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USA: "The Escalating Cost Crisis: An Update on Structural Cost Pressures Facing U.S. Manufacturers" report. 29-page report by National Association of Manufacturers.
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backAMERItalk April, 2012
Canada: Tie wages to subsidies, study says
Handouts boosting autoworkers' pay.
Government should tie workers' wage cuts to subsidies for the auto industry, according to a new report released Wednesday.
While the 2009 bailout of GM Canada and Chrysler Canada was successful, ongoing subsidies for the auto sector must be reassessed, especially in times of fiscal restraint, according to a new study by the Institute for Research on Public Policy (IRPP).
The report - which examines the economic rationale for industry subsidies and whether they are a cost-effective way to foster economic development in Canada's auto industry - paints a mixed picture.
The study found that the $14.4-billion federal and Ontario government bailout of GM and Chrysler was substantially less than the economic losses that would have occurred without the bailout - about $20 billion, of which almost two-thirds would have been borne by Ontario.
The study found similar positive results for project-based subsidies, but cautioned that this does not mean subsidies are the best way to support auto investment.
The report's authors argue that because autoworkers earn a significant pay premium - about $10 an hour - over similarly skilled workers in other manufacturing industries, subsidies to the auto manufacturers are in fact subsidizing above-market wages.
"If you want a subsidy then the company should be indifferent as to whether they get cash from the government or take wages away, both from the shop floor and management," said Robin Somerville, an economist who co-authored the report.
"Taxpayer money comes from everyone and the workers at an auto plant, both shop floor and management, earn higher wages than the average person in the Ontario economy. So what you're doing when you're giving tax money away, is you're essentially taking away from the poor and giving to the rich."
Modest concessions on wages would obviate the need for governments to use project-based subsidies to attract new investment in the auto sector, according to the IRPP, a Montreal based think tank that bills itself as an "independent, national, bilingual, non-profit organization."
The report recommends that governments make competitive wages a required condition for auto sector subsidies, as well as for subsidies in all other industries.
"This would discourage political manipulation of subsidies and make sure that the direct beneficiaries of new investment projects - the workers who are employed on them - contribute to attracting these projects to Canada," said the report.
That suggestion comes as the Canadian Auto Workers union faces growing pressure from the Detroit Three car companies to trade annual wage increases for profit-sharing payment.
While profit-sharing has been a provision in the contracts of the United Auto Workers for almost 30 years, it has been traditionally resisted by the CAW. During the recent Detroit Auto Show, Chrysler CEO Sergio Marchionne called on the CAW to dispense with annual pay hikes and instead, adopt pay based on the automaker's profits in the run-up of Detroit Three contract talks, slated to kick off in September.
The study also examined federal and Ontario loan and grant programs that have paid out $1.43-billion to auto companies and parts suppliers between 2004 and 2011, which generated about $9-billion worth of investments.
It said the amount of government money for every job saved or created by those investments ranged from $13,975 to $212,946.
For example, government support per job at the Ford Essex Engine Plant, which received $17 million from the Ontario government in 2008, totalled about $56,667.
In a supplementary commentary, CAW economist Jim Stanford called the report "flawed and anti-union."
"It ignores the universal practice in automotive jurisdictions - even those where wages are much lower than in Canada - of offering proactive policy support to attract investment," said Stanford. "In that context, how could cutting wages in Canada avert the need for investment subsidies to land key projects? The authors' proposal to require wage cuts for both union and non-union autoworkers could wreak havoc with the operational efficiency and shop-floor productivity that are among Canada's most important competitive advantages."
A $10-an-hour wage cut would have "negative implications for morale, discipline and productivity," he added. Stanford suggested that a "marginal correction" in the Canadian dollar would have a far greater effect than cutting wages.
"Yet cutting blue-collar wages (they make no mention of white-collar labour costs) is the only option the authors consider," said Stanford.
"This exclusive focus on shop-floor labour costs is empirically unjustified and seems to reflect an anti-union bias on the part of the authors."
Source: The Windsor Star - GAI
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