Nov. 26, 2008 (World News Trust) -- While the average American only makes about $25 an hour in total compensation, defined as wages plus benefits including employer wage taxes, a GM's autoworkers base pay is about $29 an hour (today's new hires start at $14 and rise to $15.30 for forklift drivers and others not directly involved in making vehicles or parts, but $29 is paid for current employees and will not change), making an auto worker job a "good job" to have.
If health care cost per worker average $12,000 per year, that adds in another $6 an hour and if the pension payment takes up 25 percent of base pay (which would be an extremely high pension which is what is claimed to be the situation at GM), that gets you another $7 an hour, bringing the total to $42 an hour. That's decent pay, much better than the average worker $25, but still a long way from $71 (or $73 or higher) an hour you hear being quoted in the anti-labor commentaries. Indeed in 2010 GM wage cost will be only $9 more than the Toyota worker gets per hour when the transfer of some legacy costs to the union fund will reduce the per hour cost to $62.
That $9 extra cost is from GM's remaining legacy costs, the pension and health care costs for retired workers, because GM did not set up an adequate retiree health fund for that cost back when today's retirees were still working, plus the extra cost of funding a generous pension plan. Legacy costs are a serious expense that adds nearly $30/hr, but is not money being paid to current workers.
When you compare your hourly rate to the $42, or $69 after legacy cost, you need to remember that to get a fair comparison you need to adjust upward your hourly rate like the Auto Companies adjust upward the claimed auto workers rate by reflecting the cost of national holidays -- indeed, include overtime, shift premiums and the costs of negotiated benefits such as holidays, vacations, health care, pensions and education and training, plus the employer's share of the Social Security payroll tax, plus the State mandated employer payments to disability workers compensation funds and unemployment insurance funds. Then look at how well funded your employer's benefit promises are and estimate how much addition annual money beyond the current contribution level, expressed as a per hour number, will be needed to fully fund those promises for both current workers and current retirees.
The cost of the health benefits for retirees that were promised by GM and then ignored and not adequately funded while the person was an active worker is now a more than $64 billion total liability for all future retiree medical care for the 432,000 GM hourly retirees and spouses. GM has only set aside $36 billion to transfer to the VEBA (supposedly 70% of the liability) -- a VEBA that will be the responsibility of the union when it takes over the total liability in 2010, and it is this transfer of legacy liability that puts GM within $9 of the per hour costs of Toyota in 2010 (but Toyota claims that some of its "older" US plants have labor costs of $30 wages with $18 of benefit/legacy costs -- a total of $48 per hour rather than the GM estimate of Toyota's overall US costs of $53 per hour -- so the difference made be as high as $14/hour).
One benefit that irks GM management is the temporary extra unemployment payments, currently being paid to 8,000 recently fired (downsized) workers, that is call the "job bank" - and that benefit is likely to die as part of the union contribution to the plan to repay the $25 billion that the auto companies want to borrow from the government.
The only real cure to save the Auto companies is National Health insurance that puts GM and Toyota's non-wage non-pension funding cost per hour at the same level -- ending the current employee and retiree health legacy cost nightmare by replacing the liability with Universal Health funded by a percentage of salary payroll contribution to that universal health plan. The only other choice is to tell the autoworkers they will to be treated like the non-union Toyota and not have good health or pension benefits.
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William Chirolas brings 40 years of real-world business experience in local, state, national, and international tax, pensions, and finance to the world of blogging. A graduate of MIT, he calls the Boston area home, except when visiting kids and grandkids. Send an email.