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Wednesday, December 10, 2008

NY Times: $73 Does Not Equal $73

There is no better example of why the NY Times is crumbling than the article $73 an Hour: Adding It Up. The article focuses on the oft-quoted fact that United Auto Worker members cost Detroit auto makers $73 per hour, which exceed the cost for workers at non-union auto plants, mostly in the South. The Times takes on this statistic with dramatic urgency, as if the fate of the union hung in the balance, concluding that "Detroit’s defenders are right that the number is basically wrong."

But read the full article, and you will see that the opposite is true. The article itself proves that the $73 per hour statistic is correct as to what auto workers cost the Detroit auto manufacturers. What is not true is that each auto worker gets a cash payment of $73 per hour. That number is an aggregate of wages, fringe benefits, and retiree benefits. 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.

The Times then goes on to announce that the cost disadvantage is not the main problem. Really, the problem is that Detroit auto makers do not make cars people want to buy. But you can't separate out the cost disadvantage from the end product. If it costs more to build something, you create a weaker product in order to compete on price. Now maybe Detroit shouldn't be competing on price, and certainly there have been numerous bad corporate business decisions, but that does not change the reality that UAW contracts are not sustainable.

For decades, the UAW pursued a strategy of targeting one of the Big Three auto makers for negotiation and possible strike. As one analyst explained it, ''[h]istorically, the union picked the strongest company financially and operationally so that they could extract a rich contract out of the more prosperous one and go about imposing it on the weaker companies.''

Now all three Detroit auto makers are on their financial death beds as a result, and all The Times can find time to do is play numbers games. With such politically-motivated journalism, it is no wonder The Times is about as healthy as the auto manufacturers.


  1. So what you're saying is that union wages, which were fixed as a ratio of the minimum wage, were skyrocketed by the federal increase in the minimum wage, thereby creating this very problem? Democrats caused this and now Democrats are spending billions of dollars to "fix" it? Kind of like the credit default swap crisis, isn't it?

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