Honda’s new Indiana plant nets the company $141 million in subsidies—and a segregated workforce.
By Roger Bybee
“Honda gearing up for diversity.”
That was how Bloomsberg News headlined its story last March on the opening of a new 2,000-worker Honda plant in the town of Greensburg, Ind., 50 miles southeast of Indianapolis.
The new plant comes with a hefty price tag of $141.5 million in taxpayer subsidies. Still, it will surely provide an economic boost for an idyllic place that National Public Radio noted “could be a movie set for an ideal American small town.”
But a boost for workforce diversity? Hardly. Beneath the veneer of corporate doublespeak, Honda’s entry into this corner of Indiana raises little-discussed issues of corporate location strategies and race, the role of government policy in reinforcing the exclusion of African-Americans from job opportunities, and the value of subsidizing corporations whose coffers are already overflowing.
Hiring Inside the Circle
Despite the prize the new plant represents for Indiana, some state leaders have blasted Honda’s hiring policy there as “discriminatory” against African-Americans and laid-off union members. Why? Hiring at the new plant is limited to MarionCounty, which includes Indianapolis along with 19 rural counties whose cumulative population is 96% white.
“This hiring radius is the worst form of discrimination,” fumes state Rep. Dennis Tyler. Tyler represents the city of Muncie, which in recent years has hemorrhaged high-paying factory jobs, many held by black residents. “Our constituents pay state income and sales taxes, and therefore they directly helped bring Honda to Indiana through the targeted use of their tax dollars,” Tyler and four other legislators wrote to the Indiana Economic Development Corporation, the state agency that pulled together the subsidy package for Honda.
Noting the large number of skilled and experienced autoworkers who are now jobless in central Indiana, the legislators declared, “For any Hoosier to be denied even the opportunity to apply for a position seems grossly unfair.”
Honda contends that its hiring radius was established to insure that workers were not commuting more than an hour, so bad weather would not mean absent workers and production tie-ups. Elected officials and union and civil rights leaders lashed out at the plan, saying it would effectively exclude many African-Americans and laid-off members of the United Auto Workers. They further argued that newly hired workers living far from the plant would likely move closer to Greensburg to avoid long commutes, especially in an era of $4-a-gallon gas.
But Gov. Mitch Daniels—a former Eli Lilly executive who later served as George W. Bush’s budget director—and state Commerce Secretary Nathan Feltman were unwilling to challenge the hiring policy. Feltman, who heads up the economic development agency, told the Indianapolis Star that “the quasi-governmental agency isn’t about to start dictating hiring policy in exchange for incentives.”
However, as the Wall Street Journal noted, Honda and other carmakers have in fact become accustomed to accepting conditions on hiring and other matters in order to receive substantial incentive packages: “Honda’s policy in Greensburg is a departure from the way it and other foreign auto makers have previously staffed plants in the U.S.”
For instance, Alabama—long known for its reluctance to regulate corporate conduct—“required the company to consider workers from across the state,” the Journal reported in October, 2007. “We wanted to spread opportunity across our state and wanted plants to be able to hire the best people in the state,” explained the director of TalladegaCounty’s economic development authority. Hyundai Motor Co. also opened a plant in Alabama, in 2005, and agreed to take applications from anywhere in the state as a condition of the tax subsidy package it received.
GeorgeWashingtonUniversity sociologist Gregory Squires argues that top Indiana officials failed to negotiate hiring terms that would have benefited all residents of the state. “They (Daniels and Feltman) are in a position in a dictate over the use of public money,” Squires said. “They at least ought to be negotiating the terms and conditions. When you’re giving those kinds of subsidies, it’s gross irresponsibility not to see that the public’s needs are being met. And there ought to be clawback provisions” allowing the state to recover funds from the corporation if it moves the operation or fails to meet job-creation goals.
Geography and Exclusion
The fight over Honda’s hiring policy throws a spotlight on a quietly growing trend: large corporations siting new facilities in rural areas where they can select a workforce that is largely white, conservative, geographically dispersed and thus lacking social cohesion—and, for all those reasons, unlikely to unionize. “When corporations seek out greener pastures, they tend to seek out whiter ones as well, in part because of the presumption of a relatively greater attraction to unions on the part of blacks, in part to avoid equal opportunity requirements … and in part due to the perpetuation of traditional stereotypes and old-fashioned prejudice,” Squires noted in his book Capital and Communities in Black and White.
This pattern is pervasive, and is particularly evident in Indiana, says University of Indiana Labor Studies professor Ruth Needleman. “The fact is that African Americans do not live in rural Indiana, but the Klan does. So in general when they go to such locations to avoid people with union experience, they are avoiding blacks.”
“The data on unions is generally that blacks are more likely to join a union if they are able, and so blacks, Latinos, and women are less anti-union that rural white workers,” Needleman said in summarizing studies of worker attitudes. Ultra-conservative attitudes remain entrenched in much of rural Indiana. In the period around 1920, the Klan had a massive following in the state, holding events with 100,000 people or more and claiming the governor and other top state elected officials as members. At that point, anti-Catholicism was the central appeal of the Klan, but fierce hatred of blacks, Jews, and unionism were also spread by the Klan. “In general, when companies go to such rural locations, they do so to avoid people with union experience. At the same time, it is a way to avoid hiring blacks,” said Needleman.
A remarkable 18 of the 20 counties within Honda’s hiring radius have African-American populations of 2% or less. Postcard-perfect Greensburg has a particularly sordid history of racial exclusion. “In 1906, Greensburg’s white residents [missing word?] out most of its black population,” according to sociologist James Loewen, author of Sundown Towns: A Hidden Dimension of American Racism. “By 1960, the entire county, which boasted 164 African American residents in 1890, was down to just three, all female. In the 2000 census, Greensburg still had only two black or interracial households among 10,260 residents.” (In 2007, after Loewen wrote a newspaper column exposing Greensburg’s past, a reception sponsored by the Indiana State Civil Rights Commission at which Loewen was to speak was cancelled, apparently at the behest of Gov. Daniels’ office.)
Despite this history, last year former Mayor Frank Manus defended the town’s reputation to the Bloomington Times-Herald in terms that reflected the local mindset: “I think there might have been something way back when, but, hell, we don’t have anything like that now. We have several colored people who live in the city.”
For its part, Honda has a record of siting plants in areas of low black population and imposing hiring requirements that effectively exclude large numbers of African-American job applicants. The Equal Employment Opportunity Commission under the Reagan administration, not regarded as an aggressive champion of civil rights, imposed a settlement in 1988 under which Honda had to pay $6 million in back wages to 370 African-American and female job applicants in Ohio.
As in present-day Indiana, the core issue was a hiring radius that included rural, nearly all-white areas but excluded the city of Columbus with its significant African-American population. A 1988 study by professors Robert Cole and Donald Deskins found that “based on the population employment potential, one would expect 10.5% of Honda employees at Marysville [Ohio] to be black; in fact only 2.8% are.” But in spite of this alarming precedent, Commerce Secretary Feltman said that the hiring radius issue came up only late in talks with Honda over the Greensburg plant.
Honda may have improved its minority hiring numbers following the Ohio case, but the company has made it hard to tell. In 2006, Honda was the target of an EEOC lawsuit initiated by a former diversity manager who claimed the company refused to provide her with data on the racial composition of its workforce. And today, despite Honda’s claims to be seeking a diverse workforce for Greensburg, the actual figures on the percentage of African-American hires remain more closely guarded than FortKnox. By now the first shift has been hired and trained and is almost ready to begin producing Honda Civics.
But Honda declined to give any statistics on minority hiring, claiming only that “HMIIN [Honda Motors Indiana] is extremely pleased that its associate population reflects the overall minority population and diversity of Indiana.” Pressed on what this means, company spokesman Andrew Stoner responded, “I will not be able to elaborate further for you.”
Commerce Secretary Feltman told Dollars & Sense, “We do not maintain hiring information for any companies. You will need to obtain this from Honda.” Asked to explain why, given Honda’s record in Ohio, the agency was not tracking minority hiring, Feltman responded, “No, you have this wrong—we do not collect data on information on minority hiring at the IEDC. We do have information on hiring as it relates to the job creation promises made to the state of Indiana, of course.”
Efforts by state Rep. Tyler to obtain hiring data also proved fruitless, despite the fact that the Honda incentive package includes $50 million coming directly from the state. Tyler has also tried to win passage of a bill to block tax incentives for corporations that would restrict hiring to specific geographic areas. But the bill narrowly lost in the Democrat-controlled General Assembly. “There's a powerful fear factor at work about jobs now,” he sighed.
Roger Bybee is the former editor of the union weekly Racine Labor and now a consultant and freelance writer whose work has appeared in Z magazine, The Progressive, Extra!, The Progressive Populist, In These Times, Common Dreams.org, and other national publications and websites. His website is at http://www.zmag.org/zspace/rogerdbybee.
Sources: Wall Street Journal, 3/24/88, 4/12/88, 10/10/08; Indystar 10/1/07, 10/18/07; Greensburg Daily News, 7/22/06; Indianapolis Star, 10/18/07; Gregory D. Squires, Capital and Communities in Black and White (SUNY Press, 1994); James W. Loewen, Sundown Towns: A Hidden Dimension of American Racism (New Press, 2005); Greg LeRoy, The Great American Jobs Scam (Berrett-Koehler, 2005).
Money for Nothing
The struggle over Honda’s hiring policy at its new Indiana plant underlines how the state-vs.-state competition for new plants and new jobs is being fueled by rising unemployment in manufacturing, without much regard for the quality of the jobs. Indiana, for example, lost 102,000 factory jobs from 2000 to 2007. Under such duress, states readily enter into a race for jobs that allows corporations like Honda—which earned a profit of $5.27 billion in 2007—to push for huge “incentive” packages even when they have plenty of capital to fund new plants, and despite the minor role subsidies play in most corporate location decisions.
Despite the firm’s record profits, Honda’s pay rate of about $31,000 in Greensburg places it far below the local manufacturing average of $54,000, and less than half of the statewide manufacturing average of $69,725, according to state government figures.
“The corporations have shipped out the good-paying jobs to China and Mexico, but we’re giving lower-paying auto companies the moon to locate here,” Rep. Dennis Tyler pointed out. “They know we won’t argue and fight because we’ve got to have the jobs. That’s what’s what wrong with our economy and our taxes. The jobs we’re keeping aren’t allowing us to keep up with our tax base for the public services we need.”
Dozens of academic studies have concluded that state taxes and subsidies play a minimal role in determining where a commercial facility will be sited, but the public’s economic desperation gives corporations enormous clout. “Usually, you know early on where you are going, and you use their leverage,” said a North Carolina executive interviewedby Greg LeRoy, director of the Washington, D.C.-based think tank Good Jobs First.
Indeed, the corporations incessantly use their powerful leverage to win corporate tax cuts and incentives, despite the absence of evidence that such subsidies actually make a difference. Still, the 50 states feel locked into a deadly competition for economic development, so they continue to shell out tax dollars in the name of “job creation.” Even the progressive Indiana legislators who criticized Honda’s discriminatory hiring plan accepted the notion that the state’s incentive package “helped bring Honda to Indiana.” The interstate competition for jobs takes an enormous yet needless financial toll, according to LeRoy. “This system costs taxpayers an estimated $50 billion a year in total spending by states and cities.”