+167,000 Auto Jobs by 2015, Thanks to 2-Tier Pay That Is Deflating the Unsustainable Wage Bubble

NEW YORK TIMES (DETROIT) — "Employment in the auto industry will return to prerecession levels by 2015, with carmakers and their suppliers adding about 167,000 jobs by then, according to estimates by an auto industry research firm.

The job growth would represent a 28 percent increase over current levels but would still replace only about a third of the jobs lost in the last decade. And much of the increase is made possible by labor agreements ratified this fall that allow the Detroit automakers to hire more workers on the lower of their two pay scales.

The industry group, the Center for Automotive Research in Ann Arbor, Mich., said it expected the Detroit automakers to hire 14,750 hourly employees in the next four years. They would receive entry-level wages of $16 to $19 an hour. Workers hired before 2007 earn about $29 an hour. The group projected that about 15 percent of the new jobs would be at Detroit automakers, and nearly 80 percent would be at suppliers. Foreign automakers would account for the rest. 

The two-tier system was created in 2007 to help the automakers cut labor costs as they were hemorrhaging money, but only recently were they able to begin hiring new workers in large enough numbers for the savings to have a noticeable effect on the bottom line. 

About 590,000 people now work in the auto industry, 13 percent more than in July 2009, when G.M. emerged from bankruptcy. That figure is expected to grow to 756,800 in 2015. Much of the job growth will happen in Michigan, where the three Detroit automakers cut more than half of their jobs since 2001."

MP: One way to think about U.S. auto manufacturing over the last several decades is to consider that it was suffering from an "unsustainable wage bubble" (thank to Tim Kane for that reference), especially for the UAW wages paid by Detroit automakers.  Now that auto wages are more realistic, competitive, and more closely aligned with market forces with the new 2-tiered wage structure, the wage bubble has burst and the auto jobs are coming back.