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Auto Industry Fallout Could Add 20% to Unemployment

By: Steve Johnson

11/16/2008 - 19 Comments

The number of people employed by the auto industry is staggering.  Each of the big three employs as many as 2.5 million.

Then there is the multiplier of others that work in relation to the industry. It has been calculated that for each factory job, there are five other related jobs from selling the vehicles to producing parts, to shipping and delivery.

If any of the big three, GM, Ford and Chrysler goes under, they could add as much as 2.5 million x 5 = 12.5 million people to the unemployment, which is about 6-7% of the employment.  If we were to loose all three, it could add 20% to the unemployment.  That said, even if they were to go into bankruptcy, many of their workers will continue working. 

The big question is what is more productive long-term, to bail them out with Federal money or let them go bankrupt?  The answer is looking more and more like letting them go under because then they will be able to renegotiate union contracts, supplier contracts and they will be forced to restructure with lower costs while improving their products.

This week I participated in several blog carnivals.

They did an excellent job and as usual, there are tons of great articles. If you have the time, I highly suggest you skim through this week’s carnivals.

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