That's what we keep hearing, right? That the UAW has pushed wages and benefits up so high that the American manufacturers can't make a profit on the cars they sell. We hear that the labor costs for Ford are $71 and hour, whereas the Japanese companies, even for plants here in the United States, are only paying $49 an hour. And that's supposed to be outragous, right? After all, how many of the people who hear these statements are getting paid $71 an hour? Therefore, the problem must be the UAW.
Yeah, but no.
When you look at the figures
, you see a totally different story. It's true, the all-in labor cost of Ford (or "Ford's", if you work in production) is about $71 an hour, $22 an hour more than what the Japanese companies are paying. That's a big gap, and would seem to support the claim that the American companies are overpaying their workers. The components of that difference, though, are significant. Ford pays a little more in hourly wages, benefits, and health care. The big difference is the "legacy costs", benefits, especially health benefits, paid to retired workers.
Why such a difference? Three reasons. First, the retired UAW workers have a union bargaining on their behalf, so they get benefits the Japanese companies aren't paying. Second, the Japanese companies don't have the same number of retired workers in the United States. They haven't been here that long, so if you look at the total number of workers the company has ever employed, the American companies have hundreds of thousands of retired workers, while with the Japanese companies with plants in the United States, almost all the workers they've ever employed are still working for them. The Japanese companies do have retired workers, of course; they're living in Japan.
The big difference is that the retired auto workers living in Japan, like the current auto workers living in Japan, are covered by national health. They aren't imposing a financial burden on their auto companies because they are covered by a public system. That component of the cost is just taken right out of the cost of a Japanese car, wherever it was made. In other words, what we learn from this is that decades of our refusal to consider national health are causing a major drag on American industry.
This isn't the whole story, of course. Primarily, this doesn't address the question of how the American companies will get to the point of building cars Americans want to buy, and that is a crucial point. Still, if we take out the legacy costs and focus on the questions of design and marketing, we can see that it's not the UAW that's causing the problem, but management. Therefore, we can't fix the problem by following the Republican prescription of beating up on the unions.