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Caterpillar Outfoxes Unions
 For decades, executives at unionized companies have harbored the fantasy that they could dictate the wages, benefits and working conditions of their employees, just like non-union firms. "Dictate" sort of gives away the author's bias. While I do not belong to a union, no one "dictates" my wages. If I don't like them here, I go over there. What stood in their way was the unions' ability to mount a strike that would prove more costly than paying above-market compensation. In the language of economics, the strike gave workers market power. Now, at a hydraulics plant in Joliet, Ill., this corporate fantasy is about to become economic reality. Thanks to globalization, declining union density and years of chipping away at labor laws, Caterpillar is set to prove that even unionized companies can operate as if they have no union at all. Southwest Airlines is not unionized, makes tons of money, but I hear it's a good place to work, not a sweatshop. In the previous six-year contract, Caterpillar won a two-tier wage structure: Existing employees would get to keep wages that average about $26, but there would be no raises and new employees would be paid wages pegged to the existing market -- roughly $12 to $19, depending on the job classification. Instead of the old defined-benefit pension plan, the company would put 3 percent of each worker's base pay into a 401(k) retirement account, and match employee contributions up to an additional 3 percent. The company would continue to pay 90 percent of the premiums for a generous health insurance plan, and profit sharing that averaged $2,300 a year. This year, the union upped the ante and management said, "No." The union walked out. The reason Caterpillar has no intention of negotiating with its workers is pretty simple: It doesn't have to. In the three months since the strike began, the company says its Joliet plant has produced all the hydraulic parts it needs. The work is done by supervisors, newly hired employees and employees contracted from temporary help agencies, along with 80 and 100 union members who have crossed the daily picket lines and returned to work. If things really got tight, the company could always import the same parts from other Caterpillar plants around the world. Caterpillar's success in effectively neutering its unions is the result of decades of disciplined work and billions of dollars in investment. The turning point came in the 1990s when, after two long strikes, 9,000 members of the United Auto Workers at its giant facility in Peoria, Ill., effectively capitulated and went back to work on terms dictated by the company. The strikes demonstrated to Caterpillar's workers that they were not as irreplaceable as they thought, and that their picket lines would no longer deny the company the workers or the raw materials needed to continue operation. As it turned out, the capitulation also allowed Caterpillar to avoid the near-death experience of the Big Three automakers, which accepted the UAW's overly generous contracts for another decade. In other words, Caterpillar bit the bullet a decade before Obama bailed out the UAW. But I don't think Caterpillar could've waited another ten years. WaPo will never admit that this was a good thing... Caterpillar makes no bones about the fact it intends to bring its I wonder why Obama didn't bail out the Canadian union? It is easy to get moralistic It's especially easy for WaPo to get moralistic... about a company that pays its chief executive $16.5 million as a reward for squeezing the incomes of employees who, even at the top of the scale, earn about one-half of 1 percent of what he does. It's just not fair! It's easy to get nostalgic about the loss of union power that really did make it possible for generations of workers with only a high-school education to enter the middle class. But the reality is that Caterpillar probably has no choice but to bow to the dictates of the markets -- not only the markets from which it gets it labor but also the markets from which it raises its capital and the markets into which it sells its products. If it can't sell its products at above-market prices or offer its investors below-market returns, it can't afford to pay its workers above-market wages. Then the author goes on about fairness. Caterpillar, he says, pays mid-level guys 15% above market to keep and motivate them. Why not pay the union guys 15% above market, too? It just ain't FAIR! Employers gotta responsibility! Because of its size and reputation, companies like Caterpillar also need to acknowledge that they have an outsize impact on the social, political and economic environment in which markets operate. WaPo means that Caterpillar should embrace progressive politics and then work to install those politics on the rest of us... Caterpillar should not expect voters to embrace its aggressive free-trade philosophy if globalization merely gives it license to grind down the incomes of average workers. Most purchasing guys are not worried about politics - get them a good product at a good price. It shouldn't expect politicians to approve more money for public works projects Ask the locomotive workers in Muncie if they are being treated fairly. The profits are shared -- people have jobs. In a society with a U-6 unemployment rate of 15% that's a good way to share... And it shouldn't expect to win the good opinion of investors or the public if its human-resource strategy is to become the recognized leader in the corporate race to the bottom. $18 an hour plus good health care benefits and employer contributions to a 401K is a race to the bottom? The reason the union movement is in trouble is because unions abused their market power and overplayed their hands. No, really? Now, it is Corporate America that has gained the upper hand, and if the news from Joliet, Ill., is any indication, it is about to make the same mistake. The market will decide! Put the unions back in charge, WaPo, and what do you think will happen? Posted by: Bobby 2012-08-05 |
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