The Risk of Green Offshoring

The United States may be indirectly subsidizing the movement of renewable-energy equipment production to low-wage havens such as China and India. That’s the finding of a new report just released by the Apollo Alliance and Good Jobs First. I co-authored the report in my capacity as the research director of Good Jobs First.

My responsibility was to analyze the recipients of Advanced Energy Manufacturing Tax Credits, a component of the American Recovery and Reinvestment Act. The program, also known as 48C because of its place in the Internal Revenue Code, provides a tax credit equal to 30 percent of the value of investments in new, expanded or re-equipped facilities in the United States that produce materials used in renewable energy generation or carbon capture.

In January the Obama Administration released of list of 183 projects in 43 states that had been approved for the initial $2.3 billion round of credits. Obama’s new budget calls for expanding the program by $5 billion.

I focused on the 116 projects involving wind and solar, the two forms of renewable energy that have the most growth potential. Those projects received $1.6 billion, or 68 percent, of the total 48C credits. There are 90 unique parent companies involved (some firms have more than one project).

While the 48C projects themselves are all located in the U.S., many of the companies are also investing in wind and solar manufacturing facilities in other countries. This is not surprising, given that 25 of the 90 firms are based outside the United States, mostly in Europe and Scandinavia. They have operations in their home countries as well as other in developed economies.

What I examined, instead, was the extent to which both the U.S. and foreign 48C recipients are also expanding output in the low-wage countries we typically refer to in discussing offshoring. It turns out that a quarter of them are doing so.

Most of these are companies from places such as Germany and Spain that are leaders in the global clean-energy manufacturing market—the likes of Gamesa, Nordex, Siemens and Winergy. Thirteen foreign 48C recipients produce in China, three in India and two in Mexico. There are also six U.S.-based 48C recipients with operations in China, Mexico, Malaysia and the Philippines.

In total, the U.S. has awarded $458 million in advanced energy tax credits to 23 companies that are also investing money and creating jobs in low-wage nations.

One might argue that companies have to produce abroad in order to supply foreign markets, especially in a booming economy such as China. Yet I found that some of the 48C recipients have adopted a business model that relies heavily on low-wage production for serving global markets. Here are three examples:

Advanced Energy Industries Inc. (based in Colorado; received $1.2 million in 48C credits). In its most recent 10-K annual report, the company states: “The majority of our manufacturing is performed in Shenzhen, China, where we produce our high-volume products. The remainder of our manufacturing locations, in Fort Collins, Colorado; Hachioji, Japan; and Vancouver, Washington, perform low-volume manufacturing, service and support.”

First Solar Inc. (based in Arizona; received $16.3 million in 48C credits). In December 2009 the company announced plans for the addition of eight production lines for its solar module manufacturing operation in Kalim, Malaysia. The Malaysian operation was already more than ten times the size (in square footage) of First Solar’s original plant in Perrysburg, Ohio.

SunPower Corporation (based in California; received $10.8 million in 48C credits). Although 90 percent of SunPower’s sales come from the United States and Europe, it has been doing almost all of its manufacturing in Asia. It produces solar cells at two facilities in the Philippines and is developing a third solar cell manufacturing facility in Malaysia. Almost all of its solar cells are combined into solar panels at the company’s solar panel assembly facility in the Philippines. Other solar panels are manufactured for the company by a third-party subcontractor in China.

Given their preoccupation with offshoring, there is a significant risk that such firms will follow in the footsteps of Evergreen Solar, which is not on the 48C list but which received some $44 million in state subsidies for its plant in Devens, Massachusetts. In November 2009 the company announced that it would transfer its solar-panel assembly operations from Devens to a plant in China.

Using programs such as the Advanced Energy Manufacturing Tax Credit to try to encourage renewable-energy companies to invest in the United States is good policy. But does it make sense to include firms that have put their primary emphasis on offshoring and may be using their 48C projects as little more than fig leaves to obscure where they are putting the bulk of their money? Are U.S. taxpayers indirectly subsidizing those foreign operations?

At the very least, the Apollo Alliance/Good Jobs First report recommends, the federal government should employ a clawback mechanism so that any company that later shifts its 48C jobs offshore would have to reimburse the Treasury for the tax credit. We also need to explore other ways of making sure that workers in the United States and other developed countries are not denied a place in the clean-energy manufacturing sector of the future.

Pressuring Big Business to Start Rehiring

hyattThe conventional wisdom is that the emerging economic rebound will be a jobless recovery for a long time to come. Yet there is no consensus on why this is the case.

Congressional Republicans are all too willing to cite the purported shortcomings of the Democrats’ stimulus program, but their ulterior political motives are transparent. Some claim that banks are keeping too tight a lid on business credit, while others suggest that newly frugal consumers are to blame for not spending more.

There is surprisingly little criticism being directed at those who are in the best position to do something about joblessness: employers, especially large ones. The assumption seems to be that corporations are helpless victims of economic turmoil and cannot be expected to start hiring again on their own initiative.

Now, it is being said, we need to give companies an extra incentive to replenish their payrolls. Congress and the Obama Administration are reported to be giving serious consideration to the creation of a new tax credit for job creation. This would be a boon for those who get hired, but it is more than a bit infuriating that we now need to subsidize employers to do what used to happen routinely when the business cycle began to turn around.

The coddling of the employer class is all the more questionable given that, in many cases, large-scale layoffs appear to be a matter of choice rather than necessity. Take the case of computer maker Dell, which just announced that it will obliterate more than 900 jobs as part of its decision to close an assembly plant in Winston-Salem, North Carolina that it opened in 2005 after pressuring state and local governments to cough up some $300 million in subsidies. Dell said the move was “part of an ongoing initiative to enhance the long-term value it delivers to customers by simplifying operations and improving efficiency.” Translation: the company has been selling off its production facilities to cut costs and raise profits.

Or consider Simmons Bedding Company, which has laid off 1,000 workers and will probably shed more as it heads to bankruptcy court. Its problems are less the state of the economy than the effects of having been taken over by a series of private equity firms that have milked the operation dry.

Then there’s the situation of the housekeepers at Boston-area Hyatt hotels who were forced out of their $15 an hour jobs so the company could replace them with $8 an hour temps. Before being told that they were being booted out, the housekeepers were asked to train the temps, whom they were told would be filling in during vacations. The layoffs have prompted protests in Boston and around the country (photo).

In Fremont, California, nearly 5,000 workers at the New United Motor Manufacturing plant are losing their jobs because Toyota decided to get rid of its only unionized U.S. operation after the new federally subsidized General Motors exited what had been a 25-year joint venture between the two companies.

Last month, drugmaker Eli Lilly said it would eliminate 5,000 jobs as part of a restructuring designed to “speed medicines from its pipeline to patients.”

These recent examples are part of a trend that began well before the current crisis. For the past decade, U.S. private sector employment levels have been stagnant as corporations engaged in an orgy of offshore outsourcing, union-busting, downsizing and compelling the workers who remained to produce more than ever before.

This is not to say that all job losses can be blamed on restructuring and corporate greed, but neither is it accurate to attribute them all to forces beyond the control of employers. Instead of focusing exclusively on bribing corporations to hire people, it would be good to hear some criticism of big business for failing to do enough to help the country recover from the unemployment crisis—and for causing much of that crisis through its short-sighted and self-interested practices.

For years, large corporations announced layoffs as a way of currying favor with Wall Street. It would be refreshing to have them now feel pressure to announce new hiring to appease the rest of us.

Green Jobs are Not Always Good Jobs

As the federal government prepares to spend billions of dollars promoting the creation of green jobs as part of the huge economy recovery bill, a new report warns that the jobs already being created in climate-friendly sectors of the economy do not always measure up in terms of wages and other terms of employment. The report, entitled High Road or Low Road: Job Quality in the New Green Economy, was produced by Good Jobs First (yours truly was the principal author). It was commissioned by the Change to Win labor federation, the Sierra Club, and the Teamsters and Laborers unions.

Many proponents of green development assume that the result will be good jobs. The report tested that assumption and found that it is not always valid. This is based on an examination of three sectors: manufacturing of components for wind and solar energy generation; green building; and recycling. In each sector, we found examples of employers that compensate their workers decently and treat them with respect. These include the Gamesa wind equipment manufacturing operations in Pennsylvania; developer Gerding Edlen’s commercial and residential construction projects centered in Portland, Oregon; and Norcal Waste Systems’ Recycle Central operation in San Francisco.

Yet we also found examples of purportedly green employers paying substandard wages and not treating their workers well. These include at least two wind energy manufacturing plants—one run by Clipper Windpower in Iowa and another run by DMI Industries in North Dakota—where workers initiated union organizing drives in response to issues such as poor safety conditions and then faced strong union-busting campaigns by management. Some U.S. wind and solar manufacturing firms are weakening the job security of their workers by opening parallel plants in foreign low-wage havens such as China, Mexico and Malaysia.

The report finds that many wind and solar manufacturing plants are receiving sizeable economic development subsidies from state and local governments. This use of taxpayer money provides an opportunity to raise wages and other working conditions. Many states and localities already apply job quality standards to companies receiving job subsidies or public contracts. In the report we urge wider and more aggressive use of such standards by federal as well as state and local agencies. The report offers other public policy options and urges the private U.S. Green Building Council to consider adding labor criteria to its widely used LEED standards for green construction.

The overall message is: green jobs are not automatically good jobs. We have to make them so.

Note: This item is crossposted on the Good Jobs First Clawback blog.

Peeking at a Company’s Pay Rates

Company-specific compensation data is one of those rare areas in which more is known about people at the top of the social pyramid than those at the bottom. Publicly traded corporations are required to file proxy statements each year that disclose down to the last dollar what top executives are paid in salary, bonuses, long-term compensation, stock options and perks. We know what the big boss earns but generally not what the company pays its middle managers or hourly workers.

Glassdoor, a new website launched this week in beta form, starts to fill that information gap. The site was created by Rich Barton, the former Microsoft executive who founded Zillow, a popular website containing data on real estate values. Whereas Zillow is based at least in part on government data, Glassdoor relies on voluntary submissions by users who anonymously reveal their own salaries, along with information on vacation time, medical coverage and retirement benefits. Users are asked to specify their length of experience and geographic location, so that salary variations can be evaluated. Those who do not wish to name their employer can specify the size of the company and the industry sector.

As the site is just getting off the ground, Glassdoor’s data are far from comprehensive. But there are already, for instance, 60 salary reports covering computer networking giant Cisco Systems. The site also provides anonymous company evaluations by current and former employees, including one in which a former product manager at Cisco complained: “They will try to work you to death.”

While we wait for Glassdoor to grow into a richer source, it should be noted that there are some limited sources for company-specific wage and salary data on those who are not top executives. For example:

* A few states that disclose the economic development subsidies they give to companies ask those firms to report on the wages of the jobs they create. The best example is Illinois, which has a database of reports filed by companies with job creation statistics, including average salaries.

* Some jurisdictions that have enacted living wage laws require employers to file periodic reports that may become part of the public record either automatically or as the result of freedom-of-information requests.

* The U.S. Department of Labor has an online archive of collective bargaining agreements—which typically include wage rates and other conditions of employment—arranged by employer. (The Bureau of Labor Statistics has data by industry but not by specific company.)

* Companies in some regulated industries have to report payroll expenses. For example, airlines must disclose this and other operating and financial data on Form 41, which is submitted to the Bureau of Transportation Statistics. The BTS system is cumbersome to navigate, but the Airline Data Project at MIT has used it to compile handy summary tables of wage and salary rates by job category for each of the major carriers going back to 1995.

* And finally, you can always check want ads and job postings to look for salary figures offered by those companies that don’t hide behind the statement that the pay rate “depends on experience.”