A minimum auto manufacturing wage?
Stop laughing. Detroit auto has repeatedly driven home the argument that UAW wages at $28+ per hour are too expensive over those paid by Asian transplants making Detroit uncompetitive in the market.
With the bankruptcy of GM and Chrysler, the UAW agreed to reduce wages for new employees and establish a core (direct line assembly) and non-core (material handling, etc.) labor rate between $14-$16 per/hour. Theoretically, employing these concessions would eliminate the wage gaps between domestic and foreign manufacturers lowering the suggested retail of new Detroit iron.
In a letter written to Ron Gettelfinger president of the UAW, I raised concerns that even as the UAW and Detroit worked diligently toward wage parity, concessions made by the UAW are not incumbent on foreign transplants. Simply put, Asian rivals have no formal contracts imposed on their work force and are not encumbered to pay a specific wage scale regardless of UAW concessions but only to pay "market wages," a basic principle of capitalism.
To that end, can Detroit and the UAW in spite of their best effort reduce contractual wages to a level that will make American manufacturing competitive? Keep in mind, all Asian transplants are located in southern states (where even $10 per/hour could possibly be considered a living wage especially in one of the most difficult economies the United States has undergone since the Great Depression.
Imagine if you will an unregulated federal minimum wage, migration of commerce across state boundaries would wreak havoc on state budgets as corporations sought the lowest paying per/hour state wages. A federally mandated minimum wage brings stability to job markets and seeks to prevent wage competition among states eliminating wage warfare.
In my letter to Gettelfinger, I expressed this might be the best opportunity for the UAW to establish a "floor" for wages throughout the auto industry both foreign and domestic within the United States. He has said on many past occasions, "Detroit and the UAW were in a race to the bottom" as they try to compete with foreign rivals even as the UAW continually made concessions on behalf of its members to improve the balance sheets of domestic manufacturers only to continually rack up concession after concession.
Socialism you say? My friends we crossed that milestone months ago with the government takeover of GM, Chrysler, AIG and Citi Group. Again, critics would say that such an outlandish proposal would simply benefit Detroit automotive and the UAW. In defense, I would say not true.
I remind you the taxpayer, the U.S. Treasury has lent Detroit auto $81 billion of your money. Failure is not an option going forward for Detroit and now you, too.
Comments
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Failure Is Not An Option
This reader finds it a bit disingenuous when the writer states that if Detroit and the uaw try to compete with the companies that produce the best cars, it's a race to the bottom. I think the teacher unions claim the same when any attempt is made to introduce measures that allow our kids to compete with countries that do education better. I think the writer would garnish more credibility if he were to simply be honest and say that he does neither like nor want competition.
Failure Is Not An Option
Ron,
Well, sort of, it is, since the US auto industry did fail - absent a massive government intervention.
Suggeting that something that actually has happened is inconceivable is, in my opinion, silly.
And back to the $81B, it is sunk, water over the bridge, bad money.
Your argument i fundamentally if we don't subsidize the UAW on the backs of the consumer we will have to subsidize on the back of the government ... again.
Well, I don't accept this. Next time the Big 3 or some subset of it fail, and it won't take long, 12-18 months is and has been my prediction, I sat we let the bankruptcy courts sort it out without the providential hands of your sympathetic buddies in the White House and Capitol Hill steering us toward the Socialistic Promied Land.
Minimum wage for auto workers
Spearo, Mt. Vernon, Oh.
Thanks so much for your comments. Do not know your attachment to the auto industry but my comments are based on 32 yrs. of experience. Yes, I fully understand your argument pertaining to fixed and non-fixed expenditures but overall employee payroll is by far one of the costs management looks at first. When I worked in accounting before the auto industry the big shots would come out from NY office every Fiday after payday grab the payroll register and the comptroller and research that document to no end. There was no union at that company and hourly workers who were at the top of their scale had OT reduced first and then some were pushed out in favor of new hires at greatly reduced rates.
One item however that has never been high on Detroits list of where to locate an assembly facility has been close proximity to schools. As far as the land, many states will almost give it away if a manufacturer (any) with the prospect of hiring a great number of people will set-up shop in their state. Taxes (local and real estate) will be abated as a lure to bring industry in so there again not a big concern for management.
And you are correct, some states have higher minimum wage rates above the federal level. NJ is one such state and as a result unemployment is high and part-time jobs for kids (age 16+) are hard to come by.
Ross Perot had one famous line he repeated constantly, "follow the money". And yes they do.
Minimum wage for auto workers
The writer presumes that wage levels are the predominant factor in determining where a plant is located. Demonstrating that there is an available and capable workfoce tends to be the first consideration, followed by economic matters, of which wage levels are but one component. Closeness to market, cost of land, taxes, schools and receptivity by the local community enter into these decisions as well.
Even the spouses of executives often weigh in on any number of matters, including the availablility of work in their chosen profession, housing and quality of life concerns.
If wage levels were the primary driving force, I suspect that every North American auto plant would be located in Mexico. In spite of Ross Perot's giant sucking sound, jobs marching southward haven't been that deafening. And, with crime going crazy down there, sending off an American to act as an executive down there involves the equivalent of combat pay.
There already is a federal minimum wage and a number of states have decided to create their own. Creating one for the auto industry would leave other industries and their unions wondering if they might also wind up with a similar mandate. It would be the economic equivalent of the Jerry Springer show, played out in every manufcturing town in America.
Rumors of the death of capitalism are greatly exagerated. Detroit and transplants alike are engaged in a battle for the hearts and minds of the American consumer - as it should be. The market will work it all out. We just need to hang on.
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