The Great Debate

What GM’s contract victory means

By Paul Ingrassia
The views expressed are his own.

General Motors won.

That’s the bottom line from the new four-year contract with the company ratified by the United Auto Workers union yesterday.

GM retained the two-tier wage system that allows it to start new hires at $16 to $19 an hour, above the current starting wage but far below the $32 an hour for UAW veterans.  Premium-paid skilled-trades workers, such as electricians, can be offered buyouts and be replaced by standard production workers at new-hire wages.

And GM got clearance to offer pension-buyout plans to UAW retirees, providing “maximum optionality,” its chief financial officer declared.  That’s atrocious English, but it’s good business.

After 65% of GM’s U.S. workers voted for the new contract yesterday, GM declared that its break-even point in North America wouldn’t increase and that the profit impact of the new contract would be “minimal.” The union hung its hat on 6,000 factory jobs “added or saved” during the four-year agreement, and bonuses of at least $11,500 per worker.

If that sounds like a great trade-off for GM, which it is, the outcome is about as much as a surprise as Vladimir Putin returning as Russia’s president or euro zone leaders continuing to grapple with Greece. The negotiating odds were stacked in the company’s favor.  The UAW gave up the right to strike at GM and Chrysler until 2016, as a condition of the government bailout of both companies. And the union was chastened by Detroit’s near-death experience in 2009, finally realizing that “job security” measures such as paying workers indefinitely not to work actually destroyed job security.  Numbers don’t lie: the UAW’s GM ranks have shrunk by nearly 90% over the past 40 years. There are 48,500 GM workers covered by the new contract, compared to the 400,000 workers who waged a 67-day strike in 1970, forcing GM to grant them a 30% wage hike over three years.

from The Great Debate UK:

Double dip a done deal?


-Jane Foley is research director at Forex.com. The opinions expressed are her own.-

Earlier this week the S&P 500 was down 15 percent from its April 2010 high.   The ongoing debate on whether the U.S. economy is poised for a double dip recession can be linked with these falls.

At present there is insufficient evidence to conclude that the U.S. economy will fall back into recession, though there are signs that the recovery could be losing momentum.  A key question is whether the adjustment in asset prices seen since the end of April has been appropriate.

Nice job, pity about falling wages

It was the strongest U.S. employment report in three years and yet just beneath the surface was plenty of evidence that inflation pressure from the labor market is more of a fond hope than a real threat.

Nonagricultural payrolls rose in March by 162,000, the most in exactly three years and for only the third time since the recession began later that year. Of course, the United States probably needs about 200,000 new jobs a month just to bring unemployment down by a point in a year’s time. No sooner do jobs become available than sidelined would-be workers start seeking employment again. That kept the unemployment rate at 9.7 percent, while the key broader measure of the unemployed, the underemployed, the discouraged and the marginally attached — those game for work but unable to find it, get to it or find child-care while they go — hit a whopping 16.9 percent.

And that, ladies and gentlemen, is why, in an economic recovery with a growing job market, average hourly earnings actually fell by two cents an hour, or 0.1 percent from the month before.