Saturday, November 26, 2005

Michigan's Economy is Changing, But How?

"It was possible for people with a high school education to get a job that paid $75,000 to $100,000 and six weeks of paid vacation. Those jobs are disappearing," said Patrick Anderson of Anderson Economic Group in East Lansing. "The Michigan low-skill, upper-middle-class way of life is in danger."

Yes, I am afraid it is. The day that unskilled labor in a union shop was a ticket to the upper-middle class is over and it's not coming back. An interesting article in the Lansing State Journal discusses this along with the changes, and some positive news in other industries.

In spite of losing nearly 200,000 manufacturing jobs in the last 10 years, Michigan is still a manufacturing powerhouse, whose factories produced 76.3 Billion dollars in Michigan last year, or a little over 1/5 of the states economy. (It is often overlooked that Michigan is also a major center for agriculture and tourism.)

Also new factories are being built in many industries, but they employ fewer people and will not pay what factories did twenty to thirty years ago. Instead of 50,000+ a year they will be looking at 30-35,000 a year.

The 2002 GOP candidate for Governor, Dick Posthumus, is optimistic, and though I do not totally share his optimism, I do agree that he brings up some interesting points.

There are a lot of jobs in health care and building trades but you cannot use these as the foundation of a state-wide economy. A state-wide economy needs to be founded upon the production of goods and materials and we must not lose this. We probably won't lose it completely but it is no longer my grandfather's state of Michigan.

As Dick Posthumus said: "The manufacturing of tomorrow is going to look somewhat different from the manufacturing of yesterday," he said. "It doesn't mean that we no longer manufacture. ... (But) it's going to be a painful adjustment."

Meanwhile the Detroit Free Press reports that when all benefits are included, the employees at Delphi are making $76.00/hr which they say is more than double their competitions pay scale.

According to a study Delphi commissioned, in part to thwart claims that it is being unfair to workers, Delphi pays its workers $76.46 per hour, up from the previously reported wage of $65 an hour. That breaks down to a wage of $26.97 an hour for a first-year employee, $26.86 an hour for benefits such as health care and vacation days and $22.63 in legacy costs, which include retirement health-care costs and costs past the obligation of workers compensation

They are saying they need to cut to $35.00 per hour counting benefits, which is strange because earlier this week they were aiming for $21.00 per hour. I do know that I make nothing like $35.00 an hour counting benefits, though I am not complaining about what I make; I am grateful to be employed at the moment. The average factory worker in America, according to this article, makes $24.24 an hour, counting benefits while Michigan averages $24.96 an hour -- $17.27 in wages and $7.69 in total benefits.

It looks like more people will need to spend more time in school.


Blogger Crazy Politico said...

It was great back in the "good old days" when Detroit steel and rubber were the standard, and you could pay auto workers anything, because folks were going to buy American.

I think history will look at Detroits demise as a 3 pronged failure.

1) The companies themselves didn't come up with the designs they needed, especially in the 70's and 80's to compell people to keep buying.

2) The workers for a lot of years did a pretty shoddy job, and that reputation, though no undeserved, still hangs on.

3) the Union's complete lack of flexibility in understanding the pay/benefits scale was part of the problem when being cost competitive became the major issue.

8:16 AM  
Blogger Crazy Politico said...

Number two should read:
2) The workers for a lot of years did a pretty shoddy job, and that reputation, though now undeserved, still hangs on

8:17 AM  
Blogger shoprat said...

The cause of the problems are pretty well established. What is needed is a solution that will stop the collapse of the US Auto Industry. Protectionism, which a lot of my coleagues want, is out because it only puts it off; it does not solve the problem.

8:23 AM  
Blogger Crazy Politico said...

First and foremost is they have to become cost competitive. The Execs and workers all need to realize their pay has to come down.

Second is they have to become faster on getting things to the market, that people want, not that are reactionary.

They need to give folks what they want, in the car, and start matching some of the other makers warranties.

I'd like to see a 60 day money back guarantee from the US makers, don't like the car in two months or 2500 miles, take it back, get a refund. As a standard thing.

You are correct about protectionism. Look at the steel industry, tariffs to protect them cost twice as many workers in other related industries their jobs due to the higher cost of steel. Yeah, that was helpful.

3:27 PM  
Anonymous Blue Cross of California said...

Great blog I hope we can work to build a better health care system as we are in a major crisis and health insurance is a major aspect to many.

11:50 PM  

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