Tuesday, November 11, 2008
While there are other factors behind the deep crisis of the Detroit auto industry, including the deep cyclical downturn and the until recently high gas prices, a key factor behind their problems is that workers are overpaid. As Mark Perry here shows, the total pay (including various benefits) for Detroit auto workers are more than 2.5 times higher than that for the average American worker ($73 per hour versus $28) and more than 1.5 times ($73 per hour versus $48) higher than the total pay of those that work in Toyota factories in America. High pay may not necessarily mean that you are overpaid, but given the chronic losses of Detroit auto companies, clearly Detroit auto workers are overpaid and it is obvious that the very high cost of labor is a factor behind Detroit's problems. While a bailout may save these companies temporarily, a sustainable survival clearly depends on reducing labor costs.