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U.S. Health Care Benefits and Auto Company Banrkruptcies

Want to know what REALLY bankrupted the U.S. auto industry? It wasn't really wages or productivity. Ultimately it was healthc care benefits.

U.S. manufacturing workers have always been paid more than foreign manufacturing workers. This was justified, until recently at least, because U.S. manufacturing workers have been more productive than foreign manufacturing workers. The more you produce, the more you are paid.

This relationship was thrown out of balance by worker benefits, which were started during World War II as a form of hidden payments. After the war, they were regarded as "fringes." But if you add the cost of those fringes to wages, American workers were "overpaid" relative to their productivity. Even so, if you used "pay as you go accounting," pensions and post retirement health care benefits could be awarded to workers without an impact on the bottom line for a long time to come. Problem is "a long time to come" is finally here. The day of reckoning has arrived. That's why we had the auto company bankruptcy crisis at this time, and not some other time.

Basically, the auto workers got premium health care benefits on top of premium wages. They were good, hardworking, productive people that deserved premium wages. Or premium health care. But not both. Because a large part of the reason for paying premium wages was to allow the workers to buy premium health care if they so CHOSE.

Giving them both high wages and benefits was a really form of "double dipping." It spared them the choice, but was a policy that would bankrupt their companies, thereby destroying the ladder of opportunity for future generations of U.S. auto workers.