The United Auto Workers strike has gripped the nation like no other labor action in modern American manufacturing history. Directed by UAW President Shawn Fain, the union boldly launched a strike against the Big Three automakers, rallying about 18,000 workers across the country. The union’s demands include higher pay, traditional retirement benefits rather than 401(k)s, and a shorter work week for its nearly 146,000 members.
Yet beneath this activism lies a critical question: Is the UAW building a future that will be beneficial for the next generation of labor, not just the union’s senior membership?
Looking closely, there’s a noticeable age disparity. Fain is 54, while the median age of a Ford Motor Co. employee is 46, placing the UAW’s core within the baby boomer and Gen X demographic. Statistically, these older generations spend around twice the length of time in a job compared to millennials, who on average stay in a position for less than three years. Higher pay and better benefits are not the only reasons why younger workers tend to job hop so much; desire for career growth and advancement are just as important. These different career goals impact what younger workers expect from employers.
For one, the concept of retirement has evolved. Gone are the days when workers envisioned lifetime employment at a single institution. Today’s workers want portability in benefits. The UAW’s traditional pension, reserved for those who joined before 2007, demands 30 years of work for full benefits. For a generation thriving in the gig economy, this is an archaic notion. Instead, newer models like 401(k)s, which UAW’s recent hires have been receiving, resonate more.
The current 6.4 percent employer contribution into the UAW’s 401(k) may be too cheap, but that doesn’t mean the model is necessarily wrong. Municipalities from New York City to Jacksonville, Fla., to Salt Lake City have pioneered successful 401(k) strategies as options for their employees with considerably higher employer contribution rates. Recent research coauthored by one of us on the public sector finds that an employer contribution of 10 percent of pay would be enticing to most workers to accept switching future benefits away from a traditional pension.
Further, the UAW’s demand to eradicate temporary positions contradicts younger workers’ predilections. Many in the emerging workforce embrace temporary roles for their flexibility. A recent Georgetown University and Bank of America survey underscored this, with Gen Z ranking job flexibility alongside pay as paramount when choosing a job. Axing positions that offer these characteristics seems counterintuitive both for automakers and the UAW.
To be clear, this isn’t an endorsement of temporary positions that offer paltry wages and inadequate benefits. Rather, future benefits packages must be cognizant of the changing labor market. Federal legislation has already begun to address this benefits gap for temporary workers, and there is no reason why the UAW’s collective bargaining agreement shouldn’t recognize the same new reality — for example, by offering temporary workers 401(k)s with attractive contribution rates. To be viable, the UAW’s approach must be more nuanced: advocate for improved conditions without eliminating a system that holds intrinsic appeal for many.
The UAW’s present course must have a vision for the future. Today’s contracts must anticipate tomorrow’s workforce. At a time when the Big Three seem poised to take a leading role in the burgeoning EV industry, the UAW has the opportunity to expand its footprint to a more skilled workforce. Given the relatively limited voting power this bloc of workers has, however, it is not clear that the current demands of the union are representative of the role those skilled workers will play in the union’s future.
This new group of younger, more skilled workers, which is in high demand, is going to be the new core of UAW. The long-term ramifications of the UAW’s demands, from industry financial strains to a weaker role for Detroit in the coming green economy, will fall most heavily on this group of workers. For this reason, the UAW must negotiate its contracts with these workers in mind. To do otherwise would jeopardize not only the UAW but also the vitality of the American auto industry itself.
The global auto sector in which US auto firms compete is morphing, calling for a leaner, more adept workforce. The UAW’s endurance hinges on its ability both to compete internationally and to adapt to the expectations of tomorrow’s American workers.
UAW leaders must therefore not reminisce about a bygone era but rather anticipate the evolving economic landscape. The true test of the UAW’s mettle will be its capacity to shape a future congruent with the aspirations of the next generation. Its leaders must prepare for tomorrow’s economy, not the one they used to know.
Joshua Rauh is a professor of finance at the Stanford Graduate School of Business and a senior fellow at the Hoover Institution. Seamus Duffy is a research analyst at the Hoover Institution.