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Non-Union Auto Workers Penalized
By Michael P. Tremoglie, The Bulletin
12/02/2008
While Congress debates bailing out the Big Three automakers and their union workers whose pensions and benefits are at stake, American workers who make cars that are still in demand are left out of the mix, according to many "free-market" politicians and economists.
The Detroit automakers GM, Ford and Chrysler are asking the American taxpayer for help as they teeter on the brink of bankruptcy. They say the nation's economy depends on their profitability and the workers they employ.
But, according to U.S. Sens. Jim DeMint, R-S.C., and Jeff Sessions, R-Ala., the auto industry is thriving in their states. They say automakers are doing quite well in South Carolina, and Alabama and autoworkers are also doing well.
These workers are employed by the 12 "foreign nameplate" automakers, such as Honda, Toyota, KIA, BMW and the rest that have plants in states such as Alabama, Ohio, Tennessee, Mississippi and South Carolina. They comprise 54 percent of the auto market and employ 113,000 Americans.
According to Dan Ikenson, associate director of the Center for Trade Policy Studies of the CATO Institute, a Washington, D.C., a libertarian public policy research organization, a Big Three bailout prevents market shares that should accrue to Toyota and others like it. Consequently, the salaries of those workers likely will not rise as rapidly as they would if the Big Three were to fail.
"Auto workers of these foreign nameplate companies are not only being discriminated against because the government is preventing their companies from more profits," said Mr. Ikenson, "they are also being penalized because, as taxpayers, they are subsidizing their competition."
He said he believes U.S. Sen. Sherrod Brown, D-Ohio, a bailout proponent, does not seem to worry about the impact a bailout will have on the workers in the Marysville, Ohio, Honda plant, the first Japanese auto plant in the U.S.
The senator, however, has focused on those jobs that support the Detroit auto industry.
"When it comes to the auto industry, the cost of inaction is too high. Our nation's economic security is tied to the auto industry, which provides more than 250,000 jobs in my state of Ohio alone," Sen. Brown said in
a Nov. 20 press statement. "The auto industry needs both immediate assistance and long-term solutions. While this is an imperfect compromise, it would help keep the industry viable as we work on long-term solutions to protect jobs for middle class families."
Giving taxpayer money to GM, Ford and Chrysler, Mr. Ikenson said, penalizes those Ohio workers for producing a car people want at a price they can afford.
According to the Center for Automotive Research (CAR) there is a $29 per hour gap in wages and benefits between the Big Three workers and those Americans who work for foreign auto manufacturers. It is the benefits, health insurance and pensions that have posed the biggest problem for the Big Three.
But CAR favors a bailout. Their research indicates if all Big Three automakers cease operations, the impact on the U.S. economy would be substantial. They project that nearly 3 million jobs would be lost in the first year if there is a 100 percent reduction in Detroit's Big Three U.S. operations.
"Our model estimates that a complete shutdown of the Detroit Three U.S. production would have a major impact on the U.S. economy in terms of lost wages, reductions in social security receipts, personal income taxes paid, and an increase in transfer payments," said Sean McAlinden, CAR chief economist and the study's leader. "The government stands to lose on the level of $60 billion in the first year alone, and the three year total is well over $156 billion."
But CATO's Mr. Ikenson is skeptical. He thinks that to believe CAR's projections one has to believe that there would be no other companies to step into the vacuum created by the dissolution of the Big Three.
"I am opposed to the bailout because it is unfair to the companies that don't need it," Mr. Ikenson said. "The Big Three have failed to make the products Americans want to consume. If you subsidize some, the others are taxed."
He thinks bankruptcy is a proper option. The problem with the Democratic Party is they do not want bankruptcy because this would lead to tearing up the existing union contracts.
As far as the workers are concerned, if congress is really worried about then extend unemployment benefits, do not prop up their inefficient, unprofitable companies, Mr. Ikenson said.
Michael P. Tremoglie can be contacted at [email protected]
©The Bulletin 2008
Non-Union Auto Workers Penalized
By Michael P. Tremoglie, The Bulletin
12/02/2008
While Congress debates bailing out the Big Three automakers and their union workers whose pensions and benefits are at stake, American workers who make cars that are still in demand are left out of the mix, according to many "free-market" politicians and economists.
The Detroit automakers GM, Ford and Chrysler are asking the American taxpayer for help as they teeter on the brink of bankruptcy. They say the nation's economy depends on their profitability and the workers they employ.
But, according to U.S. Sens. Jim DeMint, R-S.C., and Jeff Sessions, R-Ala., the auto industry is thriving in their states. They say automakers are doing quite well in South Carolina, and Alabama and autoworkers are also doing well.
These workers are employed by the 12 "foreign nameplate" automakers, such as Honda, Toyota, KIA, BMW and the rest that have plants in states such as Alabama, Ohio, Tennessee, Mississippi and South Carolina. They comprise 54 percent of the auto market and employ 113,000 Americans.
According to Dan Ikenson, associate director of the Center for Trade Policy Studies of the CATO Institute, a Washington, D.C., a libertarian public policy research organization, a Big Three bailout prevents market shares that should accrue to Toyota and others like it. Consequently, the salaries of those workers likely will not rise as rapidly as they would if the Big Three were to fail.
"Auto workers of these foreign nameplate companies are not only being discriminated against because the government is preventing their companies from more profits," said Mr. Ikenson, "they are also being penalized because, as taxpayers, they are subsidizing their competition."
He said he believes U.S. Sen. Sherrod Brown, D-Ohio, a bailout proponent, does not seem to worry about the impact a bailout will have on the workers in the Marysville, Ohio, Honda plant, the first Japanese auto plant in the U.S.
The senator, however, has focused on those jobs that support the Detroit auto industry.
"When it comes to the auto industry, the cost of inaction is too high. Our nation's economic security is tied to the auto industry, which provides more than 250,000 jobs in my state of Ohio alone," Sen. Brown said in
a Nov. 20 press statement. "The auto industry needs both immediate assistance and long-term solutions. While this is an imperfect compromise, it would help keep the industry viable as we work on long-term solutions to protect jobs for middle class families."
Giving taxpayer money to GM, Ford and Chrysler, Mr. Ikenson said, penalizes those Ohio workers for producing a car people want at a price they can afford.
According to the Center for Automotive Research (CAR) there is a $29 per hour gap in wages and benefits between the Big Three workers and those Americans who work for foreign auto manufacturers. It is the benefits, health insurance and pensions that have posed the biggest problem for the Big Three.
But CAR favors a bailout. Their research indicates if all Big Three automakers cease operations, the impact on the U.S. economy would be substantial. They project that nearly 3 million jobs would be lost in the first year if there is a 100 percent reduction in Detroit's Big Three U.S. operations.
"Our model estimates that a complete shutdown of the Detroit Three U.S. production would have a major impact on the U.S. economy in terms of lost wages, reductions in social security receipts, personal income taxes paid, and an increase in transfer payments," said Sean McAlinden, CAR chief economist and the study's leader. "The government stands to lose on the level of $60 billion in the first year alone, and the three year total is well over $156 billion."
But CATO's Mr. Ikenson is skeptical. He thinks that to believe CAR's projections one has to believe that there would be no other companies to step into the vacuum created by the dissolution of the Big Three.
"I am opposed to the bailout because it is unfair to the companies that don't need it," Mr. Ikenson said. "The Big Three have failed to make the products Americans want to consume. If you subsidize some, the others are taxed."
He thinks bankruptcy is a proper option. The problem with the Democratic Party is they do not want bankruptcy because this would lead to tearing up the existing union contracts.
As far as the workers are concerned, if congress is really worried about then extend unemployment benefits, do not prop up their inefficient, unprofitable companies, Mr. Ikenson said.
Michael P. Tremoglie can be contacted at [email protected]
©The Bulletin 2008