Hundreds of millions of dollars in labor income leaving valley with GM
WARREN — With the idling of the General Motors plant in Lordstown, $725.3 million in labor income is going to be sucked out of the Mahoning Valley, according to an economic impact study on the effects of the closure released Wednesday.
The total estimated job losses represent 4.4 percent of employment in the Youngstown-Warren-Boardman metropolitan statistical area and the loss of the three shifts and other indirect losses are expected to hit the area’s gross regional product by $1.6 billion — a 9.43 percent jolt to the area’s $16.363 billion GRP, according to the study.
“This is a significant blow to the regional economy,” said Genna Petrolla, economic development program manager for the Eastgate Regional Council of Governments.
The elimination of the shifts won’t just end the 4,352 jobs held by people working in the GM plant, but 2,300 other jobs related to the automaker — like seat suppliers — and 1,050 jobs held by people in other sectors expected to be hit with a need for fewer employees because of the cut, according to the Lordstown GM Plant Closure Economic Impact Study composed by economic experts at Cleveland State University.
The estimates lean “conservative,” Petrolla said.
That means the 7,700 jobs leaving the area are going to take $725.3 million in labor income and $34.5 million in state and local taxes, according to the report.
The indirect job losses will affect auto-part manufacturer employees hardest, but wholesale trade companies, truck transportation, administrative support services and warehousing support industries are also likely to take hits, according to the report.
The “induced” job losses come from the consumer service industries and are caused by the reduction in the community of disposable income because of the direct and indirect job losses, according to the report. Induced losses are expected in the food service industry and in health care-related jobs.
The report estimates 654 indirect and 300 induced jobs were lost after the cut of the third GM shift in 2017, affecting a $206.6 million reduction in labor income and $9.8 million in lost state and local taxes. The figures are included in the numbers framing the loss of all three shifts.
The report was released in conjunction with a report about growing regional industry drivers in the area in order to show what industries are doing well in the region, even in the face of the bad news from the idling GM plant, Petrolla said.
“It shows us what to capitalize on,” she said.
The report finds the area is less dependent on manufacturing than it was in 1970, when 33 percent of jobs depended on the industry. Now, 13 percent of jobs depend on it, which is still higher than the national average of 9 percent, according to the report.
“(Northeast Ohio) is rebalancing its economic structure to be less concentrated in manufacturing, which can better protect it from recessionary pressures in the manufacturing sector,” the report states.
The report shows the oil and gas industry is doing well, but Petrolla warns that doesn’t mean other industries should be ignored because diversification leads to a healthier economy.
The information is valuable for figuring out future strategies, but doesn’t help the people who are losing their jobs today, Petrolla said.
But, the GM impact report serves another function other than crunching the numbers to frame the impact.
The report is necessary in order to get application approval from the U.S. Economic Development Agency to bring an economic coordinator to the area to help recover from the losses, Petrolla said.
It appears the federal agency will approve the application and pay most of the costs to embed someone selected by the agency who specializes in economic recovery, Petrolla said.
“This person will be from out of the area, and he or she will specialize in recovery planning, who will examine the immediate needs in the community’s workforce and who is able to bring on other consultants,” Petrolla said.
The person would be in the area for three years, developing programs in conjunction with local efforts to ensure a more robust economy.