Felix Salmon at Portfolio.com makes a good argument against the $70/hour meme that’s being propagated in the MSM these days. Mark Perry has the graph.
I get the meme – why bail out a bloated company and “save jobs” for people who make wages far above the average person? It’s the media’s way of minimizing sympathy for the workers.
That $70 per hour figure is arrived at by dividing total labour costs by the total number of workers, then by average hours worked. It also happens to include pension obligations for GM, which is comprised of current payments accrued by past workers. So, while the average worker probably makes closer to $30 per hour, the total wages paid out include payments to retirees who have chosen to defer payment of their wages. In essence, it may be thought of as an ongoing sunk-cost.
It’s pretty obvious, though – never trust someone else with your money. If you can take the cash up front and make your own investments – all the power to you.
On balance, though, I think GM and the big three ought to fail, and the government should bail out the retirees. The big three have been making piss-poor, low-quality products, according to the market, and it’s time to pay the piper.
The Big Three are failures. What you subsidize, you get more of.
