Economics

Trump delivers on promise — manufacturing jobs to stay in Indiana. But at what cost?

Player utilities

Listen to the story.

Carrier manufactures air conditioners, like the one pictured.

Carrier manufactures air conditioners, like the one pictured.

Credit:

Brian Herzog/Flickr

During the US presidential campaign, Donald Trump often boasted that he’d stop American companies from shipping jobs out of the country. One of his favorite targets was Carrier, an Indiana company that manufactures furnaces and other HVAC equipment. The company has been building heating and cooling systems in Indianapolis since the 1950s.

Last February, Carrier's parent company, United Technologies, announced plans to shift about 2,100 jobs to Mexico. Trump gave a “100 percent guarantee” that he’d stop that. Well, Trump now appears to be making good on his word. 

And Carrier backed up Trump’s announcement.

The company wouldn’t comment further. But the factory has about 1,400 workers in Indianapolis, so that means 400 workers could still lose their jobs. United Technologies has another plant in nearby Huntington, Indiana, which is slated to shut down as well, with about 700 jobs lost to Mexico. So, doing the math, it appears that Trump and United Technologies have worked out a deal to keep roughly half of the current manufacturing jobs in Indiana.  

The big question right now: Why is Carrier staying in Indiana? The move to Mexico was expected to save the company $65 million annually.

There is speculation the state of Indiana will give Carrier incentives, subsidies to stay. Remember, Mike Pence is still the governor of that state.

Another idea is that Trump got tough with United Technologies. About 10 percent of that company’s business comes from defense contracts, and Trump may have threatened to pull some of those.

Or perhaps Trump made broad policy promises, things like lower taxes or reduced regulations to entice Carrier to stick with Indiana.

Lastly, it’s just good PR for Carrier. The price the company will pay — again, $65 million — is tiny compared with what they’re getting out of the deal. (United Technologies reported $56 billion in sales last year and $4 billion in profit.) Not only does the company look good for staying in Indiana, it now has the president-elect’s ear. 

In Indiana, the reaction has been a mix of happiness and confusion.

Chuck Jones, the president of the local Steelworkers union told the Associated Press, "I'm optimistic, but I don’t know what the situation is. I guess it’s a good sign. ... You would think they would keep us in the loop. But we know nothing."

Mike Fugate, a Democrat-turned-Trump-supporter, said via email that he’s “good right now, waiting to see the done deal.”

Republican and Trump supporter Paul Roell said he was “shocked and in disbelief when I found out. I also feel a sense of great relief knowing I will be keeping my job and will be able to maintain financial security for my family.”

Another Carrier employee, TJ Bray, who supported Bernie Sanders, said, “I want to hear the details of the deal first, but I’m happy that most jobs are saved.”

Carrier factory workers typically earn $20 to $25 an hour, plus benefits. If they lost their jobs, Carrier employees have said they’d have a hard time finding comparable work and might have to take two jobs to earn what they currently do. 

A Carrier worker in Indiana earns about the same in an hour as a Mexican worker could make in a day. 

Overall, it’s a huge PR victory for Trump. He promised something, and now he’s delivering. You can already hear it in his stump speech four years from now. And let's be fair: Democrats did the same thing, touting their accomplishment for helping save General Motors.

And 1,000 workers in Indiana are very happy today.

But let’s also keep things in perspective: these are 1,000 jobs. Typically each month, 150,000 to 300,000 new jobs are created in the US economy.

And economists are already critical of the Carrier deal. Justin Wolfers, an economist at the University of Michigan tweeted this: 

Economist Mike Hicks at Ball State University in Muncie, Indiana said, “It's obviously good politics, but not yet clear it is good economics. For every manufacturing job lost to trade, factories lose between five and nine to machines. Nothing in this announcement will change that.”

And remember, Republicans love to tear apart President Barack Obama for “picking winners and losers,” helping some companies and not others. When Mike Pence was a congressman, he blasted Obama’s stimulus deal and decision to help General Motors stay out of bankruptcy.

Back in 2009, Pence savaged the stimulus package while speaking on the House floor: "Republicans oppose this bill because this backroom deal is simply a long wish list of big government spending that won't work to put Americans back to work. It won't create jobs. The only thing it will stimulate is more government and more debt. It will probably do more harm than good.” 

Related Stories