As part of his “Build Back Better” agenda, President Joe Biden signed an executive order last week intended to boost auto manufacturing in the U.S. The order plans to inject $3 billion into the U.S. auto industry to ensure that one-in-two new cars sold in 2030 are zero-emission vehicles, and to “grow good-paying, union jobs at home.”
In reality, this order is a gift to union leaders at a time when more and more workers are turning away from union representation.
Executives from Ford, General Motors, and Stellantis N.V., as well as the president of United Auto Workers, Ray Curry, were invited to the White House as Biden announced the new executive order.
Ironically, Tesla—whose Model 3 is the top selling electric vehicle in the world—was not invited to the event. Tesla has production facilities in California, Nevada, New York, and Texas, and seems like the perfect company to attend. Coincidentally, Ford, General Motors, and Stellantis N.V. have unionized workers, while Tesla does not.
This should be the first hint to let you know that this executive order is about supporting unions under the guise of improving “fuel efficiency and emissions standards.”
Biden’s push to expand union membership among auto workers is expensive.
U.S. automakers have been battling higher domestic labor costs from unionization for decades.
Although unionization has historically resulted in higher wages for auto workers, firms are faced with higher production costs, which are eventually passed down to consumers.
In 2020, the Center for Automotive Research estimated that automakers’ expenses will rise from $800 million to $1 billion by 2023. More specifically, hourly labor costs for unionized workers are expected to increase up to $66 to $71 for Fiat Chrysler, GM, and Ford.
Meanwhile, unionization is becoming increasingly unpopular among workers in the auto industry.
Michigan, traditionally the auto manufacturing hub of America, has in fact experienced a decline in unionization since the 1980s. Union membership rates continued to fall after 2013 when the state’s freedom-to-work laws came into effect.
From 2012 to 2020, total union membership rates fell in Michigan by more than 2 percentage points, with a more substantial decline among government workers.
Just last year, the union membership rate among all U.S. wage and salary workers was 10.8%—a 9.3 percentage point drop since 1983 (but a 0.5 percentage point increase since 2019).
Americans are evidently not as receptive to unionization as they once were. Unions have outlived their usefulness in the current U.S. economy and are no longer needed to the extent they were decades ago.
Biden’s claim that “we need to grow good-paying, union jobs at home” is disconnected from the reality of the U.S. labor market. Better paying jobs can come from technology, higher productivity, and specialization. More unionization will only increase production costs, making consumers pay the price.
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