Trump Vs. Rexnord, Who Will Win?

This is how American companies move jobs out of the country.

Back in October the Milwaukee-based industrial supplier Rexnord Corp. called its 295 Indianapolis employees into meetings.

“They put cameras up last weekend, and they told us it was just for security reasons,” Don Zering, a 43-year Rexnord employee and union president told the Indianapolis Star. “We think they lied to us. It was because they knew they were going to close the plant” and wanted surveillance in place, he contended.

At the meetings, union officials were told about the plan to close the plant first, then workers, then Rexnord officials sent the employees home, clearing the plant.

“He would not take any questions from anybody,” Zering said of Tom Kress, the plant’s vice president of operations.

Employees at Rexnord’s Indianapolis plant earned about $25 an hour, and the workers in Mexico, where the factory will move by June, are expected to earn $5 or less. The new operation will save the company more than $15 million in the first year and $350,000 annually after that. That will likely help increase earnings for Rexnord stockholders and for company CEO Todd A. Adams, who’s earned $15.6 million in compensation from 2012 to 2016. The displaced employees, meanwhile, will be asked to train their successors in order to receive a severance package, a Rexnord employee told The Guardian.

All of which is just one small example of how the wealth gap in America has mushroomed into the largest deficit in a century, with CEOs of companies making 331 times more than average workers.

But there’s a new sheriff in America, and President-elect Donald Trump reacted to Rexnord plans last week by tweeting this: “Rexnord of Indiana is moving to Mexico and rather viciously firing all of its 300 workers. This is happening all over our country. No more!”

That’s generated lots of media coverage, with Rexnord officials declining to respond to the media (including Urban Milwaukee) and probably hoping to quietly weather the storm. Trump’s recently-announced deal with the Carrier company, which resulted in the Indiana company reducing the number of jobs it would ship overseas by 850 in return for $7 million in tax breaks, has been criticized both by conservative Republicans like William Kristol and liberal Democrats like Bernie Sanders. So perhaps Trump will back off on Rexnord.

But probably no campaign promise was more critical to Trump’s electoral victory than his pledge to stop manufacturers from outsourcing jobs. A study ranking states by manufacturing’s share of total employment found Indiana was first with 16.8 percent of all jobs, Wisconsin second (16.3 percent), Iowa third (14 percent) and Michigan fourth (13.5 percent). Trump won all four states, which put him over the top in an election where he lost the popular vote by nearly three million.

In short, it’s no coincidence that the first test of Trump’s promise to stop manufacturers from outsourcing jobs was in Indiana and the second involved a Wisconsin company. These two states have long been the leaders in manufacturing employment, and have been hit hard. Since 2000, Indiana has lost 150,000 manufacturing jobs, while Wisconsin has bled an estimated 90,000 factory jobs.

Three of the nations’ top 10 congressional districts in the percent of manufacturing employees are in Wisconsin, the 6th, 8th and 5th districts. Trump won all three.

Candidate Trump promised his administration would slap a 35 percent import tariff on goods made by American manufacturers that moved jobs offshore. But House Republican leaders have already indicated they are unlikely to support such a proposal. And as economists have noted, a tariff hike aimed only at imports from an American-held company would leave a foreign-held company making similar products with a big competitive advantage. America’s economy would be punished.

But with Trump, you never know how serious he is about that (or any) proposal. Maybe the approach he used with Carrier is what he’ll move toward. That could get pretty pricey. One study found the total of jobs outsourced just to China from 2001-2013 was 3.2 million. At the rate of $7 million in tax breaks to save 850 jobs, it would have cost more than $26 billion to save those 3.2 million jobs.

And if you were to spend $26 billion to boost the American economy, would you really want to invest it in manufacturing jobs that have been declining in most developed countries since the early 1990s? Imagine spending that instead to make America the leader in all kinds of cutting edge industries, including alternative energy.

Has Trump called Rexnord’s leaders? If so, neither Trump nor the company is saying. Given that Trump’s company routinely profited from foreign labor, buying products made in Bangladesh, China, Honduras and other low-wage countries, he is not the most persuasive messenger for an America-first gospel. In the case of Carrier, its parent company United Technologies is a Pentagon contractor and had reason to make peace with Trump. (Indeed, critics suggest the company will expect a better deal when it bids for its next contract, which could add to the true price tag for saving those 850 jobs). But why would Rexnord change its plans to please Trump? Better to hold your fire and wait for the smoke to clear.

Democrats, meanwhile, have proposed different ideas to try to help American workers and reduce the wealth gap: Hike the minimum wage (Trump opposes), increase the income tax on the richest Americans (Trump intends to slash it) and increase the earned income tax and child care deductions (Trump appears to favor this but it’s unlikely the Republican Congress would) and retraining of American workers (Trump has said little).

Democrats also favor significant federal spending to fix bridges, highways and other crumbling infrastructure and thereby create jobs. Trump supports an infrastructure program, but is considering an approach where federal tax credits could be used to create a windfall for private investors. Meanwhile, Democratic senators like Tammy Baldwin have called on Trump and Republicans to support a “Buy America” provision in any infrastructure bills, rather than using foreign suppliers for steel and other products, and that has fallen on deaf ears.

The best guess is that Trump will score some occasional victories with Carrier-like deals that he will publicize as big victories, even as the wealth gap in America increases. But whatever the policies he ultimately pursues, we are likely to see the greatest impact — or lack of it — in heavy manufacturing states like Wisconsin. If he can’t reverse the decline of factory jobs in Wisconsin, Trump probably won’t succeed nationally.