The Marine Trades Industry in the Water Counties

1. The Marine Trades Industry in the Water Counties Final Presentation April 21, 2006 Rebecca Brown--Mary Donegan--Matt Harris Tom Mitchell-- Olga Nesterova--Paul O’Shaughnessy Janelle Santos--Rebecca Schenk University of North Carolina-Chapel Hill

2. Presentation Overview • Purpose of Project • The Industry • The Role of a Business Association • The Workforce • The Training Centers • Land Use • Key Takeaways

3. The Project • Why were we brought in? • Existing and growing marine trades cluster • Growth bumping up against two problems: • Need for updated workforce • Need to protect boating shore

4. The Project: Location • Five Eastern NC Counties • Carteret, Craven, Jones, Onslow, and Pamlico • Linked geographically, through commuter flows, and through the location of the industry

5. Coastal Sub-region: Water Counties Earlier studies termed this area the Water Counties Convenient to use in this report

6. What are the Marine Trades? The commercial and industrial activities that support the production, distribution and use of boats and boat-related products, including: • Suppliers of production inputs and boating accessories • Boat builders and manufacturers • Distribution, sales and transportation firms • Boat storage and maintenance facilities • Support services across a range of activities

7. Analyzing the Marine Trades Using BLS and SBTDC data to analyze: • Employment, firms and wages • Trends and changes over time • Comparisons with state and nation • The structure of the value chain • Competitive advantages • Potential links between need and opportunity

8. Trends 1994 - 2004 ◄ Regional Growth > US ◄Regional Growth < US

9. Comparative Advantages Source: NCESC, BLS 20% of NC Marine Trades in Water Counties

10. Inputs Production Distribution Other Services Storage & Maintenance What is the Regional Value Chain? • Useful for: • Organizing industries into activities that add value • Understanding competitive strengths & weaknesses • Observing density of industries in the region • Thinking about Marine Trades in terms of linkages between industries and firms • Provide insight into what drives the sector

11. Inputs Employees:74 Location Quotient: 0.05 Change 94-04: -74% Average Wage: $47.733 Change 94-04: 135% Firms: 4 Change 94-04: -91% Inputs Employees:76,180 Change 94-04: -7.4% Location Quotient: 1.27 Average Wage: $44,344 Change 94-04: -8.75% Firms: 1,071 Change 94-04: 15% Production Employees: 12,681* Change 94-04: 33% Location Quotient: 0.28 Average Wage: $39,988 Change 94-04:: -10% Firms: 614 Change 94-04: 44% Production Employees: 879 Location Quotient: 0.80 Change 94-04: 217% Average Wage: $29,011 Change 94-04: 32% Firms: 105 Change 94-04: 156% Distribution Employees:20,221 Change 94-04: 33% Location Quotient: 0.84 Average Wage: $39,000 Change 94-04:: -9.4% Firms: 2,013 Change 94-04: 33% Other Services Employees:428 Change 94-04: -39% Location Quotient: 0.73 Average Wage: $32,805 Change 94-04: 0.59% Firms: 74 Change 94-04: -19% Distribution Employees:694 Location Quotient: 1.18 Change 94-04: -74% Average Wage: $25,919 Change 94-04: 1% Firms: 101 Change 94-04: -17% Other Services Employees:428 Location Quotient: 0.32 Change 94-04: 54% Average Wage: $32,805 Change 94-04: Firms: 74 Change 94-04: -19% Storage & Maintenance Employees:31,102** Change 94-04: 21% Location Quotient: 1.03 Average Wage: $15,340 Change 94-04: -20% Firms: 1,911 Change 94-04: 25.5% Storage & Maintenance Employees:1,316 Location Quotient: 1.41 Change 94-04: 287% Average Wage: $14,404 Change 94-04: 26% Firms: 101 Change 94-04: 248% Water Counties vs North Carolina WC Avg wage: $23,535 NC Avg wage: $34,632

12. Trade Schools Employees: 74 Change 94-04: -74% Location Quotient: 1.06 Average Wage: $47,733 Change 94-04: 228% Firms: 4 Change 94-04: -79% Marine Hardware Employment either 0 or suppressed in 2004 Boating Lighting Suppressed 2004 79 emp, 1994 Radio Equipment Employment either 0 or suppressed in 2004 Paint Coating & Adhesive Mfg Employment either 0 or suppressed in 2004 Plastics Product Mfg Employment either 0 or suppressed in 2004 Rubber Product Mfg Employment either 0 or suppressed in 2004 Boilers Tanks, Shpg Containers Employment either 0 or suppressed in 2004 Marine Storage Batteries Mfg Suppressed 2004 185 emp, 1994 Inputs • Majority of Inputs are commodities purchased outside region • Some specialized components and value added activities • Competitive Opportunity is ability to cultivate skilled workforce

13. Ship & Boat Building Employees: 339 Change 94-04: 285% Location Quotient:3.20 Average Wage: $25,394 Change 94-04: 14% Firms: 16 Change 94-04: 33% Design & Engineering Employees: 540 Change 94-04: 186% Location Quotient:0.61 Average Wage: $32,629 Change 94-04: 50% Firms: 89 Change 94-04: 207% Anodizing & Coloring Employment either 0 or suppressed in 2004 Production • Competitive Advantage in Boat Building: increasing employment, good wages, high concentration of industries (33, SBTDC) • Potential Competitive Advantagein Design & Engineering: includes consultants, environmental specialists, laboratories, architects • Independent craftsmen not captured by surveys

14. Boat Dealers Employees: 275 Change 94-04: -23% Location Quotient:2.45 Average Wage: $28,786 Change 94-04: 38% Firms: 45 Change 94-04: 18% Boat Hauling Employees: 419 Change 94-04: 35% Location Quotient:1.49 Average Wage: $23,052 Change 94-04: -6% Firms: 56 Change 94-04: 60% Boat & Ship Rental (1994) Suppressed in 2004 Employees: 356 Location Quotient: 0.26 Average Wage: $29,130 Firms: 44 Marine Shipping Suppressed 2004 24 employees in, 1994 Distribution • Competitive Advantage in Boat Dealers: firms and wages increasing, yet employment has decreased • Competitive Advantagein Boat Hauling: increasing employment, relatively constant real wage. Untapped specialized freight capacity? • Need more information on Boat and Ship rental. Smaller industrial concentration, but potential source of revenues from outside the region

15. Storage & Maintenance Other Services Yacht Clubs & Marinas Employees: 1,316 Change 94-04: 287% Location Quotient: 1.76 Average Wage: $14,404 Change 94-04: 26% Firms: 101 Change 94-04: 248% Marine Surveyors Employees: 340 Change 94-04: -42% Location Quotient: 0.95 Average Wage: $20,848 Change 94-04: 40% Firms: 49 Change 94-04: -22% Marine Cargo & Salvaging Suppressed in 2004 Employees: 50 Location Quotient: 0.76 Average Wage: $43,303 Firms: 10 Boat Lifts Mfg Employment either 0 or suppressed in 2004 Boating Insurance Employees: 38 Change 94-04: -67% Location Quotient:0.04 Average Wage: $34,274 Change 94-04: 24% Firms: 15 Change 94-04: -46% Storage, Maintenance, Services • Competitive Advantage in Yacht Clubs & Marinas: Critical for commercial and recreational activities. Concerns about private acquisition • Potential Competitive Advantagesin Surveyors and Salvage. Need more info on regional activity.

16. The Value Curve

17. The Industry What did firms say we should focus on? • The Workforce • Increasing demand for boats and technical innovation has shown that the workforce is not qualified. • Which is more important: skilled workers or more firms? Skilled workers. • A supplier cluster or even a manufacturing cluster not as important as a skilled workforce cluster • Spend incentive dollars on training • Land Use • Waterfront development has led to a decline in public access points and slips for producers • Potentially cripples local demand, storage, tower installation and repair services

18. Business Associations A business association could: • Be a center for knowledge diffusion • Technical change is key in the industry • Identify collective problems • Workforce • Training • Land Use • Create a regional identification • Allows for collective response • Potential for future marketing value

19. Workforce and Education • What We Knew • Boatbuilding depends on a stable and skilled yet flexible workforce • As the technology of boatbuilding changes, workforce skills must continually change • What We Didn’t Know • Is there a shortage of workers, skills, or both? • If so, what are the causes of these shortages?

20. Labor Force Supply:If there is a problem, where is it and what causes it? Schools Is there an existing worker pipeline from high school, or the cc’s? Reasons for problems: Lack of information about careers, limited internships, etc Recruiting How and where are companies looking for workers? Reasons for problems: Poor formal recruiting channels, poor social networks, etc Hiring Are the “ideal” workers accepting job offers? Reasons for problems: wages, benefits, commuting, family commitments, etc Retaining Are the “ideal” workers staying? Additional reasons for problems: direct competition, indirect competition, etc

21. Labor Force Supply:Results from firms interviews Schools Currently, there is no boat building “career pathway” at Carteret High School, there is limited knowledge about the internship program, and there is no formal apprenticeship program. THIS IS A MAJOR PROBLEM AREA Recruiting Many boat builders are recruiting from Cape Fear Community College and other locations, since the local community colleges do not offer many general courses (more on this later). THIS IS A MAJOR PROBLEM AREA Hiring Does not appear to be a major issue: if firms can find the workers, chances are they can hire them. Retaining Main problems appear to be due to direct competition and lack of information. Skilled workers may leave for work at Cherry Point, where the government wages and benefits are much higher.

22. Labor Force Skills:If there is a problem, where is it and what causes it? Schools Are new workers adequately prepared, in terms of basic skills? If not, is there a mechanism in place to address this? Are new workers adequately prepared, in terms of general and specific skills? If not, is there a mechanism in place to address this? Other Training Initial Training How are workers trained for their initial duties? Does this system work? Are forms afraid of losing their investment (through worker poaching)? Retraining How successful is retraining? Are long-time workers prepared for today’s retraining? If not, what mechanisms are in place to get them up to speed? Are firms not investing because of poaching fears?

23. Labor Force Skills:If there is a problem, where is it and what causes it? In the mass-production shops, workers lacking “basic” and “soft” skills. Basic: How to use a ruler, fractions, reading comprehension, etc. Soft: Communication and “work ethic” problems These are the foundation that all other skills are built on Need for more guidance and communication for training in this area. “As long as they show up to work and want to work, we can teach them.” THIS IS A MAJOR PROBLEM AREA Schools Other Training The cold-molded and engine shops have hard times finding workers with these skills. While some can take courses at NC MARTEC, there need to be more joinery classes for carpenters to take. This is a significant problem. Initial Training Workers are primarily trained on the job, or sent to specialized courses at NC MARTEC, Wilmington, or company training schools. But: firms may be afraid of poaching by other firms, which may be leading to underinvestment Retraining is a serious issue, primarily because of a lack of basic skills. As one NC MARTEC instructor stated, “They would be less afraid if I pulled out loaded shotgun than if I put fractions on the board.” Retraining

24. NC MARTEC • Biggest strength is biggest weakness: location in NC Community College System • Makes NC MARTEC administratively stable • But means that NC MARTEC must follow state funding • Instructor pay set at State; roughly 1/4 of market rate • Delayed funding makes expansion hard • Currently, NC MARTEC focuses on firm-specific training to ensure they are meeting local business needs • Doing a lot of training work with large firms • Small firms we spoke all expressed interest • Potential opportunity for expansion and development, since small firms are growing fast • Success of training could be improved by ensuring that students have good basic and general skills • CCs competing with NC MARTEC • Best training from complementary strategies, not direct competition

25. Workforce Recommendations BUSINESS ASSOCIATION: • Work with schools for “career pathway,” internships, etc • Work with CC’s and NC MARTEC to develop “boat building basic skills” courses • Develop a “skills panel” (as Matt will talk about later) • In doing so, the CC’s and NC MARTEC must stake out their “turf”NOW… and then abide by their agreement • Establish a nonprofit • Businesses, public sector, and other nonprofits • Can fund “market rate” that instructors will be paid • May be able to fund general skills training for workers, correcting current underinvestment NC MARTEC • Teach generalized courses, reserving specialized courses for exceptional cases

26. Commercial Waterfront and Boat Access: Why Economic Development Must Care • Public access key in workforce development • “The best workers are the folks who grew up on boats, who have built their own, who do their own repairs…they really develop a love and understanding for boats.” • Commercial waterfront important in marine trades cluster • Large boats must be finished at the water • Waterfront location imperative for marinas • Marine trades cluster important to local economy • Good jobs, many year-long • Component of coastal character • Tourism benefits

27. Commercial Waterfront & Boat Access: Problem and Causes Decreasing supply of marinas, large lifts, ramps • High demand for residential waterfront PLUS Increasing demand for storage and repair services • Additional residences adds boats • More boaters in general public 1) Increasing prices (pushing out lower-income boaters) 2) Economic uncertainty • At what point will demand drop? supply collapse?

28. Commercial Waterfront: Recommendations • Begin a process of identifying and convening stakeholders to identify funding strategies for second marine industrial park • Apply to NC Dept. of Commerce for funding commercial site development • Prepare educational piece on options for property owners to reduce taxes and preserve commercial waterfront • Write guide for marine trades businesses on state, local, and federal permitting procedures STATE-LEVEL • Pursue state legislative action to expedite commercial waterfront property permits if a public amenity is provided • Lobby the state for authority to tax commercial waterfront properties as agricultural land • Lobby the state for more funding to aid waterfront businesses

29. Boat Access:Recommendations • Zoning changes requiring waterfront development to provide minimum boat access and boat slips • Gauge interest in a “no net loss” policy for public access • Partner with other public and non-profit entities to provide access • Apply to NC Park and Recreation Trust Fund for building access • Partner with North Carolina Coastal Land Trust to buy land or purchase development rights • Gauge political and community will for passing a general obligation bond to buy land or purchase development rights STATE-LEVEL • Lobby the state for more funding for more public boat access

30. What Has Worked Elsewhere • Boatbuilding Industry in Washington State • Large firm presence, but disconnected • Effort undertaken to unlock the full potential of the cluster • The Center of Excellence for Marine Manufacturing and Technology: “a one-stop shop" - a place where Industry and Educators partner to stay abreast of emerging technologies and employment trends • A 12 County Partnership comprised of: • Companies • Community/technical colleges • Workforce councils • Economic development associations • Roles: • Train new employees and upgrading incumbent workers • Develop an emerging industry alliance composed of over thirty companies • Support the development of K-12/community college curriculum • Provide technical assistance, bringing in nationally recognized consultants • Create a library of resources and clearinghouse for information and best practices in marine manufacturing and technology

31. Key Takeaways • Entire gamut of skill formation must be addressed • Skill formation can be thought of as a pyramid: need basic and soft skills before general and specific skills • Requires collaboration between businesses, NC MARTEC, community colleges, and local schools • Land use is critical for economic development • Land use changes are complex, and require participation from many actors • A Business Association is critical for: • The long-term viability of the cluster • Ensuring strong linkages between marine trades industries

32. Questions

33. Shadow Slides

34. Marine Trades in the Water Counties Source: SBTDC 20% of NC Marine Trades in Water Counties

35. Trends 1994 - 2004

36. Evidence of a Cluster?

37. Competitive Industries and Wages

38. Custom Built (Cold Molded) ORDER DIST In House Tasks Boat Design Frame Construction Ribbands and Hull Engine Install Finish and Accessories Atlantic Veneer (Okoume Wood) & Fiberglass Major Engine Manf. Local Craftspeople Design Firms Wood Supplier (Douglas Fir) Outside Contributions

39. Mass Production ORDER DIST In House Tasks Boat Design Plug and Mold Construction Boat Mass Production Engine Install Finish and Accessories Fiberglass Major Engine Manf. Design Firms Mold Maker w/ 5 axis router Outside Contributions