Big Money

by digby

We are hearing more and more about those incredibly overpaid, cushy 70 dollar an hour autoworker jobs and if it sound fishy, it’s because it is. I know all of you remember that the UAW very recently had a big brouhaha with the auto companies (that’s what the Jim Cramer meltdown was all about) and guess what they created a whole new regime for pensions and health care — which are part of that 70 dollar an hour figure. It was only a year ago, but you’d think it never happened.

Anyway, here’s a great little piece By Jonathan Cohn on the real story, which points out something that is very inconvenient for the “right-to-work” politicians who are flogging the idea of bankruptcy: when the new UAW contract kicks in, the union members will actually be making less than non-union autoworkers.

In 2007, the Big Three signed a breakthrough contract with the United Auto Workers (UAW) designed, once and for all, to eliminate the compensation gap between domestic and foreign automakers in the U.S.The agreement sought to do so, first, by creating a private trust for financing future retiree benefits–effectively removing that burden from the companies’ books. The auto companies agreed to deposit start-up money in the fund; after that, however, it would be up to the unions to manage the money. And it was widely understood that, given the realities of investment returns and health care economics, over time retiree health benefits would likely become less generous.In addition, management and labor agreed to change health benefits for all workers, active or retired, so that the coverage looked more like the policies most people have today, complete with co-payments and deductibles. The new UAW agreement also changed the salary structure, by creating a two-tiered wage system. Under this new arrangement, the salary scale for newly hired workers would be lower than the salary scale for existing workers. One can debate the propriety and wisdom of these steps; two-tiered wage structures, in particular, raise various ethical concerns. But one thing is certain: It was a radical change that promised to make Detroit far more competitive. If carried out as planned, by 2010–the final year of this existing contract–total compensation for the average UAW worker would actually be less than total compensation for the average non-unionized worker at a transplant factory. The only problem is that it will be several years before these gains show up on the bottom line–years the industry probably won’t have if it doesn’t get financial assistance from the government.

At this point it’s up to all those really smart guys in suits and ties (who are naturally worth every penny of their salaries because they’re such superior humans) to figure out how to keep the companies going. The unions did their part already.

One things pretty clear. The Republicans aren’t angling for bankruptcy because they want to protect their own own non-unionized auto industry from competition. They just want to break the unions because the opportunity is there and it’s what they live for. And the result will be that wages will probably go down for their own constituents. Of course, the presumes that their constituents are people who live in their states and districts. If you look at the bigger picture it’s clear that their constituents are those who stand to make a profit from lowering wages.