By Chris Bennett, CEO and founder of NetInterests (Published Feb. 23, 2004)

Is it a good thing that jobs are being moved overseas?
A different viewpoint on why this can be an opportunity for us all

[Part II OF II] Link to Part I

Make the funding mechanism and its program reasonable, simple and targeted

The percentage of the relocation fee fund should be reasonable. It should apply to all companies in an area - whether domestic or foreign. It is designed to help ensure that companies are good corporate citizens. It is not intended to interfere unduly with the reasonable discretion of management or the natural function of capital markets and competition. This fee will allow management to include it in their analyses of whether or not to move operations to one country from another. Workers in the US will have a bridge from their current skill-set to another one that might be more marketable. They will have some breathing space to make the transition. The limited nature of the transition period will be an incentive for workers to act with deliberate speed. Finally, the fee fund may help federal and state government to recoup a portion of the extraordinary costs incurred by taxpayers, while the organizations were operating locally. The fee mechanism offers predictability, stability and fairness. It can work for the United States and foreign governments. The benefits of the fee fund will increase with the number of countries that adopt the idea.

I want to provide one example of how the fee fund might work. Here is a high-level application involving one imaginary company and three fictitious workers that are impacted by a decision to relocate operations outside the U.S.

o Company X, a manufacturing and consulting services company headquartered and based in Germantown, MD, is considering moving all of its operations to Beijing China. Management has determined that it needs to be closer to this market for competitive and strategic reasons
o Company X has factored into its relocation decision the cost of the fund fee to which it must contribute for each worker. Government has set the fund fee as a one-time payment at 25% of the annual compensation + benefits of each worker displaced.
o Local/state government has factored Company X's departure into its planning. They will use existing mechanisms to capture the funding and to disburse it to higher education and or to add it to funding pools for worker retraining and economic development. These funds are targeted so that they can not be diverted to other purposes
o Abby, Bill, and Chuan are three employees that will lose their jobs as a result of Company X's relocation
o Abby is the chief financial office and earns $400,000 in salary + 200,000 in annual benefits = $600,000
o Bill is a machine operator and earns $40,000 for hourly + $20,000 in annual benefits = $60,000
o Chuan is a part-timer and administers the computer network, earning $20,000 in compensation + $0 benefits = $20,000
o Company X calculates that its relocation fee fund charge will be $170,000 (Abby $150,000 + Bill $15,000 + Chuan $5,000) and remits the funds to the MD Treasury on the day that the employees are paid no longer
o Chuan finds another position immediately and does not draw from the fund. His $5,000 portion of the fee is divided between one pool of money for retraining and another for economic development.
o Abby surveys the market and decides that she wants to run her own company. She develops a business plan for a company focused on cleaning up waste-water run-off and making poultry farms organically friendly.
o Bill surveys the market and decides to become an automobile technician. He will need computer and other training.
o The state of Maryland has determined that relocation funds will be allocated as follows, to any and all workers affected by companies moving jobs outside the U.S... The state has identified the industries that will qualify for the fee fund. It has set certain criteria that each applicant must meet to demonstrate that they are reasonably pursuing retraining and / or entrepreneurship. It has determined that funds will be available for up to one-year and that they may be applied to business/tuition and related expenses as appropriate
o Entrepreneurs - range of - $25,000 - $100,000
  § Abby's company qualifies for funding under the condition that the bulk of its operations are based in Maryland for a period of time
o Worker Retraining - range of $5,000 - $10,000
  § Bill qualifies for retraining under the program, if he will commit to pay taxes in Maryland for a period of time, because skilled technicians have been targeted based on expected income
o Maryland has set-up an "apprenticeship" program to fund "hands-on" internships at companies in the targeted growth industries. The apprenticeship program is funded by unused money, and interest from investing, the relocation fee fund. The internships provide direct experience. The state has recognized that potential employers like to have workers that are both experienced and trained. The apprenticeship program lasts up to 12 months or until a retrained worker finds another position - whichever occurs first
o Also, Maryland will track the results of the fee fund using existing government agencies (business development, commerce, higher education, tax and treasury, etc.). One agency - perhaps business/economic development - will be managing, tracking and adapting the program based on its results. That agency will be accountable for determining if the relocation fee fund is creating the companies, jobs and trained workers that make Maryland, and the US, attractive to growth industries throughout the world. Maryland's goal is to use existing resources to manage these programs efficiently.

The success of a relocation fee fund proposal, or something like it, will depend on leadership, vision and commitment. The type of program should be positive. Due to the sheer number of factors involved its outcome can not be certain. However, if we do not take a direct and comprehensive approach to the issue then two things are relatively certain. Jobs will be lost. There will be no direct and reasoned process for replacing them, or their value to the local economy. That local economy may well be your economy… the job may well be your job at some point in time.

Attract capital and jobs from other domestic and foreign sources

It is reasonable to expect that the United States and Maryland can attract jobs and investment - as new and knowledge intensive markets emerge and mature. America is both an innovator and a consumer. That makes us a target to foreign companies that want to gain local access to our large base of intellectual property and consumers.

Domestic and foreign companies consider factors like customer access and workforce cost/quality as they determine where to locate. The flow of their money, organizations and people are fluid. They will continue to be mobile and to evolve… in response to changes in customer and product markets. In turn those markets are likely to experience the traditional life-cycle of - development, emergence, growth, maturation, decline/extinction and/or renewal. Similarly the engine for creating new businesses and for enhancing the workforce in America must be flexible and evolve. Today Maryland is in the midst of addressing new company and labor markets in the bioinformatics, biotechnology, government contracting and nanotechnology sectors, for example. Strengthening our ability to address new markets will keep us attractive to organizations considering relocation.

An organizations' decision to relocate to Maryland, or elsewhere within the United States, will depend on the circumstances. Most of them are beyond our control. We can make the best of the things that we can control. Building and promoting a critical mass of resources in growth markets is within our reach. It is prudent to take a comprehensive approach.

Take a different approach to the issue of job loss - to other countries… now

The relocation fee fund proposal is different because it takes a collaborative approach to a divisive issue - jobs leaving the U.S. and moving to other countries. It acknowledges the realities of capital and global market expectations. In concert it recognizes the needs of the most important foundation of any organization or society… people. Global shifts in jobs and skills present challenge and opportunity. Let's embrace the opportunity. Use the challenge to galvanize constituents. Harness any anger to stimulate positive action. Unleash an energy that helps to build a local economy that enables a reasonable living today. In concert it will position us to survive and to thrive from changes in the future.

The relocation fee fund presents an integrated approach that makes the connection between workers that lose their job when companies leave the US and a reasonable path to re-employment and job creation. By its nature the idea provides possibilities that are renewable and sustainable. It is up to stakeholders (2) to make the possibility a reality. There is another saying that I favor. One that describes what we should do next… "Carpe diem"… "Seize the moment"

(2) The stakeholder list should be inclusive - people affected directly, like companies and workers, to those impacted indirectly, e.g., government, higher education, and organizations that buy and sell to the companies relocating and / or to the workers losing their jobs, etc. I suggest that business leaders and public sector officials, at the federal and state/local levels, give this relocation fee fund proposal approach consideration serious

Chris Bennett has 20 years of domestic and international experience as an advisor and business person. He is the CEO and founder of NetInterests a company located at the MTECH/TAP incubator of the University of Maryland. chris.bennett@netinterests.com

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