Striker wallets drained
In a good week, several hours of overtime boost that check by a couple hundred dollars.
Add in a strike, and weekly pay drops to a mere $200 -- making it a very bad week for striking workers, the stores they shop in and the Michigan economy that depends on their spending and labor.
"Many of the UAW members are not financially prepared for this," said Beth Allen, a certified financial planner in Utica who counts many autoworkers among her clients.
"I've talked to some union members who already are having trouble in their month-to-month budgets because they haven't been getting overtime. They truly haven't been able to save or catch up."
The strike couldn't come at a worse time for workers, who face gas prices that have climbed to $3 a gallon and real estate prices that keep falling amid a growing wave of increasing mortgage payments and a rash of home foreclosures.
The strike also couldn't come at a worse time for Michigan. The state's unemployment rate -- already among the worst in the nation -- hit a
14-year high last week at 7.4 percent. Meanwhile, the state government faces a shutdown of its own next week as legislators wrangle over a $1.75 billion budget gap. If government grinds to a halt, both furloughed state employees and picketing autoworkers will be living without their regular paychecks."It's a disaster for Michigan if you combine the strike with a government shutdown," said Patrick Anderson of the Anderson Economic Group in East Lansing. "It is truly the perfect storm."
Pickets get paid after week of walkout
Once the strike is past its first week, strike pay of $200 will be available to union members who report for strike duty, union officials said. Strikers must pick up the checks in person at local union halls. Health coverage continues while they're on strike, except for dental and vision. Strike pay is taxable and starts on the eighth day of the walkout.
"We've warned them in advance to prepare financially, but that's not saying everybody does it," said Gary Prater, vice president of Local 898 in Ypsilanti.
That's assuming union members could find cash to save, noted George Wells, president of Legacy of America Inc., an Auburn Hills financial planner.
"There's not enough savings to fall back on because of overtime reductions," Wells said. "Guys have gone from making $100,000 to making $60,000 to now making $200 a week for a while."
Although some states allow it, striking workers in Michigan aren't eligible for unemployment benefits. If effects of the strike prompt auto suppliers and other business to cut jobs, those laid-off workers would be eligible, said Norm Isotalo, a spokesman for the Department of Labor and Economic Growth.
Advisers: Don't tap into nest eggs for cash
Strapped strikers could find themselves forced to tap family, friends, home equity or even retirement accounts during a strike, financial planners say -- but all those options come with drawbacks.
Family and friends are more than likely involved in the troubled auto industry, too, and won't be much help. Home equity is dwindling with falling property values, especially for homeowners who cashed out equity through refinancing. And the strike comes as more workers face rising payments on adjustable-rate mortgages, with the peak of resets on ARMs due next month, according to analysts.
A final step for some workers would be to raid retirement accounts. If possible, workers should try to arrange a loan from a deferred retirement plan, advisers say. Otherwise, withdrawals will mean paying regular income taxes on any cash taken out, along with a 10 percent IRS penalty in most cases.
If possible, strikers should avoid cracking into those nest eggs, Wells said.
"It's using up tomorrow's prosperity today," he said. "That's their future."