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General Motors and the UAW have lots of serious problems. Just one is a sort of children’s fantasy from the first time they signed a contract. For decades, the contracts included a promise of future payments to retired GM auto workers. The key word is “promise”; the time horizon was far in the future. Nobody can predict the future, but the parties seemed to believe in a crystal ball. But both management and labor acted as if they did. Do you remember that Peter Pan said, “I don’t want to grow up.” And, we know that little children believe in Santa Claus. Did labor and management believe they could get something for nothing? Fast forward to now. The auto companies’ UAW contracts to pay retirees are a tremendous liability. The analysts say that it requires total payouts of $73 for each hour of work done today. Of course, today’s active workers don’t make that much. That’s what you get when you throw the retiree payments on top of the wages. It looks like the UAW has always gotten the best of management. Or, is it simply that both labor and management leaders could kick the can down the road? Union leaders could boast how good life would be tomorrow? And, management didn’t have to shell out any extra money right away. So, why are these unrealistic contracts allowed to exist at all? Other unions require that their employers contribute cash to their retirement funds every payday. For example, an active, working employee would get $20 per hour on payday. That would include both the wage and a contribution to that employee’s “pension fund.” At that point, the employer has no future obligation. So here’s the obvious solution: Require that any new/future labor contract in the entire country be paid for with “cash today.” The Congress can pass such a law. The Congress can step in as the “grown-up” to keep the children’s fantasies from doing great harm. In fact, why shouldn’t everybody, union and non-union, have a mandatory pension plan which is funded with “cash today?”
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