Voting for Unemployment

Why union workers sometimes choose to lose their jobs rather than accept cuts in wages

Even with 11.5 million people unemployed, it is sometimes difficult to tell who is unhappier—those who don't have jobs or those who do. While some unions have made concessions in wages because of the weak economy, others have not. Indeed, often in recent years union workers, faced with the choice of accepting cuts in their wages or losing their jobs altogether, have voted emphatically for the latter. Two pipe mills operated by Interlake, Inc., in Newport, Kentucky, closed in 1980 after union workers voted 803 to one against a freeze of their wages and benefits at $19 an hour, which amounted to twice the local average. Forty A&P grocery stores in Pennsylvania closed last September after a union refused to amend, in mid-term, a contract that paid $10 an hour, on average, to store employees. The Buffalo Courier-Express, in Buffalo, New York, went out of business last fall after union members, including reporters who were being paid around $26,000 a year, refused to make concessions. In Milwaukee, union workers at the Schlitz brewery not only refused to accept a wage freeze, even though it was obvious that the brewery might otherwise be shut down; they went on strike demanding raises. After Schlitz closed the plant permanently, in 1981, many workers, unwilling to believe that the decision was final, continued to picket.

What is at the heart of these and other conflicts is not an urge for self-destruction but rather the chronic mistrust between corporate management and American labor unions. Louis Brandeis, hardly a corporate apologist, said in 1905, "Don't assume that the interests of employer and employee are necessarily hostile—that what is good for one is necessarily bad for the other. The opposite is more apt to be the case. While they have different interests, they are likely to prosper or suffer together." One might assume that if anything could prove the reasonableness of such advice to both labor and management, it would be the pressures of the recession and the need to work together to keep companies from going out of business. Nevertheless, confrontation, however destructive, continues to be the norm in many industries. William Hobgood, a former assistant secretary of labor, who mediated the coal strike in 1978, says, "Historically, labor has made most of its gains through confrontation, not cooperation, and historically, management has been most satisfied when it has employed pressure techniques. You would think that the recession would cause some positive structural change in that relationship, but so far, if anything, it's made matters worse."

Why this should be so has to do largely with the course of labor relations through the years of prosperity that preceded the American economy's doldrums. Then, mechanisms designed in anticipation of infinite growth, and geared chiefly to provide a constant improvement of wages and benefits, were built into contracts. These mechanisms made little provision for any decline in profits or the retrenchment that would have to follow. Today, they still have a powerful momentum, even though they have become detrimental to the interests of all, ultimately threatening the shutdown of factories and stores that are the source of union jobs and corporate income.

INDUSTRIAL work is loud, monotonous and tiring, and it nurtures in workers a deeply felt resentment of managers, who are imagined to be relaxing in wood paneled luxury while unionists carry on with the real jobs. Although working conditions, with some exceptions, are far less dangerous now than in the past, and union level wages have become adequate for a good life, a company's past offenses remain part of an industrial town's lore, and serve to embitter workers in the present. According to Stephen Schlossberg, a labor lawyer and former director of government affairs of the United Auto Workers, "Most labor relations are still about yesterday." Thus, if one is to understand where the unions are today, one must recall where they have been.

The goon squads employed by coal-mine owners, the dirty, unventilated textile mills, the subsistence-level wages, and the broken backs and missing limbs suffered by laborers working, exhausted, too close to open-hearth furnaces or vicious stamping presses are not all that far in the past. What coal miner could be ignorant of the explosion of the mine in Monongah, West Virginia, in 1907, which killed 361 men and was caused by a company's indifference to escaping methane, or of the mine explosion in West Frankfort, Illinois, in 1961, which killed 119 men and was also caused by the owner's negligence?

Before workers formed unions, they were forced to accept the wages they were offered, and either to tolerate conditions on the job or quit. Substantial improvements in wages and conditions were not achieved in most industries until the 1940s and 1960s, when unions mustered enough power to bargain on an industry-wide basis—a system known as "pattern bargaining." The United Mine Workers was among the first unions to achieve pattern bargaining. By the late 1940s, the UMW had narrowed its task to arguing over three master contracts with three regional associations of the nation's large mining companies. Finally, in 1960, the UMW's president, John L. Lewis, signed the first National Bituminous Coal Wage Agreement, a contract that bound all the large mining companies and that was quickly "patterned out" to smaller union-controlled mines. Following the UMW's example, the United Steelworkers of America also began, at about the same time, to negotiate master contracts, usually with U.S. Steel acting on behalf of the largest companies, and again the terms were patterned out to other firms (giving rise to the slogan "Basic Steel or No Deal"). In 1964, the Teamsters began to negotiate with an industry group now known as Trucking Management, Inc., and over the years most other large unions have developed similar arrangements.

Pattern bargaining created strong feelings of loyalty—now fashionably called "solidarity"—among union locals. Together, the locals would bear the burden of strikes and share the gains. Pattern bargaining would fail only if one local lost its nerve and gave in before the others, so a formidable resistance to a local's independent action developed—a resistance that has proved critical in recent years, when locals have been asked to make concessions to save specific factories. In recent months, national unions have begun to show some willingness to tolerate such concessions. Many Teamsters locals have made separate concessions to help single companies compete with independent truckers, and locals of Wheeling Pittsburgh Steel Corporation decided not to abide by the USW's national agreement, and signed a separate, concessionary contract instead. Such changes have come hard, however, within an institution fundamentally opposed to them.

Union leaders and even some company managers liked pattern bargaining, because it made their jobs simpler. Instead of negotiating the same details or grinding through the same script of strikes, lockouts, threats, and counterthreats again and again, all parties could be served by a single round of negotiations. Thus, the United Auto Workers traditionally would target a strike against one of the four U.S. auto makers, and after a new contract was settled, the remaining three would adopt its terms without further argument. Another fortunate effect of pattern bargaining was that it took wages out of competition. If every company in an industry endorsed the same labor agreement, containing the same wage-and-benefit stipulations and the same "work rules" specifying which union members could do which tasks, then no company could achieve a cost advantage through labor.

To a point, then, pattern bargaining was admirable and humane, since it eliminated a company's incentive to wring a few extra pennies of profit out of the hides of workers, as the robber barons had clearly done in the century before. But, according to Hobgood, by neutralizing a major variable in competition, pattern bargaining made companies overconfident: what difference could each new labor expense make if all competitors had to meet it? Thus, many large companies found wage demands easier to accept than to resist, and, naturally, the unions were delighted. Aware of their advantage, they grew still bolder and harder to satisfy. But the system could work only as long as all of the important competitors were bound by the same labor contracts. That is, in the steel, auto, rubber, aluminum, and chemical industries, and others governed by pattern bargaining, it could work only as long as all important competitors were domestic. Foreign competitors, free from union wage structures, could bring the system down.

THROUGHOUT the boom years of the 1950s and 1960s, union wage negotiations were helped by dramatic increases in industrial productivity. Manufacturing techniques improved, costs fell, quality rose, and factories generated goods as never before. The world's rising demand for consumer goods could be satisfied only by the output of U.S. factories, since the industries of Western Europe and Japan had not yet recovered from the war.

As long as productivity increased, workers could generate enough new wealth to finance their own raises. Contracts signed by the UAW and General Motors in 1948 and 1950, for example, included wage increases of 3 percent a year, justified by the 3 percent annual increases in productivity that were then the national trend.

Relations between corporate officers and union leaders became more and more amiable. Over the first part of the century, the two groups had generally viewed one another with contempt. Beyond the name-calling—John L. Lewis, for example, once referred to coal-mine operators as "human leeches"—were deep class differences. But as the unions grew wealthier, and began to attract college-educated people to administer them, these differences became less pronounced. And as the companies prospered, everyone had less reason to do battle at the bargaining table. The companies were making enough money for managers to avoid strikes, pay the stockholders, and keep their jobs, and enough for union leaders to win wage increases, improve conditions, and secure votes to maintain their titles. Thomas N. Bethell, a writer and former UMW official, described, in The Washington Monthly in 1969, how Lewis, after leading intensely bitter and ideological coal strikes in the late 1940s, executed an about-face once he signed the UMW's lucrative national agreement in 1950. Lewis became friendly, and even relaxed, with management—so much so that he took the union itself into management, using UMW assets to buy stock in the West Kentucky Coal Company. In l959 and 1961, the union even bailed the company out when it fell behind in pension-fund payments.

Nevertheless, in the rank and file of many unions, suspiciousness prevailed. Workers, even as they rose higher and higher on the nation's economic scale, began to distrust union leaders who, in their view, were too closely allied with management. According to a former official in the Labor Department, who asked not to be identified, this perception was generally accurate. Through the 1960s and early 1970s, he says, management and labor leaders shared the same chief interest: dividing up the country's growing wealth. Union membership, which peaked in 1953, entered a decline thereafter, as union leaders concentrated on improving the lot of workers already in unions rather than on organizing new shops. When the boom economy slowed, the decline became substantial. As time passed, the average age of union members, like the age of the factories the unions depended on for plenty, began to rise.

In the late 1960s, U.S. increases in productivity faltered. Incremental increases in steel productivity, for example, dropped so much that, in 1975, the unthinkable happened: Japan passed us by. That year, according to the U.S. Bureau of Labor Statistics, Japanese firms took only 9.2 man-hours to produce a ton of steel (far down from the 25.2 hours it took them in 1964), while U.S. firms required 10.9 hours of work per ton (only a modest improvement over the 13.1 hours required in 1964).

The nation's weak growth in productivity was doubtless chiefly the fault of management, but the unions were part of the problem. As the seniority of members increased, unions fought harder for featherbedding rules to give older workers more short-term security; unfortunately, these rules made the workplace inefficient, inhibited the exploitation of new technology, and damaged the long-term economic health of employers. Featherbedding has been especially detrimental to the transportation business, in which foreign competition is not a factor. Rail unions, for example, have fought for preservation of the "100-mile rule," which dates to the age of steam locomotives, when moving a train a hundred miles was a day's work; now, though the trip takes only a few hours, the 100-mile rule still gives most crews a full day's pay for the job. In Conrail yards around Philadelphia, four union workers might be assigned to fix an air-conditioner that any non-union company would assign a single mechanic to, according to a report last fall in The Wall Street Journal. Union workers on Conrail's Philadelphia commuter lines average $40,300 a year in wages and benefits, at a time when the system is crumbling, and dilapidated bridges and spur lines are being closed down, for lack of capital to repair them. Since 1979, the system's fares have doubled and ridership has fallen by 31 percent.

While featherbedding in other unions is not so extreme, it does exist. In auto-assembly plants, for example, job descriptions (i.e. duties) of union members may not be changed without the UAW's approval; in construction, there must be a large number of high-paid journeymen (senior workers) for every low-paid apprentice on a job, whether or not the job demands any special skills.

Although productivity growth slowed in the late 1960s, union wages continued to rise. The USW led the way. In 1973, two years before Japan's productivity in steelmaking surpassed that of the U.S., the steelworkers and the largest American steel companies signed the Experimental Negotiating Agreement (ENA). In exchange for the USW's pledge never to strike nationwide, the steel companies committed themselves to a sequence of 3 percent wage increases payable regardless of the companies' financial health. Reached at a time when American companies were selling as much steel as they could produce, the ENA, with its promise of no supply-disrupting strikes, seemed to be a good deal for everyone. Although both labor and management were aware by 1973 that foreign competition could become a threat, the industry was protected from competition within the U.S. by its "list-price" system. The large companies, generally led by U.S. Steel, published price lists to which most other companies conformed, and set the prices high enough to allow for high wages as well as large profits. The list-price system enabled the steel industry to function profitably with thirty-year-old furnaces. Yet the high prices begged foreign competitors to enter the field. The steel companies and the USW thought that rather than meet the new competition head on, they could neutralize it, by lobbying for import restrictions. As a result of the ENA, underwritten by the list-price system, the wages of steelworkers increased, in real terms, some 29 percent between 1970 and 1980, even though the steel industry's productivity scarcely changed.

For other unions, automatic raises such as those provided by the ENA became the goal, and most big-labor contracts began to include inflation indexing and cost-of-living escalators that triggered automatic raises regardless of a company's financial outlook. Thus, by 1980, although U.S. manufacturers sold fewer cars than in 1970, the wages of auto workers, in real terms, had increased 15 percent. The wages of union workers in the tire industry increased by 7 percent between 1970 and 1980, while total production fell 16 percent.

By providing raises for many years and boasting about more to come, labor leaders have given members the impression that raises are mandatory. According to Schlossberg, "At some point, items like indexing and COLAs [cost-of-living allowances] became rituals. We didn't even think of them as contract gains anymore—they were just rights."

Workers aren't the only ones who have been led to expect more money regardless of the economy. Business managers, who also have enjoyed steady raises, bonuses, and benefits over the years, have come to think the same way. From 1970 to 1980, executives of major manufacturing firms gained an average of 16 percent in real income. David Roderick, the chairman of U.S. Steel, received $821,322 in 1981, which, adjusted for inflation, was 29 percent more than his predecessor earned a decade earlier—the same percentage of increase enjoyed by steelworkers. Frederick Jaicks, the chairman and chief executive of Inland Steel, received $330,000 in 1982, despite his company's shaky financial outlook and the fact that it lost $119 million that year. Edward Jefferson, the chief executive officer of Du Pont, who presided over the company's merger with Conoco in 1981—a decision viewed by many as a disaster for Du Pont's fortunes—received $887,299 that year.

High corporate profits have allowed both management and labor to view raises as unrelated to performance—as a right rather than a reward. When foreign competition did not threaten profits, it was possible for both management and labor to satisfy their expectations. Now that foreign competition has eroded profits, it has become clear that something has to give. But can it be the unions? The wage escalating mechanisms are so deeply entrenched as to seem inalterable, and chief among them are those associated with seniority.

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Gregg Easterbrook is a contributing editor of The Atlantic. He is the author of The Leading Indicators and The King of Sports: Football’s Impact on America.

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