The “Guaranteed Annual Wage”

The “Guaranteed Annual Wage”

“The guaranteed annual wage is not a stepping stone to full security, but a milepost in a social struggle that never ends because the ramifications of America’s economy are such that with each new round of the class struggle something is almost always gained but nothing is ever solved.”

When the new contract between the United Automobile Workers union and Ford was signed last spring, Walter Reuther said, “It is one of the most historic agreements that we have written in the twenty years of our union.” Shortly afterwards, General Motors also accepted a similar contract-and a flood of editorials and speeches broke loose in the country hailing or bemoaning the “Guaranteed Annual Wage” (GAW) . Much of this comment, it can be said without hesitation, was based on ignorance, both that which saw GAW as a long creep toward “creeping socialism” and that which saw GAW as proof that under our “dynamic democracy” the pressures of the class struggle had been removed.

The facts themselves warrant neither of these melodramatic conclusions. And it is to the facts that we propose to turn.


For Reuther the new agreements are important mainly because he sees them as a breakthrough toward the GAW. The June Automobile Worker, UAW’s official organ, shows a group of auto workers struggling to hoist a flag marked “Guaranteed Annual Wage,” their task still unfinished. Compared to the GAW program as it was spelled out in steward classes and in carloads of union literature, the guaranteed pay principle nailed down in the Ford, General Motors and other contracts proved to be a considerably watered-down affair.

Worked out by Ford’s Harvard Business School boys, the plan is officially titled “Unemployment Supplemental Pay” in the contract. To create a $55 million fund over a three-year period, Ford will earmark five cents for every hour worked by each employee. From this fund the company will supplement unemployment compensation benefits, beginning one week after the worker gets laid off, to reach a possible maximum of 65%, of his take-home pay for four weeks and 60% of his take-home pay from then on up to twenty-six weeks. Benefits will be paid out according to a highly complex system based on the amount of seniority and work credits accumulated by each worker. (Actually two funds will be set up: one for auto workers and one for defense workers because the latter are more susceptible to layoffs.) Liability for the Ford company ends if and when the $55 million fund falls below 4% and until such time as it reaches that figure again. For GM the fund is set at $150 million.

Workers with at least one year’s seniority will accumulate credits as follows: For each week (a week is defined as thirty-two work hour or more) worked between June 1, 1955 and May 31, 1957, a one-fourth credit; beginning June 1, 1957, for each week worked a one-half credit. When laid off, the worker uses up credit units for each week of supplemental unemployment pay, and when lie exhausts his credits his supplemental benefits end. The number of credits surrendered for a weekR...

Socialist thought provides us with an imaginative and moral horizon.

For insights and analysis from the longest-running democratic socialist magazine in the United States, sign up for our newsletter: