An article in the NYT discusses GM's plan to replace its current workforce with new hires. According to the article, the average hourly wage of the current workforce is $28 an hour, the new hires would get $14 an hour. The NYT then tells us that: "Including benefits and retiree health care costs, each worker who leaves under the buyout program and is replaced by someone on the lower pay scale would save G.M. about $48 an hour, or nearly $100,000 a year." Okay, does anyone think that the health care and pension benefits of an autoworker average $34 an hour? That comes to $68,000 per year, for a 2000 hour work year. In fact, since new workers would still get some wage and pension benefits, the cost of these benefits for current workers would have to be even greater than $68,000. Obviously, the NYT has committed the sin (encouraged by the auto companies) of averaging its liabilities for retired workers over the hours worked by the current workforce. This is a very misleading figure because GM is obligated to make these payments regardless of how many workers it currently employs. It is also misleading because the current workers do not see this money, so it is not their compensation.
--Dean Baker
