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Disruptive Demographics

March 1, 2008
The heartbeat of America needs a bit of resuscitation. The simplicity of the complicated General Motors buyout of its workforce gives pause. In an effort

The heartbeat of America needs a bit of resuscitation. The simplicity of the complicated General Motors buyout of its workforce gives pause. In an effort to stem the bleeding and slow ongoing losses, GM has offered lucrative buyouts to 74,000 employees—its entire U.S. hourly workforce. This is part of the “Ya gotta spend money to make money” economic theory taught in school but not by dad.

Let’s think this through to its illogical conclusion. First, apply this kind of management thinking to your shop: Imagine getting rid of all your knowledgeable, dedicated employees (Don’t think of them as associates, partners, stakeholders or whatever euphemism you normally use; that’s too personal.) and replacing them with folks willing to work at one-third the rate so they can progress through the ranks to get to higher paying jobs in the future. What future?

Last month, I wrote a piece focusing on communications in outsourced logistics companies. I spoke with nearly a dozen execs, ranging from presidents through an alphabet soup of titles. Nearly to a man they said communicating with employees was critical. Passing on knowledge of how the company runs and how the job is done is essential to continuation of the business.

So, if all that experience walks out the door in July with $45,000 to $150,000 in its wallet, who is going to teach the newbies how to build a car?

Speaking here in Cleveland to our City Club Feb. 8, UAW President Ron Gettelfinger spelled out the state of employment in America today:

• Jobs are falling. We’ve lost 3.4 million manufacturing jobs since 2001.

• Wages are stagnating. Median income dropped by $1,000 per household between 2000 and 2006.

You’ve read, on these pages, of the challenges facing managers in material handling when it comes to building a responsible, energetic, dedicated, productive workforce. In only a few short years, we aren’t going to have enough people to fill the available jobs. By 2015, it’s estimated that 76% of U.S. jobs will demand highly skilled employees. In the next 15 years, there will be a 15% decline in the 35-to-44-year age group.

Beyond quality products, what else will suffer if more companies follow the General into this war on cost containment? Why spend money on training if experience will no longer be valued (read: financially rewarded)? Without compensation for what they do, people become placeholders—and they know it. What about innovation? What’s the incentive for the best and brightest to work for a company known to get rid of talent when it starts earning too much (in some economist’s view)?

The current veteran UAW member at GM today has an average base wage of $28.12 an hour. With the cost of benefits, including pension and future retiree healthcare costs, it nearly triples to cost GM $78.21, according to the Center for Automotive Research.

By comparison, new hires will be paid between $14 and $16.23 an hour. As they start to accumulate raises tied to seniority, the far less lucrative benefit package they’ll be offered will limit GM’s cost for those employees to $25.65 an hour. Let me add to that: According to the U.S. Department of Labor, the average wage of an auto worker in Mexico is $2.59 per hour, and the average wage of an auto worker in China is 84 cents per hour.

Would attrition through automation, that bane of the union worker, be less palatable?

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