COMMENTARY: The following is an article on the history and evolution of concession bargaining in the US that is perhaps appropriate this labor day 2011. It briefly traces how concession bargaining at the shop level has, since the late 1970s, evolved, transitioned recently to the public sector, and now is morphing into an attack on the ‘social wage’ (social security, medicare, etc.) at the grand ‘political’ level as the economic class war in the US intensifies and moves into every ‘nook and cranny’ of the economy. We are witnessing in Congress and the Obama administration today (political) ‘management’ decisions to cut (social) wages just as for decades corporate management cut wages and benefits at the shop or company level. Of course, it’s the same ‘corporate management’ that has been driving both. Having accomplished much of their concession bargaining goals at the shop level in recent decades, they are now-through their political managers-attempting the same at the social level.
‘Concession Bargaining At the Crossroads’ by Jack Rasmus, copyright August 7, 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 this 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.
Whats 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 whos 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, August 7, 2011
Jack is the author of the book, Epic Recession: Prelude to Global Depression, Pluto Press and Palgrave-Macmillan, 2010, which predicted the coming double dip recession in late 2009. He is also author of the forthcoming book, Obama’s Economy: Recovery for the Few, same publishers late 2011. His blog is jackrasmus.com and website:
http://www.kyklosproductions.com.
Brilliant analysis, really forceful on many counts, and absolutely required reading for any public or private sector worker on this Labor Day.
However, I just don;t think there is any impetus for this required fight-back in public sector unions- there is no union concept alive anymore, the members themselves have been conditioned to be concession-management subservient, the leaders of the union control the money, the elections, the discussions, the perks. No Retreat! as a motto is not going to work – the white flag is already out and waving. How about, At Long Last, the Beginning of a Fight-Back, Alone Against the World!
There’s some truth to your remarks. But it’s necessary to remain positive as to possibilities for the future. Change will come, if only because there will be no alternative. Workers will look for the ‘easy’ way out always, until it becomes clear there are no individual, personal solutions and easy ways. The younger workers will have to lead the way. They are being hammered the most. For now they must go through the process,which may take years yet. But at some point they will tire of minimum wage, part time, temp jobs with no benefits, of living at home with parents, with no health coverage as they come to need it. They will tire of their video games and social network nonsense distractions, of their manufactured, for-profit culture, with their $50-$100k indentureship to educational debt they have to pay for the rest of their lives…I could go on but the conditions speak for themselves. Meanwhile, if there is to be ‘hope’ we must believe it can be done. Not phony ‘changy-hopey’ Obama bull but change from where it counts–from below. The first step to having something happen is to believe it can happen. The next is to envision it happening. The next to plan to act on the vision. If these steps do not occur first, then it is true nothing will come of it. So, let’s start the process and believe and envision the change–as the start.
Brothers and Sisters: Read Dr. Rasmus’ article as many times as needed so you can fully comprehend the impact of what Jack has outlined and what has been occurring for several decades in the systematic destruction of labor unions in the U.S. by Big Business, the U.S. Chamber of Commerce, and their political allies in the Republican Party and collaborators in the Democratic Party.
Shame on union officials who tell their members to “vote for the Democrats” instead of voting for alternative political parties, like the Greens, Peace and Freedom, Socialist Worker’s Party, etc. which have candidates running for public office and in tune with Labor.
Obama has been a fraud since day one, and along with the treacherous traitor and Bush/Cheney war crimes protector, Nancy Pelosi, and Harry Reid, taking “EFCA off the table” along with the John Conyers’ sponsored bill, H.R. 676, Single Payer health care.
Why didn’t the AFL-CIO and Change To Win leadership denounce the Democratic majority when they took these two important pieces of legislation “off the table” as not to offend their Republican colleagues, with their usual remarks about “not having enough votes?
Complacency, lethargy, and ignorance are tyranny’s greatest assets in moving it’s agenda forward in accomplishing it’s duel mission: accumulating more power and more money at the expense of the working-class.
Thanks, Jack!