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Auto Industry Labor Costs in Perspective

by Richard Wallick

Bureau of Labor Statistics

Originally Posted: April 22, 2011

Compensation costs for workers in the U.S. automotive industry became a widely discussed topic in the final months of 2008.

Data from the 2009 National Compensation Survey put these compensation costs into perspective.

The auto industry occupies a special place in American folklore.1 The phrase “Americas love affair with the automobile”

appears in the American Heritage dictionary, as a usage example under the entry for “love affair.”2 An Internet search for the

phrase returns hundreds of thousands of matches.3 The College Boards study guide for the Advanced Placement exam in

U.S. History dedicates an entire chapter to “The Automobile in American Life.”4 And the idea that “Whats good for General

Motors is good for the country”—although misquoted—still resonates with many Americans.5

Thus, it is no surprise that the auto industry receives a great deal of scrutiny in the popular press. This scrutiny was

particularly intense in the final months of 2008,6 when a controversial assistance package of $13.4 billion from the U.S.

Treasury provoked a debate on whether auto industry compensation costs were excessive. Data from the BLS National

Compensation Survey (NCS) for 2009 allow auto industry compensation costs to be viewed in relation to those in other

manufacturing industries.

The perception that auto industry compensation costs for blue-collar workers7 exceed those of many other manufacturing

industries is supported by data from the NCS data series on Employer Costs for Employee Compensation (ECEC). As shown

in chart 1, the ECEC indicates that average hourly compensation costs8 for auto workers in private industry were among the

highest of any manufacturing industry in 2009.9
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This is true despite the trends of recent years, in which nominal auto industry compensation costs have held steady or

declined (except from 2007 to 2008), while compensation costs in other manufacturing industries have continued to climb.

Chart 2 shows that, in real terms, private auto industry compensation costs have been falling since 2004.10
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Compensation costs can be broken into two categories: wages and benefits. In the auto industry, upward pressure on wage

costs has been offset by downward pressure on benefit costs. In both real and nominal terms, benefit costs have been falling

for auto manufacturers in recent years (except from 2007 to 2008), while benefit costs have been steady for other private

industry manufacturers. (See chart 3.)
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But while employers in the auto industry are spending less per hour on benefits overall, they are still spending more per hour

on health insurance (as are their nonauto manufacturing counterparts), as can be seen in chart 4. Health insurance is the

single largest benefit cost to employers in private manufacturing industries.11
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Despite these declines in compensation costs in recent years, the auto industry remains an important component of U.S.

manufacturing because of its combination of relatively high compensation costs (compared with other manufacturing

industries) and a relatively large workforce. One measurement of an industrys importance to the economy is its total yearly

compensation costs, defined as the number of production workers in the industry, times the average number of hours worked

by production workers each week,12 times 50 weeks per year,13 times the average hourly compensation cost per blue-collar

worker. (In general, the higher an industrys yearly compensation costs, the more households rely on the wages and

benefits paid by that industry.) By this measure, the auto industry is still one of Americas most important manufacturing

industries.14 (See chart 5.)
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As stated previously, hourly compensation costs in the auto industry are higher than those in most other private

manufacturing industries. However, at least some of this premium may stem from industry-specific factors. For example, if

auto industry workers perform tasks that are considerably more difficult than those performed by blue-collar workers in other

industries, higher compensation costs might be expected.

When BLS economists collect wage and benefit data from an establishment for the NCS, they also collect information about

(1) the level of knowledge required by its workers, (2) the degree of complexity of its occupations, (3) the amount of social

interaction required, and (4) the physical environment in which duties are performed. These four factors (entitled

“knowledge,” “job controls and complexity,” “contacts,” and “physical environment,” respectively) are combined into a single

job rating—a value between 190 and 4,180, with higher values connoting higher degrees of difficulty, knowledge,

responsibility, or complexity.15

Plotting each industrys average hourly compensation costs against its average job rating for blue-collar workers reveals a

positive correlation: among private manufacturing industries, higher job ratings correspond to higher compensation costs. As

shown in chart 6, compensation in the auto industry is consistent with this positive correlation.16 Workers in the auto chassis

subindustry receive above-average compensation even after adjusting for job rating.
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Combining the National Compensation Surveys findings with data from the U.S. Census Bureau provides additional

insights. For example, the 2007 Economic Census calculates the value added by production workers during the production

process.17 Compared with other manufacturing industries, compensation in the auto industry is high relative to value

added.18 (See chart 7.) Or, put another way, other manufacturing industries show higher value added per unit of worker

compensation.
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Another potential explanatory variable of compensation costs is company size.19 In general, industries with larger average

production workforces per company have higher per-worker compensation costs than industries with smaller average

production workforces per company.

By this measure, the auto parts and body subindustries are in line with other private manufacturing industries.20 (See chart

8.) The chassis subindustry is an extreme case, with the average company having many more production workers than the

average company in any other manufacturing industry. As a whole, the auto-industry compensation premium is consistent

with the overall positive correlation between company size and average compensation.
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Finally, an industrys compensation costs may be influenced by the number of companies in the industry. For example,

economic theory suggests that industries with a small number of companies might possess some monopsony power—a

condition with a small number of buyers and many sellers—with respect to labor, and thus incur lower compensation costs.

On the other hand, labor unions might be better able to organize and thus exert more power, in exactly the same industries,

thereby raising compensation costs. Higher compensation costs might also be expected in industries that have some degree

of monopoly power and thus can afford to share “monopoly rents” with workers. One way to explore these questions is to

examine the relationship between an industrys compensation costs and the number of companies in that industry.21

Plotting average hourly compensation against the log22 of the number of companies in each industry reveals that if there is

any relationship at all, it is that compensation levels decline as the number of companies grows.23 (See chart 9.) Given this

relationship, the auto parts subindustry exhibits higher-than-expected levels of compensation, after adjusting for the number

of companies in that subindustry.
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In sum, while it is true that blue-collar workers in the auto industry receive higher compensation than blue-collar workers in

other manufacturing industries, this premium may be at least partly explained by three factors: (1) the relative complexity of

jobs performed by auto workers; (2) the ratio of workers to employers in the auto industry; and (3) the number of employers in

the auto industry. For workers in the auto body and auto parts subindustries, average hourly compensation is consistent with

other manufacturing industries in all three areas. For workers in the auto chassis subindustry, average hourly compensation

is consistent in one area—job rating. For auto workers as a whole, hourly compensation costs are consistent with those of

other private sector manufacturing industries, after adjusting for factors such as job complexity and industry structure.

Richard Wallick

Economist, Program Standards Group, Office of Compensation and Working Conditions, Bureau of Labor Statistics.

Telephone: (202) 691-6283; E-mail: Wallick.Richard@bls.gov. Notes

1 In this article, the “auto industry” is defined as industries 3361, 3362, and 3363 of the North American Industry Classification System

(NAICS), 2002. This includes automobiles as well as light and heavy trucks (part of 3361) and trailers and motor homes (part of 3362). See 

http://www.bls.gov/bls/naics.htm for more information.

2 See “love affair” in The American Heritage Dictionary of the English Language, 4th ed., (New York: Houghton Mifflin, 2004), Dictionary.com, 

http://dictionary.reference.com/browse/love_affair. 3 A Google search for the phrase “America's love affair with the automobile” yielded about 468,000 results.

4 See Lesson Plans for AP U.S. History, chapter 9, “The Automobile in American Life,” http://apcentral.collegeboard.com/apc/members/

courses/teachers_corner/22545.html. 5 The origin of this misquoted statement is the 1953 Senate confirmation hearing of General Motors president Charles Erwin Wilson, who had

been nominated by President Eisenhower for Secretary of Defense. Although press accounts quoted Wilson as having said, “Whats good for

General Motors is good for the country,” his actual words were “For years I thought that what was good for our country was good for General

Motors, and vice versa.” See http://www.time.com/time/magazine/article/0,9171,827790,00.html for more information.
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6 Google Trends reveals a noticeable spike in both Internet searches and news coverage of the auto industry in the last quarter of 2008. See 

http://www.google.com/trends?q=auto+industry&ctab=0&geo=all&date=all&sort=0. 7 For the purposes of this article, blue-collar workers are those whose occupations have two-digit Standard Occupational Classification (2010)

values between 33 and 39 or 45 and 53. Examples of such occupations are protective services officers, food preparers, groundskeepers,

construction workers, installers, assemblers, and metal workers. See http://www.bls.gov/soc/2000/soc_majo.htm for more information.

8 Compensation costs include wages and salaries plus employer-paid benefits, including legally required benefits. See http://www.bls.gov/ncs/

ect for more information about employer costs captured by the ECEC.

9 In this article, manufacturing industries are defined as those belonging to the manufacturing sector as defined by the 2002 North American

Industry Classification System (NAICS). Industries generally correspond to three-digit NAICS subsectors. Exceptions are NAICS 312,

Beverage and Tobacco Product Manufacturing (only the beverage [3121] industries are included), NAICS 326, Plastics and Rubber Products

Manufacturing (broken into separate plastics [3261] and rubber [3262] industries), and NAICS 336, Transportation Equipment Manufacturing

(broken into auto [3361—3363], aerospace [3364], railroad [3365], ship and boat [3366], and “other transport” [3369] industries, which includes

motorcycles and all-terrain vehicles). The “Miscellaneous” category refers to NAICS 339, Miscellaneous Manufacturing. When it was deemed

useful, the author further subdivided the auto industry into auto (chassis/complete) [3361], auto (body only) [3362], and auto (parts only)

[3363].

10 Figures are from March of each year. Values for 1996 dollars are calculated by dividing current dollar values by the CPI-U deflator for the

appropriate year and multiplying by 100. Note that because standard errors are not available, intervals of statistical significance cannot be

estimated.

11 Among all employers in private manufacturing industries, health insurance costs averaged $2.87 per blue-collar worker per hour in March

2009. Social security (old-age, survivors, and disability insurance) was the next highest cost ($1.20 per blue-collar worker per hour), followed

by paid vacation leave ($0.90 per blue-collar worker per hour).

12 Production workers and average hours worked per week per production worker are available by industry from the Current Employment

Statistics (CES) survey (http://www.bls.gov/ces). Production workers are those workers “engaged in fabricating, processing, assembling,

inspecting, receiving, storing, handling, packing, warehousing, shipping, trucking, hauling, maintenance, repair, janitorial, guard services,

product development,” as well as “other services closely related with the above production processes.” This definition is comparable, though

not identical, to that of “blue collar” used for compensation in the NCS.

13 By convention, the number of weeks used is 50, instead of 52. The ordinal rankings would be unchanged if 52 were used instead.

14 Current Employment Statistics data are not available for the railroad and other transport industries, so these industries do not appear in the

chart.

15 See National Compensation Survey: Guide for Evaluating Your Firms Jobs and Pay for more information on the four-factor job rating

system, http://www.bls.gov/ncs/ocs/sp/ncbr0004.pdf. 16 For presentation purposes, only selected industries are labeled.

17 The most recent year for which data on value added by manufacturing industries are available is 2007. For more information, see the 2007

Economic Census page on U.S. Census Bureau website, http://www.census.gov/econ/census07/. 18 For presentation purposes, only selected industries are labeled.

19 Company size is not to be confused with establishment size. A single company may have multiple establishments. Because the National

Compensation Survey is an establishment-based survey, data on company size is taken from the 2007 Economic Census instead.

20 For presentation purposes, only selected industries are labeled.

21 An even better basis for comparison would be the industrys “concentration ratio”—the degree to which a small number of firms dominate

the industry. However, concentration ratios for the manufacturing sector for 2007 are not yet available; they are scheduled to be published by

July 2011. See http://www.census.gov/econ/concentration.html for more information.

22 The relationship between average hourly compensation and the number of companies is more clearly revealed by using base-10

logarithms. To the extent that a linear relationship exists, the relationship is between average hourly compensation and the log of the number

of companies, rather than simply the number of companies.

23 For presentation purposes, only selected industries are labeled.
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Data for Chart 1. Average hourly compensation costs for blue-collar workers, private manufacturing industries, 2009

Sector Compensation Wages Benefits Health

All manufacturing $25.76 $16.67 $9.09 $2.87

Auto $36.98 $22.19 $14.79 $4.76

Nonauto $24.92 $16.26 $8.66 $2.73

Petroleum $50.29 $30.42 $19.87 $4.39

Aerospace $38.55 $23.48 $15.07 $4.03

Auto $36.98 $22.19 $14.79 $4.76

Beverage $34.18 $21.02 $13.16 $3.76

Paper $31.38 $19.76 $11.62 $3.61

Ship and boat $29.72 $20.17 $9.54 $2.53

Chemical $29.06 $18.83 $10.23 $2.78

Primary metal $28.04 $17.93 $10.11 $3.08

Other transport $27.21 $17.17 $10.04 $2.96

Machinery $26.78 $17.62 $9.16 $3.04

Electrical $26.58 $16.96 $9.61 $2.99

Rubber $25.65 $16.75 $8.91 $3.07

Fabricated metal $25.23 $16.60 $8.63 $2.91

Computer and Electronic $25.12 $16.33 $8.80 $2.75

Mineral $25.05 $16.29 $8.76 $2.72

Railroad $23.40 $14.67 $8.73 $2.63

Printing $22.90 $16.14 $6.76 $1.89

Miscellaneous $21.84 $14.55 $7.29 $2.49

Textile mills $21.81 $14.62 $7.19 $2.59

Food $21.57 $13.78 $7.78 $2.60

Plastics $20.70 $13.67 $7.03 $2.40

Furniture $20.66 $14.47 $6.19 $2.11

Wood products $18.71 $13.02 $5.68 $1.75

Textile products $18.61 $12.37 $6.24 $2.02

Apparel $12.55 $9.84 $2.71 $0.53

Data for Chart 2. Average hourly compensation costs for blue-collar workers in private manufacturing industries

Year

Current dollars 1996 dollars

Auto industry Nonauto industry Auto industry Nonauto industry

1996 $27.40 $16.94 $27.40 $16.94

1997 $29.85 $17.44 $29.05 $16.97

1998 $30.90 $17.76 $29.67 $17.04

1999 $31.46 $18.02 $29.69 $17.00

2000 $33.45 $18.68 $30.42 $16.99

2001 $31.93 $19.66 $28.21 $17.37

2002 $33.20 $20.37 $28.91 $17.74

2003 $35.82 $21.28 $30.27 $17.99

2004 $39.68 $21.47 $32.97 $17.84
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Year

Current dollars 1996 dollars

Auto industry Nonauto industry Auto industry Nonauto industry

2005 $40.18 $22.73 $32.37 $18.31

2006 $40.15 $23.07 $31.29 $17.98

2007 $38.68 $23.50 $29.32 $17.82

2008 $39.68 $24.21 $28.93 $17.65

2009 $36.98 $24.92 $27.07 $18.24

Data for Chart 3. Average hourly benefit costs for blue-collar workers, private manufacturing industries, 1996-2009

Year

Current dollars 1996 dollars

Auto industry Nonauto industry Auto industry Nonauto industry

1996 $12.29 $5.72 $12.29 $5.72

1997 $13.25 $5.82 $12.89 $5.66

1998 $13.46 $5.79 $12.92 $5.56

1999 $13.32 $5.78 $12.57 $5.45

2000 $14.89 $6.08 $13.55 $5.53

2001 $13.26 $6.44 $11.71 $5.69

2002 $13.38 $6.70 $11.65 $5.84

2003 $14.98 $7.18 $12.67 $6.07

2004 $18.82 $7.40 $15.64 $6.15

2005 $17.98 $8.22 $14.49 $6.62

2006 $16.74 $8.13 $13.04 $6.33

2007 $15.38 $8.19 $11.66 $6.21

2008 $16.20 $8.42 $11.81 $6.14

2009 $14.79 $8.66 $10.83 $6.34

Data for Chart 4. Average hourly health insurance costs for blue-collar workers, private manufacturing industries,

1996-2009

Year

Current dollars 1996 dollars

Auto industry Nonauto industry Auto industry Nonauto industry

1996 $2.97 $1.40 $2.97 $1.40

1997 $2.90 $1.39 $2.82 $1.35

1998 $2.93 $1.35 $2.82 $1.30

1999 $3.17 $1.36 $2.99 $1.28

2000 $3.87 $1.46 $3.52 $1.33

2001 $3.01 $1.55 $2.66 $1.37

2002 $3.10 $1.74 $2.70 $1.51

2003 $3.37 $1.89 $2.85 $1.59

2004 $3.77 $1.98 $3.13 $1.64

2005 $3.99 $2.24 $3.21 $1.80

2006 $4.54 $2.37 $3.54 $1.85

2007 $4.48 $2.46 $3.40 $1.87

2008 $4.82 $2.60 $3.51 $1.90
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Year

Current dollars 1996 dollars

Auto industry Nonauto industry Auto industry Nonauto industry

2009 $4.76 $2.73 $3.49 $2.00

Data for Chart 5. Total yearly compensation costs for blue-collar workers, private manufacturing industries, 2009

Sector Total production worker costs per year ($billions)

Fabricated metal $48.95

Food $48.08

Auto $37.96

Machinery $36.25

Computer and electronic $33.51

Chemical $28.73

Aerospace $25.56

Paper $20.17

Printing $16.39

Primary metal $16.35

Miscellaneous $16.05

Plastics $15.62

Mineral $14.86

Electrical $14.15

Furniture $11.53

Wood products $9.53

Petroleum $7.18

Ship and boat $6.18

Beverage $5.71

Rubber $5.32

Textile mills $4.00

Textile products $3.42

Apparel $3.19

Data for Chart 6. Average hourly compensation costs for blue-collar workers by job rating, private manufacturing

industries, 2009

Sector Points Compensation

Food 545.2 $21.40

Beverage 754.7 $34.38

Textile mills 616.0 $20.95

Textile products 571.7 $16.87

Apparel 475.2 $12.55

Wood products 586.4 $18.21

Paper 887.7 $30.80

Printing 758.9 $23.08

Petroleum 1024.1 $43.31

Chemical 800.9 $28.83
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Sector Points Compensation

Plastics 575.9 $20.47

Rubber 678.9 $25.32

Mineral 758.9 $24.76

Primary metal 862.0 $27.75

Fabricated metal 846.7 $25.14

Machinery 901.8 $26.57

Computer and Electronic 758.4 $24.32

Electrical 695.7 $26.85

Auto 827.6 $37.14

Auto (chassis only) 790.0 $46.94

Auto (body only) 744.3 $26.26

Auto (parts only) 874.6 $36.66

Aerospace 1081.1 $38.12

Railroad 645.6 $22.36

Ship and boat 1152.3 $29.92

Other transport 793.5 $27.21

Furniture 584.5 $20.58

Miscellaneous 658.1 $21.94

Data for Chart 7. Average hourly compensation costs for blue-collar workers by value added per hour of production

labor, private manufacturing industries, 2007

Sector Value added per hour Mean compensation per hour

Food $104.90 $19.79

Beverage $310.38 $28.77

Textile mills $61.02 $18.08

Textile products $59.60 $18.05

Apparel $49.57 $12.45

Wood products $49.27 $18.74

Paper $120.37 $31.91

Printing $72.50 $21.30

Petroleum $810.37 $38.93

Chemical $389.48 $27.57

Plastics $74.30 $20.19

Rubber $72.48 $23.79

Mineral $94.81 $24.07

Primary metal $116.75 $27.62

Fabricated metal $77.40 $23.16

Machinery $110.44 $27.08

Computer and Electronic $235.06 $23.86

Electrical $103.78 $24.35

Auto $111.51 $38.68

Auto (chassis only) $239.31 $44.88

Auto (body only) $57.32 $26.40
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Sector Value added per hour Mean compensation per hour

Auto (parts only) $81.09 $38.72

Aerospace $228.99 $38.95

Ship and boat $68.09 $25.81

Other transport $161.21 $24.60

Furniture $60.59 $19.53

Miscellaneous $116.86 $22.08

Data for Chart 8. Average hourly compensation costs for blue-collar workers by average number of production

workers per company, private manufacturing industries, 2007

Sector Production workers per company Mean compensation per hour

Food 52 $19.79

Beverage 23 $28.77

Textile mills 49 $18.08

Textile products 18 $18.05

Apparel 16 $12.45

Wood products 28 $18.74

Paper 92 $31.91

Printing 14 $21.30

Petroleum 61 $38.93

Chemical 44 $27.57

Plastics 55 $20.19

Rubber 66 $23.79

Mineral 31 $24.07

Primary metal 86 $27.62

Fabricated metal 20 $23.16

Machinery 30 $27.08

Computer and Electronic 38 $23.86

Electrical 53 $24.35

Auto 100 $38.68

Auto (chassis only) 479 $44.88

Auto (body only) 60 $26.40

Auto (parts only) 90 $38.72

Aerospace 154 $38.95

Ship and boat 66 $25.81

Other transport 33 $24.60

Furniture 18 $19.53

Miscellaneous 13 $22.08

Data for Chart 9. Average hourly compensation costs for blue-collar workers by log of number of companies in

industry, private manufacturing industries, 2007

Sector Log number of companies in industry Mean compensation per hour

Food 4.34 $19.79
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Sector Log number of companies in industry Mean compensation per hour

Beverage 3.50 $28.77

Textile mills 3.42 $18.08

Textile products 3.80 $18.05

Apparel 3.93 $12.45

Wood products 4.18 $18.74

Paper 3.54 $31.91

Printing 4.51 $21.30

Petroleum 3.05 $38.93

Chemical 4.03 $27.57

Plastics 4.00 $20.19

Rubber 3.25 $23.79

Mineral 4.07 $24.07

Primary metal 3.60 $27.62

Fabricated metal 4.76 $23.16

Machinery 4.39 $27.08

Computer and Electronic 4.12 $23.86

Electrical 3.75 $24.35

Auto 3.85 $38.68

Auto (chassis only) 2.51 $44.88

Auto (body only) 3.28 $26.40

Auto (parts only) 3.69 $38.72

Aerospace 3.14 $38.95

Ship and boat 3.21 $25.81

Other transport 2.98 $24.60

Furniture 4.32 $19.53

Miscellaneous 4.49 $22.08

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