Even in its diminished state, the UAW is still a leading indicator of middle class security. What does its latest deal tell us about what a 21st century middle-class manufacturing job looks like?
In the flurry of headlines about Netflix's stock price and Europe's debt crisis, it was easy to miss the news, but last week, the American auto-industry quietly embarked on an experiment that could help define the future of the middle class.
On Oct. 26, the United Auto Workers ratified a new, four-year labor contract with Chrysler, capping off the union's negotiations with Detroit's three big automakers. There were no huge surprises in the agreements, but in light of Detroit's long history of labor dysfunction, the new contracts are a thing of wonder. Here are the new rules of the road: The unions' fortunes are tied to the companies' fortunes. If the companies profit, the workers profit. If the companies stumble, they can break the promises they can't afford
In other words, the automakers and the UAW have done something shocking. They have embraced common sense.
This may sound like a middling achievement. But it's the kind of arrangement that once seemed like a pipe-dream in Detroit. And if it works, it just might point the way to what a middle-class manufacturing job looks like in a post-recession America.
THE ART OF (LABOR) WAR
To get a sense of how big a change the new contracts represent, it helps to review a little bit of history. The automakers and the UAW have a long and tortured relationship that almost sank them both.
From its origin in the 1930s to its peak at 1.5 million members in the 1970s, the UAW rose to prominence by approaching labor-management relations as trench warfare. It won recognition from GM with a grueling 94-day strike in 1936. In clash known in union lore as "The Battle of the Running Bulls," workers used spare auto parts to fend off club-wielding police officers who had come to chase them out of an occupied factory.
Over time, the violence waned. But labor-management relations didn't get any more cordial. As late as 1998, the UAW waged a possibly illegal strike against GM that, according to Paul Ingrassia's Crash Course, dropped overall U.S. industrial output by a full percentage point. The casus belli? GM had attempted to move some machinery out of a metal-processing plant.
By negotiating doggedly and striking ruthlessly, the UAW won increasingly generous contracts for its members in the heyday of the American middle class. The higher wages, health benefits, and guaranteed pensions it secured for autoworkers helped set the standard for the rest of the country. But some of the UAW's victories would also play a role in the auto industry's near downfall. The contracts saddled Detroit's auto companies with tens of billions in retiree health costs. They required base levels of employment that bore no relationship to the market. Perhaps most notoriously, they created a "jobs bank," which allowed some laid off workers to collect 95% of their wages while waiting for a new job on the factory floor.
All of that came to a head in 2007. As high gas prices ravaged sales of trucks and sport utility vehicles--Detroit's bread and butter--Ford, GM, and Chrysler began winning major concessions from their workers. Their biggest coup was an agreement to move retiree health costs off their own books and into a trust fund controlled by the UAW, which was funded by capped payments from the companies.
As we all now know, though, the changes came too late for GM and Chrysler, which both ended up in bankruptcy.
The UAW went into this year's contract talks with the deck largely stacked against it. On the one hand, the car companies were returning to profitability (even Chrysler, the perrenial sick man of Detroit, posted a $212 million profit in the third quarter). But the shaky economy gave the car companies leverage, because neither side wanted negotiations to end in the death of American Auto. As part of their bankruptcy deals in 2009, the UAW had also given up the right to strike against Chrysler or GM during this round of talks.
Still, the union didn't come away empty-handed. Its big prizes included pledges by the three automakers to create or retain a combined 20,000 jobs in the United States and to invest roughly $13 billion into upgrading and retooling their American manufacturing plants. In the process, companies agreed to bring work back to the states from Mexico and China. Hourly workers also won signing bonuses worth several thousand dollars and profit-sharing plans worth as much as $12,000 a head. The union did agree to keep in place a controversial two-tiered wage system, put in place in 2007, that pays new hires significantly less than older workers, but it also convinced the companies to increase their entry-level wage to nearly $20 an hour, up from around $15.