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May 27, 1977
After Reu th er
The founding generation of the
United Auto Workers union is dying out. Although Douglas Frasera close associate of Walter
Reuther-took over the presidency
at last week's UAW convention, he
and the other members of the old
guard on the union's executive
board will all be gone within the
next half-dozen years. After that,
new leaders will have the task of
applying the Reuther legacy-the
belief that "the labor mO\lement is
about changing society"-to an industry which itself has transformed
the world economy.
The union leadership takes pride in
what it has won in its negotiations
with the auto industry over the past
generation, including the full or
partial achievement of cost-ofliving allowances, productivity-tied
wages, guaranteed annual wages,
and four-day workweeks. But some
internal critics think it should have
gained more. One local-union
president recently told Business
Week, "Before the union existed,
the auto industry was a high-wage
and poor-working-conditions industry. After 40 years of unionism, it
is still a high-wage and poorworking-conditions industry." Yet
no one doubts that workers have
obtained a significant share of the
wealth created by an immensely
productive auto industry. The major question facing the UAW today
is what happens if the industry's
future productivity should be re-
duced by outside market and governmental forces.
Industry and union
The auto industry plays a central
role in American life, accounting
directly or indirectly for roughly
one-sixth of the nation's total employment. The motor-vehicles industry itself employs 845,000workers, but there are 337,000more in
highway and street construction,
319,000in petrole_umextraction and
refining, 2 million in auto sales and
service work, and so on. The industry is still predominantly a
production-line operation; in 1970
as in 1950, roughly half of the labor
force consisted of operatives, and
almost one-quarter more consisted
of craft workers.
The union which speaksfor these
workers contains 1,388,000people,
making the UAW the secondlargest union in the country next to
the Teamsters. (Ironically, neither
of the nation's two largest unions
belongs to the AFL-CIO, although
both are edging back, slowly and
sometimes reluctantly, towards
reaffiliation.) The union's power
derives not on Iy from its entrenched position in the auto industry, but also from its ability to
press for precedent-setting agreements in other industries (such as
aerospace and farm machinery)
which contain roughly half of the
UAW membership. And despite its
former firebrand image, the union
(continued
on page 2)
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Opinions expressed in this newsletter do not
necessarily reflect the views of the management of the
Federal Reserve Bank of San Francisco, nor of the Board
of Governors of the Federal Reserve System.
finds itself increasingly-cast a
in
bureaucratic mold of businessunionism. For example, last year's
Ford-UAW master contract contained 219 printed pages, not to
mention a
supplement
covering fringe benefits and roughly 100 pages more for each local
union agreement.
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with regular unemploymentinsurance plans, are designed to
provide laid-off workers with 95
percent of their take-home pay.
SUBfunds were at times exhausted
during the severe 1974-75recession, so the union concentrated on
improving these plans in its 1976
contract negotiations.
Wagesand benefits
Historically, the auto industry has
paid its production workers more
than they could receive elsewhere,
beginning with Henry Ford's $5-aday wage of 1914. (But to earn that
amount-56 cents an hour- workers had to meet the moral standards
set by a Sociological Department
headed by an Episcopalclergyman.)
Grosshourly earnings of auto workers reached $7.22in late 1 976-44
percent higher than the averagefor
the private nonfarm sector as a
whole. Hourly' earnings have increased about 13 percent faster in
autos than in other industries over
the past generation, and the differential has widened even more for
weekly earnings, reflecting the relative stability of the auto workweek over time.
The auto industry has frequently
been the first to introduce new
fringe benefits, and today's UAWindustry contracts remain at least as
generous asthose found elsewhere,
as regardsvacation, holidays, health
and pension benefits. In addition,
the industry pioneered the introduction of supplemental insurance
benefits, as an approach to a guar- .
anteed annual wage. These supple-
2
Trouble on the line
. Despite its past successes, UAW
the
with its aging bureaucracy now has
to deal with new problems generated by the fndustry or by its own
membership. In recent years,the
union in its attempt to organize all
industry employees has found itself
in conflict with General Motors,
which had been trying to offset
high labor and high energy costs by
shifting some production into nonunion Southern plants. The UAWGM confrontation was settled (at
leasttemporarily) last year when
GM's southern management
dropped its active opposition to
UAW organizing efforts.
An aging white male union leadership also has to deal with the problems of the young, the women and
the minorities within its own
membership-all of whom have
their own troubles in addition to
the perennial assembly-line blues.
Minority participation on the assembly line has increased in recent
years, but women and minorities
hold fewer higher-level jobs (professional, managerial and craft)
than they do in industry generally.
In 1973,black and Hispanic males
held relatively only half as many
higher-level jobs in the auto industry as they did elsewhere, and the
ratios were only about one-th:rd of
the all-industry averagesfor women
of all races.But because of the
higher auto wage rates, the earnings of minorities and women are •
still greater in the auto industry
than elsewhere despite this less
favorable occupational mix.
Younger workers and skilled workers have their own complaints, partly becauseof the orientation of the
union toward a majority of older
production-line workers. Young
workers seeking advancement find
themselvesenmeshed in a rigid
seniority system-...-not mention a
to
compressedwage structure, with
the vast majority of workers in any
given job classification earning
wageswithin a range of only 20
cents an hour. Skilled workers'
meanwhile complain about a
narrowing of occupational wage
differentials over time. Tool-anddie makers earnedA4 percent more
than janitors in 1963,but only 36
percent more in 1973-and the differential widened even more for
highly skilled patternmakers.
Trouble in the marketplace
Nonetheless, the union and the
industry find their greatest problems in the world marketplace-a
market influenced not only by the
changing preferences of consumers, but also by the efficiencies of
foreign competitors, the fuel-price
decisions of an OPECcartel, and
the environmental and energy decisions of Washington officials. All
of these problems seemed to hit the
industry at the same time during
the recent recession,which caused
a sharp reduction in employment
from 955,000in 1973to 774,000in
3
1975-and despitea strong recovery, the basic problems ·are still
there.
The 1978model cars due out this
fall will be required to achieve a
fleet-weighted fuel-economy rating
of 17.8 miles per gallon, and by 1985
the requirement will be one-third
higher. I n addition, stricter autopollution standardsare scheduled
for 1978.The auto-driving public
has become increasingiy dependent on imported oil, whose cost has
increased eight-fold since 1970
through the cartel's efforts. To reduce that import dependenceand to reduce auto usage-the Administration has now proposed
taxes on both large domestic autos
and their fuel supply.
The recent consumer demand for
large-scaledomestic models-the
type which brings profits to automakers and employment to union
members-has pushed many of
these problems temporarily into
the background. But if governmental and market pressuresforce a
permanent shift to low-profit compact models, there will be lessmoney remaining for the industry and
the UAW to negotiate over in future labor contracts. Moreover,
there will be fewer jobs for UAW
members to the extent that compacts replace gas;.guzzlers the
in
market, especially if those compacts
happen to be foreign-made. In
dealing with all these developments, an aging UAW leadership is
apt to earn even more gray hairs.
William Burke
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BANKING DATA-TWELFTH FEDERAl.
RESERVE STRDCT
DI
(Dollar amounts in millions)
Selected Assets and liabilities
Large Commercial Banks
Amount
Outstanding
5/11/77
5/4177
+
+
+
+
+
+
+
+
+
+
loans (gross, adjusted) and investments*
loans (gross, adjusted)-total
Security loans
Commercial and industrial
Real estate
Consumer instalment
U.S. Treasury securities
Other securities
Deposits (less cash items)-total*
Demand deposits (adjusted)
U.S. Government deposits
Time deposits-total*
States and political subdivisions
Savings deposits
Other time depositst
large negotiable CD's
96,234
73,836
1,826
23,965
22,856
12,896
8,774
13,624
94,314
26,637
373
65,783
5,835
32,053
26,093
9,215
Weekly Averages
of Daily Figures
Week ended
Member Bank Reserve Position
ExcessReserves (+)/Deficiency H
Borrowings
Net free{+)/Net borrowed H
Federal Funds-Seven Large Banks
Interbank Federal fund transactions
Net purchases (+)/Net sales H
Transactions with U.S. security dealers
Net loans {+)/Net borrowings H
Change
from
-
+
+
-
+
+
5/11/77
509
215
76
36
102
58
16
278
613
540
182 423
191
18
243
204 .
Change from
year ago
Dollar
Percent
8,634
7,991
632
1,657
2,889
1,855
- 721
+ 1)64
+ 6,937
+ 2,245
73
-
+
+
+
+
+
+
+ 4A52
+
+
+
+
+
+
+
+
+
+
-
-
-
865
+ 5,815
- 197
- 1,904
Week ended
5/4177
+
-
9.86
12.14
52.93
7.43
14.47
16.80
7.59
11.13
7.94
9.20
16.37
7.26
12.91
22.16
0.75
17.12
Comparable
year-ago period
25
8
33
248
+
2
3
5
424
+
145
35
+
558
214
+
7
0
7
*Includes items not shown separately. tlndividuals, partnerships and corporations.
Editorial comments may be addressed to the editor (William Burke) or to the author •. . .
Information
on this and other publications can be obtained by calling or writing the Public
Information Section, Federal Reserve Bank of San Francisco, P.O. Box 7702, San Francisco 94120.
Phone (415) 544-2184.
