It was recently reported that Carrier plans to shift 1400 jobs from its plant in Indianapolis to Mexico in an effort to cut costs. Average wages in Indianapolis exceed $20 per hour, but would drop to around $3 south of the border. While union leaders are understandably upset about the move, it’s really about economics.
http://www.reuters.com/article/us-carriercorp-layoffs-idUSKCN0VP2R6
But the story doesn’t end here. According to an article in yesterday’s The Internet Post, Carrier received $5.1 million in “clean energy tax credits” as part of the stimulus package in 2013. When receiving the funds, Carrier officials said they planned to use the money to “expand production at its Indianapolis facility to meet increasing demand for its eco-friendly condensing gas furnace product line.” Apparently Carrier officials didn’t mention their Mexico plans when getting the check.
Some are upset simply because Carrier is considering moving jobs from Indianapolis to Mexico. Worker anger was already present before the story broke about the $5.1 million stimulus payment. I understand this anger, but companies have a right to move production to minimize costs. The wage gap usually has to be substantial to justify a move outside of the US, but it’s the company’s right to make the decision. The idea that Carrier should “save US jobs” and not move is shortsighted because it assumes that the company can remain profitable while paying higher wages. Whether or not a particular company should relocate production abroad is often complicated and depends on factors unique to the company and its industry.
However, my view changed completely when I learned of the stimulus payment. While details are still forthcoming, this smells like more cronyism and unintended consequences to me. A government stimulus program is supposed to boost production and hiring in the US. As with most government programs designed to spur business activity, the bulk of the money either has little if any appreciable effect on long-term growth or ends up in the hands of cronies. As President Obama put it when confronted with the fact that the $787 billion 2009 stimulus package (ie, the American Recovery and Reinvestment Act) wasn’t working as promised, “Shovel-ready wasn’t as shovel ready as we expected.” He should not have been surprised.
This is a story worth watching and Carrier has some explaining to do. In the interim, it should remind all of us why government meddling in business affairs on either side of the equation rarely makes any sense.
Carrier should return the $5.1 M to the government. That’s the moral thing they need to do.
this is why trump is leading the polls. it’s bad enough to lose jobs to mexico, but to have the government subsidize it???
it will never happen Aliza.
spot on Jerry.
Carrier owes it to American workers to stay here anyway. Americans by their products, so why can’t Americans build them?