If you want to understand why the United Auto Workers union has evidently won its strikes against Detroit’s Big Three, it helps to return to the work of a 20th-century economist named Richard Lester.
Lester, a longtime Princeton professor, coined a phrase to describe wage negotiations between an employer and a worker: the “range of indeterminacy.” It captures the fact that wages are not a reflection simply of market forces, like a worker’s productivity or a company’s profits. In the real world, similar workers often earn different wages. Their wages fall somewhere in Lester’s range of indeterminacy.
Why? Most workers don’t know exactly how valuable their contributions are and therefore what their true market wage should be.
Company executives typically don’t know either, but the executives do have more information — about how much money different workers make and how productive each is. Employers also have more leverage. Companies employ many workers, and losing one of them is usually manageable. For most workers, by contrast, quitting over a pay dispute can create financial hardship.
For these reasons, workers’ pay often settles at the low end of the range of indeterminacy. In the relationship between an employer and an individual employee, the employer has more power. But there is an important adjective in that previous sentence: individual.
When employees band together, they can reduce the power imbalance. They can share information with one another and exert some leverage of their own on the bargaining process. A business that can afford to lose one worker over a pay dispute may not be able to lose dozens.
Of course, there is a term for a group of workers who come together to increase their bargaining power: a labor union.
Is Tesla next?
Over the past week, the Big Three — General Motors, Ford and Stellantis (which owns Chrysler) — have each agreed to wage increases that workers surely could not have received by asking nicely. The G.M. deal, announced yesterday, was the last of the three.
After adjusting for inflation, many workers seem set to receive roughly a 10 percent raise over the next four and a half years. By 2028, when the contract expires, many workers will make between $30 an hour and $42 an hour, or between $60,000 and $84,000 a year for full-time work.
The pay increases are the largest that autoworkers have received in decades, my colleagues Neal Boudette and Jack Ewing explain. The raises are also a reminder that organized labor has an unmatched record in reducing economic inequality.
A large academic study, using Gallup surveys covering millions of workers over decades, found that unionized workers typically made 10 percent to 20 percent more than similar non-unionized workers. The extra pay generally does not harm economic growth, the economists found. It instead often comes out of executive salaries and business profits, reducing inequality. Unions alter the division of the economic pie more than the pie’s size.
Or to put the idea in Lester’s terms, unions shift wages out of the low end of the range of indeterminacy.
To be clear, unions sometimes do win pay increases so large that wages exceed a reasonable range and hobble an employer. Unions can also block necessary changes in a company’s operations. Such overreach happened in parts of the auto industry during the 1970s, contributing to Detroit’s decline. Today, auto executives warn of a similar risk. The unions counter that the recent raises make up for years of wage stagnation — and that Detroit’s executives have received even larger raises recently.
I don’t pretend to know whether these wage increases will look reasonable in hindsight. It will depend partly on whether Chrysler, Ford and G.M. make more appealing vehicles in the years ahead than they did in the 1970s.
But it would be a mistake to assume that the executives are automatically correct that the wage increases are excessive. Wages make up less than 5 percent of the cost of many vehicles. And company executives in almost every industry often claim that wages are too high. They prefer it when wages are on the low end of the range of indeterminacy — partly because it leaves more money for the executives to take home.
A hat tip: I learned about Lester’s work from Lawrence Katz, a leading labor economist today. You can read The Times’s 1998 obituary of Lester.
TikTok famous: A trucker, a shepherd and a commercial fisherman have become celebrities on social media.
Bird brains: Scientists say they have evidence that roosters can recognize themselves in mirrors.
Lives Lived: Wanda Poltawska survived gruesome medical experiments in a Nazi concentration camp. She sought spiritual help from a Krakow priest who, decades later, became Pope John Paul II. She died at 101.
SPORTS
World Series: The Texas Rangers took a 2-1 lead over the Arizona Diamondbacks with a gutsy 3-1 road win.
N.F.L.: The Detroit Lions are 6-2, riding high after a 26-14 blowout win over the Las Vegas Raiders.
Sudden exit: Iowa informed the offensive coordinator Brian Ferentz, son of the team’s head coach, Kirk Ferentz, that he would not return next season. That ends an absurd saga for the Hawkeyes.
ARTS AND IDEAS
Now screaming: Looking for something spooky to watch tonight? Erik Piepenburg, a Times reporter and horror geek, lists 25 great scary movies you can stream, including:
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“Halloween” (1978), on Crackle. “When people ask me what my favorite horror movie is, John Carpenter’s groundbreaking shocker comes out on top,” Erik writes.
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“The Blair Witch Project” (1999), on Freevee. “The final minutes get my vote for the scariest horror movie ending.”
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“The Blob” (1958), on Max. “The era will look so foreign and the special effects so outdated that kids will find it to be just cartoony fun.”