Saturday, November 22, 2008

The $70 Per Hour Lie

brownsox writes at the Daily Kos about one of the stats being floated in the "save the automakers" discourse that's misleading at best, and more likely just plain false.

The statistic in question is that autoworkers make $70 per hour. brownsox posits that even if true, what's so wrong about blue-collar workers making a good living, and why is $70 per hour out of line in a company where the CEO makes $11,000 per hour?

He quotes an article by Jonathan Cohn, who explains the misleading math:

But then what's the source of that $70 hourly figure? It didn't come out of thin air. Analysts came up with it by including the cost of all employer-provided benefits--namely, health insurance and pensions--and then dividing by the number of workers. The result, they found, was that benefits for Big Three cost about $42 per hour, per employee. Add that to the wages--again, $24 per hour--and you get the $70 figure. Voila.

Except ... notice something weird about this calculation? It's not as if each active worker is getting health benefits and pensions worth $42 per hour. That would come to nearly twice his or her wages. (Talk about gold-plated coverage!) Instead, each active worker is getting benefits equal only to a fraction of that--probably around $10 per hour, according to estimates from the International Motor Vehicle Program. The number only gets to $70 an hour if you include the cost of benefits for retirees--in other words, the cost of benefits for other people.

So it would seem that once again, people have decided to stretch the truth in order to advance their position, which means that they must believe that their position is not supportable by facts. That should tell us all everything we need to know.

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