Wage losses top $250 million for striking and laid off workers; OEM’s lose at least $400 million; Suppliers affected
EAST LANSING, Mich. – Michigan economic consulting firm Anderson Economic Group, LLC estimates that the “stand up” strike by the UAW against the Detroit Three automakers resulted in economic losses that total over $1.6 billion in the first week.
Anderson Economic Group (AEG) noted the first-week losses have been concentrated in Michigan, Ohio, Missouri, Kansas, Indiana, and Alabama, where shuttered plants and laid off workers are located. They anticipate that a longer strike will spread losses to more assembly and supplier plants, and to dealers and customers across the entire United States.
The first week losses do not include plant closures, additional strike targets, or layoffs that are announced or begin on or after Friday September 22.
Effects Multiply, Especially Among Suppliers
Patrick Anderson, AEG’s principal and CEO, notes the cascading effects of the strike go well beyond the negotiating parties themselves. The UAW’s “stand up” strike has directly caused the closure of specific assembly and parts plants, such as the Jeep plant in Ohio and Ford’s Michigan assembly plant. GM has already announced the closure of an additional plant beyond the Missouri plant initially targeted by the UAW.
“Because the auto industry is highly integrated across suppliers and assembly plants, shutting down one plant will cause layoffs and shutdowns at other plants. That includes supplier businesses, especially those that are dependent on a handful of contracts with the OEMs.”
Impact on Consumers and Auto Dealers
“Consumers and dealers are somewhat insulated in a very short strike,” said Tyler Theile, vice president at AEG. “However, with current inventories hovering around only 55 days, the industry looks different than it did for the last UAW strike. In fact,” she added, “automakers have only about one-fifth of the inventory they had in 2019.” This means the 2023 strike will impact dealers and customers much sooner than it would have in the past.
Estimating Economic Losses
Categories of Loss
To determine the economic impact of a potential UAW strike, AEG estimated losses that include:
- Lost wages to workers, including striking workers and others temporarily laid off or forced to decrease work hours. AEG estimates cover both UAW and non-union auto workers, along with workers employed by impacted suppliers. Estimates were made based on the number of UAW workers in the U.S, average daily wages, and lost health care benefits.
- Supplier Losses. Because a strike would reduce demand for automotive parts and components, the firm included estimates for lost supplier wages and earnings.
- Lost earnings for the Big Three auto manufacturers. AEG estimates company losses noting wages that would not be paid to striking workers.
- Auto industry losses. Automotive suppliers and auto dealers would both see losses in the short and long term.
Loss estimates do not include strike pay or assessments for strike pay; unemployment benefits or unemployment taxes; income taxes on wages; any settlement bonuses (which are transfers from shareholders to workers and do not represent U.S. income lost); or any reputational damage to the union or the employer(s).
2023 Research Methodology
The firm’s consultants followed the same proven methodology used to estimate impacts from the 2019 UAW strike, the threatened 2022 rail union strike, the threatened 2023 Teamsters strike against UPS, two West Coast port shutdowns, the 2003 East Coast electrical blackout, the 2022 Türkiye-Syria Earthquake, and other significant events in the firm’s 27-year history.
This methodology is calibrated by comparing recorded losses in GDP and earnings in affected states after major events. For example, after the 2019 UAW strike, Anderson Economic Group compared their earlier estimates with later reported GDP in Michigan, Ohio, and the U.S., and with accounting losses reported by General Motors in early 2020.
Table 1: Estimated economic losses from week one of the 2023 UAW strike ($ millions)
|Lost Direct Wages||$107|
|Direct Economic Loss||$618|
|Industry Economic Loss||$1,174|
|Other Consumer and Dealer Losses||$470|
|Total Industry Economic Loss||$1,644|
Source: Anderson Economic Group, LLC.
Notes: Strike-caused economic losses include only direct losses to affected workers, businesses, and customers.
Estimated losses do not include settlement bonuses, transfer payments, strike pay, unemployment insurance taxes or benefits, or income tax changes.
Presumes no permanent change in production or employment caused by strike.
Company losses are direct economic losses and will differ from accounting charges.
“Week 1” is defined as Friday, September 15 through Thursday, September 22, 2023.
Estimates for time periods during a strike are necessarily imprecise, reflecting apportionment and estimates of costs incurred under fixed contracts over longer periods of time.
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