This Day in Labor History (UAW & GM Agree on 1st Cost-of-Living Wage Increases)

May 25, 1948—In a move that ended nearly two decades of labor-management warfare, the United Auto Workers (UAW) agreed on a contract with General Motors (GM), with the union gaining an "escalator clause" that increased wages in tandem with prices, while the automaker earned a longer period of labor peace.

The agreement helped inaugurate two decades after the war when Detroit ruled the world unchallenged as the king of automotive manufacturing. All the while, the car took ever more tenacious root in American culture—the car as status symbol, the car as phallic symbol, the car as vehicle of discovery, the car as badge of maturity. The age was summed up in the Bob Seger song "Making Thunderbirds," when, on the production line, the famous cars "were long and low and sleek and fast/They were all you ever heard."

Summed up this way, they seem like halcyon days. They weren't viewed that way at the time. To workers then, one set of problems had been solved—their right to negotiate, as embodied in the Wagner Act 13 years before—but a whole new set of uncertainties existed.

After 14 years of Democratic control, Capitol Hill had fallen to an unsympathetic new GOP leadership, which promptly passed the Taft-Hartley Act. Labor leaders were watching one method that Communists had used to seize power in the Soviet Union and Eastern Europe—seizing control of unions—and determined to drive them out of the leadership before the same thing could happen in the United States. And only the month before the pact, UAW President Walter Reuther was shot right in his own apartment by a sniper with a 10-gauge shotgun, in an attack that not only almost severed his right arm but nearly ended his life.

Looming larger than these uncertainties, however, was inflation, which ignited when wartime price controls were lifted. Real wages couldn't keep up, and Americans' standard of living plummeted. Reuther and the rest of the UAW leadership decided to act promptly on behalf of the 65,000 GM workers they represented.

It was part of Reuther's announced policy upon assuming command of the union two years before, when he called for "a labor movement whose philosophy demands that it fight for the welfare of the public at large." Over the next decade—actually, until his death in a plane crash in 1970—Reuther pressed and won concession after concession with the Big Three automakers, including guaranteed annual incomes, annual productivity raises, cost of living allowances, health insurance, and corporate-guaranteed pensions, in addition to good wages—collectively, a form of business-based welfare capital for workers.

What made it all possible for so long were consumer demand, pent up by nearly two years of the Great Depression followed by WWII; the weakened state of not only Germany and Japan, but even wartime partner Great Britain, after peace was declared; and productivity increases. And the good times kept rolling on, seemingly never to end.

But the seeds of the auto industry’s catastrophic decline may have been sown in the agreement hailed at the town as a historic tradeoff. So, at any rate, argued David Halberstam in The Fifties. Explaining why GM President Charles Wilson (later Dwight Eisenhower’s Secretary of Defense) signed off on the escalation clause, the historian noted: “In effect it made the union a junior partner of the corporation, [and] reflected the absolute confidence of a bedrock conservative who saw the economic pie so large that he wanted to forgo his ideological instincts in order to start carving it up as quickly as possible."

Planned obsolescence became the norm in the U.S. auto industry. So long as the American consumer had no alternative, the Big Three reaped all the profits they could handle -- $35 billion from 1947 to 1969. Auto industry business practices were looked to as a model for other U.S. industries, and two Big Three heads—Charles Wilson and Robert MacNamara—were even named to head the Defense Department. Likewise, unions won for workers unprecedented gains, and this success led them to stop prospecting for new workers and industries and simply help those workers part of their fold.

Within less than a decade, it all came apart, with oil-price shocks and foreign competition cutting into profits. We know the rest of the story of the mutual blindness of management and labor—involving, in the case of both, an inability to see beyond the immediate future, a lack of vision that has reduced both to the status of past tense in the power sweepstakes.