Collapse of Auto Industry Would Cost Pennsylvania 120,000 Jobs

Economic Policy Institute study ranks Pennsylvania ninth in nation in potential job loss
Date of Press Release: 
December 8, 2008

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HARRISBURG, PA (Dec. 8, 2008) — The financial woes of the U.S. auto industry are not just a Detroit problem but could impact the economies of states across the nation, according to a new study by the Economic Policy Institute (EPI) in Washington, D.C.

Pennsylvania ranked ninth among the 50 states in potential job loss if one or all of the automakers shut down, the study estimated. Up to 120,100 jobs would disappear in the state within a year if General Motors, Ford and Chrysler were allowed to fall into bankruptcy, while the loss of General Motors, the company most at risk of entering bankruptcy, would jeopardize up to 33,200 jobs in Pennsylvania.

Even if only motor vehicles and parts jobs are counted, Pennsylvania would lose up to 8,400 jobs from a total industry shutdown and up to 2,300 from the shutdown of General Motors alone, the study estimated.

Mark Price, Ph.D., labor economist for the Keystone Research Center in Harrisburg, noted that the EPI study should concern manufacturers and other industries in Pennsylvania.

"Anyone who thinks an auto industry collapse has little impact on Pennsylvania should think again," Price said. "As the EPI study shows, the 120,000 Pennsylvania jobs threatened by an auto industry failure account for 2.1 percent of total state employment."

The EPI paper, titled When Giants Fall, estimates that a total collapse of all three U.S. auto makers would result in the loss of up to 2.1 million American jobs within the next year. Tax revenue losses and additional governmental costs would top $150 billion within three years if the three companies enter bankruptcy.

Without cars to export, the U.S. trade deficit would rise by $109.3 billion, the study also found.

The job numbers encompass direct job losses from the automakers' potential shutdown, as well as indirect job losses in technical and service industries and vehicle production-supported industries, such as auto parts, electronics, steel, tires, aluminum and plastics. The study also estimates the loss of “re-spending” jobs as a result of the wages lost by workers in motor vehicle industries and other sectors supported by car production.

The study's author, EPI economist Robert E. Scott, said that Congress should act quickly to provide a bridge loan to the auto industry, noting that it is an investment that the U.S. government will likely recover with interest.

"It is in the national interest to invest in a bridge loan now, rather than pay the consequences of bankruptcy for one or more domestic auto-makers," Scott said.

"The domestic auto-makers don't have the same bankruptcy and restructuring options as the airline industry does," Scott explained. "Customers are unwilling to purchase a vehicle from a company that might not be able to offer a warranty or repairs." 

The study estimates the loss of jobs by industry, with manufacturing leading the pack. Motor vehicles and parts and transportation equipment also stand to lose tens of thousands of jobs.