The United Auto Workers has initiated strikes against all members of “The Big Three” U.S. automobile manufacturers, asking for 40% pay raises for union members as well as a 32-hour work week, among other demands. The path from here to the strike’s resolution is worth watching for both economic and political ramifications.
The economic aspect of this standoff is significant, but not nearly as much as a similar strike would have been a half century ago. Throughout the 60’s and into the 1970’s – the era of “What’s good for GM is good for America” – GM produced roughly half of the cars sold in this country by itself. Now the market share of GM, Ford, and Chrysler’s parent Stellantis sell about 4 in 10 of autos sold in America. With many of these cars imported from foreign manufacturing sites, not all of these cars are built with UAW labor.
Meanwhile, union membership is not as prevalent in either the US workforce or within the auto industry. The manufacturers that have taken the market share from the Big Three – most of whom have U.S. assembly factories – are operated with non-union labor.
This is significant for a few reasons. One of the fears of large pay raises within new union contracts is that they become inflationary, as non-union employers then have to bid up wages in order to attract workers. It could be argued, however, that because union workers have had to wait through the last 2 years of inflation for their contract to expire before seeking more money, their raises may be lagging the market, not setting it.
There is a concern that the inflationary aspect of this strike will come from supply shocks rather than from higher wages. Used car prices have remained stubbornly high since the pandemic shutdowns of the economy, though prices have begun to ease recently with increased new car supply. Another lack of new cars on the market would have the immediate effect of making supply more scares, and prices…
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