How the Big Three American Automakers Effect the Labor Markets in Detroit
Labor Economics 315
Detroit was built on the automotive industry, which caused an exponential rise and fall of this city’s economy. Detroit, Michigan was considered a prime location for the automotive industry, spurred by the use of the Bessemer converter located on the Detroit River. The manufacturing industry was a low-skilled employer causing a large influx of low skilled workers. As the city grew so did the growth of the “Big Three,” which over time began to stagnate and even decline. The reasons for this included; outsourcing the cost of materials and foreign competition. Which I will attempt to further explain later in this paper. The effects of this stagnation caused massive job loss, structural unemployment, and an exodus from Detroit. The problems that Detroit was facing after the economic downturn of the big three was further complicated by the housing bubble of 2007/2008. This collapse in property value hurt Detroit far more than most cities, because of its already depressed population. In the following paper I will explain the reasons and effects of the Big Three’s rise and fall and how they affected Detroit’s population and workforce. I will also touch on the role of the housing market and the meaning of this for Detroit.
Detroit’s leading dilemma is the domination of one main industry relative of the entire economy. There are not many other industries in this city that contributed as much to the economy as the auto industry. This caused a very steep rise and fall of the city’s economy. Detroit is the perfect example of a company run town. This rise of this town began with the invention of the automobile and more specifically the location Detroit provided. Detroit also delivered the mass production of steel, which was allocated to the use of the Bessemer converter, this invention allowed for iron to be transformed to steel giving the auto industry access to cheap materials. The following paragraph will express in more detail the reasons for Detroit’s boom. Even more prominent to this industry was the development of the inexpensive Ford Model-T, invented by Henry Ford in 1908. Ford was one of the three big car producers, which also included Chrysler and General Motors. In 1909 the Ford Model-T cost $1,200 and dropped to just $295 by 1928. By this time, approximately 20% of all Americans had cars (America's Economy in the 1920's). In addition, there were 6.7 million cars on American roads in 1919 and more than 27 million in 1929 or nearly a car for every household in the United States (Mintz). Henry Ford also introduced a minimum wage of five dollars in 1914 and shortened the workday from nine hours to eight hours (Mintz). Ford Motor Company employed one out of every twelve workers in 1919, and automotive titan Alfred Sloan set up the nation's first national consumer credit agency. Combined, all of these economical effects of the automobile industry promoted the growth of several other industries, such as rubber, petroleum, and steel, which helped fuel the creation of a national system of highways, and created new service facilities, such as restaurants and motels (Schultz). Twenty percent of all American steel, 80% of all American rubber, 75% of all American plate glass, and 65% of all American leather went to the car industry (America's Economy in the 1920's). The industries of the 1920's proved vital to the growth of America and provided an enormous stimulus for the national economy. Detroit became an automotive power house when Henry Ford invented the assembly line in 1913. Causing the production of cars to go from 1 car every 12.5 hours to 1 car every 1.5 hours. This invention streamlined the production of cars, making them more affordable to the public and increasing the auto industries labor force. Which in turn increased the demand for the automobile and several workers...
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