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Concessions Lead Only to More Concessions

Concession Bargaining at the Crossroads

by JACK RASMUS

This past weekend, more than 30,000 union workers at Boeing Corp. in Seattle, were forced to accept deep concessions in their union contract, gutting their pensions, future healthcare benefits, wages, and other benefits. Their contract with Boeing had not even expired but they were forced into concessions nonetheless. Nor was the company, Boeing, in any financial distress. It had registered record profits in consecutive years, and had in November 2013 bought back $10 billion in stock from its shareholders and paid another $2 billion in dividends to the same. Nevertheless Boeing demanded concessions, having received communication from Union (IAM) International leadership beforehand of their willingness to grant the same. The combination of Union International leadership pressure, pressure from countless Democratic Party local and state politicians, and the Company’s new offensive, proved too much for local workers to resist. The new concessions will effectively end workers’ defined benefit pensions, cutting retirement by replacing defined benefit with 401ks, and allow the company to end its healthcare insurance benefits before 2018 in accordance with the Obama new health care plan. Wages for new hired workers are projected to decline to levels of minimum wage or less over the next 11 years of the new contract term.

This kind of attack on pensions and healthcare–or what this writer calls the ‘social wage’ was predicted in this writer’s article, ‘Concession Bargaining at the Crossroads’ two years ago in 2011. That article is reproduced here in its original draft form once again.

CONCESSION BARGAINING AT THE CROSSROADS 

by Jack Rasmus, 2011

The history of collective bargaining since the Second World War has consisted of several stages or phases. The first phase was roughly from 1947 to 1979. During it collective bargaining was expanded both in terms of its ‘scope’ and its ‘magnitude’. Scope refers to new areas of bargaining, such as cost of living adjustments, supplemental unemployment benefits, pensions and health care benefits, union and worker rights, etc. Magnitude refers to increasing the dollar value of wages and benefits. Up to 1979 both expanded.

In contrast, from the mid-1970s to 2007, concession bargaining became the growing practice. But it was concession bargaining focused on giving back ‘magnitude’ gains of the previous decades, not necessarily the scope of bargaining. Workers in the private sector gave ground on wages and benefits in a decades-long attempt to protect their jobs.

First Stages of Concession Bargaining

Among the first to feel the effects were workers in the construction sector, starting in the 1970s. Employers formed early in the decade the ‘Construction Industry Users Roundtable’. Its strategy was to undermine the then powerful building trades unions by a new tactic: the ‘double breasted operation’. This simply put was a way to undermine the construction unions by setting up parallel, non-union companies. The unions ignored the threat more or less, since the double breasted operations were set up in the suburbs and outlying regions. The urban bastion of unionization in construction wasn’t immediately impacted. Employers progressively then moved jobs and work to the non-union operations. The loss of jobs in the unionized operations eventually forced workers and unions to start granting concessions in an attempt to prevent their work shifting to the non-union companies. Concessions soon expanded. Saving jobs in exchange for givebacks on wages and benefits eventually became the norm.

In the late 1970s the strategy of forcing workers to give up wage and benefit gains to keep their jobs leap-frogged into the manufacturing sector. The pilot and defining event was the Chrysler bailout of 1979. It worked so well the model was planned for application to manufacturing in general. By then the Construction Industry Users Roundtable’ had expanded into what is now known as perhaps the most formidable and effective Big Business organization today—the Business Roundtable. Big manufacturing and service companies joined with the Construction employers. The construction industry union-busting model was transported to other sectors of the economy.

The tactic of double breasted operations took on a new form. Alternative union-free operations were set up. But not across town, as in construction. It was now across borders. The manufacturing analog of the double breasted operation was the runaway shop, as manufacturers moved operations offshore.

In these they were aided by the most pro-business President since Coolidge—Ronald Reagan and a compliant Congress. Manufacturers were provided generous economic incentives to set up offshore. Tax incentives were generously granted. Deregulation was introduced. Then in 1988 and 1993 ‘free trade’ agreements were established with Canada and Mexico to facilitate the movement of US capital to those countries to set up operations. Free ‘trade’ is not just about export-import of goods and services; it is even more about negotiating favorable conditions for US foreign direct investment in those countries. Tax for investing offshore plus free trade plus deregulation devastated jobs in the US beginning in the early 1980s, and continuing ever since. Under pressure of losing jobs, workers in manufacturing began the long, dead-end road toward concession bargaining in an attempt to save their jobs. But it didn’t. More than 10 million jobs have been offshored ever since.

The pressure to grant wage concessions intensified in the 1990s. In addition to the threat of job loss, now escalating double-digit annual increases in health care costs provided a second hammer. That ushered in what was called ‘maintenance of benefits bargaining’. Now desperate to maintain their health care coverage, workers now gave up more wages in exchange for keeping health benefits. But that too did not last long. Health care cost shifting accelerated by 2000 and into the next decade.

To assist in paying for rising health care premiums and costs, the federal government permitted companies to drag surplus funds from workers’ defined benefit pension plans to cover rising health costs. Up to 20% of health cost increases were subsidized in this manner. But that represented giving up wages—i.e. concessions—in order to maintain benefits as well. Only this time it was workers’ ‘deferred wages’ that went into their pension funds instead of their immediate paychecks. But a wage is a wage, whether immediate or deferred. And concessions on nominal (immediate) and deferred wages became the increasing rule by the late 1990s.

This evolving concession bargaining since the late 1970s into the last decade represents the second phase of the history of collective bargaining in the US. The first, as noted above, was the phase during which collective bargaining expanded both in terms of ‘scope’ and ‘magnitude’—that is, in terms of new areas of bargaining added to negotiations as well as in terms of advances in wages and benefits. The second phase of bargaining in the US, from the late1970s to around 2000, represents the first stage of concession bargaining.

Stage Two: From ‘Magnitude’ to ‘Scope’ Concession Bargaining

This first stage of concession bargaining (1975-2000) began to change for the worst in the past decade, shifting to a new stage during which workers and their unions have been forced to grant concessions not only in terms of magnitude or levels of wages and benefits, but now in terms of scope and entire areas of bargaining as well. Defined benefit pensions were abandoned for 401k personal pension plans at an accelerating rate. Not only were pensions increasingly privatized, but the de-collectivization of health insurance plans also accelerated under George W. Bush with the introduction of what were called ‘health savings accounts’—the analog on the health benefits side to 401ks on the pensions side.

Employer provided health insurance benefits were now dropped in growing numbers altogether. Or they were dumped onto the union, as in the Auto Industry, in the form of VEBAs (voluntary employment benefit agreements). Employers removed in effect any negotiating over companies paying for health care for workers from union collective bargaining agreements. In a similar fashion, once widespread Cost of Living clauses in collective bargaining agreements were stripped from union contracts. Ditto for supplemental unemployment benefits (SUBs). More and more companies simply discontinued unilaterally retirees health care coverage from bargaining, aided now by court decisions that ruled such were not bona fide subjects of bargaining any longer. Union rights were increasingly circumscribed in agreements, as management rights clauses were expanded. In other words, concession bargaining was no longer simply about ‘magnitudes’—i.e. how much wages or benefits would be reduced in order to keep jobs or the companies from moving offshore or from being outsourced and reduced to mere skeleton crews. Not entire key areas of union contracts were being ‘conceded’ and thus wiped out, removed from the very subject of bargaining altogether.

Stage Three: Concession Bargaining Extends to the Public Sector

In the past two years this second phase of concession bargaining—i.e. cutting levels of wages and benefits and giving up entire areas of bargaining—is now being applied to public sector workers as well, in a vicious attack now unfolding throughout the country. Politicians of both political parties, public sector employers, and wealthy billionaires and millionaires who pay for the elections of these same politicians, are in the process of imposing concession bargaining on public workers.

Furthermore, concession bargaining is occurring in an especially compressed form. Both magnitude and scope are occurring simultaneously and in a matter of just a few years instead of the few decades in which it was deepened in the private sector of the economy. The entire process is effectively ‘telescoped’ and thus taking place is a particularly intense form. All across the country today, in state after state, politicians are declaring bargaining over pensions and health care no longer will be the practice. They are unilaterally discontinuing defined benefit pensions and replacing them with 401k plans.. They are moving to eliminate union and agency shop agreements with the open shop, placing ‘caps’ on wage negotiations, and in general attempting to return to the days of ‘civil service’ rules and regulations in lieu of bona fide collective bargaining.

Stage Four: Concession Bargaining’s New Target: ‘Social Wage’ Reduction

Concession bargaining is morphing still further, however. It is now moving from the level of taking back money wages and benefits at the ‘shop-floor level’—both in the private and public sectors—to the level of ‘social wage’ concession bargaining.

The ‘social wage’ is money wages that workers give up in exchange for pay they will receive at a later date. Social wages are thus deferred wages. Social wages are most notably Social Security and Medicare taxes that workers pay in the form of payroll taxes, in order to receive the wage paid upon retirement in the form of social security pension and medicare health care benefits. The focus since the 2010 midterm elections in the US is now on austerity—a codeword for cutting so-called ‘entitlements’ like social security and medicare. But social security and medicare represent wages paid by workers in the past for claims in the future. Not content with concessions from current wage and benefits, Corporate America—the rulers behind the throne of Congress and the Presidency and Courts—now want reductions in the ‘social wage’ as well. Why? So they can maintain their historic tax cuts enacted over the past three decades and not have to pay the costs of the bailouts and economic crisis that they themselves caused.

The dimensions of the Great American Tax Shift of the past three decades, still on-going and expanding under Obama and the Democrats (and about to expand further still) are the subject of another analysis. But briefly, a tip of the iceberg view is: In the 1960s corporations paid 30% of total federal tax revenues; today they contribute 6.6%. In the 1960s the top income brackets paid 45% of total federal tax revenues; today the effective top bracket tax paid by the wealthiest individuals is only 16%.

The latest phase of concession bargaining now emerging in the past year—concessions giving back the ‘social wage’—is historic. It represents concession bargaining over workers’ income that is shifting to the political level on a grand scale. It is ‘grande scale concession bargaining’. Not content with concessions in money and benefits at the shop level in the private sector, not even content with extending that in intensified form today to the public worker sector, corporate interests now demand concession bargaining over social wages at the political level.

What’s especially onerous about the new concession bargaining is that politicians are making the decisions. Workers don’t even have the option of voting on the concessions, or striking in opposition, as they might when undertaken in cases of earlier concession bargaining at the shop level. They now have virtually no say in the process short of taking to the streets to have their voices heard—which appears increasingly as the only alternative. Moreover, the dollar value of the concessions being, and about to be, offered are now also immensely greater. As the recent debt ceiling debate illustrates clearly, the coming attack on Medicare represents social wage concessions approaching half a trillion dollars. Concessions involving social security retirement that will soon follow in 2012 will amount to a like amount, at minimum, with even more Medicare cuts. In just a few short years, several times the value of total givebacks in concessions in wages and benefits at the shop level since 1979 may occur. It is a massive transfer and shift of income from working and middle class America to the wealthiest households and their corporations.

Behind the facade of Washington politics are the same corporate interests, however. Only now instead of directing their managers at the bargaining table, they now direct their political managers by means of their immense, and growing, campaign contributions and billion dollar lobbying efforts.

Occasionally an example slips through the veil of confusion about who’s behind it all. The veil drops revealing the ‘Wizards of Oz’ pulling the levers and the curtains. Witness the notorious relationship between Wisconsin governor, Walker, and the billionaire Koch brothers. But there are ‘Koch brothers’ lurking everywhere behind the veil, in Ohio, in New Jersey, Connecticut, Massachusetts, Georgia, and even California. They are driving the fundamental strategy, directing the elected politicians in exchange for campaign contributions and day to day lobbying largesse.

The Empty Legacy of Concession Bargaining

What concession bargaining has proven over the past three decades—whether at the political level or the shop floor level—is that concessions only result in demands for more concessions.

Concessions in the private sector over the past three decades haven’t saved jobs. What they have achieved is a stagnation and decline in the income for 100 million families that is choking off consumer spending and economic growth and therefore economic recovery. The second phase, concession bargaining in the public sector, will now add to this consumption decline. And the now emerging third phase, expanding concession bargaining to the level of social wages, about to begin with the direct attack on social security and medicare will not ‘save’ those programs any more than concession bargaining in the past ‘saved jobs’.

Concession bargaining will only result in a deepening crisis in those programs and lead, inevitably in turn, to more demands by corporate interests for still further cuts (i.e. concessions) in those programs. Calls by politicians for ‘shared sacrifices’ are really concession bargaining by another name: to reduce the social wage represented by social security and medicare.

Nothing positive whatsoever has come from concession bargaining the past three decades in the private sector. Good jobs have continued to disappear by the tens of millions. Wages and earnings for the 100 million non-supervisory workers in the US have stagnated and fallen. Giving up wages to ‘maintain health and retirement benefits’ have fared no better. Pensions have nearly disappeared and employer provided health care coverage has declined by the millions of companies, and will not last out the current decade. Nor will anything beneficial come from the intensification of concession bargaining now penetrating the public sector. Union leaders will give up wages and benefits, but that will not stop the millions that are slated for layoffs in the public sector over the next few years—at minimum 500,000 in the year ahead alone! The extension of concession bargaining to the public sector, now accelerating at a pace far worse than that which previously occurred in the private sector, will produce the same results—only now telescoped into a much shorter time period. Not least, nothing positive will come from granting concessions over social wages—i.e. agreeing to reduce social security and medicare benefits. Those programs will not be ‘saved’ by concessions. They will be destroyed by them.
The only way to stop concession bargaining in any of its forms, including the most virulent now attacking the ‘social wage’, is to refuse any and all concessions. ‘No cuts and No Concessions’ is the only effective bargaining demand.

And just as, at the shop floor, when union leaders cave in to employer demands for concessions, they should be thrown out and replaced with leaders who will refuse to do so and stand firm—so too should any politician who agrees to concessions from social security and medicare be thrown out. Indeed, any politician who fails to actively resist such concessions should be thrown out. Not in the next election. But by immediate recall.

Finally, any political party that allows its elected to members to agree to concessions in social security and medicare, or whose elected members stand by silently while the fight to defend the social wage takes place, should be replaced by another political party whose members consider the social wage ‘non-negotiable’.

Unfortunately, it appears the political party—the Democrats—who introduced and once championed social security and medicare are now becoming participants in its destruction. Not only President Obama, but Senate leader Harry Reid and House leader Nancy Pelosi, have all publicly indicated this past summer they are prepared to concede and to cut medicare before year end 2011 in some form. Next it will be social security retirement. And medicare again.

But once starting down that road of initial concessions, it will only lead to further concessions—as the history of concession bargaining at the shop floor over the last three decades sadly shows.

If that happens, and the leadership of the Democratic Party abandon social security and medicare to concession bargaining, as it appears they will, the only answer to stopping concession bargaining is to create a new party of labor, every member of which must solemnly pledge to expand the social wage, to defend and expand social security and medicare, to stand firm on the question of concession bargaining. There can be no ‘Bi-Partisan’ compromise. It is time to raise the flag, with the motto boldly proclaiming across it: ‘No Concessions! No Retreat!.”

Jack Rasmus is the author of the 2012 book, ‘Obama’s Economy: Recovery for the Few’, published by Pluto Press and Palgrave. He hosts the weekly radio show, Alternative Visions, on the Progressive Radio Network. His website and blog are: www.kyklosproductions.com and jackrasmus.com, and his twitter handle, @drjackrasmus.