Higher wages slow US automakers in marketplace
Some auto company executives and the United Automobile Workers (UAW) union have been trying to persuade the administration, Congress, and the public that their industry deserves protection against imports. The UAW also has been spending $200,000 on radio and newspaper advertising to urge those in the market for cars to buy American.
Says the headline in the full-page ad in the New York Times last Friday: "Paying for imports with our jobs is a price we can't afford." The headline refers to a New York Times/CBS poll showing that 71 percent of Americans conclude that given a choice between higher unemployment or cheaper foreign goods, its more important to protect jobs.
The ad copy goes on to read: "Every ship bringing foreign-made cars to America carries a hidden cargo. Unemployment. For each foreign car sold here, one of our workers gets laid off. Right now, hundreds of thousands of workers in the auto and related industries remain idle."
What the ads don't say is that one important element in the import problem is the high wages of the UAW members. The average worker making $5 or $6 an hour, said Sam I. Nakagama, chief economist at Kidder, Peabody & Co., is being asked to protect the wages of auto workers making $18 an hour or steelworkers making about $19 an hour.
Mr. Nakagama advocates that the Congress pass legislation freezing the wage levels of any industry getting trade adjustment assistance -- the government payments to industries and workers suffering from import-caused plant shutdowns and layoffs. Auto workers have been getting that assistance.
A study within the Carter administration concludes that US car prices would increase by about $350 if Japanese imports were reduced by 250,000 a year and $ 700 if the import restrictions stopped 500,000 cars from coming into the US.
Commented Robert Dunn, an economics professor at George Washington University in an article in the Washington Post: "The UAW, in other words, is suggesting that Americans pay a few hundred dollars more for cars in order to subsidize its members who earn 50 percent more than the average for US manufacturing. This is from a union which claims to support measures to shift income from the rich to the poor."
General Motors currently pays its average assembly line worker straight time of $9.65 an hour plus a cost-of-living allowance of 84 cents, plus benefits of $ 8.11 for a total hourly cost of $18.60.
The Bureau of Labor Statistics has stopped collecting statistics on total employer expenditures on wage compensation. So full comparisons are difficult. But they do have gross hourly earnings figures which show that auto workers in August got $10.76 an hour and steel workers got $12.10. The average manufacturing wage was $7.30, an average which included these two high-paying industries.
Professor Dunn points out that the gap between the wages of auto workers and those in other industries has increased from about 25 percent in the 1960s to about 50 percent today. The gap has similarly widened for steel workers, producing a product vital to the auto industry.
About 34 percent of the revenues of General Motors go into the wages of employees. Another 53 percent of revenues is paid to suppliers, including a good chunk to the steel companies.So wages are an important element in the competitiveness of American auto firms. They are far above the wages paid by Japanese automakers and well above those paid by European auto firms.
Does this imply that American autoworkers should be paid no more than foreign autoworkers?
Mr. Nakagama does not make that argument. But he does hold that auto-worker wages should be brought more into line with the average. And his view is not simply based on a question of fairness.He is worried that the government -- either a Carter or Reagan administration -- will be unable to restrain the economy enough in the battle against inflation for fear of burying the US auto industry.
In other words, to prevent inflation from taking off once more, the Federal Reserve System will have to restrain the growth of the money supply. This will result in high interest rates, perhaps higher than already existing. Those rates could once more clobber auto sales. Auto industry losses, already about $ 4 billion this year, would continue far into 1981, endangering this key American industry.
Thus, Mr. Nakagama suggests the freeze on auto wages to save the industry and , in a way, the nation.
The steel industry earlier this fall got the protection of a revised trigger-price protection system and immediately boosted its prices. The auto industry would undoubtedly follow that example should it get extra protection.
Of course, wages are not the entire problem of the auto industry. Although the industry disputes the charge, it probably was slow in producing enough small , fuel-efficient cars. The UAW is also right in pointing out that many foreign countries (It's ads say 27) do protect their domestic auto industries by various measures. Duties on foreign imports in West Germany and Italy are 11 percent and higher. Italy holds Japanese imports to 2,200 units annually. Britain and France limit the market share of Japanese cars.
In the United States, imports are now more than 25 percent of US domestic sales, compared with somewhat more than 10 percent at the end of the 1960s. The US industry lost its oligopolistic powers -- the ability for a few firms to manage prices, though not necessarily by conspiracy -- both in the US market and abroad. It became tougher for the industry to make what used to be above-average profits.
Despite this boom in imports, the next president and Congress should be cautious in protecting the US car industry at the expense of those making far less than American auto workers.