cccFurniture

An Economic Perspective for the Furniture Industry: 

Michael Luger Professor of Public Policy, Business, and Planning Director, C3E The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise Winston-Salem, NC 29 June, 2005 Furniture Industry: Health and Safety Forum An Economic Perspective for the Furniture Industry

Outline: 

Outline Where we’ve been in the past Where we are headed today Some reasons for our plight Where we can/must go in the future The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise

North Carolina’s Historic Strength in Furniture: 

North Carolina’s Historic Strength in Furniture The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise TABLES Table 1 - North Carolina's Top Furniture Employers, 2004 Why did the furniture industry take root in NC? Many Moravians and Quakers, settling in Forsythe, Randolph and Rowan counties were wood craftsmen Settlers in the rural back woods made handmade chairs, tables, beds, for their own use, and then for sale NC forests had an abundance of oak, poplar, maple and other popular varieties for furniture Streams/rivers provided power for sawmills

North Carolina’s Historic Strength in Furniture: 

North Carolina’s Historic Strength in Furniture The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise TABLES Table 1 - North Carolina's Top Furniture Employers, 2004 Why did the furniture industry thrive in NC? From the late 19th-century: abundance of workers in the Piedmont to man furniture factories paid less than in north; worked longer hours Rail lines through Piedmont gave producers access to ports and markets Growth of east coast population in late 19th- early 20th century raised demand for inexpensive furniture. “By the end of the 1920s, NC led nation in production of wooden furniture.”

North Carolina’s Historic Strength in Furniture: 

North Carolina’s Historic Strength in Furniture The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise TABLES Table 1 - North Carolina's Top Furniture Employers, 2004 This early strength created a value-chain cluster that was self-reinforcing.

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TABLES Table 1 - North Carolina's Top Furniture Employers, 2004

NC’s Strength in Furniture: 

NC’s Strength in Furniture The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise

NC’s Strength in Furniture: 

The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise North Carolina ranks among the top three furniture manufacturing states in the United States in terms of employment. In 2004, furniture-making: employed almost 60,000 people contributed about $2.8 billion annually to the state's gross product Catawba County had the highest employment in the industry with 12,000 people working in furniture manufacturing in 2003. Guilford, Randolph, Caldwell, and Davidson counties all had over 5,000 people working in furniture manufacturing in 2003 NC’s Strength in Furniture

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2004:IV

Where the Industry is Headed: 

The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise TABLES Table 1 - North Carolina's Top Furniture Employers, 2004 Where the Industry is Headed

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The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise TABLES Table 1 - North Carolina's Top Furniture Employers, 2004 Where the Industry is Headed

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The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise Where the Industry is Headed

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The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise Where the Industry is Headed Reasons given for layoffs:

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The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise Mass layoffs reported, 2003 Where the Industry is Headed

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The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise Where the Industry is Headed

Trends: 

Trends Employment in the furniture industry has been declining over the past decade. dropped from 72,000 in 2001 to around 58,000 at the end of 2004, with a 23 percent decline in furniture employment since 1998. Davidson County was the most affected county, with 1,461 jobs lost in 2003. The average weekly wage per employee in furniture is 22.2 percent below the average manufacturing wage in North Carolina's manufacturing industries The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise

Trendswood furniture imports: 

Trends wood furniture imports The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise

Trendseffect on supply chain– hardwood lumber purchased by US furniture makers: 

Trends effect on supply chain– hardwood lumber purchased by US furniture makers The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise

Why these Trends?: 

Why these Trends? The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise Increased importation of foreign furniture– globalization loss of wage advantages A furniture worker in the United States earns around $14 per hour, compared to less than $0.75 per hour for a worker in China changing location of markets increasingly strict environmental regulations 2002 -- 1/3 of all bedroom furniture in US imported from China

Where we can/must go in the future: 

Where we can/must go in the future The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise However, there are still considerable opportunities/advantages for the American, and North Carolina furniture industry: Demand-side Continued population growth in state, region, and country, fueled by continued heavy immigration A consistently strong housing market (2 million units per year); homes getting larger and more specialized Increasing affluence among home buyers, and a steadily rising percentage of home ownership Supply-side Existing skilled labor and “know-how” in North Carolina Existing infrastructure Proximity to good wood Growing “linked clusters”

Where we can/must go in the future: 

Where we can/must go in the future It is inevitable that we cannot generally compete in the market for inexpensive furniture… Schuler and Buehlmann argue that a "Paradigm Shift" is required for the wooden, residential furniture industry to survive. They argue that the "industry needs strategic renewal in the form of a new and more appropriate business model,” new manufacturing strategies, a re-invented product (furniture), newly organized distribution channels and a focus on innovation throughout. The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise There already are examples of that happening in NC – including by companies in this room

Where we can/must go in the future: 

Where we can/must go in the future We must turn globalization into an advantage, not a disadvantage. Freer markets AND a falling dollar, make exports more attractive, especially of higher-value furniture that pays to ship. The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise That, too, is happening, as shown in the following table:

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The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise Where we can/must go in the future

Where we can/must go in the future: 

Where we can/must go in the future Finally, we must recognize that products that have been or can be made by traditional furniture makers have uses in growing “clusters” in NC and elsewhere that are not labeled as “furniture”: boats (cabinets) aircraft fiber optic cables apparel/textiles mobile homes labs others… The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise

Where we can/must go in the future: 

Where we can/must go in the future The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise

Where we can/must go in the future: 

Where we can/must go in the future The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise

Where we can/must go in the future: 

Where we can/must go in the future The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise

Where we can/must go in the future: 

Where we can/must go in the future The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise

Where we can/must go in the future: 

Where we can/must go in the future The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise

Conclusion: 

Conclusion The trajectory and prospects for the furniture industry are not unlike textiles/ apparel and other “traditional” NC industries: globalization is an undeniable reality to compete we must increase productivity, rethink how we are organized, make new products, and find new markets the legacy of the nation’s strongest industry in NC is a foundation on which to build – the skills, tradition, know-how, and leadership are all here. NC can be a base for global operations and for more exports the furniture industry can continue to be an element of other growing clusters The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise

Conclusion: 

Conclusion In short: we can be victims of history or be pro-active, seizing new opportunities and changing in order to maintain our competitive edge. The Carolina Center for Competitive Economies (C3E) Kenan Institute for Private Enterprise