Carrier Deal Is More Complicated Than You Think

Carrier Deal Is More Complicated Than You Think

By Abdul Hakim Shabazz

Whenever I am asked whether the deal reached between the incoming Trump administration and United Technologies (UT) to keep about 1,000 Carrier manufacturing jobs in Indianapolis was a good or bad idea, my answer is “it’s complicated”.

There are multiple elements to this news.   If I may steal a line from my good friend, Dr. Matt Will at the University of Indianapolis, there’s the personal element, the public relations element and the economic element.  

First the personal, if you are one of the 1,069 individuals the incoming Trump administration says whose job was saved for now, you are pretty darn happy and a lot of us are happy for you.  However, if you’re one of the other 1,100 jobs that have been lost or in the process of being sent south of the border, we feel your pain.

Second is the public relations element, for Donald Trump and Mike Pence this is major victory they can claim and they haven’t even gotten out of the gate yet.  For Carrier, they generate a lot of good will for keeping some jobs in America and that will translate into sales.  On the other hand, what happens in the next instance where jobs are going to be lost?  Will the new administration be able to step in?  For example, the workers at Rexnord, not too far from Carrier are wondering who is going to intervene on their behalf?

Thirdly, and I would argue most important, is the economic element,  Yes, anytime you can keep 1,000 jobs in an area you are going to have a positive impact on the nearby economy.  Also the $7 million the state is providing in performance based incentives over 10 years will be cheaper than the estimated $10,140,000 it could end up paying in unemployment insurance over a 26-week period if all those workers to file and stay on for the full time.  And there’s Carrier’s business model and the response from Wall Street.  When UT announced earlier this year it was shipping jobs to Mexico its stock traded at about $86 per share.  Most recently that number was more than $108.  We’ll see how long that lasts going forward.

And there are lot of questions that go into this mixed bag.  What kind of precedent is being set?  Will this give companies an excuse to strongarm state and local governments into concessions by threatening to leave.  Does this give American workers in the manufacturing sector new hope that their jobs that might be on the line will be saved?  Or will this stifle automation and efficiency that is necessary to keep an industry competitive?   And do we really want our governments “suggesting” to private industry that if they do something the government doesn’t approve “life might get difficult for them”.

There are a lot of questions surrounding the Carrier agreement.  And not only are they complicated, but we may not know the answers for quite a while.