Connect to share and comment

The American middle class is in distress. Here's what that means to the world's largest economy, and the rest of planet earth.

United States

America the Gutted: Outsourcing America's infrastructure

Once the bridge-building capital of the West Coast, the Portland area has suffered as major projects go overseas.

managed to find ironwork, life has become much more difficult. Larry Brown has been laid off twice in the past six years, and says he makes about a third less than he once did. Suffering from heart problems, he recently took a pay cut to get a job that would give him health insurance.

“It was real tough,” Brown said. “It’s hard to buy groceries when you’re making a car payment, a house payment, and buying your meds.”

The competition

Prospects for the ironworkers look especially bleak when considering their competition. The job market has gone global, and paying workers enough to buy a house in suburban America is no longer part of the labor equation.

The Chinese workers who helped build the San Francisco-Oakland Bay Bridge typically made between $9 and $15 a day, working 27 days a month.

Larry Brown earned $23.50 an hour as base pay, and that’s not counting benefits or overtime.

“When you have a project that is five million man hours, and you’re $20 or $30 per hour difference than your competitor — or in the case of the Chinese it could be as much as $40 an hour — it doesn’t take long to do the math and go, wow, that’s a huge problem to be overcome,” said Tom Hickman, Vice President of Sales and Marketing for Oregon Iron Works.

Chinese steel producers and manufacturers also have other advantages. Many are government-run. They have access to low-interest financing, substantial energy subsidies, and aren’t subject to the same kinds of environmental or worker safety regulations as American companies. And China maintains a low exchange rate, making anything bought with foreign money even cheaper than it might be if the currency fluctuated freely.

Still, evaluating the cost of foreign labor and materials is difficult. Recent projects suggest it’s not necessarily cheaper to buy a bridge made in China, particularly for public works paid for with tax dollars.

Part of the reason is that a significant fraction of the salary paid to an American worker goes back to government coffers through taxes.

“He has to buy food for the table. He has to buy milk, gasoline. He has to pay his taxes. He has to pay his rent or mortgage,” said union rep Aden Blair. “Look at how many people are affected just from one guy’s paycheck.”

The federal government has taken action to protect those paychecks. So-called Buy America provisions attached to some types of federal infrastructure appropriations require states to hire workers and buy a significant percentage of materials in the US.

States, particularly those without their own steel industries, have sought ways around those provisions.

California’s transportation department found a loophole with the San Francisco-Oakland Bay Bridge by splitting the project into segments. The stated aim was to encourage competition by separating the project into manageable pieces that smaller companies could take on. The move also allowed California to declare that federal money would pay for certain parts of the bridge, but not the expensive and iconic east span, thus avoiding Buy America provisions for that contract.

Convoluted bidding processes and opaque budgeting make it difficult to compare the cost of building the Bay Bridge in China to what it might have cost in the United States. The most cited number comes from an early bid that estimated the savings of going to China at approximately $400 million.

Yet, as the project nears completion, it seems it may not have been cheaper at all. Problems with welds prompted CalTrans to send quality control inspectors to China at great expense. CalTrans declined to say how much money that cost to fix but some estimates put it at tens of millions.

In its public statements now, the agency plays down the benefits to the bottom line.

“We knew right from the beginning that you don’t just save $400 million,” said Bart Ney, a transportation department spokesman. He said they expected extra expenses once production began, given the project’s scale and complicated design.

An industry in decline

Instead, Ney says the decision was based on capability to build this kind of massive project. China has it and America just doesn’t.

“The capacity flat out does not exist in the United States of America. There’s no way that can be refuted,” Ney said. He said awarding the east span contract to American companies would have meant a decade-long delay.

“You’re trading lives for jobs and we’re not going to do that because we know the earthquake is coming,” Ney said, adding that it’s not California’s responsibility to revive steel manufacturers. “No one project can rebuild the steel industry. It’s going to take more than one project.”

American steel industry leaders dispute this claim, but the debate may reveal less about who’s right in this case than it does about how fragile America’s infrastructure manufacturers have become.

Tom Hickman of Oregon Iron Works says a consortium that included his company and three others had been able to build the bridge, and had been pre-approved by CalTrans to do so.

He maintains that they could have done it with no more delays than California has experienced since sending the work to China.

“I do believe that they had far and away more problems quality-wise than they would have ever had in the US,” Hickman said. “Part of it is companies getting used to and understanding all of those state, federal requirements that come with all of the standards from those organizations. The Chinese have never done that before. Not on this scale.”

But since losing the Bay Bridge bid, the temporary consortium has dissolved, one of the companies that participated has shut down and the bridge-building capacity that once existed is clearly dwindling.

In the Portland area, the change is as evident on the river bereft of steel barges as it is among the remaining, graying workforce on the factory floors. Larry Brown trains ironworking apprentices, but he says it’s been three years since he’s taken on a new candidate. At the same time, many experienced ironworkers have fled the trade.

“When people go into other trades, or they just get completely out of the bridge industry, then you lose a lot of knowledge,” Brown said. “You lose good people and the trade suffers.”

It’s easy to get Portland’s manufacturers to imagine what things might have been like had any of the projects that went overseas ended up in Portland instead.

“Had the San Francisco-Oakland Bay Bridge job been kept here, had we been successful, we would have built a brand new facility, which the Chinese did,” said Tom Hickman. “We would have trained hundreds, if not thousands of workers – which the Chinese did.”