Yesterday’s New York Times had an interesting analysis of auto wages, and the disparity between the U.A.W. organized plants and the non union manufacturers. The Times story refers to the $73 an hour wage rate often cited by those folks highly critical of the U.A.W. and Detroit. That number however includes the overall pension costs of the automakers, which they divide by the hours worked in their plants to arrive at a figure of about $15 per hour, which has been added to the wage and benefit package of an autoworker to arrive at the higher number. From the New York Times:

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.

So the Times story shows that in terms of wages the active U.A.W. worker does indeed make more money than a similar non union worker at Honda or Toyota, the spread is not what people have made it out to be. The story is worth a look, and does go beyond the wage differential to insist that the real problem lies in Detroit’s manufacturing of sub-standard cars that Americans do not want to buy.

I would add to that the observation that at least in the short to middle term the automakers are saddled with a business model that requires them to sell a volume of cars that is not achievable. The same dynamic applies to the foreign manufacturers, who have also seen sales plummet. American society, with the wringing out of our credit markets, will have substantially less buying power than in years gone by. And that is at least in part because we have lived beyond our means as a country. With reduced buying capacity for this country many business models, not just autos, will begin to fail, a victim of assumptions about sales that are just not going to hold up. A correction without pain is highly desirable, but not likely.

Read the Times story here.