Business, Finance & Economics

Knocked Down by Globalization, Newton, Iowa Rebuilds

On paper, the economics of Iowa look pretty good. It has the seventh lowest unemployment rate in the nation. Corn has been fetching record prices in recent years. Des Moines and the other metropolitan areas are thriving. (In fact, Forbes Magazine recently ranked Des Moines the number one city in America for young professionals.)

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But not everywhere in Iowa is prospering. Rural manufacturing towns continue to struggle. Young people have been leaving these small communities in droves since the 1980's.

Take the case of Netwon in central Iowa, population 15,000. It was the quintessential one-company town — Fred Maytag began building his washing machines here in 1893. It was a good run: company and town prospered together for more than a century.

In the past decade though, the company shifted jobs to southern states and Mexico. By 2007, Maytag, which was acquired by Whirlpool, closed its doors in Iowa for good.

"Definitely that was a demoralizing blow to the town," said Darrell Sarmento, who directs the Greater Newton Area Chamber of Commerce. "Not just from an economic standpoint, but at one point in its heyday, Newton was the washing machine capital of the world. So that was a lot of the town's identity."

Towns don't die quickly. Housing prices fall, sewage systems and roads fall apart. Crime rates creep up. Newton is trying to avoid that fate and not become like dozens of other Midwestern manufacturing towns that have lost industry to cheaper foreign labor markets.

Over and over, you hear that the best way to avoid that downward spiral is to invest in education. That's a message that community leaders in Newton are embracing.

I took a tour of the old, cavernous Maytag factory with Terry Norton, director of the career academy for DMACC, Des Moines Area Community College. He pointed at old railings along the ceilings used to move heavy equipment and other relics from a bygone era.

Then we entered a different part of the old factory where DMACC has done some remodelling. Here, students were being trained for higher-skill trades like welding, autobody repair, nursing, and cooking.

DMACC isn't your typical college campus — laid off Maytag workers have skewed the demographics a bit older.

"Let's see, I would've been 47-years-old, and I made the decision to go back to school," said Jenny Michael, a former assistant to the general counsul at Maytag.

Michael got a degree in business administration. She's working again. But I asked her how her lifestyle compares today with her days at Maytag.

"People don't give raises as easily," said Michael. "I work part-time now, as opposed to full time before, but that's been a benefit to me."

Still, Michael is one of the lucky ones. Economist David Swenson at Iowa State University said the transition to life after Maytag has been rough for people in their 40's and 50's.

"Many try to go back to school, we have federal programs that try to help them retrain, re-skill, re-pot themselves back into the economy. The success rate isn't that great," said Swenson. "It works best for younger people. It works not so well for older people. And what happens if these workers do find work? They very, very often find work at even less than half of what they were making before."

Swenson says towns like Newton have to diversify their economies and their workforce. Frank Liebel, executive director of the Newton Development Corporation, said that's already happening, and that the mourning period from the loss of Maytag is coming to an end.

"We've created almost 1,200 new jobs since Maytag closed," said Liebel. "Our goal is to diversify our community. Let's try to go out and get 10 companies that employ 200 people instead of one company that employs 2,000 or 3,000."

One piece of the puzzle is the Iowa Speedway, which opened its doors in Newton five years ago. It's Iowa's only professional sports complex, a place where "the action is non-stop, where you start your day tailgating and end it partying," promises a pumped-up advertisement.

Community leaders highlight the speedway as a way to put Newton back on the map. But it can't turn the local economy around by itself.

"When the racetrack is running, and there are people at the speedway, everybody is full. That's four weekends a year," said John Gerken. He and his wife own the August Bergman Inn in Newton, a charming bed and breakfast built a century ago. "You don't make it on four weekends a year."

A handful of smaller companies have set up shop in the area, staffed partly by former Maytag employees. They're building things like wind blades and spotlights that use low-energy LED's for theater lighting.

Garrett Young founded Prism Projection. He showed me his new lighting system, reaching out and tapping a spotlight. "If it was a traditional fixture, if I reached out and touched it, I would get a very serious burn, probably leave some skin on it. Whereas this, a baby could touch it and it wouldn't be an issue."

He's just the kind of guy the area is trying to attract, a 29-year-old Ph.D. in plasma physics who relocated from New Jersey. Young says he chose to start his company in Iowa mostly because he got funding from a private investor. He also liked that the town of Sully, right next door to Newton, just gave him his office space, a big barn-like structure.

"It used to be a gymnasium, and it wasn't being utilized," said Young. "The community bought it back from the people that were using it and basically then gave it to us so that we could start this company here."

I asked him though, as his company grows, what's to stop him from eventually building his spotlights in Mexico or China? He looks down at a semiconductor board he holds in the palm of his hand and says this is the future of manufacturing in America. He said the actual construction is so mechanized that he doesn't need low-wage workers.

"We hired the highly-skilled engineers that designed the schematic and the components that need to go on there. And then we have a machine that places these components, a thousand components a minute, and so why not do it here in the US?"

Young's company only employs 20 people. It may very well continue to grow, but he'll continue to hire highly-skilled workers.

If towns like Newton, Iowa have a future in manufacturing, that's where it's at. Like it or not, the days of joining the middle class in Iowa by tightening screws on washing machines are over.