What’s Good for GM Is Bad for Labor
Cutting and Running on American Workers
Back when labor wasn’t an expletive for management and media, you could expect news outlets to report labor conflicts at least partially from workers’ perspective. Not anymore. Workers today are incidental to the stories, mattering the way wheat and oats futures matter in the pits of the Chicago Board of Trade — as commodities. Last week’s General Motors labor deal shows how. What was reported in the national press read like excerpts from GM’s annual report: The company did what it did — replacing six decades of generous health and retirement benefits with hope and a trust fund — because market forces and shareholders demanded it. The United Auto Workers union’s 181,000 employed members might as well have been nameless guest workers in the background. That, in fact, is just what they’re being turned into.
The GM deal won’t affect the auto industry alone. Just as auto union contracts once created “an industrial aristocracy of blue-collar workers whose pay and benefits set the standard for the American middle class” (as the Wall Street Journal put it last week), the systematic busting of benefits once gained through union-led bargaining is lowering that quality across industries. Companies alone, however, aren’t to blame for this degradation.
A little memory-jogging. The United Auto Workers’ union was formed in 1935. Through successive contracts and a few strikes between 1950 and 1970, years of rapid growth and wealth for the American economy, the union won significant benefits to go with hourly wages. By 1970, GM was providing full health coverage to active workers, retirees and surviving spouses of retirees, plus prescription-drug coverage, plus eligibility for retirement after 30 years. GM called it “concessions.” I prefer to call them basic rights, the kind of rights workers and their spouses enjoy in all other industrialized country without being derided as claiming favors, hand-outs or concessions.
GM’s commitments mean that each hour of labor costs $73 ($31.75 in wages, $22 in health care, $19.25 in pension, insurance and other benefits). That compares with $45 to $55 an hour for Japanese auto workers. It makes it hard to compete. It so happens that American car makers’ products are significantly clunkier than those of their Asian rivals and much less in demand than they once were. Toyota’s U.S. market share now exceeds Ford’s and Chrysler’s and is gaining on GM’s fast. Even putting that bit of reality aside for a moment, it still leaves 340,000 retirees for GM alone to take care of, a $51 billion obligation. Considering that GM lost $12 billion in the last two years, it’s not hard to sympathize with a company that’s been parallel-parking next to bankruptcy for the last few years.
That still doesn’t mean GM made foolish promises to its workers for 60 years, or that the company is right to cut and run now under the guise of competing more evenly with Asian auto makers (it’ll be buying out a slew of contracts, and abandoning its retirement fund to a “trust,” hoping that the trust can generate enough income to sustain its obligations. In other words, to a bet). What the business stories don’t tell you about those $45 to $55 an hour labor costs for Asian companies is how richly subsidized they are. True, Toyota, Nissan and Honda don’t have to provide retirement health benefits and prescription drugs to their workers. But their government does. So do the governments of auto makers in Germany, France and Italy, where the health care system is a less expensive, better-quality and universal version of America’s Medicare.
The solution isn’t to bail on workers, as the market-driven corporate playbook now has it. It’s for government to help companies even out their competitive position by taking on the health-care burden every other industrial nation’s government takes on. Some companies, including Detroit’s, are trying to compel government to do just that. But it’s token lobbying, not the kind of concerted effort that — if corporate America was truly committed to it, and without playing vassal to the insurance industry — would make national health care a reality faster than the Patriot Act became law in 2001. Instead, workers are increasingly getting the worst of all possible worlds. They’re being forced to make concessions to their companies to save their jobs while government sits by, a solution in hand, but indifferent. Or, rather, still subservient to the nation’s Reagan-era motto: “In business we trust.”
So benefits are cut, pensions ended, jobs eliminated and promises to retirees left to the whims of chance, making the American workforce a mirror of that other former backbone: the nation’s creaky, battered infrastructure. When lawmakers get involved, it’s to tax less, regulate less and question not at all. Economic Darwinism of this sort might make us more competitive for a while. But it’s also making monkeys of us all again.