Several media outlets have used data that combines the average cost of current wages and benefits and future benefits to falsely assert or suggest that autoworkers make $70 or more per hour. But, as analysts and some media outlets have noted, the figure includes not only future retirement benefits for current workers, but also benefits paid to current retirees.
As Congress debates whether to authorize a multibillion-dollar bailout of the U.S. automotive industry, several media outlets, notably New York Times columnist Andrew Ross Sorkin, nationally syndicated radio host Lars Larson, and MSNBC's Chris Matthews, have used data that combines the average cost of current wages and benefits and future benefits to falsely assert or suggest that autoworkers make $70 or more per hour. But, as analysts and some media outlets have noted, the figure includes not only future retirement benefits for current workers, but also benefits paid to current retirees. Further, the “Big Three” U.S. automobile makers negotiated with the United Auto Workers (UAW) in 2007 to significantly reduce the salary and benefits packages for certain new employees, a fact that Larson and Matthews did not note.
Despite the misleading nature of the $70 per hour claim, it continues to be repeated. In a November 17 New York Times column, Sorkin described General Motors employees' benefits as “off the charts” : “At G.M., as of 2007, the average worker was paid about $70 an hour, including health care and pension costs.” Contrary to Sorkin's suggestion, the “health care and pension costs” include health care and pension benefits for current retirees, and not what an “average worker was paid,” according to GM. The Associated Press reported:
GM, which negotiated the four-year deal that serves as a template for UAW deals with Chrysler and Ford, says its total hourly labor costs dropped 6 percent this year from pre-contract levels, from $73.26 in 2006 to around $69 per hour. The new cost includes laborers' wages of $29.78 per hour, plus benefits, pensions and the cost of providing health care to more than 432,000 GM retirees, GM spokesman Tony Sapienza said.
On the November 20 edition of Hardball, Heritage Foundation senior research fellow James Gattuso stated, “I think that there'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.” Matthews responded, in part: “They negotiate for their salaries, and they're getting 70 bucks. So that's how the free market works.” While speaking about the “unskilled, high-school graduate workers” in U.S. auto plants on his November 19 radio show, Larson said, “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.” Contrary to Gattuso's, Matthew's, and Larson's assertions, a UAW worker is not “get[ting] total compensation of $70 an hour.”
In a November 18 post on his American Prospect blog criticizing Sorkin's reporting, economist Dean Baker wrote that the $70 figure Sorkin used is distorted by conflating “legacy” costs -- medical benefits and pensions paid to retirees -- with current labor costs:
The New York Times told readers that GM's autoworkers are paid $70 an hour (including health care and pension). This is not true. The base pay is about $28 an hour. If health care cost per worker average $12,000 per year, that adds in another $6 an hour. If the pension payment takes up 25 percent of base pay (an extremely high pension), that gets you another $7 an hour, bringing the total to $41 an hour. That's decent pay, but still a long way from $70 an hour.
How does the NYT get from $41 to $70? Well the trick is to add in GM's legacy costs, the pension and health care costs for retired workers. These legacy costs are a serious expense for GM, but this is not money being paid to current workers. The person on the line in 2008 is not benefiting from these legacy costs.
The UAW also notes that the auto companies frequently inflate their labor costs by combining all of the expenses attached to maintaining their workforce:
In addition to regular hourly pay, the labor cost figures cited by the companies include other expenses associated with having a person on payroll. This includes overtime, shift premiums and the costs of negotiated benefits such as holidays, vacations, health care, pensions and education and training. It also includes statutory costs, which employers are required to pay by law, such as federal contributions for Social Security and Medicare, and state payments to workers' compensation and unemployment insurance funds. The highest figures sometimes cited also include the benefit costs of retirees who are no longer on the payroll.
From Sorkin's November 17 New York Times column:
G.M. currently employs about 8,000 people who actually don't come to work. Those who do go to work are paid about $10 to $20 an hour more than people who do the same job building cars in the United States for foreign makers like Toyota. At G.M., as of 2007, the average worker was paid about $70 an hour, including health care and pension costs.
Those costs are already coming down slightly because of a renegotiated deal with U.A.W. last year, but not nearly enough.
LARSON: When Detroit is making cars at $73 an hour to its line workers, its unskilled, high-school graduate workers, and I'm a high school graduate as well. 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.
From the November 20 edition of Hardball with Chris Matthews:
MATTHEWS: Don't we need factory workers to be a healthy society?
GATTUSO: Well, first off, in the auto industry, were -- it's not a matter of losing factory workers to keyboards. It's -- to a large extent, losing factory -- UAW jobs for non-UAW jobs. Jobs in Michigan for jobs in Tennessee --
MATTHEWS: Do you think that's a good change? That's a good --
GATTUSO: -- or jobs in Michigan for jobs in Indiana.
MATTHEWS: You like having non-union labor? Is that a healthy thing?
GATTUSO: I think that there'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.
MATTHEWS: Well, you negotiate for your salary, and they negotiate for --
GATTUSO: And there's no reason that the average American should have to pay for that UAW worker.
MATTHEWS: Sir, you negotiate for your salary at the Heritage Foundation or wherever. They negotiate for their salaries, and they're getting 70 bucks. So that's how the free market works.
GATTUSO: And if Heritage didn't have the money to pay me -- which, you know, I hope they do -- but if they didn't have the money to pay me, I wouldn't go to the government asking for more money. I would have to take a lower salary.