High-Paying Jobs for Non-College-Educated Workers are Disappearing, But We Can Save Them Together
- Essential Common Future
As manufacturing jobs disappear around the country, a transition to collective ownership can keep jobs local, and preserve the legacies of retiring owners
Over the past 40 years, American manufacturing has been in decline, yet it still plays a vital role in our economy. This isn’t new information to many cities and the economic development professionals that try to plan for and fund the future of business. Currently, across the country, 125,000 manufacturing firms — and the 2.6 million jobs they support — are at risk of disappearing.
Many small businesses, including those in the manufacturing sector, do not have a clear succession plan to move their business from its current owner to a family member or other individual to keep it open and operating. As manufacturing owners retire and shut their doors, get eaten up by private equity, or are merged with another business, the result is the same: the opportunity to build wealth, through ownership and career paths, is lost.
Manufacturing jobs offer more benefits and pay 13% better than comparable work — especially for positions offering non-college educated workers a path to steady wages and employment. Approximately 35% of manufacturing jobs in the U.S. are held by BIPOC workers — with even higher rates for manufacturing in urban areas. Once gone, these jobs are largely irreplaceable, leaving workers and their families without income sources.
Rather than seeing the ongoing manufacturing exodus as a threat to local economies, we see it as an incredible opportunity to transition ownership to a new set of business stewards — also known as succession planning. The BIPOC workers and managers that keep these businesses running deserve the opportunity to become entrepreneurs and owners.
Manufacturing’s workforce is diverse, and skews under 35, while the ownership population is the exact opposite: 44% of Americans are BIPOC but represent only 14% of manufacturing owners. For Black ownership the numbers are even smaller: representing 14% of the population, yet owning only 3% of manufacturing. What’s more, most owners are 65+, white, and few have actionable succession plans.
We see this moment as the time to transfer wealth held in the manufacturing sector to people of color and other marginalized communities who are primed for ownership.
To ensure BIPOC workers and managers have the tools they need to become owners, there are two key barriers that need to be addressed:
- Business owners, especially those ready to retire, don’t see many options besides selling to private equity firms, larger corporations, or liquidation. This results in job relocation or loss.
- Community lenders are not primed to work with existing manufacturing businesses and their specific capital needs. Community Development Financial Institutions, or CDFIs, often target their efforts to startups and smaller companies seeking micro-loans.
We see a unique opportunity to reverse this picture, particularly for people from marginalized communities who rely on manufacturing jobs. We believe that workers — with support and proper financing — can become owners and operators. That this transition-to-ownership can save the jobs that communities rely on — while preserving the legacy of the exiting owner.
The Solution: Empowering CDFIs and local economic ecosystems to support business transition
T.E.A.M. — a collaboration between Urban Manufacturing Alliance, Concerned Capital, and Common Future — will build the capacity of community-based lenders to support and finance the transition of manufacturing businesses to BIPOC workers. Together with our place-based lending partners, we will guide 30 companies through these transitions, and build tools for future use.
For financial service providers, this program will build deeper technical expertise to identify opportunities for ownership transitions, and provide tools to facilitate them. Whether it’s two or twenty BIPOC workers who come forward to own their manufacturing business, we want to ensure transitions. What’s more, we’re also ensuring the financing to set these owners up for success in the years to come.
A three year pilot, financing more manufacturing businesses as they transition to BIPOC owners.
Generally, lenders are in strong positions to begin conversations about succession planning, but lack the knowledge to act. We believe that capital providers — with the right support — can gain new knowledge about buying and selling manufacturing businesses, and financially support these ownership transitions, as well as identify additional capital partners to close the deals. The result can be the preservation of local business assets and jobs.
During our pilot we are excited to work with Mountain Biz Works, CDC Small Business Finance, Community Reinvestment Fund USA and PCR Business Finance to build and test our curriculum, identify what works best for manufacturing financing, and transition businesses in their communities. We want to build the story that BIPOC workers can and should be supported as viable buyers of manufacturing businesses.
If you have questions or want to keep up with our progress sign up here.