Wages at American auto makers are too high

Dec 20, 2008

Harley Shaiken had a piece on Marketplace yesterday arguing that high labor costs, the sticking point for Senate Republicans concerning last week’s bailout, are not a prime reason for the US auto maker’s downfall. I don’t feel the need to break apart Shaiken’s short argument, because he sums it up well in the final sentence, “A superior product, high productivity and high wages pave the road to a healthy economy and a decent society.” We can all agree that workers in Detroit have high wages and the indigenous car manufacturers even have good productivity; but a superior product? Not a chance.

The prime reason that Asian cars sell so well in the United States is because they have a superior product at nearly every price point when compared to the US companies. Often features are not what makes domestic cars pale compared to their Korean & Japanese counterparts; usually a general air of cheapness, from bad switchgear and low-grade plastic to unsorted suspension American cars are made to a much tighter budget. The reason? High labor costs at the plants of domestic auto makers, an average of $78 vs. $45 for non-union plants, force those car makers to make up for these costs elsewhere. The only way to compensate for such a large disparity in costs is for the US manufacturers to cut back on the amount of money put into their product, hence the low-quality cars.