Impact of Big Three Automakers on U.S. Job Market Is Grossly Overstated, Says Boston College Researcher
Frequently-cited figures imply that about 1 in 10 jobs -- or 10 percent of the full-time civilian labor force -- will be lost if the big three go into bankruptcy. This indeed would be a sobering statistic: at the end of
This implication is inappropriate, says
In fact, the maximum impact if the entire automobile industry in the US were to shut down completely and permanently would be 190,000 jobs in auto manufacturing and 540,000 other jobs throughout the economy. "And only about 60 percent of this number would be affected were the big three to shut down," he said.
"When jobs are calculated in terms of the number of hours tied to automobile manufacturing," said Havens, "and the hours are expressed in terms of 'full-time jobs,' less than 0.8 percent of the labor force will be affected -- substantially less, because competitors or new startups would pick up many jobs if the big three went out of business."
Citing figures from the Center for Automotive Research, Havens notes that only 190,000 jobs (not full-time equivalents, as used in the other calculations) are located in the entire U.S. automobile manufacturing industry. Suppliers entail another 777,000 jobs, he said, but what is frequently overlooked is that they supply other industries as well.
Auto dealerships constitute the greatest number of jobs within this industry, he said; some 1.235 million total, with about a million jobs in sales alone, most of which are part-time, each amounting to an average of less than 15 hours per week.
"For many sales people, these are weekend, part-time jobs to supplement full-time employment," added Havens. "Moreover, many dealerships have diversified their product line beyond the big three models, meaning they have other products to fall back on."
Data from the Bureau of Economic Analysis, he said, tells us that the employment multiplier for the automobile industry varies depending on the type of job. The multiplier indicates how many total jobs in the economy would be lost due to a job lost in any given industry.
"On average, the multiplier for any given job in the automobile industry rarely rises above 3. But for the sake of this argument, let us assume it is 4," he said. "Even if all 190,000 jobs in the automobile industry were lost, the overall economy would see a decrease of 760,000 jobs with approximately 540,000 of those outside the industry.
"This maximum estimate amounts to 0.5 percent of the labor force," he said, "not the 10 percent some are claiming. But even this smaller number involves hundreds of thousands of jobs and hundreds of thousands of households.
"The loss of U.S. jobs especially in this quantity is cause for concern," said Havens, who stresses that the analysis is not intended to minimize the gravity of the economic situation facing the nation or that of individuals facing unemployment.
"It is always important to take a hard look at numbers being reported," he said, "if only to serve as a benchmark for assessing the effectiveness of public policy."
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