Labor contracts of large employers can significantly impact smaller related employers through a series of economic forces. One primary mechanism is the influence of wage and benefit standards set by major corporations within a specific industry. When large companies establish high standards in their labor contracts, it creates a benchmark that smaller employers often feel compelled to meet to attract and retain skilled and experienced workers.

Hence, ASE closely monitored the recent contract negotiations between the UAW and GM, Ford, and Stellantis.  As more is learned about the agreements, it is clear the UAW won historic gains for its members.  Gains that are likely to create a ripple effect in the labor market, leading to increased wages and across the industry. While this can be beneficial for workers, smaller employers may struggle to absorb the associated costs. This dynamic can be particularly challenging for small businesses with limited resources, potentially leading to financial strain or even closure if they cannot compete with the labor conditions set by larger counterparts.

ASE queried its members after the settlements to better understand the impact.  Of the 153 participants, slightly more than 10% of those surveyed indicated that the settlements would have a significant impact on their organization.  Those with direct business with GM, Ford, or Stellantis (i.e., part suppliers) appear to have greater concerns over the settlement with nearly 20% of those employers suggesting a significant impact.

What is at stake?  Most organizations (72%) anticipate increased labor costs in the form of increased wages or benefits.  Nearly 40% suggest that the settlements will lead to lower profitability.   Fewer than a third (29%) anticipate greater union organizing.

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We have already seen several large employers act in response to these contracts.  For example, Hyundai, Honda, and Toyota all appear to have reacted with wage increases of their own.  As these large employers take steps to avoid unionization it may represent the tide that lifts wages.  Total increase budgets for hourly staff, according to the ASE survey, are projected to average 4.5%.

ASE will closely monitor changes in wages as we begin our 2024 compensation survey cycle.  Data collection for that survey will begin in late January.  The survey is open to all companies.  Member participants will receive complimentary access to the results.

Sources: ASE Strike Impact Survey; https://apnews.com/article/hyundai-honda-toyota-wage-increase-united-auto-workers-1349059944c75d7372f53d1ee6cf5cb2