Thursday, November 27, 2008

I Wish I Could Be Thankful For $70/Hour Pay For Auto Workers


Later today I'm going over to my friends Russ' and Rebecca's house for a Thanksgiving dinner. I wish I could thank God that American auto workers and other workers are making $70 an hour. If it were true, there would be no financial crisis in this country. But it isn't true. It isn't even nearly true. I had lunch with a friend from CitiGroup yesterday. She's an enlightened person who enthusiastically voted for Obama-- and more enthusiastically cheered his appointments of the Wall Street contingent he just hired to fix the economy some sat they were complicit in breaking. Her prescription for the Detroit problem is the plan being pushed by the right: bankruptcy, jettisoning of pensions and, more than anything, abrogation of labor contracts. Like many Americans she has been persuaded that auto workers make $70/hour. I wish it were the case. They don't make half that, however.

I'm not sure what my friend makes per hour. She moves money and monetary instruments around on computers. Her income is certainly closer to $300/hour than it is to the $70/hour she begrudges the auto workers. Since the beginning of the Bush Regime, the rich have gotten richer-- much richer-- and the poor have gotten poorer-- and the middle class has gotten smaller-- and poorer. And this isn't like a coincidence; it's the result of careful planning, Regime policy and legislation. Despite all the corporate scandals that have been one of the more repulsive hallmarks of the Bush Regime-- and despite the much-ballyhooed but toothless "reforms" bandied about-- the asymmetry in the distribution of wealth and income disparity between those at the tippy-top of the economic pyramid (scheme) and the rest of us, has actually gotten much worse every single year single the Enron catastrophe. According to the Economist, in 2004 America's top 2000 CEOs averaged pay raises of around 30% bringing their salaries to nearly $6 million annually. And CEO bonuses at the top 100 companies rose gigantically and are well over a million dollars each. If there is any correlation between overpaid CEOs and stock values, it is a negative correlation, with stock prices actually declining as CEO pay packages rise into the stratosphere. Between 1990 and 2004 the average worker's pay remained basically flat at $27,000 while CEO pay went from $2.8 million to almost $12 million. And in the entire industrial world, the U.S. has the worst disparity between workers and their CEO bosses, far worse than Japan, Sweden, Germany, France, Italy, England, Canada... more in line with places like Saudi Arabia. The Bush Regime agenda of regressive tax policies are at the heart of this. A couple of years ago the NY Times took note that the income gap during the Bush years has widened significantly.
Income inequality grew significantly in 2005, with the top 1 percent of Americans — those with incomes that year of more than $348,000-- receiving their largest share of national income since 1928, analysis of newly released tax data shows.

The top 10 percent, roughly those earning more than $100,000, also reached a level of income share not seen since before the Depression.

While total reported income in the United States increased almost 9 percent in 2005, the most recent year for which such data is available, average incomes for those in the bottom 90 percent dipped slightly compared with the year before, dropping $172, or 0.6 percent.

The gains went largely to the top 1 percent, whose incomes rose to an average of more than $1.1 million each, an increase of more than $139,000, or about 14 percent.

The new data also shows that the top 300,000 Americans collectively enjoyed almost as much income as the bottom 150 million Americans. Per person, the top group received 440 times as much as the average person in the bottom half earned, nearly doubling the gap from 1980.

We don't pay much heed to the twisted, distorted, corporate-oriented New Republic these days but last week even one of their senior editors, Jonathan Cohn, was moved to debunk the Republican Party talking point that so many have swallowed whole about $70/hour auto workers.

The actual average pay for auto workers by the Big 3 is $28/hour, just under $60,000 a year... before taxes and "hardly outrageous, particularly when you consider the physical demands of automobile assembly work and the skills most workers must acquire over the course of their careers." The non-unionized Japanese auto makers operating their scab plants in backward, anti-labor states like Alabama, home of GOP reactionary and corporate shill, Richard "Let Detroit Go Bankrupt" Shelby, don't pay that much less-- approximately $20-26/hour, maybe $10,000 less per year. Cohn wants to get to the bottom of the $70 an hour myth. "It didn't come out of thin air," he writes and, for a change, Rush Limbaugh didn't just pull it out of Bill O'Reilly's ass.
Analysts came up with it by including the cost of all employer-provided benefits--namely, health insurance and pensions--and then dividing by the number of workers. The result, they found, was that benefits for Big Three cost about $42 per hour, per employee. Add that to the wages-- again, $28 per hour-- and you get the $70 figure. Voila.

Except... notice something weird about this calculation? It's not as if each active worker is getting health benefits and pensions worth $42 per hour. That would come to nearly twice his or her wages. (Talk about gold-plated coverage!) Instead, each active worker is getting benefits equal only to a fraction of that--probably around $10 per hour, according to estimates from the International Motor Vehicle Program. The number only gets to $70 an hour if you include the cost of benefits for retirees-- in other words, the cost of benefits for other people. One of the few people to grasp this was's Felix Salmon. As he noted yesterday, the claim that workers are getting $70 an hour in compensation is just "not true."

Interestingly a fascinating new report on China's economy from the World Bank seems to attribute that country's slowdown to the shrinking share of GDP that has been going to workers (from 50% at the start of the decade to a drastically reduced 40% now). If workers have no money they can't be consumers-- not here and not there. Henry Ford may have been a right-wing jackass and, like many at the apex of the GOP Establishment at the time, an anti-Semitic Hitler cheerleader (if not conspirator), but he understood one thing about business that the Bush economic team never seems to have cared to grasp: if workers can't afford basic products, a consumer-driven economy dies... fast. Ford kept his model T's cheap claiming he wanted his factory workers to afford to buy them. A few nights ago I was reading how WalMart workers-- because they are paid so poorly, primarily due to the Republican Party's obsessive efforts on behalf of their WalMart paymasters to keep unions out of America's #1 employer. WalMart workers are a drain on taxpayers because they get no health care benefits and are as likely to wind up in a taxpayer supported emergency room as to be able to pay to see a doctor. WalMart and the GOP have one priority and one priority only for the first months of the Obama presidency: prevent the passage of the Employee Free Choice Act (EFCA), passage of which is a stepping stone on the road back to a healthy, middle class society that features a more equitable distribution of wealth, historically anathema to right-wing parties and their supporters.

As George Packer points out in this week's New Yorker, the authors of America's financial and economic collapse are not only not being punished, they are still busily gorging themselves on an inordinate share of the GDP. Should they be hunted down and shot like mad dogs in the streets (mostly Wall Street)? No, I believe in fair trials first.
Having brought the American and global economy to its knees through their reckless, shortsighted, downright stupid investments, and then looked to the government for a very expensive lifeline, the leaders of Citigroup, A.I.G., Goldman Sachs, Morgan Stanley, Lehman, and other financial giants are maintaining a carefully nonchalant public posture. Andrew Cuomo, New York’s Attorney General, had to hold a threatening press conference on Wall Street in order to frighten A.I.G. into announcing that raises, bonuses, and lavish retreats will be suspended. But fear is not the same thing as shame. Morally speaking, it’s inferior.

Packer, more of a moderate than I, apparently doesn't go for my shooting solution. He writes he would like to see "these malefactors of great wealth apologize to the country. I would like to see them organize their own press conference in a lineup on Wall Street and, in the manner of disgraced Japanese officials, bow low to the pavement, express contrition, and beg their countrymen’s forgiveness. Such a scene would go some way toward cleansing the smell of the financial crisis." I think they would be happy-- very, very happy-- to do just that so long as they could keep their ill-gotten gains. But Packers says even the apology scenario is sheer fantasy. "[I]nstead, like the parents of two-year-olds, the next Congress should summon them to Washington and publicly punish these executives who, in Kohlberg’s terms, “see morality as something external to themselves, as that which the big people say they must do.”

I like the punishment idea. It should start with confiscation of amassed fortunes.

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At 11:52 AM, Anonymous Anonymous said...

With a freind like you......

At 1:12 PM, Anonymous Anonymous said...

When people talk about their wages, they don't add health insurance, 401K matching funds & other benefits to the salary. The pundits ranting about $70/hour wouldn't present their own salaries this way... apples & oranges

At 6:46 AM, Anonymous Anonymous said...

Where is the AIG turnaround plan, the Citibank turnaround plan etc? Wallsteet welfare a okay. LOANS that will actually be paid back, no way!

At 6:49 AM, Anonymous Anonymous said...

Here is some actual facts about the auto sector:

At 8:19 AM, Anonymous Anonymous said...

In the accounting profession, they call this wages/benefits/retirement combo platter "the burden." It's not what the worker earns in an hour, it's what it costs the company to employ the worker for an hour, and it's unfair anti-worker propaganda to put the fully-burdened numbers out in the media and describe them as "pay."

At 12:32 PM, Anonymous Anonymous said...

Our economic support depends on the auto industry. Before this my husband was a worker at Electrolux, the company that moved to Mexico that Kelly Rippa thinks is just dandy.

The auto industry played ball with Bush and Cheney and every other oil man who gained political power, now they are left high and dry and STILL they want to blame the workers.

As far as I know and since the 90's workers have been held hostage by threats of job losses for a long time. Since NAFTA, there has been no job security in these United States.

I had a friend early in the Bush years who said they would not destroy the American worker because big business depended on our consumption. As it turns out they did and they do.

At 2:25 PM, Anonymous Anonymous said...

They also, of course, depend upon our debt to fuel our consumption of the goods and services they offer. They certainly have not added to the income of the vast majority of families during the Bush years (in fact, average incomes among working families has fallen). Yet, after stoking economic growth by pushing debt upon debt they now wonder why so many families are actually saving, or refusing to add to debt (even those who actually can secure loans, higher credit card balances, etc. from suddenly - and understandably - cautious banks). The so-called financial crisis, in its most dangerous manifestations, is not a credit supply problem. In the end, I think, it will be viewed as a credit demand problem, at least from the viewpoint of the debt strapped consumer.

The average Jane and Joe in our country, the debt burdened majority, has learned a great deal about debt in the last six months, and the lesson has begun to sink in. As they watch banks and financial firms go belly up from leveraged financing, the middle class, I believe, will go on a debt strike, and refuse to add significantly to family indebtedness. In fact, as debt is shed rather than added, I'd guess we're in the early stages of a massive buyer's strike, a period of price deflation where millions of families repay debt, unfortunately with what they call deflation's "swollen" dollars. GDP in that scenario has just begun to fall.

Obama's plans for massive fiscal stimulus may pave the way to a softer landing, but the effects of fiscal stimulus is still hotly debated. Also, will Republican and Blue Dog Senators stand in the way? The other tool available, monetary policy has little to offer anymore, and little traction, if any (see Paul Krugman's discussions of "liquidity traps"). If all fails, perhaps we'll see a "clear the decks" wholesale G-20 mediated trans-government debt holiday. We're already hearing some of that in the proposals to write down the principal on home mortgages. What would be among other candidates? Credit card debt. "Moral hazard" be damned at this point!

For sure, those at the top of the economic ladder will find it hard to avoid their own massive losses as consumers prove that Henry Ford was correct: when you do not pay your workers enough to purchase your company's products or to service their debt, profits collapse, investment ceases, and look out below. Oh, and as well, to the regal Walmart ownership families of this world, look out above!

At 4:36 PM, Anonymous Anonymous said...

What is the reason? when we start talking about benefits, no one is criticizing the medical insurance institution. We gave the insurance industry, medicare and medicaid, so they took that money, and said, "It's not enough we need more!". Help me to understand, why is this industry not criticized for producing such an expensive product? Why on earth are companies paying for advertising and marketing, when we have a shortage of medical care? While we are at it, can we know what the CEO's benefits and salary costs are? If we are going to accompish anything, everyone has to tighten their belts.


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