The result, they found, was that benefits for Big Three cost about $42 per hour, per employee. Add that to the wages--again, $28 per hour--and you get the $70 figure. Voila.
Except ... notice something weird about this calculation? It's not as if each active worker is getting health benefits and pensions worth $42 per hour. That would come to nearly twice his or her wages. (Talk about gold-plated coverage!) Instead, each active worker is getting benefits equal only to a fraction of that--probably around $10 per hour, according to estimates from the International Motor Vehicle Program. The number only gets to $70 an hour if you include the cost of benefits for retirees--in other words, the cost of benefits for other people. One of the few people to grasp this was Portfolio.com's Felix Salmon. As he noted yesterday, the claim that workers are getting $70 an hour in compensation is just "not true."
I remember reading a year ago or so that NASCAR ordered Toyota to cut HP from its engines in one series because they were winning all of the races.
This has been too easily overlooked. In delmoi's link, they point out that one of the biggest costs is in payout to retirees' health benefits. A decent national health insurance plan could go a long way to making the US companies more competitive.
One way or another it's going to end sooner than that. If nothing changes, GM will be in Chapter 7 within a year.
« Older The Abominable Charles Christopher.... | From The Economist (remember w... Newer »
This thread has been archived and is closed to new comments
Buy a Shirt