Wage cuts aimed at increasing the competitiveness of U.S. auto companies may harm the economy by reducing workers’ disposable income, said Steven Rattner, the former leader of President Barack Obama’s auto task force.
Rattner, now chairman of the Willett Advisors LLC investment firm in New York, led the $63.4 billion bailout in 2009 of General Motors Corp. and Chrysler LLC, which he said would have shut down and fired their workers without government support.
“What I saw when I started to spend time in the auto industry is this incredible downward pressure on wages that comes from other countries being able to do things increasingly as well as we do at much, much lower wages,” Rattner said today at the Bloomberg Hedge Funds Summit in New York. “So today, General Motors workers are getting hired at half of what these old line workers were getting.”
U.S. economic growth will probably be limited in part because of wage reductions, he said.
Americans unexpectedly pared spending in October as superstorm Sandy depressed wages. The 0.2 percent decrease in purchases followed a 0.8 percent gain, Commerce Department figures showed in Washington last week.
Adjusted for inflation, the decline was 0.3 percent, the biggest in more than three years. Incomes were little changed as the biggest Atlantic storm to ever hit the U.S. shaved $18.2 billion in wages at an annual rate.