Human Resources paper
Contents The Internet saps the fall TV season 24 Lawyers circle another medical device failure 25 ^ The high cost of being into leather 26 Now girls can dress like their avatars 27 Briefs:
Best Buy's worst nightmare 28 Edited by James E. Ellis Companies&lndustries FortheUAW, A Bargaining Dilemma >• Some of the auto union's newest members receive poverty-level pay "The idea of middle-class wages...
in manufacturing has been over for a long time" Preston Bunce, an assembly-line worker at a GM sport-utility vehicle plant in Lan- sing, Mich., is at the center of the upcom- ing contract talks between the United Auto Workers and U.S.
automakers.
The 29-year-old father of two started in 2008 at $14 an hour and today makes less than $16, a wage that he says is too low to buy a home or purchase the SUV he builds, a Chevrolet Traverse that sells for more than $30,000. His mother, who like Bunce's grandparents is a CM lifer, makes double his wage for similar work at a CM plant across town. "It is tough to make ends meet," says Bunce, who also works part-time installing windows and siding when he can find extra work.
As the UAW bargains for a new labor deal with CM, Ford Motor, and Chrysler Group, a key question is how much of a raise the union will demand for workers such as Bunce. UAW Presi- dent Bob King has a tough choice: He can push for higher wages to secure new workers a better standard of liv- ing-as the union has for decades while watching its membership shrink by almost 80 percent since 1979, to barely 360,000 members-or he can keep pay low and use the cheap wages as a carrot to get carmakers to increase the number of unionized U.S.
jobs.
King says that raising the second- tier wage is his top priority in this year's negotiations, now under way with the Big Three. That runs head-on against automakers who are negotiating buyouts for tenured workers making $28 to $33 an hour with an eye toward replacing "This wage is near federal assistance levels.
That's not the role the auto industry has traditionally played" them with cheaper new hires to com- pete with more-nimble foreign rivals, say two people familiar with the matter who were not authorized to comment.
With CM, Ford, and Chrysler all logging profits, the union argues they should pay even new workers enough for a mid- dle-class lifestyle. "There will be tough bargaining on this issue," says Harley Shaiken, a labor professor at the Univer- sity of California at Berkeley. "The debate is:
Can we have a highly competitive auto industry and middle-class wages?" Including benefits, senior UAW workers cost CM $52 an hour and $58 an hour at Ford, says Kristin Dziczek, director of the labor and industry group at the Center for Automotive Research (CAR) in Ann Arbor, Mich. New hires cost $30 to $33 an hour. Despite lower pay, workers line up for the $14-an-hour jobs.
Ford, for instance, had 17,000 applicants for 600 entry-wage jobs September 19 - September 25,2011 Bloomberg BusinessWeek Companies&lndustries The Great Wage Stagnation Auto plant wages used to outpace inf iation Real (Inflation-adjusted) wages 1940 1960 1980 2000 2010 1941 At $1.15 an hour, how k>ng to buy...
New car:
$800 ^"^ 696 hours of work Gallon of gas: $0.20 ^J 0.2 hours Six-pack of beer:
$1.11 Hi 1 hour Iw 10 At $5.43 an hour, how long to buy...
New car: $4,950 ^^f 912 hours of work Gallon of gas: $0.45 ^^ 0.1 hours Six-pack of beer:
$2.20 •• 0.4 hours 2010 At $28.13 an hour, how long to buy...
New car: $24,250 'S"* 1,059 hours of work Gallon of gas: $3.67 Six-pack of beer:
$6.99 0.1 hours I 0.2 hours •BASE HOURLY RATE FOR A MAJOR ASSEMBLER AT FORD DATA: UNITED AUTO WORKERS. BUREAU OF LABOR STATISTICS. US ENERGY DEPT.. NATIONAL AUTOMOBILE DEALERS ASSN at its SUV plant in Louisville last month.
The UAW agreed to a $14 wage for new workers (it hits $16 after three years) in 2007, when U.S.
car compa- nies were losing money and the union was trying to keep assembly jobs in the U.S.
It was a profound shift, since the union had traditionally sacrificed jobs to preserve wages of its members on the factory floor, says Diane Swonk, chief economist at Mesirow Financial.
But as the industry slid into crisis, it became clear the union had to give in on wages just to get new people hired.
"The idea of having middle- to upper- middle-class wages in manufactur- ing has been over for a long time," she says.
"The automakers are not going to be paying what they once did." All three car companies declined comment.
For workers supporting a family of six, the starting wage at GM assembly plants is at the federal poverty level.
Bunce started at $14.12 an hour, or about $29,370 a year.
A married couple with four children living on $29,990 is consid- ered to be living in poverty, according to the Health and Human Services Dept.
A family of six living on $28,665 could qual- ify for the federal food stamps program.
UAW workers in Big Three car plants last made a wage this low in 1985, ac- cording to CAR.
Back then, a gallon of gas cost $1.17 and a six-pack of beer was $3.16.
A Chevy Celebrity family sedan sold for $8,702, according to industry publication Ward's Automotive Reports.
Today, the Malibu family car starts at $22,735.
To get to equivalent inflation- adjusted wages, you would have to go back to 1950, when union workers made $1.58 an hour, says Dziczek. Since 1960, union auto workers have received aver- age raises of 5.2 percent a year, provid- ing a solid middle-class lifestyle. In 1915, Henry Ford doubled assembly wages to $5 a day, or 63(t an hour, says Berke- ley's Shaiken. That's about $14 an hour in today's wages, so the two-tiered wage has reversed much of those gains, he says.
"This wage is near federal assis- tance levels.
That's not the role the auto industry has traditionally played." The lower wages have helped the union secure jobs, however. About 40 percent of the 1,550 UAW workers at GM's assembly plant in Lake Orion, Mich., are paid $14 an hour. Accepting the lower wage was key to securing pro- duction in the U.S.
of the Chevy Sonic, a subcompact engineered in Korea. Small cars have thin profit margins and are often made in low-wage countries.
"I've got to have a very competitive and unique labor deal in the Lake Orion plant," GM Vice-Chairman Stephen J.
Girsky told analysts on Sept.
7.
"We are the only ones building a small car in the U.S." Even with the lower wage- contract, profits on the $14,495 Sonic will be low.
Currently, fewer thiin 3 percent of GM's workers make the entry-level wage.
Chrysler has hired as many as 14 percent of its workers under those terms, and Ford has fewer UAW's King has decided to push for raises for newer workers than 100 second-tier workers.
That could change depending on the new contract.
For senior workers.
King is seeking better benefits and has said he is open to compensation tweaks that won't raise automakers' fixed costs, which may include a mix of profit sharing and bonuses based on achieving produc- tivity and quality goals.
"We are going to make sure the companies are com- petitive coming out of these agree- ments," he said in August at the Detroit Economic Club.
Yet he also contends that workers must be rewarded for the $7,000 to $30,000 in concessions they each gave since 2005 to help the U.S.
automakers survive. Finding a middle ground won't be easy. —David Welch The bottom line The UAW, whose memtiership has fallen 80 percent since 1979, may try in contract talks to raise the industry's $14 hourly starting wage.
Television New TV Season, and Fewer People to Watch It • Declining TV households and a drop In young adult viewers hurt • "Online I can watch the few programs I actually care about" As a college student, Jordan Geddis took cable TV for granted.
MTV, Comedy Central, and ESPN were just part of the dorm tab at Syracuse University. Even when she moved off campus, Geddis split the bill with roommates. Now, on her own in a tough economy, the 25-year-old General Dynamics engi- neer in Groton, Conn., no longer pays.
"When 1 had cable I followed a couple shows, but the rest was garbage to me," Geddis says.
"Online I can watch the few programs 1 actually care about." With more young adults tuning out this TV season, the industry is confront- ing a generation of viewers who say they won't pay the typical $75 monthly cable or satellite bill.
Nielsen, whose TV ratings influence ad rates, in May cut the estimated number of U.S.
TV households by 1 percent, to 114.7 mil- lion, the first drop since 1990.
College towns such as Boston, Madi- son, Wise, and Austin, Tex., posted some of the Copyright of Bloomberg Businessweek is the property of Bloomberg, L.P. and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission.
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