Michigan, as we all know, needs to regain not only prosperity, but also an informed belief in, and hope for, a better future.

Right now we are home to a domestic auto industry struggling through the greatest and more difficult transformation of modern times. We’re facing a 7.7 percent unemployment rate, highest in the nation. We have thousands of homes under repossession, with more to come, all the consequence of the sub-prime mortgage crisis.

For the first time since the Great Depression, we are seeing reductions in the absolute value of real property, even in wealthy Oakland County. And at bottom, lies a political and policy system that is – putting it charitably – broken, as the spectacle of how our lawmakers behaved during the budget crisis has made all too clear.

Yet there are other less obvious, but perhaps even more important factors: Long-standing, deeply-embedded cultural attitudes that hinder progress. We have a baffling and unjustified scorn for education; according to a Detroit News poll, only 27 percent of Michigan families consider post high-school education critical to their kids’ success.

Too many of us are reluctant to accept risk and are too willing to tolerate failure. All this has worked to stall the development of a take-charge, creative entrepreneurial economy that our state desperately needs if we are again to be competitive.

The problem with cultural issues, of course, is that they are intangible, hard to get at and even harder to change.

But now for the very good news: The recently concluded labor agreements between the domestic automobile manufacturers and the United Auto Workers represent the single most important cultural change in Michigan in more than half a century.

Since the 1930’s, confrontation between labor and management has been the hallmark of the auto industry, our most important. Its history has been one of shop-floor anger, out-of-touch management, repeated strikes and restrictive and complex contracts.

Now we have a series of labor contracts that reduce the labor costs to the car companies by something like $30 an hour, putting them nearly on a par with the foreign transplant plants. They also offer a two-tier wage structure that significantly reduces the wages paid to non-core job classifications. In return, the companies are committed to make investments in existing and new plants and to manufacture new product in UAW-represented facilities.

David Cole, president of the Center for Automotive Research, told me this is an historic shift in the culture, from confrontation to collaboration. Cole thinks this change has been developing for around a decade, but the threat of disaster facing the domestic manufacturers and their union partners has been so terrifying as to speed this up, inspiring new contracts that call for a completely different way of working together.

“Instead of framing the choice as between gold and silver,” Cole told me, “both the union and the companies realize the real choice is between silver and lead.”

After all, the word “collaboration” comes from “co” (“together”) and the Latin verb, “laborare” (“to work”). A collaborative relationship, like a marriage, doesn’t mean the partners never argue or disagree. But it does mean they recognize that it is in each party’s basic interest to work together.

Many people have remarked about southeast Michigan’s preference for conflict, argument, confrontation. And many have suggested that this long-standing cultural attitude stems from the labor relations pattern in the automobile industry.

Perhaps the new auto contracts represent a change that will spread much farther. Imagine what a culture of collaboration might do to relationships between Detroit and the suburbs! 

Another deeply ingrained cultural attitude hindering Michigan has been “entitlement thinking,” the attitude that gold-plated health care coverage or generous pensions are to be expected from any job. Plus the attitude that workers are entitled to such benefits regardless of what they do or how successful their employer is.

Consider, now, the VEBAs (Voluntary Employers’ Benefit Associations) in the new contracts. Setting up these trusts inside the UAW to pay for retirees’ health care takes that liability off the balance sheets of the auto companies – and doesn‘t stop there. 

The trusts are funded by complex financial instruments called “convertible debentures” which can be converted into company stock. That means UAW members have become major equity owners of the auto companies. Preliminary calculations suggest the UAW’s stake in General Motors is now around 16 percent, nearly 15 percent at Ford.

What the VEBAs have done is, in effect, converted a defined benefit health care plan (i.e. one in which the benefits are set regardless of the contribution of the employee) into a defined contribution program (in which the contributions of the employees are fixed and, therefore, can only buy as much health care as they can pay for). This conversation hits at the core of entitlement attitudes that are so damagingly pervasive in Southeastern Michigan.

Both sets of cultural changes – moving from confrontation to collaboration and from entitlement to shared responsibility – are enormous in their implications for the future health of our state.
 
And both are driven by the most powerful objective facts in Michigan – the workings of the auto industry.

Yes, the new contracts will be important – maybe revolutionary – in their long-term economic impact. But what they might do to overcome and reverse long-held cultural patterns in our state may in the long run be far more important for our futures.

Former newspaper publisher and University of Michigan Regent Phil Power is a longtime observer of Michigan politics and economics. He is also the founder and president of The Center for Michigan, a centrist think-and-do tank. The opinions expressed here are Power’s own and do not represent the official views of The Center. Power welcomes your comments at ppower@thecenterformichigan.net.