Is Bad Arithmetic Bankrupting GM?

Readers of the Wall Street Journal might think so. The WSJ reports that the agreement that GM just signed with the UAW will allow it to hire new workers in non-core positions where they will "get paid about half or less of the $70-to-$75 an hour wage-and-benefit package traditionally given UAW members." The problem with this statement is that much of this $70-$75 hour calculation refers to the legacy costs for retired workers. These are fixed costs that GM owes regardless of how many workers they currently employ. For bookkeeping and PR purposes it may be helpful to average these legacy costs over the hours worked by the current workforce, but the calculation does not reflect the money actually paid as wages and benefits to these workers. Presumably GM will be paying its new workers less than the workers they replace, but the difference will not be $75,000 a year per worker. Hopefully GM has a better grip on these numbers than the WSJ.

--Dean Baker