Wednesday, December 10, 2008

How Much Do UAW Workers Cost?

Various left-wing commentators have praised an article by David Leonhardt in today's New York Times, denying that workers at Detroit car companies really cost as much as $73 per hour. While he concedes that they are still more costly than workers at Japanese-owned plants, he argues that they aren't as costly as $73 because that number allegedly includes benefits for already retired workers.

But as James Sherk of the Heritage foundation points out, that would be incompatible with established accounting principles. According to established accounting principles set by the Financial Accounting Standard Board, the cost of benefits for retired workers should be taken when they're accrued (when the workers are still working). It is not permitted for companies to promise workers benefits after they've retired without taking it up as a cost now. Leonhardt appears to have derived his figures by only including wages and benefits paid out today to workers, while excluding both the post-retirement costs that are accrued for current workers and the benefits paid out to currently retired workers, which of course is very misleading.


Anonymous Anonymous said...

Last year Japan prosuced 11.000.000 cars(no1 in the world) and exported more than 60%. Most Toyotas in the US are actually made in Japan. No one seems to care about the fact that the Japanese government until recently intervened to keep the yen undervalued. I recently read that the yen has lost half it's trade weighted value against the Euro. Add to this the falling real or even nominal wages of the Japanese workers(for more than a decade) active state support and low healthcare costs. And remember that only after Reagan imposed export quotas and tarrifs Japanese car manufacturers started building factories in the US.

12:48 PM  
Anonymous Anonymous said...

Obviously economists are unable to calculate properly. This is embarrassing and I'm surprised you quoted them
And as an academic Stefan you should look through references before you publish something. I do it all the time. I hate inccorect refereces. The Heritage Foundation isn't known for excellence. Look at ref 12 in their report "The figure is the $4.88 billion paid out to retired workers divided by 85,000 active hourly workers in the pension plan, each working 35.5 hours a week for 52 weeks in a year."

What calculator were they using? GM has 266,000 employees. This would mean that each employee contributes 16000/year to the retired workers corresponding to $10/h (at 35h/week and 52 weeks). How does the Heritage Foundation come up with $31.04/h????

9:23 AM  
Anonymous Anonymous said...

Ok, numbers work out if you assume that only 1/3 of GM workers contribute to the pension system

9:47 AM  
Blogger stefankarlsson said...

I can understand you want to be anonymous, as your criticism is simply embarrasing for you. After having claimed that I had failed to check the sources, you reveal that you had yourself not done so. If you had looked at the SEC filings from GM that James Sherk refered to, you would have seen that the number of full-time workers in the United States are just 85,000. The rest work in Canada, Germany, Sweden, China and other countries or are for other reasons not included in the plans.

5:34 PM  

Post a Comment

<< Home