The Campbell Conversations: A discussion on the Micron project with Tod Rutherford

Campbell Conversations

President Joe Biden speaks in Syracuse in April on the $6.1 billion grant that Micron will receive to build a chip megafab in the Town of Clay(Darren McGee / Office of the Governor )

Last month, a number of political dignitaries, including President Joe Biden, Senate Majority Leader Chuck Schumer, and Gov. Kathy Hochul, descended upon Syracuse to tout the massive $6.1 billion grant for Micron from the CHIPS and Science Act for its massive megafab project in the Town of Clay. This week, Grant Reeher talks about the labor and economic impacts of the project with Syracuse University Professor Tod Rutherford.

Program transcript:

Grant Reeher: Welcome to the Campbell Conversations. I'm Grant Reeher. Last month, a host of political dignitaries, including President Biden, Governor Hochul and Senator Schumer, descended upon Syracuse to tout the federal government's $6.1 billion in grants through the Chips Act to Micron, which plans to build a microchip mega complex in Clay and has said it will invest $100 billion in the project. There was, needless to say, a lot of celebration on that day. My guest today is an economic and labor geographer who's been looking at the Micron project. Tod Rutherford is a professor of geography and the environment at Syracuse University's Maxwell School of Citizenship. Professor Rutherford, welcome to the program.

Tod Rutherford: Thank you very much, Grant. Thanks for having me on.

GR: Well, we're glad you could make it. So, as I just mentioned, you know, there are a variety of government incentives for this Micron project and $6 billion from the Federal Chips Act most recently. But there have been other, goodies and incentives that state and local governments have been putting in as well. Could you just briefly summarize some of those?

TR: Yeah, I mean, the Chips Science Act is $280 billion in total, with $39 billion allocated to, supporting domestic manufacturing. and another $13 billion for research and development and workforce development. But this is, of course, been accompanied by a host of other, kinds of, subsidies and, tax abatements and so forth like this. So, I know that the county, Onondaga County has put in a fairly significant, level as well as New York state. I don't quite have the figures to hand, but, it's a significant amount of money on top of that. Yes.

GR: I think it was in, you know, like almost $300 million by the time it got added up..

TR: Yeah over a 20 year period. Yeah.

GR: Okay, that’s important to note, right? It's not all up front. So, thinking about that and also thinking about the promise of Micron, what people are hoping to see out of it. in one way, I guess I could say we've seen this movie before in this region, and there's even a pun in that sentence, in terms of Syracuse's history on this. But it is nonetheless the case when I talk to people around the town about Micron, a lot of them are very excited. But there are others that say, you know, they'll believe it when they see it, and, so they're a little suspicious of it. Do you think that that it's different this time around with Micron when it comes to helping the area economically?

TR: Well, I think, you know, some degree of healthy skepticism is a good thing to have with respect to this, as you say, there is a history. I don't think, though, we've ever had this kind of level of federal and state commitment, through the Chips Act, through the other kinds of, interventions that are being made. So that would, what I would call wouldn't it doesn't eliminate the possibilities that there are risks with this. Nothing will, but it would seem to me that this would, help the project meet, at least some of its at least minimal goals, if not more. Yes.

GR: Yeah. This is kind of a more political question for you, but at least one of the things that seems different to me anyway is I get the sense that that there are some pretty prominent political players that have put a lot on the line here. I mean, you know, I mentioned Governor Hochul, Schumer, President Biden. So that that to me feels a little different than maybe some of the other economic development projects, you know, if you would.

TR: Yeah. And I think that, you know, post-Covid, there's been a really strong sense in which the kind of globalization model that had been adopted from, like the late 1970s onwards was clearly, problematic in terms of the level of resiliency, dependency on complex overseas, supply chains, all of which were, you know, on, just in time systems. So there was no kind of room for error in them. And we found that, you know, in trying to recover from Covid in the economic sense that, these were really, deeply problematic. And so there has been, I think, both an economic and political argument for reshoring on top of this longer-term concern about the level of investments that's required to sustain a viable manufacturing base in the United States.

GR: Yeah. So the country itself has a stake in this project, I guess, as opposed to, say, the film hub or the mall. So, I was wondering, in addition to the confidence level in the project, actually happening, which is what you've just been speaking to a little bit from an economic standpoint and a governmental tax standpoint, are there reasons to think that that will see the government and therefore, you know, we the people of Onondaga County, I guess we'll get our money back from these upfront investments?

TR: Yeah. I mean, assume let's assume that the number of jobs direct jobs that are, said to be created over this next 20-year period are created. So there's something that we, economic geographers talk about, multiplier effects. and that is, for every direct dollar spent in a sector, how many other, indirect, spendings and jobs can be linked to it. And manufacturing tends to have a fairly high level of multipliers. like, you know, the auto industry in particular, but also, chip manufacturing. So, if we say that we're going to get 9,000 direct jobs as, as is, the forecast in this project with Micron, then we're looking up to, an additional 40,000 more jobs being created. And so, if we're anywhere near that figure, then, then it will pay back just in terms of, the multiple ways of spending, tax revenue and so forth. Yes.

GR: Yeah. Those number of those jobs is really mind-boggling when you think of the size of Syracuse.

TR: Yeah, so assuming that we get anywhere near those jobs, that's that's the big thing. Yeah.

GR: You're listening to the Campbell Conversations on WRVO Public Media. I'm Grant Reeher and I'm speaking with Syracuse University geography professor Tod Rutherford, and we're discussing the Micron project in central New York. So based on your research, Tod, and the things that you've looked at and thought about, what are your biggest concerns about the economic aspects of this project as you look at it right now?

TR: Well, when we have to remember that this is a very cyclical industry. and so it's it's very difficult to forecast in any one year or even a five-year period, you know, exactly if jobs will be created or if jobs that are created don't simply result in layoffs. So we need to be prepared for thinking about the cyclical nature of the industry, even one that's getting the level of subsidy that it that it's getting. The other thing that I'm somewhat concerned about on the kind of economic front is, you know, who's going to be responsible for training, and, and doing those kinds of things, because it seems to me that the model that the United States has followed for about the last 50 years is increasingly, employers expect, either the public sector through the education or some other body to do the training and so it seems to me that there is this expectation and this is certainly happening in the local economy where, you know, Onondaga College and Syracuse University are stepping up the amount of investment and I'm not necessarily against that. But we do have to ask, you know, whose responsibility is it to make somebody's job ready? Where does the the public sectors, responsibility and the employer's responsibility, begin? And it seems like, for a long time, the kinds of training that used to be done internally, are, are now expected to be done either by the individual coming into the job or, through the public education system. And so if, if Micron and other companies are gaining this level of subsidy, is it not fair to expect that they should also pick up more of the training? And that's not clear to me that that's going.

GR: Yeah, that's an interesting point. And and I wanted to ask you about that, that what I mean, what happens if okay, OCC and SU and you know, maybe LeMoyne and other schools around here create programs, and then Micron says after they encounter these people, well, they're really not quite what we need. We're going to have to hire overseas or we're going to have to pull people over from, Idaho or something. I mean, is that what happens then is that is that just the company's decision or?

TR: Well, I mean, and again, we're not sure, exactly what the agreement says about those aspects, assuming that it's just simply the company's decision to make, then, yes, they could bring in people on visa. They can bring that is non domestic workers or they can bring people in from other locations. So that is a concern in the sense that we're not sure, about what the responsibility of Micron should be in terms of, doing that kind of training. I, you know, my other concern is that, you know, if you build this training infrastructure and the jobs don't appear, what's going to happen? There has been some, reports from Arizona recently that they're doing, they're stepping up these trainings and apprenticeships and other kinds of programs for the chip companies that are coming there. But the hiring hasn't really gone on to nearly the extent, that they expected at this point. It may yet come to fruition. But it seems to me that, you know, the risk is kind of on the public and the individual worker to invest in skills and then hope that that's exactly what the firm wants. and it seems to me that there should be some levers of intervention within any kind of agreement that says, you know, you have some responsibilities. We're not we can't train everybody down to the last, bolt to tighten and, and, and screw to, to screw in. Right. You know, you've got to do something on this, you know.

GR: Yeah. On that, on that issue of the levers, are based on, your experience and your research, are there like best practices for that, that the government or, you know, policy instruments that, that could speak to that?

TR: Yeah. Well, there does seem to be some local community benefit agreements, that that have occurred, in other communities that have, received, companies receiving chip grants. And these tend to be coalitions of local labor unions and, community groups. And they were stipulating things about, minority hires. You know, a union neutrality agreements and other kinds of things. And, you know, there's stipulations within, for example, the Federal Chips Act about not engaging in stock buybacks. whether it is, you know, using the money that you get from the Chips Act from the public to very effectively, just simply inflate your shares by buying, buying stocks. And it's not clear that this is being enforced. So, we have the letter of the law and then we have the fact of the law. And it seems to me that so far there's some discrepancy. and I'm not sure who's making that decision. And it's partly in the sense that there, there's different layers of responsibility here. So the Chips Act is passed by, by the, by executive and by the, by the US government, but it's enforced by the Commerce Department. and the Commerce Department may have other priorities. So it's not clear that that's, that's going on in the same way.

GR: You're listening to the Campbell Conversations on WRVO Public Media. I'm Grant Reeher, and I'm talking with Tod Rutherford. He's a professor in the geography and the environment department at Syracuse University's Maxwell School. And we've been discussing the Micron project here in central New York. So obviously, one of the big things that I have read about this project when it comes to the jobs is, that in addition to creating a lot of jobs and you mentioned that multiplier effect in the first half of the program, which, again, is just an astonishing number when you think of the size of the area. But, many of these jobs that Micron is going to be providing are going to be very high paying relative to the Syracuse, market, the current set of jobs in the area. And I was just wondering what effects will that have? Obviously, it's going to have some huge effects on the labor market here in central New York. And I it's just kind of hard to think that through. What do you see happening in terms of ripple effects or broader impacts to the labor market here?

TR: Well, there's a there's a number of different ways to address this. First of all, we need to look at the fact that the types of jobs that are being created, there's differences in terms of pay and skill level. I mean, obviously, you have people who are, graduate engineers. but then about 60% of the workforce, I believe, will be what we call technical workers. The graduate engineers are going to be earning significantly above the average for the predicted, pay, but the technical staff will probably be earning maybe 50 to 60,000 a year, which, you know, maybe 20 to $25 an hour, give or take more with overtime and other kinds of things. So it's a kind of a skewed or bifurcated, labor market. So, you know, let's assume the number of jobs that are being created are being created at the level of wages and salaries that are predicted. Obviously, this is going to, you know, have these ripple effects. You know, they can be very beneficial in the sense that, you know, workers' wages in the United States and elsewhere have been fairly stagnant for 40 years and including in Syracuse. So they'll be probably actually good thing that wages are going to go up. but, you know, on the other hand, you can have things going on like, what they call poaching, where, a big firm like Micron can, can fulfill its skill needs by just simply taking, a worker from an, already an existing, firm that's done the training and so forth like this, but can't afford to necessarily bump up the pay to the level that Micron is offering. And so then, then you can have skill shortages that can come out of that. And so that becomes a potential issue in terms of how that affects labor market. But you know, especially if you also have more equitable and diverse hiring, we have an opportunity here for, you know, minorities and other groups in the Syracuse region that have not been included in a lot of what we would call good and good paying jobs to, to have access to these jobs. But again, it has to be, there has to be benchmarks set by the community. There either is an advisory board, but these benchmarks have to be have some teeth. And in terms of, you know, maybe holding back certain subsidies if, if, they're not being, fulfilled. So, you know, it's not simply up to Micron. It's also the community should have some levers into this particular, impact. Yes.

GR: Well, it's interesting you mentioned that because one, one lever that I was struck by and it's not doesn't really fit the categories you've mentioned so far exactly. But I watched the announcement. of, of the, of the $6 billion and where again, President Biden, Governor Hochul, Senator Schumer, among other elected officials spoke. And I was struck by how much was being made about unions during all of that. Every single speaker hit that point hard, about the value of unions, the fact that these would be they kept talking about union jobs, and they made it sound like most of the jobs at the new manufacturing plant would be unionized, except I was I was left a little confused. Were they talking about the unionization of the construction of the plant, or were they talking about both the construction of the plant and the operation of the plant? Anyway, what's your what's your sense? I mean, how many of these jobs are going to be unionized? Which ones will be unionized? Do we know?

TR: The only thing that I do know is that they have a, an agreement to only hire, union labor for the construction phase. I don't think there's any other understanding, beyond that. And that's why in other communities there are, especially ones that are getting chips money, but other kinds of infrastructure money. There have been agreements to have a union neutrality that is, if Micron and union wants to form their that they're not going to hold compulsory one-on-one, anti-union meetings, they won't engage in arbitrary firings or intimidation of the workforce. They will agree to be neutral during that process. And certainly, there have been other agreements in New York state between, for example, the Communication Workers of America and General Electric, which is also receiving some infrastructure and green infrastructure money for those kinds of things. So it's it's not clear that there will be necessarily a union at all. The point is, is that if workers wanted to have one, will they be able to make a truly free choice in order to do that.

GR: Well, let me push you a little bit on this, and I kind of pushing you into your values a bit, I suppose. But, you know, Micron is this really high-tech company. Do you think it's do you think it's important that a lot of the jobs there at the plant are unionized, in your view?

TR: Well, I go back to I feel that there needs to be a real choice made by the workers. It's ultimately up to the employees themselves to make that decision. But, you know, my values would be that, there is some important, features of unionization when unions work well, of giving workers, voice in the workplace. Also, unions are positively associated with things like investment and training. They often make firms do more training than they would normally do otherwise. They also reduce, the level of employee turnover. So they build kind of the human capital that comes by through learning, by doing. So, you know, in my view, there's a lot of positives that come out of unionization. And I do believe it would be a positive benefit, to the workers there. But as I said, ultimately it's their choice to make.

GR: If you're just joining us, you're listening to the Campbell Conversations on WRVO Public Media. And my guest is Syracuse University professor Tod Rutherford. Well, let me stick with the unionization, just just a little bit longer. Do you happen to know whether Micron itself has a particular history so far? Have they been friendly to unions, unfriendly or anything else that you're aware of?

TR: I and I must confess my ignorance here. I don't I don't know what their history has been. You know, traditionally, the semiconductor industry is not particularly friendly, to unions. Okay. Like a lot of the high-tech industry, that slowly changing in some areas. There are some unions and, and associated with high-tech industry more generally. But you know, you know, the one reason that they've offshored over those years, the last 40 years is, is to avoid and in some cases, union labor or paying the levels of wages that are typically associated with not just unions, but, but U.S. standards.

GR: Right. Yeah. No, I wondered about that as well. Well, you mentioned something, at the beginning of our conversation about the investments that educational institutions like OCC, Syracuse University and I believe I read about also some things that we're going to be done at the high school level, even about this, to get the students ready to go into those programs. And so it does seem that these institutions are making some upfront investments now in their curriculums and their programs and, and particularly in the STEM areas. And I, I believe if, if my understanding of what I heard, in a, in a faculty meeting was correct, that I believe that that Syracuse University has actually reallocated some faculty lines in to to reflect this. So they're making some real decisions about this. Just your sense is that is that too risky at this point? it's just necessary at all to do this?

TR: They may be privy to more, they may be privy to more information than I have. So, it is it is something of a risk in the sense that there is no guarantee that the number of jobs that are pledged to be created will be created. And there's no guarantee that those workers will stay in the Syracuse region, whether they're skilled engineers, graduates of Syracuse University or whether they're graduating from OCC. I will say that especially for the technical level, it's very important that if any investment is made in training, that workers are receiving a recognized transferable skill, that is, you know, that it's not just simply to the demands of Micron, but are skills that can be transferred to other firms in the region, you know, hopefully that people can stay in the region, assuming that happens so that it's not just simply a skill that is either linked to Micron or is completely unrecognized elsewhere. So I do believe OCC is trying to make sure that they are and as a public institution, they should be. But it is really important that if you are going to make these investments, you can't guarantee exactly that they're going to get those jobs, but you can at least say they've got a transferable skill that could go to another, you know, firm.

GR: Yeah, that's that's an important point. Well, we've we've got about three minutes left or so, and I wanted to give you a bit of time to discuss this final question. And it it's I wanted to get, you know, you you've looked at a lot of these kinds of things in the past and other industries. And you've looked at Micron now a little bit. From your particular perspective and your perch, what do you think are the most important questions that the people who are listening to this program, you know, the citizens of the region, should have at the front of their minds as they're thinking about this, because, again, some of these numbers are just mind-blowing and I think the, I wouldn't necessarily call it a danger, but maybe it's a danger. But I think the, the, the, the inclination is just to say, oh, we have to have this, you know, this is just these are numbers I've never contemplated before. So. But what do you think people here should be have at the front of their minds as they're processing this in the next few years?

TR: Well, you know, as I said, this is an equal parts opportunity and a risk. I think, people here should be thinking about an opportunity in the sense of developing, also a supply base that is not just simply wedded to Micron, but has possibilities of, developing its own synergies with other firms supply elsewhere. And so that we are not just putting all our eggs in one basket with Micron, that we develop a kind of, a kind of a momentum that, that this kind of investment will generate, but not just simply to say we're just only going to supply to Micron, but to develop, independent capabilities in, within terms of research and development and other kind of capacities that will allow, a kind of cluster to develop here that isn't just dependent on Micron, so that we have a more diversified base. So I think that that's critical. I haven't talked about that so much, but I think that's also very critical.

GR: Just a few seconds left and maybe taking you out of your lane here. But one of the things that I've noticed just since this announcement has been made is, the value of my home has gone up considerably, and a lot of people are excited about that, particularly in my neighborhood. But there's a downside to that is that continues. And that's affordability of housing. And it's already an issue in Syracuse. So just in a just in a couple seconds, is that is that a big problem we ought to be thinking about too?

TR: Yeah. You know, in the short to medium term, you know, housing is is not something that responds very well to to market changes. So the supply isn't going to necessarily match the demand if the demand comes to fruition of course. And so we need to think about, how we're going to have affordable housing, and the public sector and private sector need to make some agreements on that too.

GR: Well, we'll have to see how it all plays out. That was Tod Rutherford. Professor Rutherford, thanks again for taking the time to talk with me. It's been very informative.

TR: Well, you're very welcome, and thanks for having me.

GR: You've been listening to the Campbell Conversations on WRVO Public Media, conversations in the public interest.