Low wages “aren’t what it’s about anymore”: Delaware’s governor on bringing jobs home

Delaware governor Jack Markell has traveled around the world quite a bit lately trying to drum up business for his small state's companies. We caught up with him at last week's SelectUSA conference to chat about how it's done. The following is a lightly edited transcript of our conversation. 

(State of Delaware)
(State of Delaware)

Lydia DePillis: What have you gotten out of your overseas recruiting tours? 

Jack Markell: We go for two main purposes. One is to promote exports for Delaware companies, and when I go, it's usually for the smaller companies, because the bigger companies -- Dupont, for example -- can do it on their own. There's a federal program called the STEP program, and that has enabled us to take along some small businesses, and they've gone to Israel, they've gone to India, Brazil. So that's a great program, as far as forging relationships with other companies overseas. And the second thing we go for is foreign direct investment. We went to Korea in December. A few months later, we were in a position to announce that a Korean company, a poultry firm, and they're going to make a $100 million investment in the state of Delaware, and create 700 jobs. Similarly, we went to India, and the reason I went to India in part was that there is an Indian company that already has an operation in Delaware, a pharmaceutical packaging firm. So I really went to solidify that relationship. So in some cases we go to touch base with existing customers, in other cases it's to drum up additional business.

[Another journalist]: What's the main misconception you have to overcome when talking about Delaware overseas? 

JM: The biggest issue is, Delaware's a small state, so companies from other countries, they'll know New York, California, and Texas, but they won't know some of these smaller states. So we need to start with the basics, and we start with where we're located. We're in a great location, between New York and Washington. Many companies want to be able to get here on one flight. But then you talk to issues that matter to these companies themselves, and what do they care about, and it's not that complicated a list. First of all, they care about having access to a very good workforce. They want to know about regulatory issues, that it's not going to take very long to get their permits, or licenses, or whatever they need to start their business. They care about accessibility to government leaders. They care about strong linkages with institutions of higher education. and of course they care about the cost of doing business. So basically we walk through the things that are important to them when deciding where to put a business.

LD: Bill Simon, the CEO of Walmart, was talking earlier about how hard governors are competing with each other for the factories Walmart is bringing back to the States. Have you seen that yet? Is it even healthy? 

JM: Governors are very comfortable competing with each other for jobs. The challenge is, if you're talking about employers who are overseas, if the U.S. is not even at the top of their list, it doesn't matter how effectively we compete with other states. So one of the reasons I'm bullish on this whole SelectUSA initiative is it's one additional level of outreach for these potential investors, because once they decide they want to invest in the U.S., governors go about our work and compete  with each other. The place where I think its best to compete is the quality of our schools, the quality of life, the quality of infrastructure. Sometimes, we have to go beyond that, to incentives. And frankly, it's not where any of us want to be, but we don't want to compete with one hand tied behind our backs.

LD: Do foreign investors care about the idea of the minimum wage rising in America? 

JM: It's not something I hear. Historically, when people talk about globalization, they think it's about moving low-wage call center jobs, low-wage assembly jobs. That's not what it's about anymore. And I think it's an important wake-up call for all of us, because you go to any of these countries now, and you see companies putting research and development into their factories. But I think people still think it's about low wages, but that's not what it's about. I was talking to the CEO of DuPont, and she was saying the cost of hiring a mechanical engineer in China is the same as the cost of hiring a mechanical engineer in tis country. So the cost of labor's an important issue, but there's a lot more going on here besides wages.

[Another journalist]: The whole point of this event is governments getting more involved in pushing the U.S. for foreign direct investment. Why is it happening now?

JM: First of all, my job as governor is to help as many Delaware companies to participate in economies that are growing faster than the US economy. And there are a lot of economies around the world that are growing faster than ours, and I want the people of Delaware to benefit from that. Number two, there are three billion people looking for work in the jobs, and there are 1.2 billion jobs available.

LD: That's an interesting stat, where did it come from?   

JM: This comes from the CEO of Gallup, who used it in his speech about a year and a half ago at the National Governors Association. So if there are three billion people looking for work, and 1.2 billion jobs available, we're in a global war for jobs, which really means that we're in a global war for talent. So why are we doing this for the first time? Because we recognize, businesses have more choices than they ever have before, and we want them to understand that they have a good choice right here in the United States. Twenty five years ago, they would've said, we're either going to go to Western Europe, the U.S., Canada and maybe Australia. That's a different world. It's incredibly, In the last year, I've been to Israel, India, Brazil, and Japan, and it's astonishing, just in the last decade, the number of multinationals that have put their facilities in those countries, employing lots of people. And they're doing it because they have access to a great workforce all over the world.

LD: In Delaware, you have a lot of big companies that depend on outsourcing firms that have people in India do back-office and IT functions. Have you tried to have conversations with those companies about bringing some of those jobs back to the U.S.? 

JM: Some of those jobs have come back. Labor costs in those countries have been raising fairly significantly, so you don't have as much of a savings as you used to have.

LD: One piece I feel like is missing from this whole conversation is unions and the labor movement. What role do they have to play here, if any? 

JM: So, I just talked about the port. we've signed these agreements with Chile, with Morocco, and many of those are union jobs, at the port. To the extent that some of the construction jobs that will be created as a result of foreign investment, some of those will be union jobs. My focus is on creating jobs for delawareans, but when jobs for Delawareans get created, some of those are going to be union jobs.

LD: Does anything need to change with the tax code to ease this process? 

JM: I would say that there are industries where tax policy at the national level, not the state level, is a challenge. In the pharmaceutical industry, I've heard some of the CEOs talk about that as a challenge. And I think we have continuing work to do to make sure we're competitive. Again, you have to start this conversation with then philosophy that businesses have more choices than they ever have before. And if you don't believe that, you say taxes don't matter. But if you do believe that, which I do, it's one of those things, along with quality of life, quality of education, quality of education, quality of infrastructure, cost of labor, it's one of those things that matter.

Lydia DePillis is a reporter focusing on labor, business, and housing. She previously worked at The New Republic and the Washington City Paper. She's from Seattle.
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