Caterpillar lays off 300 Illinois workers

The layoffs come amid a dismal manufacturing climate in the Land of Lincoln.

A seemingly typical morning meeting brought somber news to Caterpillar Inc. employees on Aug. 24, as the company announced plans to lay off 475 employees, including 300 in Illinois.

Caterpillar has laid off more than 650 Illinois employees since May, according to the Peoria Journal Star.

The victims of the Illinois layoffs reside in the Peoria area, and work in the company’s Customer Services Support Division. Nearly half of the layoffs will come from nearby Morton, the Journal Star reports.

While Caterpillar’s recent round of layoffs doesn’t affect manufacturing workers, it does put a spotlight on the pain points that manufacturers like Caterpillar face when doing business in Illinois. For years, Illinois’ industrial business leaders have been crying out for relief in key policy areas.

Those cries have fallen on deaf ears in the Illinois General Assembly – and refusal to act has had major consequences for the state’s working class.

In 2011, Caterpillar CEO Doug Oberhelman wrote a letter to state lawmakers detailing exactly what needed to be done to help Illinois compete for quality jobs and business investment. His recommendations included genuine workers’ compensation reform and a balanced state budget that offers tax certainty and relief in the long term.

The Illinois Policy Institute recently sat down with Don Haider, a professor at Northwestern University’s Kellogg School of Business, to discuss the effects of poorly defined workers’ compensation laws on Illinois businesses.

“Business leaders are making decisions today on where to invest in the future,” Oberhelman wrote in his letter to political leaders. “Illinois must act now, with a bipartisan sense of urgency, to position itself for future job creation that is being discussed in boardrooms all across this country.”

“When Caterpillar and most other companies look to locate a new factory in the United States, Illinois is not in the running for such projects. It doesn’t have to be that way.”

Marty Flaska, president and CEO of Hoist Liftruck, is one of Illinois’ business leaders who has the types of boardroom discussions Oberhelman speaks of every day. He thought long and hard about whether to keep his business in Illinois or relocate and expand in Indiana. News broke Aug. 13 that he had chosen the latter.

Hoist will relocate to East Chicago, Indiana, by the end of the year, taking nearly 300 jobs out of Illinois and creating 200 more at a new facility. The average annual salary for one those jobs is $55,000.

Flaska cited an unfriendly business climate in Illinois as his reason for leaving, including sky-high workers’ compensation costs, an ever-growing property-tax burden and massive uncertainty about the future tax burden for Illinois businesses like his.

A little over a week after the Hoist news, TRADEBE Environmental Services announced it will move its U.S. headquarters to Merrillville, Indiana, from Oakbrook, Illinois, according to the Indiana Economic Development Corporation. The move will create up to 30 high-wage jobs in the Hoosier State.

The concerns of Oberhelman and Flaska are echoed in Springfield, but not where you might think. Mark Selvaggio, owner of Springfield’s Selvaggio Steel, can barely compete with manufacturing firms that operate in Indiana, as his business has to bear the brunt of cost differences caused by drastically different state business climates.

When Selvaggio does the calculations on workers’ compensation costs for a small manufacturing firm like his, he understands why the likes of Caterpillar don’t choose to depend on the Land of Lincoln as a place to prosper.

“That’s why Caterpillar is slowly moving all of their manufacturing out of the state of Illinois,” Selvaggio said of the state’s workers’ compensation climate. “Even though they’re not moving, their manufacturing is.”

The Caterpillar layoffs show how poor policies for manufacturers can hurt more than just welders, forklift operators and fabricators. Those policy blunders hurt the whole industry, creating ripple effects for middle-class families in the service sector.

Hundreds of those families now have a mother, father, sister or brother who must set out to find a new job in Illinois. Or maybe, like Hoist, they’ll pack up, ship out and fight for their futures elsewhere.