EconoPlay, June 1, 2006, Thursday

EconoPlay, June 1, 2006, Thursday

Labor Union Outlook:
Amid Economic Recovery, Unions See a Struggle Just to Maintain Lost Ground

* Management Gives On Wages But Seeks to Whittle Away Healthcare and Pensions
* First Steel, Then Airlines, Now Auto Parts Suppliers Seek Relief Through Bankruptcy
* Labor Braces for Next Year’s Talks with Detroit’s Troubled Automakers

By Gary Rosenberger

NEW YORK (EconoPlay) June 1 – Facing the most hostile political and business climate in decades, labor unions say they’re struggling just to preserve job security, pensions and health benefits at a time when an economic recovery should be helping them to recoup lost ground. While benefits continue to be whittled away at every turn, wage increases are up modestly from a year ago – the one obvious gain labor is deriving from a tightening labor pool and record corporate earnings, union officials say.
The big difference between this recovery and prior recoveries is how much this one is grounded on the manufacturing shift to low-cost countries and on the rewards garnered by corporate heads who seek to impress Wall Street with a tough anti-labor stance, they add. The roughest battles these days are happening in the courts, where a growing number of companies seek relief from business-friendly bankruptcy judges who have the power to rescind collective bargaining agreements.
This past week, for instance, Delta pilots approved a plan that reduces pay by 14% and makes other concessions on retirement and healthcare valued at $280 million. A similarly austere arrangement days earlier between Northwest Airlines and ground workers prompted Bobby DePace, president of District 143 of the IAM, to declare: “We are not recommending ratification because the terms are favorable, but because the alternative is worse.”
Labor’s biggest focus for now is on Delphi, another company in bankruptcy, where courts will determine what constitutes an acceptable evisceration of the UAW contract – setting a tone for negotiations next year between autoworkers and Detroit’s troubled Big Three.
Another test is on the political front, where it remains to be seen how last year’s splintering of the AFL-CIO will muffle union efforts to elect friendly Democrats at a time when Republicans are vulnerable.
Yet amid the gloom, union officials point to victories of varying degrees of significance in organizing low-wage service workers and telecommunications workers and what they regard as the heroic strike by New York City transit workers to preserve benefits for future generations. There is a smattering of contracts up for renewal this year, including Alcoa (that contract expired at midnight), tire workers (contracts begin to expire July 22), hotel and municipal workers. But none should have the kind of nationwide economic ramifications of the West Coast dockworkers lockout three years ago or next year’s automotive talks.

An Assault on the Blue-Collar Working Class

“What you’re seeing now is the continuation of an assault by employers on the blue-collar working class in this country,” said Rick Bank, director of the AFL-CIO’s Center for Collective Bargaining.
“They’re using massive outsourcing to hollow out the middle class. That includes white-collar service workers who thought they were safe – even high-wage workers are seeing their jobs outsourced to India and China,” Bank said.
“You see a continued erosion of healthcare benefits for workers as employers shift the increasing cost of providing healthcare to employees,” he added.
Most troubling for him is the emergence of high-deductible defined contribution plans where employers and employees put aside tax-deferred payments for “barebones policies that appeal to young, healthy workers who think nothing will happen to them.”
But none of the problems related to healthcare can be resolved at the bargaining table, Bank said. “The health care system is broken. The only answer is a national single pay system. When you look at $1,400 in every car going to healthcare, it’s a mystery to me why more people aren’t demanding it.”
The attack on defined pension benefit plans is another bone of contention. “Where employers used to terminate plans by pleading poverty, now even big healthy companies like Verizon and IBM terminate them in the name of competitiveness,” Bank said. “That raises a broad philosophical question when the middle class can no longer afford healthcare or have retirement security. It’s a pretty depressing picture.”
Unions, he said, are determined to make inroads by convincing workers they are better off with a union than without. “Unions are better at holding on to healthcare benefits. They’re getting nicked, but by and large unions have been successful in keeping healthcare plans intact. The rest of the workforce is in a catastrophic state when it comes to health benefits.”
He also takes umbrage at the spate of two-tier contracts that favor current workers at the expense of new hires, imperiling worker solidarity. A case in point is last June’s NYPD contract that cut rookie salaries by about $10,000 to $25,100 a year, the lowest starting salary for NYPD officers in more than 20 years. The drastic pay cut was designed to fund a 10.25% raise over two years for officers already on the payroll.
Another worrisome trend is the use of bankruptcy to restructure collective bargaining agreements. “It used to be that bankruptcy was a last resort. It had a stigma attached to it. Now it’s seen cynically as a proactive strategy to break promises to employees, terminate contracts and leave unions with no choice but to accept draconian cuts,” Bank said. “We saw it with steel, it then spread to airlines, now its auto parts. Hopefully it won’t spread to automotive.” He is somewhat hopeful that next year’s automotive talks won’t be held under the gaze of a bankruptcy judge, but they will be contentious. “If GM, Delphi and the UAW can work something out, if GM’s product revamping strategy starts working and the buyouts have their intended effect, there’s a decent chance GM will recover,” Bank said.

“Clearly there’s Going to Be Conflict”

But Bank sees the Delphi-UAW talks taking place under the rubric of bankruptcy protection as a kind of lead up to full-scale negotiations with automakers in 2007. “That will be huge. The UAW is a premier union with premier benefits. Wages and working conditions are superb and they set the standards for other unions. Clearly there’s going to be conflict,” he predicts.
In other talks, the United Steelworkers contract with Alcoa expired Wednesday night, and 9,000 workers have voted to authorize strikes if the parties don’t reach an agreement. Both sides have agreed to an orderly shutdown of refineries and smelters in the event of a strike. “The issues are healthcare and pensions. The rebound in metals prices should help steelworkers,” Bank said.
Another upcoming negotiation pits Goodyear, Bridgestone-Firestone, Michelin and Continental – all of whom have seen profit growth – against 70,000 unionized workers. Those contracts begin expiring July 22.
When asked about recent “victories,” Bank recounted last September’s machinist strike that compelled Boeing to withdraw proposed reductions in healthcare and pensions. “Boeing has been doing well and the machinists were determined to get a piece of the pie after the sacrifices they made when the company was not doing well.”
He also pointed to the Communications Workers of America, which got a reduction in healthcare premiums from Bell South and has been successful in organizing non-union wireless workers at Cingular.
Last summer’s labor split – when the SEIU, Teamsters, UNITE HERE, United Farm Workers and others formed their own group called Change to Win – has not been a factor on the bargaining front. “There’s not much difference in leverage because most collective bargaining is done at the local level,” Bank said.

Upward Wage Pressures Seen

By Bank’s reading of recently negotiated contracts, wages are up modestly from a year ago, a reflection of a tighter labor pool. But that comes at a cost. “Management gives you a wage increase but you have to increase your co-pay, deductibles and premiums,” he said. “Unions aren’t stupid. They look at the total package. In this climate, it’s tough for all workers. But union workers are doing better than most,” he added.
Gordon Pavy, collective bargaining coordinator, for the AFL-CIO sees evidence of management’s willingness to trade off higher wages for benefits reductions. Citing BNA data through May 22, contract settlements reported this year resulted in 3.2% first-year wage increases, up from 3.0% last year.
“Increased healthcare costs to employers actually have been abating recently, dipping below double digits. The reason is partly due to increased cost shifting to workers in traditional plans and an increase in the use of consumer driven health plans with high deductibles,” Pavy noted. With unemployment at 4.7% and economic activity strong, “employers are more likely to feel upward wage pressure to hire and retain good employees, and the slowdown in medical cost increases gives them the room to do that without too much pressure to increase prices,” he said. “However, energy cost increases are going to cut into employers’ ability to continue to keep prices down, so it isn't certain how long this trend in slightly higher wage settlements will continue,” Pavy added. “Existing agreements have out-year increases at about the same level as new contract first-year wage increases, so this will keep wage increases up for a while.”
Paul Krell, the UAW's director of communications, described no substantive discussions between the UAW and Delphi – in part because the focus is on bankruptcy court proceedings. “Clearly the UAW’s strong preference is for all parties to negotiate a settlement without having a judge issue a ruling. We did negotiate an attrition program and buyout package, which we see as a major step toward remedying the Delphi situation,” he said.
The broad issues with Delphi and the big auto makers are “the same as in the past, with healthcare, job security and retirement security at the top of the list,” he added. “The difference is that those issues have grown more complex over the past decade. It’s one of the reasons the UAW advocates national health insurance.”

Automakers Seen Unlikely To Resort to Bankruptcy

Krell doubts that Delphi’s bankruptcy will set the tone for Big Three talks next year. He notes that public statements from GM CEO Rick Waggoner and Ford CEO Bill Ford point against automakers using bankruptcy as a negotiating bludgeon. “When consumers put $18,000 into an automobile, they want the company to be there for them. Bankruptcy is not a viable business strategy because it would have a hideous impact on their customers,” he said.
Nevertheless, the UAW faces an uphill battle. Membership has declined in the past year as major UAW employers downsized or moved operations to China and India. By the union’s own count the monthly average membership was 598,000 in 2005, down from 620,000 in 2004. Wayne Ranick, spokesman for the steelworkers union, said the main issues in upcoming talks with tire giants Goodyear, Bridgestone-Firestone, BF Goodrich (now part of Michelin) and Continental are maintaining health plans, retirement benefits and job security. “With healthcare benefits rising 12 percent and prescription drug costs up 30 percent, healthcare is a real problem,” he said.
Those same issues apply to Alcoa, where the steelworkers union is negotiating a contract that expired on Wednesday night. In the case of both tires and aluminum, union is negotiating with growth industries that have strong revenues and an eye toward offshoring.
Goodyear has rebounded by focusing on the North American market and boasts a logistical advantage when it comes to supplying auto manufacturers with its premium tires. “But Bridgestone/Firestone is Tokyo-based and has less allegiance to the U.S. market. The same applies to Continental, which is German, and Michelin, which is French,” Ranick said.
Looking at the larger picture, Ranick feels the union split has had only a minor impact on negotiations. For him the real issue is how the split will affect elections in November. “That’s when we’ll have a better indication of the impact of the schism – whether organized labor can work in a coordinated manner to have an impact on elections, or whether it has weakened labor’s clout.”
Kate Bronfenbrenner, director of labor education research at Cornell University, believes the outlook for organized labor is better than is commonly portrayed. “It’s not that bad at all. The labor movement has taken some hits, but it is fighting back and making global connections like it never has before,” she said.
Nor does she see the current political climate as particularly disheartening from a labor standpoint. “The president’s popularity is waning on a whole host of issues, but one of the bigger issues is the disparity of wealth. People are taking a whole new look at tax policy, social justice, mine safety, retirement and health benefit, all the things at the core of the union movement,” she said.
“It is unionized workers who are the most protected. And it’s unions that are standing up for workers with low wages and no health services – and it is unions standing up for people who don’t have voices,” she said. “We’re seeing victories in food processing, hotels and telecommunications. Labor unions are neither down nor out. They’re just embattled.”

A Train of Labor Victories

Among recent labor victories she cites is UNITE HERE organizing low-wage service workers at Angelica Corp., which supplies laundry services for the healthcare industry, and the Communications Workers of America organizing workers at Cingular Wireless. “You would have thought these workers would be difficult to organize because it’s a highly mobile workforce and management constantly uses the threat of outsourcing to scare workers,” she said.
SEIU also got a win in organizing the building service industry in Houston, and she described a promising campaign for hotel workers led by UNITE HERE. “Rooms are more luxurious than ever, with tons of amenities, but it’s the same number of housekeepers keeping those rooms clean,” Bronfenbrenner said. “That’s more trips to the cart because of all those little liquor bottles that go in the fridge and those bath gels they have to keep track of. It is backbreaking work, and they’re not getting paid more, just working harder.”
On the down side she sees bankruptcy judges using expanded powers to gut collective bargaining agreements and treading on the rights of workers to organize. “Judges have been emboldened by Bush’s anti-union stance, especially after he invoked Taft-Hartley during the West Coast lockout,” she said.
Bronfenbrenner does not see recent job growth strengthening the hand of organized labor. “The good jobs with benefits are disappearing and they’re being replaced by low-wage contingent jobs where you can’t support a family. It’s not a tight labor market as much as it is a bifurcated labor market,” she said. “When people are losing good jobs, it makes them more insecure and less willing to take risks that challenge their employers.”
In March, New York City was the venue for the largest-ever gathering of international labor unions, which Bronfenbrenner described as an effort to establish global links in the same way that multinational corporations have been doing for decades. “Labor should have been working with unions in Mexico and India to build a global unionized workforce 20 years ago. It’s now starting to happen, maybe 20 years later than it should have, but it’s a significant development.”

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