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Region's industrial workers getting raises in 'shot in the arm' for local economy

United Steelworkers union members rally for a fair contract outside Gary Works in August. Many of the Region's industrial workers will be getting raises for the first time in years, and they have raises locked in for years to come. An Indiana University Northwest economist said it will be a "shot in the arm" for the local economy.

The Region's industrial workers are getting raises for the first time in years.

Steelworkers, oil refinery workers and auto workers will see boosts in pay for years to come, and it's expected to benefit the overall economy in Northwest Indiana.

"While the steel industry employs only 6 percent of all workers in Northwest Indiana, it generates 12 percent of all earnings for all workers," Indiana University Northwest assistant professor of economics Micah Pollak said. "Steel, and other goods-producing industries like those at BP, Lear and Ford, are very much the backbone of jobs in the Region. These raises, and the new hiring, will certainly provide a shot in the arm for the local economy."

The United Steelworkers union secured 14 percent raises over the next four years for steelworkers at ArcelorMittal and U.S. Steel at a time when Northwest Indiana's two larger steelmakers collectively pulled in more than $6 billion in profit last year.

"With our major companies, we did pretty good this time," USW District 7 Director Mike Millsap said. "The workers always expect more and want more, but given the last couple of contracts and the difficult overall environment we just came out of, we did pretty good. Workers made sacrifices to get the companies to the point where they're at today. Many are happy to get decent wage increases."

Workers will have more money in their pockets to spend at local businesses, Millsap said.

"Workers spend money right here in the community," he said. "They're going to go to businesses here, and it's good for everyone."

The USW also negotiated 11 percent raises over the next three years for workers at BP Whiting Refinery, and the United Auto Workers union got unspecified wage increases for workers at Lear's seat-making factories in Hammond and Portage.

"They bring more disposable income into the hands of its residents, which, in turn, is multiplied into greater spending in our local economy, which will spill over into other sectors like retail, food service, entertainment, etc.," Pollak said.

Just across the state line, Ford is paying workers at the Chicago Assembly Plant in Hegewisch and the Chicago Stamping Plant in Chicago Heights an average of $7,600 in bonuses this year. The automaker also recently announced plans to invest $1 billion and hire 500 more workers at the Chicago Assembly Plant, which is being modernized for the new Explorer model.

"This does reflect the industrial sector bouncing back, at least in the short term," Pollak said. For the steel industry, it is being driven in a large part by the steel tariffs put in place last year. These tariffs were largely responsible for increasing Indiana steel output by 14 percent and raising the price of steel by as much as 11 percent.

In turn, some of the resulting increase in profits is being reinvested in Northwest Indiana, both through capital investment, such as the $750 million investment in the Gary Works by U.S. Steel, and through gains in wages and benefits in the new union contracts."

Northwest Indiana saw strong overall economic growth last year, Pollak said. The 2.3 percent growth rate in 2018 was more than double that of the previous two years.

"There is certainly plenty of evidence of the industrial sector bouncing back in Northwest Indiana," Pollak said. "Whether this continues in the long term, or if it is merely a short-term cyclical high point, will depend very much on both how long the current trade-war and anti-globalization sentiment continues and how the extensive political and financial uncertainty that is forecasted for 2019 plays out."

But tariffs alone can't prop up heavy industry in Northwest Indiana forever. 

"While the tariffs have been effective so far at import substitution, there are several long-term concerns we need to be aware of," Pollak said. "First, many manufactured goods have long supply chains, many stages of which may be international. Rebuilding these supply chains in the U.S. will take some time. For example, BP recently announced they are seeking some exceptions from the tariffs on steel because they require a steel product that is not currently produced in the U.S."

The tariffs also could end up hurting other sectors, slowing overall economic growth.

"While high prices for steel and other semi-manufactured goods are a boon for manufacturers of these goods, ultimately these higher prices will be passed up the supply chain and appear in other products," Pollak said. "As the cost of producing many goods rises due to higher input costs, the resulting decrease in supply will mean higher prices for many goods and may slow or completely offset any economic growth from these policies."

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Business Reporter

Joseph S. Pete is a Lisagor Award-winning business reporter who covers steel, industry, unions, the ports, retail, banking and more. The Indiana University grad has been with The Times since 2013 and blogs about craft beer, culture and the military.