The $70-an-hour question: What does a UAW worker cost?
A lively debate has erupted over labor costs at General Motors, Ford and Chrysler. Figures of $70, $72 or even $75 an hour are often cited as evidence that the companies and the United Auto Workers have not made the sacrifices necessary to compete with foreign-owned car companies, whose labor costs in the U.S. are about $48 an hour. I cited the $72 figure in a recent column and got several emails from readers who couldn’t believe that anyone, outside the executive suite, earns that much. (The answer: It’s not an hourly wage figure, it’s a total employment cost figure, which includes payroll taxes and benefits.)
MediaMatters.org, a group dedicated to “correcting conservative misinformation in the U.S. media,” has launched a campaign against use of the $70-plus hourly numbers. It argues that the big numbers include both legacy costs — the pensions and health care provided for retirees — along with the cost of employing current workers.
Not so, counters James Sherk of the conservative Heritage Foundation . It says the numbers come straight out of the automakers’ SEC filings. Using GM’s 2006 figure of $73.26 an hour, Sherk says it breaks down into wage costs of $39.68 an hour (base pay of $30 plus overtime, shift differential, vacation, etc.); and benefit costs of $33.58 (including the employer’s share of payroll taxes).
Sherk asserts that MediaMatters’ “correction” is flat-out wrong:
Average hourly costs include the costs of wages and benefits (current and future) to employees divided by the number of hours worked by those same employees. It does not include the benefits paid to retirees. This is in accord with standard accounting principles that require the Big Three to report their costs as they occur. Labor costs are the costs to the Detroit automakers of employing its current workers, not paying former workers for services performed decades ago.
The hourly cost figures would be far higher if they really did include legacy costs, Sherk says.
It seems like we have a factual argument here that should be pretty easy to settle. Heritage’s reasoning seems sound to me, but I’d love to see some more analysis. Perhaps the Government Accountability Office should look at this, since the Big Three want to become wards of the government.
(7 votes, average: 4.43 out of 5)
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David Nicklaus has covered St. Louis business for more than 25 years. His column appears three days a week on the Post-Dispatch business page. 
What about the salary of the executives? Looks like the CEO of GM made a lot more than $70/hr.
http://www.reuters.com/article/businessNews/idUSN2534738420080425
Perhaps his wealth and the wealth of the executives who bled GM, Ford, and Chrysler dry should be used to bail out their own car companies and have the workers who build the cars and the engineers who design them run the company instead?
Well Michael, managers get paid more than workers. VP’s get paid more than managers. CEO’s get paid more than presidents and vice presidents. That’s the way it works in business, not just here, but most capitalist societies. Try to grasp that before you enter the work force.
Well Michael, managers get paid more than workers. VP’s get paid more than managers. CEO’s get paid more than presidents and vice presidents. That’s the way it works in business, not just here, but most capitalist societies. Try to grasp that before you enter the work force. Because adding up the cost of employees easily tops what one CEO makes.
Horrendous, ridiculous amounts of money. I think part of the bailout should be a requirement to make the total wages/benefit per hour match those of the foreign car companies in the States. Then the Big 3 would have a fighting chance — after they start making fule-efficient cars, of course.
I think there is a misconception about the line workers. First of all I worked at the Chrysler plant in Fenton in “management”. I can tell you that the white collar workers do not make as much as the line workers. I had a bachelor degree and the person putting in floor mats as the car rolled by made more than me. They also worked less hours than me and had better retirement plans than me. So to blame everything on management is not fair.
First of all - if you are talking about what Toyota pays its US workers - realize a couple things - you are not comparing apples to apples - They dont have to pay their workers in Japan’s health care. The government does. Huge Savings. Look where they put their plants - Alabama, Kentucky, Indiana - they dont have to pay average wages. My father was an auto worker and believe me - he earned every cent of what he made in that place.
Second point - The Big 3 make fuel efficient vehicles - you are not looking. All foreign cars are not fuel effiecient - Tundas, Titans, 4-Runners.
All I ask is for people to stop comparing a Prius to a 4×4 truck.
I am a UAW auto worker and I have never meet this person that makes 39.58 an hour.And to be fair can anyone say what the benifits cost is in any other company? Like Boeing,Anheuser-Busch,Ameren or Rockwell. It is absolutly amazing how much mis-infromation there is in these comment areas. Let me ask a question,anybody out there know an auto worker? Maybe have one living in your comunity? Do they live in a house that someone making 70+ an hour would live in or a house that is comparible to everone else?And as far as these statements being made that we should make the same as foreign car companies are paying, is that what this country is about?As far as I’m concerned it is disrespecful to the veterans that gave their lives in WWII when you spend money on one of their cars.But thats another story.
We must disband the UAW, they have been feeding on the automakers for years,like a cancer, sucking the life blood from the industry. Disband the UAW before any type of bailout plan for the big 3.
http://disbandtheuaw.com
I grew up in a union family so I am not going to blame the union workers, the “company” doesn’t have to give in ya know.
I am in favor of helping the Big three as long as the line workers give back as well. I know I would take a cut in pay if I needed to keep my job, in these times. I think the UAW should ask it’s member to take a cut of say 3 or 4 dollars an hour until their respective companies return to profitability and this goes for all the white collar workers as well.
In response to Glen for a real example. As a young pup out of college 10 years ago, I made $24,000 at my first job. A friend who dropped out of college after his freshman year was making $65,000 working at the Ford plant at age 23. Most people in this country with bachelors and graduate degrees make less than an auto worker, because their union artificially perverts the prevailing wage laws of economics. If they were so valuable, they wouldn’t need a union to force high wages. But the fact is any person with heartbeat could work on an assembly line. As to why they don’t live in fancy houses or rich neighborhoods. Since most these people don’t know the difference between an asset and a liability, they buy modest homes instead so they can have a bass boat, an RV and sports season tickets.