The Art of the Lose-Lose Deal

Has there ever been a worse time to be a lowly American wage earner?

First, Washington spewed out $6 trillion in printing press money.  This pushed consumer price inflation to a 40 year high.  At the same time, it diluted wages from a standard lager to a pilsner light.

Now, at this very moment, the demand for higher wages through union organization is leading to the mass culling of payrolls.  The higher wages go.  The less jobs will remain.

Just last month, for example, Yellow Corp., a trucking company, filed for Chapter 11 bankruptcy protection.  Yellow CEO Darren Hawkins blamed the International Brotherhood of Teamsters for driving the company out of business.

Teamsters General President Sean O’Brien pointed the finger at, “Yellow’s dysfunctional, greedy C-suite” for the company’s demise.  Adding, “They shamelessly pin their corporate incompetence on working people.”

Who’s right?  Who’s wrong?  Who knows?

What we do know is that some 30,000 workers are now looking for jobs.  For some of these truckers, losing their jobs at Yellow will be the best thing that ever happened to them.

Maybe they’ll be compelled to learn a new skill.  One that demands higher compensation without the need for union strongarming.

With some hard work and perseverance, they’ll come out far ahead of where working at Yellow ever got them.  They may be rewarded with fatter paychecks and greater satisfaction in their new endeavors.

Others, however, will fall further behind.  Maybe they’ll take a job with a competitor at reduced income.  Maybe they’ll find themselves on the unemployment dole.

Regardless, for millions of U.S. workers something’s got to give.  Incomes and the cost of living are at a significant mismatch.  And squaring the difference via credit cards is a dreadful solution.

Expect the Unexpected

The challenge for wage earners is that everything’s so doggone expensive these days.  The average gross annual wage income per full time employee in the U.S. is roughly $75,000.

That may sound like a lot.  But it really doesn’t cut it.

After factoring in federal and state income tax, social security and Medicare, $75,000 is eroded to about $57,000.  Then subtract 4 percent of gross (or $3,000) for 401k contribution and another 6 percent of gross (or $4,500) for health insurance premiums.  The $57,000 of after-tax income drops to just $49,000 in actual take home pay.  That comes to $4,125 per month.

Now, subtract $2,000 for rent, $400 for a car payment, $100 for cell phone charges, $200 for gas, $300 for utilities, $800 for food, and you’re left with $325 to get through the month.  Buy the kids a pair of shoes and a couple of Happy Meals – or a round of puberty blockers – and the money is long gone.

We recognize these numbers are gross generalizations.  In some American cities the costs will be more.  In others they will be less.  The point is a $75,000 income doesn’t get you very far these days.  That’s the reality Americans are facing.

According to a recent study by SecureSave, 67 percent of Americans don’t have enough money saved to cover an unexpected expense.  However, unexpected expenses, as based on a broad spectrum of empirical evidence, should be expected.

Inevitably a head gasket blows, a crown breaks, or the washer goes on the fritz.  Having savings set aside for expenses like these is essential.

Work Less, Make More

When wages fall short of expenses, the options for getting though the month are lacking.  The difference can be made up with credit card debt, which leads to bigger problems down the road.

Another option available to wage earners is to take on a second job to boost their incomes.  Still, there are only so many hours in the day.

Alternatively, families can downsize their lifestyles.  They can go on a beans and rice diet.  They can move into smaller apartments in seedy parts of town.

If needed, several families can pile into the same residence.  The quality of life suffers.  But at least the bills are paid.

Again, these options are lacking.  This is why promises of working less and making more are so, so appealing.

Have you ever heard of Shawn Fain?

We hadn’t heard of him until the Wall Street Journal published a special Labor Day article titled, Meet the Man Who Has Detroit on Edge.

Fain, as we learned, is the 15th president of the United Auto Workers (UAW).  He recently took out incumbent Ray Curry and assumed office in March.

Fain, a fan of ‘90s hip hop who carries one of his grandfather’s Chrysler pay stubs from 1940 in his pocket, has an incredible idea.  He wants auto workers to have a shorter, 32-hour workweek and a 46 percent wage increase.

In fact, this is the deal he recently put forth as part of his negotiations of new labor contracts for about 146,000 hourly workers at General Motors, Ford Motor, and Stellantis (the global car company that now owns Jeep, Ram and Chrysler).

The Art of the Lose-Lose Deal

The existing contracts expire on September 14 – in less than a week.  According to Fain, if a deal isn’t reached by then, he’s ready to strike all three automakers at the same time.

“‘How far are you willing to go to get the contract you deserve?’  Fain yelled to a roaring crowd at a recent rally, after walking on stage to Eminem’s ‘Not Afraid.’”

Clearly, Fain knows exactly what he is doing.  Though, he may not get his intended result for the 146,000 hourly workers he represents.  He may get something much, much different than what he’s bargaining for.

About a month ago, as part of his negotiating strategery, Fain made a public spectacle of throwing Stellantis’s bargaining proposals in the trash.  Fain said Stellantis was making “lowball” demands that are “a slap in the face” to union autoworkers.

Two weeks later, UAW Vice President Rich Boyer revealed that Stellantis has threatened to relocate production of their Ram 1500 pickup trucks from its location in metro Detroit to a facility in Mexico.  Stellantis has yet to confirm or deny the move.

As the clock ticks forward, the September 14 deadline is rapidly approaching.  With a unified strike of all three automakers, Fain and Boyer may get the ‘work less, make more’ deal they’re proposing.  They may even tout this as a big win.

But who ultimately wins?  Not the UAW.  Not General Motors, Ford Motor, and Stellantis – at least initially.  But, rather, laborers in Mexico.

Such are the sort of shabby lose-lose deals that union bosses and corporate executives must come to following an episode of extreme currency debasement.  An episode that is now only partially contained.

At this rate, Detroit autoworkers – the ones that still have jobs – will soon find a 46 percent wage increase will be woefully insufficient.

What will Fain and Boyer demand then?  What sort of discord and discontent will prevail?

[Editor’s note: Is the Pentagon secretly provoking China to attack Taiwan?  Are your finances prepared for such madness?  Answers to these important questions can be found in a unique Special Report.  You can access a copy here for less than a penny.]

Sincerely,

MN Gordon
for Economic Prism

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