A State in Training for the Global Economy
The European currency crisis that spread fear and consternation throughout the world last week was both extremely close to and yet far away from South Carolina.
This green and pleasant state of 3.5 million people--with proportionately more foreign investment than any other--is doing a little better than the rest of the country. Its unemployment rate at 6.5% is lower than the national average.
And South Carolina doesn’t much fear currency fluctuations. In a way, it welcomes them for helping to bring in job-creating investment, such as the BMW auto assembly plant that’s about to break ground near Greenville.
For Munich-based BMW the currency crisis didn’t start last week or last year, but back in 1986 when the United States, Germany, Japan and other countries negotiated a readjustment of the dollar. Since then the U.S. currency has been down 35% to 50% against the German mark in any one year, forcing BMW either to raise the price of its cars from around $30,000 to more than $40,000 or deduct the effect of currency shift from its profits.
BMW sales in North America have declined from 97,000 in 1986 to 53,000 last year. So the company decided to make cars in the United States, where it can pay for labor and materials in dollars, the same currency it sells the cars for.
And like many other German companies, BMW chose South Carolina for its plant. Siemens, the electrical giant, Bosch, the auto parts maker, Hoechst, Bayer and Badische Anilin the chemical companies, along with Michelin, the French tire maker, and dozens of other European companies have poured billions into South Carolina in the last 30 years.
And thereby hangs a tale--with particular meaning for California--of how one poor state has taken advantage of the global economy.
Along with tax incentives for investment that every state offers, and a pro-business, anti-union attitude that some other states peddle also, South Carolina offers a labor force trained specifically for incoming employers at the state’s expense.
It’s education with a difference. Along with traditional universities, South Carolina is educating 56,000 full-time students in two-year technical colleges where courses are often changed to meet employer needs and requests.
“Unlike most community colleges, our special schools are not based on a baccalaureate academic model,” explains James Morris, head of the state’s $130-million-a-year tech school system.
“We have a dynamic curriculum that we evaluate annually to keep up with technology, and what employers want.” The schools award two-year associate degrees in chemistry, metallurgy, fluid mechanics, whatever is needed.
And the state screens and trains about 1,000 workers a month for employers. Next year South Carolina instructors will study BMW’s procedures in Germany and as the 1995 plant opening nears, they will train the employees BMW hires from pools of candidates screened for it by the state.
Such custom service costs South Carolina taxpayers $6.4 million a year. The state doesn’t see it as a giveaway to business, but rather as a job-creating skills-enhancing favor to its own people.
The state is not selling cheap labor. Its average wage is $9.35 an hour--less than the national average of $11.30 an hour, but not grievously so. Simply put, South Carolina realizes you can’t sell cheap labor today, because there is really no demand for it.
It’s an insight going back 30 years to the beginning of the state’s development programs, under then governor, now Senator Ernest F. Hollings. The textile industry was automating its production because it saw that only the efficiency of advanced machinery would allow it to compete with the cheap labor of developing countries.
Sophisticated machines need fewer workers, but they must be smarter ones. And other industries had to be found to employ the workers discontinued in textiles.
Also, the state--which still flies the Confederate Stars and Bars along with the Stars and Stripes from its capitol--was integrating. The days of domestic service and sharecropping for South Carolina’s black citizens--30% of is work force--were fading. Better jobs had to be found.
So South Carolina sent delegations to Europe to recruit manufacturing companies--demanding companies such as Robert Bosch, the world leader in auto parts. The state didn’t say we can make a shirt as cheaply as Hong Kong, but rather we can make an anti-lock braking system as reliably as Stuttgart.
It was an insight that prepared South Carolina’s work force for powerful trends in world industry, where the investments in technology that stand behind any manufacturing job are enormous. “It used to be $125,000 of investment for each job,” says Wayne Sterling, director of the State Development Board. “Now it is $219,000.”
The moral for California may not be obvious, so let’s state it directly: South Carolina started on its development road with a poor, unskilled and heavily minority work force. Its textile and apparel industries were under siege in a changing world economy; new work had to be found.
California’s work force today is changing, becoming poorer, less skilled, more heavily minority. Aerospace jobs are shrinking in the state, but simple apparel jobs are growing--not a hopeful sign. New work must be found.
What South Carolina understood is that for a society to prosper, it must add value to its work force. In today’s industry a worker’s brains and ability count for more than wages, and education creates more jobs than tax incentives.
That’s a very hopeful lesson, when you think about it, and South Carolina has put it into practice and is looking pretty good today. Surely California can do as much, can’t it?
