Voting for Unemployment

Why union workers sometimes choose to lose their jobs rather than accept cuts in wages
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IN nearly every union, when layoffs occur, the young go and the old stay. Seniority rights are perhaps the most passionately guarded of all union benefits, and in many respects they constitute a social victory. It is only fair, after all, that one's job should not be threatened merely because one is no longer young. But union seniority regulations were designed in an age of prosperity, when most layoffs were temporary. These days, unfortunately, layoffs are routine, and often permanent.

At some point, workers who have been laid off either lose interest in maintaining their union membership or become ineligible to do so. USW members, for example, retain their voting rights for only two years—recently increased from one year—after a layoff. Thus, many of the 160,000 steelworkers now out of work did not have a voice when their new contract came before the union early this year, and they did not have a voice when two more stringent contract proposals were defeated in 1982. In the UAW, workers who have been laid off keep their voting rights for six months after their unemployment benefits expire. Thereafter, they must renew their voting rights on a monthly basis, a process that in some locals entails filing forms at the union hall. "As a practical matter, very few bother," a UAW spokesman says.

When a new contract or a proposed concession comes up for a vote, especially in industries already hard hit by layoffs, such as auto and steel manufacturing, the majority of those doing the voting are the least likely to be laid off. Senior workers can afford to remain militant in their wage demands; they know they will lose their jobs only if the factory closes or the company itself goes out of business. Younger workers, anxious for employment, might be more willing to forgo raises or to make concessions, but as their ranks are depleted by successive layoffs, they become outnumbered in any vote.

Last fall, Chrysler's American workers rejected a proposed no-raise, no-layoff contract that union leaders had approved. The UAW then called an unusual "strike sentiment" vote. Fifty thousand Chrysler workers—the 45,000 still on the job and the 5,000 most recently laid off—were entitled to vote. Chrysler's remaining 42,000 workers, who had been laid off so long that they had lost their voting rights, did not participate. The workers voted 65 percent to 35 percent against a strike, but in favor of a demand for raises; eventually, a strike began anyway, when the UAW's Canadian affiliate walked out. The contract that settled the strike gives Chrysler workers in the U.S. immediate raises to about $20 an hour in wages and benefits—a total of about $2,200 each for the year. The contract satisfies those who want raises and helps those drawing retirement benefits, but it also hinders Chrysler from calling back many of the 47,000 workers hoping to be rehired.

Supplemental unemployment benefits (or SUBs)—a fairly recent development in labor contracts—have become a powerful incentive for senior workers to resist compromises. Various SUB plans provide for workers who are laid off or whose factories close, and all the plans become significantly more lucrative as a worker's years of service increase. In steel, senior workers can get up to $180 a week from their SUB plans, in addition to the money they receive from the state and from the federal trade adjustment insurance program, which covers workers in industries that have been hurt by foreign competition. All told, these benefits can provide a senior steelworker with about 80 percent of what he would have made on the job, for as long as two years.

Steelworkers are eligible to retire after thirty years of service, and a new benefit, called the "rule of sixty-five," allows retirement also to steelworkers whose mills shut down and whose age added to years of service equals sixty-five. Based on the American Iron and Steel Institute's figures for 1980—the most recent ones available—steelworkers would now be, on average, forty-three years old with eighteen years of service, which works out to sixty-one under the rule of sixty-five. Thus, a large number of steelworkers in any threatened mill are quite close to eligibility for retirement, and their special SUB benefits would see them halfway there.

Steel's SUB benefits are not unique in industry, although they are the most generous. Many UAW members have the benefit of SUBs and trade-adjustment insurance coverage, and at Ford and General Motors they are also protected by a new benefit called "guaranteed income stream," or GIS, which pays senior union members at factories that are shut down about $13,000 a year, on average, until they retire (most auto workers, like steelworkers, can retire after thirty years' service) or turn sixty-two. According to the Bureau of Labor Statistics, half of the country's manufacturing workers—the most heavily unionized sector of American business—have some kind of SUB protection. Some 95 percent of rubber and plastics workers, 82 percent of auto and aircraft workers, 70 percent of workers in "primary metals" industries (steel, aluminum, and so on), and 61 percent of apparel workers are covered by SUBs.

Audrey Freedman, the labor economist for the Conference Board, a non-profit organization for research in business economics and management, points out that SUBs and other special benefits were not intended as severance payments for the shutting down of the industrial state; instead, they were devised to give workers subject to cyclical layoffs the means to live relatively undisrupted lives (Likewise, the early-retirement plans that are being exploited by many companies to cut back work forces were conceived originally to be a gentle way of laying off employees to make room for new talent.) As the economy has spiraled downward, the character of SUBs has been transformed. Now, in many cases, the benefits encourage union workers to root for failure.

Consider the fate of the Ford Motor Company plant in Sheffield, Alabama, which had been losing money since 1974. Last year, Ford offered to keep the plant open if the local would break with the national union and accept a cut in wages and benefits to $10.50 an hour—about half of union scale, but by no means low pay for a small town in Alabama. Ford also offered to sell the plant to its employees. The union local turned down both proposals, and let the plant close. The workers at the Sheffield plant were, on average, forty-eight years old, with fifteen years of service. By combining SUBs, the "income stream" (for which Sheffield workers were eligible), and early retirement, many could live reasonably well without working at all, and some with high seniority could actually make more with the plant closed than they could working at the concessionary rate.

A similar chain of events led to the closing of the pipe mills operated by Interlake, Inc., in Newport, Kentucky. Interlake offered in 1980 to keep the plants open, and make investments to improve them, if the USW local would agree to postpone for a year the raises then due. No reduction in pay was asked. Negotiations went on for two months: the union insisted that the company was bluffing; the company insisted that it was not. The local voted against a postponement, and, according to an Interlake spokesman, "the plants were chained and padlocked by that evening."

Freedman, of the Conference Board, had been contacted during the negotiations by one of Interlake's directors, who was puzzled by the company's inability to preserve the plants. "I told him to check the average age," she said. "He did, and it was high. That was all you needed to know." Walter Soward, fifty-five, a USW member who worked for Interlake for sixteen years, says, "The men who had their thirty years were the ones shouting loudest against making concessions. They just knew they had nothing to lose." Phillip Brown, fifty-six, who worked for Interlake for thirty years, and was on the union's negotiating committee, says, "It did give me satisfaction [during the negotiations] knowing that pension was going to be there."

None of this is meant to suggest that older union workers are scheming on an organized scale to be paid for not working. While there are a few shirkers in any group, the work ethic runs deep in American society, and very few people, given the choice, would rather be idle than work. Instead, these episodes show why—especially in the heat of the moment—workers would take the seemingly illogical step of abolishing their own jobs. The senior workers who vote against concessions are not voting to turn themselves out into the cold, because they have special benefits to fall back on. The payments may not be as generous in some industries as in others, but they at least give workers some courage when the time comes for a show of hands. Then, too, imagine the perspective of a senior worker looking back on two decades of monotonous labor in a pipe mill. The prospect of a long paid vacation—available only if the plant shuts down—could, understandably, be tempting. And while most workers might tire of their vacations after a year or two, relent, and wish to resume working and earning their place in society, by then the plant would be closed, and the chance to work gone.

Of course, the SUB and other benefit plans must be financed by someone, and they are only as good as the companies that back them. Caterpillar's SUB fund is out of money, as is International Harvester's. International Harvester, in fact, is contemplating a default on its entire pension system, and may try to saddle the federal government's Pension Benefit Guaranty Corporation with its obligation. The guaranteed income stream is guaranteed only for the length of a three-year contract. But in the anger and confusion of a union-hall concessions vote, considerations of a company's long-term economic health are readily forgotten. The closing of a single factory does not erase the benefits a company has agreed to pay; as long as a company exists, even if it diversifies out of manufacturing into some other field, its contract pledges remain. Thus, union workers need to fear the disappearance of their benefits only if the company as a whole is threatened with bankruptcy, and so far bankruptcy is a bullet that major manufacturing companies have been able to dodge.

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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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