GM/UAW Jobs Bank or Wall Street?

The infamous “Jobs Bank” was created in the 1980s to protect UAW members from job losses that would otherwise result from automation and robotics. An excellent summary is found here:

The Jobs Bank was created as GM made its plants more flexible and automated to compete with the Japanese. As GM became more efficient, it no longer needed as many workers to run a plant. The union demanded that it keep paying workers displaced by the new technology.

The UAW argued that if workers knew they had job security in spite of the advances in automation, they might embrace the new methods.

Of course, the UAW got its concessions and then some, while still fighting the plant closings. The Jobs Bank became little more than a welfare system for laid-off workers, who are still paid most of their wages and benefits.

Many of the Flint job-bankers, for example, worked in a plant that no longer exists: the huge Buick City factory that closed 10 years ago. Yet GM has paid them up to $85,000 a year. They also still enjoy health care coverage, while continuing to collect years of service toward their pensions.

Keep in mind that GM *agreed* to this. No presidential administration put a gun to their heads and forced this (as with the Rick Wagoner firing), the Jobs Bank was a negotiated benefit.

The IBD editorial says “blame the unions” but remember it takes two to agree to a contract, no matter how awful the deal is for the company. It was cheaper for GM to buy short-term labor peace… no wonder principle #1 of The Toyota Way involves making long-term decisions (it’s a hard principle to copy). Maybe GM should have suffered through a strike instead of agreeing to such bad contracts. Maybe that pattern of short-term bad thinking is the reason GM ended up on the path to ruin?

It’s ironic that the automation was used to compete with the Japanese when the average Toyota plant relied less on automation (investing in people) while GM and Roger Smith dreamed of the “lights out factory.” It’s too bad GM couldn’t choose to compete on Toyota’s terms. While copying the Toyota Production System on the shopfloor, GM’s automation strategy wasn’t enough to beat Toyota. As GM was finally on the brink, the Jobs Bank program was mercifully put to rest (after being mocked endlessly on this blog, see the “Jobs Bank” link at the bottom of this post).

So what dredges up thoughts of the Jobs Bank? I worked in a GM plant where Jobs Bankers played cards in the cafeteria (since management was rarely creative enough to find productive things for the workers to do, such as training or process improvement activities… after all, they were “just workers”).

This article in the WSJ made me think of the Jobs Bank:

The Big Bored: NYSE Traders Look for Diversions as Life Slows on Floor – WSJ.com

Just as automation reduced the number of jobs needed in a factory, Wall Street traders aren’t needed to physically execute as many trades these days. Computers and software do a lot of this now, with about 10% of trades being executed manually.

So, as much as the finance world LOVES layoffs, what did they do with unneeded traders? They apparently have a “Jobs Bank” type program (without a formal agreeement and without union involvement). They’ve cut 1,500 traders (from a starting point of 3,000), but it still seems like they’re overstaffed.

Traders, according to the WSJ piece, do the following during the day:

  • Play cards
  • Watch movies
  • Take long lunches
  • Have a beer (“or two”)
  • Work out
  • Read newspapers
  • Talk sports
  • Watch YouTube
  • Read books
  • Do crossword puzzles

So the same things that “lazy auto workers” would be criticized for are the exact same things happening among professionals. Amazing.

I can’t feel sorry for the traders, they should have seen this transition coming and should have saved some money. Auto workers, even at what seems like an eye-popping $80k a year, make less in a decade than some traders make in a year:

Traders have traditionally earned some combination of salary and bonuses. In recent months, some, like Mr. Henderson, say their incomes have evaporated as firms have cut back on pay. Annual incomes vary widely, with a few traders cracking $1 million in good years.

So what is management doing with them? Maybe because their pay is mostly commission, they don’t care if the traders are idle? What does it say for the work ethic of these traders if they sit on their asses instead of finding some productive use of their time? They want an easy million dollars each year?

One trader is at least trying to better himself, just as some auto workers did:

Some are taking advantage of the slowdown to better themselves. Gordon Charlop, a trader with Rosenblatt Securities, used to spend hours after trading closed doing paperwork or meeting with clients. Now he studies. He’s now close to earning a business degree from online-based Capella University that he started in 2004.

It’s a crazy world we’re living in…

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Mark Graban's passion is creating a better, safer, more cost effective healthcare system for patients and better workplaces for all. Mark is a consultant, author, and speaker in the "Lean healthcare" methodology. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. His most recent project is an eBook titled Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also the VP of Improvement & Innovation Services for the technology company KaiNexus.

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9 Comments on "GM/UAW Jobs Bank or Wall Street?"

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  1. Bob Graban says:

    I remember, in the mid 1970’s, a good friend who was in manufacturing at GM telling me that labor costs were an ever-increasing step function, especially in the days of double-digit inflation. Therefore, GM’s strategy was to automate to reduce the labor.

    So any time a company increases efficiency and reduces the need for labor, there is the question of whether to fire the workers or do something else. With all the years of poisoned relationships, the opportunity to do something else (creative) was thought to be limited. Hence the jobs bank seemed like the humane thing to do back then, and it bought (short-term) labor peace.

    But idle hands create a problem (but also an opportunity), whether on the plant floor or on the trading floor. What we’ve seen in 20-20 hindsight is that just throwing money at it doesn’t solve the problem.

  2. Matt McKnight says:

    Customer demand is not a steady flow…and sometime it’s a permanent downward slope, like the demand for newspapers. One way to deal with it is to just keep supply low, see the availability of the Nintendo Wii, which hasn’t actually hurt it too much since it is a unique product. The job bank prevents other industries and companies from making use of talent, so I see that as a major problem in keeping other complementary industries from developing that might be countercyclical to the auto industry. It’s really a terrible plan and the management that is no longer there and the union leadership that is no longer there got to enjoy the benefits, while the people there today feel the negative consequences.

  3. 1Man says:

    I agree with a post on http://www.ProudlyMadeInAmerica.com in that the problems at GM start at the top. GM management, including Rick Wagoner, did not want a strike because any protracted strike would affect profits and their bonuses.

    In the end people like Mr. Wagoner got hundreds of millions in bonuses for making bad company decisions. The UAW did their job in representing their members. GM management did not do their job in protecting the long term viability of GM, the thought about short term stock prices and bonuses.

  4. Rick Bohan says:

    Here was my thing with the job bank…let’s say you’re running a company and you’ve got a whole bunch of folks you’re paying even though you eliminated their jobs. Again, you’re already paying them and YOU CAN’T FIGURE OUT ANYTHING FOR THEM TO DO?!?!?

    You’re the one that should be fired.

  5. Matt McKnight says:

    Mr. Bohan- You miss the key point that the union contract stated that you couldn’t use them for any job you wanted- the work rules were very limited and inflexible. The UAW functioned as a government protected cartel or monopoly, preventing the negotiation of sane contracts.

  6. Mark Graban says:

    Matt — When I worked at a GM plant, we *were* able to use Jobs Bankers for some process improvement work. I utilized some for a project I did as an IE. It was possible… but mostly management didn’t care if people were sitting and doing nothing.

    That’s management’s fault, I always said.

  7. Anonymous says:

    Mark,

    There are two managment in the negotiations. One is GM the other is the UAW. Both had limited vision of the long term cost and consequences. As a GM Manager, it is never good to have people sittig around and doing nothing. It sends the wrong message to the organization. There were restrictions on what the people could do and as a company we should have negotiated better flexibility in what assignments the people could be assigned.

    You also talked about the lights out factory. In the late 1970’s, Toyota built a new factory which was highly automated. The US auto industry was criticized by the “manufacturing experts” for not having the same focus on automation. Toyota modified their direction to incorporate increased worker involvement.

    So the reasons for taking actions are not so simple but get intertwined.

  8. Anonymous says:

    I could be wrong, but my memory seems to tell me that the Jobs Bank originally was a management suggestion made to solve a sticking point during negotiation and avoid a strike. Many people seem to blame the union for high contractual costs when it seems to me that many of these costs evolved from management ideas to reduce labor costs under the GM bookkeeping system while avoiding work stoppages.

  9. Mark Graban says:

    Anon – I'm not blaming the union for the Jobs Bank. A contract requires two parties to sign it… I'd generally put more blame at GM's feet than the UAW's.

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