Iain, I don’t think Robinson is talking about executive compensation; I think he is drawing a comparison between the concessions asked of the rank-and-file workers in each case. In the case of the automakers’ bailout, Senate Republicans asked the Detroit three and the UAW to junk their labor contracts and do whatever they needed to do to get compensation down to parity with the foreign automakers. The UAW refused, so the Democrats refused, so the Republicans blocked the bill.
Robinson is complaining that the Republicans did not demand that rank-and-file workers at the banks get similar treatment. This argument is so self-evidently ridiculous, I’m surprised Robinson tried to get away with it. Just one bank — Citigroup — laid off over 75,000 employees in the wake of the financial meltdown. That is the kind of adjustment that the Detroit three’s labor contracts don’t permit them to make. And that is sort of the whole point, isn’t it?
As Megan McArdle put it earlier this week:
Labor costs are not the issue at banks, or AIG; balance sheet impairment is. Labor costs are a much smaller portion of their financial burden than at an automaker. Cutting their compensation will not return the balance sheets to full strength.
However, in fact, workers in the banking industry are taking a massive hit. CEOs were forced to take huge paycuts, and if their bank is in trouble, they’ve already lost the greatest portion of their personal net wealth. The banks are firing huge numbers of people, and the ones who are left can count on their paychecks looking pretty anaemic this year. I know that many of you would like to see every single one of them have their paycheck reduced to that of a Nissan line worker, but it doesn’t work that way. The good people at those banks have better alternatives than being a Nissan line worker, and have usually invested substantial amounts of time and money in building human capital, rather than hitting the line after high school. If you cap their pay there, they will leave to pursue those other opportunities, leaving you a firm staffed with the rejects who can’t work elsewhere. Given that we are trying to save the banking industry, not destroy it, that’s not a good idea. A UAW worker, on the other hand, has alternatives that are generally much worse than the wages on a Nissan line.
So that’s why Republicans didn’t raise the issue of salary caps for stockbrokers, or whatever. Rank-and-file compensation just wasn’t an issue in that case. It isn’t an apples-to-apples comparison. And someone employed as a columnist for the Washington Post ought to be smart enough to figure that out.