Manufacturing has again become part of the conversation on the presidential campaign trail, though not for the best of reasons.
On Feb. 10, Carrier Corp. announced that it will relocate its furnace assembly plant from Indianapolis to Monterrey, Mexico, eliminating some 1,400 jobs over the next three years. That same day, United Technologies Electronic Controls (UTEC) said it would also be moving its assembly plant in Huntington, IN, to Monterrey, eliminating 700 jobs by 2018. That facility makes controls for HVAC and refrigeration equipment. Carrier and UTEC are units of United Technologies Corp.
It’s not hard to see why, says Chuck Jones, president of the United Steelworkers, which represents workers at Carrier. The Carrier plant has a two-tier wage system. A quarter of the workers make about $14 an hour, or $30,000 a year. The rest make about $26 an hour, or $55,000 annually. Workers in Mexico make $3 to $6 per hour, says Jones.
Reaction from local, state and federal politicians was swift.
Republican presidential front-runner Donald Trump vowed to tax Carrier furnaces and air conditioners. (Ironically, Trump has also famously called for a wall to be built along the U.S.-Mexico border, to keep out those would like to earn more than $3 per hour.) Democratic candidate Sen. Bernie Sanders called Carrier an “example of how NAFTA and other trade policies have been a disaster for American workers.”
Indiana Gov. Mike Pence said he was “profoundly disappointed” by the move and demanded that the companies repay the state for tax incentives they received. To their credit, Carrier and UTEC have agreed to reimburse nearly $1.6 million in incentives to local and state government. The incentives included $1.2 million in tax abatements, which will be returned to the Metropolitan Development Commission in Indianapolis, and $382,000 in training grants that will be reimbursed to the state.
Just weeks after news of the layoffs broke, the Indiana House approved an amendment to an otherwise routine tax bill by a 60-34 margin. The amendment empowers local units of government to claw back property tax incentives granted to Indiana companies that move jobs to foreign countries. It further prevents those companies from accessing additional advantages or tax breaks enacted by state government.
“Today’s vote represents a chance for the members of the Indiana General Assembly to tell companies that they do not have the right to take full advantage of taxpayer-funded assistance to locate in our state, only to abandon us to move out of the country when they get a better deal for their shareholders,” says Rep. Karlee Macer, D-Indianapolis, who sponsored the amendment.
What a shame. It’s a global economy, of course, but executives at Carrier and UTEC should remember that when workers make a decent wage, they can, in turn, buy “luxuries” like air conditioners. They may regret their decision.