Leading up to this year's so-called Stand Up Strike by the UAW, the Detroit Three and many analysts argued that boosting union autoworker wages and benefits significantly would hinder the companies' ability to compete against nonunion automakers with lower labor costs.

But on Thursday, in an address to union members, UAW President Shawn Fain used Toyota and its just-announced decision to raise wages for many of its U.S. workers to highlight the other side of that argument: that union gains might also push pay and benefits up at the nonunion competitors of Ford Motor Co., General Motors and Stellantis, owner of Jeep, Ram, Chrysler, Dodge and Fiat.

Fain called it the “UAW bump,” and noted that the Japanese automaker wasn't just being generous.

“Toyota isn’t giving out raises out of the goodness of their heart. Toyota is the largest and most profitable auto company in the world. They could have just as easily raised wages a month ago, or a year ago," Fain said. "They did it now because the company knows we’re coming for them. The company knows that Toyota workers are watching and, when the time comes, Toyota workers and all nonunion autoworkers are going to be ready to stand up.”

News media outlets, including the Wall Street Journal, reported that the automaker would be boosting wages by 9% and reducing the time it takes for workers to get to top wage. Toyota spokesman Scott Vazin confirmed a wage increase to the Free Press “for our hourly manufacturing, service parts operations and logistics team members,” effective Jan. 1.

In a statement, Chris Reynolds, executive vice president of corporate resources for Toyota Motor North America, said: “We value our employees and their contributions, and we show it by offering robust compensation packages that we continually review to ensure that we remain competitive within the automotive industry.”

The United Auto Workers union won wage increases of 25% over the life of the contracts in addition to numerous other improvements in its tentative agreements with the Detroit Three in the latest round of bargaining, which included a historic strike against all three companies. Those deals will need to be ratified by members before they can take effect.

The threat effect of unions

It’s too early to say whether Toyota’s move to boost wages so close on the heels of the UAW’s tentative deals is indicative of a trend, but the idea that union gains could benefit nonunion workers isn’t new. The concept is that nonunion companies may want to discourage their workers from unionizing, and one of the ways to do that, is to make things better for their own workers.

Henry Farber, economics professor emeritus at Princeton University, is an expert on the labor movement and unions' so-called threat effect.

“There's a lot of nonunion producers in the U.S. One of the things they can do … if they don't want unions is proactively improve the work wages and working conditions of their nonunion workers. And then the workers look at it and say, ‘Well, I'm already getting this from my employer. I don't really need the union.’ That's the idea, and that would translate into real benefits for the workers. No question,” he told the Free Press last week.

Farber said there’s a sense in which the current settlements, which are happening at a time of other big union wins by the Teamsters with UPS and Hollywood writers, could spill over to the nonunion sector and result in increased wages.

A 2003 paper by Lawrence Mishel and Matthew Walters of the liberal Economic Policy Institute titled “How Unions Help All Workers” found that “strong unions set a pay standard that nonunion employers follow. For example, a high school graduate whose workplace is not unionized but whose industry is 25% unionized is paid 5% more than similar workers in less unionized industries.” It also noted that “the impact of unions on total nonunion wages is almost as large as the impact on total union wages.”

Nelson Lichtenstein, a research professor in history and labor expert at the University of California, Santa Barbara, predicted that other automakers would raise wages somewhat in response to Detroit Three worker gains to stay competitive with higher wages at the union firms, which he described as a sort of anti-union organization insurance.

He said that when the unionized Detroit Three say they want to stay competitive with their nonunion competition, they’re banking on the UAW’s failure to organize those companies.

“There is much reason for that pessimism because the UAW has in fact failed to organize Toyota or Tesla for many years. However, the UAW has in the past been unable to take to the non-union workers any sort of real high wage, high benefit victory," Lichtenstein wrote in an email to the Free Press. "It looks likely it will now be able to do so, and if the union can unionize and raise labor costs at the competitors of the Big Three, well those executives should be cheering that on. Tesla, for example, would have to raise car prices thus making Ford and GM (electric vehicles) more competitive.”

Fain himself has talked about the union’s failure to provide a compelling reason for nonunion autoworkers to join the UAW in recent years and the need for the union to change that. In an interview before he become union president this year, Fain told the Free Press:

“We used to set the standard. We don’t set the standard anymore. When you go to Nissan or Toyota or Hyundai now, they look at us and they look at themselves. Our members hire in as temps, theirs hire in as temps. … They look at what we offer and what they get, and it’s the same thing, so where’s the incentive? We have to bargain better for our people.”

The new deals with the Detroit Three don’t just boost wages, they also restore items like cost-of-living allowances and eliminate some wage tiers, which the union calls divisive and which many workers have complained about. And they’ll mean big gains for current and future temporary workers, from starting pay to rolling over to permanent status.

Farber called the UAW agreements a win for the labor movement, which will also help in organizing down the road.

“For the first time in a long time, I'm cautiously optimistic about the prospects for increased unionization, which I think would be good for workers. It would be good for the economy, be good for society,” Farber said.

A changing tide?

Unionization in the United States has been at a low ebb for years, representing a fraction — 5%-6% — of private sector employers, Farber noted.

Shifting the unionization picture among the many nonunion auto companies in the South or at electric vehicle makers like Tesla won’t be easy, however, Farber said.

“I'm not really expecting Tesla to become organized very soon, partly because of the attitude of the owner … Elon Musk. He's not amenable as far as I can tell to unionization. And how hard he might fight that. But to the extent the workers can see real benefits to unionization, I think we can see some successful battles. It's going to be a slow, long process and it could reverse itself. It depends on how the economy goes. So it's too soon to really see much. But I'm saying the signs this year have been more favorable to unions than anything I've seen really in my career. I started working on this stuff in the early 1970s,” Farber said.

Count Steve Delie, the conservative Mackinac Center for Public Policy’s director of labor policy, as a skeptic on the spillover effect of wage gains for Detroit Three workers.

Delie, speaking before the Toyota announcement, said that he didn’t necessarily expect significant spillover impact from the UAW’s gains to nonunion operations, but if it were to happen, he would expect it to be in locations that are closer to states where the UAW has a bigger presence.

“At that point, you are competing between relatively similar workers in relatively similar climates in states that are close to each other. So Indiana and Ohio plants there may see some degree of spillover effect. I see much less of that for plants that are in far-flung portions of the country,” he said.

Delie also said he sees the history of big contracts tied to the Detroit Three more closely connected to a time when there was less competition in the industry, a time when U.S.-based automakers were much more dominant, and he sees the potential impact of higher labor costs as doing more to shift market share to potentially lower-priced competition.

Prior to the announcement of the tentative agreements, the Free Press noted the difference in hourly labor costs, including benefits and expenses, at nonunion plants operated by Tesla and foreign transplants, of $45 to $55 per hour, compared with an estimated $66 per hour at the Detroit Three.

The Detroit Three have been profitable in recent years, but Delie said he sees warning signs in their balance sheets. Companies like Ford and GM have been aggressive in announcing EV targets, but there have been losses there, too.

“So I think when you look at labor costs, it's not just a comparison between unionized firms and nonunionized firms. It's looking at, can we transition to a new product that the market is willing to buy and sell them at a price that people can afford? And I think the more you increase labor cost, the less likely that gets,” he said. “When you increase labor cost, either the price of the product goes up or you have to cut costs somewhere else.”

Trimming the balance sheet

The UAW has argued that labor costs have represented only a fraction of new vehicle prices and are not responsible for the dramatic rise in average transaction prices in recent years. The union has been quick to point out during this round of bargaining that the automakers have not hesitated to spend big in other areas, such as executive compensation and stock buybacks.

The focus on CEO pay, in particular, is an area that Dan Cornfield, professor of sociology at Vanderbilt University and a labor expert, said could make a difference for nonunion workers as they weigh their own situations. The public’s exposure to how much more auto company CEOs make than their workers is one reason why nonunion autoworkers might not be dissuaded from unionizing, Cornfield said.

“There's always been talk about it, but the other phenomenon is that, over time, the degree of income inequality in the United States actually has sharpened. And so people are now getting an update as to just how sharp it is,” he said.

Cornfield said that the general pattern in the post-World War II era has been for union gains through collective bargaining to translate to higher wages and benefits at nonunion locations. Cornfield said it’s important to note that this latest strike with the Detroit Three occurred at a time when many labor actions were happening elsewhere, but it’s also been important because of how much of an impact the auto industry has on the rest of the economy.

“What results from these bargaining sessions will presumably set new norms, not only about the wages and benefits generally,” but for other parts of the economy, too, he said. “It (will) also be an important signal in labor history about what the public thinks about the legitimacy of collective bargaining altogether, which has fallen on hard times until the last couple of years.”

Contact Eric D. Lawrence: elawrence@freepress.com. Become a subscriber.

This article originally appeared on Detroit Free Press: UAW gains in Detroit 3 deals could boost nonunion autoworkers, too