Wednesday, November 26, 2008

The Auto Sector - To Bail or Not To Bail

There's a debate raging right now as to whether Ottawa and Washington should make a major financial commitment to the North American auto industry. Personally I don't want to see any of GM, Ford or Chrysler dissappear...but only under one condition do I favour bailouts. And that is with major concessions from the unions.

I have heard and read the missives from CAW and UAW leaders, how this crisis was not of their making and that they've already made concessions. And that is a fair comment in my opinion, but only to a degree. Even if wages were much lower for auto workers I could still see the industry in serious trouble given the current economic climate. But to suggest that the high wages paid in the auto sector have had no bearing on the big three's plight...well that's overstating things to put it mildly.

From what I've heard line workers in Canada earn somewhere in the neighbourhood of $35 per hour. Assuming a 40 hour work week that equates to over $70,000 per year, without even taking overtime into account. That's more money than many nurses earn, and nurses have to undergo years of training often leaving school with significant debt loads. There are in fact many professions that require people to invest heavily in their education, and at the end of the day they're still not earning what an auto worker gets.

I don't wish to come across as a heartless advocate of the free market, one who extols the virtues of business over labour because that's far from the case. In fact I consider myself to be a pretty ardent supporter of the union movement. However the current financial state of the world does not allow for dogmatic thinking.

We all know that expenses rise to meet income, and that an auto worker making 70+ thousand a year is probably spending most of it....not unlike most people. In our society identities are built around our possessions, hobbies and leisure activities...and many come to expect them as something of an entitlement. But reality often ignores that to which we feel we're entitled.

The harsh reality is this...if any or all three of North America's auto giants go bust, the vast majority of auto workers are going to be hard pressed to find jobs that pay as well...taking their skills into the marketplace I would wager a hefty sum that the vast majority would not be able to find anything near as remunerative as what they've been used to.

Now...does that mean I think the unions should be disbanded and the jobs filled based on strict market influences? Absolutely not!!! But I do think wages in the range of $20-$25 per hour are more than reasonable. $20 per hour equates to over $40,000 per year which is still a decent wage...and a damn sight higher than what most would be able to find were the auto giants allowed to fail.

Things have changed remarkably over the past twenty to thirty years. Back in the day when the big three owned the North American auto sector life was easy. Unions could bargain hard for big increases in wages and benefits and the costs would simply be passed onto the consumer. But in today's competitive global marketplace that's no longer and option.

If the unions balk and refuse to accept substantial wage concessions? Then I think we should simply let the sector fail and hope that Honda and Toyota among others can step in and fill some of the void. Maybe some of those who would lose their $35 per hour jobs would be able to find replacement jobs paying $15/$20 per hour with one of the foreign based, non-unionized companies.

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