Ford’s UAW Contract and Weak Consumer Spending

Ford’s (NYSE: F) new UAW contract is good news for the auto company’s financial future but bad news for workers, who will have a stagnant standard of living. It is another example of how corporations have gained an edge over labor. And, it is an example of how consumer spending in the U.S. is undermined by the trend.

The Wall Street Journal reports that, “Ford Motor Co. said its total annual labor expenses will increase less than 1% over the four-year term of its new contract with members of the United Auto Workers union.” Buyouts of Ford’s highest paid assembly workers will contribute to these numbers. So will Ford’s ability to improve manufacturing productivity. But those items do not change the fact that the company’s 41,000 assembly line workers have gotten very modest raises as part of the new agreement.

One of the trends that has hurt consumer expenditures as much as any other is the inability of the average American to improve his salary compared to the increased cost of living. The figures are stark when average household income is adjusted for inflation. Wages have actually fallen over the past decade based on that measure.

The flat to slightly down trend in real wages can be added to the nation’s more than 9% unemployment and the millions of people who want full-time jobs and cannot find them. Millions more have stopped seeking new jobs. Many of these people will lose their unemployment benefits as the year passes, unless Congress extends them.

The American consumer is not much of a consumer, compared to what he was in 2000 and through the robust years at the start of the past decade. Home prices and access to home equity increased purchasing power, but the housing collapse has taken away that money. In much of the country, home prices many not reach 2006 levels for many years.

Taken as a whole, the trends of the worker compensation part of the  economy have sucked increasingly more buying power from consumers recently. The leverage companies have over workers who are concerned not just with wages but with job security has continued to undermine the chances for raises. It is a trend that  makes it nearly certain that there is no consumer spending revival on the horizon.

Douglas A. McIntyre