Grand Rapids Pundit

Make Michigan Attractive to Business Again

The stunning inability of Michigan’s politicians to talk about the 8,000 ton elephant in the room continues to amaze us here at GR Pundit. Michigan’s economy is suffering a “single-state” recession for one primary reason – the United Auto Workers union. Why? Michigan’s economy is/was so heavily dependent on the domestic auto industry that any disruption in that industry would surely affect the entire state. The United Auto Workers, along with the management of Ford, Chrysler, and General Motors, conspired over the decades to build extremely lavish and unsustainable benefits packages for unionized employees. However, there was a problem. Toyota. Japanese carmakers entered the market with superior products at lower prices. Suddenly, the domestic big three are completely unable to compete. Here’s the rub: they are being prevented from competing because they simply can’t reduce labor costs enough. The UAW is standing in the way of the necessary and painful reorganization that is required to bring the domestic auto industry into line with foreign car makers.

While the politicians in Lansing debate how best to tax businesses in Michigan, we notice the deafening silence on the issue that is truly the destroyer of Michigan’s economy – forced unionization. This past Saturday’s Wall Street Journal had an excellent editorial by Larry Reed of Midland’s Mackinac Center. He outlines the case for ending forced unionization. The concept is called “right-to-work,” which means that anyone is free to join a union or not. Today’s law in Michigan states that if you join a company with a union, you are forced to pay dues.

We only need to look south, within our own United States, to see the contrast between a heavily unionized state and a non-heavily unionized state. Alabama, which is seeing new car factories being built like crazy, is the exact opposite of Michigan. In fact, according to the editorial, “If current trends continue, Alabama will eclipse Michigan in per-capita income in just three years. With base pay and bonuses, and especially when the cost of living is factored in, nonunion workers in many auto plants in the south are better off than their union counterparts in Michigan.” That’s a powerful statement.

Michigan needs to pass right-to-work legislation immediately. Another interesting point, according to the editorial, is that, between 1970 and 2000, right-to-work states created 1.43 million manufacturing jobs, while non-right-to-work states lost 2.18 million jobs.

The politicians can tinker with taxes all they want, but nothing will substantially change until the real labor environment in Michigan changes. Car factories are being built in the south, while car factories and manufacturers are shuttering in Michigan.

Posted by: GRPundit on Tuesday, 19th Jun, 2007

State of the Statist

Governor Granholm’s State of the State speech was a surprising call for expansion of government, even for our current governor.

According to the Mackinac Center for Public Policy, the governor called for 20 expansions of state government and only one reduction in state government. Apparently our governor has yet to take Economics 101. Michigan has been competing to be the worst economy in the nation, and the governor is doing a great job of proposing greater bureaucracy, government, and taxation to make sure things stay that way.

Among the highlights of the governor’s proposed expansion of government, and consequently, increased taxation, are:

Union Shafts Workers

In reading about the striking workers from Northwest Airlines, one can’t help but feel sorry for them. Northwest is operating smoothly after replacing them, their health insurance runs out tomorrow, and they get their last paycheck on Friday.

Here are GR Pundit, we’re often hard on unions, but it’s important that our readers understand that we’re hard on union leadership, not union members. The airline mechanics’ union had the opportunity to make concessions to keep the jobs of most of the union members, but those concessions were rejected. Intead, over 4,000 mechanics are now out of work with no income.

Today’s unions are losing their clout and their muscle. The airline mechanics’ union is just one example of many to come where the members are going to be out of a job in the name of solidarity.

Now there are 1,200 replacement mechanincs working at Northwest who, we’re sure, are happy to have a job. In the mean time, the head of the mechanics’ union makes statements which are clearly untrue:

AMFA co-founder and national director O.V. Delle-Femine visited picketers Monday at Detroit Metro Airport to boost spirits.

“In a couple weeks, people are going to see the failure of this airline,” Delle-Femine told strikers gathering at a nearby United Auto Workers union hall before heading to picket lines.

He’s lying to his members to try and keep them in line. In the mean time, we’re sure Mr. Delle-Femine is receiving his full salary and health benefits.

Posted by: GRPundit on Tuesday, 30th Aug, 2005

Michigan’s Economy Ranks Dead Last

A recent report issued jointly by the National Governor’s Association and the National Conference of State Legislatures (hardly partisan hack groups) this month said that Michigan’s economy ranks dead last in the nation.

Some highlights are:

Personal income grew in Michigan by 3.29 percent between March 2003 and March 2004, placing Michigan second to last among the states. The national average was 5.15 percent.

Michigan was last among the states in employment growth between January 2004 and January 2005, showing a -0.3 percent decline, compared to a national average of 1.4 percent growth.

Michigan tied for 43rd in population growth between 2003 and 2004, registering 0.3 percent growth. The national average was 1 percent.

In the mean time, the governor and legislature continue to push useless “economic development” initiatives to give some businesses tax breaks (and tax increases to others). The Mackinac Center just released a report showing that the Michigan Economic Development Corporation has been completely ineffective over the last ten years at creating jobs.

Time to face reality and fix Michigan’s economy with real reforms:

Michigan Unemployment Rises (Again)

Today we see that Michigan’s unemployment rate again increased. February’s rate is 7.5%, up from 7.1% in January.

Meanwhile, the legislature and governor wrestle with a $400 million budget deficit for next year.

The news just isn’t getting any better for Michigan. What is to be done to help this state? It seems we’re heading toward returning to the days of double-digit unemployment. That’s not the Michigan I want to live in.

And the news over the horizon is even worse. Ford and GM, two of the state’s largest employers, are steadily losing market share. GM just announced that their 2005 results will be far lower than previously expected.

Our state is reaping the results of heavy unionization. GM and Ford have such enormous unfunded pension and health care liabilities that there is a lot of doubt that they’ll be able to pay the bills in the next few years. This article quotes the former CEO of American Airlines saying that if GM doesn’t fix its pension and health care problem fast, “it cannot continue.” What would happen to Michigan if there is a GM or Ford bankruptcy?

Radical changes are needed for this state to begin to prosper again. Here are our radical recommendations:

‘SHOW ME THE JOBS’

It’s the irony of the year that the AFL-CIO stopped in Greenville to hold a “Show us the Jobs” rally this weekend. It is organizations like the AFL-CIO that advocate such job-killing measures as forced unionization and living wage laws that end up increasing unemployment.

It is a pretty well-established fact in the world of economics that unionization, especially forced unionization, increases unemployment. Why? A brief explanation: unions limit the size of the workforce because they require higher wages to do jobs that could be done at lower wage levels. The result is that the supply curve of labor is skewed by higher-than-market wage levels. Employers, in order to remain profitable, are able to hire fewer people with the same amount of money. Therefore, some workers get more money per hour, but fewer workers are employed, increasing unemployment.

There has been an extensive amount of research on “right to work” states where forced unionization is outlawed (you can’t be required to join a union in order to work in a union show in a right to work state). Right to work states have seen faster rates of growth in employment, wages, and decreases in poverty rates that non-right to work states do not show.

In addition, organizations like the AFL-CIO advocate in favor of so-called living wage laws, requiring companies and government units to pay higher wages. Again, economists understand that the minimum wage increases unemployment (due the same principle as unionization), but the living wage magnifies the problem. Increasing wage levels artificially through regulation distorts the labor market and, once again, forces employers to hire fewer people, once again increasing unemployment.

And the real sticker is that those hardest hit are minorities, unskilled laborers, and the disabled, since they are the first to go when these types of laws go into effect. Why hire someone who doesn’t have the skills at a high wage when you can find someone who does and pay the same?

So, go ahead AFL-CIO and drive the big bus around getting people whipped up into a frenzy over job creation, but know that you’re a big part of the problem.

Posted by: GRPundit on Monday, 29th Mar, 2004