Average total compensation for a Big Three autoworker is $73.21 an hour Toyota, Honda and Nissan pay a still-generous $44.20 an hour in total compensation — a cost edge of nearly 40%
Quite a difference, wouldn’t you agree?
Credit this idea to Robert Reich, the former Clinton administration official. We’ve had lots of disagreements with Reich in the past, and no doubt will in the future. But on this he’s right: If a bailout is to be given, the Big Three and their unions must thoroughly revamp their businesses, almost as if it were a bankruptcy. Call it a Chapter 11 Bailout.
Above all, the companies’ poisonous contracts with the United Auto Workers union have to be torn up. The problem is that the UAW, under President Ron Gettelfinger, remains adamant: No givebacks. This is financial lunacy.
Thanks in part to managerial incompetence, but mostly due to pricey union contracts, it costs American carmakers too much to build cars here; they can’t compete. When you fold in health care, pensions, hourly pay, vacations and the rest, average total compensation for a Big Three autoworker is $73.21 an hour, according to data cited by University of Michigan economist Mark Perry.
Toyota, Honda and Nissan pay a still-generous $44.20 an hour in total compensation — a cost edge of nearly 40%. Is it any wonder that Ford, GM and Chrysler can’t compete? Or that, after paying their workers, they never have enough cash left to retool?
Today the total market capitalization of the Big Three has fallen to about $7 billion. Is it better for the owners of those companies to suffer a total loss or for taxpayers to lose $25 billion? The answer is obvious. As such, the only case for a bailout is if it would force major changes on the industry. That won’t happen with current management in place or with giveaway union contracts that make the companies unviable.
The Toyota’s and Honda’s last forever and have excellant resale value, the same can not be said for the domestic brands.. I am not as familiar with the Nissan brand.
November 18, 2008 - 06:13 PM on November 18th, 2008
[...] average total compensation for a Big Three autoworker? $73.21 an hour. Toyota, Honda, and Nissan, meanwhile, pay an average of $44.20 an hour. Scarier is the fact that [...]
November 18, 2008 - 11:47 PM on November 18th, 2008
[...] Average total compensation for a Big Three autoworker is $73.21 an … … on outreach pelosi policy Politics Polls Presidential Race Hustlers Rashid Khalidi reid Republicans Right Rosie sarah palin Saudi Sean Stanley Kurtz Subprime Crisis surrender Taxes Terrorism The troops Voices Voter Fraud war Warming … [...]
November 19, 2008 - 02:37 PM on November 19th, 2008
[...] The Four Little Piggies keep claiming this is all about jobs, but it’s not: it’s about luxury. The UAW wants to keep their companies from going bankrupt so that they can keep agreements in place that pay workers not to work and make union car labor in the US pay $73.21 an hour while non-union car workers in the US make $44.20. [...]
November 20, 2008 - 05:15 AM on November 20th, 2008
[...] generous $44.20 an hour in total compensation – a cost edge of nearly 40% Complete article: SOURCE __________________ "I was a soldier, I am a soldier, I always will be a [...]
November 28, 2008 - 02:20 PM on November 28th, 2008
[...] interesting article concerning what may just be the major root cause of the problems in Detroit. SOURCE The $70 an hour claim has actually been debunked. SOURCE [...]
December 12, 2008 - 08:13 PM on December 12th, 2008
2006 stats: AVG UAW salary=$27/hr.
AVG Toyota salary=$30/hr.
AVG Nissan salary=$26/hr.
The $70/hr included income of those retired and others divided by active employees.
December 12, 2008 - 09:32 PM on December 12th, 2008
Shelly, please provide a source for that..in the maen time, here is credible data:
Auto Bailout Ignores Excessive Labor Costs
Without government intervention, one or more of the Big Three automobile manufacturers–General Motors, Ford, and Chrysler–faces restructuring in bankruptcy. Bankruptcy would not be the end of the Big Three but a new beginning. Coming out of bankruptcy, the automakers would start fresh, free of the contractual obligations that have kept them uncompetitive. The United Auto Workers (UAW) and Detroit automakers want to avoid bankruptcy and are seeking a taxpayer bailout. Such a bailout, however, is not an acceptable alternative to bankruptcy because it would delay the restructuring the Big Three need to become competitive again.
UAW workers earn $75 an hour in wages and benefits–almost triple the earnings of the average private sector worker. Detroit autoworkers have substantially more health, retirement, and paid time off benefits than most Americans. These benefits, and a JOBS bank that pays UAW workers nearly full wages to not work, have been a major force driving the Detroit automakers’ current fiscal woes. Consequently, Congress should not force all Americans to pay for high wages and benefits for UAW workers.
UAW Workers Highly Paid
The Big Three automakers are asking taxpayers to bail out some of the most highly paid workers in America. Chart 1 shows the average hourly compensation (wages and benefits) earned by all private sector workers and for UAW represented workers at the Big Three. It also shows the hourly compensation at Japanese plants in the United States.
Chart 1
The average private sector worker earned $25.36 an hour in 2006–$17.91 an hour in cash wages and $7.45 an hour in benefits such as pensions, paid time off, and health insurance.[1] Autoworkers at Japanese plants located in the United States earn substantially more than this: between $42 and $48 an hour in wages and benefits, which amounts to over $80,000 a year in total compensation–hardly cheap labor.[2]
The typical UAW worker at the Big Three earned between $71 and $76 an hour in 2006. This amount is triple the earnings of the typical worker in the private sector and $25 to $30 an hour more than American workers at Japanese auto plants. The average unionized worker at the Big Three earns over $130,000 a year in wages and benefits.[3]
Generous Benefits
Most of the Big Three’s UAW workers’ compensation comes as benefits, not cash. Table 1 breaks down the average hourly labor costs for a UAW worker at Chrysler in 2006. Ford and General Motors have similar compensation profiles.
Chart 2
Only 38 percent of the $75.81 an hour that Chrysler’s UAW workers earned came as base wages. The rest came as benefits (though some of those benefits, such as overtime premiums and paid vacation days, are paid in cash). Health care costs are the most expensive benefit, accounting for over a quarter of total compensation.
Gold-Plated Health Care
Health care costs the Big Three so much because the UAW negotiated gold-plated health benefits that include medical, hospital, surgical, and prescription drug coverage. These benefits also cover durable medical equipment (e.g., hearing aids), dental benefits, and even Lasik eye surgery.[4] For all this, GM workers and retirees must pay monthly premiums of $10 for an individual and $21 for families.[5] As a result, UAW workers and retirees have some of the most comprehensive and least expensive health care in America.
Competitive Disadvantage
These gold-plated health care benefits put the Big Three, and especially GM, at a competitive disadvantage. For example, GM has three times as many retirees as active workers, and health care costs for both groups cost the company $4.6 billion in 2007. The UAW’s lavish health benefits added $1,200 to the cost of each vehicle produced in the United States.
The Japanese automakers, by contrast, provide standard health benefits to their American employees. Consequently, health care for active workers cost Toyota $215 per vehicle in 2006.[6]
Every American buying an auto made in Detroit pays an extra $700 to $1,000 to support health benefits far more generous than most Americans receive.
UAW employees also receive the following extraordinary provisions:
* 30-and-Out contracts. UAW employees work under a 30-and-Out contract that allows them to retire with generous pension benefits after 30 years on the job, irrespective of age.
* Seven weeks’ vacation. A Chrysler worker with 15 years’ tenure was entitled to 34.5 paid holidays and vacation days in 2006–seven weeks in paid time off.[7] This is three weeks more paid vacation than the average private sector worker with similar tenure.
* Paid not to work. Under UAW contracts, workers whom the automakers let go when plants close are not laid off. Instead, after exhausting regular unemployment payments from the automakers and the government, they are transferred to a JOBS bank where they are paid nearly full wages to not work.
A Step in the Right Direction
These affluent wages and benefits prevent the Detroit automakers from successfully competing. The Detroit automakers and the UAW have known about this competitive disadvantage for decades, but the UAW resisted making any concessions until 2007–when bankruptcy became an impending reality.
Under the 2007 contract, the Big Three and the UAW agreed to the following:
* To transfer, starting in 2010, retiree health care obligations to a Voluntary Employee Benefits Association (VEBA) run by the UAW. The automakers agreed to collectively pay $60 billion into the VEBA, after which time the UAW would have full responsibility for providing retiree health benefits. This agreement takes the cost of providing health benefits off the Big Three’s balance sheets.
* To limit time in the JOBS bank to two years.
* To require workers in the JOBS bank to accept new employment offers.
* To create a two-tiered wage structure. Detroit automakers may now hire entry-level workers for “non-core” positions (those not directly involved in manufacturing automobiles) for roughly $26 an hour in wages and benefits. Although these entry-level workers may transfer to the higher paid vehicle assembly jobs as vacancies occur, they will never receive retiree health benefits.
Too Little, Too Late
GM estimates the new contract will eventually cut 70 percent of their labor cost gap with the Japanese manufacturers.[8] Average compensation will fall to $54 an hour once the contract takes full effect.It will, however, take years for the Big Three to realize these cost savings. The cost reductions affect only a minority of workers and occur gradually as current workers retire.
The vast majority of UAW workers in Detroit today still earn $75 an hour, and the Detroit automakers must still find $60 billion to finance the VEBA. Detroit’s labor costs will not fall as much or as rapidly enough as the Big Three need to restore their competitive position and remain solvent.
Had the UAW made similar concessions in the early 1990s, it might have prevented the Big Three from falling into such dire economic straits. It did not, however, and the new contract is too little, too late to keep the Detroit automakers solvent.
Taxpayers Should Not Bail Out the UAW
By seeking a bailout, the UAW, along with the Detroit automakers, are asking taxpayers to help keep UAW earnings at $75 an hour when the typical American takes home a third that much. The Big Three also want Congress to use taxpayers’ money to pay billions of dollars into the new health care VEBA, thereby funding health care benefits for UAW retirees that are far more generous than those provided by an already under-funded Medicare system.
UAW workers understandably want to preserve the standard of living to which they have become accustomed, but that standard is not sustainable in a competitive economy. Congress should not tax all Americans in order to maintain UAW workers’ affluent lifestyles.
James Sherk is Bradley Fellow in Labor Policy in the Center for Data Analysis at The Heritage Foundation.
[1] Department of Labor, Bureau of Labor Statistics, “Employer Costs for Employee Compensation,” Table 5: Private Industry Workers by Major Occupational Group, at http://www.bls.gov/NCS/ (November 18, 2008).
[2] A worker earning $45 an hour for 35.5 hours a week throughout the year earns $83,070 a year.
[3] Based on a 35.5 hour workweek, the average hourly hours worked at DaimlerChrysler in 2006. DaimlerChrysler Corporation, “Chrysler Labor Talks ‘07: Media Briefing Book,” p. 38, at http://chryslerlabortalks07.com/Media_Briefing_Book.pdf (November 18, 2008).
[4] United Auto Workers, 2003 Auto Contract Summaries, “UAW Delivers on Health Care Pledge,” September 2003, at http://www.uaw.org/contracts/03/gm/gm03.cfm (November 18, 2008).
[5] “Why the UAW-GM Deal Matters to You,” Hospitals & Health Networks, November 2007, at http://www.hhnmag.com/hhnmag_app/jsp/articledisplay.jsp?
dcrpath=HHNMAG/Article/data/11NOV2007/0711HHN_
Dept_StoryBoard&domain=HHNMAG (November 18, 2008).
[6] Alex Taylor, “Behind Ford’s Scary $12.7 Billion Loss,” Fortune, January 27, 2007, at http://money.cnn.com/2007/01/26/news/compan
ies/pluggedin_taylor_ford.fortune/index.htm?postversion=2007012611 (November 18, 2008).
[7] DaimlerChrysler Corporation, “Media Briefing Book,” p. 40. Note that both figures exclude paid sick days.
[8] Joseph Szczesny, “Big-Three Contracts Even the Playing Field–Eventually,” Auto Observer, November 18, 2007, at http://www.autoobserver.com/2007/11/big-three-uaw-
contracts-even-the-playing-field—-eventually.html (November 18, 2008).
December 27, 2008 - 10:22 AM on December 27th, 2008
It seems to me that if you look at the salaries of the execs on board who make the conscious decisions to run and manage the companies, its waaay too much. Why should the top ten draw salaries ranging from 5-10 million dollars annually get compensated and then bailed out for running a company into potential bankruptcy and closure?
Too many times we see; within the mortgage bailout and now the Big Three auto makers blaming the workers. Its time to see the executives take responsibility for their actions. They should not be looking at the govt to bail them out, but the gas companies, Exxon/Mobil, Chevron, whose claim to make over 12 BILLION DOLLARS each in profit last quarter.
Its not the workers faults that the industry did not re tool to build fuel efficient cars, they build them and its the executives that decide how to run the company.
If all the articles are true regarding wages by employees average out to be $75 an hour, then there should be concessions on the workers part as well, discluding retirees.
With the country in a recession we all need to focus on rebuilding.
I work in the film business and have taken up to 25% pay cut to keep the business in the US and maintain a competitive market. I have yet to see anyone offering any bail out to me or my business during the back to back contractual negotiations of the previously striking writers guild and… now the Screen Actors Guild.
Come on now, its time for all of us to rebuild this country and look at the future of which was one of the richest countries in the world, The United States of America. EXECUTIVES need to take a pay cut, PERIOD!!!! WAKE UP SHAREHOLDERS, We need to step in and monitor salaries of CEO’s that still draw huge incomes even after the bailout.
The only way I see this whole picture is; there is a boat is going down in the middle of the ocean, and their are going to be some casualties. The top CEO’s are carrying their gold bullion in their pockets while they know they that the sheer weight of all the money will sink the rescue boat. They don’t want to let go, cause the gluttony they have created. But on the other hand they are so willing to kill the rest of the people in the boat to save their money.