High pay of "elite" auto workers causes low pay,
unemployment elsewhere

February 13, 2015




The $9,000 profit sharing bonus for GM workers this year is nearly half James Robertson's earnings for the entire year.


Robertson is the Detroit man who walked 21 miles a day to get to and from work. Robertson makes $10.55 per hour. If he works 40 hours a week 52 weeks a year, his annual earnings are $21,522. Veteran GM workers get over $66,000 a year, and that doesn't include overtime, shift differential and fringe benefits. I estimated annual GM worker pay in a story last July.


Robertson's situation was the basis for a February 9 story in the Detroit Free Press called "Detroit commuter's low-wage job reflects new reality." In that story, Lou Glazer, president of the nonpartisan Ann Arbor-based think tank Michigan Future, was quoted as saying ""The fact that (Robertson) has such hardship that he has to walk 21 miles to work, that's the unusual part. But the wage is not unusual." He said most traditional manufacturing jobs in Michigan pay $10 to $15 per hour.


Compared to assembly-line workers at auto suppliers and other traditional manufacturers, $28 per hour UAW auto workers are the "elite of the working class," according to University of Michigan economist Don Grimes. 


The reason for the low market wage for manufacturing jobs is, according the Free Press story, foreign competition and the slow recovery from the Great Recession. Another cause not mentioned is the high wage paid to the "elite" UAW workers. High auto worker wages increase the cost of cars, reducing sales. As a result, fewer workers are needed. The low demand for labor pushes the price (wages) down. It also causes unemployment. As of December 2014, 297,613 remain unemployed in Michigan.


Those auto workers who are earning over $66,000 a year are very, very lucky, but the rest of us pay for it. For the less fortunate, it causes unemployment, low wages and poverty. For all of us, it raises car prices.


Of course, it is not just auto workers who contribute to the low market wage. Any time workers are paid more than the going rate, whether due to union contracts, prevailing wage laws or minimum wage laws - in other words, government interference in the free market - the total number of jobs is reduced, causing unemployment and forcing the market wage down.


The fact that autoworker pay is outrageously high is demonstrated by the UAW's own contractual pay structure. Since 2007, the contracts with all three domestic auto companies have provided for two "tiers" of workers: those hired before and those hired after the contract was signed. The first tier is the current workers, who get $28 per hour. The second tier is the new hires, originally paid $14 per hour. (In the 2011 contract, starting pay was increased to $15.78 and grows to $19.28 with seniority.) This creates the uncomfortable situation where one assembly worker may be working side by side with another whose wage is half what he is getting.


At Ford, some second tier workers will be getting a big pay raise. Since Ford didn't declare bankruptcy in 2009 like GM and Chrysler, its contract limits second tier workers to 20% of the workforce. With the retirements of first tier workers and growth in the overall workforce, total second tier workers at Ford have reached 20%, so a few of those who have been on the job the longest will get bumped up from $19 per hour to $28 per hour - a $9 increase. (Detroit Free Press, 1/30/2015)


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