Farnam Street helps you make better decisions, innovate, and avoid stupidity.

With over 350,000 monthly readers and more than 88,000 subscribers to our popular weekly digest, we've become an online intellectual hub.

The Generational Incentive Structure @ Big Auto

On problem American car manufacturers are struggling with these days is how to provide health care and pension benefits to retired workers. The cost burdens are high and the willingness to accept cuts is low.

Big Auto is like a big family—literally. Many factory workers are third or forth generation workers and that has an enormous impact on incentives.

One reason the union is so adamant that there won’t be any rollbacks in health care is that the current membership is largely made up of the sons and daughters those retired workers and they aren’t about to let their parents get screwed over. If their parents don’t get the medicine they need immediately, they hear about it. If their parents can’t afford something, they hear about it.