Striking UAW Workers Are Losing the Race Against Inflation

Past wage increases have failed to keep up with surging cost-of-living expenses

(Bloomberg) — With the United Auto Workers strike entering its sixth week, the ongoing dispute has underscored a widening disparity between stagnant wages and ballooning living costs such as housing, college tuition, and basic necessities like food and gas.

Under the most recent contract, a newly hired full-time production employee at Ford Motor Co., General Motors Co., and Stellantis NV earns an hourly wage of about $18 — rising to a top rate of around $32 in as little as four years on the job. Adjusted for inflation, these hourly wages are lower than in previous decades, according to a Bloomberg News analysis of wage and inflation data.

This data doesn’t include other payments workers receive. When benefits and bonuses are added, the average hourly cost of a UAW worker grows from $29.58 to $64 an hour, according to data published by Ford. And in recent years, profit-sharing payments have been be substantial and helped offset inflation, with Stellantis distributing an average of nearly $15,000 earlier this year, while GM paid  out $12,750.

But even some of these added payments aren’t keeping up with rising prices. For instance, Ford’s profit-sharing payouts during the most recent contract have been lower on average than a decade ago, when adjusted for inflation. And as cost-of-living expenses have surged in recent years, rising by more than 10% in 2022,  the company’s flat $1,500 “inflation bonus” for the past decade hasn’t stretched as far as it did when inflation was around 2%.

Additionally, though the top UAW-negotiated base wage has risen faster than the average wage for auto manufacturing workers since 1987, it hasn’t kept pace with the overall growth in pay for private-sector workers, which is up more than 220%. 

“Our members are asking for more because they cannot keep up with the pace of inflation,” said Jay Makled, financial secretary of UAW Local 600 in Michigan. “People are recognizing like the wages we were making four and five years ago are the same today, but it’s not the same if you go into the grocery store and buy milk and eggs and bread for my family.”

In September 1987, a newly hired Ford worker could buy an average 12 gallons of unleaded gasoline at their hourly wage. Today, a new hire could purchase around 4.5 gallons. A roughly 24% increase in food prices since the pandemic began has further impacted striking workers.

As US home prices have skyrocketed, a new UAW hire in early 2023 would have to work nearly 24,000 hours to earn enough to purchase a median-priced home, pre-tax, as opposed to around 8,200 hours in early 1987, according to a Bloomberg analysis of Ford data and data from the Census Bureau and Department of Housing and Urban Development.

The gap for college tuition is even more pronounced. While average annual tuition and fees at 4-year institutions surged a staggering 539% between 1987 and 2021, the negotiated hourly wages at Ford grew 78% for entry-level positions, not adjusted for inflation, and 126% for the top rate for workers hired before 2007, when a two tiered system was introduced.

Around 80% of hourly workers earn the top rate at Ford, according to the company, which is the second largest US automaker.

Detailed historical data was only available from Ford, but experts said that the UAW has generally aligned its contracts across Detroit’s three major automakers. A review of wage details published in Federal Reserve Bank of Chicago presentations and recent UAW contracts confirms there were very minor differences between the companies since 2008 — often less than $1 or $2 per hour.

Against this backdrop, Ford has offered striking workers a wage increase of 23%, according to UAW President Shawn Fain. Ford said its offer would put UAW-represented workers in the top quarter of all US jobs, hourly and salaried. The UAW is said to be seeking a pay increase of at least 30%, down from an opening demand of 40%, Bloomberg has reported. General Motors and Stellantis have proposed wage increases of around 20%. Those raises — combined with cost-of-living-allowances, which were removed in 2009, and that all three companies have agreed to reinstate — could help to close the inflation gap.

“A lot has changed since 2019,” said Jim Farley, President and CEO of Ford, referring to the pandemic, in remarks in late September that the company pointed to when asked for comment. “And right after that, inflation hit. And this affected our workers’ standard of living, even with strong profit-sharing checks coming in every year.”

The company also noted that their latest negotiation proposals would give employees a double-digit wage increase immediately upon ratification and that they expect wages and bonuses from their latest offer to outpace expected inflation during the next contract.

Bloomberg also reached out to GM and Stellantis. GM pointed to its latest offer, which would see average total compensation, including benefits and bonuses, rise 11.9% to $150,000. Stellantis declined to comment. 

Regardless of whatever pay raises ultimately get negotiated, workers have seen their purchasing power seriously erode over the last few decades, particularly those who started after 2007, when a new UAW contract significantly reduced starting wages as part of a new two-tiered pay system.

The system was created to help Detroit’s automakers overcome the financial crisis, which caused the bankruptcies and government bailouts of GM and the former Chrysler, now Stellantis. It introduced different compensation rates for new and legacy employees, with the starting pay for the second-tier workers being about half of those hired before.

Since then, an in-progression system has been established, gradually moving second-tier workers to the same pay rates as first-tier colleagues as they build up seniority. In 2019, UAW and the Detroit automakers agreed that workers hired before that contract will move to the top rate of around $32 an hour within four years and those hired after within eight years.

While negotiations continue and the UAW has expanded its strikes, the rising cost of living remains a key issue for workers. 

“Cost of living is huge — being able to keep up with inflation. There’s a lot of single parents that work here. People shouldn’t have to work here and have a second job, third job,” said Landen Bradshaw, a striking body shop worker at the Kentucky Truck Plant, while picketing Sunday night. “And things have gotten backward.”

–With assistance from Josh Eidelson, Keith Naughton, David Welch and Gabrielle Coppola.

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