Later On

A blog written for those whose interests more or less match mine.

Lies from the Right: the $70/hour auto worker

with 4 comments

Eric Boehlert takes down the canard about autoworkers making $70/hour:

It’s been one week since New York Times financial columnist Andrew Ross Sorkin wrote that at General Motors, “the average worker was paid about $70 an hour, including health care and pension costs.”

The nugget was part of a column in which Sorkin argued that the government should not bail out the ailing Big Three automakers and that they instead should embrace bankruptcy.

Sorkin’s point was that labor costs were out of control — workers enjoyed “gold-plated benefits” — and that during bankruptcy, the auto companies could address those runaway wages.

As I mentioned, it’s been one week since the column appeared, which seems like plenty of time for Sorkin and the Times to correct the misleading $70-an-hour claim. But to date, there’s been no clarification from the newspaper of record or from Sorkin himself.

And he isn’t alone. Appearing on NPR last week, Times senior business correspondent Micheline Maynard told listeners that the “hourly wage” of Detroit’s union autoworkers had been driven up “towards $80 an hour.”

Somebody at the Times needs to clarify the record, because the average United Auto Workers member is not paid $80 an hour. Or even $70. Not even close. Yet (thanks to the Times?) the issue has become a central talking point in the unfolding national debate about the future of America’s automotive industry.

Indeed, that $70-an-hour meme, actively promoted by the anti-union conservative media, has ricocheted around the traditional press as well as the political landscape, where it was picked up by congressional critics last week during hearings and used to argue against aiding GM, Ford, and Chrysler.

For the record, I’m not from Michigan, and I don’t have friends or family members who work in the auto or auto-supply business. And honestly, I think there are compelling arguments on both sides of the question about whether to bail out the U.S. auto industry. So I’m genuinely torn on the issue. But what’s obvious to me is that it’s harmful to public discourse when the press, on such a central issue facing our country, fails to clearly state the facts and instead perpetuates misinformation with sloppy reporting — reporting that seems to hold blue-collar workers to a different standard than their white-collar counterparts.

Last week, Senate Majority Leader Harry Reid (D-NV) announced that automotive executives should return to Washington in coming weeks to “make their case, to the Congress and the American people,” for a federal bailout. And as Times columnist and Nobel Prize winner for economics Paul Krugman wrote recently, “[M]aybe letting the auto companies die is the right decision, even though an auto industry collapse would be a huge blow to an already slumping economy. But it’s a decision that should be taken carefully” [emphasis added].

But having the media echo conservative misinformation and bandy about urban-myth salary figures about allegedly high-on-the-hog GM workers does not constitute a careful review of the facts.

Question: Is the press just being sloppy on this issue of supposedly pampered autoworkers, or are there other elements in play? Because honestly, I’ve had trouble escaping the not-very-subtle elitist, get-a-load-of-this tone that has run through the media’s misinformation on the topic; i.e., “These autoworkers get paid that?!”

Answer: No, they don’t, so please stop reporting it. (And why has the press been so reticent to note that Big Three autoworkers recently made significant concessions to management?)

And it’s funny, because I don’t remember hearing much coverage in the press about AIG workers’ six- and seven-figure salaries when the U.S. government announced it was bailing out the insurance giant. And I haven’t seen or heard a single press reference to the annual salaries pocketed by Citigroup employees, even though the government has moved in quickly to bail the banking giant out of a hole its executives dug.

As Rep. Barney Frank (D-MA) pointed out during congressional hearings last week, “There is apparently a cultural condition that’s more ready to accept aid to a white-collar industry than the blue-collar industry, and that has to be confronted.”

That cultural condition seems to extend to, and be embraced by, today’s white-collar press corps.

Make no mistake: The $70-an-hour claim represents a classic case of conservative misinformation. It’s also a very dangerous one. The falsehood about autoworkers is being spread at a crucial time, when a make-or-break public debate is taking place, a debate that could affect millions of American workers.

  • “Lavish contracts granted to the United Auto Workers, for instance, put GM on the hook for more than $70 an hour per worker.” [New York Post]
  • “The United Auto Workers are keen on saving their jobs and the $70-an-hour paychecks that go with them.” [National Review]
  • “[T]here’s no reason that a UAW worker should get total compensation of $70 an hour when the average American only makes about $25 an hour in total compensation.” [James Gattuso, from the conservative Heritage Foundation, appearing on MSNBC]
  • “Given that we’re in tough economic times, it’s hard for the average American to muster a lot of sympathy for workers at the Big 3 automakers when all of the companies pay out over $70 per hour in wages, pension and health care benefits.” [Right Wing News]
  • “The bailout as proposed today is a bailout of the UAW; it’s not the auto industry. A Big Three worker in Detroit makes $73 an hour if you include all the benefits.” [Conservative columnist Charles Krauthammer, appearing on the syndicated television show Inside Washington]
  • “Companies at which union workers make $71 an hour in wages and benefits — compared to just $47 an hour at Toyota’s U.S. plants — are not going to be saved by a $25 billion government check.” [Former House Speaker Newt Gingrich, writing at Human Events Online]
  • “Big Three union workers, with their gold-plated health care plans, make about $73 an hour in total compensation.” [Conservative columnist Amanda Carpenter at Townhall.com]
  • “When you’re paying $73.73 an hour to those people with salary and benefits and your competition is paying $48 to its workers, you’re going to get your butt kicked in the marketplace unfortunately.” [Conservative radio host Lars Larson]
  • “The average Detroit autoworker makes more than $100K each year.” [On-screen Fox News graphic]

Let’s note that any suggestion in the press that most UAW workers earn, or are paid, $70 an hour is spectacularly dishonest. Period. (As one Daily Kos diarist pointed out last week, according to the UAW website, the base pay for a worker in a UAW plant is about $28 an hour.)

What that $70 figure (or $73) actually represents is what it costs GM in total labor expenses, on an hourly basis, to manufacture autos.

Do you see that there’s a big distinction? General Motors doles out $70 an hour in overall labor costs to manufacture cars. But individual employees don’t get paid $70 an hour to make cars. (The discrepancy between costs and wages is explained by additional benefits, pension fees, and health-care costs GM pays out to current and retired employees.)

Simply put, GM’s labor costs are not synonymous with hourly wages earned by UAW employees. Many in the press have casually used the two interchangeably. But they’re not.

Felix Salmon at Portfolio did perhaps the best job explaining the misinformation at play:

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. [emphasis in original]

Indeed, according to this Associated Press report, a chunk of GM’s $70-an-hour labor costs goes toward paying current retirees’ pensions and health-care coverage. In other words, that’s money that’s not going to end up in the pocket of any autoworker when he cashes his paycheck this week. That’s money GM has to set aside in order to pay off costs associated with workers already in retirement. That money has absolutely nothing to do with calculating the hourly wage of a full-time UAW employee today. None.

So, no, UAW workers don’t make $70 an hour even if you factor in benefits, because a portion of those benefits are going to people who retired years ago.

Nonetheless, that formulation (wages+benefits=$70 an hour) has been widespread. That’s what Sorkin did in his Times column: “The average worker was paid about $70 an hour, including health care and pension costs.”

Not only is that inaccurate, but there’s also a problem in terms of perception. It’s true that autoworkers don’t earn annual salaries and that when calculating hourly wages, the cost of benefits paid directly to the worker can be included. But some media outlets have been so casual and sloppy in presenting the facts that news consumers are left with the false impression that GM workers pocket $70 an hour. That’s not true, and it seems some in the press are doing very little to correct that misperception.

For instance, BusinessWeek also used the same convoluted language: “Older UAW members make more than $70 per hour in combined wages and benefits.” Dallas Morning News columnist Cheryl Hall did it, too: “GM’s average worker makes $78.21 an hour in wages and benefits.”

Why does the press use that convoluted equation when calculating how much autoworkers supposedly make?

I have a hunch it’s because that $70 an hour is a real eyepopper. It makes a very deep impression within the space of just a few words.

I’m sure everybody understood the $70-an-hour implication in Sorkin’s column, especially since he also lamented the “gold-plated benefits” UAW workers enjoyed. (They were “off the charts,” he stressed.) And since it’s harder to back up a claim of gold-plated benefits by citing the actual hourly wage of UAW workers ($28), Sorkin went with the $70 figure, along with completely nebulous language about “health care and pension costs.”

The takeaway from Sorkin’s column was quite clear: GM is mismanaged, and its workers are wildly overpaid.

By the way, here’s the right way to cover the issue: In a November 18 column, the St. Louis Post-Dispatch‘s David Nicklaus wrote that the Big Three “need to bring their labor costs, which average $72 an hour, closer to the Honda or Toyota level of about $45.” Note how Nicklaus never implied that labors costs equaled take-home wages. Why? Because they don’t. (And kudos to Washington Post business columnist Steven Pearlstein, who refuses to use the $70-an-hour figure because it’s so misleading.)

How much money GM’s workers make is certainly relevant when discussing the unfolding automotive crisis. But the press should stop confusing the issue, and tainting the perceptions of news consumers, by casually suggesting that $70-an-hour labor costs represent what UAW workers pocket every 60 minutes.

That’s misleading and dishonest.

And that’s why it’s still not too late for Sorkin and the Times to correct the record.

Written by LeisureGuy

29 November 2008 at 8:51 am

4 Responses

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  1. The person who wrote the above post does not come from the automotive industry and clearly has no idea what they are talking about.

    Anonymous

    29 November 2008 at 9:58 pm

  2. Could you explain your statement? As it stands, it’s tantalizing but uninformative. We already knew that Eric Boehlert doesn’t work in the auto industry. But where does he go wrong in his analysis? (Normally I would delete a content-free comment, but you seem to have something pertinent to say.)

    LeisureGuy

    30 November 2008 at 6:32 am

  3. For the last 60 years, the American automotive industry has suffered from two major burdens. Firstly, the burden of the mismanagement of the leadership of the Big 3, who failed to see the changing of the landscape in a changing economy. They failed to see after the oil crisis of the early 1970′s, that smaller, more fuel efficient vehicles had a necessary role to play going forward. Their Japanese counterparts, did not miss these signs and began importing these types of vehicles and Americans bought them. This clearly falls at the feet of the automakers.

    They also were very late to the game in upgrading the quality standards of the vehicles they built. The UAW and the Big 3 top management had an equal share of the blame here.

    As for the comments around the hourly wage discrepencies between the Foreign on Shore (FOS) transplants and the Big 3, that does come from large discrepensies in both the hourly wage they receive but more importantly, the significant costs the Big 3 are forced to bear due to such requirements as continuing to pay laid off workers at roughly 85% of their current wage, an unrealistically low cost sharing arrangement for health care and other fringe benefit costs.

    Having worked as an executive in the automotive industry during the 1990′s it was clear, particularly to the Tier One supply base, that these problems would come home to roost. By far, the best thing that could happen is for the Big 3 to either consolidate or to enter Chapter 11 reorganization or a combination of both. The mismanagement of the approach to the market by the leadership of the Big 3 is to blame as much as the UAW and its unrealistic demands of employers which were clearly not sustainable. The landscape of the U.S. auto industry has changed so dramatically in the last twenty years that in order to survive, the above changes will need to be made.

    So in my response to Mr. Boehlert’s original post, he clearly has a partisan axe to grind. He spends so much time in the weeds on hourly wage analysis he neglects (or simply doesn’t know) that the other elements of the collective bargaining agreements between the automakers and the UAW play a more substantial part of the costs structure then is being discussed.

    The trouble with the U.S. auto industry rests with both sides. It can be argued that it cannot be fixed from inside and may require the expertise of turn around specialists, who may not be experts on building cars, but are experts in recognizing unstainable business models and turning around unsuccessful businesses.

    Anonymous

    30 November 2008 at 8:09 am

  4. My understanding is that one cause of the massive problems facing the Big 3 is that the companies used pension-fund money for other purposes. The Big 3 signed the contracts requiring the payment of substantial pensions and then short-changed the fund, preferring to use the money for other purposes. Is that correct? (Here’s a news story on the topic.)

    I think Boehlert had reached a point of frustration with how reporters continually state that US autoworkers make, on average, $70/hour—which, as he points out, is simply untrue.

    Many thanks for clarifying your original post. Good report.

    LeisureGuy

    30 November 2008 at 8:15 am


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