Will the Last Union Member in Michigan Please Turn Out the Lights?

Will the Last Union Member in Michigan Please Turn Out the Lights?
MiBiz • July, 25, 2005
by Jim Gillette

Oh how I wish the announcement of Toyota’s new assembly plant had read “West Michigan,” rather than “Woodstock, Ontario.” That’s a $655 million dollar plant and 1,300 jobs at the plant, let alone all the supporting jobs the community will gain.

I don’t want to discourage the hard-working economic development folks or the governor from continuing to try, but at some point we need to face the fact that Michigan just doesn’t measure up in two critical areas: we are viewed by foreign auto companies as having an “old school” labor force prone to joining a union and an unfriendly tax environment.

Union Representation: We Are Third Highest In The US

Michigan ranks third in the US in union representation of employed wage and salaried workers at 22.4%. The state is exceeded only by New York at 26.4% and Hawaii at 22.8%. Alaska is tied with Michigan at 22.4%. States attracting new auto assembly operations include:

unionrepresentation

Foreign manufacturers have, for the most part, avoided states with high manufacturing wage rates and a strong union presence in favor of states with an available labor pool of trainable workers to whom a $15-$19 per hour wage rate and good benefits would have previously been an unachievable dream. The New American Manufacturers have also benefited by hiring a younger workforce that significantly reduces their healthcare liability.

Couple that with the fact that literally all of the southern states now gaining new plants are “right-to-work” states and Michigan drops further down the list of potential plant sites.

In 2001, 39.5% of US light vehicle production capacity was located in the Great Lakes states (including MI, OH, IN, IL, WI, and the Windsor area in Ontario, Canada.) 18.6 percent was located in the southern region of the US including Texas. By 2009, however, the Great Lakes states will house only 33.7 percent of US capacity, while the southern states will have 27.8 percent.

This creates a dilemma for auto parts suppliers located in the Great Lakes area as they lose competitive advantage on two counts: one, the lower direct labor costs of the South and, two, the lack of just-in-time (JIT) capability (not to mention increased shipping costs) when selling to southern customers. When we lose an assembly plant to the South, we also lose a huge number of supplier jobs.

Source: NRTWLDF, Inc.

Source: NRTWLDF, Inc.

Relative Tax Burden

Another impediment to capturing new automakers and suppliers is Michigan’s tax environment. Many businesses consider Michigan’s Single Business Tax to be an excessive burden and a negative when considering the state as a manufacturing site. Here are the results of a recent analysis:

businesstaxburdenrankings

Michigan Transportation Equipment Manufacturing Employment

The consequence for all Michiganders is that our opportunities for building a higher standard of living decline. Unions, of course, will argue that they are necessary to maintain high wages and benefits for workers. Sure, for the shrinking few.

According to the US Department of Labor, employment in the Transportation Equipment Sector of Durable Goods Manufacturing in Michigan is expected to decline by 7.8% between 2002 and 2012, representing a loss of 22,670 jobs. This will be offset in only a small way by an increase in Automotive Retailing jobs of 6,090 or 9.6%. Transportation Equipment Manufacturing is predicted to decline from 6.5% to 5.4% of total jobs, while the retail side of the industry will hold steady at 1.4%.

West Michigan is the Big Loser

I have lived in West Michigan my entire life, but have traveled extensively. I know and you the reader knows that this is a great place to live and work. We cannot give up in our efforts to attract automotive employment, but we do need to strengthen our arguments that the business environment here is much different than in the “other side” of the state. Maybe we could cede Eastern Michigan to Canada…