American Morning

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November 19th, 2010
06:00 AM ET

Gut check: Do GM profits = pay raises?

By Carol Costello and Ronni Berke

The scene would have been inconceivable just a few years ago: management and union standing together at the New York Stock Exchange as the new General Motors went public.

It was a truly new day, not only for GM, but for – don't laugh – bipartisanship.

“We understand that to be globally competitive, we have to work together," says United Auto Workers president Bob King. "There's so much division and partisanship in America. Here's labor and business and government all working together to keep jobs in America."

To accomplish that, thousands of UAW workers retired early. Wages for senior workers are frozen at about $28 an hour, while new hires now make 50 percent less – $14 an hour, or about $30,000 a year. Fat pension plans are gone for new employees; they now contribute to 401k's.

The painful cuts have led some union workers to feel betrayed by union leaders. Still, the UAW accepted the changes and GM’s CEO credited them and increased worker creativity for his company's resurgence.

"It's inspiring how good the company has come out of this, and it's largely because of the employee base," says GM CEO Dan Akerson.

General Motors is projected to make $5-6 billion in profits this year. If GM continues to prosper, should employees prosper too?

It's a valid question. Negotiations on a new union contract starts next year. "We're paying competitive rates vis-a-vis our competition," Akerson adds. "A success-based pay structure is what we strive for, like you do in most businesses."

For the union, that sounds promising. Its goal is to share in the company's "upside" while helping the auto industry remain viable. "It's a different world we're in," says King. "Top management at General Motors recognizes you've got to work together everyday and when there's an upside, workers have to share in that upside. We will."

Yet many economists say even if your company is healthy, it's unlikely you will get any substantial raise as long as the unemployment rate remains high. There's no incentive for companies when a hundred people are standing in line for your job. However, even in better economic times, wages in recent decades have been stagnant. Commerce Department statistics, adjusted for inflation, show that from 1990-2008, middle class incomes rose just 20 percent.

And most of that happened in the first decade. After 2000, when many businesses were fat and happy, income stagnated. Shareholders profited, but middle class workers did not. The current economic downturn has hit wages hard. According to the Bureau of Labor Statistics, hourly wages increased only 1.7 percent over the past year, but because companies did hire workers for more hours, weekly pay was up. Increases were even lower in manufacturing.

Gut Check: If GM profits, should workers share the wealth?

Filed under: American Morning • Economy • General Motors