The signs of distress are many and include frequent auction advertisements as shops close and need to liquidate their equipment.
The tool-and-die industry has long been a staple of southeastern Wisconsin’s economy.
However, the Wisconsin chapter of the Tool Die & Machining Association (TDMA) is down 12 members — more than triple the normal rate of annual member turnover.
In Wisconsin, tool-and-die employment has been plummeting for two years, according to Wisconsin Department of Workforce Development economist Terry Ludeman. "Employment in the sector was relatively stable up until 2000," he said.
"In durable goods manufacturing, we are 38,000 jobs down from two years ago," Ludeman said, citing figures from the Bureau of Labor Statistics (BLS).
That decline reflects an 11% decline in employment in durable goods manufacturing in Wisconsin.
Employment in business categories specific to the contract manufacturing sector also have been hit hard in Wisconsin. The number of persons employed in the fabricated metal products industry has dropped by about 10%, according to Ludeman and BLS data.
The most distressed manufacturing sector may be industrial machinery manufacturers. A decline in capital investment and overseas competition have contributed to a 17% reduction in the state’s industrial machinery manufacturing workforce.
Between the three sectors Ludeman identified — durable goods, fabricated metal products and industrial machinery — Wisconsin has seen 54,300 manufacturing jobs either evaporate or shipped overseas in the last two years
Because contract manufacturing is a central part of southeastern Wisconsin’s economy, the manufacturing malaise could push the local economy further into recession than would be the case in refions less oriented toward manufacturing. According to US Census Bureau statistics, Wisconsin is ranked second among states, with 24.4% of its non-farm labor force working in manufacturing.
Only Indiana — with 25.3% — ranks ahead of Wisconsin.
In Wisconsin’s highly-industrialized areas, including Milwaukee and Racine counties, unemployment rates have been hanging around 6%, a figure which escalated in the metropolitan county seats themselves. In August, the unemployment rate in Racine was a daunting 11.1%. In Milwaukee, the jobless rate was 9.5%.
The economies of Wisconsin and Indiana appear to be following similar trends, according to Pat Murphy, deputy commissioner of the Indiana Department of Workforce Development.
"We are probably a little closer than we have been before," Murphy said of unemployment rates in the Badger and Hoosier states. "We tend to be a little higher than Wisconsin.
"The contract manufacturing sector in Indiana, as in Wisconsin, has been brutally strafed," Murphy said.
Bankruptcies rising
Bankruptcies are up substantially in both states. For the year to date through August, Indiana’s Southern District Federal Bankruptcy Court led the nation with 18 of every 1,000 residents filing for bankruptcy.
Personal and business bankruptcies filed in Wisconsin’s two Federal Bankruptcy Court districts indicate that four out of every 1,000 Wisconsin residents filed for bankruptcy between January and August of this year.
Personal and business bankruptcies filed in Wisconsin’s Eastern District Federal Bankruptcy Court are up almost 14% during the 12-month period ending June 30, far outpacing the national rate of increase.
While 691 businesses sought protection from creditors in Indiana during the year to date ending in August, 842 Wisconsin businesses did the same.
Personal and business bankruptcy rates often are linked. For example, Banner Tool & Engineering, Milwaukee, closed its doors in February of this year, and Banner principal Keith Akers also filed for bankruptcy protection.
The company left in its wake more than 17 small claims suits and collection actions, including two suits from the DWD for unpaid unemployment compensation. Grinding shops, machine tool repair firms, computer system vendors and other smaller machine shops were left in the lurch when Banner, which had employed about 50, folded.
High-skill employees of tool-and-die and mold-making companies forced to find work outside of their field almost certainly take a significant cut in pay.
The average income of a toolmaker in the Milwaukee-Waukesha metropolitan statistical area, according to the DWD, was $43,240 in 2000. The average income of workers in the production, transportation and material moving occupations as a whole was about $29,600.
In service occupations, the average income was $24,156.
The mix of stagnant wages, manufacturing job loss, high unemployment and inflation of consumer necessities, including housing and fuel, are taking their toll on Wisconsin’s economy, according to Mark Mundl Outreach Program Manager for the Racine County Workforce Development Center (RCWDC).
"I was working with one company in particular where, because of competition in China, the work has been outsourced," Mundl said. "They were saying essentially that they can’t even cover the raw material cost. The Chinese are giving away the tool-and-die costs. … The jobs that seem to be coming available for these people are jobs they are honestly overqualified for. A tool-or-die maker or pattern maker is applying for a machine operator position in the $9 to $11 range."
Smaller shops suffer
According to Mundl, victims of mass layoffs from large companies who receive help from RCWDC are fairing better than when they became unemployed. But former employees of smaller job shops are not as likely to come in for help as those let go from major employers.
"Looking at preliminary statistics, some of the outcomes of services we are able to provide are pretty good," Mundl said. "Going back to fourth quarter of 2001 – it looks like those individuals who have found employment are earning more than they were when they lost employment.
"In part, that is because, where appropriate, we are sending people back for retraining services. … But a lot of those smaller companies, when they go under, they don’t get the attention. We don’t get notified," he said. "An individual would have to walk in the door and tell us the company closed – and even then we have no way of contacting these people."
For many displaced manufacturing employees, Mundl has been recommending work in airport security.
"One thing we have been encouraging is that with the federalization of airport security, there is an application process online, and we have been telling a lot of folks coming from a manufacturing background that some of the same skills, like quality control, attention to detail and understanding a process flow can be very transferable to airport security," Mundl said. "They have starting salaries of $23,000 to $36,000 – plus an 8% to 10% cost-of-living adjustment in the Milwaukee area."
Oct. 11, 2002 Small Business Times, Milwaukee
