WSJ.com - The Middle of Somewhere
For years, freight trains and trucks have zoomed past this little farm town 80 miles west of Chicago on their way someplace else.Then in 2003, Union Pacific Corp. gave them a reason to stop: an unglamorous yard where the standardized shipping containers carrying goods from across the world could be transferred between trains and trucks. Now, the explosion in global trade is remaking Rochelle, population 9,500.
Amid the nearby fields of corn and soybeans, Target Corp. and Lowe's Cos. are building distribution centers. Real-estate developers have snapped up land. Higher property values have plowed more tax revenues into city coffers. To feed the new lunch and dinner crowd of truckers and construction workers, a Culver's fast-food restaurant opened near Interstate 39 in January, serving "ButterBurgers."
Experts point out that warehouses and distribution plants don't create a wealth of new jobs. "Distribution isn't a high labor activity," says Terry Harris, managing partner and a logistics consultant at Chicago Consulting. "It's not a manufacturing plant." Average wages at distribution facilities in the area run at $10 to $12 an hour for shipping clerks and $12 to $16 a hour for lift-truck operators. Salaried supervisors make an average of $35,000 to $40,000, and facility managers $50,000 plus.
Downtown, Aldo Barone, owner of Aldo's Pizzeria and Italian Ristorante, last year almost quadrupled his dining floor space to 7,000 square feet from 1,800 square feet. And it still isn't enough.
Interesting article describing how intermodal transfer stations--where freight rail lines interconnect with trucking--are being created in rural areas with good proximity to major markets.
Several trends are driving intermodal transfer to the same small towns that have lost their manufacturing base due to globalization (or, at least, to very similar towns). The very same forces that drive globalization, in fact, make these locations ideal for intermodal transfer.
Cheaper overseas labor, combined with greater capital mobility, create manufacturing capability and capacity overseas. These, when combined with the economics of intermodal shipping, make it economical to build cheap in China and still sell cheap in America. The massive buying power and streamlined operation of Wal-Mart?, Target, etc, also help to hold the line on the price of goods. All of this has allowed for sustained demand in America. The existing intermodal transfer points, located in traditional urban rail yards in Chicago, San Francisco, etc, are straining to keep up with these forces. Since it would be costly to expand them in place, the rail companies are looking elsewhere to satisfy the demand.
American manufacturing didn't leave because the demand decreased. The demand is still there, but competition in global labor markets is driving costs down.
