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IU professor: Donald Trump's Carrier deal a 'spot solution'

Posted at 7:04 PM, Dec 01, 2016
and last updated 2016-12-01 19:04:05-05

INDIANAPOLIS -- A $7 million deal to keep approximately 1,100 manufacturing jobs in Indianapolis is just a one-time, spot solution, says Indiana University professor specializing in international trade and manufacturing competitiveness.

Professor Mohan Tatikonda teaches operations management at the IU Kelley School of Business. He says Indiana is in a much better place economically than many other manufacturing-heavy states, but that increases in productivity from automation – and therefore decreases in manufacturing jobs – aren't likely to go away.

"We're really actually very fortunate in Indiana," Tatikonda said. "This is a top state for manufacturing, but a lot of people forget that because every day we need fewer people to get the same amount of work done. And that frees up folks. We need to have a sustainable policy around that."

What isn't a sustainable policy, Tatikonda said, is offering millions of dollars in tax breaks to companies looking to outsource jobs out of the country.

President-elect Donald Trump and Vice President-elect Mike Pence announced the details of a deal Thursday to keep approximately 1,100 jobs at the Carrier manufacturing plant in Indianapolis. As part of that deal, the state of Indiana will provide a reported $7 million in tax breaks over the next 10 years. That's on top of $4.3 million in tax breaks Carrier's parent company, United Technologies, has already received since 2007.

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"Mr. Trump said today that this isn't just about Carrier, and that suggests that there is a framework or a philosophy or a policy that might be announced later, but we don't have any details on that," Tatikonda said. "What we heard today made it a beautiful day for a good number of Carrier workers, but it was a spot solution. It's something for this facility, at this time, for a certain number of workers, for a certain period of time. It does not address the underlying pressures that lead to reduction of manufacturing and other high-wage jobs."

While he doesn't think the approach is sustainable for other businesses, Tatikonda said the Carrier deal could be a good launching point for a national discussion about the future of the national manufacturing economy.

"Do the workers matter? Are our corporations supposed to maximize returns to shareholders, and is that at odds with worker welfare and employment? That needs to be figured out," he said. "The other thing is, why do companies – not all, some – choose to compete on minimizing costs and squishing every penny out of their products? It's very difficult to do that, and those are the kinds of activities that logically move to lower-cost labor locations. Instead, there are companies – and we have many of them throughout Indiana – that compete on providing special products with high levels of innovation and features that competitors don't provide. And products like those garner higher margins which allow for hiring higher-wage workers, and you need those to make those kinds of products."

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