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The dubious habit of steadily increasing worker benefits
Posted by Raven on July 10th, 2008
Can we learn anything from this?
General Motors established its pension in the “treaty of Detroit,” the five-year contract that it signed with the United Automobile Workers in 1950 that also provided health insurance and other benefits for the company’s workers. Walter Reuther, the union’s captain, would have preferred that the government provide pensions and health care to all citizens. He urged the automakers to “go down to Washington and fight with us” for federal benefits.
But the automakers wanted no part of socialized care. They seemed not to notice, as a union expert wrote, that if Washington didn’t provide social insurance it would be “sought from employers across the collective bargaining table.”
Detroit was too flush to envision that it would ever face a financial strain. Ford and Chrysler signed identical pacts with labor, so all three automakers were able to pass on their costs to customers. Besides, the industry’s work force was so young that few workers would be collecting a pension any time soon.
Nice attempt to blow snow on the issue here. Once again we see how unions take down entire industries by inflating costs and taking away the ability to compete. Good job, UAW and the other unions. You’ve succeeded in killing the tit that feeds you.
Lesson? Think of this Op/Ed as being written about the US instead of the automakers. Years down the road, after the US agrees to insure and benefit and provide retirement to all it’s citizens, the system cracks because some people were not able to envision all the possible future problems…this is the hallmark of Democrat’s failed policies through the years.
July 10th, 2008 at 8:24 am
Politicians, particularly Democrats, never take into account the contingencies of their plans and policies. That flaw is inherent in the definition of “Democrat.”
July 10th, 2008 at 4:14 pm
I think most people know that labor has been dead in the USA for a long time now, regardless of what unions or government policies do. America, like other first world countries, has moved from an economy based on the production of goods to one that is based on banking and finance. If you feel that labor isn’t dead in this country, just look at how Nike can pay workers in Mexico 11 cents and hour for the same work an American does for $15 an hour. I don’t blame Nike for moving its factories over seas (I don’t blame NAFTA or the FTAA either) This price differential between labor costs is not because unions and government intervention has jacked up the price of labor either. Its solely based on the cost of an American standard of living. We live in the greatest county on the planet, so we all have to pay to enjoy the benefits of this country. Its just not possible to live the American life on 11 cents an hour so labor will eventually die out in this country.
July 10th, 2008 at 7:24 pm
I’ve always been fascinated by the double standard.
Employers are expected to look upon workers as commodities to be acquired at the lowest possible cost (human resources) and then dumped into the trash when they drop in efficiency. Employees are expected to demonstrate loyalty and give 110% to the company.
Is anyone really confused by the death of the work ethic?
July 10th, 2008 at 11:29 pm
This is not just the bad old unions; both sides are to blame here. The contracts arising from the “treaty of Detroit” were a great collusion between the UAW union leaders and the automakers. The leaders were able to sell their workers on lower wages (which was in the industry’s interest) by the pension/health benefits. By disguising the true cost of these benefits, the companies were able to offer higher net packages (wages plus benefits) than they should have been able to. This solidified the union leaders’ positions because they were able to negotiate fat wage packages.
Meanwhile, the industry was allowed to underfund these liabilities on their ledgers sheets, which made them look more profitable than the companies were if they had been forced to put aside enough reserves to fund the pensions. In turn these phantom profits boosted stock prices and justified higher pay for the executives, as well as buying labor peace (mostly).
In the absence of effective competition, the auto companies were able to pass these costs on to auto purchasers. Since then, however, the U.S. auto companies have faced increasing effective competition and find themselves locked into excessively high labor costs, while at the same time, the unfunded pension liabilities started to come home to roost as their young workers of the 50’s started to reach retirement age and the accountants blew the whistle on the underfunding.
So now, faced with their companies drowning in red ink, rather than negotiate more rational labor costs, the auto industry (like several other irresponsible industries) and the UAW are renewing their connubial arrangements and together want to screw the U.S. taxpayers by seeking to dump these debts onto the public via establishment of a government-managed health care system that will supercede the automakers’ health care programs – as well as public subsidy of their pensions.
Of course, if they don’t get this bail out, then the auto retirees are going to get screwed. But we know that regardless of what else happens, the union leaders and auto executives are going to escape with their inflated salaries.
July 12th, 2008 at 11:26 am
I am not surprised at all. The unions just unionized themselves out of benefits, and if GM goes bankrupt, then they’ll be outta job. Ofcourse, the Dhimmicratsand and their looter brethren will just come in and get tax $$$ to bail them out….