Thursday, November 12, 2009

Charleston Daily Mail, November 11, 2009, Wednesday

Copyright 2009 Charleston Newspapers
Charleston Daily Mail (West Virginia)

November 11, 2009, Wednesday

HEADLINE: Many unsure unions can take over PEIA

BODY:
A plan by five of West Virginia's most powerful unions to take over the state Public Employees Insurance Agency faces political and practical obstacles.

While there is likely to be opposition from state lawmakers to giving unions control of the 200,000-member PEIA, a big question is whether or not the unions can do a better job than the state of controlling medical costs.

If they can't, union officials could find themselves in the perverse position of seeking to raise insurance rates and cut benefits for their members.

In the corporate world, unions have faced problems running what are called voluntary employee beneficiary associations. The so-called VEBAs for Caterpillar and Detroit Diesel both ran out of cash and went belly up.

"A VEBA may be a good idea, but it's not a panacea," said David B. Lipsky, a professor of industrial and labor relations at Cornell University. "It's not like the union has some magic dust it can use that management doesn't have."


The five unions suggesting a takeover of PEIA are the American Federation of Teachers, West Virginia School Service Personnel Association, United Mine Workers of America, Communication Workers of America, and American Federation of State, County and Municipal Employees.

Aon, a Chicago-based consultant hired by the group, suggested in a memo to Gov. Joe Manchin that the unions take over the several billion-dollar health care liability the state faces if the state would pledge to make hefty annual contributions to a union-managed trust fund.

It also suggested that unions should essentially replace the finance board that oversees PEIA.

Investment risk would be fully transferred to the unions, which "would have greater control over benefit plan structure, coverage levels and associated plan expenses."

While there are differences between a union takeover of a company health plan and a takeover of state-run health plan, the risks faced by the unions in both cases are similar.

"I think the union leaders are fully aware of the risk they are assuming by advancing this proposal," said John Ab-raham, director of AFT Benefits, the national group that helps local AFT chapters negotiate health benefits. "I don't think they've advanced this proposal by a rush to judgment."

But one question is whether the unions could do much differently than the current PEIA finance board. That board's membership is defined by state statute.

For instance, the unions would almost certainly have to employ an expert third-party administrator to run the agency. Right now, the state uses Wells Fargo, which processes claims for PEIA.

The unions can't do without such a company, perhaps even the same company, said Terry Rose, the director of West Virginia University's insurance and financial services center.

"The unions are certainly not in a position to do this without outside help, and I don't know that they'll get better outside help," Rose said.

Another way to potentially improve PEIA's finances would be to do a better job of investing money. That, too, could be hard, said Lipsky.

Investments are a key concern because medical inflation is rising faster than normal inflation. That means even good investors are struggling to catch up to rising medical costs.

Lipsky said financial expertise is clearly not going to come from inside the union, so the unions would be seeking help from the same pool of financial consults the state has access to.


"So the question is, 'Can you buy better expertise than I can?' " Lipsky said.


At the heart of the union's proposed takeover of PEIA is an accounting dispute.

The consultant hired by the unions says the state is overestimating by nearly $4 billion the liability it faces to cover future retiree health care costs.

The calculation dispute is over non-pension benefits promised to teachers and other public employees once they retire. These so-called "other post-employment benefits," also known as OPEB, reflect mostly health care and life insur-ance.

The unions say those benefits will cost the state $4 billion, which is far less than the $8 billion the state estimate.

The unions and the state differ most on the projected rate of medical inflation. The unions say that the rate will be about half what the state says it will be and that the state is using the higher number to justify cuts to employee benefits.

"Nobody's checking these numbers to see if these numbers are accurate," said Josh Sword, an AFT-WV lobbyist who sits on the current PEIA finance board.

Using its lower estimate of the projected deficit, the unions propose that the state pitch in $150 million in the first year to reduce the figure. The state would add 2 percent to the figure each year until the liability was eliminated in 20 years. In the 20th year, the debt payment would be $218 million.

That's in addition to what the state already spends on its pay-as-you-go method of funding health care coverage for public employees. The unions' figures put the state's total contributions at $359 million in the first year and rising to more than $1.9 billion by the 20th year.

The union does not suggest where the state would find the additional money for PEIA, especially as it braces for a budget crunch caused by the recession that is projected to last for at least a couple of years.

This scenario would have the deficit eliminated a decade sooner than state officials have discussed.

But WVU's Rose worries that just refiguring the numbers could be a problem.

"Just going in there and making adjustments to the actuaries' original assumptions, that's a dangerous thing," he said.

Rose also said he's "perplexed" about why the unions really want the responsibility.

AFT's Abraham said the goal is to do the right thing for the state and for retirees and future retirees.

"The biggest difference, I think, for the state would be for the state to remove the liability off the state's books," he said. "My guess is their bond rating would probably go up as a result of removing the liability."

In the past several years, Ford, General Motors and Chrysler have handed over about $60 billion in insurance liabilities to the United Auto Workers.

The unions perhaps saw it as a way to have better say over insurance benefits, but the companies also saw it as a way to clear their books.

In the end, if the underlying economic conditions are a problem, there might not be anything unions can do about it.

"Is that really an improvement?" Lispky said of the auto industry's decision to move insurance liability off their books.

"It looks like an improvement. In point of case of the auto companies, their success or failure depends on can they produce cars that people want to buy."

Also, there's nothing to prevent the unions - despite the risk they say they will assume - from going back to lobby the state Legislature for more money.

While some hope U.S. Congress' overhaul of the nation's health care system will drive down medical costs, it might not.

"If that turned out to be the case, these union people would really be in the soup," Rose said.
Contact writer Ry Rivard at ry. rivard@dailymail.com or 304-348-1796.

LOAD-DATE: November 11, 2009

The Sacramento Press, November 9, 2009, Monday

The Sacramento Press

November 9, 2009, Monday

The Sacramento Press

Sacramento County and Blue Diamond: Management tactics when employees organize

Efforts to form labor unions in Sacramento shed light on what public- and private-sector workers face in organizing across the United States.

The Sacramento County Management Association is made up of more than one-third of all nonunion managers in the county. To gauge their interest in forming a union, the board of SCMA has given 1,172 managers the option to vote on forming a union by signing cards indicating their choice. The process began Sept. 26. Approximately 300 cards must be collected by mid-December to hold a vote to choose a union in early 2010.

Unrepresented Sacramento County managers oversee employees who deliver services in airports, courts, health, parks and public works, among other agencies.

Sue Elliott, chief of administrative services for the Sacramento County district attorney’s office, is president of the association. What set the SCMA vote process into motion was a straw poll at a spring luncheon indicating that 46 percent of those attending were interested in forming a union, she said.

“This decision is predicated upon the fact that the county has called into question management benefits that were given in lieu of pay raises over the years,” she said. Those benefits range from cost-of-living-adjustments to sick and vacation days and 401(k) retirement plans.

Employees who belong to a union have collective-bargaining agreements requiring that any changes to their contracts be negotiated. So, in Sacramento County, nonunion managers are at higher risk of job, wage and benefit cuts than their union counterparts.

County executive Terry Schutten declined to comment on SCMA’s move. Steve Keil, the county’s director of labor relations, said Sacramento County has "no position on SCMA exercising its rights under the law.”

The Blue Diamond Growers almond processing plant in Sacramento offers a glimpse of what can happen when private-sector workers seek representation.

According to Blue Diamond employee, Frank Garcia, after the International Longshore and Warehouse Union Local 17 began to organize workers five years ago, Blue Diamond hired a firm to make employees fearful of voting to join the union. To date, the plant has no unions.

Professor Kate Bronfenbrenner is director of labor education research at Cornell University’s School of Industrial and Labor Relations. Her research shows that from 1999 and to 2003, private employers used nearly five times the number of anti-union tactics as public employers.

"In 48 percent of public-sector campaigns,” she notes in her 2009 report “No Holds Barred: The Intensification of Employer Opposition to Organizing,” the employer did not campaign at all —no letters, no leaflets, and no meetings."

The Blue Diamond campaign appears to match U.S. workplace trends. American employers more than doubled their use of anti-union tactics against employees attempting to form unions between 1999 and 2003, according to Bronfenbrenner. In “No Holds Barred,” she analyzed a random sample of 1,004 NLRB union election campaigns, and conducted in-depth surveys with head union organizers in 562 of the campaigns.

Sixty-three percent of employers were reported to use mandatory one-on-one, anti-union meetings with employees. Further, 57 percent of employers threatened to close the workplace, 47 percent of employers issued threats to slash benefits and wages, and 34 percent of employers fired workers during union organizing drives.

"Both the intensity and changing character of employer behavior, as well as the fundamental flaws in the NLRB process,” Bronfenbrenner writes, “have left us with a system where workers who want to organize cannot exercise that right without fear, threats, harassment, and/or retribution."

Under the NLRB election process, 276,353 workers organized in 1970. By 1999, the year that Bronfenbrenner's latest study begins, 106,699 workers had won union representation through elections. In 2003, 71,427 workers organized. According to her findings, the decline is because of employer behavior such as threats, interrogation, promises, surveillance and retaliation for union activity. Bronfenbrenner confirmed every unfair labor practice mentioned by survey respondents through Freedom of Information Act requests to the NLRB.

She questions how much freedom American workers have regarding unionization.

"[E]mployers have control of the communication process. In today's organizing climate they take full advantage of that opportunity to communicate with their employees through a steady stream of letters, leaflets, e-mails, digital electronic media, individual one-on-one meetings with supervisors, and mandatory captive-audience meetings with top management during work time."

In her view, private employers try to neutralize union campaigns, emphasizing "interrogation and surveillance to identify supporters." If that fails, Bronfenbrenner says, "threats and harassment" follow "to try to dissuade workers from supporting the unions." She found that the union election win-rate for public-sector employees is nearly double that of private-sector workers.

Sacramento County's Keil said that if a majority (50 percent plus one vote) of nonunion managers vote for representation, the county executive’s office would begin to meet with the SCMA. One item for discussion would be job titles, or classes, under a collective bargaining agreement between the new union and the county, he said.

Seth Sandronsky lives and writes in Sacramento. Contact ssandronsky@yahoo.com

Chicago Tribune, November 9, 2009, Monday

Copyright 2009 Chicago Tribune Company

Chicago Tribune

November 9, 2009, Monday

Chicagoland Final Edition

HEADLINE: Is there a vaccine for the Web?

BYLINE: McClatchy/Tribune news

BODY:

Like many big organizations, Comcast Corp. is taking precautions to halt the spread of H1N1 flu. For one, it has distributed bottles of hand sanitizer to employees.

But Comcast, the nation's largest residential Internet provider, with 14 million high-speed subscribers, may have a bigger problem if the flu leads to rampant absenteeism by students and workers. All those people may be online at home simultaneously, a recent government report warned, causing an Internet meltdown.

Homebound workers and ailing children could overload the Internet with video game downloads, Web surfing, online shopping and Webcast viewing. Neighborhood telecommunication nodes that act as traffic cops for the Internet could be overwhelmed with data.

A Government Accountability Office report released late last month said the Internet could slow dramatically if worker absenteeism reached 40 percent -- a reasonable speculation for a severe flu outbreak.

John Hausknecht, assistant professor of human resources at Cornell University, said the 40 percent estimate was five to 10 times the typical absentee rate. With many more users home with the flu, the Internet could become so congested that functions critical to the economy, such as online banking, might grind to a halt. And the government could have trouble disseminating information about the pandemic itself over the Internet.

"Concerns exist that a more severe pandemic outbreak than (April) 2009's could cause large numbers of people staying home to increase their Internet use and overwhelm Internet providers' network capacities," the report said. It notes that in an emergency, authorities could seek to shut down video-sharing Web sites to ease congestion.

The Buffalo News, November 4, 2009, Wednesday

The Buffalo News

November 4, 2009, Wednesday

The Buffalo News

After bankruptcy slog, Delphi regains traction
Reacquired by GM, Lockport plant feels relief, optimism as it re-emerges

By Matt Glynn

For employees of Delphi’s Lockport manufacturing plant, the last four years were dominated by the company’s bankruptcy case.

That changed a month ago, when Delphi finally emerged from Chapter 11 protection and General Motors reacquired the Lockport plant.

To Pat Curtis, manager of the Lockport plant, the switch to GM was more than symbolic for the 1,400 hourly and salaried employees. The workers felt “a lot of anxiety” during Delphi’s protracted bankruptcy, he said, and there now is a sense of relief.

“There’s optimism. I think the morale of the team has improved,” Curtis said in a Tuesday conference call about the Lockport plant’s transition.

The Upper Mountain Road site was placed into a new subsidiary formed by the automaker, GM Components Holdings LLC. Delphi Holdings LLP, as it is known post-bankruptcy, continues to run a technical center with 200 employees at the Lockport complex in space leased from GM.

The Lockport manufacturing site, which makes thermal products such as climate-control systems, has proved a survivor. It was one of the few plants that Delphi chose to keep while it was selling off or closing others. GM then agreed to reacquire the operation, saying that what it makes is vital to the automaker’s business. The plant had left the GM corporate family when the Delphi parts division was spun off a decade ago.

GM’s newly created subsidiary contains the Lockport parts plant and three other sites in Rochester; Wyoming, Mich.; and Kokomo, Ind. The automaker formed a separate subsidiary for the steering business that it took back from Delphi. GM said Tuesday that it will use $1.1 billion of its government aid to acquire those businesses.

While Delphi slogged through bankruptcy for years, GM has had its own struggles, coping with a dismal U. S. car market and going through a bankruptcy filing earlier this year.

But Bill Shaw, GM’s general manager of GM Components Holdings, said the Lockport plant can grow under its new affiliation by supplying products for popular vehicles and making itself more competitive to attract more business.

The plant needs to pinpoint ways to reduce costs, Shaw said. “[Curtis] and his team have already done a lot of homework on where they need to take waste out of the operations,” he said.

GM will implement its Global Manufacturing System at the newly acquired operations, Shaw said. The system emphasizes areas such as employee involvement, quality expectations and faster delivery times.

Shaw is familiar with the region and its connection to the auto industry. He held leadership roles at the company’s plants in the Town of Tonawanda and St. Catharines, Ont., and was previously manufacturing manager for the engine sector of GM Powertrain.

Curtis, who has served as the Lockport plant manager for a year and a half, said the site provides a lot of product volume for the Buick LaCrosse, a luxury sport sedan, and will also supply a lot for the Chevrolet Cruze, a compact car set to begin production next summer in Lordstown, Ohio.

Art Wheaton, director of labor studies for Cornell University’s School of Industrial and Labor Relations in Buffalo, said the Lockport plant’s shift back to GM was good news for the operation.

“I don’t think the long-term future for Delphi manufacturing in the United States is very good at all,” Wheaton said, noting that most of its manufacturing is now in other countries.

Wheaton said GM has a keen interest in ensuring that the air-conditioning systems in its vehicles are top-notch, both for energy consumption and the comfort of the vehicle occupants. Riders will be affected if the systems are not up to par, so the Lockport plant is well-positioned to address the automaker’s needs, he said.

Curtis said that only 1.6 million of the Lockport complex’s 2.8 million square feet are in use. The company has no plans to sell the unused space, which he said is kept in “cool storage” should the company need to expand into more space.

mglynn@buffnews.com

The Seattle Times, November 1, 2009, Sunday

The Seattle Times

November 1, 2009, Sunday

The Seattle Times

S.C. decision transforms Boeing's relationship with Washington, labor unions

By Dominic Gates

Seattle Times staff reporter

Boeing's decision to build a new airplane-assembly plant in Charleston, S.C., will change the shape of the company and dramatically alter how both the state of Washington and the Machinists union approach Boeing.

Washington state must accept a future where it competes for every new Boeing airplane program, with low-wage South Carolina as a certain rival.

The Machinists must accept that if Boeing doesn't like their demands, it can direct future work to its nonunion Charleston plants.

A defining moment could come about 2015, when Boeing will choose where to build the successor plane to either the Renton-built 737 or the Everett-built 777.

"There was a lot of sniping from Washington to the effect that 'it may be cheaper in South Carolina, but we build it better,' " said John Krug, an executive at Development Advisors, a corporate site-selection firm based in North Carolina. "The company didn't buy that argument.

"Boeing has clearly illustrated what its preference is," Krug said. "They believe they can manufacture in South Carolina and they can do it cost effectively."

Another crucial point will come even sooner, in 2012 — soon after Charleston is due to roll out its first Dreamliners — when the International Association of Machinists (IAM) and the white-collar union at Boeing, the Society of Professional Engineering Employees in Aerospace (SPEEA), will negotiate their next contracts.

That's when the unions must face their new reality, said Scott Hamilton, an Issaquah-based aviation-industry analyst.

"Clearly, Boeing is going to be looking at the 2012 SPEEA and IAM contracts as a benchmark for deciding where the successor airplanes will be built," Hamilton said. "That will be crossing the Rubicon for labor and for Boeing."

The IAM leadership and many of its members are angry now at the abject failure of talks with management, in which they had hoped to save the second 787 assembly line for Everett by agreeing conditionally to lay down their most potent weapon, the ability to strike.

Yet Adam Pilarski, an industry expert with aviation-consulting firm Avitas, believes that weapon may now be almost unusable in 2012, given the need to compete with Charleston for new planes.

"If labor has a strike, then it's over," said Pilarski. "A strike would be terminal."

The second line slated for Charleston will be modest compared with Boeing's Everett operation.

But South Carolina's hope — and Washington's fear — is that Boeing Charleston will grow substantially.

Doug Woodward, a University of South Carolina economist who expects to begin an economic-impact study for Boeing soon, said that when BMW opened an auto-manufacturing facility in South Carolina 15 years ago, it started relatively small. After major expansions and a complete change of product line, it now employs more than 5,000 workers.

"It's evolved and grown," Woodward said. "It could be the same with Boeing. What we see now is quite different from what they may make 20 years from now."

Officials of the Charleston County Regional Development Alliance plan trips to Seattle soon to recruit suppliers to set up facilities near the new Boeing plant, said Leighton Lord, managing partner of Nexsen Pruet, a law firm Boeing hired to help negotiate its South Carolina incentive package.

That package is valued at about $450 million — made up of $170 million in upfront grants, plus tax breaks.

Risky strategy

Art Wheaton, who teaches labor and industrial relations to union officials and others at Cornell University, said Boeing's strategy is risky. He points to the product-quality problems Nissan had when it opened a factory in Canton, Miss., with an inexperienced work force.

"It hurt Nissan badly," Wheaton said.

Nevertheless, he said, Boeing's strategy is a familiar one from the steel and auto industries, and it's a threat to the IAM's power.

"The union has to prove that it's worth something of value," he said, by continually delivering better quality, productivity and reliability with lower employee turnover.

IAM District 751 President Tom Wroblewski angrily denounced Boeing's negotiating tactics after the talks failed, saying the discussions were only a "smoke screen" for the company's intention to move anyway.

Yet looking forward, he strove to be more positive.

"We still have 25,000 members here building airplanes. Their future depends on us maintaining their jobs here," Wroblewski said. "We need to maintain a relationship with the company. That's what we'll do."

Rich Michalski, the IAM's general vice president and chief negotiator in the failed talks, said the union won't trust the company again, but will move on.

"We're resilient people," Michalski said. "We're going to build the best airplanes. We're going to deliver the quality."

Come 2012, Charleston may have rolled out a few Dreamliners, but Everett should be in full production. Because a strike then would be crippling, the IAM will be potentially powerful again but also possibly restrained by the desire to win the next airplane.

How does Michalski see the contract negotiations going? "We'll talk to them in three years," he said.

In the meantime, politicians and economic-development officials in Washington must regroup and work out a strategy to compete against South Carolina and other potential rivals.

Snohomish County Executive Aaron Reardon said the choice of Charleston this past week should not have come as a surprise.

He listed a series of pointers to Boeing's shift out of Washington, beginning with the merger with McDonnell Douglas in 1997, the headquarters move to Chicago in 2001, and the competition for the first 787 line in 2003.

"It's not the Boeing Company we all knew, homegrown in Washington state," Reardon said.

"I view them as a very aggressive, very competitive, publicly traded corporation who are focused on meeting their stockholders' needs above all else."

Nonetheless, Reardon said, Boeing jobs "are the backbone of the middle class in my county."

To protect those jobs in the years ahead, the state's elected officials should move to reduce business costs, work to improve labor-management relations and promote work-force training, he said.

"It comes down to investments," Reardon said. "What investments are we as a state ready to make?"

Regarding incentives, he said Washington should structure them as it did in 2003 to win the initial 787 assembly line — tax breaks on new investments, as well as funds for education and training.

John Monroe, a former Boeing executive consulting for the Snohomish County Economic Development Council, said Washington needs to be aggressive.

He recommends the state extend its wide-ranging tax breaks for commercial-airplane manufacturing to cover production of unmanned aerial vehicles, space systems and military and defense products — all of which would benefit Boeing.

"Washington is no longer the incumbent; we are the challenger," Monroe said.

Steve Mullin, president of the Washington Roundtable, an organization of local business CEOs, agrees.

"We would be well advised to consider ourselves the underdog and plan accordingly," Mullin said.

Analyst Pilarski said one key factor in determining where Boeing builds its next airplane will be how the company's Charleston experiment performs between now and 2015.

"If things are splendid in Charleston, with no unions, no absenteeism, low turnover and super productivity, then there's no chance for Washington," he said. "But don't write the obituary yet."

Not nearly gone

Most of Boeing's commercial-airplane operations will still be here for years to come, whatever the company decides about assembling its next airplane.

And because Boeing's design engineers are in Washington, this is the place where the program will be headquartered.

Boeing had about 15,000 engineering and technical staff in the Puget Sound region at the end of 2007, according to the latest available state data.

That cadre of intellectual capital couldn't be relocated or re-created elsewhere on short notice.

So while portions of the design work on the next airplane may be outsourced, it must largely be designed here.

And even if Boeing had a complete pullout strategy for its manufacturing, it would be very slow.

The 777 and 737 programs will run well into the 2020s and beyond.

If Boeing wins the contract for the Air Force tanker, the plane will be built in Everett, bringing tens of billions of dollars of work.

Alex Pietsch, director of Renton's Department of Community and Economic Development, has had to plan for the prospect of Boeing leaving for years.

Early in this decade, Boeing dramatically shrank its footprint at the 737 assembly plant on the south end of Lake Washington.

Renton rezoned the land in 2003 and drew up plans for condominiums, hotels and retail stores.

"If and when Boeing were to vacate the property, the city is ready to create a new future," Pietsch said.

Yet Boeing's presence in Renton keeps getting extended: The date for delivering a jet replacing the 737 has been pushed out until after 2020, the company will build a 737-based anti-submarine plane in Renton even beyond that, and Pietsch said Boeing is negotiating to extend its lease at the Renton airport for more than two decades.

Even as Washington warily watches Boeing's growth in Charleston, the vast majority of the company's commercial-airplane infrastructure remains in Washington, says Ed McCallum, senior partner in the South Carolina site-selection firm McCallum Sweeney, which advised Boeing on its 2003 search for the first 787 assembly line.

"You've got a chance to keep the rest of it," McCallum said. The Charleston selection, he said, is "a wake-up call."

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

Seattle Times researcher Gene Balk contributed to this report.

Governing Magazine, November 2009

Copyright 2009 Congressional Quarterly, Inc. DBA Governing Magazine

Governing Magazine

November 2009

HEADLINE: CAN HIGHER ED CONTROL ITS COSTS?

BYLINE: Josh Goodman

HIGHLIGHT:

Tuition can't continue to rise the way it has.

BODY:

At Virginia Tech, freshmen learn mathematics in a 60,000-square-foot box of a building that used to be Rose's discount department store. It's called the Math Emporium now, and it has 537 computers. Nearly 5,000 students take math there each semester, and 95 percent of Virginia Tech undergrads take a course there at some point in their college careers. But what the students do at the Emporium doesn't likely resemble any class you've ever seen.

For one thing, they're taking many different courses: algebra, geometry, calculus, sitting side-by-side but following the lessons their individual computers are teaching. The students show up when they want and leave when they want. Instructors roam the warehouse-like space looking for those who have placed red cups on their computers--the signal for help.

Some students complain about the Math Emporium. Some parents do, too. Nonetheless, Virginia Tech officials strongly believe that students are learning math better than they did when they sat in lecture halls watching professors scribble on chalkboards. "The time a student learns mathematics," says Mike Williams, the professor who designed the Emporium a dozen years ago, "is when he does it, pencil in hand, using his own brain cells to find the answer." Or, in today's world, sitting at a keyboard.

The Emporium has another crucial benefit, though: It saves the state university a fair amount of money. High-priced faculty play a reduced role in the operation. Students learn mostly from graduate students and even some upperclass undergraduate instructors--and, of course, from the computers.

This is a crucial time for innovations such as the one at Virginia Tech. Since the 1980s, tuition at colleges and universities--both public and private--has increased far faster than the rate of inflation. Unless the trend changes, a college degree will be out of reach for an increasing number of young people. The challenge for colleges is to keep costs in check so that tuition doesn't have to rise, while somehow maintaining the quality of instruction.

If you think that challenge sounds like another one the nation is stuck with at the moment, you're right. We've spent most of the past year arguing about how to control the cost of health care. But the problems of higher education are, in an odd way, analogous. Costs are spiraling out of control, demands keep increasing, and governments lack the resources to pay for them. Many of the questions Americans have been asking about medical care have their counterparts in the academic world.

For example: Why do students spend so much time listening to professors lecture? Why does a standard college education last four years? Why do schools with low graduation rates keep getting so much state money? As the resource gap increases, the questions are becoming more insistent. And like hospitals and HMOs, colleges and universities are looking at how to do more with less.

The stakes are high. If the efforts fail, state lawmakers will face a painful choice between committing more money to higher education or allowing America's public colleges and universities--and America's economy--to suffer.

If there's one industry in this country that might seem allergic to change, it's higher education. "It's an industry that has rising costs but no productivity gains," says David Breneman, a higher education economist at the University of Virginia. "People are still teaching in the way they did at the time of Socrates." For decades, even talk of change was relatively rare.

That's very different, of course, from the situation in health care, where cost containment has been a buzz phrase for years. Almost everyone acknowledges that the future of the American health care system hinges on getting good results while controlling spending.

Colleges and universities are only beginning to speak that language. But the reason isn't just hidebound tradition. When university budgets are out of balance, schools have an alternative to cost cutting. They can simply raise tuition. And they have. Tuition and fees have increased by 439 percent since the early 1980s, an even more dramatic increase than the rise in health care costs. These increases are making it harder for American students to finish college. Among adults 25 to 34--the generation that has had to cope with soaring tuition rates--the percentage with at least a two-year degree is only tenth-best among developed nations.

That isn't to say that public colleges and universities have been spending recklessly. Over the past decade, their spending per pupil has stayed roughly flat. Public universities remain a bargain when compared to their private counterparts, at which a four-year education can cost as much as a 30-year mortgage.

So why does tuition keep going up? The problem, college officials say, is state lawmakers. As states have faced budgetary pressures in other areas--most notably health, K-12 education and prisons--they've scaled back per-pupil support for higher education, knowing that the difference could be made up out of the pocketbooks of students. As Jim Rosapepe, a Maryland state senator, puts it: "You can't increase tuition at the prisons."

More and more, though, lawmakers are learning that tuition at colleges and universities can't just rise at rapid rates indefinitely. Tuition has turned into a campaign issue, with candidates promising to control the cost of higher education as a matter of political necessity.

So, belatedly, cost containment has become a hot topic in higher education. There are now hundreds of experiments with computer-based courses, even at schools that, quite recently, might have dismissed the idea as beneath them. After a successful pilot program, Tennessee, for example, is redesigning instruction at all of its public colleges, with Emporium-style teaching a big part of the strategy.

But Virginia Tech's Emporium remains, even after 12 years, one of the most revolutionary of the experiments. That's because it flouts one of the most sacred laws of higher education: that earning credit is about spending time in class. In college classes almost everywhere, each student listens to the same lectures and completes the exact same homework assignments. In the Emporium, students can stop working on a lesson whenever they're confident they know it. This approach likely saves money. Most schools expend a lot of resources teaching students things they already know.

Computer-based instruction, however, is only a small part of the story. If you want to see more systematic efforts to tackle the cost conundrum, a good place to look is Maryland.

Five years ago, Maryland had one of the most severe cost-control problems facing any university system. Students in the Maryland system were paying, on average, the nation's sixth-highest tuition, thanks largely to cuts in state funding. At that point, the university system launched what it called the Efficiency and Effectiveness Initiative, an effort to save money anywhere and everywhere, without hurting the quality of the schools. "The pattern in higher education is that you make cuts and raise tuition in bad times," says William "Brit" Kirwan, chancellor of the Maryland system, "and build back into business as usual in good times." It's that pattern that Kirwan has sought to break.

Some of what Maryland came up with was fairly mundane (though effective). It launched collaborative purchasing across its campuses to lower prices. It required faculty in each academic department to spend slightly more time teaching, thereby lowering personnel costs.

Other steps, though, were more radical. Every student in the Maryland system has to get at least 12 credits outside of the classroom. Students satisfy this requirement through study-abroad programs, internships and online instruction. There may be room for dispute about how much students are broadening their intellectual horizons, but there's no disputing that the schools save on teaching and facility costs.

Maryland also is one of a growing number of states seeking to direct more young people to community colleges, at least to begin their careers in higher education. The key to making community college more appealing is to make it easier for students to switch to four-year schools later. In Maryland, any student who graduates from community college is guaranteed a slot at one of the state's four-year schools. And the state is working to ensure that these transfers can graduate with a bachelor's degree two years later. Maryland is even offering dual enrollment, under which students take classes at a community college and a four-year school simultaneously.

Those might sound like modest steps, but they're not. Maryland is acknowledging that far more students will spend at least part of their college careers away from residential campuses. The live-in nature of college, after all, is a big part of what makes it expensive. Schools pay for dormitories, sports stadiums, cafeterias and health care facilities. Students also pay for those things--indirectly, through higher tuition. Community college doesn't come with the same price tag or the same need for thousands of dollars in student loans.

The best evidence that Maryland's approach is working is that the system's in-state tuition hasn't increased for four years. Part of the reason for that can be traced to politics. In Martin O'Malley's successful campaign for governor in 2006, he spent hundreds of thousands of dollars producing ads promising to control tuition costs, and he has sought to keep that promise. But it's also true that the system has been saving money through the Efficiency and Effectiveness Initiative--more than $120 million so far, according to some estimates. Legislators have directed more money to higher education to keep tuition down.

Other states are trying similar cost-containment efforts. In Louisiana, Governor Bobby Jindal has assembled a special commission with the goal of getting a handle on the higher education budget. One of the governor's priorities is to substantially increase the share of Louisiana degrees awarded at community colleges by making four-year schools more selective. Louisiana already has a funding model that assigns money to schools based on performance standards, such as graduation rates. It is one of a growing number of states that intend to fund schools based on the degrees they produce--not the number of students they enroll.

Despite the promise of these approaches, there are plenty of skeptics. Some, inevitably, are professors uncomfortable with new technologies or departments that fear they will be losers in performance- pay systems. But there are less self-interested arguments against the changes that are being put in place. Ronald Ehrenberg, a higher education economist at Cornell University, wonders whether the push for more extensive use of community colleges could backfire. "We know," he says, "that students who start out at two-year colleges are much less likely to get four-year degrees."

The most troubling concern about cost-control efforts in higher education, however, is that they aren't nearly enough at this point. Jim Rosapepe, the Maryland state senator, is a big supporter of the state's efficiency initiative. He should be--he was on the university system's board of regents when it was designed.

However, Rosapepe notes that a recent legislative study found the statewide system $700 million short of funds over the next decade. In other words, he says, all of the efforts at efficiency haven't changed the fundamental reality that Maryland colleges and universities need more money. Rosapepe wants that money to come from general state revenues. "The big driver of tuition is state support," he says. "The states with high tuition have low state support. States with low tuition have high state support."

For now, Rosapepe is right. If something doesn't change, states will either have to raise tuition, thereby reducing access, or transfer money from somewhere else in an over-strapped budget. Given that predicament, states had better hope that colleges and universities go a lot further toward making cost containment work.

LOAD-DATE: November 2, 2009

The American Prospect, November, 2009

Copyright 2009 The American Prospect, Inc.

The American Prospect

November, 2009


HEADLINE: The Innovation Administration

BYLINE: DANA GOLDSTEIN

HIGHLIGHT:

When it comes to social policy, is newer always better?

BODY:

Every single one of you has something you're good at," President Barack Obama told children in his Sept. 8 back-to-school address. He went on to list future occupations toward which students could strive--doctor, teacher, police officer, architect, lawyer. Also included in that list was a career option no previous president had ever named: innovator.

Indeed, the Obama administration has been promoting "innovation" to anyone who will listen. The stimulus package includes more than $100 billion for innovation efforts across fields as diverse as school reform, energy research, health care, and poverty alleviation. In July, first lady Michelle Obama spoke at two "innovation events" honoring architects and product designers. On Sept. 21, the president delivered a speech at Hudson Valley Community College in upstate New York on how innovation can create jobs. A search of WhiteHouse.gov turned up 531 documents mentioning the term.

The most concrete definition of innovation is offered by economists, who point out that with manufacturing and service-sector jobs migrating overseas, the United States cannot compete in the global economy without developing new products, services, and processes. In 1942, Austrian economist Joseph Schumpeter coined the term "creative destruction" to describe how innovation drives economies. When Wal-Mart came up with new, cheaper ways to move products around the globe, it allowed consumers to buy essential goods at lower prices but destroyed local mom-and-pop shops. Similarly, the iPod was an innovation that destroyed the Discman, and the Internet may, someday, completely destroy the daily print newspaper. All these innovations created jobs, even as they made others obsolete. And they all grew the economy.

It makes sense, then, during a recession, for the federal government to invest in technological innovation. It's difficult to argue with the Obama administration's decision to provide $400 million for a new energy-research agency called ARPA-E, which will look for technological solutions to global warming. Or the administration's proposed $19 billion investment in electronic health records, which would result in better, more consistent care for patients.

Social policy is where the innovation agenda gets tricky. The incentives are less clear, the outcomes are more difficult to measure, and the entire endeavor is more open to ideological debate. In the White House, though, the importance of "social innovation" as a poverty-fighting tool is regarded as received wisdom. There is the new White House Office of Social Innovation, led by former Google.org chief Sonal Shah, and the Social Innovation Fund, both with the goal of working alongside the nonprofit sector in order to address joblessness, bad schools, and urban blight. And the Department of Education is using billions of dollars of stimulus money to help local school districts, nonprofits, and colleges enact "innovative reforms."

At its core, social innovation refers to the belief that for-profit institutions should be the model for nonprofit ones, and that nonprofits, in turn, can be more effective protectors of social welfare than government. There's nothing particularly new about these ideas. After the fall of the Soviet Union, American philanthropists spoke of helping former Eastern Bloc countries build "civil society" sectors, which would better care for human needs than bloated communist states had. In the 1990s, business schools promoted the idea of "corporate social responsibility," which held that government regulation wasn't needed in order for companies to do the right thing for the environment or public health. They could police themselves! During the Reagan and Bush years, conservatives suggested the nonprofit sector could serve as an effective replacement for the welfare state. (Some still do. At a health-care town hall meeting on Sept. 21, House Minority Whip Eric Cantor told a woman that her uninsured, cancer-stricken relative should seek care from "charitable organizations.")

Today, advocates for "social enterprise" argue that divisions between the public, private, and nonprofit sectors need to be broken down in order to better address social problems. The Obama administration has taken this message to heart. But it's entirely possible that social innovation is little more than a federal foray into a B-school fad that may be, during an economic crisis, insufficient to addressing the scale of the social problems facing the American public.

THE OBAMA ADMINISTRATION effort that best embodies this ideology is the Social Innovation Fund, a competitive grant program passed by Congress in March as part of the Edward M. Kennedy Serve America Act. Ironically, considering the fund is an anti-poverty program, it was rolled out by Michelle Obama at Time magazine's 100 Most Influential People Gala, a star-studded, black-tie event at Lincoln Center.

"The idea is simple," Obama said from the podium. "Find the most effective programs out there and then provide the capital needed to replicate their successes in communities around the country. By focusing on high-impact, results-oriented nonprofits, we will ensure that government dollars are spent in a way that is effective, accountable, and worthy of the public trust."

What could be less controversial among liberals than public investment in social-justice nonprofits?

A lot, it turns out. The Social Innovation Fund "is like how baby boomers think they invented sex," says Jeff Trexler, a professor of social entrepreneurship at Pace University. The idea adopts, uncritically, "the rhetoric of business schools and business magazines in the late 1990s," Trexler adds. "You can't conflate investment and innovation with guaranteed success"--a lesson the finance industry learned when it created an innovation called the sub-prime mortgage.

Even Eric Nee, managing editor of the Stanford Social Innovation Review, is somewhat skeptical of the Social Innovation Fund, in part because no one can agree on what innovation is, or when, exactly, it is a goal worth pursuing. "It's true that not everything should be innovative," Nee says. "If all you did was go around innovating and didn't spend any time building, or following up, or doing incremental improvement, it would sort of be just chasing your tail. Why is it popular? I don't even really know--just to be honest."

The idea for the Social Innovation Fund came out of America Forward, a campaign-season coalition of nonprofits and philanthropies. The driving force behind the group was the queen bee of the social-entrepreneurship movement, Vanessa Kirsch, founder and president of New Profit, one of the country's first "venture philanthropy" firms. Venture philanthropists direct charity dollars toward nonprofits that have embraced corporate efficiency and accountability standards, often with the explicit goal of fostering "social innovation." America Forward pushed its agenda--a government investment in grant-making institutions like New Profit--to all 14 presidential candidates in both parties. "Our incentive was to get the decision of what nonprofits to fund outside of government. The idea is that there is an intermediary--the foundation--that can make those decisions and isn't politically driven," Kirsch says. "The things that really last for the long haul are the things that have bipartisan support, that will be here through administrations."

The Obama campaign was one of the most receptive to America Forward, which was no surprise--both Barack and Michelle Obama go way back with Kirsch. Barack served on the founding advisory board of Public Allies, a nonprofit Kirsch co-founded in Washington, D.C., in 1992, with the goal of directing low-income teens toward public-service careers. In 1993, Michelle left her corporate law firm job to found a Public Allies branch in Chicago and later joined the organization's board of directors. Public Allies won plaudits from both Bush presidents and Bill Clinton, but Kirsch was frustrated by her attempts to grow the group nationally. Many donors were less interested in "scaling up" a successful nonprofit than in launching sexier, newer programs.

In 1997, Kirsch married Alan Khazei, the co-founder of CityYear, an AmeriCorps volunteer program for young adults. (Khazei is now a Democratic candidate for Ted Kennedy's Senate seat, and he's running on a social-innovation platform--"a message of Big Citizenship instead of Big Government," according to a fundraising e-mail.) In 1999, Fast Company profiled Khazei and Kirsch. "There's lots of money for nonprofit work," Khazei said. "There's lots of money for the really big, established groups. But there's almost no money for those organizations in between--those who need bridge money to sustain and to grow."

The Social Innovation Fund, as drafted by Kirsch and America Forward, is intended to fill that need for "second stage" funding. "The term 'innovation' is maybe a little misleading," Kirsch now admits.

After going through the legislative meat grinder, the fund emerged as a relatively small competitive grant program of $50 million. (For comparison's sake, a single grant from the Bill and Melinda Gates Foundation can top $1 billion.) It is administered by the Corporation for National and Community Service and will award grants between $1 million and $10 million, with a focus on education, health, and economic empowerment. Per Kirsch's vision, the vast majority of the funds it allocates--85 percent--will go not to "innovative" nonprofits themselves but to private philanthropies and other grant-making institutions, which will then match the funds and reallocate them to community organizations. In turn, the recipient groups must match, dollar for dollar, the grants they receive. A federal white paper on the program trumpets, "The result? Three dollars in funding for every $1 in government spending."

Obama's June 30 speech announcing the program adopted America Forward's disdain for big government; it almost sounded like Reaganomics. "Let's face it, there's only so much Washington can do," Obama said to nonprofit and philanthropic leaders assembled at the White House. "Government can't do everything and be everywhere--nor should it be."

The president continued, "Folks who are struggling don't simply need more government bureaucracy; that top-down, one-size-fits-all program usually doesn't end up fitting anybody. People don't need somebody out in Washington to tell them how to solve their problems, especially when the best solutions are often right there in their own neighborhoods, just waiting to be discovered."

The truth, though, is that big, top-down government programs like Social Security, Medicaid, and Medicare have done more than almost any nonprofit effort to lift Americans out of destitute poverty. Imagine what something like a national universal day-care system could do, in terms of encouraging work among poor parents and providing early childhood academic enrichment.

That's not to say charity isn't crucial, just that setting it up in competition with government is hardly relevant--and certainly not politically helpful for an administration attempting to overhaul the health-care system and potentially create a new, national public-insurance program. As Jeff Trexler writes in an article for the journal Emergence: Complexity and Organization, traditional nonprofit leaders critique concepts like social innovation and venture philanthropy as "an appropriation of business jargon that is inconsistent with the core values of the charitable sector."

The Social Innovation Fund rushes headlong into this debate and picks sides. Its requirement that each government dollar be matched by the recipient organization ensures that only nonprofits that are already financially sustainable will win grants. Many small organizations, no matter how essential their work, operate hand to mouth. Groups that haven't already attracted significant corporate, foundation, or individual donor support are unlikely to be able to match a multimillion-dollar government grant.

So it turns out the Social Innovation Fund is actually searching for safe bets. "The title was selected because it sounds really good," says Sean Stannard-Stockton, founder of the consulting firm Tactical Philanthropy Advisors and a well-known blogger in the nonprofit world. "We all want innovation. But the Social Innovation Fund is not going to draw up a lot of great nonprofits that nobody has heard of before. It's going to call attention to what works."

Pablo Eisenberg, a philanthropy expert at Georgetown University, is much harsher. "The administration's vision excludes the overwhelming majority of nonprofits that are really in need of assistance," he says. "Nonprofits that are activist, that are organizing, that are watchdog, that deliver important social services at the local level, like food banks and domestic-violence shelters."

IRONICALLY, IT IS EXACTLY such a small, scrappy nonprofit that Barack Obama worked for in Chicago in the mid-1980s, helping residents of a public-housing project demand better schools and public services from city government. That kind of community group, which engages directly with the political system, is out of vogue with the new generation of social entrepreneurs, who are more interested in self-sufficiency than activist government. "Foundations are some of the most elite organizations, whose boards are invariably made up of the wealthiest people in the country," Eisenberg says. "They have no sense of what community needs are."

At least so far, there's no indication the White House will push philanthropies in a more activist direction. The nonprofit groups singled out for praise by the Obama administration, in press conference after press conference, are studiedly apolitical, already enjoy significant corporate support, and often lack a systemic approach to addressing inequality.

One example is Rising Tide Capital in Jersey City, which runs a Community Business Academy for high-poverty adults looking to become small business owners. The group was founded in 2004 by Harvard graduates Alfa Demmellash and Alex Forrester. With a name that could belong to a hedge fund and a focus on self-sufficiency, Rising Tide Capital enjoys financial and in-kind support from companies including Goldman Sachs, Bank of America, Capital One, Chase, Wachovia, and Fidelity Investments.

Demmellash, the group's CEO, immigrated to the United States from Ethiopia at the age of 12. Her mother worked as a seamstress and waitress, and the family was poor. She is a young, inspiring, photogenic do-gooder, so it's no surprise that last June, right before the launch of the Social Innovation Fund, Demmellash was named a 2009 "CNN Hero." She and Rising Tide Capital were suddenly everywhere. Soon, they got a call from the Obama administration. Demmellash was whisked off to the White House, where she sat in the audience during Obama's speech announcing the Social Innovation Fund. "So far, Rising Tide Capital has helped 250 business owners in the state of New Jersey," Obama said.

The problem is Rising Tide Capital hasn't helped 250 new business owners. In reality, 216 people have gone through its business academy, 79 of whom have launched businesses and 71 of whom are in the planning phases. That's an impressive achievement but certainly no cure-all for low-income neighborhoods.

Rising Tide Capital knows these numbers because it already received a large donation that allowed it to purchase outcome-tracking software and conduct surveys of program graduates. In the future, it hopes to follow its graduates over a number of years, to see whether the Community Business Academy contributes to long-term financial well-being. "As a person who is investing tremendous energy and resources, making sure our mission is actually met is incredibly important to me," Demmellash says.

The use of trumped-up numbers downplays the difficulty of the work Demmellash and other nonprofit leaders do--and it downplays the stubbornness of problems like poverty, racial isolation, and lack of education. The 250 number was likely lifted by Obama's speechwriter from the CNN Heroes report, which used the same inflated statistic--ironic, considering the Social Innovation Fund is supposed to emphasize the responsible use of metrics in evaluating how well nonprofits are working.

The Social Innovation Fund is not the only corner of the Obama administration to fall under the sway of venture-philanthropy vogue, sometimes to the detriment of good social science. Through the Department of Education's innovation funds, Secretary of Education Arne Duncan is promoting a very specific image of school reform, one that borrows liberally from the venture philanthropists' goal of bringing free-market values to the public sector. The federal guidelines encourage states and schools to embrace specific "innovations," such as enacting merit pay for teachers and lifting laws that cap the number of charter schools. Though such policies may have tertiary benefits, there is no research consensus on whether either one contributes to the "bottom line" of education reform--increased academic achievement for high-poverty kids.

A recent Stanford University study of charter schools in 16 states found that in math, only about 17 percent of charter schools increase student achievement over traditional public schools. The researchers described the results as "sobering." A competing study out of Stanford, by Hoover Institute Fellow Caroline Hoxby, found that students who win a lottery to attend a New York City charter school do much better on standardized tests than socioeconomically similar students who lose the lottery and return to traditional public schools. But New York's charters may be superior in quality exactly because state law allows only a few carefully selected organizations to manage charters. It is exactly such laws that the Department of Education claims stifle innovation.

Regardless of whether you believe the charter detractors or defenders, it's undeniable that the obsession with innovative charter schools is out of proportion to the reality that less than 5 percent of American kids attend such a school. "[Charters] should not distract us from the challenging, important, and unheralded task of making process improvements in the operation of traditional schools," writes Grover Whitehurst of the Brookings Institution, in a gently mocking essay titled "Innovation, Motherhood, and Apple Pie."

In Denver, the site of one of the largest experiments in merit pay for teachers, a 2008 study from the University of Colorado found no evidence that the new compensation system helped students; rather, teachers who were already high-performing chose to opt in to merit pay, while those who were less successful opted out. Even among teachers who participated in merit pay, only 38 percent believed the program directly improved student test scores.

Critics contend the administration has ignored more difficult, yet proven school reforms, such as efforts to integrate schools, thus guaranteeing that fewer classrooms are overwhelmed by the challenges of poverty and racial isolation. Research by Cornell labor economist C. Kirabo Jackson found that when the Charlotte-Mecklenburg school district in North Carolina ended a 30-year busing program and resegregated, the highest-performing teachers fled schools that became predominantly black and poor. Yet integration is seen as a pie-in-the-sky, old-school lefty goal by the venture-philanthropy crowd and has registered not at all on the Obama/Duncan agenda. It's not "innovative."

Another criticism is that even when innovative social programs are proven to work well, the Obama administration underestimates the costs involved with scaling them up. The White House's single favorite nonprofit is probably the Harlem Children's Zone, Geoffrey Canada's effort to flood 97 blocks of New York City with educational, health, and economic resources--including several charter schools. The president has asked Congress to set aside $10 million in the 2010 budget to replicate 20 such "promise neighborhoods" across the country. But that figure is considered laughable by most nonprofit experts. The Harlem Children's Zone has an annual budget of $70 million.

While the Social Innovation Fund and Department of Education grants are unlikely to result in systemic policy improvements, it would be a mistake to view the administration's social-innovation efforts in a vacuum. The same White House is pushing for a major overhaul of our health-care system. The $700 billion stimulus package is the greatest increase in federal spending since the Great Society.

In the end, the administration's social-innovation push may be most useful for its signaling effect. Both Obamas have appeared in front of the moneyed and influential to tell them they should invest in community nonprofits and care about inner-city schools and unemployment. Nevertheless, it's true that the Obamas' infatuation with social entrepreneurship and venture philanthropy serves as a reminder of their aversion to a more robust, liberal, government-focused rhetoric. In this regard, they are, perhaps, more Clintonian than they'd like to admit.

The administration's concept of social innovation injects government into the philanthropic sector as a sort of taste-maker, hopefully influencing charities to advance progressive public policy ideas without the federal government having to spend too much more money. With the Republican congressional delegation in a full-on tax revolt, the strategy is arguably politically savvy, at least in the short term. But is it innovative? Not so much. There's nothing new about vilifying big government and asking a stretched-thin philanthropic sector to address a truly staggering landscape of human needs--10 percent unemployed, 47 million uninsured, only half of all black and Latino boys completing high school.

"Many of these social problems are of the scale that require the government to be involved," says Nee of the Stanford Social Innovation Review. "A lot of the nonprofit stuff is sort of ... nickel and dime."

GRAPHIC: Illustration, no caption, MICHAEL SLOAN

LOAD-DATE: November 5, 2009

Chicago Sun-Times, October 31, 2009

Chicago Sun-Times

October 31, 2009

Chicago Sun-Times

Cubicle workers unite ... white-collar unions?

Time may be right for unions to attract white-collar employees
Comments

BY ANITA BRUZZESE

Could a union be coming soon to a cubicle near you?

While unions often have been associated with the factory floor, the current congressional and presidential support of unions, along with a disillusioned professional labor force, may mean that the time is ripe for unionization to move into new territory -- the white-collar arena.

Not only has President Obama expressed support of unions, but his appointments to the National Labor Relations Board "have fundamentally changed the face of the NLRB, and are poised to make much more union-friendly policies," says Shanti Atkins, a lawyer and president and CEO of ELT Inc. in San Francisco.

One of those changes currently afoot is the proposed Employee Free Choice Act, now in a House committee, which would change the NLRB system regarding how workers vote on unions, Atkins says.

Specifically, the bill would give workers the choice of forming unions by getting a majority of employees to sign cards to join, without having to hold a secret ballot election. Currently, the law leaves it up to companies to decide whether employees must hold an election or can organize by checking the union membership cards. The proposed bill also states that if employers and employees can't agree to a contract within 120 days, then a government arbitrator will help them set terms.

"There is certain to be an increase in union-organizing activities, regardless of whether or not the highly controversial bill passes," Atkins says.

That's a change since union memberships have declined dramatically since the 1950s. It's estimated that currently only about 7 percent of the private sector is unionized, but workers battered by the recession and the increasing government support of unions sets the stage for those numbers to grow, Atkins says.

Clete Daniel, professor of labor history for Cornell University, agrees.

"Traditionally white-collar workers have made advances because of their individual hard work, so there was reluctance to assign themselves to groups such as a union," he says. "The relationship between professionals and their employers was based on loyalty and mutual good will. As long as they were productive and efficient, then they had a reasonable expectation that they would be rewarded."

But as millions of white-collar workers have been laid off "in a capricious way," have seen their pay and benefits reduced or are required to do more work without getting a pay raise, a different attitude is sweeping through America's cubicles, he says.

"That old emotion -- loyalty -- gives way to an attitude of obedience," he says. "And obedience is rooted in fear."

If that fear becomes outweighed by anger, then unionization may become more appealing to white-collar workers, Daniel says.

Still, that doesn't mean these unions will look like they do currently, he says.

"Unions have often been in an adversarial position, and I don't know that white-collar workers will be that way," he says. "I think they're going to say that there just ought to be a way to decide what's fair. These workers may want to express themselves through activism."

Another reason unions may find a toehold in the professional ranks is the changing relationship between the white-collar employees and their managers.

"Management authority has really been eroded over the last 20 years by Wall Street and investors who have now become the ones who dictate what success is," Daniel says. "What this leads to is managers not attuned as closely to the worker, and they're not influencing employee loyalty as before. Managers' roles have really been undermined by other people. They're really caught in the middle."

Daniel says it's important to remember that even though union membership has declined in the last 50 years, union influence shouldn't be discounted.

"Labor unions have actually been much more successful than they have been portrayed," he says.

"A lot of companies voluntarily gave workers comparable pay and benefits as those gained through collective bargaining. It was a way for them to stop unions from coming in. But all the workers benefited -- even the white-collar ones."

New York Post, October 30, 2009, Friday

New York Post

October 30, 2009, Friday

New York Post

Bare-bone$ Hooters

Waitresses sue over outfits

Hooters waitresses are not only forced to wear trashy boob-clinging uniforms -- they also have to pay for them.

Waitresses Gina Rosati and Amy Frederick filed a class-action lawsuit in Brooklyn federal court yesterday accusing the Hooters of Long Island chain of labor-law violations.

"Hooters of Long Island requires its waitresses to purchase and wear a nationally recognizable uniform," attorney Louis Pechman wrote in the suit.

The cost of the uniform is $5.45 for "Dolphin" shorts, $6 for a Lycra tank top, $2.50 for shiny beige pantyhose, $3.23 for a pouch and $2.25 for thick white socks, the suit says.

The waitresses also have to share their tips with kitchen staff. Such a requirement, Pechman said, is also illegal.

The suit seeks back pay and damages from owners Richard Buckley and Christopher Levano and parent company Strix.

At least 100 waitresses who worked at the chain's locations in East Meadow and Islandia, LI, and Fresh Meadows, Queens, over the past three years could qualify to collect.

Hooters of Long Island declined comment.
kati.cornell@nypost.com

The Washington Post, October 30, 2009, Friday

Copyright 2009
The Washington Post
All Rights Reserved

The Washington Post

October 30, 2009, Friday

HEADLINE: Boeing's S.C. jobs a setback for unions; Manufacturers grow more willing to use unorganized labor

BYLINE: Dana Hedgpeth

BODY:
Boeing's decision to open a second assembly line for its 787 jetliner in South Carolina is another blow for organized labor, experts say, signaling that major manufacturers are increasingly willing to look for non-union workforces during a time of economic stress.

Chicago-based Boeing said Wednesday that it had picked North Charleston over Everett, Wash., the home of Boe-ing's commercial aircraft division, because it best fit its production plans for the 787 Dreamliner. Full production of the jet has been much anticipated because it has more than 800 orders and is designed to carry up to 250 passengers. But the Dreamliner, which is assembled from parts made by suppliers around the globe, is two years behind schedule. It has been plagued by production problems and delays, including strikes by union machinists in Everett and other sites in Washington state that forced the company to take costly write-downs as it closed commercial aircraft operations last year for eight weeks.

Boeing's move comes at an especially tough time for organized labor in the United States. The car industry is struggling to survive and is wringing historic concessions from its unions. Steel and other industries have restructured their deals with unions, as more manufacturing heads overseas or to "right-to-work" states in the South.

"This is the escape from collective bargaining," said Gary Chaison, a labor expert at Clark University. "Boeing is creating its own trend in heavy manufacturing, and more and more manufacturing is going to move south."

Boeing and officials from the International Association of Machinists and Aerospace Workers had been negotiating recently to put the second 787 assembly line in Washington state, but those talks broke down, according to union and state officials.

Tom Wroblewski, president of the union there, issued a sharply critical statement Wednesday, saying Boeing had "betrayed our loyalty." He went on to say that Boeing was "only using our talks as a smoke screen, and as a bargaining chip to extort a bigger tax handout from South Carolina."

Yvonne Leach, a Boeing spokeswoman, said that the union offered its "best and final proposal" last week and that it didn't have the "production stability" the company wanted. There were also issues with cost-of-living increases, pensions and bonuses, guarantees on no strikes, and wages, according to those involved in and close to the talks.

Boeing said it expects to start construction on its assembly plant in South Carolina next month, with the first planes expected to be finished by the first quarter of 2012. It expects to produce 10 of the 787s per month by 2013 -- with seven being built in Everett and three in North Charleston.

Leach said putting the second assembly line in South Carolina was the "most efficient way to meet the needs of our customers. It gives us the manufacturing diversity we need."

The company already operates a factory in North Charleston, and it owns a stake in a plant that makes parts and sections of the 787. Boeing considered opening a second assembly line for the jet in California, Kansas, North Carolina and Texas. South Carolina officials offered Boeing $170 million in tax incentives in exchange for the promise of creat-ing up to 3,800 jobs.

Harley Shaiken, a labor expert at the University of California at Berkeley, said Boeing is "sending a message to the union that this is our other alternative" by moving the second assembly line to South Carolina.

He said that Boeing has had disagreements with the machinists union and that they "marred the fact that they have a skilled and capable workforce" in Everett. Experts say it could weaken union support as Boeing is expected to decide in the coming years where to build the next generation of its 777 and 737 aircraft.

That could come as a blow for the Puget Sound area, which depends heavily on the aerospace industry.

"Puget Sound is going to be in direct competition with South Carolina," said Jefferson Cowie, a labor expert at Cornell University. "You have this competitive geography of labor relations that Boeing will be able to whip saw one location off of another. It is very difficult to rise above that for the union. Boeing will have a non-union workforce in a right-to-work state with a favorable business climate. It is emblematic of contemporary labor relations.

"This goes all the way back to garment manufacturers moving out of New York to electronics and textiles," he said. "You've seen it in auto, and now you're seeing it with the biggest aircraft. This is the kind of thing that is bad news for organized labor."

GRAPHIC: IMAGE; Mic Smith/associated Press; Boeing will open a second assembly line for its Dreamliner jets in North Charleston, S.C., which beat union stronghold Everett, Wash.

LOAD-DATE: October 30, 2009

CNN Money, October 21, 2009, Wednesday

CNN Money

October 21, 2009, Wednesday

CNN Money

Like it or not, here comes more stimulus

There's a push to extend some expiring provisions from the American Recovery and Reinvestment Act. But it will be done in bits and pieces.

NEW YORK (CNNMoney.com) -- You won't see it all in one neat package. And you won't hear the White House call it stimulus.

But there's a good chance lawmakers will decide to extend some of the stimulus measures included in the $787 billion economic recovery package passed in February and possibly create some new ones as well.

On Wednesday, House Democrats are convening a forum of economists to debate the state of the economy, with a specific focus on job creation. And lawmakers are convening hearings on Capitol Hill this week to discuss the economic outlook and the state of the housing market.

A number of ideas on the table are lifeline measures, while some are flat-out incentives to spur economic activity.

Here's a rundown of what's under consideration, estimates of what the provisions might cost and where they stand currently in the legislative process.

Unemployment benefits extension
By year-end, an estimated 1.3 million jobless workers will have run out of unemployment benefits, according to the National Employment Law Project.

It's expected that lawmakers won't let that happen.

The House has already approved an extension and the Senate has amended it but not yet voted on it. Both parties say they want to extend benefits but they disagree over how to pay for it and how to handle amendments to the bill.

In the Senate proposal, unemployment benefits would be extended by up to 14 weeks in every state and then another six weeks on top of that in states where the unemployment rate tops 8.5%.

Currently, states with unemployment rates topping 8% now offer up to 79 weeks of unemployment benefits, said Chad Stone, chief economist of the liberal Center for Budget and Policy Priorities. States with unemployment rates between 6% and 8% now offer up to 59 weeks. And all other states currently offer up to 46 weeks.

Estimated cost: $2.4 billion. But Senate Democrats say the proposal would be paid for in full by extending an add-on tax for employers under the Federal Unemployment Tax Act.

For the past 32 years, employers were required to pay an additional 0.2% on the first $7,000 of a worker's annual wages on top of the 0.6% they normally pay, said George Wentworth, a policy analyst for NELP. That surtax was supposed to expire this year. But lawmakers would extend it through June 30, 2011, to pay for the benefits extension.

If they do, the Congressional Budget Office estimates such a move could reduce the deficit by $200 million over 10 years.

Cobra premium subsidy extension
The White House supports extending the federal subsidy now offered to unemployed workers who opt to continue their health insurance coverage from their former employers.

Under the original provision passed under the economic recovery act, Uncle Sam agreed to pick up 65% of the cost of the Cobra premium for up to nine months for workers laid off between Sept. 1, 2008, and Dec. 31, 2009.

That 65% comes close to replicating the share of the premium typically paid for by employers when a worker signs up for coverage.

To date, a Cobra extension has not been attached to any proposed legislation.

Estimated cost: The original provision was estimated by the CBO to cost roughly $25 billion. Absent the exact parameters for an extension, however, it's too early to tell how much the provision would cost.

There will likely be a cost to employers as well. The publication Business Insurance reported recently that companies typically pay out $1.50 in claims for every $1 collected in Cobra premiums.

Emergency payment to seniors
To compensate for the fact that there will be no cost-of-living adjustment made to Social Security benefits in 2010 due to a lack of inflation, President Obama has proposed sending a $250 economic relief payment to seniors, veterans and the disabled next year. It would be identical to the $250 emergency payment sent out earlier this year under the economic recovery law.

Democratic leaders in the House and Senate have voiced their support for such a payment.

But others don't think it's a good idea. The Committee for a Responsible Federal Budget notes that the cost-of-living adjustment for 2009 was much higher than average -- 5.8% -- due to record energy prices. So "even holding Social Security benefits steady means they will have increased in value. There is no economic or moral justification for increasing them further," said CRFB president Maya MacGuineas in a statement.

To date, a proposed emergency payment to seniors has not been attached to any legislation.

Estimated cost: The measure would cost $13 billion, according to White House estimates.

Homebuyer tax credit expansion
An estimated 1.4 million tax filers to date have taken advantage of a temporary first-time homebuyer tax credit aimed primarily at people making less than $75,000 ($150,000 for joint filers). An estimated 15% of them bought their home specifically because of the tax break.

The latest iteration of that credit is worth $8,000, and it's scheduled to expire on Nov. 30.

Many lawmakers want to extend that deadline, expand eligibility beyond first-time homebuyers and include those who make more than is allowed under the current rules.

Sen. Johnny Isakson, R-Ga., and Sen. Chris Dodd, D-Conn., co-sponsored an amendment to the unemployment extension bill that would extend the credit until the end of June 2010 and be available to single filers making up to $150,000 and joint filers making up to $300,000.

The amendment may or may not remain attached to the unemployment bill -- which has been stalled due to political skirmishes between Democrats and Republicans. But Congress Daily reports that senators and aides "said both [measures] appear likely to clear the chamber in some form this fall."

It's still not clear where the White House stands. At a Senate Banking hearing on Tuesday, Housing Secretary Shaun Donovan said "within a few weeks we'll have sufficient data to get to a conclusion on this."

Estimated cost: The Isakson-Dodd bill is estimated to cost $16.7 billion. Isakson said at the Senate Banking hearing that he'd be happy to look for ways to pay for it and Dodd concurred. Typically, if a measure is considered stimulus it is not something that lawmakers feel obligated to pay for by either reducing spending or raising revenue in other areas.

Jobs credit creation
Although no formal proposal has been made, there has been some talk of creating an employer tax credit for hiring new workers.

The idea is to spur job creation and to do so in the face of forecasts for a 10% unemployment rate in 2010.

But it's hard to do that without rewarding companies that were already planning to hire anyway, said Clint Stretch, managing principal for tax policy at Deloitte Tax.

Consider two competitors who dealt with the downturn differently, Stretch said. One made deep cuts to its workforce and is ready to ramp up again, while the other cut costs but managed to do so without laying off too many people. In this instance, the first company benefits far more from the credit than its competitor.

A hiring credit was put in place during the Carter administration and the consensus among researchers is that two-thirds of the 2.1 million jobs created by the credit would have been created without it, according to a post on Tax Vox, a blog of the Tax Policy Center edited by Howard Gleckman.

"Tim Bartik [of the W.E. Upjohn Institute for Employment Research] and John Bishop [of Cornell University] ... argue it nonetheless created 700,000 new jobs in a year - not bad, even if a lot of money was wasted. Others insist the research they used is flawed," Gleckman noted.

Estimated cost: Bartik and Bishop estimate that a job creation tax credit that refunds to employers 15% of new wage costs in 2010 and 10% in 2011 could create 5.1 million jobs at a cost of $27 billion, or $5,400 per new job created.