September 25, 2007

Let's Play Unemployment Bingo!

SO I WAS AT THE PHARMACY today when the pharmacist, who was buying some goods up front, mentioned to the cashier he had just ordered a car from General Motors Corp. Unfortunately, said the pharmacist, he had ordered the car just as General Motors went on strike, meaning it would be a long time before he received his vehicle. My reaction to this can be summed up as follows: Uhhhhhhhhhhhh ...

What the hell? I thought negotiations were going -- well, they were negotiations, which are never fun, but nobody said anything about a strike. Maybe this is just what happens when I take a weekend off to watch football. So my question is this: how bad will things get now in my home state of Michigan?

Clearly the UAW's leaders felt a strike was their last and best hope to force the company to make concessions regarding job security, which was supposedly the rationale for the walkout. That's the idea behind a strike -- a union tries to make it more painful for the company to settle their differences than to have the union continue with the job action. Plus, striking GM is a shot against the bow to Ford and Chrysler. Still, a strike is so disruptive things must have been going pretty badly for the UAW to order their people off the job.

The trouble for the union is that I don't think General Motors is going to make any major concessions. General Motors may be at a point where they've privately said the hell with it -- let's take our chances with this thing. The UAW has 73,000 workers out on the line, each getting $200 a week in strike pay and medical coverage. According to the New York Times, the union's $900 million in the strike bank is good enough for a two-month walkout. However, GM has $23 billion in the bank and more than two months' worth of inventory. If GM decides that it can last four or even five months with the workers on strike, it may decide to go for it if its leaders think they'll emerge stronger afterwards. By that time, of course, General Motors may decide to bring in replacement workers -- if it can do so under the terms of the contract -- and then things will really get ugly.

Things may not get to that point, however. Let's face it: although these are workers with good jobs, how many of them are prepared to live on strike pay for several weeks? Not many, I'm guessing. Here's how one GM worker described her situation:

"Oh my God, here they come," said Anita Ahrens, 39. "This is unreal."

Ahrens has seven years at the plant, where she works nights installing speakers in sport utility vehicles. She waited Monday for her husband, Ron Ahrens, who has worked there for 21 years.

The couple has three children, including a college freshman, and Ahrens worried about how they would pay their bills.

"This is horrible, but we're die-hard union, so we have to," Ahrens said. "We got a mortgage, two car payments and tons of freaking bills."

Now, based on that, do you think Mr and Mrs Ahrens can take three or four months out on the line? I don't believe they can, and there are undoubtedly lots of workers in the same boat. I remember reading an old saw that said a typical American family would be out of cash a week after losing a job -- and sure, there are credit cards and friends and family and other sources of money -- but after a while, things would get really unpleasant. Sure, there's a lot of bravado from the workers right now, but the workers admit no one wins when there's a strike.

But as a Michigander, and thus someone who will always have a soft spot for his home state, I am more worried right now about the chain-reaction effects. Things were bad enough already back home. I mean, when I was there in spring, people I didn't know from Adam asked me about jobs in New Hampshire after two minutes of talk. That's how bad it is. Also, the state government is bleeding red ink, property values are falling, the roads are shot, and Lloyd Carr is still Michigan's football coach. Thus, you can see the state is going to hell in a handbasket. This will only make things worse.

Excluding its corporate headquarters staff, General Motors has 57,495 employees in the Great Lakes State, according to its Web site, and all of them are probably reaching for the antacid right about now. As it happens, that's 1.1 pc of Michigan's entire labor force.

Unemployment in Michigan is already 7.4 pc and 8 pc in the state's southeastern industrial heart. Based on some back-of-the-envelope calculations, this strike will have the effective impact of pushing statewide unemployment in Michigan to about 9 pc, and perhaps 9.5 pc in the southeast. I'm basing those numbers on two factors: the hourly workers are probably screwed and the salaried workers are probably scared, and I'm assuming all will accordingly cut back on their spending, whether they have to do so or just want to do so. Those numbers are also highly optimistic -- because when GM stops, all of its suppliers will eventually stop, and have to lay off their own people. I don't even know how many workers those folks employ.

But what's going to happen to all the other businesses? After all, when people stop spending, that means money stops flowing into local businesses. God help the poor souls who own restaurants and gift shops and all those other outlets for the workingman's discretionary income, and God help the people who work there, because they could find themselves out of work if this strike lasts a long time. Plus, economic disruption is kind of like waves crashing in on the beach -- small ones won't damage a sand castle, but a few of the big ones in succession will wipe the castle out in short order. Even if one is clever and builds a moat to divert the oncoming tide.

I guess about all the workers can do, aside from praying the strike will end soon, is make up some cards for unemployment bingo. Your local autoworkers are your free square. And for all my people back home, I hope you don't find your numbers called anytime soon.

Posted by Benjamin Kepple at September 25, 2007 12:48 AM | TrackBack
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