The Blog of the Frances Perkins Center

Posts Tagged ‘auto bailout’

It’s health care, stupid

In Political world on December 5, 2008 at 5:14 pm

I had the opportunity to listen to about two hours of the House hearings on the big three auto bailout as I drove to Augusta today. Maybe I missed it, but I didn’t hear one word about a major issue that’s driving these companies into the ditch.

National health care was the unfinished piece of Frances Perkins’s agenda. By the 1940s, the country was gearing up for war-time production. There was a labor shortage, and employers started offering health insurance as an enticement to attract workers. National health care seemed less necessary. Unfortunately, when unemployment rates are high, employers no longer need to compete for workers, and benefits seen as “extras” fall by the wayside.

Today, there seems to be a sense in the country that auto workers make way too much money. And when you hear statistics such as this quoted in the NY Times, you can understand where that resentment comes from:

Currently, the average U.A.W. member costs G.M. about $74 an hour in a combination of wages, health care and the value of future benefits, like pensions. Toyota, by comparison, spends the equivalent of about $45 an hour for each of its employees in the United States.

But the article in the Times goes on to clarify:

Base wages between the Big Three and the foreign companies are roughly comparable, with a veteran U.A.W. member earning $28 an hour at the Big Three compared to about $25 an hour at Toyota’s plant in Georgetown, Ky. (Toyota pays less at its other American factories.)

But the gap in labor costs becomes larger when health care, particularly for thousands of retirees and surviving spouses, and job security provisions are considered.

The UAW has offered major concessions. For example, UAW President Ron Gettelfinger said that

the union would agree to delay the multibillion-dollar payments to a new retiree health care fund that the automakers were scheduled to start making next year.

The Detroit companies will remove billions of dollars in financial obligations from their books when the U.A.W. health care trust takes over responsibility for the medical bills of retirees in 2010. But delaying payments to the trust by the companies is a more pressing concern for the automakers.

G.M., for example, is scheduled to make a payment of $7 billion to the health care trust before the end of next year. The U.A.W.’s offer to delay that payment will significantly help G.M.’s cash flow as it tries to recover.

Clearly, the cost of health care insurance places a tremendous burden on the car companies.

“Taking retiree health care off the books will save the companies billions and billions of dollars,” said Mr. Shaiken [professor of labor studies at U.C. Berkeley]. “By not paying into the trust next year, it won’t postpone the trust, but it will save G.M. and the others a lot of money for now.” At the U.A.W. meeting in Detroit, union officials described their members as extremely anxious about the prospect of more concessions but at the same time afraid of what would happen if the union did not aid the automakers.

But those workers have negotiated for benefits that should be available to all people. Health care is a human right — it’s not an “extra” benefit to use in competing for employees. It’s time to de-link health care and employment. Employer-based health insurance was a stopgap measure in the 1940s — and now we know for sure that it just doesn’t work.

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