CEO Pay Gone Wild
The auto industry is soaring. CEO pay is up 40%, but worker pay remains stagnant.
CEO salaries for, from left, Mary Barra (GM – $29M), Jim Farley (Ford – $21M), and Carlos Tavares (Stellantis–$25M) have increased by 40% over the last 4 years while the workers who build their products are paid as if the year is 2003. Such income disparity is bad for the country.
The United Auto Workers union (UAW) has gone on strike because their recent contract demands have not been met by the big three manufacturers, General Motors, Ford, and Stellantis (Fiat Chrysler). The fight holds important lessons for all unions struggling to strike a fair balance with a greedy management class - especially here in New York where powerful developers seek to weaken construction unions.
The UAW demand sheet is long, and many say it was overdue. Because the American auto industry is rolling. Profits are up nearly 14% from one year ago, according to CNN. Auto industry analysts say earnings per share for auto companies are forecast to grow by 55% through the year, according to FactSet data. “The auto sector is rebounding, and car prices are flattening out as normalizing supply factors lift production, inventories, and sales from depressed levels,” wrote Francis Scotland, director of global macro research at Brandywine Global Investment Management.
So, Who Benefits?
It is said a rising tide lifts all boats. But not in the auto industry. While CEO pay has seen astronomical growth in the past 4 years, worker pay has been stuck in place since the beginning of this century. Autoworkers' average hourly wages in the U.S. have fallen by 30% over the past two decades, and the UAW has pointed to major sacrifices autoworkers made during the industry's crisis in the late 2000s as a reason for its ambitious contract demands. The union agreed to give up retiree healthcare for new hires and cost-of-living adjustments for all members as automakers pushed for a federal bailout in 2008.
So the industry is healthy again, but it’s only the fat cats get fatter. Like, 40% fatter. UAW President Shawn Fain said at a recent news conference, "The Big Three CEOs saw their pay increase by 40% over the last four years, while our pay only went up by 6%,”
The union proposed a 46% pay increase for its members (that demand is now down to 36%).
362 to 1
In the game of management pay vs. worker pay, management is winning big time. Mr. Fain draws this example to illustrate the enormous chasm between worker and CEO pay. General Motors CEO Mary Barra made nearly $29 million in 2022. A new worker at Ultium Cells, GM's joint-venture battery plant in Lordstown, Ohio makes $16.50 an hour. Fain explains, ”That means a newly hired Ultium worker would have to work full time for 16 years to earn what Mary Barra makes in a single week.”
If you need more proof that this pay disparity is dangerously out of wack, see the below chart.
The median worker annual income is so small in comparison to the CEO's salaries that the blue area of this chart representing worker income can barely be seen (it's there - squint!). Most economists who express an opinion on CEO pay say that a healthy CEO to worker pay ratio is in the area of 20:1 to 30:1. The disparities shown here are more than ten times that difference.
This pay scale is “rigged,” according to former U.S. labor secretary Robert Reich. He argues that when pay is taken from the middle class and put into the pockets of the wealthy, it removes billions of dollars from the U.S. economy. Unions are the best way to strike a better income balance between management and labor.
Senator John Fetterman of Pennsylvania, where several important auto industry plants are located, said, “It is time for the Big Three to come to the table in good faith and work with UAW to strike a fair deal. UAW is ready, but these companies are being completely unserious.”
Meanwhile, management is up to their old tricks. Ford has been prepping for a possible strike by readying non-union salaried employees to staff key parts of their distribution centers. And Labor Notes reported that "Stellantis has been making its own preparations to weather a strike by stockpiling parts at a facility in Belvidere, Illinois, near its recently shuttered Belvidere Assembly Plant. The company has been staffing the warehouse with newly hired non-union workers—which Stellantis is trying to keep secret because there are 1,300 laid-off UAW members from the assembly plant who still live in the area.”
"CEO pay went up 40%. No one said a word. No one had any complaints about that. But now, God forbid that workers actually ask for their fair share."
Shawn Fain, UAW President
This is how an industry protects its kings, AKA its CEOs. They work in insidious and secretive ways to weaken labor before a pivotal negotiation occurs.
In New York construction, powerful developers succeed as their lobbyists fight against laws that will protect worker safety, against laws that will ensure workers’ fair pay. And in this industry, the developers pick the winners and losers when they select which contractor bids to accept. As we have pointed out on this web site, that bid process is as rigged as the auto industry’s pay scale.
How Much is Enough?
What does a $29 million salary buy that, say, a $15 million salary doesn’t? How many vacation beach homes, or future grandchildren’s college education must one person pay for before they recognize that the very people who make their enormous salaries possible, the people who build their products, are hurting?
"If the Big Three can find money in the couch cushions to bump executive pay by 40% over the past few years, they sure as hell can find the money to give hard-earned raises to the people who actually build the cars and trucks Pennsylvanians drive," Fetterman said.
The UAW strike is about fairness, and the New York construction industry is watching.
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