It’s health care, stupid

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.

Labor’s feeling unappreciated by Obama

Back before Thanksgiving, Ben Smith at Politico published this story: Labor sec. not on econ team. Here are a few excerpts:

Obama’s team of treasury secretary and four top economic advisers, introduced as the hands that will steer America’s economy, had no particular ties to the labor movement. And Obama’s secretary of labor was not introduced as part of that team — a suggestion that that post will retain its second-tier status and quiet voice in matters central to economic policy.

“I wish that [the secretary of labor] would have been among them,” former Michigan congressman David Bonior, a labor stalwart and member of Obama’s transition team, said of the group at the Chicago press conference. “I hope they take that job seriously.”

Meanwhile, today, Steve Fraser at The Nation is unhappy with all the ex-Clintonites in the new administration. He writes about the Obama appointees in Beyond the Bailout State,

A suffocating political and intellectual provincialism has captured the new administration in embryo. Instead of embracing a sense of adventurousness, a readiness to break with the past so enthusiastically promoted during the campaign, Obama seems overcome with inhibitions and fears.

and contrasts that with FDR’s transition:

Meanwhile, Felix Frankfurter (another confidant of FDR’s and a future Supreme Court Justice), aided by the behind-the-scenes efforts of Supreme Court Justice Louis Brandeis, fiercely contested the influence of the corporatists within the new administration, favoring anti-trust and then-new Keynesian approaches to economic recovery. Secretary of Labor Frances Perkins used her extensive ties to the social work community and the labor movement to keep an otherwise tone-deaf president apprised of portentous rumblings from that quarter. In this fashion, she eased the way for the passage of the Wagner Act that legislated the right to organize and bargain collectively and that ended the reign of industrial autocracy in the workplace.

Is there just cause for handwringing? That remains to be seen. Keep in mind that Roosevelt didn’t officially appoint FP as his secretary of labor until just five days before his inauguration, which took place on March 4th, 1933.