September 2012

From "the editor"  

              October 1, 2012
               No broken promises

              September 1, 2012

A Pending Renaissance?

The prevalent attitude that unions are passé grew along with 401(k) plans—and the decline of pensions.

Screaming against pension plans, city and municipal managers can hide their own bad decisions and other inefficiencies. Municipal bonds were always touted as safer than the stock market. Safer, not absolutely safe. Most investment strategies rely on growth. Pension plans are no exception. The question of how much growth is reasonable is the crux of the problem. Nobody knows. Somebody should know. In a consumer-driven economy, can anyone know with certainty the direction of spending, which ultimately relies on employment and some sense of economic security?  If all working Americans know their jobs can move or disappear, and there’s no assurance for the future, it seems to me we’ve got major problems—economic and otherwise. 

     The uproar over municipal employees' pensions seems to be especially hostile in the states which I'm most familiar: Pennsylvania, New York, and New Jersey.  Tying to similar issues, many cities in California, Michigan, and Nevada appear to be thinking about getting in line for bankruptcy.  Most discussions of municipal budget issues include an underlying premise that employee unions are a significant problem.

My fellow Democrats, in most cases, are the ones who award contracts, with what have become outrageously generous future benefits—or benefits that cripple the local budget. Apparently the politicians recognize that municipal employees vote. How many voting cycles are these employees expected to support the politicians who enabled their contracts and then blame the union employees for shortfalls of the struggling budget, as if the benefits were coerced? Amazing how politicians point the finger in all directions but their own, but that’s the one job they do well.

From my limited view of government funding, income and sales tax play a major role in funding. So with a bad economy where new jobs are scarce and increasingly low-paying, the net from income tax has to decline. People without job security avoid discretionary purchases, so sales tax declines. I don’t have all the answers. I do know the answer is not neglecting funds that should be sacred: pension plans and healthcare, nor is it increasing sales tax on necessities.

Meanwhile, is a good profit ever enough to satisfy corporate goals? If one year’s profits are 20%, and the next year 19%, the result is labeled a loss. Profit growth may be potentially infinite, but reason indicates a limit exists. Corporate mandates continual growth—not just profit—at any cost. Pensions and other union-initiated benefits fell from the cutting board in rapid succession.

This may not be a good time for unions, but I believe they are here to stay. Eventually unions regain presence because simply a good profit never satisfies business. Corporate goals include profit, but corporate greed ensures unions remain an option to the little guy.

The bashing of unions continues in America because too many of us don’t realize how unions, along with the G.I. Bill legislated after WWII, created the middle class. Healthcare for chronic conditions grew expensive along with miracle drugs and high-tech treatment. Previously, benefit packages were primarily limited to the owner-class of management. Providing healthcare and pensions to the little guy became widespread only when unions fought for it. Even employees not in unions gained similar benefits to encourage avoiding unions. Most of us came to assume a forty-hour work week as standard. Eventually most middle class families had healthcare and pensions. The forty-hour  work-week, when one could earn a living on a single job, was also  a win for the working stiff. These days of people holding multiple jobs, most would be happy to get the benefits of a forty-hour work-week for one of the concurrent jobs.

No one blames a corporation for getting the best price for products or services, so why blame the little guy who’s stuck with those prices, but can contract a good return for his time and effort?

Union negotiating frequently draws a negative light, but some practices, such as what became known as featherbedding, were part of the solution to job safety and insecurity. Featherbedding could also be applied as a criticism to excessive layers of management, where each layer adds little to the bottom line or to production returns. I strongly suspect management featherbedding when I hear of layers of higher-ups spending their time in multitudes of meetings.

After WWII, American jobs boomed and unions grew with little competition from the destroyed manufacturing powers of Germany and Japan. Unions could demand and set increased wages, and they did. The United States had the greatest economy, and many saw prosperity on the horizon, at least for a while. Even before the turning point for Allied victory occurred during WWII, Eleanor Roosevelt advocated for peacetime prosperity based on employment. Visiting factories during the war, the American work ethic glowed. Concern for the fate of returning military, soon to be veterans, developed late in 1943. After Eleanor visited the cemeteries at Guadalcanal, her influence aided evoking FDR to action. In her weekly column, she considered the fact that servicemen lost employment and opportunities for advancement in occupations:  

“There is one great fear in the heart of any serviceman, and it is not that he will be killed or maimed but that when he is finally allowed to go home and piece together what he can of life, he will be made to feel he has been a sucker for the sacrifice he has made.”

In October 1943, FDR presented Congress with what became known as the GI Bill of Rights, to support servicemen in buying a home or starting a business, provided an unemployment stipend, expanded hospital facilities, and covered both college tuition and living expenses. The bill with its unprecedented benefits was signed on June 22, 1944. Incidentally, the vote was 50-0 in the Senate and 387-0 in the House – at least in 1943 all of Congress could work together with the President. It should be well-known the GIs exceeded all expectations in school, entering the workforce with an advantage rather than disadvantage from having served their country.

Competition against the United States’ manufacturing advanced under recovery programs implemented after WWII.  While Germany and Japan built new, incentive to invest in old facilities in the US decreased. Increased worker demands didn’t loosen the corporate purse strings. Manufacturing upgrades can cost more than building new, as my friend the plumber noted: it’s much nicer and even cheaper to install new fixtures than to deal with having to first remove the old.

In post-WWII Japan, for example, featherbedding decreased in union contracts. But the Japanese government champions full employment, along with a culture and practice of a strong social safety net.  As steel production became more efficient, Germany cut back to a 32-hour work week in their mills decades ago. In the United States, a cultural heritage of independence and celebration of the self-made man run counter to a strong social safety net: the result is little or no need to moderate the effects of tumultuous economic changes. The personal results can be disastrous for many, while policy-makers and politicians see only numbers on a chart.

Increased automation means less need for manpower, work interruptions are beyond worker control, with little gain from even great worker solidarity. Going “Global” is another reason for the decline of unions. Cheaper labor, little enforceable accountability, and no tax on pollution all work together to decrease the domestic manufacturing workers’ leverage. Profit dictates shipping even the most basic products from countries with low wages.

Worker safety legislation helped replace the need for unions, or the perception of that need in most cases. And most of us don’t work in intrinsically dangerous occupations. The exceptions prove the rule: firemen and policemen are often unionized, needing to negotiate pensions for when they can no longer perform dangerous work. When the collectors come calling, most of us forget that municipal and government employees contract for pensions partly because they are willing to take lower wages than offered in the public sector, and partly because they may need to move to another occupation.

Always learning to better market for profit, employers soon recognized the need for a perception of fairness. Union membership has little appeal when a worker can get fairness and a good deal without bargaining cooperatively.

There’s little leverage in a strike, when an employer can quietly move jobs overseas. Why pay dues when there’s no hope of a level playing field? Only when financial survival is onerous and nearly impossible will unions be resuscitated.

We learned in the 1930s the great and pervasive danger of inflation. Spiraling wage increases leads to higher prices, but high prices require higher wages in a consumer economy. Blame often ends up on the working guy, even though resources and continually increasing profits are part of the equation. In fact, with healthcare in the profit-growing business, the effect is exponential—but that discussion waits for another day.

Starting with WWII, the public and political hostility and impatience with unions grew. Beginning with the Korean Conflict, our wars—which now seem to be perpetual, have not required the widespread sacrifice on the home front as in WWII. Factory workers and military are less visible, their benefits appear less warranted. We should know better.

The irony of politicians’ blaming union workers for increased costs, is the nepotism and featherbedding in their own jobs. Who  has more rent-seeking behavior than politicians, convincing us that they have some special qualities to do their jobs? Apparently that behavior increases with the size of the municipality or government entity, with Congress becoming, as I’ve called it before, the most expensive day-care in the country.

This Labor Day, I’d hope my fellow Americans reflect on the accomplishments of the average working stiff, those who make both the “Haves” and “Have Nots” possible.  This is my call for a renaissance in real reasons for celebrating labor.

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© 2012 Beano Cook