Q&A of the Day – How Much Damage Is the UAW Strike Doing to the Economy?
Each day I feature a listener question sent by one of these methods.
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Today’s Entry: @brianmuddradio How long will the strike last? How much damage is it doing to the economy?
Bottom Line: I don’t have an answer to your first question, though I do have historical context along with a bit of insight into how long it likely could last that I’ll share. I can answer your second question and it’s not as much as you’ve commonly heard reported thus far. Key in this conversation is how the UAW has decided to go about striking thus far. The UAW’s total striking workforce is approximately 12,700 employees, which represents only about 9% of the union’s total workforce. The strike has been focused on shutting down one key plant from each of the big three American auto makers to apply pressure as opposed to an outright shutdown of production as we’ve seen in previous UAW strikes (though Tesla can make the case that the “big three” characterization is no longer accurate). Part of what makes this one different than the few that have most recently happened, is that it’s aimed at all three at the same time. The last time we had a strike that had the potential to impact as much of the American auto industry as this one was the 1970 strike. Let’s start by taking a look at how long the three most recent auto strikes have lasted.
- 2019 GM strike: 48,000 workers – 42 days
- 2007 GM strike: 73,000 workers – two days
- 1970 GM strike 300,000 workers – 67 days
The total workforce of the UAW is about 143,000 employees currently. In other words, the potential impact economically if this strike were to extend to all employees would be something between the impact of the 2007 strike and the 1970 strike. More on what that could look like in dollars in a minute but first you see the length of time these have typically lasted. With a range of two to 67 days it doesn’t necessarily provide us with a lot of potential insight – though the average strike has lasted 37 days so if history holds this could play out for quiet a while yet – especially if this continues with less than a tenth of the workforce on strike at a time. That takes us to the potential cost of this strike to the US economy.
To date, if you’ve heard economic impact discussed you’ve probably heard that the cost to the US economy is $5 billion per ten days. That’s based on an August study by Anderson Economic Group and is frequently cited. While the economic analysis in the study is sound, it’s not directly applicable to what’s currently happening. The study’s data was based on a strike of the entire workforce. What we can do is extrapolate the potential economic impact based on the percentage of the UAW that is strike. The figure I come up with is $435,000,000 per ten days, or $43.5 million in negative economic impact per day. The US economy’s economic output is $73.6 billion daily. That means the economic output negatively impacted is 0.0006% of the total US economy. What this shows is that while the current strike is certainly important to those involved and the local communities that are impacted, its overall impact to the US economy is extremely minimal. That dynamic obviously could change if this turned into a full fledge strike of the entire UAW...but even then, we’re still talking about well less than 1% of the total US economy.
In 1970 when 300,000 UAW workers went on strike, what they produced represented 2.3% of the country’s GDP. What we see today, with UAW membership in total checking in at less than half of the workforce at GM alone in 1970, is that the impact of the union and for that matter – unionized American auto production is a fraction of what it used to be. Here’s a bit of food for thought on that note. The total corporate value of the non-unionized Tesla, which employs 128,000 people (or nearly the same number of people as the entire workforce of the UAW) is $850 billion. The entire value of the “big three” American unionized automakers (and Stellantis is actually a Netherlands based company) is $154 billion. In other words, Tesla is valued at 5.5 times more than what the other three are combined. It’s a powerful comparison about how investors and markets view the value created by the businesses in addition to what they represent in the overall economic landscape.