Where Industry and Security Intersect
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The impact on regional employment levels from building the first TSV (from 2004 to 2005) will be to create more than 1,400 jobs. When a second production line is operational, the cumulative impact on regional employment of building the initial seven vessels will be more than 2,800 jobs. These figures assume the same production schedule as the output and earnings impact figures, as well as virtually 100 percent U.S. sourcing and manufacturing.
Figure IX: Total Economic, Earnings, and Employment Impacts
Vessels Built |
Total Economic Impact |
Total Earnings Impact |
Total Employment Growth |
1 |
$191,525,984 |
$44,402,351 |
1,424 |
7 |
$1,340,681,891 |
$310,816,456 |
2,849 |
12 |
$2,298,311,814 |
$532,828,210 |
Stabilizes at 2,849 |
24 |
$4,596,623,627 |
$1,065,656,420 |
Stabilizes at 2,849 |
Source: U.S. DOC/BIS TSV Site Survey Data and U.S. DOC/BEA RIMS II Multiplier Data
The employment effects will be felt mainly in the shipyard regions, both at the shipyards themselves and in the local economy. Job growth will also occur in other U.S. regions where the key suppliers are based. A percentage breakdown of the job growth for each region involved in the TSV procurement is shown in Figure X below:
Figure X: Employment Growth Breakdown by Shipyard and Key Supplier Region
Source: U.S. DOC/BIS TSV Site Survey Data and U.S. DOC/BEA RIMS II Multiplier Data
For the purposes of this study, BIS is assuming that the remaining ships would be built two at a time. Should all 24 TSVs be built, the cumulative employment effects will remain at the 2,800+ level through 2016. It is possible that a longer procurement could create new domestic and international markets and/or a greater number of jobs, but this is not assumed for the purposes of this study. The job growth trend for TSV production is presented below in Figure XI:
Figure XI: Shipyard and Subsystem Manufacturers Job Growth from TSV Procurement (Dual and Single Source Production Effects)
Source: U.S. DOC/BIS TSV Site Survey Data and U.S. DOC/BEA RIMS II Multiplier Data
Dual sourcing would create over 2,800 jobs at each shipyard, bringing the overall employment level to over 5,600 jobs related to the TSV procurement. However, these jobs would be sustained for the time period through 2010, not 2016.
All the shipyards surveyed by BIS had adequate facilities to build the TSV procurement. Several commented that new sites could also be built if necessary. All shipyards surveyed were operating at least slightly under capacity. As conveyed by the unemployment numbers, there remains a large and skilled labor pool in each shipyard region that could be put to more efficient use with a TSV procurement.
The BIS team also explored the dual sourcing implications of the TSV procurements. On an aggregate basis, our analysis indicates no major economic difference between single and dual sourcing to the overall U.S. economy. However, there are several strategic benefits that are highlighted from the survey results. The main strategic impacts of dual sourcing are:
By increasing the production from one shipyard to two, risks are reduced due to threats from natural disasters, such as a hurricane, or terrorist attacks. This reduces the likelihood of a slowdown or a complete shutdown of TSV production for a period of time.
Producing the TSV in two different shipyard regions will also change the dissemination of economic and employment impacts. For the purposes of this example, we assume that a full production of 24 vessels would be built using dual sourcing. The impacts would be as follows:
The lasting economic effects of a full production at one shipyard, and its economy of scale, would not be the same with dual sourcing, but the overall impact on the U.S. economy would remain the same. In the long run, however, the combined strategic and economic benefits of dual sourcing outweigh several specific economic benefits of single sourcing.
Dual sourcing also would ensure that capability and knowledge concerning TSV construction would not be restricted to one company or region of the United States. Examples of skill sets created from TSV construction include aluminum welding, assembly, and piloting of the vessel. Technology transfers could include water jet propulsion, lighter pumps, and high speed vessel design and technology. Dual sourcing will also create larger demand for training new skilled workers to upgrade and maintain the continuity of skills and knowledge in the current labor force.
Dual sourcing will also provide a more robust and competitive shipbuilding industry. By supporting more than one shipyard in the TSV procurement, technique and know-how will be increased in more than one region. Development of a more technically adept shipbuilding base will make current and future acquisitions more competitive for the Army and the taxpayer. In addition, by having more than one company work on the same program, competition between them is likely to improve the overall product for the Army. Furthermore, this improves the shipbuilders' ability to compete in the emerging commercial high-speed vessel and transport markets, valued at over $400 million annually.10
The following analysis is based on the assumption that there is no substantial difference in quality or cost between U.S. and foreign components. According to the shipyards surveyed, several key TSV components and systems could likely be sourced from foreign suppliers, although the list varied from shipyard to shipyard. These potentially include:
In addition, according to the shipyards surveyed, the design and technical support would be performed in the United States by Australian, British, Swedish, Canadian, and/or Italian nationals.11 Again, specific needs vary by shipyard. Foreign trainers would also be brought in to teach welding and vessel piloting techniques. For all the shipyards BIS surveyed, foreign nationals would make up a very small percentage of the employed personnel, and they would only be used during the initial stages of TSV production.
At the same time, BIS and a number of shipyards have identified potential U.S. suppliers for many of these inputs. Using foreign inputs and labor rather than domestic inputs and labor would significantly reduce the beneficial impact of the TSV procurement on U.S. output, earnings, and employment levels.
The reduction of these domestic gains can be seen by examining the impact of outsourcing the aforementioned subsystems to foreign suppliers. For the 2004-2008 construction period, these subsystems would total $346.4 million of the seven TSVs' $994.2 million of total content, or approximately 26 percent of the total content value. These subsystems would also represent 24 percent of the total $310.8 million in total earnings generated by this phase of the TSV program, as well as 19 percent of the 2,849 jobs created during this period. All these figures exclude the design and technical support costs of the TSVs.
If this work is sourced abroad, significantly less output will be added to the U.S. and regional economies, considerably lower earnings will be generated, and noticeably fewer jobs will be created by the initial TSV procurement. Specifically:
Figure IX12 : Total Economic, Earnings, and Employment Impacts
Vessels Built |
Total Economic Impact |
Total Earnings Impact |
Total Employment Growth |
1 |
$191,525,984 |
$44,402,351 |
1,424 |
7 |
$1,340,681,891 |
$310,816,456 |
2,849 |
12 |
$2,298,311,814 |
$532,828,210 |
Stabilizes at 2,849 |
24 |
$4,596,623,627 |
$1,065,656,420 |
Stabilizes at 2,849 |
Source: U.S. DOC/BIS TSV Site Survey Data and U.S. DOC/BEA RIMS II Multiplier Data
Figure XII: Total Economic, Earnings, and Employment Impacts - Without Key Domestically Produced Subsystems
Vessels Built |
Total Economic Impact |
Total Earnings Impact |
Total Employment Growth |
1 |
$142,027,605 |
$33,559,021 |
1,158 |
7 |
$994,193,234 |
$234,913,149 |
2,316 |
12 |
$1,704,331,259 |
$402,708,256 |
Stabilizes at 2,316 |
24 |
$3,408,662,518 |
$805,416,511 |
Stabilizes at 2,316 |
Source: U.S. DOC/BIS TSV Site Survey Data and U.S. DOC/BEA RIMS II Multiplier Data
The impacts of foreign sourcing of key components and subsystems can also be viewed below:
Figure XIII: Domestic vs. Foreign Sourcing: Economic Impact (2004-2008)
Source: U.S. DOC/BIS TSV Site Survey Data and U.S. DOC/BEA RIMS II Multiplier Data
Figure XIV: Domestic vs. Foreign Sourcing: Earnings Impact (2004-2008)
Source: U.S. DOC/BIS TSV Site Survey Data and U.S. DOC/BEA RIMS II Multiplier Data
Figure XV: Domestic vs. Foreign Sourcing: Employment Impact (2004-2008)
Source: U.S. DOC/BIS TSV Site Survey Data and U.S. DOC/BEA RIMS II Multiplier Data
10. Source: Australian Trade Commission 2003
11. Source: U.S. DOC/BIS TSV Site Survey Data
12. Figure IX is first found on page 9 of this report.