An astute reader writes to point out that the NYT‘s Andrew Ross Sorkin wasn’t all for the sacrosanctity of contracts when it had to do with union workers, not Wall Street executives (if you didn’t read my previous post, “Sorkin and the Straw Man,” check it out here).
In November, Sorkin recommended shoving General Motors into bankruptcy largely so GM could rip up its union contracts, which he said pay workers an average of $70 an hour with benefits.
Once again, Sorkin was toeing the corporate line, in this case, GM’s. It’s near false, and for damn sure misleading, as Portfolio‘s (and soon-to-be Thomson Reuters’s) Felix Salmon has correctly noted:
The average GM assembly-line worker makes about $28 per hour in wages, and I can assure you that GM is not paying $42 an hour in health insurance and pension plan contributions. Rather, the $70 per hour figure (or $73 an hour, or whatever) is a ridiculous number obtained by adding up GM’s total labor, health, and pension costs, and then dividing by the total number of hours worked. In other words, it includes all the healthcare and retirement costs of retired workers.
Now that GM’s healthcare obligations are being moved to a UAW-run trust, even that fictitious number is going to fall sharply. But anybody who uses it as a rhetorical device suggesting that US car companies are run inefficiently is being disingenuous…
it won’t mean anything, unless you’re trying to be deceptive.
So how much does your average lunch-pail GM worker really make? The liberal economist Dean Baker estimates a high range of about $41 an hour. Here’s how Baker adds it up:
The base pay is about $28 an hour. If health care cost per worker average $12,000 per year, that adds in another $6 an hour. If the pension payment takes up 25 percent of base pay (an extremely high pension), that gets you another $7 an hour
That’s a long ways from $70.
Basically, Sorkin’s logic is: General Motors would not make it without government support, and despite supporting millions of jobs, it’s not critical to the economy, so let it go belly-up so we can pay $28-an-hour assembly-line workers less.
AIG would not make it without government support, but it’s critical to the economy so let’s keep it in business so we can pay millions of dollars in bonuses to a handful of people who destroyed a giant company and darn-near capitalism itself.
This is a textbook example, like the WSJ writer yesterday, of how being in the bubble corrupts your thinking.
Worse, it appears Sorkin is aware of this discrepancy. Here’s his CYA disclaimer in today’s piece:
If government officials were to break the contracts, they would be “breaking a bond,” Ms. Meyer says. “They are raising a whole new question about the trust and commitment organizations have to their employees.” (The auto industry unions are facing a similar issue — but the big difference is that there is a negotiation; no one is unilaterally tearing up contracts.)
Again with the straw man of shredding the law. I don’t think so.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.