Big Three Jobs: The Nub of the Numbers

A look at how many jobs could really be lost if a Big Three Detroit automaker failed.

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While it's certain that a failure of any Big Three automakers in Detroit would bring a new kind of pain to the country's jobs market--there is some dispute over the numbers.

The New York Times Economix blog takes a look at the oft-quoted figure that 1 in 10 U.S. jobs is supported by the auto industry (a figure harvested from a 2003 Center for Automotive Research study) and offers some insights. 

From Economix:

The study concludes that “new vehicle production, sales, and other jobs related to the use of automobiles are responsible for 1 out of every 10 jobs in the U.S economy.” The term “responsible for” is interpreted quite broadly, and covers jobs in steel, glass and electronics (the so-called “upstream” jobs) as well as those in taxi-driving, travel and advertising companies (”downstream” jobs), among others.

The broadness of the term “responsible for” aside, the study has minimal relevance to the question of how many jobs are at risk if the Detroit Three go bankrupt, for two reasons:

1) The study uses data from 1998 to 2001, and the industry has changed significantly since then. Employment in the motor vehicles and parts manufacturing sector has fallen, for example.

2) Much more importantly, it is an industry-wide study: The auto-related jobs covered in the report cover more than those dependent on the Detroit Three; they are related to cars sold by any manufacturer, domestic or international, in the American market.

Economics editor Catherine Rampell notes: "The failure of General Motors, for example, wouldn’t eliminate the entire car-wash industry."

The most recent report from the Center for Automotive Research--available here--studies the potential job losses if two or three of the Big Three carmakers failed. Researchers included jobs at the automakers, their suppliers, suppliers to suppliers, and jobs lost through a "spin off" effect when Big Three employees and suppliers reduce their spending.

If all three ceased operations in 2009, 3 million jobs would be lost in the first year, according to the report. If two failed--or if total employment and production was reduced by 50 percent--2.5 million jobs would be lost in the first year. In both scenarios, researchers estimate the employment picture would begin to recover in 2010, as international carmakers beefed up U.S. production and workers began to find work elsewhere. In the latter scenario, the remaining member of the Big Three would help by picking up production again as well.


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