Voting for Unemployment

Why union workers sometimes choose to lose their jobs rather than accept cuts in wages
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KEITH Johnson, the president of the International Woodworkers of America, told his union at its 1982 annual convention that wages are not a factor in the 30 percent unemployment rate current in the forest-products industry. Johnson blamed instead the nation's high interest rates and monetary policy, and management's failures. William Winpisinger, the president of the International Association of Machinists and Aerospace Workers, told the Conference Board in 1982, "The steel industry's inability to compete with more modern, government-subsidized, foreign manufacturers is largely due to its own shortsightedness. These companies now blame their plight on wages .... It is not labor's fault."

Clearly, wages are not the only source of America's industrial ailments. It is wrong to say, however, that wages are irrelevant. Unfortunately, this is what union members—especially those with seniority—want to hear. In the words of the former official in the Department of Labor who was cited earlier, "No labor leader can run on any platform except higher wages, and once they're elected, they can take a concession at most once if they want to stay in office." Recent history bears out his observation. In 1977, for example, as I. W. Abel was retiring as the president of the USW, he and Lloyd McBride, his chosen successor, were also negotiating a new contract. Abel and McBride both believed that the steel industry was in grave danger; they offered to waive many union work rules to allow for greater productivity, in return for management's pledge of greater job security. The idea seemed to be a breakthrough in cooperation between labor and management, for the good of both. But a young leader of a USW local, Edward Sadlowski, who was challenging McBride for Abel's job, got wind of the proposed deal and made it a campaign issue, charging that it proved that the USW leadership was too cozy with management. McBride retreated and was forced to run on a platform similar to Sadlowski's: no cooperation, no trade-offs and raises for all. The revision in work rules was abandoned. McBride won, but only by running up majorities in the USW among members other than the 40 percent in steel. (The USW also represents workers in the aluminum, copper, zinc, lead, container-manufacturing, chemicals and plastics, and metal-fabricating industries.) Sadlowski carried the steelworkers themselves handily.

Most labor leaders who wish to retain their high status and income have few alternatives other than winning reelection. Unlike business executives or politicians, union officials cannot smoothly transfer to corporate or legal jobs; according to an officer of the AFL-CIO, the "possibilities available to a defeated labor leader are extremely limited."

Despite the influx of college-educated administrators over the years, union headquarters are still dominated by men and women who worked their way up from the labor force. John DeConcini, the president of the Bakery, Confectionery and Tobacco Workers International, grew up in the coal town of Kulpmont, Pennsylvania, never went to college, and began his career at the Bond Bread Company. Robert F. Goss, the president of the Oil, Chemical and Atomic Workers International, went to work as a laborer at a Union Oil Company refinery after graduating from high school. S. Frank Raftery, the president of the International Brotherhood of Painters and Allied Trades, joined a sign-painters' local when he was sixteen. Frank Drozak, the president of the Seafarers International, started work at a Mobile, Alabama, shipyard at the age of sixteen, and a year later he was at sea.

Unions are perhaps the only institution left in the U.S. in which people without academic credentials routinely rise to high office. When the business establishment ignores or patronizes labor, union leaders become all the more determined to protect their organization—their brotherhood. Typically, they do not want to leave the union hierarchy, because it accords them the respect that, in their view, society as a whole denies them. As a result, union leaders, like union members, are advancing in seniority (the average age of members of the AFL-CIO's executive council is fifty-seven), and faced with the temptation of defending their perquisites at the expense of future generations.

THE increasing size of U.S. conglomerates means sales figures well into the billions, and where billions are involved, many union workers cannot believe that there isn't enough left over for them. When U.S. Steel spends $7 billion on Marathon Oil, and then goes, hat-in-hand, to its workers, asking for a cutback of $1.50 an hour in wages, its chances of being taken seriously are slight, even though its need for a wage concession may be real. Last year, International Harvester asked its unions for $100 million in concessions, citing the company's undeniably bleak financial condition, but not long after, the workers learned that it had paid a total of $6 million in year-end bonuses to top management. In April of 1982, on the very day that General Motors signed a delicate and hard-won concessionary contract with the UAW, it sent a proxy solicitation to shareholders, asking them to make it easier for management to award itself bonuses. Needless to say, the union was furious, and the workers who had voted for concessions felt betrayed.

One impediment in wage negotiations, in any case, traditionally has been the rank and file's belief that every company has a set of "secret books," which, unlike the doctored public books shown to the union, are swollen with profit. Efforts to keep the Interlake, Inc., pipe mills in Newport open were probably doomed when the USW local discovered, at a late stage, that one of the plants had shown a $1.9 million pre-tax profit in the first six months of the year. Although the raises the company wanted to defer would have quickly wiped that profit out, such a sum uncovered after Interlake's pronouncements of certain doom enabled the union local's leaders to convince its members that they were up against a secret-books ploy. Walter Reuther, who was the head of the UAW from 1946 until he died, in 1970, pursued the secret-books theory with gusto. Last year, when General Motors for the first time opened all its records to an independent audit, during negotiations for a concessionary contract, it was found, to no one's surprise, that the company actually was in trouble. Given the creative possibilities of modern bookkeeping, however, it is only natural that unions should be uncertain about whether the numbers are accurate or not.

Golden parachutes—the huge bonuses payable to corporate officers whose companies are acquired—also suggest to workers that a company can always come up with extra money if it is forced to do so. The bonuses have been justified with the argument that they will discourage mergers, by making the companies providing them more expensive to take over, but the message they imply is clear: forget the health of the company and grab everything for yourself that you can. John C. Duncan, the chairman and chief executive officer of the St. Joe Mineral Corporation, acquired by the Fluor Corporation in 1981, was able to take a $1 million golden-parachute bonus, not because he had been fired but merely because his responsibilities had been "substantially reduced." According to Ward Howell International, an executive search firm, some 15 percent of the nation's l,000 largest corporations have made provisions for golden parachutes, and it's not hard to predict how unions will react in the next rounds of contract talks with those firms.

Golden-parachute awards are symptomatic of the debilitating emphasis on short-term gains current in American corporations as a whole. And in a maddening way, management's zeal for quick profits can be served by the closing of factories. A company can often take a tax write-off far greater than the value of the facility's physical assets, because it can also write off some of the cost of the long-term benefits it is obliged to pay workers. When Colt Industries closed its Crucible Steel mill in Midland, Pennsylvania, it took a tax write-off of $134 million in benefit obligations. Although the company will be paying on that debt for many years to come, most of the tax advantages—and short-term earnings improvements—were realized immediately. U.S. Steel was able to spend $7 billion for Marathon in part because the closing of thirteen steel mills had generated $850 million in cash flow, as assets and obligations were written off. Just as the promise of SUBs may discourage workers from devoting themselves wholeheartedly to keeping plants open, so the promise of these tax breaks may discourage managers from doing so.

THE development of the skyscraper—which moved management off the factory grounds—was probably a bad omen for labor-management cooperation. Workers are not inclined to trust pronouncements coming from some far-off headquarters suite; managers, remote from the daily fears and concerns of workers, find it possible to see labor as just another factor in a business school equation. Many companies have created special departments to deal with labor relations, distancing top managers still further from workers. "Even in good companies, they pick the meanest son-of-a-bitch they've ever seen to be vice president for labor," the Department of Labor official says. "And that man, if he wants to advance his career, has to do one thing: bust the union. So it's not in his personal interest to have cooperative labor relations."

Small attitudinal and language differences can become major barriers when the gap between management and labor is large. Companies refer to "salaried" management personnel and "hourly" factory employees, as if to emphasize that blue-collar workers may be jettisoned at any moment. They speak of "wages" for workers but "compensation" for executives, as if a manager honored a company merely by consenting to keep office hours. I asked one business executive last fall why his company could not offer employment guarantees in return for wage concessions, and he replied, "Why, that would be converting a variable cost into a fixed cost!" Try to imagine a union's reaction after the word filters down that management considers workers to be "variable costs."

From one industry to another, there can be marked differences in style and spirit, which contribute significantly to the mood of labor relations. The auto industry, though troubled, is still committed to the future; it is still building new plants and designing new products, and many auto executives simply like cars. Management's attitude gives union members hope that there is a reason for them to sacrifice. The steel industry, on the other hand, is a skeleton. It has been spending neither to build new plants nor to improve old ones. (As part of the most recent contract negotiated with the USW, which was signed in March, the steelmakers sent the union a "letter of intent" to reinvest their savings in labor costs in steel plants, but they did not commit themselves to any specific projects.) Most steel companies have been investing their money elsewhere, and managers at those companies deprecate their own business and appear uniformly funereal. Not surprisingly, their attitude tends to convince steelworkers that all hope is lost, and that they ought to take what they can and run.

Even within industries, distinct differences exist between one company and another. General Motors, for example, has a tradition of insensitivity that goes beyond its ill-timed maneuver to win bonuses last spring. (In 1964, the company ordered all doors removed from toilet stalls, to prevent loitering. It would not have required much insight into human nature to realize that workers would be furiously insulted, and, of course, a strike followed.) The vote on General Motors's present concessionary contract was only 52 to 48 percent in favor, despite the company's marginal profitability. "Even we were amazed at the depth of resentment and hostility people feel toward GM," a source close to the UAW says. He believes that this narrow victory was achieved only because General Motors had recently laid off a relatively large number of workers, who hoped the new contract might bring them back to work. (The contract also requires GM to put more money into its SUB fund to cover workers with low seniority.) Ford, by contrast, has a tradition of appreciation and concern for workers. Ford's vice president for labor relations, Peter Pestillo, often makes statements of glowing praise for workers and labor leaders, and although he follows up his praise with requests for concessions, his respectful manner makes him unusual. Ford has begun to emphasize communications within its factories, and to adopt a version of the "quality circles"—the factory equivalent of staff meetings—that Japanese companies have found make workers more productive and convince them that their employers value their opinions. Ford's corporate attitude seems to trace to the Ford family itself. Auto workers frequently tell the story of how, on a frigid day during a strike at Ford's vast River Rouge complex in 1967, Henry Ford II sent out fire drums and coffee urns to keep workers on picket lines warm. The gesture was minor, but the fact that it is long and fondly remembered illustrates the rarity of acts of good will in labor relations.

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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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