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.