March 12, 2009

U.S. auto workers do NOT make as much as we've been led to believe

Just now on Yahoo news they featured a headline from Reuters Ford-UAW deal cuts wages to $55 an hour. Wow, $55 an hour is a pretty high wage, eh? Well if you read the actual article they then say 'Ford said the agreement would trim its average wages for the 42,000 workers covered under the contract, including the value of benefits, to about $55 per hour this year, ...." So its not actually hourly pay that is $55, its pay + benefits. When someone asks you how much you make "an hour" do you include the cost of your employer provided health care benefits, retirement plan or other benefits? No of course you don't. But every time it seems we hear a figure about how much the US auto makers pay their employees the number includes benefits.

Not only do the figures we hear include benefits paid to the workers it also includes the total cost of benefits paid to retired workers. If I ask you how much you make "an hour" do you include the cost your employer paid to anyone who ever retired from the company? Obviously not.

So the reason we keep hearing that US automakers make ridiculous amounts of money per hour is that the figures cited include the cost of medical benefits, pension costs and the expenses the company pays for retirees as well. They probably throw in the cost of the kitchen sink in the employee break room too. The auto companies cite the large numbers including all the benefits for current and retired workers. Its in their interest to make the wage numbers look as large as possible to shift 'blame' over their problems to their labor costs. It is misleading to include the benefits in discussion of wages and not make it abundantly clear what the exact differences are. I'm not sure if its mostly the auto makers or the press that is at fault for this but they're probably both to blame.

But you still might think that even if you look at hourly wages alone that the US autoworkers are over paid compared to the workers in foreign auto company plants. Thats not the case. Workers in US auto factories are paid hourly wages that are close to or on par with the foreign auto plants in the US. This article UAW Losing Pay Edge from the Detroit Free Press they say that a Toyota plant paid workers bonuses that brought their pay up to equivalent of $30 an hour while the UAW workers got $27 an hour. So in that case Toyota workers in the US are making $3 an hour more (including bonus) for that plant compared to the union workers at US auto maker plants.

Here is an article that discusses the point: Debunking the myth of the $70-per-hour auto worker from the New Republic.

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