The declining middle class and rising unemployment have eroded consumer buying power and will eventually effect the profit margins and income to the top 1%. Labor unions have consistently made concessions to corporations that effectively make it impossible for US workers to afford the very products they produce. Despite a culture that presents high wages as unsustainable and pushes the inevitability of working more for less, it is possible to pay good wages and still be successful as proven by the comparison of German auto manufacturers and their US based factories.
But the case of German automakers — BMW, Daimler, and Volkswagen — tells a different story. Each company produces vehicles not only in Germany, but also in “transplant” factories in the U.S. The former are characterized by high wages and high union membership; the U.S. plants pay lower wages and are located in so-called “right-to-work” (anti-union) states.
It turns out that “inevitability” has nothing to do with the differing conditions; the salient difference is that, in Germany, the automakers operate within an environment that precludes a race to the bottom; in the U.S., they operate within an environment that encourages such a race.
Sales and profitability
In 2010, over 5.5 million cars were produced in Germany, twice the 2.7 million built in the United States. Average compensation (a figure including wages and employer-paid benefits) for autoworkers in Germany was 48.97 Euros per hour ($67.14 US), while compensation for auto work in the United States averaged $33.77 per hour, or about half as much as in Germany, all according to 2007 data from the Bureau of Labor Statistics. For Germany-based auto producers, the U.S. is a low-wage country.
Despite German companies’ relatively high labor costs in their home markets, these firms are quite profitable. An examination of the latest publically available financial statements of BMW, Daimler (Mercedes-Benz cars), and Volkswagen reveals strong sales and profits even in the midst of the currently weak consumer markets in Europe and the U.S. In 2010, for example, BMW, produced 1.48 million cars (63 percent of them in Germany), and earned a before-tax profit from its automotive division of 3.88 billion Euros. The Mercedes-Benz car division of Daimler, likewise produced 1.35 million cars (72.4 percent in Germany) in 2010, and earned a before-tax profit of 4.65 billion Euros.
Even government sector unions make concessions and in a recent memo from Commissioner Bob Main he thanks the unions. “I applaud the unions that have settled their contracts with very minimal raises…” As labor accepts less and less pay their buying power diminishes and so to the local and national economy.
Faultlines highlights the story of Boeing’s decisions to move manufacturing from the unionized Washington to the right-to-work South Carolina. Coos Bay resident and Boeing VP, Jim Albaugh is quoted in the video below.
A new battle has emerged in 2011 as Republican governors have taken on public sector unions, in some cases stripping them of rights that have been in place for 50 years. It is part of a trend that is happening in key swing states and may weaken democratic voting strength in next year’s presidential election.
But organised labour has fought back hard. In Wisconsin, unions occupied the state capitol as 100,000 protesters took to the streets. In Ohio, voters overturned a law that was intended to greatly reduce the right that unions have in that state to bargain collectively.