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General Motors Corp. (GM) explained the calculation for its total compensation and benefits in the "Other Benefits" section of its Media Handbook, available on its website at www.media.gm.com/manufacturing/handbook (accessed Jan. 6, 2009):
"The total of both cash compensation and benefits provided to GM hourly workers in 2006 amounted to approximately $73.26 per active hour worked. This total is made of two main components: cash compensation ($39.68) and benefit/government required programs ($33.58).
The average annual cash compensation for hourly employees in 2006 was $39.68 per hour. Included in average earnings are straight-time pay, Cost of Living Allowance (COLA), night-shift premiums, overtime premiums, holiday and vacation pay. In 2003, GM workers logged 41,363 (hours in 000's) in overtime hours for an average of 371 hours per worker; in 2004, 39,409 overtime hours for an average of 374 hours per worker; in 2005, 33,555 overtime hours for an average of 337 hours per worker; and in 2006, 27,265 overtime hours for an average of 315 hours per worker.
Benefit/government required programs in 2006 added an additional $33.58 for each active hour worked. These costs include: group life insurance, disability benefits, and Supplemental Unemployment Benefits (SUB), Job Security (JOBS), pensions, unemployment compensation, Social Security taxes, and hospital, surgical, prescription drug, dental, and vision care benefits."
Ford Motor Company commented on factors in its calculation of the hourly compensation in the "Hourly Labor Cost" section of its 2007 UAW-Ford National Negotiations Media Fact Book, available on its website at media.ford.com/pdf/07_UAW_Negotiations.pdf:
Labor costs can be defined and measured in a number of ways. One of the most meaningful measures is the total average hourly cost to the company per hour worked. This includes: (1) all the dollars paid to employees, (2) the cost of contractual benefits for employees, and (3) the cost of statutory payments, such as Social Security and Workers' Compensation - all calculated on the basis of hours worked by employees...
[D]uring the 1997-2006 period, Ford's total average hourly cost per hour worked increased 62%, from $43.55 to $70.51."
Chris O'Malley, Indiana Economic Digest Correspondent, wrote in an Aug. 4, 2006 Indiana Economic Digest article titled "Honda's New Plant in Greensburg Poses Pay Dilemma for Other Nearby Manufacturers":
"Japanese plants like Honda and Toyota often pay closer to $24 an hour."
Yuri Kageyama, USA Today Correspondent, wrote in a June 22, 2007 article titled "Toyota Sees No U.S. Wage Cuts Ahead" in USA Today:
"Ford, according to its annual report, paid $70.51 per hour in wages and benefits to workers last year. GM's annual report says its labor costs average $73.26 per hour, while Chrysler's costs average $75.86 -- all well above the average $48 hourly cost incurred by Toyota, Honda and Nissan."
The US Bureau of Labor Statistics (BLS) wrote the following in its Dec. 14, 2006 report titled "Employer Costs for Employee Compensation, September 2006":
"Employer costs for employee compensation averaged $27.31 per hour worked in September 2006.
Wages and salaries, which averaged $19.12, accounted for 70 percent of these costs. Benefits - including insurance, legally required benefits, paid leave, retirement and savings, and supplemental pay - averaged $8.18, accounting for the remaining 30 percent."
The states of Michigan and Ohio were chosen for comparison because the largest and second largest number of GM auto plants are located in these states. Michigan has 32 and Ohio has 9. Data from "Map of GM Plants" at www.gmdynamic.com (accessed Jan. 8, 2009).
Michigan Average for 2007 data from "Labor Market Information: Michigan Area Average Wage Rates 007" on Michigan's Department of Energy, Labor & Economic Growth website at www.michigan.gov/dleg.
Ohio Average for 2006 data based on "Total Wages, Employment, and Establishments, Annual 2006" from Ohio's Department of Job and Family Services website at lmi.state.oh.us/cep/CEP_NAICS.htm#Publications.
Commentary on Automaker Wages and Benefits
The United Auto Workers (UAW) offered a different estimate of wages in a Dec 2, 2008 document titled "The Truth About UAW Members and the U.S. Auto Industry" on its website at www.uaw.org/auto/12_02_08auto1.cfm:
"Wages for UAW members at Chrysler, Ford and GM range from about $14 an hour for newly hired workers to $28 an hour for assemblers to $33 for skilled trades workers.
Typical hourly wages at Honda, Nissan and Toyota are only slightly lower. Due to the effect of profit-sharing formulas, however, there have been some recent years in which a typical Toyota worker has taken home a larger annual paycheck than a typical GM worker.
The $73 an hour figure is outdated and inaccurate. It includes not only the costs of health care, pensions, and other compensation for current workers, but also the costs of the pensions and health care benefits of retired employees spread out over the active workers. Active workers never receive any of this compensation in any form, so it is not accurate to describe it as part of their 'earnings.'"
Mark J. Perry, PhD, Professor of Economics and Finance at the Flint campus of the University of Michigan, wrote in a July 11, 2007 entry titled "Transformational UAW Deal? Accept Professors' Pay" on his "Carpe Diem" blog:
"Labor cost per hour, wages and benefits for hourly workers, 2006.
Ford: $70.51 ($141,020 per year)
GM: $73.26 ($146,520 per year)
Chrysler: $75.86 ($151,720 per year)
Toyota, Honda, Nissan (in U.S.): $48.00 ($96,000 per year)
According to AAUP [American Association of University Professors] and IES [Institute of Education Sciences], the average annual compensation for a college professor in 2006 was $92,973 (average salary nationally of $73,207 + 27% benefits).
Bottom Line: The average UAW worker with a high school degree earns 57.6% more compensation than the average university professor with a Ph.D. (see graph above, click to enlarge), and 52.6% more than the average worker at Toyota, Honda or Nissan."
David Leonhardt, "Economic Scene" Columnist for the New York Times, in a New York Times Dec. 9, 2008 article titled "$73 an Hour: Adding It Up," wrote:
"The calculations show, accurately enough, that for every hour a unionized worker puts in, one of the Big Three really does spend about $73 on compensation. So the number isn't made up. But it is the combination of three very different categories.
The first category is simply cash payments, which is what many people imagine when they hear the word 'compensation.' It includes wages, overtime and vacation pay, and comes to about $40 an hour. (The numbers vary a bit by company and year. That's why $73 is sometimes $70 or $77.)
The second category is fringe benefits, like health insurance and pensions. These benefits have real value, even if they don't show up on a weekly paycheck. At the Big Three, the benefits amount to $15 an hour or so.
Add the two together, and you get the true hourly compensation of Detroit's unionized work force: roughly $55 an hour. It’s a little more than twice as much as the typical American worker makes, benefits included. The more relevant comparison, though, is probably to Honda;s or Toyota's (nonunionized) workers. They make in the neighborhood of $45 an hour, and most of the gap stems from their less generous benefits.
The third category is the cost of benefits for retirees. These are essentially fixed costs that have no relation to how many vehicles the companies make. But they are a real cost, so the companies add them into the mix -- dividing those costs by the total hours of the current work force, to get a figure of $15 or so -- and end up at roughly $70 an hour."