The Auto Bailout Saved Michigan–If You Don’t Count Black Workers

Mitt Romney and President Obama have slugged it out over the Detroit bailout. It's clear at this point that the bailout revived the auto industry. But thus far, it's not been enough to heal the most ailing part of Michigan's economy: black employment.

By Shani O. Hilton Feb 29, 2012

Michigan’s Republican primary once again revealed the uncertainty of Mitt Romney’s presidential campaign, which squeaked out a win over Rick Santorum in his home state. Perhaps that’s not a huge surprise, considering Romney’s best efforts to appeal to Michigan voters included auto union bashing in a state that builds cars.

President Obama and the GOP presidential candidate have been trading barbs over the effectiveness of the auto company bailout–a stimulus initiated by President George W. Bush and extended by Obama. Most observers have scored the president as winning that fight politically.

But beyond politics, the debate also begs the question of what’s happened since the bailout in Michigan’s crucial Midwestern economy. The answer is that state appears to be another data point in a troubling pattern of inequitable, and thus unsustainable, recovery. The bailout may eventually spur a full rebound in Michigan, but thus far it does not appear to be helping the most devastated parts of the state–black communities.

A couple of weeks ago, Romney argued in an op-ed for the Detroit News that the bailout was an example of caving to unions and just another sign of the "defects" of Obama’s management:

My view at the time–and I set it out plainly in an op-ed in the New York Times–was that "the American auto industry is vital to our national interest as an employer and as a hub for manufacturing." Instead of a bailout, I favored "managed bankruptcy" as the way forward.

Managed bankruptcy may sound like a death knell. But in fact, it is a way for a troubled company to restructure itself rapidly, entering and leaving the courtroom sometimes in weeks or months instead of years, and then returning to profitable operation.

Obama’s response has been that the auto bailout worked. And by one measurement, it has: Both Chrysler and GM have paid back most of the money they were loaned, are selling cars, and creating jobs. Yesterday, Obama took to the United Auto Workers union to give a speech reminding members of that and clapping back at Romney:

"THE PRESIDENT: Some even said we should "let Detroit go bankrupt."


THE PRESIDENT: You remember that? (Applause.) You know. (Laughter.) Think about what that choice would have meant for this country, if we had turned our backs on you, if America had thrown in the towel, if GM and Chrysler had gone under. The suppliers, the distributors that get their business from these companies, they would have died off. Then even Ford could have gone down as well. Production shut down. Factories shuttered. Once-proud companies chopped up and sold off for scraps. And all of you, the men and women who built these companies with your own hands, would have been hung out to dry.

And even Michigan’s unemployment numbers are looking relatively good: In November, the state’s unemployment rate–which had a high of more than 14 percent in 2009–dropped below 10 percent for the first time in since 2008. And it dropped more sharply than unemployment in any other state.

Obama boldly proclaimed that "the American auto industry is back."

But, Clint Eastwood Super Bowl ads aside, as we’ve found, there’s more to the unemployment picture than top line numbers.

The black unemployment rate is almost always double the average. In 2009, at the height of Michigan’s unemployment problems, 26 percent of black people in the state were jobless. That was only more concentrated in cities like Detroit and Flint, where large numbers of black Americans live. In 2010, the Bureau of Labor Statistics counted Michigan among states with the highest rates of black unemployment.

We know that black workers shed jobs fast–but there’s plenty of evidence that they haven’t regained them at the same rate, even though joblessness has dropped in the state. In the Detroit metropolitan area, the jobless rate is around 11 percent; in Flint, it’s around 10 percent. But black unemployment hit a high of nearly 25 percent–Depression-era levels of unemployment–within Detroit’s city limits in 2010, and it’s been slow to come down.

Most notable, though, is how quickly black middle-class workers–who relied on the higher wages paid by the auto industry–lost their jobs when the recession hit.

A 2008 report by the Economic Policy Institute found that black auto workers were laid off far more quickly than other workers: At the end of 2008, black workers saw a 13.9 percent decline in employment. For all manufacturing workers, there was only a 4.4 percent decline in employment.

Black workers were first to feel the effects of the recession, and despite Obama’s proclamations that all is well, it looks like they’ll be some of the last to see the effects of the recovery.