Economic historians trace the onset of the Rust Belt to the year 1970. This was the year the Occupational Health and Safety Act was passed and the Environmental Protection Agency was created. The unintended economic consequences which followed devastated industrial cities from Detroit to Flint to Gary to Toledo to Pittsburgh.
Heavy industry has several basic needs, with none being more important than a dependable supply of affordable energy. The combination of the Arab oil embargo spiking petroleum prices and EPA’s cost effect on electricity production removed what was once a major competitive advantage for the United States globally throughout the '70s and beyond. OSHA regulations had three major consequences. OHSA standards made workplace injury litigation substantially easier to successfully pursue. As an additional consequence, employers found themselves with substantially higher insurance premiums while expensing billions on new workplace safety requirements.
But while OSHA, EPA, and even the oil embargo all contributed to Rust Belt manufacturing cities such as Detroit’s downfall, labor law itself was also a major contributor. No public-sector pension plan or union bargaining agreement governing hiring practices I am aware of was ever planned to be able to handle a 25% drop off in population tax base. Yet that is exactly what has occurred in Detroit. Labor law prevented public officials from scaling back the cities’ workforce while need for services declined. Michigan lost nearly 50% of all its manufacturing jobs during the 2000s, with Detroit hit particularly hard.
Whether Detroit goes bankrupt or not, its history should stand as
a stark reminder of the consequences of anti-business federal legislation and legalizing public sector labor unions.