The Pitfalls of
Collective Bargaining: Part I
The
current cycle of major union contract negotiations has come to an end. For both
the Teamsters and the United Auto Workers (UAW), this has been a critical year,
a time when these unions would confront some of the largest and most profitable
corporations in the world. UPS generated $74 billion dollars in profit in 2022,
while General Motors profits were $21 billion dollars during the same year. The
new, reform leadership of both unions pledged to organize militant struggles
that would bring significant victories in wages and working conditions for
their members. In their rhetoric, Teamsters President Sean O’Brien and UAW
President Shawn Fain strongly suggested strikes would be used to extract the
best deal possible for their members.
In the end, little actual
pressure on the capitalists happened. The Teamster contract with the United
Parcel Service (UPS), covering 340,000 workers, was settled without a strike,
while the UAW agreement with the three large unionized auto corporations,
covering 150,000 workers, was negotiated after a few weeks of token strikes.
The resulting contracts included some partial gains, but,
overall, both sets of contracts fell far short of what had been promised. The
Teamsters contract was approved by a large majority in a ratification vote, but
union members nearly defeated the tentative contract at General Motors.
Groups
like Teamsters Mobilize formed in opposition to their belief the Teamsters
failed to live up to the radical promise presented this past summer. As rank
and file workers mobilize to demand a more militant union, what are the lessons
to be learned from this round of negotiations?
Instead of going through each contract on a point-by-point basis, this
article will seek to distill broader lessons to be learned from this most
recent discouraging debacle. The focus will be
looking at typical pitfalls that occur during the collective bargaining
process, in the hope that they can be made
to avoid themed in the future.
The
Necessity for Militant Action
It was widely understood that both the
UAW and the Teamsters had suffered from inept and corrupt leaders who had given
away major concessions in previous contracts. Forcing the corporations to
cancel these concessions would require a show of solidarity by union members. Yet
little was done to prepare for a lengthy strike and contract negotiations
proceeded smoothly with little sign of militant resistance.
Once
the contract was negotiated, Teamster leaders insisted that the mere threat of
a prolonged strike had been sufficient to extract significant concessions from
UPS. This claim is empty bluster. Powerful corporations are not impressed by
union threats. The only way to effectively counter corporate power is to shut
down production for a lengthy period of time. Threats of militant action will
be perceived as a bluff until the union can demonstrate that its members are
united and willing to confront management.
A
sizable strike fund makes it more possible to conduct a long strike. Such a
fund cannot provide a total solution, but it can help. The UAW leadership
turned this argument around by claiming that a full-scale strike at one of the
large auto corporations would deplete the strike fund. This is upside down.
Unions create strike funds so that they can conduct lengthy strikes.
The
Need for Short-Term Contracts
Both the Teamsters and the UAW failed
to organize militant strikes, so the contracts that were negotiated included a
myriad of dubious provisions. To start, both contracts are for a time period
that is far too long. The negotiation of a new contract is a crucial time when
rank and file members can become actively involved in determining the union’s
policies. Longer contracts allow union officials to entrench themselves in
power as those on the shop floor become passive bystanders. The Teamsters
contract will last for five years, while the UAW contract will extend for four
and a half years. Both terminate in 2028. Just on this basis, both contracts
should have been rejected. There is no valid reason for a union contract to
last more than two years.
Wage
Increases Versus Inflation
The need for contracts covering a
short period of time becomes even more important in a period of rapid
inflation. Predicting the rate of inflation for several years in the future is
virtually impossible. Wars, breaks in the supply chain and the increasing
volatility of global climate patterns can all trigger a spike in inflation.
A
modest estimate of the inflation rate for the next five years would set it at
five per cent (5%). The Teamster contract calls for an increase in the basic
wage for full-time workers of 19% over the life of the contract. This would
mean an increase of less than 4% per year. The chief financial officer of UPS
estimated the total cost of the contract, wages and benefits, at 3.3% per year.
These figures mean that union members will be receiving less in 2028 in total
compensation, allowing for inflation, than they receive now.
The
wage increases included in the UAW contract are marginally better. Full-time
production workers will receive an increase of about 30% over the term of the
contract, or an increase of about 6% per year. This includes expected increases
due to a clause that provides partial protection against inflation.
Thus, the UAW contract will at least cover
inflation, but not much more. Since 2008, when the union agreed to a contract
filled with concessions, there has been a drop in real wages for union members
of 19%. Just to get back to where its members were before, the UAW needed to
negotiate a contract that would include pay increases substantially higher than
the rate of inflation. The 2023 contract failed to do this.
Mollifying
Skilled Workers
The current UAW leadership likes to
congratulate itself as progressives pledged to a more just and equal society.
Nevertheless, the current contract includes a provision that will significantly
increase income disparities among full-time workers.
Skilled
workers are an important segment of the auto industry workforce. Their votes
are counted separately, although the final tally includes all union members.
The UAW leadership knew that there would be significant opposition to the
proposed contract among those working on the line, so they went out of their
way to pacify the skilled trades.
In the first year of the contract, skilled workers will receive an
additional $1.50 an hour, beyond the wage increases going to production
workers. The special increase is termed a tool allowance. Over a year, this
comes to $3000, a lot of tools.
This
is a substantial increase, particularly since it is included for each year of
the contract. Prior to the start of this contract, skilled workers received
about $4.90 an hour more than full-time production workers. By 2028, this gap
in pay will have increased to nearly $8.00 per hour. Over the life of the
contract, the gap in pay between production workers and skilled workers will
have increased by 65%. Instead of an egalitarian approach to wage rates, the
UAW leadership opted for a strategy that increased wage differentials between
skilled workers and those on the line.
The ploy worked. In General Motors, production workers in seven of the
eleven large assembly plants rejected the proposed contract, but skilled
workers overwhelmingly supported it by a margin of nearly two to one. In the
end, the contract was narrowly approved, with 45% of UAW members at GM
rejecting the contract. The leadership depended on the votes of skilled workers
to carry a contract that held little appeal for many production workers.
This
first section of the article looked at some of the broader issues raised by the
UAW and Teamster contracts. The next section will look at specific points in
the contracts.
Pitfalls in Collective Bargaining: Part 2
The first section of this article
examined the broader issues raised by the recent Teamster and UAW contracts.
Specifically, it looked at the length of the contracts and the wage increases
granted to full-time workers. This second section will focus on some of
the specific points in these contracts.
As in the previous section, the intent is to recognize the pitfalls embedded in
these contracts, in order to avoid these traps in the future.
Front Loading
Union leaders understood that the
failure to substantially increase real wages over the life of the contracts
would result in rank and file resistance to approving them. Those negotiating
the contracts therefore turned to tricky maneuvers to overcome this resistance.
One of these maneuvers was the front loading of wage increases.
When contracts are designed to last
for several years, as both the Teamster and UAW contracts were, increases in
the hourly wage rate can be scheduled so that the largest increases occur
during the first year. Significantly lower increases are slotted for the
following years, often significantly less than the expected inflation rate. The
tentative contract can then be sold to the membership on the basis that
ratification will lead to an immediate and rapid jump in wages. This is a
tempting prospect for those living on the edge of financial disaster.
Nevertheless, a few years later, with real wages falling, creditors will again
be at the door and the cycle will begin again.
The UAW contract is a particularly
flagrant example of front loading. Over the four and a half years of the
contract, basic wages will rise by 25%. In the first year, wages will jump by
11%, before falling to 3% increases during the next three years. A provision in
the contract provides a partial protection against inflation, so the total wage
increase will come to 30% during the entire term of the contract. Of that,
about 40% of the increase will come during the first year.
The Teamster contract with UPS is also
front loaded. The basic wage rate will increase by $7.50 over the five years of
the contract. Of this, $2.75 will come during the first year and an increase of
only $4.75 an hour over the next four years, or about $1.20 on average each
year. This means that UPS workers will get about 37% of their wage increase in
the basic rate during the first year. Front loading is even worse when the
entire package is taken into account. The chief financial officer of UPS has
estimated that 46%, or nearly half, of the increase in total compensation,
wages plus benefits, would be received during the first year of the contract.
In a five year contract, this is front loading with a vengeance.
There is no legitimate reason for
front loading a collective bargaining contract. Indeed, there is no reason for
a lengthy contract in the first place. At least, when a lengthy contract is
negotiated, wage and benefit increases should occur at a steady rate over the
entire period covered. Front loading is designed to confuse union members and
to convince them to accept an inadequate contract on the basis of an immediate,
but short-lived, gain.
Bonus Payments
Another manipulative maneuver used to
ensure ratification was the provision of a pay increase through a bonus
payment. The UAW contract offered a $5000 bonus to full-time workers upon
ratification. This is again tempting those in financial distress with an
immediate but illusory solution to their problem.
Bonus payments are a one time event.
Although the sum may seem a large amount, calculated over the entire length of
the contract the amount is small. Furthermore, the bonus is not integrated into
the basic wage rate. Thus, when the next contract is negotiated, the existing
wage rate does not include the bonus payment. The starting point for the next
contract is therefore likely to be a real wage, allowing for inflation, that is
even lower than the one at the start of the current contract. Bonus payments
are designed to confuse members. They should never be included in a contract.
The Tier System
Another set of problems involves the
creation of artificial divisions, or tiers, within the workforce. The tier
system is not only unjust, it is divisive.
The concessionary contracts negotiated
by the previous administrations in both the UAW and the Teamsters were
particularly harmful in that they created a tier system of pay categories.
Union members doing exactly the same work, even those hired on a full-time
basis, were being paid substantially different wages. These artificial
divisions undermined solidarity within the union. The introduction of tiers was
done deliberately by management with exactly this intent.
The UAW signed concessionary contracts
for several decades prior to this last round of negotiations. In one of these
previous contracts the UAW agreed to a special wage scale for new hires.
Initially, a newly hired full-time production worker would receive a wage rate
that was barely more than half the standard wage rate for production workers.
The new hire would then receive small increases in pay for each year on the
job. Only after eight years on the job would newly hired workers finally be
merged into the regular pay scale and receive the wages due them given their
seniority. The second tier for full-time workers remained in place during the
contract that expired in 2023.
This provision in previous contracts
proved to be enormously profitable for the auto corporations. The tier system
fueled the opposition in the UAW and gave an impetus to the election of a new
union leadership. Abolition of tiers was a key demand leading into the
negotiations. Nevertheless, the new 2023 contract continues to include a second
tier, although the number of years that new hires have to remain on this
inferior scale before being moved on to the standard wage scale has been
reduced from eight years to three years. Those workers who benefited from this
change received a sizable increase and wages and provided much of the support
for the new contract.
This provision of the new contract
marks a significant improvement and yet the initial concession should never
have been made. A truly militant union would start from a position of rejecting
all previous concessions and build from there. Instead, the UAW settled for a
limited, partial gain after a series of token strikes.
Part-Time Workers
In UPS, the primary division created
by the contract is the huge gap between full-time and part-time workers. Nearly
half the workforce is hired on a part-time basis. Under the previous Teamster
contract, the wage rate for part-time workers was so low that many were being
paid at the prevailing market rate for entry jobs. Part-time UPS workers were
averaging $20 an hour in 2023 across the country, with the wage rate varying
considerably by job market. Since the previous contract set the rate at less
than $17, this meant that a majority of part-time UPS workers were being paid
at the market rate, rather than a wage set through the collective bargaining
process. Such a situation can only occur when a union totally fails its
members.
The new, so-called reform Teamster
leadership promised that they would fight for a contract that brought major
gains to the part-time workers. They failed to do this. The new contract set
the new rate for part-timers at $21 per hour. Although this is a substantial
increase over the previous contract, it did little to help the majority of
part-time workers employed at the prevailing market rate for their community.
At the end of this contract, in 2028, the wage rate for part-timers will increase
to $25.75. This modest increase might just keep up with inflation over the next
five years. The Teamster contract with UPS is likely to leave current part-time
employees with the same real wage in five years as they receive now.
Still, this is not the worst feature
of the 2023 contract relating to the part-time workforce. Those hired following
the start of the contract will be paid $21 an hour, but this will only increase
to $23 by 2028. Part-time workers hired during the life of the contract will
actually receive a lower real wage in five years than that received by
part-time workers who were hired in 2023.
In effect, the new contract creates
yet another tier of lower paid workers at UPS. There will now be full-time
workers, part-time workers hired before the fall of 2023 and a third tier of
part-time workers hired after 2023.
All part-time UPS workers should be
placed on the same pay scale, no matter when they were hired. Even more
important, the vast gap in pay between part-time and full-time workers should
be eliminated. Every UPS worker should receive the same hourly wage rate and
the same benefit package per hour, given their seniority, whether they are
employed as full-time or part-time workers. The current Teamster leadership
promised to end the tier system, but in fact the 2023 agreement creates a new
tier of lower pay for part-time workers hired after the start of the contract.
Pensions
Cuts in pensions are one aspect of a
major pitfall that is all too frequently included in collective bargaining
agreements. In order to overcome rank and file resistance to inadequate
contracts, concessions are included that have a detrimental impact on those who
are excluded from the ratification vote. The UAW did this in the past by
sharply lowering wages for those hired after the start of the new contract. The
current Teamster leadership has followed the same path, but in relation to
part-time workers rather than those hired on a full-time basis.
Retired workers receiving a pension
are often the target of the same type of unscrupulous negotiating trick. UPS
Teamster members are covered by twelve different pension funds, with specific
benefits negotiated for each fund. The Teamster national master contract sets
the amount that UPS pays to the relevant fund for each person covered. The
contract froze this contribution for a majority of the pension funds for the
next five years. These pension funds will remain solvent, so those who are
eligible will continue to collect their pensions, and yet the amount they
receive will not keep up with the rate of inflation. The 2023 contract will result
in a significant decrease in the real value of the pensions received by a
majority of Teamster UPS retirees.
A truly progressive union leadership
would make sure that those least able to defend their interests are not
negatively impacted by a new contract. The UAW and Teamster leaders failed to
meet this basic standard and as a result, pensioners and part-time workers took
a hit.
Air Conditioned Vans
To its credit, the Teamster leadership
did make an effort to extend the usual scope of bargaining to meet the
challenge set by the climate crisis. Summer heat waves are becoming more
frequent and more intense. This has caused critical health problems for UPS
drivers sweltering while delivering heavy packages in vans that absorb the
sun’s rays. Indeed, several UPS van drivers have died of heat stroke. In July
2022, a driver in the Los Angeles area collapsed during a heat wave and could
not be revived.
UPS management has recognized the
problem but has done little to resolve it. The 2023 contract has been touted as
a historical breakthrough since UPS has agreed to install air conditioning
units in every van purchased after January 1, 2024. Unfortunately, the promise
is better than the reality. UPS runs its delivery vans until they collapse.
Apparently, it is cheaper to continue to repair a van than to buy a new one, so
vans are often in use for more than twelve years. Given this, only one-third of
the delivery vans being used by UPS in 2028, the final year of the current
contract, will be equipped with air conditioning. By then, the summer heat will
be significantly worse and a majority of UPS drivers will be even more stressed
than now.
UPS makes billions of dollars in
profit every year. A satisfactory agreement would have required management to
have all UPS vans air conditioned by the end of the contract, either by buying
new equipment or retrofitting old ones.
Conclusions
Triumphalism often characterizes the
rhetoric of union officials as they seek to sell their members on a newly
negotiated contract. Small gains become historic victories. Incomplete
rollbacks of previously granted concessions become momentous breakthroughs.
Partial advances improving the health and safety of the workforce become
transformed into landmark successes.
It is not surprising that rank and
file Teamster members or auto workers have become cynical about the new batch
of supposedly progressive reform leaders. In reviewing the recent contracts,
one is struck less by their major faults, although these are important, than by
their overall mediocrity. There is no doubt that these are better contracts
than those negotiated by Hoffa Junior or the incompetent and corrupt
bureaucrats that occupied the UAW’s Solidarity House over the last two decades.
Nevertheless, the Teamster and UAW contracts failed to deliver the genuine
gains that would have significantly improved the wages, benefits, and working
conditions of union members.
This raises the question: what type of
changes need to be made before these unions can become truly militant forces
for change?