http://www.latimes.com/business/la-fi-workers18oct18,0,7671153.story?coll=la-home-headlines
THE NATION
U.S. Labor Is in Retreat as Global Forces Squeeze Pay and Benefits
By David Streitfeld
Times Staff Writer
October 18, 2005
Workers at auto parts maker Delphi Corp. will be asked this week to take a
two-thirds pay cut. It's one of the most drastic wage concessions ever
sought from unionized employees.
Workers at General Motors Corp., meanwhile, tentatively agreed on Monday to
absorb billions of dollars in healthcare costs. Ford Motor Co. and
DaimlerChrysler employees are certain to face similar demands.
The forces affecting Delphi and GM workers are extreme versions of what's
occurring across the American labor market, where such economic risks as
unemployment and health costs once broadly shared by business and
government are being shifted directly onto the backs of American working
families.
Four years into an economic recovery, workers across America should be
riding high. Instead, they're facing new demands to surrender hard-won
benefits and agree to wage concessions. Companies say these cutbacks are
essential to stay competitive in an increasingly globalized economy.
In recent weeks, there have been numerous examples and they aren't
limited to manufacturers.
Grocery workers at the 71-store Farmer Jack chain in Michigan agreed to
take a 10% wage cut to make their operation more palatable to a new owner.
Hundreds of workers at a hose plant in Auburn, Ind., approved a $2 cut in
their $18-an-hour pay to keep the plant open. Police officers in Wyandotte,
Mich., agreed to a three-year wage freeze and to pay more for healthcare.
Jerry Jasinowski, president of the Manufacturing Institute at the National
Assn. of Manufacturers, said such givebacks would simply become a fact of life.
"From airline pilots to auto assembly workers, employees need to help
reduce their costs," he said. "We can't afford to live with the very
generous benefits we provided 10, 15 years ago."
Workers' reduced leverage has many origins, including a slack labor market
and the offshoring of jobs to low-cost countries such as China and India.
Some companies, challenged by low-cost rivals, say they can't afford more
than minimal raises. And even at firms doing well, high premiums for
healthcare insurance take away from the pool of funds that could be used to
provide raises.
Only 60% of businesses offer health insurance to their workers, down from
66% in 2003 and 69% in 2000, according to a new survey by the Kaiser Family
Foundation and the Health Research and Educational Trust.
Companies also are asking workers to produce more for the same pay.
The result is that the cost of living has been outpacing wage increases for
most workers all year. Driven by high energy costs, inflation rose twice as
fast as wages in September, the government reported last week. The liberal
Economic Policy Institute called it "the largest decline in real earnings
in decades."
Wages that stand still or decline help to damp inflation. But that's small
consolation for anyone contemplating a lighter wallet.
As old-line industries such as auto parts and airlines struggle to adapt to
harsh circumstances, their workers are particularly vulnerable.
When the mechanics at Northwest Airlines Corp. went on strike nearly two
months ago in an effort to forestall a 26% pay cut, the company promptly
filled their jobs. The workers have an offer from the company that features
the same pay cut and worse job security than the deal they rejected before
the strike.
Prospects for the rank-and-file at Delphi, which filed for bankruptcy
protection Oct. 8, are just as grim. Labor historians say they can't
remember a moment during an economic recovery when so many at one company
were asked to give back so much all at once.
The proposed givebacks are "extraordinary sacrifices," especially in light
of Delphi's "disgusting" decision to sweeten retention packages for
executives, United Auto Workers union officials said in statements.
Critics say that Delphi employees, who earn an average of $27 an hour in
addition to generous medical and retirement benefits, make too much to
allow the company to compete. By contrast, workers at Delphi's profitable
China operations earn about $3 an hour.
"Companies cannot provide gold-plated healthcare benefits and open-ended
pension commitments," said economist Peter Morici, a trade negotiator in
the Clinton administration. The UAW, he said, "should have educated" its
members long ago "and been realistic" in its demands.
The new Delphi contract will set a precedent for labor negotiations at GM,
Ford and DaimlerChrysler. Ford also said Monday that it was in talks with
its union about possible health benefit cuts.
The auto industry has been a weather vane for wage trends almost since it
began. Henry Ford's 1914 announcement of the Five Dollar Day, doubling at
once the pay packages of his 15,000 assembly line workers, inaugurated what
the Detroit Free Press called a "new industrial era."
Then, factory workers were leading the way. Now they're seen as doomed.
"There's a widespread view that the old-line industries are just going to
go away," said Steve Szakaly, an economist with the Center for Automotive
Research. "In the global economy, we're all supposed to become service
employees. And Delphi is as old-line as one could get."
Based in Troy, Mich., the company spun off by General Motors in 1999 is
less of a dinosaur than it may appear. More than two-thirds of its 185,000
employees already work outside the United States. It's been closing and
modernizing its U.S. plants. Its one California plant, in Anaheim, shut
this year.
"As a world-class employer," the company proclaims on its website, "Delphi
offers its full-time employees world-class benefits." In recent days, that
proud statement has acquired another meaning: Delphi workers in the United
States, management says, must earn something closer to what the rest of the
world gets.
Vacations reportedly will be slashed from six weeks to four weeks.
Healthcare premiums will be higher. The company's pension contributions
will be lower. Paid holidays will shrink from 17 a year to as few as 10.
And wages will fall sharply, to as low as $10 or $12 an hour. Those levels
would make it unlikely that Delphi workers would be able to afford the cars
they're helping to build.
Robert S. Miller, the restructuring specialist brought in this summer to
run the company, said he didn't blame the workers for their unhappy
predicament. He described the process as akin to a storm. "Globalization
has swept over them," he said at a news conference.
It's a storm that has ravaged other American industries. "This is death by
a thousand lashes, so it passes under the political radar," said economist
Thomas Palley, a former assistant director of public policy at the AFL-CIO.
"It hit the apparel producers, then furniture, then textiles, then steel,"
Palley said. "It's moving up the value chain. I've gotten article proofs
that were done in the Philippines. Radiologists in India now read charts
for American hospitals. It's hit basic architectural work."
Globalization has many admirers and undeniable benefits. Every auto parts
plant that Delphi sets up overseas improves the local standard of living.
And in the U.S., globalization works to keep prices low, as domestic firms
and importers compete to deliver the cheapest goods.
Some economists see little to worry about. The U.S. unemployment rate, at
5.1%, "is evidence that our economy's ability to provide jobs on a
sustained basis has not been impaired" by international competition,
Federal Reserve Gov. Donald Kohn said in a recent speech.
Others aren't so sanguine. "How do U.S. firms compete in the global
economy?" asked UC Berkeley economist Harley Shaiken. "If the only way to
compete is with $10 wages, we have a problem that is much larger than just
Delphi. We're looking at a society where people exit rather than enter the
middle class."
Last year's presidential election prompted a debate over globalization and
the offshoring of jobs that yielded a lot of heat but little light. Some
said the phenomenon was overblown in an economy that creates and destroys
millions of jobs a year.
Others contended that it would swell over time and soon affect millions.
"Maybe we were looking under the wrong rock," said Jared Bernstein, an
Economic Policy Institute economist.
A few hundred thousand jobs may have been lost directly to cheaper jobs
overseas, he said. But what's under-recognized is how millions of others
might have kept their jobs or at least, a job but lost current or
future benefits.
The labor historians offering the bleakest outlook say they don't know what
will arrest this downward process.
"There used to be a kind of floor for worker welfare," said Leon Fink,
editor of the journal Labor: Studies in Working-Class History of the
Americas. "But we're now living in an age in which all those old standards
have come unglued."
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