The UAW Deal with the Big Three Is a Big Deal

It’s a big win for labor, the economy, and Joe Biden

Photo: CNN via Getty Images

On Sunday, the United Auto Workers reached a tentative agreement with General Motors, the last of the Big Three automakers to hammer out a new contract with the union. The agreement still needs to be formally ratified by the union’s members, but assuming this occurs, it’s a big win for labor, for the economy, and for the Biden Administration.

For the labor movement, the deal represents the latest in a string of victories, where striking unions consistently obtained favorable terms and concessions from large corporations. Many economists and analysts view the deal as another sign of labor’s renaissance, which is reshaping the employment landscape of the country.

For the economy, the deal averts a crippling strike. The UAW had been rolling out strategic work stoppages at key parts and manufacturing plants and had begun aiming at the most popular brands of vehicles. The terms of the new deal will likely result in higher wages for factory workers across the board, including in nonunion facilities.

For the Biden Administration, which had staked its reputation on the issue, with Joe Biden even joining picketers on the line in Michigan, the new contract is a validation of “Bidenomics.” It demonstrates how government programs, from bills passed in his first term, incentivize investment in factories and workers right here in America.

Let’s look more closely at each of these wins today.

A summer of strikes and labor wins

You’re not alone if it sure feels like there has been more labor unrest this year than any other in recent memory. According to former Labor Secretary Robert Reich, over 450,000 workers have gone on strike this year, compared to two years ago where the number was less than one tenth of that. That’s a 900% increase.

It can feel dizzying, and the uncertainty no doubt added to a general sense of unease among consumers. Are UPS packages going to stop coming? Is my hospital going to remain open? Will we only see reruns and late night TV next year? Will car prices go sky high again due to low supply?

The good news is, labor pressed ambitiously, and corporate America caved after all of these strikes so far. The only remaining large strike is the AFTRA-SAG stoppage by actors, and it is likely, though not guaranteed, that an accord will be reached soon in light of the writers’ strike ending.

Reich notes that this year is a watershed in the labor movement, with high public approval for what the unions are doing:

For thirty years – from 1946 to the late 1970s – the American middle class expanded. That was largely because unions won increases in wages and benefits that roughly tracked gains in overall productivity…. 

But since the late 1970s, the wages of production workers have been nearly stagnant, adjusted for inflation. Most gains have gone to the top.

So far in 2023, there have been 22 major strikes, 17 of them at corporations.

Contracts negotiated by the UAW, Hollywood writers, UPS workers, Kaiser Permanente healthcare workers, and even university employees, among others, provide significant pay increases and more job security (writers even got some protections against AI).

Most Americans are solidly behind the workers. Polls show that the public supported autoworkers over the companies by large margins.

Confidence in big business is at its lowest point in decades while approval of labor unions is near its highest.

In the case of the UAW, the union won back rights that it had given away in the wake of the 2008 Great Recession, which nearly crushed automakers in the U.S. That contract had created a two-tier system of pay, with low wages for new employees and higher wages for senior ones. Over time, this discrepancy had the effect of keeping a growing number of newer or younger union workers down, while older, more established workers in the force benefitted. That created strong tensions and hard feelings within the union, as workers performing the exact same job were paid very differently.

The new contract eliminates that two-tier system, gives the union the right to strike over plant closures, reinstates cost of living adjustments, cuts the time it takes to reach top tier wages by more than half, and grants an immediate pay increase of 11 percent, with a 25 percent general wage increase over the life of the four-and-a-half year contract. 

A win for the economy

The prospect of a prolonged autoworkers’ strike threatened to derail economic growth and create additional inflationary pressures due to shortages of cars and parts. The strike, which officially lasted six weeks but hadn’t exploded into an across-the-board stoppage, now isn’t expected to have much impact on supply or pricing.

“The near-term impact of this strike will be relatively minor,” said Karl Brauer, executive analyst at iSeeCars.com, an online auto sales site.

U.S. automakers have been enjoying record profits without much of those gains going back to the workers in the plants. And while the wage increases are substantial, most analysts believe that the companies can absorb the additional costs without sacrificing market share. 

“Everybody had their pencils out, and I’m quite certain the deal wouldn’t have been signed if they weren’t confident they could remain competitive,” said Steve Patton, mobility sector leader for consulting firm EY.

Many are watching to see what impact the new contracts have upon wages paid at nonunion plants owned by competitors like Honda, Toyota and Tesla. There will be strong pressure on those companies to raise wages in order to retain and attract workers, even if they are not bound by union contracts. Meanwhile, the UAW sees an opportunity to increase organizing in nonunion facilities, now that it has notched such a significant win for its members.

A win for Joe Biden

Joe Biden is the most pro-union president in recent U.S. history, a point on which he prides himself. His support for the striking workers “can’t be overstated,” said Steve Smith, of the A.F.L.-C.I.O., which includes the UAW. “There’s a lot of upside here for Biden. The contracts set a new standard for the industry that clearly show the benefit of collective bargaining.”

“This historic contract is a testament to the power of unions and collective bargaining to build strong middle-class jobs while helping our most iconic American companies thrive,” Biden said in an official statement.

Biden had come under some pressure for supporting and investing in more electric vehicles made in the U.S. as part of his climate initiatives under the Inflation Reduction Act. Such cars require fewer workers to manufacture, and this could put pressure on the numbers within union ranks as E.V. manufacturing facilities proliferated. To offset this, and as part of the deal reached, General Motors brought its E.V. joint venture, Ultium, under the national contract, protecting the workers there under the auspices of the union.

“The legislative intent behind the industrial policy in the Inflation Reduction Act was an implicit deal,” explained Jason Walsh, executive director of the BlueGreen Alliance, which united labor and climate activists behind the Biden Administration’s initiatives. ”We as a nation are going to invest in the sectors of the economy that are important to the country and the planet in the long run, but in return we want the companies that receive those benefits to maximize returns to workers, communities and the environment.”

He added, “It highlights the lie peddled by Donald Trump and at times the Big Three that the E.V. transition means lower-quality jobs in a nonunion work force.”

Trump’s attitude toward the unions and electric vehicles could hardly have been more different than Biden’s. “For auto workers, Biden’s transition to electric is a transition to hell,” Trump said to a crowd of workers in Michigan. “A transition to unemployment.” Taking a shot at the UAW leadership and its president, Shawn Fain, Trump said, “Shawn, endorse Trump and you can take a nice vacation. Your leadership should endorse me and I will not say a bad thing about them again. They will have done their job. In fact, if they endorse me they will have the easiest labor leadership in the country. They just have to sit back and watch as our auto industry reinvents.”

Fain wasn’t buying it. “Every fiber of our union is being poured into fighting the billionaire class and an economy that enriches people like Donald Trump at the expense of workers,” he said. “We can’t keep electing billionaires and millionaires that don’t have any understanding what it is like to live paycheck to paycheck and struggle to get by and expecting them to solve the problems of the working class.”

Both Biden and Trump understand the importance of the moment. Michigan is a key swing state for the 2024 election, one that Trump took in 2016 but Biden took back in 2020. On this front, the significant wage increases for autoworkers, won after a hard-fought but successful strike, will be a campaign selling point for Biden, who can now count on the full organizational support of the largest union in the state.