UNDERNEWS

Undernews is the online report of the Progressive Review, edited by Sam Smith, who has covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964. The Review has been on the web since 1995. See main page for full contents

April 22, 2009

THE AUTO WAGE LIE

Jim Stanford, Globe & Mail, Canada - The auto industry is in crisis around the world, due to an unprecedented collapse in sales. And governments around the world (from Europe to Asia to the Americas) have moved quickly to keep the industry in business.

Only in North America, however, has this restructuring been sidetracked by an ultimately phony confrontation over auto worker wages. Auto workers are well paid everywhere - after all, that's a key reason governments chase auto investments in the first place. But only in Canada and the United States have governments made auto assistance contingent on union concessions. That's not the case in Germany or Japan (where auto workers make more than they do in Canada), nor in Brazil or Korea (where they make less). Only here has the future of the industry been linked to a frontal attack on unions. . .

Economically, wage cuts are irrelevant to the future of Chrysler and any other auto maker. Whether these companies live or die depends on bondholders, on government, and - most importantly - on consumers. Direct labor accounts for 7 per cent of total auto costs: less than capital, less than materials, less than dealer margins. Cutting that to 6 per cent won't sell a single car or truck. . .

Jim Stanford is an economist with the Canadian Auto Workers union.

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