I am happy to see that about 1000 workers at Carrier in Indianapolis are going to keep their jobs. I am wondering though if this deal is the start of corporations blackmailing the governments of every state in the country.
On the plus side, Carrier agreed to keep 1069 jobs in its Indianapolis plant. They also agreed to spend up to 16 million dollars in improvements at the plant. In return, the State of Indiana promised them 7 million dollars in tax incentives.
According to Trump and Pence the job is done. They stopped Carrier from moving jobs overseas. Only, they only stopped about half of the jobs that were announced to move to Mexico. The other half are still going to Mexico.
There are about 400 workers at the Indianapolis plant who will lose their jobs despite the deal. Additionally, Carrier has another plant in Huntington, IN and still plans to shut down that plant costing another 700 jobs. So, in essence Trump and Pence saved half of the workforce. That is good.
The bad is there are no provisions that were announced that would penalize Carrier if they decided a year or two from now to shut down that Indianapolis plant. That type of thing has happened all across the country. Just Governor Walker in Wisconsin.
States have a history of giving “incentives” to corporations to increase or save jobs only to have those jobs lost anyway without recouping any of the “incentives” they handed out.
There is a reason these incentives rarely work. Money. That money is in the savings a company gets from making products in countries like Mexico. The politicians will tell you it is because of our corporate tax structure, and that may contribute to it, but it is wages that make the difference.
Let me give you and example. When Carrier makes one of their furnaces in Indianapolis the average wage is 20-25 dollars per hour. In Mexico they can get away with paying 3 dollars per hour. That fact was reported on by an Indianapolis reporter who went to Mexico the check on the factory and workforce.
The numbers I am going to use are just examples, please do not go around saying they are facts. If it takes 20 man-hours to put together one furnace at the low-end of the average wage that means Carrier would pay out 400 dollars for that assembly.
If Carrier makes 10,000 units they would have a cost of 400,000 dollars in labor. If Carrier makes those same units in Mexico, they would pay 60 dollars per unit and a total of 60,000 dollars. As you can see they would save 340,000 dollars in manpower costs. If they sold one million units that results in about 3.4 million dollars.
And those numbers do not include any retirement benefits or health care coverage which they won’t have to pay in Mexico. Since Carrier is a billion dollar industry, the savings would be much higher than my example above.
So, why should they keep their end of the bargain for the full ten years if there are no consequences attached to the deal? If they follow other companies’ examples, they won’t.
And, Trump knows this. That is why all of his products are made in 12 countries and none of them made in the U.S. During the campaign he explained this by saying “I can’t make my products in the U.S.” He is right. He can’t make them at 3 dollars per hour in the U.S. Maybe that is why the 35 percent tax on products made overseas went away in this “deal”.
Speaking of consequences, Donald Trump seems to have gone back on his promise on the campaign trail. He said at a rally in Pennsylvania:
I’ve watched as politicians talked about stopping companies from leaving our states. ‘Here’s a tax abatement of any kind you want. We’ll help your employees.’ It doesn’t work, folks. That’s not what they need. They have money. They want to go out, they want to move to another country, and because our politicians are so dumb, they want to sell their product to us and not have any retribution, not have any consequence.”
He even said that if Carrier pulled its plant form Indianapolis they would be charged a 35 percent tax when they try to sell it back in the U.S. They would pay “consequences” and not get any incentives.
Now that he is the President-elect he seems to have had a need to show us how it works. He stepped up and showed us what “consequences” really means. Only, it doesn’t work the way he said it would. He used the same “dumb politicians” tactics to keep Carrier at that one plant. The other plant in Indiana? Gone!
The jury is still out on this deal. Some are calling it very troubling because it could possibly open the door to corporate blackmail against states. All a company needs to do is say they are leaving and politicians will fall all over themselves to hand out incentives.
Conservatives are wetting themselves all across the country because Trump “saved” 1000 jobs. Yet, when the President saved 3 million automotive and automotive related jobs during the Great Recession they complained that he was just handing out incentives.
Then there is the little tidbit that not many are talking about in this deal. Carrier is owned by United Technologies. United Technologies has billions of dollars in government contracts mostly with the DOD. Was this a quid quo pro for United Technologies to keep their contracts by handing out bread crumbs to Trump?
We also need to ask if Trump threatened United Technologies with those contracts if they didn’t “step up” on the Carrier deal? If that happened, that is a very serious problem for both the government and private companies. Remember, Pence walked from a similar deal with Carrier back in 2014. So, this isn’t breaking any new ground on the incentive front.
As usual, Trump has kept the terms of this “deal” secret. We have only got what we have from Carrier and not Trump or Pence. So, we don’t know what happened behind those phone calls. That is the biggest problem in this deal.
Yes, the Carrier deal saved 1000 jobs and that is good news. The problem is Carrier is still shipping out 1100 jobs to Mexico from Indiana. Also, there is another company, I cannot recall the name, that is about 1 mile from the Carrier plant that is also closing and shipping 1000 jobs to Mexico.
So it would be fair if those 2100 workers asked Trump and especially their current Governor Pence “what about us?” As Trump continues his “victory tour” this week we will be hearing all about this wonderful thing he did. But, we won’t hear about those other workers he has turned his back on.
As I said, I am very happy that these 1000 workers’ jobs were saved by the State of Indiana. But, we are in another wait and see moment. Is this deal going to be good for the American workers or is it going to place our states and federal governments up to corporate blackmail? Only time will tell.