Are Autoworkers Really Making $73 an Hour? No, Says UAW & NYT...

...but Yes, says the Heritage Foundation and the automakers themselves.

Are Big Three autoworkers really making over $70 an hour? Economics writer David Leonhardt, who on August 24, argued in a Times magazine cover story that candidate Barack Obama looked like "a fiscal conservative," strenuously argued the UAW and liberal line No Way in Wednesday's front-page "Economic Scene" column, "$73 an Hour for Autoworkers And How It Really Adds Up."

Leonhardt was picking up on a theme that's being pushed hard by Media Matters in defense of the United Automobile Workersagainst sets offigures complied by the automakers now pushing for a bailout from Congress. The Big Three as well as Wall St. analysts have figuresthat putthe average compensation for a Big Three autoworker at a staggering $73 an hour (amounting to around $150,000 a year).

Seventy-three dollars an hour.

That figure - repeated on television and in newspapers as the average pay of a Big Three autoworker - has become a big symbol in the fight over what should happen to Detroit. To critics, it is a neat encapsulation of everything that's wrong with bloated car companies and their entitled workers.

To the Big Three's defenders, meanwhile, the number has become proof positive that autoworkers are being unfairly blamed for Detroit's decline. "We've heard this garbage about 73 bucks an hour," Senator Bob Casey, a Pennsylvania Democrat, said last week. "It's a total lie. I think some people have perpetrated that deliberately, in a calculated way, to mislead the American people about what we're doing here."

So what is the reality behind the number? Detroit's defenders are right that the number is basically wrong. Big Three workers aren't making anything close to $73 an hour (which would translate to about $150,000 a year).


The calculations show, accurately enough, that for every hour a unionized worker puts in, one of the Big Three really does spend about $73 on compensation. So the number isn't made up. But it is the combination of three very different categories.

The first category is simply cash payments, which is what many people imagine when they hear the word "compensation." It includes wages, overtime and vacation pay, and comes to about $40 an hour. (The numbers vary a bit by company and year. That's why $73 is sometimes $70 or $77.)

The second category is fringe benefits, like health insurance and pensions. These benefits have real value, even if they don't show up on a weekly paycheck. At the Big Three, the benefits amount to $15 an hour or so.

Add the two together, and you get the true hourly compensation of Detroit's unionized work force: roughly $55 an hour. It's a little more than twice as much as the typical American worker makes, benefits included. The more relevant comparison, though, is probably to Honda's or Toyota's (nonunionized) workers. They make in the neighborhood of $45 an hour, and most of the gap stems from their less generous benefits.

The third category is the cost of benefits for retirees . These are essentially fixed costs that have no relation to how many vehicles the companies make. But they are a real cost, so the companies add them into the mix - dividing those costs by the total hours of the current work force, to get a figure of $15 or so - and end up at roughly $70 an hour.

The crucial point, though, is this $15 isn't mainly a reflection of how generous the retiree benefits are. It's a reflection of how many retirees there are. The Big Three built up a huge pool of retirees long before Honda and Toyota opened plants in this country.

But blogger and Cornell associate law professor William Jacobson cited a HeritageFoundation report to show Leonhardtwas being misleading. Jacobson wrote:

The Times claims that retiree benefits (equal to about $15 per hour for each current worker) shouldn't be counted in the cost per worker statistic, because Detroit automakers have so many more retirees.

The Times is being intellectually dishonest. First, retiree benefits are part of the UAW-negotiated contract. Second, the stated cost per worker of $73 per hour includes only anticipated retiree benefits for current workers, it does not include what is paid for retired workers.

So $73 per hour really does equal $73 per hour.