Would you take a job where you were paid *NOT* to work?
In recent discussions on the future viability of US auto manufacturers, one of the topics to come up was the UAW job bank program.
According to that document, the basic guarantee from the 1987 agreement is that no eligible employee will be laid off over the term of the agreement, except under the following specific circumstances. 1)Reduced customer demand, a maximum of 42 weeks over the life of the agreement (commonly known as loss of marketshare); 2)Acts of God or other conditions beyond the control of management; 3)Conclusion of an assignment known in advance to be temporary; and 4) Plant rearrangement or model changeover.
Eligible employees can not be laid off because of new technology (robots), sourcing decisions, or company-implimented efficiency actions. There are generally three states of layoff: temporary layoffs where workers know their return date, indefinite layoffs where workers get 48 weeks of unemployment benefits and a supplemental from their employer equal to 100 percent of your salary. After 48 weeks workers are reemployed by the Job Bank, at which time they receive 95 percent of their salary.
Now if you are like me, you’ve never heard of this program before very recently. Ultimately, what the program is used for is to keep paying some number of UAW union members a worker’s salary while they don’t work. This is part of a program implemented in the 80s as a concession by auto manufacturers to the union to get support for productivity improvement efforts. In other words, the union realized that improving worker efficiency would mean fewer workers needed, so brought in this program as a way to keep paying some of the people who lost their jobs as a result.
How much does this cost the auto manufacturers? Well, we don’t know for certain, but looking back a few years gives us at least some idea:
General Motors Corp. has roughly 5,000 workers in its jobs bank. Delphi has about 4,000 in its version of the same program. Some 2,100 workers are in DaimlerChrysler AG’s Chrysler Group’s job security program. Ford had 1,275 in its jobs bank as of Sept. 25.
. . .
Detroit automakers declined to discuss the programs in detail or say exactly how much they are spending, but the four-year labor contracts they signed with the UAW in 2003 established contribution caps that give a good idea of the size of the expense.
According to those documents, GM agreed to contribute up to $2.1 billion over four years. DaimlerChrysler set aside $451 million for its program, along with another $50 million for salaried employees covered under the contract. Ford, which also maintained responsibility for Visteon Corp.’s UAW employees, agreed to contribute $944 million.
Now let’s look at what the auto manufacturers are asking for. GM alone is requesting $4 billion to finish this year plus an additional $8 billion in cash to start 2009 and a $6 billion line of credit in case more is needed. The claim from the head of the company is there is a chance for GM to fail completely if a bail-out for the last few weeks of the year does not come through.
If GM alone continued the jobs bank program at the 2005 rate when renewing their UAW contract in 2007, we are talking about somewhere around $550 million per year. Let’s call it $600 million due to inflation, although this is honestly just a nice round number I pulled out of the thick, magical fog around my head. Suddenly, I can see one way to cut the need for about 7.5% of the requested bail-out funding for next year. Can anyone else? It is true that UAW representatives agreed to eliminate this program, but until I see it happen, I’m counting that cost as part of GM’s ongoing cost of running the business.
On top of the jobs bank program, there is talk of cutting workers’ wages. While I would personally think it makes more sense for everyone to take a pay cut than for some people to get full pay while others lose their jobs, I don’t know how pragmatic those who have to make this decision will be. There are sure to be workers who will vote against wage concessions and take the gamble that they will remain employed and someone else will be let go instead.
Just these couple of things makes me wonder aloud, as I have done many times before –
Why would a logical worker choose the gamble that best benefits him/herself with the high-probability downside of ALL employees losing all financial rewards, when the option that costs all workers somewhat evenly has the high-probability upside that MOST workers keep their jobs? Am I just being a blind romantic (in the literary sense) here, or am I overlooking something that makes the selfish choice smarter than I’m seeing it?Â I can actually see a reason why the workers would have fought for this in the 80s.Â But I just can’t see why it still exists.
[tags]Auto industry bailout, UAW, Pragmatic, GM, Unions[/tags]