee's business climate, suggesting that the USBC was leaving because taxes are too high and regulations to onerous.
The facts suggest a different motivation- to integrate the operations of the USBC and the Bowling Proprietors' Association of America (BPAA), bowling's trade association, which is located in Arlington, and use the resulting efficiencies to help grow the sport of bowling. USBC President Jeff Bojé admitted as much stating:” With USBC and BPAA under the same roof, there's an untold number of ways we can work together to help grow the sport. There already are a number of joint programs that we work together on and this proposal would allow us to do so even more."
This was a deal that had little or nothing to do with tax rates and regulation.
Rather it is an attempt to revive a sport that has been losing market share for years by promoting collaboration between bowling's two most prominent organizations.
The decision was an admission that the USBC, created in 2004 by the merger of four bowling organizations had failed to"... reverse an exodus of members the past 20 years, stabilize bowling as both a recreational activity and a sport and address bowling's stodgy image." Nationally the combined membership in the organizations has fallen from about 10 million 20 years ago to about less than 3 million today.
Bowling grew as the nation's manufacturing base and industrial workforce expanded. By the end of World War II, bowling was a billion dollar industry that involved between 12 to 16 million Americans. It reached this status in part because it was promoted by the U.S. armed forces during the War and because unlike tennis or golf anyone with a few dollars and the desire could play.
In the postwar years bowling alleys were stripped of their hardscrabble origins and unsavory reputations. They were reconstituted with chrome and neon, becoming "transitional" institutions that exposed and helped integrate mainly white working-class families into the emerging middle-class mass consumer culture.
Milwaukee's working class embraced bowling. Unions like UAW 248 (Allis Chalmers), UAW 75 (Seaman Body/ American Motors) United Steelworkers 1114 (Harnischfeger) and UE1111 (Allen Bradley) organized teams with thousands of participants. Dick Stoll regularly reported on bowling in the Wisconsin CIO News' "Down Your Alley" column.
Bowling has declined as Milwaukee has hemorrhaged manufacturing jobs and as other forms of recreation have become more accessible and desirable. In a real sense consumers have voted with their feet, leaving the bowling alleys and the USBC behind.
The USBC decision is an effort to reverse these very real market trends as was the M7s effort to retain the headquarters in Milwaukee.
One of the ironies of the M7 approach to economic development has been been its focus on retaining corporate headquarters even as it has embraced the global economy's relocation of tens of thousands of manufacturing jobs from Milwaukee.
Its efforts to save the headquarters of Midwest Express, Miller and now the USBC stand in stark contrast to its laissez faire approach to deindustrialization and support for "free trade" agreements like NAFTA that has cost Wisconsin 25,000 manufacturing jobs and China's most favored nation status.
Put simply the M7 has worked tirelessly to save the job of Midwest CEO Tim Huekesma, but done little for Milwaukee's real life Ralph Kramdens.
The failure to keep the USBC in Greendale, despite a package of more than $8 million, also suggests the limitations of an economic development approach that relies on subsidies and economic incentives.
Such an approach is inadequate because every region of the country offers similar deals. Arlington's competitive advantage was the possibility of creating a critical mass of bowling activity on an international campus. It's the same reason Madison is emerging as a biotech center-federal and state funded stem cell research conducted at the University of Wisconsin has created a critical mass of scientific talent and knowledge that is attracting additional public and private investment. As this research is commercialized and the UW and Wisconsin Technical College System produce the sector's scientific and technical workers, the state's biotech sector will expand.
This economic development model can work in Milwaukee if we strengthen relations between our advanced manufacturing sector and the area's engineering schools, technical colleges and apprenticeship programs.
Such an approach won't solve all of area's economic problems, particularly Milwaukee's depression level rates of African American unemployment. For that we need to ensure that publicly subsidized developments like the Park East or UWM's Engineering School include community benefits such as local hiring and training and pay the prevailing wage. In addition, we should press to locate projects like the new Engineering School in the City of Milwaukee to maximize its economic impact.
These targeted economic development strategies are far more promising than offering the same economic incentives as every other region or engaging in self-flagellation.
The question is whether Milwaukee's political and civic leadership has the resolve to pursue them?
The decision was made despite concerted efforts by the Milwaukee 7 and state officials to keep the Congress in Milwaukee. Even Sports Illustrated columnist Frank Deford joined the effort writing that Milwaukee and bowling go together like baseball and crackerjacks.
Once the decision to relocate was announced, the usual cast of market fundamentalists used the decision to attack Milwaukee's business climate, suggesting that the USBC was leaving because taxes are too high and regulations to onerous.
The facts suggest a different motivation- to integrate the operations of the USBC and the Bowling Proprietors' Association of America (BPAA), bowling's trade association, which is located in Arlington, and use the resulting efficiencies to help grow the sport of bowling. USBC President Jeff Bojé admitted as much stating:” With USBC and BPAA under the same roof, there's an untold number of ways we can work together to help grow the sport. There already are a number of joint programs that we work together on and this proposal would allow us to do so even more."
This was a deal that had little or nothing to do with tax rates and regulation.
Rather it is an attempt to revive a sport that has been losing market share for years by promoting collaboration between bowling's two most prominent organizations.
The decision was an admission that the USBC, created in 2004 by the merger of four bowling organizations had failed to"... reverse an exodus of members the past 20 years, stabilize bowling as both a recreational activity and a sport and address bowling's stodgy image." Nationally the combined membership in the organizations has fallen from about 10 million 20 years ago to about less than 3 million today.
Bowling grew as the nation's manufacturing base and industrial workforce expanded. By the end of World War II, bowling was a billion dollar industry that involved between 12 to 16 million Americans. It reached this status in part because it was promoted by the U.S. armed forces during the War and because unlike tennis or golf anyone with a few dollars and the desire could play.
In the postwar years bowling alleys were stripped of their hardscrabble origins and unsavory reputations. They were reconstituted with chrome and neon, becoming "transitional" institutions that exposed and helped integrate mainly white working-class families into the emerging middle-class mass consumer culture.
Milwaukee's working class embraced bowling. Unions like UAW 248 (Allis Chalmers), UAW 75 (Seaman Body/ American Motors) United Steelworkers 1114 (Harnischfeger) and UE1111 (Allen Bradley) organized teams with thousands of participants. Dick Stoll regularly reported on bowling in the Wisconsin CIO News' "Down Your Alley" column.
Bowling has declined as Milwaukee has hemorrhaged manufacturing jobs and as other forms of recreation have become more accessible and desirable. In a real sense consumers have voted with their feet, leaving the bowling alleys and the USBC behind.
The USBC decision is an effort to reverse these very real market trends as was the M7s effort to retain the headquarters in Milwaukee.
One of the ironies of the M7 approach to economic development has been been its focus on retaining corporate headquarters even as it has embraced the global economy's relocation of tens of thousands of manufacturing jobs from Milwaukee.
Its efforts to save the headquarters of Midwest Express, Miller and now the USBC stand in stark contrast to its laissez faire approach to deindustrialization and support for "free trade" agreements like NAFTA that has cost Wisconsin 25,000 manufacturing jobs and China's most favored nation status.
Put simply the M7 has worked tirelessly to save the job of Midwest CEO Tim Huekesma, but done little for Milwaukee's real life Ralph Kramdens.
The failure to keep the USBC in Greendale, despite a package of more than $8 million, also suggests the limitations of an economic development approach that relies on subsidies and economic incentives.
Such an approach is inadequate because every region of the country offers similar deals. Arlington's competitive advantage was the possibility of creating a critical mass of bowling activity on an international campus. It's the same reason Madison is emerging as a biotech center-federal and state funded stem cell research conducted at the University of Wisconsin has created a critical mass of scientific talent and knowledge that is attracting additional public and private investment. As this research is commercialized and the UW and Wisconsin Technical College System produce the sector's scientific and technical workers, the state's biotech sector will expand.
This economic development model can work in Milwaukee if we strengthen relations between our advanced manufacturing sector and the area's engineering schools, technical colleges and apprenticeship programs.
Such an approach won't solve all of area's economic problems, particularly Milwaukee's depression level rates of African American unemployment. For that we need to ensure that publicly subsidized developments like the Park East or UWM's Engineering School include community benefits such as local hiring and training and pay the prevailing wage. In addition, we should press to locate projects like the new Engineering School in the City of Milwaukee to maximize its economic impact.
These targeted economic development strategies are far more promising than offering the same economic incentives as every other region or engaging in self-flagellation.
The question is whether Milwaukee's political and civic leadership has the resolve to pursue them?
Wednesday, August 29, 2007
Costco Takes the High Road to Grafton!
It's well know that poverty level wages subsidize Wal-Mart's low prices!
Wages are so low that Wal-Mart's employees qualified for $2.5 billion in federal assistance in 2004.
Earlier this week the Milwaukee Journal Sentinel reported Wal-Mart is also shortchanging Wisconsin, failing to pay over $17 million in state and local taxes between 1998-2000.
Wal-Mart’s tax avoiding schemes shift the burden for funding schools, fire protection, public health, infrastructure maintenance, workforce development and public safety to property tax paying homeowners.
The state is trying to recover its losses in court and Senators Robeson and Decker have introduced combined reporting legislation that would close the loophole Wal-Mart is using to avoid paying its fair share.
While that case unfolds, Milwaukee area consumers can use the power of the purse to send a message to Wal-Mart that we do not appreciate their tax dodging shenanigans, low pay and unfair labor practices.
There’s a new boy in town-Costco- that competes head to head with Wal-Marts’ Sam’s Club. In fact, Costco same store sales are growing faster than any other club shopper, 6.2% so far this year.
Maybe that’s because as the MJS reports: ”The employees seem more helpful at Costco.”
And why are Costco's employees more engaged? Perhaps because they average $17 an hour, while Wal-Marts’ average $10. And unlike Wal-mart’s employees, 92% of Costco employees can afford the company’s healthcare benefits.
Costco employees earn more because they have a union-the Teamsters that represents 13,800 of the company’s 127,000 employees. That’s only 17% of Costco’s total workforce. But union representation creates a ripple effect that helps set labor standards for all Costco employees.
Costco’ labor agreements lock in wage and benefits packages that are the highest in the grocery and discount retail industries. And Costco passes on similar compensation packages to its non-union workers.
Costco’s executive management recognizes that Wal-Mart/Sam's Club competes based on low prices and low wages-a low road corporate strategy. They recognize that in the labor market, like all markets, you get what you pay for. So Wal-Mart’s low wages attract less skilled and motivated employees. The result is low levels of service.
So while Costco’s prices are roughly equivalent, it competes on the basis of service and productivity. Costco attracts more skilled and dedicated employees by paying them fairly. The result is better service and higher productivity.
As Costco CEO Jim Senegal has said: “We pay much better than Wal-Mart. That’s not altruism. It’s good business.”
Costco’s CFO Richard Galanti elaborated: “From day one, we’ve run the company with the philosophy that if we pay better than average, provide a salary people can live on, have a positive environment and good benefits, we’ll be able to hire better people, they’ll stay longer and be more efficient.”
Henry Ford understood this a century ago.
Ford doubled his employees’ wages to $5 a day in an effort to solve a 300% absenteeism rate. Voola! Bad jobs turned into good ones and turnover plummeted. An added benefit was that Ford employees could actually buy the cars they produced.
A 2004 Business Week study compared Costco’s business model to Wal-Mart's. The study confirmed that Costco’s employees are more productive. They sell more: $795 of sales per square foot, versus only $516 at Sam’s Club. Consequently Costco generates more revenue per employee; U.S. operating profit per hourly employee was $13,647 at Costco versus $11,039 at Sam’s Club.
The study also revealed that Costco’s labor costs are actually lower than Wal-Mart’s as a percentage of sales.
By compensating its workers fairly, Costco enjoys rates of turnover far below industry norms, one-third the industry average of 65%. Wal-Mart's is about 50%.
High employee retention rates save Costco’s money. It costs $2,500 to $3,000 per worker to recruit, interview, test and train a new hire, even in retail. Wal-Mart’s turnover rate cost the firm an extra $1.5 to $2 million in costs each year.
Of course, other factors besides low turnover and employee productivity are responsible for Costco’s cost advantage. For example, Costco saves millions because it does not advertise.
Costco can also afford to pay more because it cuts the fat from executive paychecks. Its overall corporate philosophy is that workers deserve a fair share of the profits they help generate — not just a pat on the back or being called “associate.”
While CEOs at other major corporations average 531 times the pay of their hourly employees, Sinegal takes only 10 times the pay of his typical employee. His annual salary (2004) was $350,000, compared to $5.3 million awarded to Wal-Mart’s Lee Scott.
After California Costco Teamsters ratified a contract a few years ago, CEO Jim Sinegal said Costco workers are “entitled to buy homes and live in reasonably nice neighborhoods and send their children to school.”
Costco's high road strategy including union representation, decent pay and fair treatment leads to better service, increased employee productivity and loyalty.
Costco has now opened in Grafton. Its entry into the Milwaukee market poses a question to all of us-do we want to live in a country where the largest employer pays below poverty-level wages and cheats on its taxes? Or, do we want Americans to enjoy a decent income and a sense of security in return for their work?
If you believe the latter, take a trip out to Grafton and let your money do your talking.
Wages are so low that Wal-Mart's employees qualified for $2.5 billion in federal assistance in 2004.
Earlier this week the Milwaukee Journal Sentinel reported Wal-Mart is also shortchanging Wisconsin, failing to pay over $17 million in state and local taxes between 1998-2000.
Wal-Mart’s tax avoiding schemes shift the burden for funding schools, fire protection, public health, infrastructure maintenance, workforce development and public safety to property tax paying homeowners.
The state is trying to recover its losses in court and Senators Robeson and Decker have introduced combined reporting legislation that would close the loophole Wal-Mart is using to avoid paying its fair share.
While that case unfolds, Milwaukee area consumers can use the power of the purse to send a message to Wal-Mart that we do not appreciate their tax dodging shenanigans, low pay and unfair labor practices.
There’s a new boy in town-Costco- that competes head to head with Wal-Marts’ Sam’s Club. In fact, Costco same store sales are growing faster than any other club shopper, 6.2% so far this year.
Maybe that’s because as the MJS reports: ”The employees seem more helpful at Costco.”
And why are Costco's employees more engaged? Perhaps because they average $17 an hour, while Wal-Marts’ average $10. And unlike Wal-mart’s employees, 92% of Costco employees can afford the company’s healthcare benefits.
Costco employees earn more because they have a union-the Teamsters that represents 13,800 of the company’s 127,000 employees. That’s only 17% of Costco’s total workforce. But union representation creates a ripple effect that helps set labor standards for all Costco employees.
Costco’ labor agreements lock in wage and benefits packages that are the highest in the grocery and discount retail industries. And Costco passes on similar compensation packages to its non-union workers.
Costco’s executive management recognizes that Wal-Mart/Sam's Club competes based on low prices and low wages-a low road corporate strategy. They recognize that in the labor market, like all markets, you get what you pay for. So Wal-Mart’s low wages attract less skilled and motivated employees. The result is low levels of service.
So while Costco’s prices are roughly equivalent, it competes on the basis of service and productivity. Costco attracts more skilled and dedicated employees by paying them fairly. The result is better service and higher productivity.
As Costco CEO Jim Senegal has said: “We pay much better than Wal-Mart. That’s not altruism. It’s good business.”
Costco’s CFO Richard Galanti elaborated: “From day one, we’ve run the company with the philosophy that if we pay better than average, provide a salary people can live on, have a positive environment and good benefits, we’ll be able to hire better people, they’ll stay longer and be more efficient.”
Henry Ford understood this a century ago.
Ford doubled his employees’ wages to $5 a day in an effort to solve a 300% absenteeism rate. Voola! Bad jobs turned into good ones and turnover plummeted. An added benefit was that Ford employees could actually buy the cars they produced.
A 2004 Business Week study compared Costco’s business model to Wal-Mart's. The study confirmed that Costco’s employees are more productive. They sell more: $795 of sales per square foot, versus only $516 at Sam’s Club. Consequently Costco generates more revenue per employee; U.S. operating profit per hourly employee was $13,647 at Costco versus $11,039 at Sam’s Club.
The study also revealed that Costco’s labor costs are actually lower than Wal-Mart’s as a percentage of sales.
By compensating its workers fairly, Costco enjoys rates of turnover far below industry norms, one-third the industry average of 65%. Wal-Mart's is about 50%.
High employee retention rates save Costco’s money. It costs $2,500 to $3,000 per worker to recruit, interview, test and train a new hire, even in retail. Wal-Mart’s turnover rate cost the firm an extra $1.5 to $2 million in costs each year.
Of course, other factors besides low turnover and employee productivity are responsible for Costco’s cost advantage. For example, Costco saves millions because it does not advertise.
Costco can also afford to pay more because it cuts the fat from executive paychecks. Its overall corporate philosophy is that workers deserve a fair share of the profits they help generate — not just a pat on the back or being called “associate.”
While CEOs at other major corporations average 531 times the pay of their hourly employees, Sinegal takes only 10 times the pay of his typical employee. His annual salary (2004) was $350,000, compared to $5.3 million awarded to Wal-Mart’s Lee Scott.
After California Costco Teamsters ratified a contract a few years ago, CEO Jim Sinegal said Costco workers are “entitled to buy homes and live in reasonably nice neighborhoods and send their children to school.”
Costco's high road strategy including union representation, decent pay and fair treatment leads to better service, increased employee productivity and loyalty.
Costco has now opened in Grafton. Its entry into the Milwaukee market poses a question to all of us-do we want to live in a country where the largest employer pays below poverty-level wages and cheats on its taxes? Or, do we want Americans to enjoy a decent income and a sense of security in return for their work?
If you believe the latter, take a trip out to Grafton and let your money do your talking.
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