-
Website
http://willwilkinson.net/flybottle -
Original page
http://www.willwilkinson.net/flybottle/2008/11/20/how-much-are-gms-labor-costs/ -
Subscribe
All Comments -
Community
-
-
Top Commenters
-
Popular Threads
Not a particularly difficult concept.
Even at $28/hr, it is higher than the Honda plant that just opened in Indiana
It's quite misleading for your average non-economist reading in the Times or on a blog that UAW workers are taking home $70/hr in wages in benefits when no individual worker is doing such a thing. Using this statistic, if they cut half their labor force (half of the hours worked) their "labor costs" will increase sharply when measured in this way. So, may be useful for the automakers accounting departments...not a good way to assess the standard of living of a UAW worker..which many are apt to do when faced with this figure.
Only because of the UAW "jobs bank" that says that even laid off workers continue to be paid most of their salaries. For most companies, cutting ones labor force actually reduces labor costs. Not for the Detroit companies. (Also, they're forced to cut the new workers making less.)
It's certainly true that because of recent agreements, new hires make a lot less than the old system. But retirees and older workers are still grandfathered in under the old system. So the current system involves newer Detroit workers subsidizing the retirees (and retirees' families.)
They made pension and medical benefits promises to retirees that they couldn't keep.
If journalists and economists are going to play at accounting and finance they should probably have a clue.
Toyota and Honda will simply dump their retirees' costs on the U.S. government, a much overlooked fact (the workers' 401 (k) plans are melting down as you read this).
Actually, lots of people are saying that. And the difference is highly relevant. The liability to the retirees is a fixed cost, much like interest charges on debt. It doesn't grow as GM builds more cars.
By the way, I think a little heftier apology is in order, not this "gee I didn't mean it" stuff. When an obviously implausible fact comes your way, don't you have an obligation to verify it before passing it on?
However, let's be clear that it isn't the guys on the line earning $28/hr (which by the way is 58k/yr, which will support a family in a lmid to ower middle class lifestyle) that ran the company into the ground.
The whole $70/hr thing strikes me as something that has been latched onto by some (no matter how incorrect the numbers are) precisely because it tends to shift the attention and blame from the bad business decisions made for decades by mgmt to the the workers.
Union management along with Corporate management made bad deals along the way that has caused the companies to tank. The union mentality that every line worker should be paid like they hold a Masters Degree is insane.
Union management played a major role in forcing corporate management to agree to terms that could in now way shape or form allow the company to survive long term.
The Big Three are similar to the US Social Security System where as people retire the current workers are paying for people who no longer are employed with the company. It is fine when you have 1 retiree for every 3 workers, not so good when the reverse is true.