Big Blue's Layoffs Bring Wave of Dislocation
School district, charities, and local businesses in Dutchess County, N.Y., try to adjust to reality of few jobs and lower property values
SINCE the end of World War II, International Business Machines has been good for Dutchess County. Employment peaked at 31,306 workers in 1984.
So it was like an earthquake when the computer giant announced on March 30 that it would let go 6,500 workers in the county, reducing its total employment in the mid-Hudson region to 15,000 employees.
And like an earthquake, there have been plenty of aftershocks. Sales tax revenue, which supports local government, is down. At one school district, officials are worried since IBM supplies 31 percent of the tax base. Automobile salesmen, dry cleaners, even optometrists expect to see fewer customers.
In June the number of single family houses for sale was up 36 percent over last June while the average sales price declined 7 percent. Attracted by the falling prices, buyers from Westchester and New York City have started making offers, which are up 7 percent over last June. "On the basis of sales negotiated today we are seeing some of the lowest prices since 1987," says William Lavery, owner of W. J. Lavery Real Estate.
The IBM layoffs have also dealt a psychological blow. The prosperous area felt insulated because IBM did not have a history of layoffs. "There has been a lot of bitterness and a lot of anger - there was a feeling it wasn't supposed to happen to this community," Mr. Lavery says.
The unemployment rate has jumped to 8.8 percent compared to 5.5 percent in May of 1991. According to the Bureau of Labor Statistics, the county has lost nearly one-third of its manufacturing jobs in the last three years. As of May, total employment had dropped 6,000 compared to the prior year. It is likely the numbers will get worse since many of the IBM workers lost their jobs effective May 30 and may not show up on the unemployment rolls until the July numbers are released next month.
For the county, the dollar impact of the new IBM layoffs could be substantial as fewer PhD computer designers spend their incomes at area merchants. Lavery estimates that if the average IBM employee had salary and benefits of $50,000 a year, the local economy could see a drain of $300 million from the latest layoffs.
The layoffs are in large part the result of a significant decline in IBM's sales of mainframe computers. According to the 1992 IBM annual report, revenues from the System 390 processors, those made in the mid-Hudson plants, were down 6.9 percent.
Local businessmen have noticed the decline in IBM's business for sometime. Bruno Battistoli, assistant general manager of the Radisson Hotel, says over the past three years there has been a steady drop off in IBM-related business as fewer vendors come to sell goods to IBM, fewer clients came to buy, and the company hired fewer college graduates.
"It's had an impact on the hotel business in the entire area," Mr. Battistoli says.
The decline at IBM is also taking a toll on area philanthropies. IBM, considered a model citizen, represented 58 percent of the money raised by the United Way of Dutchess County. In 1992, the United Way raised $700,000 less than '91. This year, the United Way also expects giving to shrink. "We are bracing ourselves," says Michele Muir, a United Way vice president. United Way cuts staff
The squeeze at IBM has forced the United Way to think and act differently even though demand for its services is up. This spring the fund raising organization cut its own staff by six people. And, when the Beacon Community Center needed a playground built, the United Way gathered volunteers from different companies to build the playground instead of giving money to the center. "Since we can provide fewer dollars, we're trying to provide people power," Ms. Muir explains.
The county is also expecting increased demand for its social services. Substance abuse, alcoholism, and domestic violence often show up when families are going through wrenching changes.
"I don't think we fully understand the impact of the changes at IBM," says William Steinhaus, the elected county executive.
To try to help residents cope with the negative news, Lavery held an open house with a bank manager, a bankruptcy attorney, a psychologist, and a family counselor. About 50 people showed up. "They were talking to people who were angry and depressed," Lavery says.
Mr. Steinhaus says the community is beginning to galvanize. He has observed "a sense of mission that has not existed before." The county held an economic forum in April and then began a series of town meetings. "This seems to be the beginning of a period of creative and innovative thinking," Steinhaus concludes. Excellent access
To be sure, the county has some advantages. It is only two hours outside New York City but is also close to other regional markets which can be reached on Interstate 84, an east-west highway.
The county also is trying to market the spacious IBM manufacturing facilities. IBM says the company is willing to lease some excess space. "We are trying to stay very close to the economic development in Ulster and Dutchess county," says Stephen Cole, an IBM spokesman for the mid-Hudson region.
The Dutchess County Economic Development Corporation (DCEDC) has hired North American Realty Advisory Services, which found companies to move into facilities vacated by Bethlehem Steel in Buffalo. The county is hoping that other high-tech-oriented companies will be attracted by the highly skilled work force. So far, however, most of the jobs people have found have been in other states.
For months there have been rumors that chip maker Intel would be taking over the IBM semiconductor plant in East Fishkill. "So far they are just rumors," laments Patricia Heaney, the acting president of DCEDC.
Steinhaus now wants to put more emphasis on tourism. The area boasts the Vanderbilt mansion, the FDR Library, and vistas overlooking the Hudson River. Development officials are hoping to find a way to get some added value from Vassar, Marist, and Bard Colleges nearby.
The IBM shakeup is also stimulating the entrepreneurial urge among some early retirees who are now asking the county for financial backing.
"There is a lot of small business starting up here," Heaney says. "We're getting calls for help everyday."