Auto Industry Effect on Households

Auto Industry’s Impact on Households

The automotive industry is an essential piece to the economy of the United States. Currently, there are about 850,000 manufacturing workers and 1.8 million auto dealership workers that are employed in the automotive industry today (Amadeo). This industry was and continues to be negatively impacted by the recession that has plagued our nation’s economy since 2008. Unemployment has been one of the biggest issues in the auto industry, along with the negative impact on the government and firms in the United States. Therefore, I will focus on how households have been impacted by the auto industry recession. This will include how unemployment affects households, why the auto industry needed to be bailed out and what areas of households have been hurt the most by the unemployment.

A massive amount of job cuts in the American automotive industry was the result of a devastating recession that the United States began to face in 2008. Job loss results in immediate problems for workers and in turn, the household that worker lives in. When a worker loses their job, the entire family of that worker is affected because now that family cannot live the way it is used to living with steady income. This was a problem that 174,192 workers had to come up with a solution to, because that is how many jobs were cut in the 2009 automotive industry (Challenger, Gray and Christmas 2). The unemployment rate has risen from 7% in 2007 to over 25% in the automotive sector of the economy. Many workers that were laid off could not afford to live without a job, so the demand for jobs began to increase. However, the problem was that companies had to continue to lay off workers and shut down factories because the economy was not recovering. This led to a decrease in the supply for jobs in the United States. Graph 1-1 shows this relationship with supply and demand curves. The area in between the two dots and the equilibrium represents the job shortage that was being faced in the United States automotive industry. The ratio of unemployed workers to job openings in the auto industry was close to 6:1 at some points in 2009. That goes to show how difficult it was to find a job after being laid off from a job in the auto industry and how large the gap was between unemployed workers and job openings.

Although there were hundreds of thousands of households who were impacted by the automotive industry recession, it could have been millions if the United States didn’t loan money to the American auto industry to bail them out of financial troubles. According to a poll administered by CNN’s Peter Hart, “18 million households or 15% of American households would be directly impacted by the auto industry going out of business.” Hart says that this has an equivalent impact on households as having a dozen Hurricane