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U.S. healthcare crisis cause of automakers' woes, not unions

By John Leschak

The three biggest U.S. automakers-GM, Ford and Chrysler, also known as the "Big 3"-are in serious economic trouble. They have asked Congress for over $34 billion in aid to prevent them from going bankrupt. Some media pundits have blamed the collapse of the U.S. auto industry on unions. But the true culprit is the lack of affordable healthcare.

According to Fortune magazine, labor costs the Big 3 substantially more per vehicle than it does their main competitors, Japanese automakers Honda and Toyota. This disparity in labor costs has been attributed to the widespread unionism of the Big 3 employees-most are members of the United Auto Workers (UAW). However, the Confederation of Japan Automobile Workers' Union (JAW)-Japan's largest auto worker union-has over 700,000 members, while the UAW-the U.S.'s largest auto worker union-has fewer than 600,000 members. If unions inherently raise costs, how can the Japanese have lower costs and more unionized workers?

The base wages of UAW members and Toyota workers is roughly comparable. The gap in labor costs only emerges when healthcare costs are factored in. For instance, GM pays $1,635 per vehicle on healthcare for active U.S. workers while Toyota only pays $215 for healthcare for Japanese workers.

The UAW has offered to renegotiate its 2007 collective bargaining agreements with the Big 3 by allowing the automakers to defer payments into a new retiree healthcare fund and reducing wages and other health benefits. Some have claimed that these concessions are needed to make the Big 3 competitive with Japanese automakers. But, what is really needed is healthcare reform to make the system more affordable. This will make U.S. businesses more competitive without sacrificing workers' health and safety!

To achieve this goal, we ought to learn from the Japanese. According to National Public Radio, "Everyone in Japan is required to get a health insurance policy, either at work or through a community-based insurer." However, this mandate is not burdensome, since healthcare premiums are only about $280 a month for the average Japanese family and Japanese employers, like Honda and Toyota, pick up half of the cost. The Japanese have managed to keep healthcare affordable because the Japanese Health Ministry tightly regulates the healthcare industry.

House Resolution (HR) 676, the U.S. National Health Insurance Act, follows the Japanese approach. Introduced by Rep. John Conyers (D-Ill.), HR 676 would replace the hundreds of complicated and redundant payment plans currently imposed on the system by private health insurance companies with a "single payer" method of paying for medical services, thus saving literally billions of dollars every year by eliminating wasteful duplication.

Each private insurance company has its own set of forms, rules and procedures. This is inefficient and tremendously costly. By simply replacing these redundant systems with a national single payer system, billions of dollars can be saved every year and this money can be used to improve the U.S. healthcare system and make its benefits available to every citizen.

HR 676 is not socialized medicine. The state will not own the healthcare industry; it will remain privately owned. Instead, like the Japanese Health Ministry, the state will only exercise cost controls and provide operating guidelines.

In a recent interview on "Meet the Press," President-elect Barack Obama said that the Big 3 need to restructure, and he specifically singled out the UAW. Labor, management, shareholders, creditors-everyone is going to recognize that they do not have a sustainable business model right now. But the truly non-sustainable model is the U.S. healthcare system. Obama's own campaign materials note that "health insurance premiums have doubled in the last eight years, rising 3.7 times faster than wages. Over half of all personal bankruptcies today are caused by medical bills, and over 45 million Americans-including over eight million children-lack health insurance."

In light of the differences between U.S. and Japanese healthcare systems and the fact that Japan has more unionized auto workers than the U.S., it can reasonably be concluded that the fall of U.S. auto makers has been caused not by unions, but by our failing healthcare system. The solution is a single-payer healthcare system.

John Leschak is a second-year law student. You may e-mail him at

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