Thursday, April 3, 2014
Fruit of the Loom to Close Last Kentucky Factory
Underwear maker Fruit of the Loom announced today that it is closing its last factory in Kentucky, in Jamestown, at the cost of 600 jobs. The company, which still has its headquarters and a distribution center in Kentucky, is moving the Jamestown operations to Honduras.
In Janet Patton's story about the announcement, the town's state representative is quoted as saying there was no warning, but there kind of was. Twenty-five years ago, Fruit of the Loom was one of the commonwealth's largest employers. Only General Electric was bigger. At the time there were many textile plants in Kentucky. OshKosh B'gosh also had several. Many were located in rural areas in the south-central region.
Fruit of the Loom started to close its plants in 1998. Every couple of years, another one would close. Jamestown went from 3,200 workers in 1990 to 600 today.
The Fruit of the Loom factory at Jamestown was built in 1981, so it lasted 33 years. That's the textile industry. Cutting plants, sewing plants, textiles move all over the world. They're always looking for the optimal balance of skills and wages. They know what skill level each type of plant needs and they go wherever the wages for people with that skill level are lowest. That's why Kentucky got a bunch of those plants 30-40 years ago and why it is losing them today.
This isn't a secret and shouldn't be a surprise.
This story is appearing in this space because of the story we reported on Tuesday. Many people reflexively condemn government 'handouts' to big business, but the purpose of those investments is to preserve existing jobs and tax revenue streams and create new ones. The new tax break for whiskey-makers was one small part of an overall budget bill that passed 91 to 9 in the House and 35 to 3 in the Senate. The Kentucky Senate, it should be noted, is ruled by Republicans while the House is ruled by Democrats, so passing a budget with those kinds of majorities is no small feat.
But let's look at the advantages of Kentucky investing in bourbon versus investing in boxer shorts.
'Made in Kentucky' never did a thing for underwear sales, but millions of consumers all over the world look for the word 'Kentucky' on whiskey labels. Every year, thousands of those millions personally bring their money to Kentucky because they want to experience the place where their whiskey is made. Just like underwear, you can make whiskey anywhere. You can make bourbon anywhere in the United States. But you can only make Kentucky bourbon in Kentucky.
(Pay attention, Tennessee.)
It is hard for many Kentucky legislators to support the whiskey industry because there are so many conservative, anti-alcohol voters in the state. They are to be commended for recognizing that an investment in the whiskey industry is a smart one. This particular change will be very good for the industry, but it merely eliminates a competitive impediment from which the state's whiskey-makers had long suffered, as Kentucky is the only state that taxes the value of aging whiskey. Producers are forced to balance the value of 'Kentucky' on the label against millions in taxes they can avoid just by moving to the next state. The value of that name on the label is proven by how few producers have (well, none), but you can't safely remain higher cost forever.
Just ask the soon-to-be unemployed workers in Jamestown.