WAGE AND BENEFIT GAINS BY THE UAW IN 1980

Transcription

1 Allied Academies International Conference page 19 WAGE AND BENEFIT GAINS BY THE UAW IN 1980 James T. Rhodes, Christian Brothers University Sarah Pitts, Christian Brothers University Rob H. Kamery, Christian Brothers University ABSTRACT The United Auto Workers Union is the legal representative for autoworkers in bargaining with General Motors Corporation, Ford Motor Company, and Chrysler Corporation. In 1979, the membership of the union was 1.5 million, with a record strike fund of 290 million dollars (USNWR, 1979). In the last 30 years of bargaining with the auto companies, the United Auto Workers Union has won wage and benefit concessions that clearly place the autoworkers among the world s industrial elite (BusinessWeek, 1979). But did the autoworkers keep up with the rate of inflation? In studying this complex subject, a historical overview will be presented. The time period analyzed was from the 1967 contract up to the 1980 agreement. INTRODUCTION During September of 1967, the United Auto Workers Union s contract with the auto companies expired, and the bargaining committee was unable to negotiate a new contract prior to a strike. The United Auto Workers Union shut down Ford Motor Company s production lines for 49 days. Prior to the walkout, the average Ford Motor Company employee was earning slightly more than $ a week (USNWR, 1967). After the 49 day shut-down of the plant, a contractual agreement was reached between the auto company and the United Auto Workers Union. The contract called for an immediate 20 cents an hour raise for all, and a three percent increase an hour in the fall of 1968 and 1969 (BusinessWeek, 1967). The contract also called for a cost-of-living allowance (COLA) based on the consumer price index. The cost of living adjustment was a one cent an hour raise for every 0.3 percent rise in the consumer price index, with a maximum increase of 0.8 percent per quarter (BusinessWeek, 1967). THE BEGINNING OF THE AGREEMENT In 1968, the rate of inflation was 4.3 percent for the year based on the consumer price index, with the quarterly average increase of 1.07 percent. This was over the maximum point allowed by the contract, which indicates that the autoworkers fell behind the rate of inflation per quarter by an average of.27 percent based on the consumer price index. Recalling that the contract called for a 20 cent raise immediately and a three percent raise in 1968 and 1969, at the end of 1968 the average Ford Motor Company worker was making $ per week based on the $ prior to the Proceedings of the Academy of Organizational Culture, Communications and Conflict, 7(2) Las Vegas, 2003

2 page 20 Allied Academies International Conference walkout in The cost of living increased 4.3 percent in 1968, while the autoworkers wages increased 9.8 percent. This figure includes the 20 cents an hour raise. In 1969, the rate of inflation was 5.4 percent with the autoworkers pay increasing by five percent, and in 1970 the rate of inflation was 5.9 percent, with the autoworkers wages increasing 4.3 percent, bringing their average wages up to $ per week. By the time September 1970 came around, the autoworkers were losing purchasing power because of the increase in the cost of living. THE EARLY 1970s AND THE AGREEMENT In 1970, the United Auto Workers Union was unable to reach an agreement with the auto manufacturers prior to the September 14th deadline, and the union went on strike, curtailing operations at the General Motors Corporation s plants throughout the U.S. The strike lasted a total of 67 days before an agreement could be reached. The strike was very costly to the union members and the union. The pay lost by the average autoworker, based on the typical pay received by the workers, was $1, in nearly ten weeks without work (USNWR, 1970). While on strike, the union paid strike benefits of $30.00 per week for a single worker to $40.00 for a union member with a family (USNWR, 1970). The General Motors Corporation workers that were on strike lost a substantial amount of money, and the union paid out some 124 million dollars in strike benefits to General Motors Corporation employees from September to November 30th, according to the UAW Secretary-Treasurer (USNWR, 1970). The terms of the agreement between the United Auto Workers Union and General Motors Corporation called for the biggest wage and benefit increases in auto industry history (WSJ, 1970). The first year of the contract called for an average pay increase of 51 cents, plus a 14 cents an hour raise in both the second and third years of the agreement (WSJ, 1970). This is an average increase of 19.5 percent over the three years of the contract. A very important gain in the contract by the auto union was the change in the cost of living calculation. In the prior contract, there was a maximum limit set on the adjustment. The 1970 contract called for a cost of living raise formula with an unlimited ceiling (WSJ, 1970). This unlimited increase in the cost of living formula would protect the autoworkers for an up to approximate 80 percent rise in the consumer price index. The autoworkers received a one-cent an hour raise for each 0.3 percent rise in the consumer price index. The typical autoworker who was making $ for a forty-hour week would receive an increase of $20.40 per week for the first year and $12.80 the second year based on a four percent increase in the consumer price index (WSJ, 1970). The time that it took this average worker to make up the pay loss during the 67 day strike was 66 weeks, not including overtime (USNWR, 1973). Over the life of the contract, from September 1970 through September 1973, the yearly inflation rate was 4.5 percent, while autoworkers wages rose 19.5 percent during the contract period, or a yearly average of 6.5 percent. With the contract of 1967, the autoworkers fell behind the rate of inflation, but in the negotiations for the contract, the autoworkers definitely stayed ahead of the increases in the consumer price index. Las Vegas, 2003 Proceedings of the Academy of Organizational Culture, Communications and Conflict, 7(2)

3 Allied Academies International Conference page 21 THE GAINS OF THE AGREEMENT In September of 1973, a new type of labor contract emerged from the strike settlement at Chrysler Corporation--an agreement in which wage increases took a backseat to gains in employee benefits and working conditions (USNWR, 1973). In the preceding contract, the United Auto Workers Union made real gains in their income after deducting for inflation. This monetary gain of two percent for the average worker was a taxable gain, but the benefits and improved working conditions were not taxable. This created a situation where the autoworkers were keeping pace with inflation and benefits, such as more paid holidays, and not increasing their taxable income. In the three-day strike, the union settled for an average increase of $.27 an hour for the first year, plus a three percent an hour increase for the next two years, with no change in the cost of living formula (USNWR, 1973). The first year increase worked out to 5.3 percent prior to any adjustment for increases in the consumer price index (USNWR, 1973). At Chrysler Corporation, the average worker was making $5.12 per hour prior to the strike. Adding the average of $.27 an hour brought the average hourly pay to $5.39 prior to the cost of living increase. The consumer price index increased a total of 6.2 percent for the year, or an average of 1.55 percent per quarter. The increase due the autoworkers was based on the one cent an hour increase for every 0.3 percent rise in the consumer price index, which was $.20 per hour for the year. By the end of 1973, the average worker was making $5.59 an hour, or an increase of 9.2 percent, while the consumer price index rose only 6.2 percent. In the second year of the agreement, the inflation rate was 11 percent and the average wage of the autoworkers increased from $5.59 an hour to $6.07, an increase of $.12 per quarter on the average, or a yearly percentage of 8.5. The third year of the agreement saw the inflation rate at 9.1 percent, and the salaries increased by $.43 an hour, an increase of seven percent. MARKED COMPANIES In 1978, the Ford Motor Company was the target company for a strike by the United Auto Workers Union. The strike lasted for 28 days. The reason for this strike was that the auto companies wanted to hold the line on escalating labor costs in the benefits area, especially healthcare coverage (USNWR, 1973). Benefits were very costly to the auto companies, while the union saw benefits as a hedge against inflation and taxes. More than one-third of the industry s average labor cost of $11 an hour is attributable to benefits (USNWR, 1976). In the agreement, in addition to today s average of 33 holidays and vacation days a year, workers did receive 6 more days of paid time off in the second year, and 7 days off in the third year of the pact (USNWR, 1976). In addition to receiving more benefits, the autoworkers wages were among the highest in any industry--hourly earnings averaged $6.83 in April and an uncapped cost of living allowance has largely shielded autoworkers against inflation (USNWR, 1976). The 1976 agreement called for an immediate wage hike of 20 cents an hour and an increase of three percent each year from the current average of $6.79 at the Ford Motor Company s plants (USNWR, 1976). There was no change in the cost of living formula. COLA payments remained at one- cent per hour for each 0.3 percent rise in the consumer price index, adjusted quarterly. Proceedings of the Academy of Organizational Culture, Communications and Conflict, 7(2) Las Vegas, 2003

4 page 22 Allied Academies International Conference With the agreement, the average Ford Motor Company autoworker received $2.70 an hour, or more in additional wages and benefits over the three years. The company figured that its 1976 hourly labor cost was approximately $11.25 per employee (Brody, 1979). Using the $2.70 increase, the wages and benefits for employees over the three-year period increased by 24 percent, while inflation increased 20 percent over the same period. The autoworkers enjoyed a four percent real gain in income and benefits, and, on top of that, the benefits were not taxable. THE GENERAL MOTORS CORPORATION OPPOSITION In September of 1979, the United Auto Workers Union set General Motors Corporation as the target company for a possible strike, if a contract agreement could not be reached prior to the deadline of September 14th. The last time the United Auto Workers Union set General Motors Corporation as a target for a strike, a contract was reached after 67 days of shutting down the General Motors Corporation s plants. An agreement was not reached prior to the 14th, but the 1979 strike lasted less than a week. The newest contract was the most generous auto settlement since 1948, and the most inflationary auto settlement since 1948 (Brody, 1979). The union settled for the traditional three percent a year, a real wage increase reflecting increasing productivity, and also negotiated an improvement in its cost of living adjustment formula (Brody, 1979). This was the first change in the COLA formula since the United Auto Workers Union signed the agreement to have an uncapped formula, which took place in 1970 when the union shut down the General Motors Corporation s plants for 67 days. The change in the formula will take place in the third year of the pact. The autoworkers will receive a one-cent an hour COLA payment for each 0.26 percent rise in the consumer price index, instead of the past one-cent an hour payment for each 0.3 percent rise in the CPI (BusinessWeek, 1979). The analyst calculated the inflation protection for the new pact at 82 percent, up from the past 78 percent (Business-Week, 1979). The increase in the protection provided by the COLA adjustment gave the auto- workers a larger real gain each year, as the union continued to settle for the traditional three percent increase in wages. The cost analysis for 1980 is provided below for General Motors Corporation based on the new (1980) contract, assuming an eight percent inflation rate, and a pay base of $14.28 per hour Total Wages $.48 $.28 $.29 $1.05 COLA Paid Days off Pension increase Add cost to current health benefits Other Benefit increases Roll-up Dollar increase $1.90 $1.51 $1.36 $4.77 Percentage increase 13.3% 9.3% % Las Vegas, 2003 Proceedings of the Academy of Organizational Culture, Communications and Conflict, 7(2)

5 Allied Academies International Conference page 23 Using these figures, the hourly labor cost per worker was $19.05, based on an eight percent inflation rate. If the rate was higher, the labor cost also would be greater. In 1981, the inflation rate was approximately 13 percent for the year. The autoworkers stayed abreast of the rate of inflation, even more so in the third year of the contract because of the adjustment in the cost-of-living formula. CONCLUSION In 1967, the United Auto Workers Union signed an agreement with the automakers to compensate the workers for increases in the consumer price index as a hedge against inflation. This was a big coup for the union. Autoworkers wages began to shoot upward in late 1970 after the union struck General Motors Corporation for 67 days and won an uncapped COLA formula. At Ford Motor Company, for example, the hourly wage rate for assemblers advanced faster than the consumer price index, rising from $4.30 in 1970 to $6.57 in COLA payments accounted for $1.44 of that increase (BusinessWeek, 1979). In the 1980 agreement, the union and the automakers agreed to an adjustment of the COLA formula, which gave the autoworkers more protection from inflation. The United Auto Workers Union has been able to negotiate contracts that have enabled the workers to stay ahead of the increased cost of living since the 1967 agreement, and they continued to do so over the life of the 1980 agreement. REFERENCES Anonymous (October, 1967). Ford sets costly pattern, BusinessWeek, 38. Anonymous (November, 1967). Reuthers delivers the goods, BusinessWeek, 54. Anonymous (July, 1976). Peace with the UAW--but at a price, BusinessWeek, 110. Anonymous (October, 1979). Labor s quid pro quo in the Chrysler rescue, BusinessWeek, Anonymous (October, 1967). What the auto strike is costing the workers, U.S. News & World Report, 104. Anonymous (October, 1970). Cost of GM strike to the auto union, U.S. News & World Report, 90. Anonymous (November, 1970). What auto strikes cost the U.S., U.S. News & World Report, 17. Anonymous (December, 1970). UAW s money and contract troubles, U.S. News & World Report, 48. Anonymous (October, 1973). Latest Auto Pact--Its Meaning for Other Industries, U.S. News and Report, 82. Anonymous (October, 1976). Ford settlement: big step toward the four-day week, U.S. News & World Report, Anonymous (September, 1979). UAW and auto makers gear up for a strike, U.S. News & World Report, 80. Anonymous (November, 1970). GM and UAW Settle on Contract, The Wall Street Journal, 1, Brody, Michael (September, 1979). Pacesetting contract, Barron s, 9. Proceedings of the Academy of Organizational Culture, Communications and Conflict, 7(2) Las Vegas, 2003

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