At the White House, Mr. Biden’s aides believe the battle between the car companies and its workers will underscore many of the president’s arguments about the need to reduce income inequality, the benefits of empowered employees, and the surge in profits for companies like the automakers that makes them able to afford paying higher wages.
Ford reported a first-half profit of $3.7 billion, up from a loss of $2.4 billion in the first half of 2022, with revenue growing 16 percent.
New York Times
As this quote shows, high profits or any profits are not a constant climb. This is especially true in a competitive world economy. There won’t always be a surge in profits.
It is foolish for a company to commit to higher and compounding fixed costs. If the UAW workers were to receive the initially requested 40% raise over four years, that would translate to much more when you add the employers share of payroll taxes and pension funding – both irrevocable pay related commitments.
Both parties must exercise fiscal responsibility and ignore the politicians trying to equate CEO compensation and current profits to the ability to agree to long term cost increases.
If you divide the total compensation of the three CEOs by the number of UAW workers at the automakers, each worker gets $516.
A fair package is possible, but if the union and companies were smart and cautious they would provide the bulk of the worker increased income using expanded profit sharing arrangements.
An overly generous package of higher fixed costs based on current conditions among the companies is risky business for both the workers and companies. That was demonstrated back in 2008. Has anyone learned the lesson?
Ignore the politicians.
A key difference between Tesla’s compensation plan and that of the UAW workers revolves around company upside. UAW workers have been getting profit-sharing bonuses while Tesla workers receive stock options, which don’t have a direct cash cost to the company. Over the years, Tesla shares have risen like a rocket, though there have been periods of turbulence. Shares this year have more than doubled.
Wall Street Journal 9-16-23
QUINNSCOMMENTARY 
I don’t care what they negotiate so long as I, a taxpayer, don’t have to be called upon to bail out GM, Ford or Stellantis when they fail. Back in 2008, it was taxpayers who backstopped those guys, directly and indirectly, with contributions to VEBAs, unique tax preferences, Cash for Clunkers, etc.
Sometimes it takes a circuitous route such as tax credits for EV purchases, the Inflation Reduction Act, etc.
Or, how about S.547, the Butch Lewis Emergency Pension Plan Relief Act of 2021, the bailout of union pension plans that became part of The American Rescue Plan Act of 2021, Pub. L. 117-2. Remember, it is not as if Congress and various presidents didn’t know/understand the underfunding of union pension plans. After all it was President Carter (yes, Jimmy Peanut) who signed the Multiemployer Pension Plan Amendments Act of 1980 (Pub. L. 96-364) on September 26, 1980. Congress avoided taking action, over and over and over, to force unions and management to stop colluding and raise funding levels for four decades – until they found a vehicle where the unions and management could pocket their profits and shift the liability to taxpayers.
Stop! Stop I say! Put the workers and management at risk, and let em negotiate to their heart’s content – and bear the consequences.
I especially like one of the headlines of an article in today’s print edition of the Wall Street Journal: Whatever the UAW Strike Outcome, Elon Musk Has Already Won. Detroit automakers entered labor talks at cost disadvantage to Tesla.
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Taxpayer beware
GAO study,
Published: Oct 19, 2020.
“Millions of American adults who earn low wages rely on federal programs to meet basic needs, such as Medicaid for health care and the Supplemental Nutrition Assistance Program for food.
We found:
About 70% worked full time
Most worked for private sector employers in places like restaurants, department stores, and grocery stores.
Others worked for state governments, public universities, or nonprofit organizations…”
“Other corporate giants who have a large number of workers* relying on federal benefits included Amazon, Dollar Tree, Dollar General, Burger King, Wendy’s, Taco Bell, Subway, Uber, FedEx, Target, Dunkin’ Donuts, CVS, Home Depot, and Lowe’s.”
Are we taxpayers subsidizing low income workers, or are we subsidizing their employers? Some of these low income workers are temporary, just passing through. As a state government employee my first few years, I qualified for child care subsidy. With my second promotion, I moved out of that income bracket, but I still know several career State clerks (CA) and laborers on section 8 housing, SNAP, etc.
*large number of workers is relative. I saw several articles suggesting that about 2-3 percent of Wal-Mart workers qualify, but that is still a big number.
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Everything is linked, higher wages = higher prices or lower profits or or both or perhaps fewer jobs and more technology or higher inflation. Lower profits = lower stock prices = more pension funding needed or lower 401k growth. Nothing is without some cost somewhere.
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Higher wages for whom?
There is an interesting phenomenon with government workers, verified by both liberal and conservative studies, to a large degree. I call it the flaw of averages. It varies by state or locality, but overall, public sector workers on average earn about the same total compensation as —equivalent— private sector workers. (Total compensation is wages plus the value of all benefits. Generally, public workers earn lower wages than equivalent private workers, but have higher benefits.)
However, within this average, there is a continuum, which can be divided into three groups.
1. Lower paid public workers earn about ten percent more than equivalent private workers. Usually, their wages are equal to or lower than the private sector. The ten percent advantage comes from better pensions and healthcare, particularly retiree healthcare.
3. Higher level government workers; PhD and professionals, earn significantly lower wages, and the higher benefits are –not– sufficient to compensate for lower wages. The difference in total compensation is about ten percent.
2. In the middle are the Goldilocks workers. For a large group of public workers, higher benefits roughly compensate for lower wages, so the total compensation is ” just right”, or roughly equal to similar private sector workers.
In groups 1 and 3, all ten percents are not equal. For the lower group, ten percent is about a $3,000 advantage over the private sector. For the professionals, ten percent is about a $10,000 dis advantage. (Data from 2008-2012) But the groups are not the same size, group 1 is about 30-40 percent of public workers, and group 3 about ten percent.
Random thoughts, 1. Since the overall average pay, public to private, is roughly equal, it appears the higher level public workers are essentially subsidizing the lower level workers. 2. Public workers are more egalitarian, or less unequal than the private sector. 3. Since government is about twelve percent of the workforce, without their influence, private sector disparity would be even greater. 3. If, heaven forbid, private sector emulated the public sector by a ten percent decrease in the income of higher earners, and a ten percent increase for lower earners, the U.S. would likely still be more unequal than most OECD countries, but it’s a start.
One of the first things we learned in Econ 101 is that the free market, or “perfect competition” leads to a more efficient distribution of resources. The next thing we learned is there is no such thing as perfect competition.
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I think you will find government workers in all categories come out ahead. Pensions and retiree benefits are powerful components. https://www.bls.gov/news.release/pdf/ecec.pdf
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No, I didn’t find that.
Page 16,
Private sector workers in establishments with 500 or more workers.
Cost: $59.47 per hour
“state and local government workers averaged $58.25 per hour” page 1, 6
How many states, counties, or even cities have fewer than 500 employees? Rhetorical question. Public workers should be compared to private workers in large establishments. *
BLS data also confirms that public worker salaries are a smaller component of compensation (61.6 percent) than comparable private workers (65.4 percent) and that private workers have more paid leave (9 percent of compensation vs. 7.3 percent for public.)
I don’t believe BLS is being intentionally deceptive. On page 3, every month, is the boilerplate disclaimer:
“Comparisons: Compensation cost levels in state and local government should not be directly compared with levels in private industry. Differences between these sectors stem from factors such as variation in work activities and occupational structures.”
But, even when you use reliable data, it can be misinterpreted.
*Private workers in establishments over 500 are a little over 50% of the U.S. workforce.
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Still, something is intrinsically wrong if a “boss” “earns” more in one month than a “worker” earns in a lifetime. Forgive the scare quotes, but it is scary. I mean, fine, pay him all you want, then tax him proportionally.
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Why wrong? That’s a problem for the BOD and shareholders. The CEO pay which is nearly all stock or at risk has nothing to do with worker pay. The very comparison is a false narrative promoted by politicians mostly on the left. Are the CEOs all worth their compensation? Probably not, but still a shareholder problem. I do favor wider U.S. of profit sharing schemes though.
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rd Quinn : “Are the CEOs all worth their compensation? Probably not, but still a shareholder problem.”
“Intrinsically” is the most appropriate word I could come up with.
Are —any— of the CEOs worth their compensation? No way, and it’s not just a shareholder problem.
It is a failure of the market. A socio-economic problem, and it’s not just unfair, it is unsustainable and dangerous.
Not just CEOs, by the way, it’s mid level management and marketing and legal, etc. Realistically, in the U.S., probably everyone in the top twenty percent income group are paid more than what they are worth. Intrinsically.
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How is it unfair? Who does it hurt? It’s like saying the wealth of Musk, Bezos, and company is unfair? Their wealth does not take a piece of a limited pie from anyone. How much of the overall value they have created should be considered?
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1. “Owners”, may be slightly different from employees, even high level ones (I believe I just read that Zuckerberg takes a dollar a year salary, FWIW). ” Tax the rich” still applies.
2. You seem to imply that without Musk or Bezos, we would somehow be worse off, financially or otherwise, as if their businesses could not have been duplicated, or even surpassed, by other entrepreneurs. That defies logic. Even so, ” Tax the rich” still applies.
When one man, or group has huge amounts of money, they have dangerous political and social power. When millions of full time workers are below poverty level*, you have a political, social, and economic disaster.
*again, through no fault of their own.
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The political power can be, may be a problem, not their wealth as such. The power problem is our fault by voting the same people into office decade after decade thus placing in a position to be influenced.
Perhaps someone else could have started Amazon. How is that the point? Anyone would do the same, create their wealth through the function of the stock market creating wealth from nothing by investors willing to gamble. Today Bezos owns a tiny percentage of Amazon.
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Try That in a Small Town®
I admit general ignorance (even apathy) to the wealth inequality or income disparity phenomenon. And my B.A. was in economics, with a sociology minor.
In my defense, it appears this problem has increased mostly in the forty years since I graduated (1984), and mostly in the U.S., as opposed to other OECD countries. Why?
May be a victim of our own success. Look at most small towns, and sparsely populated states. Inequality there is much less pronounced than in major metropolitan areas. (An assumption, no data available.)
The big, high density cities, with financial, trade, and manufacturing centers are growing, and where the extremely high incomes are possible.* But why in the last forty years (Reagan?) And why mostly in the U.S. (Reagan?)
The market failed. Some are paid more than they are worth, and others not paid enough to survive. Like it or not, the answer is, tax the rich. And subsidize the poor, or perhaps more accurately, subsidize the —employers— of the poor. Enlightened self interest.
*and lower incomes stagnated.
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