One in 10 Jobs Tied to Autos? Not so Fast
Bailout Backers Claim 13 Million Jobs Rely on Auto Industry, but Economists Say It's 2 Million
By RUSSELL GOLDMAN
Dec. 19, 2009
In an effort to convince Congress to bail out the U.S. automakers, company executives, union leaders and politicians have made the compelling argument that the industry directly and indirectly supports one in every 10 jobs in the country. The only trouble is nobody wants to take ownership of that statistic, which is almost certainly false.
The figure is routinely attributed to the Center for Automotive Research, but officials at the nonprofit organization, which has ties to labor and government, claim they never said it and have no idea where it came from.
"It's such an exaggeration. I kind of grit my teeth every time I hear it," said Debbie Maranger Menk, a project manager at the center who researches the industry.
The Center, she said, estimates some 350,000 people in the United States are directly employed by automakers, both foreign and domestic, and that 2.1 million jobs are indirectly connected to the industry including suppliers.
That 2.1 million jobs figure is in line with what most economists estimate to be the number of people supported by vehicle manufacturing, according to economist Richard Block a professor at Michigan State University's School of Labor and Industrial Relations.
"One in ten is an over-estimate," said Block. "There are 130 million people working in the US. To say 13 million people are affected by the auto industry is a bit much. There are an awful lot of tentacles in the industry and it diffuses in so many ways -- metal producers, fabric producers, leather producers. There are 8,000 parts in a car. But it's probably not fair to downstream it all the way to some guy washing floors someplace near a factory.
"The figure is probably 2 to 3 million people affected, still a very large number, but nowhere near 10 percent," he said.
That economists have soundly discredited the one-in-10 figure has not prevented proponents of the auto bailout from trotting out the figure over the past three months.
In October, members of Michigan's Congressional delegation sent a letter to Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke that read in part: "There is no single segment of America's economy that is more critical to the financial well-being of millions of Americans than the automotive industry.Â One in 10 American jobs is related to auto manufacturing."
Sen. Levin Steps Back from Figure
In November, Sen. Carl Levin, D- Mich, one of the signers of that letter, repeated the statistic on NBC's "Meet the Press."
"Well, this is a national problem. First of all, without any question, we've got at least 3 million jobs dependent upon this industry surviving ... This is a Main Street problem. We've got 10,000 or more dealers; they cover the country and every town of this country. The auto industry touches millions and millions of lives. One out of 10 jobs in this country is auto-related. Twenty percent of our retail sales are auto-related or automobiles," Levin said.
A spokesman for Levin, after being asked about the figure by ABC News.com, issued this statement: "Sen. Levin recently became aware that the '1 in 10 American jobs' statistic is based on old data and he is no longer using that number. More than 1 in 10 jobs in Michigan are related to the auto industry, and we are attempting to verify an updated figure that will reflect the importance of the auto industry to the American economy as a whole."
As recently as last week, a General Motors executive sought to justify a government bailout because of the large number of people in ancillary industries, including advertising and hospitality, who would be affected if the automaker were allowed to fail.
"I would guarantee there will be a lot of job losses in the automobile industry. A lot of job losses in the supplier industry, advertising industry, hotelsâ€¦ the one in 10 Americans that [are] somehow, directly or indirectly dependent on the auto industry," GM Vice Chairman Robert Lutz told Fox Business.
Both the Detroit Free Press and the New York Times have in recent weeks credited the one-in-10 statistic to the Center for Automotive Research (CAR), though the Times hedged a little bit when it wrote "the figure appears to come from a 2003 study" conducted by the center.
Officials at the center deny having published a report that cited the figure.
"Our best guess," said Menk, the researcher at CAR, "is that a figure from a 2003 report was totally misinterpreted."
Some 2.1 Million, Not 13 Million to be Affected
Menk said that the center often researches what is called a "job multiplier," a calculation based on computer models that determines how many jobs outside the auto industry are affected by the industry.
A 2003 report, she said, would have been based on data from 1999 or 2000, the "industry's best year ever and would have shown a robust industry with a broad impact on the economy."
"As recently as 2005, we were showing a jobs multiplier of 7.5. That means for every job in the auto industry, 6.5 others were created in the economy," she said. "It is possible someone saw a multiplier of 10 from 1999 data and turned that into a fraction."
The multiplier this year, she said, was about 6 based on an econometric computer model.
CAR estimates 2.1 million jobs will be affected by multiplying the 350,000 people employed by "original equipment manufacturers," which includes the Big Three -- GM, Ford and Chrysler â€“ as well as foreign companies operating in the US.
When contacted for comment regarding Vice Chairman Lutz's recent one-in-10 comment in light of CAR's distancing itself from the figure, a GM spokesman said they knew of CAR's figures and said the statistic came from the Auto Alliance, an industry trade group.
"CAR tends to be a little more conservative in their estimates. [The one-in-10] figure comes from the Auto Alliance," said GM spokesman Tom Wilkinson.
But when the Auto Alliance, which quotes the figure on its Web site, was asked where it came from, spokesman Charles Territo, said they got it from CAR.
"They're the ones that we're getting the research from," said Territo. "They're the economists."
When told CAR had denied that 13 million American jobs would be affected, Territo said the "2 million jobs is just a small piece."
"Millions of people are dependent on this industry. That number includes things like carwashes, drive-throughs, and restaurants near plants. This is a very broad analysis," he said.