Does it bother you that the Prius is not Union made?

Calculating total compensation or total labour cost is a wonderful topic for writers of semi-fiction. Consider the following:

- three weeks vacation "costs" an employer 6% (2% per week of worker absence) so employers say that "increases" labour costs by 6%, but wait, there's more.

The employer then may add 6% more because it costs them to replace the worker who is on vacation. Now the worker on vacation may complain that the employer didn't replace them and the worker still had all of the three weeks' work to do when they returned. Never mind. The employer has now inflated reported labour costs by 12%.

Then the employer sends the worker to training for a week to learn about new equipment. Bingo, another 4% (2% + 2%) added to "labour costs".

So now labour costs have been inflated by 16%.

Then the employer pays its share of pension contributions when the employee retires and says it "cost" them $250,000. The employee doesn't understand, because his 50% contribution only cost $100,000.

Ah, but the employee contributed from every paycheque, saving toward pension. The employer (like the silly grasshopper in Aesop's fable) lived for the day and didn't put aside the pension contributions it was supposed to. Suddenly "labour costs" are again inflated.

I could go on, but most of you have probably stopped reading by now.

 

Smooth Operator, I don't doubt labor costs are inflated by the company when it comes time to negotiate, although your examples convince to varying degrees. The most egregious example I found in this regard was including overtime in the calc. That is clearly BS, but I don't know how much it adds to the total. I think not much given Detroit's excess inventory reports.

I did think about this a bit before writing my original post, but ignored it for two reasons: one, I guessed that a lot of this spin is industry standard and so tends to cancel out in compensation comparisons; and second, I do not have vacation leave, sick leave, or receive on-site training (keeping up to date is my responsibility), so from my POV, those things are most certainly extra compensation.

 

<div class='quotetop'>QUOTE(EricGo @ Jul 10 2006, 09:14 PM) [snapback]284286[/snapback]</div>

Overtime is a popular way to inflate stated labour costs. Overtime is typicaly not pensionable and does not attract additional costs for medical care, vacation, etc. So the quoted hourly rate can be inflated, but wage-dependent costs are not taken out of the equation.

Another one I enjoyed was when a child protection agency was being urged to increase the number of social workers. They argued a very large figure for the increased labour costs for hiring social workers. It turned out that they were adding to the social workers' "labour costs" the cost of hiring support staff for the social workers, more telephones, more office space, etc.

Fun with numbers.

 

<div class='quotetop'>QUOTE(Smooth Operator @ Jul 10 2006, 09:35 PM) [snapback]284298[/snapback]</div>

My wife had a similar discussion when she worked at a university; she argued that paying her premium overtime was cheaper, in the long run, than adding additional personnel. She noted that they failed to factor in the extra money required for vacation and other benefits paid to additional employees that were 'flat' costs to them if they paid her overtime instead.

In other words, no matter how many EXTRA hours she was paid, even at premium rates, her BENEFIT costs for vacation, pension, and medical remained the same. Adding a new employee would also mean an additional set of vacation, pension, and medical benefit costs. it took several weeks to convince management to just allow the overtime.