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The significant increase in labor costs initiated by the recent UAW settlement will be expensive for American vehicle manufacturers.
Under the new contract, the average salary and benefits package for an assembly line worker at GM will be $80,034 annually. An average Ford plant employee will make $74,691 yearly. Overall General Motors’ annual labor costs will rise by $9.3 billion, Ford’s will go up by $8.8 billion. These additional labor costs will add about $900 to the price of a new vehicle.
President Biden’s decision to walk a picket line in support of UAW strikers should not have gone unnoticed by the American public, especially those shopping for a new car. The president has not been shy in his support for organized labor. His early years in Scranton, located in the heart of one of the most pro-union regions of the country, no doubt imbued him with the belief in the sanctity of organized labor.
Biden was not the first president to become involved in union organized strikes. In 1902 Teddy Roosevelt intervened in the United Mine Worker’s anthracite coal strike, one of several that plagued the coal mines in the last half of the 19th and early 20th century.
Roosevelt formed a commission which addressed the most contentious concerns of miners leading to an eventual end to the strike. However, addressing the inhuman conditions present in the coal mines then, including below substance wages, 10-hour workdays, six-day work weeks, horrible working conditions, and child labor exploitation flagrant in the mines then is a long way from striking to raise total annual wage packages for assembly line auto workers to about $78,000.
The American public is not naive. While they may not grasp all the idiosyncratic components of the complex pay package the UAW was able to negotiate, they do understand the impact of significantly increased vehicle prices on their family’s current and future wellbeing.
They also understand that the current administration’s policies overtly favor union members in ways beyond wage and benefit issues alone. For instance, the only electric vehicles eligible for the current $7,500 income tax credit are those built by union workers. Even EVs like Toyotas, BMWs and other foreign brands built in U.S. plants by non-union employees and purchased by Americans are not eligible. This policy increases the UAW’s monopoly power and by so doing assure that we will pay more for a new vehicle.
This policy is one of the reasons why the union pressed so hard to ensure that existing and new employees working in new American battery production facilities were included in the latest contract.
What is a little more difficult to understand is why non-administration economists and policy makers are concerned about the latest UAW contract. Manufacturing output per hour in the U.S. has grown by just .02% since 2009. As a bargaining strategy it makes sense for John Fein, president of the UAW, to argue that auto manufactures are enjoying significant profits, and that some auto executives are paid giant salaries. However, what is not as well publicized is that productivity in the domestic automobile industry, as measured by output per hour, has declined by 32% since 2012. Some of this precipitous drop in productivity can be blamed on the pandemic, but such drastic productivity decreases were not as apparent in Asia.
Simply put, American auto manufacturers and workers are not very efficient.
Emboldened by the support the UAW has received from Washington, the union has now set its sights on organizing workers at Toyota, Nissan, BMW and other non-union U.S. auto plants. This will no doubt raise the price of these vehicles. This blatantly pro-union stance is still another example of Washington initiating policies that helps organized labor while harming the American public.
Such short-cited policies may also signal the renewal of collusion like the U.S. faced in the 1970s and early 1980s when the UAW and the car companies joined hands with Washington to place quotas on foreign cars. Not only did these contrivances reduce competition, and hence raise auto prices, they also led to a decline in the quality of American made vehicles.
Michael A. MacDowell is President Emeritus of Misericordia University.