Community Profile: Potosi, Mo., Tries to Keep Head Above Water
With the United States enjoying its longest period of economic growth in history, the days of 10 percent unemployment rates seem as difficult to remember as life without the Internet. Twenty percent unemployment is even harder to recollect. Thirty percent? Unfathomable. During the Great Depression maybe, but surely not anytime recently.
One place where the harshest of economic times is not a distant memory is Potosi, Mo. Even residents without graying hair remember the devastating conditions that peaked in early 1983 with a 34.1 percent unemployment rate in Washington County, where Potosi is the government seat. Although the unemployment rate in the county had dropped to 7.2 percent by the third quarter of 1999, it was still greater than twice the state average.
For this small town 60 miles southwest of St. Louis, climbing out of a hole has been a struggle, but some progress has been made thanks to an effort to attract and grow a manufacturing base. The Potosi/Washington County Industrial Development Authorities is the main organization in the county promoting and facilitating economic development. The area's attempt to rebound is best summarized by the group's executive director, Emory Oliver, who says: "We're not distance swimmers, but we're doing a little more than treading water now."
In the 1960s and '70s, the principal source of employment in Washington County was mining. Some large and several small companies dotted the county and hired people to mine for lead, iron ore and barite. By the mid'70s, about 3,000 miners were working in the area and making good salaries, some as high as $50,000 a year.
The downturn came late in the decade. In 1977, the Pea Ridge iron ore mine laid off about 1,000 people. What remained was a skeletal staff. Layoffs at the Indian Creek lead mine and other smaller mines all but obliterated the industry in the area. The primary reason for the layoffs? Mined materials were being acquired much more cheaply from foreign sources like China, where barite, for example, is available in abundance.
Mining wasn't the only industry in Potosi affected by cheaper foreign competition. Brown Shoe operated a factory in Potosi for nearly 40 years before packing up and moving its operations offshore in 1986. The result was the loss of more than 400 jobs. On the heels of Brown Shoe's departure, the Trimfoot Shoe Co. moved into the same building a year later but left town in 1992 for the same reasons that Brown did.
Potosi is not the only small town in Missouri to experience the effects of companies shutting down domestic operations in favor of foreign suppliers. Just recently in neighboring Farmington, the Huffy Bicycle Co. closed a factory that in 1998 employed 830 people, including more than 100 from Washington County. The company announced it will now contract with companies in China, Taiwan and Mexico to make all its bikes.
Oliver's goal for Washington County is to avoid a repeat of these scenarios: "We want the companies we talk with to look at us as a home, not just as a pit stop," he says. "We don't want them to leave when the special incentives and programs are gone. There has to be a long-term commitment to the community."
In the case of Huffy, that company's commitment to Farmington ended when the special incentives did. Huffy peeled out of town just two weeks before it would have had to begin repaying some of the $2.15 million in aid the state and city gave the company. Instead, Huffy left without paying back a thing.
After bottoming out in the 1980s, Potosi's reversal of fortune began when the area won a bid to be the home of Missouri's new maximum security prison. Belgrade State Bank Chairman Harold Turner said that landing the prison, which opened in 1989, gave Potosi a more positive attitude about its economic future.
"If there was anything to stop the downward spiral, it was the correctional center," Turner says. "Usually, people don't want a prison in their town. But the county here was reaching for anything for employment."
The community's next coup came in 1994 when a third shoe company moved into the building that Brown and Trimfoot had previously abandoned. The Redwing Shoe Co. Inc., whose product line includes steel-toed work shoes and hiking boots, at first employed only 21 people at its Potosi factory, which the company leases from the Industrial Development Authorities. Six years and several expansions later, about 300 are on staff at Redwing, and the company plans to lease additional space in a next-door building.
So why would a shoe company expand domestically when competitors are relying on cheaper labor in foreign markets?
|Red Wing Shoe employs about 300 people at its Potosi plant and plans to expand to a next-door building. The company's product line includes steel-toed industrial work shoes and hiking boots.|
"Redwing is a traditional shoe company, and our marketing told us that there is a need for shoes made in the United States," says Jim Lands, general operations manager at the factory. The company chose Potosi after learning that the town could supply not just available space, but also a pool of labor familiar with manufacturing shoes.
Manufacturing, rather than services, is the key to the area's economic future, local officials say. They want to change Washington County from being an exporter of labor to being an importer of jobs. About half of the residents leave the county every day to go to work, most traveling to St. Louis.
But a few companies in Potosi have given workers a reason to stay home. One is Sure Seal Inc., which supplies butterfly valves and related products for nearly all tanker trailers in the United States. The company began operations in Potosi in 1991 and now employs 53 people. In 1998, Inc. Magazine named Sure Seal one of the fastest-growing private companies in the United States, measured in terms of sales growth percentage from 1993 to 1997. The company never has trouble hiring qualified people from the local population, says Jim Bright, vice president and controller at Sure Seal.
Other business leaders in Potosi express that same sentiment. Ron Stephens, president of Unico Bank, says, "I think our labor force is used to manufacturing. We have, for example, a lot of experienced welders who commute to places in St. Louis like Boeing and Chrysler. If given the opportunity, most of them would rather work back here in Potosi."
"There is a tradeoff," says Rick Ramos, chief financial officer at Purcell Tire and Rubber Company. "You might be able to make more money working in St. Louis, but a lot of people would give that up for the time and convenience they gain by working here in town." Locally, Potosi-based Purcell employs about 150 people in the corporate office and retreading plant.
One Stroke at a Time
Oliver has no delusions about Potosi. The potential for economic growth is there, but it may be a while before the town lives up to the meaning of its South American Indian name--"place of much noise."
"I wish I could tell you we have companies that are coming in here and hiring thousands of employees, but that sort of thing just doesn't exist," Oliver says. "We try to recruit companies that will pay competitive wages and benefits and offer good working conditions in the manufacturing sector."
Oliver says it is not realistic to expect companies to come to town offering jobs that pay $20 an hour. He shoots for those that pay in the area of $12 an hour, though he says he knows he can't dictate what a company will pay its employees.
Taking a measured approach to growth, Oliver says his office aims to help generate about 80 new jobs each year and has been consistently reaching that target in recent years. Signs of hope are evident in the Redwing expansion, a 1,000-foot runway expansion at the Washington County municipal airport, and the agreement of a landfill equipment manufacturer to move into the 260-acre Potosi industrial park, where current tenants include Sure Seal and an AmerenUE regional service center. Growth in the service industry has also occurred. Within the past five years, fast food establishments and a new motel have opened.
After going through some very dark and troubled times, it remains to be seen to what extent Potosi and Washington County will be able to profit from the current strong U.S. economy. But at least for now, the waters here are a lot smoother and more inviting than they once were.
Potosi, Mo., by the numbers
|Per Capita Personal Income||$14,140|
|Top Five Employers|
|Potosi Correctional Center||400|
|Red Wing Shoe Company Inc.||
|Potosi Public School District||
|Purcell Tire and Rubber Company||
|Pea Ridge Iron Ore Mining||110|
The Regional Economist offers insights on regional, national and international issues. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.