A Spoke in the Wheel: The UAW Strike’s Impact and How Similar Acts Can Negatively Impact Regionalized Economies

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By: Nathaniel Reiff

After a six-week long strike, General Motors Co.’s employees finally agreed on a four-year labor agreement, stifling further loss for the company and mitigating further blows to the economy.  The longest automotive walkout in 50 years, was initiated on September 16, 2019, when approximately 48,000 United Automobile Workers members went on strike. According to Bloomberg Law, the agreement awards among other things workers pay raises, $11,000 ratification bonuses, a route for temporary employees to reach full-time status, and preserves the automaker’s health-care plan. It is reported that the prolonged strike diminished automotive supply chain revenue and removed tens of thousands of workers from an October Labor Department jobs report. In particular, one business tied to the automaker claimed he had laid off nearly his entire staff and used his personal savings to keep his company afloat.

Paul Clark, director of the School of Labor and Employment Relations at Penn State University, while commenting on the similar University of Chicago Medical Center nurses’ strike which sought wage increases, a workforce development program, and the reinstatement of a  worker-management partnership, relayed that the nation’s high employment rate nationally actually incentivizes union workers to demand more from their employers. But do these strikes adversely affect the rest of American economy outside of GM’s direct supply chain? If so, should they be outlawed?

Currently, auto manufacturing constitutes more than 5% of private-sector positions approximately 9.9 million jobs in the U.S., and is responsible for 3 to 3.5% of the nation’s GDP. Harley Shaiken, a professor of U.C. Berkeley’s graduate school of education, stated in an interview with USA Today, “For every job at GM’s eleven U.S. auto assembly plants, it’s estimated six or seven additional jobs are generated or connected to the facility, from people who work for outside suppliers, to employees at local restaurants where autoworkers eat…. That certainly has a regional impact, . . .”

Furthermore, striking UAW workers only received $250 a week, which likely resulted in these individuals refraining from making discretionary payments, meaning that local businesses potentially saw their profits substantially drop. Localized sales tax revenue plausibly also took a hit. Erik Gordon, a professor at the University of Michigan’s Ross School of Business, states that strikes “affect sales tax revenue if people are buying less things, . . . When you don’t go to restaurants, when you hold off buying . . . a new refrigerator, the decrease in sales tax revenue really impacts cities and states who can’t really afford to take the blow.”

Accordingly, strikes and their extensive duration certainly rekindles a fiery debate as to whether union strikes should be generally outlawed in the United States as the UAW claims the GM strike’s outcome will serve as a benchmark for its future negotiations with Ford and Fiat Chrysler Automobiles NV.

In the United States, private-sector workers have a right to strike under Sections 7 and 13 of the National Labor Relations Act for the purpose of collective bargaining or obtaining other aid or protection. The strikes however, may not be used for satisfying an unlawful objective, such as stopping the handling of goods for another producer, nor may they be conducted in an illegal manner. Furthermore, another limitation exists when a strike is “abnormally destructive and threatens the health or safety of others.”

While strikes can be an effective tool for addressing wealth inequality in the immediate employee-employer relationship, it is important to remember the adverse implications they may impose on regional US economies. The future of strikes and their ramifications has already taken center stage in the 2020 presidential election. Therefore, it will be interesting to see how the Trump Administration will handle any impending strikes in the upcoming months, as any action could be the foundation for his reelection.

For more information about the regionalized economic ramifications of the UAW strike, please read here.

Nathaniel Reiff is a third-year law student at Wake Forest University School of Law. He holds a Bachelor of Arts in Business Administration and a Master of International Business from the University of Florida. Upon graduation, he intends to practice corporate and insurance law.