Friday, Feb. 23, 2024 |
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The announcement by General Motors that it is slashing 30,000 jobs and closing all or parts of 12 plants is the fruit of decades of “victories” by the United Auto Workers that even King Pyrrhus would consider shortsighted. The union has done so well at the bargaining table that it has priced its workers out of jobs.
According to the Bureau of Labor Statistics, the average hourly manufacturing wage is roughly $16. Autoworkers for the Big Three, in contrast, earn more than $25 an hour. Who says the UAW doesn’t get results? On top of the wages are cushy benefits that mean it costs automakers roughly $65 an hour to employ its workers. The expense of pensions for retired workers — and there are more than twice as many GM retirees as current workers — adds about $2,500 to the price of every car.
There is a high cost to unsustainably high wages and benefits — they tend to destroy the businesses in question. GM is perpetually shedding jobs. The only thing surprising about a new announcement from a CEO of a Big Three automaker would be if he said he had initiated a hiring binge.
If an enemy conspirator had infiltrated the U.S. auto industry with the mission of undermining it from within, he couldn’t have come up with a worse system.
An example: Big Three autoworkers never quite go away. As part of a union-negotiated “jobs bank,” roughly 10,000 of them are each paid $100,000 a year in salary and benefits for not working at all. When a plant closes, workers either have to be transferred to another plant (not more than 50 miles away) or given an expensive early retirement. Otherwise, they stay on the payroll.
It would be wrong to put all the blame for the Big Three’s troubles on the UAW. Management is responsible for designing unappealing cars and selling them at a loss with “employee discounts.” For all its woes, however, Detroit is improving under the pressure of competition, making major efficiency gains in recent years.
The GM announcement has met the usual laments for the death of U.S. manufacturing. By one key measure the sector is actually robust. Manufacturing productivity has been posting strong gains, as manufacturers make ever more products with fewer workers. But we are witnessing the end of a certain kind of manufacturing, the post-World War II model of heavily unionized, lumbering industry as welfare state. U.S. manufacturers need to be faster, leaner, smarter.
This is the future even in Michigan, even in the automotive industry. A new report by a Southeast Michigan group called Automation Alley notes that the more advanced slices of the auto industry are properly thought of as part of the technology sector. It notes that “the higher-wage, higher-skill jobs in the industry were less likely to be outsourced to lower-cost countries or reduced through internal cost-cutting.”
Instead of bludgeoning management, unions should be working to create a better-educated work force. That is the only path to labor victories that aren’t Pyrrhic.
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