Labor Day, With An Auto Workers Strike Looming

At Cornell University’s School of Industrial and Labor Relations, a required first year course is labor history. You learn about the guilds, about the rioters and the Pinkertons hire to beat them, about the horrific treatment of industrial workers in the age of Robber Barons and the birth of unionism. As my girlfriend at the time proclaimed one day after Roger Keeran’s class, “I want to be a Wobbly!”

The problem is that was history, a different time and different circumstances, long before the Wagner Act was born and the AFL-CIO flexed its might. A great many arguments about what we should do today are grounded in things that happened many years ago, ignoring everything that’s happened since. It’s true for civil rights. It’s more true for unionism.

The average price of a new car today costs more than $48,000. That’s a lot of money any way you cut it, and that’s for the basics. Some will argue that the cost is due to greedy corporate overlords who want to pocket millions at the expense of both the consumer and the worker. But the absurdly high compensation for executives doesn’t compare with what the unions did to the American auto industry. Remember when the Big Three almost went bankrupt under the generations of accumulated pension costs as they became unsustainable, regardless of what the CEO was paid?

The United Auto Workers contract expires this September 14th, an the UAW is almost certain to call a strike.

The United Auto Workers union and the three Detroit automakers have less than two weeks to negotiate a new labor contract, and a strike of some sort seems increasingly likely.

The union’s president, Shawn Fain, has primed rank-and-file members to be prepared to walk off the job if the union’s long list of demands for improved wages and benefits are not met.

Joe Biden, the most union-supportive president ever according to his self-description, has endorsed the UAW.

There are political stakes as well. President Biden has declared that “the U.A.W. deserves a contract that sustains the middle class” and has named a White House liaison to the union and the automakers.

Then again, the union has yet to endorse Biden, as his EV initiatives conflict with the interest of union jobs, requiring fewer workers to manufacture the far more expensive vehicles. No union president wants to tell a significant percentage of his members that the wage and benefit package for which they went out on strike is huge, but they won’t have a job after next Friday. That’s not a good pitch to pay union dues for the absurdly high salary paid union bosses.

What’s unfortunate is how few seem to connect the dots between the these competing interests of labor and management, and how they affect the overall economy and the cost of cars. It’s not as if autoworkers aren’t being paid pretty well already, even if it could be better. There are a few lawyers who would be pretty darn happy to get a comparable salary.

To argue that they should be paid more is fine, but to assume that the money for any increase in wages and benefits will come from a reduction in executive compensation is foolish. The monies spent on management isn’t the problem. Some argue that the cost should come out of profits, as if automakers should be run as charities or non-profits for the benefit of the workers. That’s not how it works or could work, fantasies aside.

Where is the right balance, the tipping point between workers being fairly paid while corporations are able to generate sufficient revenue to survive? That’s the point of strikes, where the enterprise fails to produce its products such that the business ceases to earn revenues and profits, while the workers stop getting paid. Pain is spread across both sides so that each has the motive to reach a resolution that’s better than the alternative, the strike.

But where does that leave the rest of us? What happens to those of us who have to buy cars? There are two ways for automakers to generate revenue. Sell more cars or charge more for each car sold. If possible, they want to enjoy both, although people have never tended to be all that elastic in their auto purchasing and while car dealers were selling cars over sticker when there were supply chain shortages, they’re now making better deals, even if not as good as the incentives before the pandemic. Either way, the money comes from consumers. If wages go up, so too will the cost of a car to pay those wages. That’s how it works.

“President Fain has declared war, and that usually means there’s going to be a battle, and that battle would be a strike,” said Sam Fiorani, the vice president of global vehicle forecasting at Auto Forecast Solutions, a market researcher. “The U.A.W. leadership is in a position now where they have to prove to the members that they are fighting for them, so it’s pretty unlikely there won’t be a strike.”

The president supports unions, and supports the UAW’s demands, even if he isn’t talking about how autoworkers are earning more than you are and still want more. Don’t blame autoworkers. If there’s more to be had, who can blame them for wanting it? Don’t blame the UAW, as this is the reason for its continued existence, to generate union dues for its leadership’s new curtains.

Nobody is arguing that autoworkers shouldn’t be paid a decent wage, but they’re not Wobblies. But cars cost a lot of money, and for the people who need cars, that money has to come from somewhere. And when their wages increase to pay for cars, so too does the cost of the goods and services they provide. There was a myth that Henry Ford increased the wages of his workers so they could afford to buy the cars Ford manufactured. It’s a nice thought for this Labor Day, but it was only a myth. The economics didn’t work.