George Will

     The bankruptcy of Delphi is another pebble -- a big pebble; Delphi has 185,000 employees worldwide, 33,000 of them unionized Americans -- in an accelerating avalanche of corporate decisions dismantling ``defined-benefits America." As a result, intergenerational strife, which has long been anticipated, may at last be at hand: Delphi proposes cutting the compensation -- pay and benefits -- of younger workers from $65 per hour to $20 or less, in order to fulfill the promise to retirees of a fixed percentage of their salaries.

     Robert ``Steve" Miller, Delphi's CEO, minces no words, telling The Wall Street Journal that defined benefit programs are imprudent anachronisms: ``The notion of having all your retirement eggs in one basket -- your employer -- is a concentration of risk that is simply inadvisable for anyone in today's fast-moving economy." He calculates that a competitive American industrial compensation cost is about $20 an hour. And to get to a total compensation cost of $20, including health care, retirement and workers' compensation ``which is high in the states we are in like New York, Ohio and Michigan," you have to have a basic hourly wage of $10. Pay at Delphi's plants in China is roughly $3 an hour.

     Miller bluntly says that the social contract written after 1945 is being -- must be -- repealed because, given globalization, unskilled manual labor cannot be paid $65 an hour, with the cost passed on to consumers. ``When you buy a Hyundai you get a satellite radio as your option, but if you buy a Chevrolet you get social welfare as an option. Long term, the customer is going to desert you if you try to price for your social-welfare costs."

     Herb Stein, the University of Chicago economist who served as chairman of President Nixon's Council of Economic Advisers, famously said: If something cannot go on forever, it won't. Delphi's resort to bankruptcy and GM's attempt, with the cooperation of UAW, to avoid, for now, doing that, suggest that America's welfare state -- its private sector as well as its public-sector components -- is reaching its Herb Stein Moment.


George Will

George F. Will is a 1976 Pulitzer Prize winner whose columns are syndicated in more than 400 magazines and newspapers worldwide.
 
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