GRAND RAPIDS, Mich. — It’s a metaphorical storm that may not bring widespread destruction. However, a local economist predicts isolated incidents of damage for West Michigan, if speculation of a United Auto Workers (UAW) strike comes true.
On Wednesday, UAW’s president said members planned to strike against General Motors, Ford, and Stellantis if they do not reach a new work agreement by Sept. 14.
“We’ve weathered these things before,” said Paul Isely, associate dean at the Seidman College of Business at Grand Valley State University. “The sky is not falling, but it will lead to some pain for some people.”
According to Isely, more than 15 percent of manufacturing jobs in Kent and Ottawa counties help supply components for automakers, like those three companies. He says it equates to about $10 billion in direct economic activity and $20 billion in indirect economic activity, so any work stoppage would likely affect businesses and consumers in the area.
“Something short that’s a week or two generally has very little lasting effect,” said Isely. “It doesn't tend to create any problems that are seen. As you go past that time frame, then you start seeing the second and third tier suppliers start to have to cut what they're doing, and that starts affecting us.”
Isely explains that with many of those companies still financially fragile from the pandemic, it’s possible some could close or layoff workers, although it depends on how long a strike lasts and other factors.
“I would start to get worried as we get out into the month, two month range and I'm not predicting that that's how long something will last,” said Isely.
He added, “People can't buy and sell things that they could before, and so their incomes drop and that affects their ability to do the things they do every day.”
Isely notes the union and automakers want a deal though, and understand the risk of a work stoppage.
“It’s expensive for both sides,” said Isely. “It's politically damaging for both sides. They want, they want to get it done and so, generally, these things don't last that long. I mean, two, three weeks is not uncommon.”
An analysis released by Anderson Economic Group (AEG) in East Lansing estimated a 10-day strike from all three automakers could result in a $5.6 billion national economic loss. If only one automaker shutdown, it could cause $665 million in losses according to AEG.
The group added that record low vehicle inventory means dealers and customers would likely notice the effects of a strike sooner than in previous years, which Isely agrees with, especially due to UAW’s requests for higher wages.
“This really suggests that it will have a short run effect on the price of automotive, automobiles, and quite frankly, it's probably going to have a long term effect,” said Isely. “Even though labor is only a small fraction of the total cost, it is extremely important on the margin for pricing, and therefore, it will it will have an end effect on the price of cars.”
However, Isely believes an eventual deal could improve working conditions across the country. He says for now that workers just need to wait out the storm.
“There is some ability, as we see union gains made, that they lead to gains elsewhere for workers elsewhere,” said Isely. “We've talked about some of those negative effects [but] some of those positive effects would be that it might lead to better working conditions for, for people in other industries.”
