Tuesday, November 25, 2008

A Question Regarding CAW vs. UAW Benefits

I clearly don't know enough about auto industry labour relations, and my quickie internet research has failed to yield any answers, so I thought I would put this out there.

I had always assumed that, given the enormous amounts that U.S. automakers pay out to their employees in the form of health care benefits ('more than they spend on steel' is the usual estimation), it would be far more profitable for them to make cars at plants here in Canada since most of our health care is paid for by the government.

And yet, I read here that Canadian Workers actually make significantly more in pay plus benefits than their American counterparts.

Is that true? Why is that? Do Canadian workers get that much more per hour? Do they get hot stone massages as part of their benefits package? Does this have anything to do with the two-tier wage system I keep reading about but do not fully understand?

Please explain. Thank you in advance.

In the meantime, I feel that I gained a much greater understanding of the Big Three Bailout situation by reading Andrew Coyne's recent essay in MacLean's. Call it "The Auto Industry for Dummies". Here's a sample:

The real reason a Big Three bailout is a bad idea
The hope is that billions of dollars will succeed where hundreds of millions failed

...Anyone proposing to bail out the auto industry, in whatever amount, is obliged at the least to answer the question: where does the money come from? The answer is not simply “the taxpayer.” If that were all, the immediate objection—why should taxpayers be dragooned into paying for cars that consumers won’t?—might be answered: because the alternative is worse. Indeed, bailout proponents argue, not bailing out the auto industry might cost the taxpayer even more.

But the cost of such subsidies is not borne only or even primarily by the taxpayer, but by all those industries and firms that don’t get bailed out. It’s what economists call the opportunity cost: all the capital that subsidy traps in one industry is capital denied to other industries; all the sales diverted to one firm are sales diverted from its rivals; all the jobs “created” in one part of the economy are jobs destroyed elsewhere. Indeed, the cost of subsidy grows rather worse the more the subsidy “succeeds.” For then the diversion, from the efficient and competitive to the inefficient and uncompetitive, is made permanent.

...But even in the worst-case of liquidation, the factories do not simply go up in smoke. Somebody would have to fill the demand that Detroit had previously supplied, and the fastest and cheapest way for other manufacturers, foreign or domestic, to ramp up production would be to buy up all that unused capacity.

Interesting. And I would be the first to write this off as back-handed way of advocating a hands-off, free-market approach that end up screwing workers, except... workers are already being screwed. Not the ones who still work for GM and Ford and Chrysler who make more in a day than I make in a week, but the tens of thousands who were promised jobs for life and suddenly found themselves sans employment.

I'm just not sure the job situation would be any better under our new Asian overlords. So perhaps we should be looking seriously at building these. Or maybe these.


  1. The UAW-GM deal in the U.S. further weakens the union by agreeing to pay new hires about half of what current UAW-GM workers make while giving GM what it wants on health care without demanding that GM back a single-payer national health care system.
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  2. Always remember that negotiations between companies and unions are agreed upon compromises to both parties. Skilled negotiators and lawyers work out the contract and it is, usually endorsed by both parties.
    The Canadian dollar, and medicare, make us a bargain to the US businesses. For decades, those business could pay Canadian wages and benefits and still be lower than US wages. It was mutually advantageous.

    CAW, big three primarily, have some benefits that include massage, naturopaths, chiropractors, etc. Again, these were negotiated and it was a good deal.

    The US worker typically had a higher dollar amount and the benefit of less taxes. The company bore the cost of the benefits.

    The worker cost in car production? Figure on about $900, including front line management, for an entry level car and $950 for the Cadillac.

    Consider removing that worker cost from the car industry completely: $0. Free labour would not change the problems of the car industry right now. It's a matter of market demand, unattractive designs, old technology and bad advertising.