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  • Writer's pictureJoe Carson

UAW Labor Agreement--Does It Represent a Major Shift Towards Higher Labor Costs?

Updated: Oct 31, 2023

How tight is the US labor market? Exceptionally so, judging by the newly negotiated UAW labor agreement with the auto companies. The UAW is far smaller and less potent than it once was. Still, it was able to successfully negotiate a massive increase in pay and benefits for its workers.

After a six-week strike, the UAW has agreed with all three automakers (GM, Ford, and Stellantis) on a new labor contract spanning four and half years. The new agreement gives workers a 25% wage increase, and with cost of living adjustments, the pay increase will be over 30%. When the contract talks started, the car companies offered pay increases of less than 10%. With other benefits and bonuses to retirees included, the increase in total labor costs could be as high as 40%.

Today, the UAW represents about 370,000 workers (this agreement covers about half of that), down from the record high of 1.5 million workers in 1979. Also, UAW represents roughly one-third of all manufacturing motor vehicle jobs in the US.

As such, this agreement by itself is not going to jump the overall wage needle in the overall economy by a lot. Yet, these wage settlements need to be viewed with a broader lens since they involve companies competing with a large group of non-union companies and involved in the early stage of massive transformation of their products. If unioned auto workers can win such significant pay hikes, what are the odds that others do, too? UAW employees and the "Big 3" auto companies are not working/operating in an environment of 2% inflation, nor do they think they will be in the near future. More than fifty years ago, a strike in the auto industry started a decade-long gain of wins (higher wages and benefits) for labor. Is the UAW agreement a harbinger of things to come?

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