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(email exchange)


>   On Fri, Nov 21, 2008 at 10:26 AM, wrote:
>   Why don’t people get their facts straight? Blind ideology divorced from >   facts was the basis of the last 8 years! When are we going to learn?
>   From Felix Salmon (Professor Zhen should see this as well):

The return of the 70 per hour meme

You might expect it from right-leaning commentators like Will Wilkinson. You wouldn’t expect it from someone like Mark Perry, who lives in Flint, Michigan. And you certainly wouldn’t expect to see it in the New York Times, from the likes of Andrew Ross Sorkin. But all of them are perpetuating the meme that the average GM worker costs more than $70 an hour, once you include health and pension costs.

It’s not true.

The average GM assembly-line worker makes about $28 per hour in wages, and I can assure you that GM is not paying $42 an hour in health insurance and pension plan contributions. Rather, the $70 per hour figure (or $73 an hour, or whatever) is a ridiculous number obtained by adding up GM’s total labor, health, and pension costs, and then dividing by the total number of hours worked. In other words, it includes all the healthcare and retirement costs of retired workers.

Now that GM’s healthcare obligations are being moved to a UAW-run trust, even that fictitious number is going to fall sharply. But anybody who uses it as a rhetorical device suggesting that US car companies are run inefficiently is being disingenuous. As of 2007, the UAW represented 180,681 members at Chrysler, Ford and General Motors; it also represented 419,621 retired members and 120,723 surviving spouses. If you take the costs associated with 721,025 individuals and then divide those costs by the hours worked by 180,681 individuals, you’re going to end up with a very large hourly rate. But it won’t mean anything, unless you’re trying to be deceptive.


5 Responses

  1. Why let accounting get in the way of reality?

    The same GM worker moves south, works for Honda, gets paid less, is more productive, builds better cars, and is happier.

    The US govt. is going to get stuck with the tab for the GM pensioners and health care anyway. Why do we want to subsidize an unproductive, disfunctional company that produces inferior products?

  2. “The same GM worker moves south, works for Honda, gets paid less, is more productive, builds better cars, and is happier.”

    Yes, American workers always are happier getting paid less. After all, it’s better for the next generation to have a standard of living below that of the previous. It’s better to have homes where both parents must work to pay the basic bills rather than homes where only one has to work. It’s better for a kid growing up today to have fewer avenues for a livable wage than kids of the past. It’s better to put our science and engineering in the hands of foreign companies than it is to keep a domestic base in strategic sectors.

    I think Warren should begin immediately by having Mosler Motors taken over by SAIC. That way, all of the workers there in Florida can “move south” and get lower paying jobs where they will be happier and more productive. In fact, here is the best way to make them happier: forget wages altogether. Just give them food and housing, for free (as a condition of employment, of course)! That way as long as they work for the company, they can have something to eat and a place to live. It will really cut down on turnover, I assure you. And not only that, we can extend them credit against their wages for other unnecessary things like cars, or TV’s, or iPhones. That way they can just borrow against their future work for the company; they only need to keep working long enough to pay it back. If they die, we’ll just add the debt to their children. If we do this, everyone will be so much happier, and aggregate demand will be so much higher. People tend to buy so much more when their wages are lower and they are being forced to be as productive as possible, while simultaneously being denied the benefit of that productivity. That sounds like a winning economic model!

  3. Once the pension plans are nationalized, Detroit is probably profitable.

    Another reason to support this bailout is financial. It will be cheaper than dealing with the consequences of letting these companies fail.

  4. if the govt had sustained demand at ‘normal’ levels and the US automakers couldn’t make it we’d probably all be better off if they were gone, as long as the govt continue with the right fiscal balance to keep the economy at full employment levels.

    however, the govt let the economy fall to current depressed levels where no auto companies can make a profit. if they let this macro economic condition stand any funds advanced will be ‘lost’ and the effort a futile one.

    if they are going to do a bridge loan, it should be part of a general fiscal package designed to restore demand in general. and then if the autos can’t cut it let them go.

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