(H/t to Paul O’Malley for flagging this one). The Wall Street Journal has an interesting article about the Greensburg Honda plant entitled Honda and UAW Clash Over New Factory Jobs. The article discusses the Honda plant’s restriction of applicants to those who live within the 20 counties near Greensburg. The UAW says that the restriction is designed to exclude most of the state’s thousands of laid-off unionized workers. Honda says it’s merely designed to make sure workers live close to the plant and can get to work on time.
According to the WSJ article:
Of the 33 auto, engine and transmission plants in the U.S. that are wholly owned by foreign companies, none have been organized by the UAW, despite repeated attempts. Mainly, foreign auto makers have located plants in Southern states where the UAW has little presence and where right-to-work laws limit union power. When they have ventured into Northern states such as Indiana and Ohio, they have mostly chosen rural locations far from any unionized plants and UAW halls. The moves now are helping the foreign-owned plants begin to lower wage scales.
It used to be that the presence of UAW jobs kept the foreign automakers’ salaries and benefits up, even if the foreign shops weren’t unionized. But now, apparently, with the UAW in decline, foreign manufacturers are decreasing what they offer to workers.
Again, I go to a more generalized question — productivity is way up over the past 30 years. Wages are stagnant. Where is the money going?
To the lawyers, of course.
If Honda has a block of workers they don’t want to apply (and if they can exclude them without discriminating), why shouldn’t they? I mean, there’s probably lots of folks without GED’s or high school diplomas who’d kill for a Honda job. Is Honda OK to exclude them?
To Doug’s question: The benefits of working– and the cost of renting labor services– go well beyond wages. One must include fringe benefits, deferred compensation, and job characteristics to round out the picture. If one looks at compensation, the gains there match the gains in productivity.
For those who might be interested, I’ve posted on this as well– taking the (ironic) angle that unions love to restrict their product and labor market competition (through public policy), but don’t like it much when others (seem to) edge them out.
Yea, a union debate! I have changed my mind so much on unions, I could never get elected. I’ve have to have a flip-flop logo for my campaign.
Change my mind again! I *think* I’m against them at the moment…
Whereas I’m generally supportive of unions, but don’t think I side with them on this particular issue. A twenty-county area that looks to be in a regular geographic shape seems like a perfectly reasonable hiring decision. If the area in question was very, very small or gerrymandered horribly, I’d probably reconsider.
In general, I think unions are necessary to balance the negotiating power of companies and corporations. Corporations often have pooled capital to enhance their negotiating position. It seems reasonable to allow unions to pool labor to enhance their negotiating position.
Most companies are in an odd position. They want to pay their own employees as little as possible. But, they also have an interest in having other companies pay their employees good wages that will allow those employees to buy company 1’s products.
As a general rule, I think we do better when the distribution of wealth is more even. I’m not talking about anything like perfect equality. There should be ample incentives for hard work, ingenuity, and risk taking. But, I think there is a point of diminishing returns on those incentives. And, I think that the more money that the average citizen has above subsistence (preferably money available directly, rather than through incurring debt), the better the economy does as a whole. Selling 5,000 washers or dryers seems better for the economy than selling 1 million dollar piece of art.
I don’t know if unions are the best way to balance a desire for the incentives I mentioned with the desire for a reasonably equitable distribution of wealth. I do know that, historically, without unions, you ended up with the Gilded Age and its historical relatives.
The region of the state hardest hit by layoffs the last two decades, and particularly the last five years is the east central region, particularly Delaware, Grant and Madison counties. Honda’s hiring zone ends at the southern border of Madison and Delaware counties. What struck me in the article is that the State is, directly or indirectly, giving almost $200 million in aid to Honda to build this plant, and then allowing the company to exclude from employment residents of the most econimcally depressed area in the state.
It is also interesting to me that the state would lay out so much money for 1800 jobs which start at under $15 an hour and cap out after three years at about $18 an hour. Now that isn’t terrible pay, but will the state be ready with say $150 million to prop up the GM stamping plant in Marion which employs 1300 (and pays a whole lot more per hour) should GM announce its prospective closure?
I’m not a big fan of incentive packages to bring in, or keep industry, and most development economists who have written on the issue seem to rage at the inefficiency of these programs. It seems that many politicians, and I refer to our Governor with a vengence, vanish as existing businesses die while laying out millions to bring in new businesses. They will tell you that new starts are needed to replace old businesses as the economy evolves, which, as a generality, is true enough, but ducks the issue that our health insurance and pension schemes, and the natural bias of Governors to throw construction and engineering projects to their contributors, push our economy past simple replacement into the area of churning.
If a CEO of any corporation takes home so many millions in benefits and ‘salary’ ( for lack of a better term), how much should a staff secretary in the same corporation be taking home in salary and benefits? We don’t even ask questions like that. Certainly both have contributed to the very same process of making wealth.
The theory is that the CEO will be much harder to replace, so they pay him / her more. The staff secretary can be replaced far easier and with less impact to the company.
Isn’t that pretty much the way we decide salary? Wages are an expense, but there is an expense in turnover as well. The more expensive turnover is, the more we pay the person to stay.
I’m not sure there is much more to it than that. From a company’s greedy viewpoint, should their be? Doug’s point about wanting everyone else’s workers to be well paid while paying bottom dollar for their own staff seems spot-on.
The CEO’s job is to increase value for the shareholders. Ideally that means by making a better product than the competition, and cheaper. But sometimes that means having your employees run from room to room looking busy, a la Enron. Increased value to shareholders by share price growth doesn’t always equal better company. But usually the CEO’s compensation is tied to that share price. You can blame the board of directors, but also the stock market as a whole. Often the price shoots up on expectations of future earnings, increases in share price of other companies in the sector, or random good economic news that has nothing to do with the fundamentals of the company at that moment. I don’t think you’ll often hear of a secretary getting a large raise based on expectations of a future improvement in her/his typing skills or output.
The secretary’s options are to go back to school, or go work for a company that grants everyone options so they end up like Google, where everyone wandering the halls is a multimillionaire wondering why they’re still showing up to work.
The rich will always exploit the less rich, and the skilled will always make (in a lot of cases exponentially) more that the average worker on the line. If compensation is important to you, it’s important that you endeavor to obtain the skills and training that will be in demand, starting at as early an age as possible.
On Paul’s post, #5, he brings up some points that are near and dear to me. I live in Madison County and am retired from the Marion stamping plant. I too wonder if the state will kick in some money to save the Marion plant should it not be one of the plants that receives GM business in 2011. I haven’t done the research yet but I also wonder if the location in southeastern Indiana is not condusive to racial discrimination. After all, how many African-Americans live in that particular corner of the state? I would be willing to bet not that many. Honda is shutting out Ft. Wayne, Terre Haute, South Bend, Anderson, Muncie and all of Lake County. Each area has a significant population of African-Americans. I am white, by the way.
On post #1, Joe asks if it is okay to exclude those people lacking a certain amount of education. I think this is a bit harsh. Proper pre-employment testing should determine if you have the proper skills. A lack of formal education should never exclude anybody from a job they are capable of doing. Unlike the perfect world described in post #8, not everybody will have the time or money or even location to go back to school so as to run with the big dogs. Not everyone can work for Google in this world.
Obviously not every Hoosier will have the same equal and fair opportunity to work for Honda in this state. If Honda would have spent their own money, from top to bottom, in the location and construction of this plant I wouldn’t be saying a word about their hiring practices. It would have been a totally private matter (subject to law) if the state would have not offered up incentives. But the state did offer incentives with OUR money and so those jobs should have been posted statewide.
There’s all sorts of ways to discriminate against certain groups and/or races. Honda is just being extremely cute in the way they are doing it.
Well said, Ron. It is one thing for Honda to require employees to live within a certain distance after they’ve been hired. It is something else to shut out applicants who happen to currently live in counties outside of a specific geographic area. If someone from Fort Wayne applied for and actually received a position at the new Honda plant, that person could–and probably would–move to Greensburg or the surrounding area.
People who work in the area of labor law can see through what Honda is doing. Their restriction on applicants seems innocent enough, but there appears to be an ulterior motive. If I’m not mistaken, they’ve tried to do this in other states and were called on it. If tax dollars came from people all over the state of Indiana to pay for “incentives” to close this deal, then people from all over the state ought to be able to apply for the jobs.
Discrimination based on a lack of formal education happens even with the Google’s of the world. Many, many technology jobs get posted with prerequisites for previous experience in a programming language or technology, and if you don’t have those skills, don’t bother applying.
If the northern Indiana legislators want to pass a law requiring that jobs that result from state incentives require the company to accept applicants from all over the state, that’s fine with me – I’m sure they’ll make it a higher priority than property tax reform. Fact is, it’s not the law right now.
I think the legislators would benefit more from figuring out why Honda & Toyota don’t just want to hire their workers, they don’t want to build anywhere near their towns. I don’t think it’s entirely because their workers were unionized in the past – does anyone else?
As far as why the state shelled out so much money for jobs that aren’t paying giant bucks, well, what other companies do you see walking in the door to replace those GM plants? Manufacturing jobs are exiting this state/country, and the best we’ve been able to do to replace them seem to be distribution centers. I don’t know what the solution is either.
Joe: Anyone with a passing familiarity with labor law issues can tell you that Honda is trying to avoid unionization by locating in a rural area with few former or current unionized workers. While what they are doing may not be illegal, it is certainly questionable, if tax dollars from people all over the state were used to get Honda to come here. Furthermore, I have read elsewhere that Honda has tried the geographic limits in other states and either been told “no deal unless you open applications up to everyone” or was successfully challenged in court. Honda has shown a pattern of this behavior elsewhere, why wasn’t the IEDC aware of it and when they did become aware of it, why didn’t they say,
“No way!”? Honda backed down in another state (Arkansas?), and likely would have here.
Also, I very much doubt that the skills of people in the Greensburg area are any better or worse than those of people in northern Indiana. I live in Wayne County–which is actually within Honda’s hiring zone–and there are lots of people here whose skills are probably no better than those of potential employees from the northern counties.
Likely would have here being the key quote. Would you like to be the governor who lost a Honda plant? You think those five Democratic legislators would have praised Mitch Daniels for sticking up for their constituents? I doubt it.
Honda/Toyota don’t feel they can work with unions and make good cars and/or make money. I think it’s primarily the former, everyone else thinks it’s primarily the latter.
To me, this is somewhat akin to petitioning the Indiana Pacers … complaining that they’re not giving Ron Artest another chance.
Joe
I noticed your comment about Honda/Toyota feeling they could not make good cars working with unions. I would think by now that auto companies are seeing that as long as management is worth their salt that quality of cars is not an issue vis a vis whether a company is unionized or not. American cars have pretty well caught up with their foreign rivals in quality. Like Daniel Howes, a columnist for The Detroit News said, a lot of the issues about American quality are just “import snobbishness.”
I don’t even think it’s all that much about how much the average autoworker is paid. In the auto industry we use the term “whipsawing” to denote how plants within the same corporation can be pitted against each other to extract concessions from each individual plant. So too do corporations “whipsaw” states and localities into giving into demands for tax abatements and infrastructure improvements, and probably in Honda’s case here questionable hiring practices. A lot of people defend this sort of thing as “just capitalism.” To me it’s capitalism out of control. It’s a power thing with the corporations and their honchos, way beyond providing attractive returns for their shareholders.
You’re right in saying that the governor would have looked bad losing the Honda plant. That’s why Indiana needs to have a law in place that states that if a company wants to locate here and any sort of public money is granted to that company then equal oppotunity will be given to all Indiana citizens in the hiring process. It would take that particular onus off the governor and any other politician involved.