UAW pension demand likely a bigger ask than a 40% raise

Published: Sep. 18, 2023 at 10:59 PM CDT
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KANSAS CITY, Mo. (KCTV) - As the UAW strike against three plants for the Big Three automakers hits its fourth day, the ask that has been getting the most attention is wage increases.

Rockhurst University accounting Tony Tocco has been watching. The UAW demand of 36 percent over four years is a hefty one, he said, but it’s not the demand with the biggest potential impact on the automakers’ bottom line.

“To me, the bigger issue is the UAW wants to reinstate defined benefit plans for its workers,” Tocco said. “This is a huge issue for the Big Three.”

A defined benefit plan is another name for a pension. Back in the day, UAW workers got a pension in retirement. Some still do. Then, six years ago, the companies switched to 401K plans.

It’s not clear if the pension demand is one the UAW will hold out on or if it’s just a bargaining chip. But it could be an untenable ask for the automakers. What most businesses offer nowadays is a 401K. Businesses contribute only while the employee is working.

“Basically, the employer currently matches what I put in 3 percent, 5 percent, whatever we want to match, and basically they match it, and then you invest it in a portfolio you want,” Tocco described. “And the employer says good luck.”

Tocco is an accounting professor at Rockhurst University’s Helzberg School of Management. He explained why a pension plan — where the company pays a percentage of a worker’s wage for life — is so complicated for companies.

“What you got to do with have enough money on hand to pay all your future liabilities and how long people are going to live. And you get into this game. It just is a massive, massive guessing game,” Tocco said. “This is going to cost a massive amount of money for all those companies to do that.”

His concern is about whether cars will remain affordable to the ordinary consumer, among other things.

Tocco is not sure whether the union or the companies will blink first, but he says neither will be able to hold out for long before a third player steps in.

“Within 30 days, 30 days, there will be government intervention. I will guarantee it. And I’ll bet you on it,” he said emphatically. “They aren’t going to let this happen for any longer. The government’s going to step up and somewhere along line bring them to the table and they’re going to be forced to negotiate.”