Dollars and sense

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Republican senators in the U.S., playing politics with the future of the North American auto industry, tried to scapegoat the United Auto Workers for the apparent failure of the U.S. auto rescue package. While an interim lifeline to help the industry survive now seems imminent, many misconceptions remain about how much auto workers are paid. Many have falsely claimed that auto workers make $70 or more per hour and hence are to blame for the industry's woes.

Average wages in auto assembly plants are about $35 per hour. That's a good wage, but the industry is uniquely productive. Each auto worker produces, on average, $300,000 worth of GDP per year. There's no credible case that labour costs can be blamed for either the short-term collapse of U.S. auto sales (resulting from the credit freeze) or the longer-term flood of imports to North America.

The $70 figure arises from a misunderstanding of a concept called "total labour costs." This figure is calculated by dividing a company's total labour costs (including payroll taxes and other statutory fees paid to government, and the costs associated with retired workers) by the number of hours worked in the factories. This is not a measure of compensation; it reflects broader factors like taxes, pensions and health-care policies.

So-called legacy costs look very large, measured per hour of work, because the auto makers have reduced employment so dramatically.

On a total active labour-cost basis, at current exchange rates, the Big Three producers pay about $53 (U.S.) per hour worked in Canadian facilities. That's not much higher than the $49 (U.S.) per hour cited for non-union plants run by offshore auto makers, and it's lower than unionized plants in other major auto-producing countries (including the U.S., Germany and Japan).

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