GM's Layoff Lesson: It's time for a manufacturing strategy that helps workers, not shareholders

Earlier, General Motors made headlines when it announced the closure of five major factories and the elimination of more than 14,000 jobs. For many Ohio and Michigan families preparing for the holiday season, the news was a dark reminder of the recession that crippled the state’s economy in the early 2000s.

 

Unfortunately, the response from many policymakers has been equally dismal. As debates around tariffs and profit margins abound, few of the nation’s top lawmakers have stopped to ask a seemingly obvious question: What about GM’s workers and their communities? The GM layoffs should be a wake-up call—if an overdue one—to policymakers that the U.S. needs a manufacturing strategy that puts at its center working families, not corporate shareholders. 

The Plain Dealer

 

Over the past year, The Century Foundation’s High Wage America project has documented how important good-paying manufacturing jobs are to communities like Lordstown in Ohio’s Trumbull County. Despite losing two-thirds of its manufacturing base since 1990, Trumbull still relies more on factories than 86 of Ohio’s other 87 counties. Manufacturing jobs also pay better than other industries in the state—$11,000 more per year on average.

 

The workers at GM factories have given much to their employer. The construction of the soon-to-be-shuttered Poletown plant in Hamtramck, for example, required the razing of an entire historic neighborhood. Yet while communities are loyal to manufacturers, multinational companies are loyal only to shareholders. At Lordstown, after earlier shift cutbacks, politicians reached out multiple times to ask what GM needed to stay open: they got few responses. 

 

Teddy Roosevelt once taught that policy and politics should bring corporations’ behavior back into line with what serves our nation and people. But ever since U.S. manufacturing faced new international competition in the 1970s, our industrial policies have followed shareholders’ interests much more than those of the general public. 

 

Trade policy, for instance, has enabled American automakers to expand low-cost production in Mexico, then ship back home. As a result, GM will make the new Blazer SUV in Ramos Arizpe, near Monterrey, rather than re-tooling in Lordstown. 

 

It’s the same with tax policy. The so-called tax reform law passed in 2018 could have been written by corporate lawyers. And despite promises that it would bring jobs back, it made taxes on foreign profits permanently lower than in the U.S., thus boosting the incentive to outsource. 

 

For their part, states and localities mostly hand out subsidies to big companies like GM. Ohio gave $82 million to GM and they closed Lordstown anyway. Wisconsin gave Foxconn an astonishing $3 billion over 15 years, getting only 13,000 jobs in return.  

 

It’s time to try something different. One possible starting point? Sen. Warren’s (D-MA) proposed “Accountable Capitalism Act,” which would require large corporations to give workers the ability to elect 40 percent of board members, in addition to requiring executives to hold stock options for longer so that they are less inclined to maximize short-term value.

 

Another idea? A renegotiated NAFTA, which requires more automobiles to be built by well-paid workers in the U.S. and Canada, and which has strong provisions to protect the rights of workers at Mexican factories and raise their wages. 

 

States and localities also need to stop wasting money on bigger and bigger subsidies chasing fewer and fewer jobs. They should follow the lead of major metro areas like Dayton, Denver and Kansas City, which cooperate with neighbor regions rather than poach jobs from them. 

 

What’s more, we should help manufacturers invest jointly in their common skills needs through group apprenticeships, and support partnerships between industry and universities to develop new advanced manufacturing products. Today, we lead the world in cutting-edge scientific research, but do a poor job of translating that into the creation of new jobs. 

 

In communities hit hard by layoffs, we need to provide greater support for worker adjustment programs, giving families much needed help with retraining, health care and unemployment benefits during tough times, and helping communities weather the blow of factory closings on their tax base.   

 

There’s no shortage of good, reasonable policy ideas. There is a shortage of political will. 

 

If there’s a silver lining in the GM announcement—and that’s a big “if” —it’s that American workers are showing that they will no longer let policymakers off the hook for broken promises and a lack of courage. Michigan families are fighting to keep manufacturing jobs, and demanding policies that help in doing that. 

 

After decades of neglect, the least we could do is give them that. 

 

Andrew Stettner is a Senior Fellow with the Bernard L. Schwartz Rediscovering Government Initiative at The Century Foundation, a leading progressive think tank. Stephen Herzenberg is an economist with the Keystone Research Center, a research and policy organization.

 

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