Do They Really Earn $70 An Hour?

Posted by Kirhat | Sunday, August 16, 2009 | | 1 comments »

UAW Protest

Ever since the economy turned upside down as a result of the steepest economic slide in decades, the Detroit's automakers are seeking billions of dollars in government aid and asking the American Congress to help them survive.

And the lawmakers may give them what they want using the taxpayers' money for a simple reason: jobs.

However, the average American were not too keen on granting the top executives of General Motors Corp., Ford Motor Co. and Chrysler LLC, the requested rescue package after reading is several reports that the average hourly employee of the Big Three makes US$ 70.00 per hour.

This is really an awful lot of money. Seventy dollars an hour in wages works out to almost US$ 150,000 a year in gross income, assuming that there are forty-hours of work in a week.

According to Forbes, labor cost per hour, wages and benefits for hourly workers in 2006 are as follow:
  • Ford: US$ 70.51 (US$ 141,020 per year)
  • GM: US$ 73.26 (US$ 146,520 per year)
  • Chrysler: US$ 75.86 (US$ 151,720 per year)
The rates of Toyota, Honda, Nissan (in U.S.) pegged at US$ 48.00 per hour or US$ 96,000 per year, paled in comparison. Even the average annual compensation for a college professor in 2006 was only US$ 92,973 (average salary nationally of US$ 73,207 + 27 percent benefits).

Car Worker's Salary ComparisonThe average United Auto Workers (UAW) worker with a high school degree earns 57.6 percent more compensation than the average university professor with a Ph.D. (see graph above), and 52.6 percent more than the average worker at Toyota, Honda or Nissan.

Is it any wonder the Big Three are in trouble? And with auto workers making so much, why should taxpayers - many of whom make far less - finance a plan to bail them out?

Well, here's one reason: The figure is wildly misleading.

The New York Times debunks the claim that the Big Three auto workers earn more than US$ 70 an hour. That number really came from the car companies themselves during union negotiations, writes David Leonhardt, but it is not completely accurate since not all of that goes to the worker's pocket.

Here's how it breaks down:
  • Cash: All the basics - wages, overtime and vacation pay - add up to US$ 40 an hour.
  • Extras: Health insurance and pension costs total about US$ 15 an hour.
  • Retiree benefits: These are fixed costs, and the Big Three have a huge pool of retirees out there, Leonhardt writes. They add up to about US$ 15 an hour.
This means that the true hourly salary for a union worker is about US$ 55. That is still about twice what the typical American worker makes. And it's about US$ 10 more than what a non-unionized worker at Honda or Toyota makes, Leonhardt writes.
"There is good reason to keep GM and Chrysler from collapsing in 2009. (Ford is in slightly better shape.) The economy is in the worst recession in a generation. You can think of the Detroit bailout as a relatively cost-effective form of stimulus. It’s often cheaper to keep workers in their jobs than to create new jobs."
But, he adds, the Big Three will have to get smaller to survive.

1 comments

  1. Buggys // August 17, 2009 at 8:39 PM  

    What is wrong with this country? $70. an hour? Seems to me that jobs are dropping like flies and if you are able to keep your job then the hourly wages/salaries have been forced to drop. Why not in Detroit? Again I must ask why haven't the unions been forced out? Instead Obama is placating them as he promised. There goes my blood pressure...

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