May 2004 | Commentary | Checking In

Someone is After Your Job...

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And they want it to relocate it—no, not to Mumbai or China, but right here in the United States. Cities, states, and regions are increasingly competing to attract logistics and transportation jobs.

Why? Because U.S. manufacturing jobs, and more recently, service sector jobs, continue to migrate to lower wage, lower tax, lower liability, lower regulation locations in China, India, and elsewhere. That movement seems to be inexorable. How we deal with it is another question.

With other jobs disappearing, competition for the remaining careers is stiff. That's why economic development personnel are considering transportation and logistics even more important to their success now than it has been in past years.

Logistics jobs are important to economic development for several reasons, some positive and some negative.

First, the negatives:

  • An accelerated loss of manufacturing jobs to overseas locations. The job loss is augmented by the newer trend of medium- and lower-skilled service sector jobs in key industry segments being outsourced to overseas centers that offer good education and technology infrastructure. Policy-makers must come to terms with at best a static, and in some cases a shrinking, pool of job creation opportunities.
  • Immigration trends and domestic educational gaps indicate continued long-term growth of medium- and lower-skilled worker numbers. Policy-makers must deal with this increased workforce, along with the existing workforce, given the challenges noted above.

And the positives:

  • Domestic population growth steadily increases demand for products that need to be transported. Many of these products are, and will remain, recession-proof.
  • Domestic and international infrastructure strains and security challenges require more transport management personnel to keep product flow constant and safe.
  • The complexities of new business practices that recognize the efficiencies of supply chain management (inbound logistics) require more transportation and logistics personnel to drive end-to-end logistics policy strategies and operational changes.

Naturally when the U.S. economy weakens, all sectors suffer to varying degrees. But the value of the logistics market for job creation and economic development is that it is partially immune to the stress factors of other economic sectors. In fact, it is tied to some negative trends in an inverse way.

Why? Because no matter where the product is manufactured, as long as the United States remains the number-one market in the world, product will have to be transported here. That transportation, logistics and supply chain challenge will have to be executed and administered.

The acceptance of demand-driven logistics practices argues for administration personnel to be located close to the market, the demand point, here in the United States. As a result, logistics becomes more and more important in terms of overall economic development activities in our domestic economy.

Beyond that, U.S. transportation and logistics practitioners are widely regarded as the best. Transferring that management skill and experience to offshore workers will be difficult to do quickly, if ever.

Today, logistics in the United States contributes 11 percent to our Gross Domestic Product, and it is expected to grow by 70 percent between now and 2020, according to the U.S. Department of Transportation.

Both an opportunity and a challenge appear to be emerging, which policymakers at the federal, state, and local levels will need to address in the coming months and years. All should act to strengthen and encourage this industry, not tax, regulate, and regard it as one more area of social engineering or wealth transfer scheme by spending funds promised for infrastructure maintenance and improvement on pork and the social safety net.

For their part, state and local governments, as the branches of government closest to the people and to the business community, have begun to respond in a variety of ways. One is flirting with "trickle down" economic ideas by cutting taxes and offering other incentives.

Here's an example that illustrates the importance of the tax issue. Fifteen states—Alaska, Arkansas, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Ohio, Oklahoma, Rhode Island, Tennessee, Texas, Vermont, Virginia, West Virginia—currently tax inventory located there. In each state there are proposals to repeal those taxes.

Why, in an era of federal, state, and local government deficits, are policymakers considering repealing taxes? It's about jobs. It's about attracting business. Would cutting taxes actually mean you may need a smaller social safety net? Someone once called that "voodoo economics."

Another interesting idea, which emerged from the Maryland Department of Transportation, is the creation of an Office of Freight Logistics. "Freight is a major economic driver in Maryland, but moving it involves a complex network of private and public sector entities that must be better coordinated," says Robert L. Flanagan, secretary, Maryland Department of Transportation. We agree.

The Office of Freight Logistics will serve as the central location to facilitate interaction between Maryland's various transportation agencies and the private sector logistics community, including maximizing of logistics- related business opportunities. We really agree.

"Maximizing of logistics-related business opportunities" really means they want more logistics, transportation and supply chain jobs in their state. Maryland has taken an important step in recognizing that logistics jobs can significantly contribute to its economic development. Others should follow.


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