The myth of the $70/hour auto worker

Keith Olbermann, at 1:42, names Andrew Ross Sorkin of NYT Worst Person in the World for inventing the myth of the $70/hour auto-worker. Short version: add all Big Three liabilities, including retiree pensions and benefits, current benefits including health care, and actual wages, then divide by current worker/hours. Ta Da!


Eric Boehlert at MediaMatters also deconstructs the myth, excerpted here, at length:

It's been one week since New York Times financial columnist Andrew Ross Sorkin wrote that at General Motors, "the average worker was paid about $70 an hour, including health care and pension costs."

The nugget was part of a column in which Sorkin argued that the government should not bail out the ailing Big Three automakers and that they instead should embrace bankruptcy.

Sorkin's point was that labor costs were out of control -- workers enjoyed "gold-plated benefits" -- and that during bankruptcy, the auto companies could address those runaway wages.

As I mentioned, it's been one week since the column appeared, which seems like plenty of time for Sorkin and the Times to correct the misleading $70-an-hour claim. But to date, there's been no clarification from the newspaper of record or from Sorkin himself.

And he isn't alone. Appearing on NPR last week, Times senior business correspondent Micheline Maynard told listeners that the "hourly wage" of Detroit's union autoworkers had been driven up "towards $80 an hour."

Somebody at the Times needs to clarify the record, because the average United Auto Workers member is not paid $80 an hour. Or even $70. Not even close. Yet (thanks to the Times?) the issue has become a central talking point in the unfolding national debate about the future of America's automotive industry.

Indeed, that $70-an-hour meme, actively promoted by the anti-union conservative media, has ricocheted around the traditional press as well as the political landscape, where it was picked up by congressional critics last week during hearings and used to argue against aiding GM, Ford, and Chrysler.
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Question: Is the press just being sloppy on this issue of supposedly pampered autoworkers, or are there other elements in play? Because honestly, I've had trouble escaping the not-very-subtle elitist, get-a-load-of-this tone that has run through the media's misinformation on the topic; i.e., "These autoworkers get paid that?!"

Answer: No, they don't, so please stop reporting it. (And why has the press been so reticent to note that Big Three autoworkers recently made significant concessions to management?)

And it's funny, because I don't remember hearing much coverage in the press about AIG workers' six- and seven-figure salaries when the U.S. government announced it was bailing out the insurance giant. And I haven't seen or heard a single press reference to the annual salaries pocketed by Citigroup employees, even though the government has moved in quickly to bail the banking giant out of a hole its executives dug.

As Rep. Barney Frank (D-MA) pointed out during congressional hearings last week, "There is apparently a cultural condition that's more ready to accept aid to a white-collar industry than the blue-collar industry, and that has to be confronted."

That cultural condition seems to extend to, and be embraced by, today's white-collar press corps.

Make no mistake: The $70-an-hour claim represents a classic case of conservative misinformation. It's also a very dangerous one. The falsehood about autoworkers is being spread at a crucial time, when a make-or-break public debate is taking place, a debate that could affect millions of American workers.
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What that $70 figure (or $73) actually represents is what it costs GM in total labor expenses, on an hourly basis, to manufacture autos.

Do you see that there's a big distinction? General Motors doles out $70 an hour in overall labor costs to manufacture cars. But individual employees don't get paid $70 an hour to make cars. (The discrepancy between costs and wages is explained by additional benefits, pension fees, and health-care costs GM pays out to current and retired employees.)

Simply put, GM's labor costs are not synonymous with hourly wages earned by UAW employees. Many in the press have casually used the two interchangeably. But they're not.

Felix Salmon at Portfolio did perhaps the best job explaining the misinformation at play:

The average GM assembly-line worker makes about $28 per hour in wages, and I can assure you that GM is not paying $42 an hour in health insurance and pension plan contributions. Rather, the $70 per hour figure (or $73 an hour, or whatever) is a ridiculous number obtained by adding up GM's total labor, health, and pension costs, and then dividing by the total number of hours worked. In other words, it includes all the healthcare and retirement costs of retired workers. [emphasis in original]

Indeed, according to this Associated Press report, a chunk of GM's $70-an-hour labor costs goes toward paying current retirees' pensions and health-care coverage. In other words, that's money that's not going to end up in the pocket of any autoworker when he cashes his paycheck this week. That's money GM has to set aside in order to pay off costs associated with workers already in retirement. That money has absolutely nothing to do with calculating the hourly wage of a full-time UAW employee today. None.

So, no, UAW workers don't make $70 an hour even if you factor in benefits, because a portion of those benefits are going to people who retired years ago.

Nonetheless, that formulation (wages+benefits=$70 an hour) has been widespread. That's what Sorkin did in his Times column: "The average worker was paid about $70 an hour, including health care and pension costs."

Not only is that inaccurate, but there's also a problem in terms of perception. It's true that autoworkers don't earn annual salaries and that when calculating hourly wages, the cost of benefits paid directly to the worker can be included. But some media outlets have been so casual and sloppy in presenting the facts that news consumers are left with the false impression that GM workers pocket $70 an hour. That's not true, and it seems some in the press are doing very little to correct that misperception.

For instance, BusinessWeek also used the same convoluted language: "Older UAW members make more than $70 per hour in combined wages and benefits." Dallas Morning News columnist Cheryl Hall did it, too: "GM's average worker makes $78.21 an hour in wages and benefits."

Why does the press use that convoluted equation when calculating how much autoworkers supposedly make?

I have a hunch it's because that $70 an hour is a real eyepopper. It makes a very deep impression within the space of just a few words.
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How much money GM's workers make is certainly relevant when discussing the unfolding automotive crisis. But the press should stop confusing the issue, and tainting the perceptions of news consumers, by casually suggesting that $70-an-hour labor costs represent what UAW workers pocket every 60 minutes.

That's misleading and dishonest.

And that's why it's still not too late for Sorkin and the Times to correct the record.