While everyone is debating the Big 3 Bailout, you’ve undoubtedly heard something along the lines that current Big 3 autoworkers are making about $70.00/ hour fully burdened and the automakers in the south are making considerably less. It turns out that $70 figure is wrong:
The average GM assembly-line worker makes about $28 per hour in wages, and I can assure you that GM is not paying $42 an hour in health insurance and pension plan contributions. Rather, the $70 per hour figure (or $73 an hour, or whatever) is a ridiculous number obtained by adding up GM’s total labor, health, and pension costs, and then dividing by the total number of hours worked. In other words, it includes all the healthcare and retirement costs of retired workers.
Jonathan Cohn at TNR does the work to try to pin down the real numbers. What is clear here, is that current unionized autoworkers aren’t making anywhere near the burdened rate of $70 per hour — and the only way to get to that number is to make current employees carry the costs of the retirees. Which, if you are a competent businessperson with some basic knowledge of accounting, you already know is Just Not Done. The costs for the current retiree pool would have been booked when they were incurred — when those retirees were actually building cars — and they would have been built into the cost of the cars these retirees were building back in the day.
No doubt that the Big 3 have significant retiree overhead to deal with — but then, the newer plants don’t have that because they are newer. Their retiree pool is just that much smaller as a result. The Big 3’s problem is that they made a bunch of commitments that they certainly built into the cost of their products, but they didn’t bank for future payouts. And, to be fair, no one could anticipate in the 60’s and 70’s the massive increases in health care costs. But no matter how you cut it, the $70.00 per hour meme is just plain false.