$73 an Hour: Adding It Up

[underpants]

http://www.nytimes.com/2008/12/10/business/economy/10leonhardt.html?pagewanted=1&_r=1&hp

Let’s start with the numbers. The $73-an-hour figure comes from the car companies themselves. As part of their public relations strategy during labor negotiations, the companies put out various charts and reports explaining what they paid their workers. Wall Street analysts have done similar calculations.

The calculations show, accurately enough, that for every hour a unionized worker puts in, one of the Big Three really does spend about $73 on compensation. So the number isn’t made up. But it is the combination of three very different categories.

The first category is simply cash payments, which is what many people imagine when they hear the word “compensation.” It includes wages, overtime and vacation pay, and comes to about $40 an hour. (The numbers vary a bit by company and year. That’s why $73 is sometimes $70 or $77.)

The second category is fringe benefits, like health insurance and pensions. These benefits have real value, even if they don’t show up on a weekly paycheck. At the Big Three, the benefits amount to $15 an hour or so.

Add the two together, and you get the true hourly compensation of Detroit’s unionized work force: roughly $55 an hour. It’s a little more than twice as much as the typical American worker makes, benefits included. The more relevant comparison, though, is probably to Honda’s or Toyota’s (nonunionized) workers. They make in the neighborhood of $45 an hour, and most of the gap stems from their less generous benefits.

The third category is the cost of benefits for retirees. These are essentially fixed costs that have no relation to how many vehicles the companies make. But they are a real cost, so the companies add them into the mix — dividing those costs by the total hours of the current work force, to get a figure of $15 or so — and end up at roughly $70 an hour.

The crucial point, though, is this $15 isn’t mainly a reflection of how generous the retiree benefits are. It’s a reflection of how many retirees there are. The Big Three built up a huge pool of retirees long before Honda and Toyota opened plants in this country. You’d never know this by looking at the graphic behind Wolf Blitzer on CNN last week, contrasting the “$73/hour” pay of Detroit’s workers with the “up to $48/hour” pay of workers at the Japanese companies.

[Veritas_et_Aequitas]

1. Here we go again

:popcorn:

[unapatriciated]

2. Now spend some time...

calculating the pay of the CEO's - we already know they are overpaid but never hear of the the hidden compensations that they receive

[underpants]

6. I have looked and there is no real data on that

It is no surprise that that is not required in financial statements

[EstimatedProphet]

3. Good explanation, most people don't think about those things, as you noted

The outrage that a skilled laborer in a union would make a good living wage really pisses me off. If the people who complain about how union workers make too much money would think about the total compensation issue, and how it isn't automatically all take-home pay, they'd realize they really had nothing to gripe about. But instead they go off half-cocked, probably because they're jealous.

Remember when we used to think about things in this country before we'd make knee-jerk complaints? Those were times when we were able to get strong, functioning unions. Those were the days...

[underpants]

5. As someone posted here a few weeks ago

"I've never seen crabs so trained that they pull the one that got out back in"

I think that sums it up completely

[sendero]

4. Even $55 per hour..

.. is a ridiculous wage for that type of work.

I'm not against unions in general or the UAW in particular, but here is a simple FACT.

In a couple of years, they will be making less money, or they will have no jobs at all. The reason GM et al made those SUVs and trucks is because they could not compete on price on passenger cars, and this wage structure is a large part of that failure.

[EstimatedProphet]

9. Bullshit

It is not a ridiculous wage. It is not ridiculous to pay people a wage that allows them to live a decent life. The real reason that GM, and all the car companies in general, are hurting right now is because salaries are so top-heavy. Management makes in the millions, and then comes up with ideas to lay off the real producers in the company so that they can take the money that would go to those producers for themselves - who is going to buy the cars, and keep money coming into the company?

[sendero]

13. I defy you....

.. to prove that the reason US UAWs are not price competitive is because of executive pay. Simple math says otherwise.

Do I agree that execs are seriously overpaid? Ab-so-fucking-lutely. But that is not what makes it impossible for US UAW automakers to compete with non-union automakers in the same country.

[EstimatedProphet]

19. Prove to me that it is the laborers instead

Since you were the one to make the claim first.

However, as far as impact on the economy goes, even with equal amounts of money on each side, a few high-paid execs are far worse for the economy than a number of lesser-paid employees. So, rising executive salaries are really what everyone should be complaining about anyway, and not the labor costs, because high exec salaries have negative impacts on cash flow through the economy.

[sendero]

22. Concentration..

.. of wealth at the top is definitely a contributing factor in our economic problems, but high executive salaries are again only a small cause of that. Tax codes are the main problem.

As for proof, the UAW has 550,000 members. http://www.detnews.com/apps/pbcs.dll/article?AID=/20060413/AUTO01/604130375

How many overpaid execs do you think there are? Trust me, it's not even 1% of that.

Finally, please don't mistake my comments as being against the UAW or being against people making money. I'm saying that, in simple economic terms, the UAW is unsustainable. UAW members will be making less money, or they will be no UAW auto manufacturing at all, within a year. No amount of wishful thinking will fix that, just as no amount of wishful thinking will bail us out of a long grinding recession or even depression.

[EstimatedProphet]

24. See, here's why I say what I do...

Wages are affordable for a company or not, based on a companies' income. That's the only real factor. A company has income based on sales. When companies do what they have been doing for the past few decades and concentrate wealth in the upper management, it directly effects the outflow of money from the employees back into the economy. Here's an example (simplified):

Company A has 550 employees, 500 making $10/hr and 50 executives making $100/hr. This is pretty close to pre-Reagan levels for industries, when it was more common for management to make on the order of 10 times or so what the average employee makes. In this case, those 500 employees use their money for living expenses, and the money goes back into the economy to buy 500 gallons of milk, loaves of bread, gallons of gas, etc. The 50 executives buy the same things too, so all told you have 550 gallons of milk, gas, loaves of bread being sold, which employs other people.

Now Company A execs ship the jobs off to a third world country and give themselves a raise to $5000 per hour (and companies these days often have execs making 500 times the average employee). They still buy their 50 gallons of milk, gas, bread, etc. but more of their money goes to investments, banking, luxury items, overseas, rather than flowing through the economy and ultimately back to the company. In effect, the economy at large now has lost 90% of their income from Company A. They have for all practical purposes taken a 90% pay cut. This means that, among other things, the money from the community flowing back to Company A gets cut drastically.

This is, as I said, a very simplified model, but it shows how the economy as a whole changes when wages are changed and wealth gets consolidated at the top. There's simply not enough re-spending of money to keep the economy at previous levels. The same amount of money is present, but the money flow contracts. Now, when we talk about how exec salaries have increased, we have to realize that they have increased at the expense of labor. They weren't increased because the auto companies made that much more money, but instead because the labor cutbacks that have been going on for decades have allowed execs to claim more of the profit. This ends up rippling through they system in the way the model above shows. Because cash flow contracts when companies follow this model, it doesn't take many overpriced execs to have large consequences, because the impact is magnified as money that used to flow several times through the system is removed. So, when I say that employees aren't the ones being overpaid, it is because the employees do a lot more to keep driving the backbone of the economy, which in reality powers the profits of the company and keeps it able to pay the workers as much as it does.

[nini]

11. what the hell is wrong with you?

That kind of work???? That kind of work is not flipping burgers at the local McDonalds. There is a safety issue involved with the end product here. It is physical work. It is many things that warrant a decent salary. We are so conditioned to what the rich tell us a days work is worth we have lowered our standards for the American worker. $28 dollars an hour is NOT living high on the hog. It's a decent wage but hardly one that allows you to drive that lexus as you pull up to your fancy condo.


If we as a society continue to diminish the importance of decent wages and benefits we will continue our slide into the death of the middle class. There is nothing ridiculous about paying people enough money to house, feed and clothe their families for a job like this. If people can't make a decent wage for a decent job how the hell are we going to buy those products in the first place?

We used to pay those decent wages not so long ago and all of a sudden they're ridiculous? Shit like this is exactly why unions need our support.

I find it extremely interesting the bloated salaries and perks of the upper management seems to be not a big deal in their mess. There is not fucking way those assholes deserve their salaries - it's obscene on many levels. Yet people continue to blame the guy that actually puts in the hours and hard work just trying to survive.


:eyes:

[sendero]

12. What is "wrong" with me..

.. is that I live in the real world not some fairyland.

The US UAW automakers are not competitive. They are going to take a haircut whether you like it or not. Just like the one I took in 2002, and I got over it and went on with my life.

[spoony]

14. That "type" of work

What you mean is, that factory workers are uneducated apes, and that blue collar grunts don't deserve fair compensation. What "type" of work deserves that money, in your opinion? Who is worthy, since you've made it clear who isn't.

[gravity]

15. $55 an hour is over $100k a year

That is more money than the average college graduate makes, who spent years of studying to get where they are.

Unless you have a specialized skill that requires lots of training, $55 an hour is not competitive for that type of work.

[Nightflurry]

16. I made $14.

Tell me to my face that I made too much money working on the line. This is just pathetic. You'd be amazed how many people I worked with in the plant who did actually go to college, but couldn't find work in their chosen career field.


I'm sorry if our icky work offends you.

[gravity]

17. You didn't make enough

The problem is that the UAW demands made the wage differences between auto workers absurdly wide.

GM has to basically hire new workers at a low price, to make up for the workers that it has to pay high wages for. There is no middle ground here.

[Nightflurry]

18. And 28 isn't too much, either.

$28 that the older tier workers make isn't too much either. It's just enough to raise a small family on non-extravagantly and put a little away. I agree they should have evened out the wages all around rather than two-tiered, but it's a shame we have to describe a middle class job as being too much for someone to have.

[spoony]

20. No, there is no middle ground.

You either stand with unions, or you stand against labour. You've made it clear where you stand.

[mdavies013]

7. Here are some numbers on executive pay...the real reason why no one has the right

to complain that the average worker is paid too much:

2007 Ford - $22.8M

2007 GM - $14.4M

2007 Chrysler - Private company...not reported, however their CEO left Home Depot where he made $38.1M. His serverance with the company ($210 M in cash and stock, $20M severace, and $32M retirement benefits)

You also see when plants are closing or companies are shutting down, they raid the pension funds, pay bonuses and then stick it to the taxpayer. The worker gets 1/4 of what they had expected and worked for in retirment income.

Fuck everyone who says that someone getting paid a decent wage is earning too much.

Our parents may have earned less in dollar terms, but they had more purchasing power. The average american has been in a hole for a long time while CEO compensation has increasted over 2200%.

[sendero]

8. Executives...

.. are overpaid, but there are only a few of them. Cutting their pay to zero would have less impact than cutting the line workers pay $10.

You know, everybody should make $100 an hour, but unfortunately the world does not work that way. The big three are TOAST unless they can compete head to head with Toyota and Honda building passenger cars. And they cannot with the current compensation structure.

It's true that if GM/Ford/Chrysler fail, much of the "slack" will be taken up by American workers in non-union states. It that what you want?

UAW pay will either drop, or it will disappear altogether.

[mdavies013]

10. I am in no way saying that everyone should be making $100 per hour...

I am saying that people should be paid a living wage. One in which they can achieve the american dream...not the I can pack my house full of crap dream...the I can afford to pay my bills, take vacation, feed my family, pay my mortgage and not need to declare bankruptcy.

Executive pay - white collar jobs - pay is ridiculous. Anyone who does not think so is hitting the crack pipe. There is no justification for thier pay, especially when they run a company into the ground. There is no basis for bonuses if you run a company into the ground.

By the way, Toyota and Honda are subsidised by their government through currency value controls. In addition they do not have to worry about healthcare costs because they have universal healthcare.

Everyone is going to have to take a pay cut....and the workers have already volunteered. They are more interested in saving the company...they don't have a $20M severance package or $200M leaving bonus).

[Mike 03]

21. Thank Christ, just what we need, another one of these posts.

Sometimes I wonder if this is a forum for auto union guys only or something. It is a bit ridiculous.

[Cleita]

23. Even if they got $73 an hour in their checks, why are their panties in a wad

and not about Rush Limbaugh, who makes $18,865 and change an hour?