Inflating Auto Worker Pay
June 14, 2007 It's contract time for the United Auto Workers and the Wall Street Journal is working hard to build the case for big pay cuts. The paper tells us that compensation for UAW members is in the range of $70-$75 an hour.
Well that's serious money. At that rate, with overtime, an autoworker can earn as much in a year as an incompetent CEO gets in a day. Clearly things are out of line.
Seriously, $70-$75 an hour is pretty good pay, but it is also not really what UAW members earn. The base pay for these workers is around $25 an hour. To get to $75 an hour, you would have to believe that autoworkers get $100,000 a year in benefits. Is that plausible?
Assume that they get $15k for their pension and $25k for their health insurance, that gets you to $40k. Where is the rest of the $100k? Well, what the auto industry does to get this figure is they average in their health care and pension costs for their retirees. These are real expenses for the industry, but they have nothing to do with the compensation received by current workers.
News reporting on the UAW contracts should clearly distinguish between the compensation received by current workers and the legacy costs from retired workers. UAW members are well-paid, but averaging in the legacy costs hugely exaggerates their earnings in the mind of readers.
--Dean Baker
On 6/14/07, Doug Henwood <dhenwood at panix.com> wrote:
> Wall Street Journal - June 14, 2007
>
> Detroit Pursues
> Sweeping Cuts
> In Union Talks
>
> Big 3 Cite Wide Cost Gap
> With Asian Auto Rivals;
> Threat to Export Jobs
>
> By JEFFREY MCCRACKEN