Thursday, October 06, 2011

UAW Contracts Will Boost Michigan's Economy

You mean to tell me that if you pay your employees a decent wage with bonuses, they will turn around and spend it? And that helps businesses?

Well I'll be damned. And here we thought austerity and tax cuts were the way to go.

Signing and profit-sharing bonuses for hourly workers at Detroit's Big Three will give autoworkers a nice wad of cash in time for the holidays, pumping an estimated $200 million into the Michigan economy starting next month.

Metro Detroit businesses say they expect a much-needed boost in sales — and some stores already report an uptick in spending.

And if those employees are out spending money, that will create jobs? Really? Someone get the Republicans on the horn. They need to hear this one.

At Bill & Rod's Appliance in Livonia, autoworkers already are coming in for new appliances, boosting sales by 60 percent over last September and prompting the store to hire four full-time salespeople, noted sales manager Joseph Legato.

"We had to expand the number of employees just to keep up with demand," Legato said. The spending, though, is decidedly practical — refrigerators, washer and dryers, not game systems and high-def televisions, he adds. "I think that a lot of people have been holding out. They're replacing appliances that are 20 or 30 years old now, and those things are giving up the ghost."

Wow. So what happens next?

That bonus cash also will ripple through local economies, as the increased spending flows to businesses, their workers and suppliers, whether the money goes toward delayed home repairs or a splurge or two.

"These contracts do represent a boost to the Michigan economy," said Robert Dye, chief economist for Comerica Bank. "There's a lot of pent-up demand out there. I think there's a high potential for most of this money to get spent, and a good chunk will be spent in the state."

As large as the total estimate sounds, even $324 million is a drop in the bucket for Michigan. During 2009, the last year with total numbers available, personal income in the state totaled $339 billion for the year. The bonuses and profit sharing would total just slightly more than half of 1 percent of that figure.

Just think if we could somehow expand on this theory. Hmmm...

Too bad certain folks in power are always insisting on pay and benefit cuts, and advocate that we get rid of the unions. Maybe we can ask those people to leave soon. Given the evidence above that it's consumer demand that creates jobs, I'm guessing we will be better off if they just go and do something else now.

Sound like a plan?