Robert Bruno is a professor and director at the School of Labor and Employment Relations, University of Illinois
Welcome to Peoria Magazine’s Econ Corner, a recurring feature in which we pose questions to experts about various economic issues and how they affect our lives and careers here in central Illinois. Our guest this month is Robert Bruno, PhD, a professor at the University of Illinois, based in Chicago.
Peoria Magazine (PM): As this is written, the United Auto Workers has authorized a limited strike against the Big 3 automobile companies, idling more than 25,000 union workers with another 120,000 or so who could yet join the picket lines. The Writers Guild of America has just ended a 148-day strike. What is the economic impact of strikes like these? Are the effects primarily local or regional, or could something like the UAW strike have national ramifications? How so?
Robert Bruno (RB): Different strikes and different industries have different spatial and economic impacts. The impact of the Writers Guild of America (WGA) and Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA) strike is largely confined to where TV/movies have production centers, mostly New York, Los Angeles and a few other locations such as Chicago and Georgia.
The industry employs a lot of folks. The number of directly employed workers in New York and California is large but even in other locals with smaller numbers of directly employed people there are secondary workers and businesses impacted. And obviously if the product — TV shows and movies — can’t get made or released, there can be financial loss to the studios. But the national economy isn’t really touched.
The auto strike, however, has a far greater reach due to the way the industry is geographically spread out. And the automotive industry is the largest manufacturing sector of the national economy. It makes up roughly 9% of the nation’s workforce and 11% of GNP.
Additionally, every manufacturing job is estimated to create upwards of seven to nine other non-manufacturing jobs. If 150,000 auto workers stop working, then at some point lots of other workers and businesses dependent on auto manufacturing are at risk.
PM: On the one hand, bargained contracts that pay higher wages put more money in the hands of workers who also are consumers, including of the products they make. The more they earn, the more they buy, which employs others and arguably is good for the economy. On the other hand, higher wages can drive up the price of consumer goods, and inflation can have negative economic effects, as we’ve recently witnessed.
On balance, are unions and collective bargaining a plus or minus for economic health, or do they produce more of a wash?
RB: A big plus.
The research over many decades showing the relationship between union density and economic growth is very robust and extensive. When workers have the power to collectively bargain their compensation and working conditions, working-class and middle-class people prosper. And they are the consumers that drive the economy.
On inflation, consider the labor cost of manufacturing an automobile. The total “fully burdened (including benefits)” labor cost is only 5.6%.