A long UAW strike will cut deeper and wider in to the U.S. economy, says Virginia Tech economist
The first trilateral strike in the United Auto Workers’ nearly 90-year history will pass the seven-day mark this Friday. The UAW’s strike focuses on the wide gap in annual wage increases for factory floor workers versus those of CEOs and other auto executives at Ford Motor Company, General Motors, and Stellantis. The strike began late Friday, Sept. 15.
Wall Street is watching closely as the strike casts a shadow on not just the U.S. economy, but Biden’s White House administration. Jadrian Wooten, an economist at Virginia Tech, says the longer that the strike goes on, the more significant and wider its impact, from car prices to even housing prices. “If this strike drags on for months, that's when we start worrying about much broader impacts,” Wooten said.
The economic impacts of a short strike vs. a long strike. “Prolonged strikes could indeed lead to higher prices for cars, layoffs in adjacent business sectors, and reduced spending in regions with striking workers. In the long run, these impacts could extend beyond the local areas, most notably in higher car prices. It could seep into housing markets, financial markets, and beyond. That’s when customers are more likely to start seeing high car prices, which will impact their other purchasing decisions.”
The auto-related industries most vulnerable to a long strike. “We're talking about the suppliers of auto parts — the companies that produce the headlights, brakes, and other components that go into these cars. With production halted, they’d find themselves with fewer customers and, inevitably, may have to reduce orders and consider layoffs.”
Other impacted industries include car dealerships and trucking companies and owner-operator truck drivers who deliver cars or auto parts and supplies, Wooten said, adding the “restaurants, diners, and shops near striking auto plants would experience decreased foot traffic, impacting their revenue.”
Impact of strike on foreign auto makers located in U.S. “The supply chain in today’s auto industry involves a lot of interconnectedness. Even if international automakers aren’t directly involved in the UAW strike, they rely on a network of suppliers. Many of these suppliers provide components to multiple manufacturers, creating a ripple effect.”
Strike impacts on new and used car prices. “If this strike stretches on for months, that’s when it’s more likely to trigger higher price tags on both new and used cars. Reduced supply from production delays and lower inventory would be met with increased consumer demand if folks rush to buy before prices surge further. The result? New cars could become pricier, and even the used car market could see higher prices as consumers seek alternatives to costlier new vehicles.”
Jadrian Wooten is collegiate associate professor with the Virginia Tech Department of Economics, part of the Virginia Tech College of Science, and is the author of “Parks and Recreation and Economics.” Wooten has been featured in USA Today, WJLA ABC 7 Washington, D.C., Scripps News, and NBC News, among scores of other media outlets. Read more about him here.
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