Wednesday, July 13, 2011

Markets Prevail

... Unless you're a megabank that can get the government to give you free money when you louse up. The rest of the time markets .... soon or later ... call the tune. Witness this from the Times of New York:

... The U.A.W. tried to persuade the Ford Motor Company to build the Fiesta subcompact in the United States. But Ford chose a plant in Mexico, where the combined wages and benefits of a production worker total less than $10 an hour. By contrast, a full-wage union member in the United States costs G.M. close to $60 an hour. Even an entry-level wage employee costs about $30 an hour in wages and benefits.

While it is not the only factor in producing a profitable subcompact, lower employment costs were critical to the decision to build [General Motor's new sub-compact] Sonic in Michigan. In a groundbreaking labor agreement, the union allowed G.M. to pay 40 percent of its union workers at Orion Township an “entry-level” wage that sharply reduces overall production costs.

“The entry-level wage structure was an important enabler, because obviously the smaller the car the less the margin,” said Diana D. Tremblay, G.M.’s head of labor relations. ...

Call this the flip-side of the recent BMW warehoue closing.

In the present case, the union and the car company were motivated to reach an accord for making the Sonic plant happen, so the deal got done.

Unions, like most corporations and normal human beings, have to deal with the realities they find in the actual world. Sometimes reality can be held off for a while (see "Sachs, Goldman") but most times, the cold hands of hard facts drag the borderline delusional back from positions that no longer hold up, much as they would like those positions to prevail.

I recall, two decades ago, the angry debate inside meetings at the IATSE. The IA would present a new, albeit "concessionary" contract to the assembled business agents, many would angrily denounce the "lousy rates," the "lousy conditions" and vote the deal down.

But over time, as more work went non-union, this attitude changed. More contracts that were less than Basic Agreement ideal were approved and came into existence. As a high-placed IA official said to the assembled multitude of union reps (which included me):

"The work's out there. The cable movies are getting done, the cable shows being made. And your members are doing them. They're just doing them without getting any benefits. The question is, you want the work done under a contract, or done non-union?"

It would be nice if everybody could get maximum wages with maximum bennies. But markets, as we say, have heavy influence. Yet unlike BMW in California, here General Motors and the UAW compromised with each other (and the forces of buy and sell) to keep employees working. Kudos to them.

7 comments:

Anonymous said...

Eastern markets prevail. Western ones decline - wages with them.

Anonymous said...

All I can see is that the trend will continue until the rich get their wish, and all workers will soon be working for $10.00 per hour or less right here in the good old U.S.of A.
It looks like the end of middle class.
Not a good trend in the long run.

Anonymous said...

The middle class facade in this country has been propped up by consumer spending for 30-40 years. In reality, it died in the seventies and has been infused with Greenspan's FIRE economy debt since then. Sandy Weill, Don Regan, and Robert Rubin's Wall Street zombie has finally had it's head blown off by Asia. We are essentially complaining that we can't pretend to be rich anymore. Declining standard of living is the norm. The only argument going on in DC is about how fast we want to drop and who gets pushed off first.

Anonymous said...

There would be so much pressure taken off employers if only America had some sort of nationalized health care system. I hope that Vermont's efforts of setting up a single payer system in their state succeed and then spread to the rest of the country. Bosses may be able to keep older workers if they didn't have to worry about their insurance costs rising because seniors need more care than young people. People who hated their jobs and were only doing them for the benefits could start their own businesses. And families wouldn't have to risk financial ruin because someone got a chronic illness. I truly believe that when/if we get a sane health care system installed in this country a lot of the unemployment problems with take care of themselves.

Anonymous said...

In China, you can get a job at a car factory making $500.00 a month! But with that, you get a day off every 14 days, and only have to work 10 hours a day. The bad news is health care's not so good. And safety standards are no where to be found.

Anonymous said...

Yes, but they do have very large savings accounts, which Americans do not have, b/c they understand feast and famine very well and do not trust that the system will not come unraveled at any moment. Our current predicament is entirely the opposite. Americans generally do not save and are systemically encouraged to over-leverage on consumer spending in order to keep the big lie of wealth going. If you do not over-leverage with debt, the economy and your job evaporates instantly. This charade has bought us an extra forty years of global dominance, but it is not working anymore. BTW, a larger and larger percentage of Americans are sinking to $500/month doing telemarketing from home without healthcare, and don't have any days off. So what's your point?

Anonymous said...

http://www.credoaction.com/comics/2011/07/good-morning-children/

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