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Unions and Investment Tax Credits

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In an effort to stop the migration of many of the automobile manufacturing facilities from the Detroit area, Detroit's city council is considering passing a statute that would give investment tax credits to auto manufacturing. Effectively, this would reduce auto manufacturing costs of using capital and high tech equipment in their production processes. On the evening of the vote, local union officials voiced serious objections to this statute. Outline the basis of the argument most likely used by union officials. as a representative for one of the automakers, how would you counter the union officials argument?

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When capital becomes less expensive, it can be used in place of workers. Thus, the union officials' objections would be based on the argument that the city council is essentially giving tax credits to support the layoff of ...

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In an effort to stop the migration of many of the automobile manufacturing facilities from the Detroit area, Detroit's city council is considering passing a statute that would give investment tax credits to auto manufacturers. Effectively, this would reduce auto manufacturers' cost of using capital and high-tech equipment in their production processes. On the evening of the vote, local union officials voiced serious objections to this statue. Outline the basis of the argument most likely used by union officials. (Hint: Consider the impact that the statue would have on auto manufacturers' capital-to-labor ration.) As a representative for one of the automakers, how would you counter the union officials' argument?

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