By now, everyone knows that the contracts of the auto workers constitutes a big part of the problem of restructuring the auto industry. With the government posed to play an ever greater role in running the industry under the Obama administration’s plan, the debate is shifting to the question of how much will the United Automobile Workers (UAW) give up to save the industry its members are employed in.
It’s not an easy issue to solve. The New York Times website provides a public service- something unusual for this paper-with its balanced debate on whether the auto workers should be rescued. The major issue is the retiree health plan at GM. Should the provisions in the current contract be honored, or should the high benefits its workers enjoy be scaled down to something approximating the level of health benefits most Americans working for other corporations have?
The issue is debated by Sean P. McAlinden of the Center for Automotive Research, Jerry Tucker, a former UAW board member, Gary Chaison, a professor of industrial relations, James Sherk of the Heritage Foundation, and Lynn M. LoPucki, a law professor .
Even if one agrees with Sherk and the conservative argument, it is difficult not to sympathize with the auto workers who did their job on the assembly line for a few decades, and who were told when they went to work for GM that when they retired, their pensions and health care benefits would be ensured. The late dynamic founder of the UAW, Walter Reuther, is undoubtedly looking down on the situation facing the union he built with complete perplexity. At the end of World War II, Reuther helped generations of unskilled and poor assembly line workers graduate into the American middle class, with good wages, suburban homes, and the promise of a well earned retirement. Despite his own origins in the democratic socialist movement, Reuther’s union organizing helped destroy the dream of the Marxists. No matter how much socialists argued that the auto worker was still suffering from “alienated labor,” his progeny did not join the socialist ranks. With a good job and wages, a home and all the perks of a middle-class lifestyle, they did not buy the argument that they were the shock troops of a future revolutionary proletariat.
Now the moment of truth has arrived. The first and second generation of retirees had no problems. But as the industry faced foreign competition, closing of plants, and lowered profits—it has become untenable to maintain the promises made to workers in the GM contracts. As Sherk argues, and others acknowledge to be true, the benefits are “far much more generous than what most senior citizens get,” including those on Medicare. Indeed, most auto workers retire in their 50’s, and receive these sterling benefits. To continue at the same level, Detroit would need $50 billion more to cover these retiree health costs. Should the taxpayer foot the bill? I bet that if you asked the average man on the street, the answer would be a resounding no. As Sherk puts it: “It makes no sense to tax American families to fulfill promises that were impossible to keep when they were made. Certainly not when the government lacks the money to fulfill much less generous promises made to the soon to be retiring baby boomers.”
One might also compare Ford to GM. The UAW locals at Ford accepted cuts in benefits to save the company, and Ford did not ask for any bailout money. Moreover, Ford is now putting all its efforts into the new Taurus, which is giving Toyota a run for its money. The company claims that their current new cars are every bit as competitive with the Japanese imports and a better deal. And Taurus continually gets the awards for safety. As I argued months ago, many of those who are arguing for the union position are upper middle class and elite buyers-many of them on the political Left—who wouldn’t be caught dead driving an American car.
As Sean McAlinden argues in his commentary, it is true the UAW argues that its medical benefits were won through negotiations, and obtained with an agreement to forfeit higher wages. But their current wages are 63 per cent higher than the average manufacturing wage and much higher than that of government employees. Hence “there is no justification for supporting these benefits with public funds at their current level.”
Of course, the union advocates have one simple answer. It comes here from Jerry Tucker, the former UAW board member. Tucker essentially admits all the factual data of his opponents. He also acknowledges that many auto workers retire before they are eligible for Medicare. (He ignores that if they do, it is their choice.) That means they would leave with no health insurance if the contracts are voided. His answer- you guessed it: “universal health care…along the lines of the Canadian system.” In other words, an answer that is not a real answer.
So if the UAW does not agree to a compromise and to cuts in benefits, it looks like bankruptcy for GM. And that means the judges will cut their benefits or end them entirely. Perhaps that is what Barack Obama wants. The union negotiators are stalling, hoping that Obama’s debt to the unions for working for him during the campaign will lead him to force a settlement in their favor. I doubt whether Obama will do that or can do that, realizing full well what it would mean for the government treasury. Instead, he will allow GM to go to bankruptcy court. The court will enforce stringent cuts in the UAW benefits, and Obama can say to the UAW: “I did all I could for you. The courts did it, not my administration.”
If anyone wonders why these blue collar workers will soon again become Reagan Democrats in the next election, now you know.