President Joe Biden, a prolific green energy subsidizer and the self-dubbed “most pro-union president in American history,” wanted to eat all the political candy without getting the corresponding political stomach ache.
Biden’s dogged support of green energy subsidies has caused havoc in several sectors of the economy. These subsidies and the administration’s proposals to limit drastically the quantity of gas-powered vehicles sold have destabilized the auto industry. They have also catalyzed unrest among another key Biden constituency, namely, organized labor. Sure enough, the United Auto Workers union has gone on strike against Detroit’s “Big Three”: Ford, General Motors, and Stellantis (once Chrysler).
Electric vehicles, which the Inflation Reduction Act heavily subsidizes, contain fewer parts than gas-powered vehicles. Their assemblage consequently requires as many as 40% fewer workers — not good news for union jobs. The threat environmentalist economic interventions pose to existing energy sector jobs should surprise nobody.
Their subsidies and regulatory barriers have distorted market incentives, prompting businesses to reallocate capital and other resources toward economically inefficient projects. The Wall Street Journal reports that Ford, in 2023’s first quarter, lost almost $60,000 on each EV sold, and the company has projected for its EV division a total annual loss of $4.5 billion. It also recently announced layoffs of 3,000 workers in an “effort to slash costs as it makes a longer-range transition to electric vehicles,” according to the Wall Street Journal. Acceding fully to the UAW’s demands would prevent manufacturers from selling EVs at prices low enough to attract a wider customer base.
UAW boss Shawn Fain says he supports Biden’s efforts to electrify American vehicles in general. Meanwhile, Biden has joined the picket lines. He, like Fain, does not acknowledge the economic trade-offs at work. And neither man recognizes that the auto manufacturers’ capitulation to the UAW’s demands would likely harm unions’ political power and job security in the long term.
Fain has demanded for his members 40% wage increases, a 32-hour work week, better pensions and retirement benefits, recurring inflation-tied wage adjustments, and more. Sources toldBloomberg that Fain’s demands would boost the Big Three’s labor costs by $80 billion apiece. Total hourly compensation (wages plus benefits) would rise from the current $64 past $150. By seeking unsustainably generous wages, work schedules, and benefits, Fain poses a serious threat to his own union’s future. Securing the UAW’s desired compensation bumps would incentivize all manufacturers to cut costs by decamping to right-to-work states or to foreign countries such as Mexico. Far from the UAW’s $150-per-hour pipe dream, analysts peg the hourly average wages at $55 and $45 at nonunion plants and nonunion Tesla plants, respectively.
Unionized plants (irrespective of wages) have also proved less productive than nonunionized competition. “Roughly 50% of the vehicles produced domestically in 2019 were manufactured at non‐unionized plants, even as unionized plants have a higher share of total U.S. automotive factory employment,” write the Cato Institute’s Scott Lincicome and Ilana Blumsack. Lincicome and Blumsack add that nonunionized manufacturers in general innovated in the EV market more robustly than unionized ones. Automation presents still another threat to auto workers’ job security. Fain seems unable to perceive that his economically unfeasible demands will almost certainly quicken automation’s adoption.
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