Show me the money: What the UAW got for GM workers in new contract
GM's 48,500 UAW members will get $5,000 "signing bonuses." This is money GM will pay the UAW's hourly auto workers in a lump sum instead of giving them cost of living (COLA) raises over the course of the four-year contract. That means they get a bonus that will siphoned as a one-time cost from company profits instead of a raise.
While that sounds like a lot of money, when you run the numbers you'll find out that it isn't. Not really. GM's $5,000 bonus payout comes to an average of $1,250 per year per UAW member, or about $25 a week for four years. It amounts to about a 2% increase in compensation for a veteran UAW worker who is paid about $30 an hour.
Most veteran union auto workers from GM and Ford Motor Co. make in the neighborhood of $60 per hour when taking into account their pay and benefits. Chrysler Group counterparts lag at $48 hourly, including benefits. That's a compensation gap of 20% between Chrysler and GM and Ford. Crain's Detroit Business estimates that a veteran GM auto worker earns $116,480 in annual wages and benefits.
Paying the bonus is a business decision for GM. Workers forsake hourly raises to get immediate financial gratification. The company is not being magnanimous just for fun. There is a true benefit to GM for paying up right now.
It makes sense for GM to pay one-time bonuses with no taxes being taken out instead of providing COLA raises because it gives the company tax advantages. At the same time, paying bonuses from profits instead of approving permanent wage increases depresses worker pay while not harming monthly cash flow. In the event of a layoff or dismissal, that means GM would have to pay a worker less severance pay and less in jobless benefits through the state unemployment office.