Best business model: Making stuff here, selling it everywhere

Staff writerAugust 25, 2013 

DREAM

FILE - Toray employee Jagnar Agostini-Bradley, a test lab technician sets the starting clearances for a compression test of 38,000 pounds per square inch on a piece of composite. Toray Composites manufactures a composite material used in the building of the 787 Dreamliner's vertical tail fin. (The News Tribune staff file)

RUSS CARMACK — THE NEWS TRIBUNE Buy Photo

The list of major employers in Pierce County, published annually by the local economic development board and published in last Sunday’s paper, is always good for some browsing and quick takes on the local economy — who’s up, who’s down, whose employment total is far larger than you might have guessed.

But there are some deeper reads to be gleaned from perusing the list, telling us a lot about the structure of the regional economy and its long-term prospects for growth, not just in the numbers of jobs but the kind of jobs.

Here’s a key indicator to consider: Where is the revenue coming from to support the jobs at employers on the list? Are those companies importing revenue from outside our region, or are they just recirculating money that’s already here?

The trick is to have a whole bunch of the jobs, and employers, that fall in the first category.

One of the secrets to the success of the region thought of by outsiders as “Seattle,” but really including a lot of other towns including those in Pierce County, is a preponderance of employers who get the bulk of their revenue somewhere else. Boeing would not be much of a company if it only built planes for Seattle-based or even U.S.-headquartered airlines. Microsoft wouldn’t have created Microsoft millionaires by selling computer operating systems solely to users in Western Washington. Paccar’s trucks are found on (and in some cases off) highways all over the world, not just on our local interstates.

Even in retailing, a sector normally thought of as moving wealth around a region or exporting it, the local presence of headquarters for Amazon, Nordstrom, Costco and Starbucks means money is being imported into the region from around the world to create jobs here.

Conversely, the reason Russell Investments’ departure from Tacoma hurt so much was not just that it was a locally based company generating a lot of decently compensated employment. It was that Russell’s revenues came almost entirely from outside the region. Economically speaking, we got to live on the rest of the world’s money.

With that structure in mind, how does Pierce County’s economy stack up?

At least with the top 10 employers, it’s not an encouraging list – it’s entirely public sector, health care and retailing. That’s not to denigrate those employers, or to suggest that government, schools and health care are not necessary. But by and large the jobs generated by those organizations are supported by revenue produced here, and in some cases such as retailing there’s considerable leakage to somewhere else of the money spent here.

No economic model explains reality perfectly, and this one has its exceptions, as evident with the public-sector entry at the top of the list — Joint Base Lewis McChord, with 63,501 jobs. That’s 63,501 jobs — more than the combined total of the other nine in the Top 10 — supported with money generated elsewhere and spent here on wages and salaries, as well as provisions purchased from local companies that also have employees. If you ever wondered why communities fight so fiercely to keep bases open, there’s your answer. They still have an economic function even if their military purpose is gone.

Still, what we’re looking for are companies that use money from outside to pay employees here. By that definition we’re looking at companies such as (to pluck some names from the list of those that added the most jobs in the last year) Toray Composites (America), Bradken, Manke Lumber, Green Mountain Roasters and Brown & Haley.

If that sound suspiciously like a bias toward manufacturing — guilty as charged. But it also provides a rationale for focusing economic development efforts on that sector (as well as port-related activities — maybe most of the goods passing through the ports of Tacoma and Seattle don’t stay here, but the revenue generated by the handling of those goods does). A new Walmart store might produce jobs in raw numbers, but those aren’t the same jobs in terms of compensation or funding source as jobs generated by making things that someone somewhere else buys.

Building an economy of companies like that is a long, laborious process that has its occasional setbacks (i.e., goodbye Russell) and roadblocks (i.e., hello Great Recession). Progress may not show up at the top of the list for years, if ever. That’s fine. What matters more is adding lots of companies in the lower and middle tiers of the list of major employers, companies that you may have never heard of but that have proven adept at the export of goods or services and the importation of their customers’ cash.

Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

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