Barack Obama NOW!

This week, the auto industry was at the center of the American news cycle as the CEOs of the Big Three used their private jets to fly to Washington DC to plea for money to bail them out of the holes that they dug for themselves.

A lot of pundits have used the “$70-per-hour” myth as an excuse to focus on cutting the costs of labor, rather than the high salaries of the CEOs. Former Republican candidate Mitt Romney, son of a former CEO of extinct auto manufacturer AMC, wrote an editorial stating his belief that the industry needs “new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota.”

The New Republic sets the record straight on the myth of the $70-per-hour labor rates of the American autoworker.

Let’s start with the fact that it’s not $70 per hour in wages. According to Kristin Dziczek of the Center for Automotive Research–who was my primary source for the figures you are about to read–average wages for workers at Chrysler, Ford, and General Motors were just $28 per hour as of 2007. That works out to a little less than $60,000 a year in gross income–hardly outrageous, particularly when you consider the physical demands of automobile assembly work and the skills most workers must acquire over the course of their careers.
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More important, and contrary to what you may have heard, the wages aren’t that much bigger than what Honda, Toyota, and other foreign manufacturers pay employees in their U.S. factories. While we can’t be sure precisely how much those workers make, because the companies don’t make the information public, the best estimates suggests the corresponding 2007 figure for these “transplants”–as the foreign-owned factories are known–was somewhere between $20 and $26 per hour, and most likely around $24 or $25. That would put average worker’s annual salary at $52,000 a year.
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So the “wage gap,” per se, has been a lot smaller than you’ve heard. And this is no accident. If the transplants paid their employees far less than what the Big Three pay their unionized workers, the United Auto Workers would have a much better shot of organizing the transplants’ factories. Those factories remain non-unionized and management very much wants to keep it that way.
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But then what’s the source of that $70 hourly figure? It didn’t come out of thin air. Analysts came up with it by including the cost of all employer-provided benefits–namely, health insurance and pensions–and then dividing by the number of workers. The result, they found, was that benefits for Big Three cost about $42 per hour, per employee. Add that to the wages–again, $28 per hour–and you get the $70 figure. Voila.
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Except … notice something weird about this calculation? It’s not as if each active worker is getting health benefits and pensions worth $42 per hour. That would come to nearly twice his or her wages. (Talk about gold-plated coverage!) Instead, each active worker is getting benefits equal only to a fraction of that–probably around $10 per hour, according to estimates from the International Motor Vehicle Program. The number only gets to $70 an hour if you include the cost of benefits for retirees–in other words, the cost of benefits for other people. One of the few people to grasp this was Portfolio.com’s Felix Salmon. As he noted yesterday, the claim that workers are getting $70 an hour in compensation is just “not true.”

Read the whole article by clicking here.

What’s important to note is that the automotive industry has spent a lot of money lobbying against fuel-efficiency standards. In 2007 alone, the automotive industry spent a record $70.3 million lobbying Congress.

In the meantime, the American public is more interested in buying fuel-efficient cars, which tend to be from Toyota or Honda, as opposed to anything from the Big Three.

Any wonder?

November 22nd, 2008 | Category: Election 2008, editorials, energy, environment | Subscribe to comments | You can skip to the end and leave a response. Pinging is currently not allowed