A Labor Day Balance Sheet:
Hard Times for U.S. Workers as Economy Sinks; Major Class Battles Loom
by Jerry Gordon
This article was first posted on the web site Labor
It has been edited for Labor Standard. The author was, for 23 years, a
staff representative for the United Food and Commercial Workers (UFCW). Now
retired, Brother Gordon is state chair of the Ohio State Labor Party.
The U.S. economic crisis continues to deepen, bringing ever increasing unemployment and declining living standards to tens of millions of workers.
The number of jobless, according to government figures, is nearly 6 percent, or 8.6 million. The actual numbers are undoubtedly much higher. Less than 40 percent of workers who lose their jobs are eligible for unemployment compensation, the rest disqualified usually because their earnings have been too low or they did not work a sufficient number of weeks. The nation’s safety net has largely been shredded, making access to welfare difficult, if not impossible.
Wages have long been stagnant and now take-home pay has taken a big hit as a result of reduced overtime and a shorter workweek (now down to 34 hours, the lowest since the Labor Department began to track the workweek in 1964, other than a blizzard in 1996 and immediately after September 11); cuts in hourly pay for many, particularly in the airlines industry; and cost shifting in health care as companies force workers to pay higher premiums, co-pays, and deductibles.
Virtually every union in the country is under fire from the bosses and the government as corporate America relentlessly seeks to reverse its slide in profits by squeezing greater productivity—currently at an all-time high—and wresting concessions from beleaguered workers. With an increasing army of unemployed at their disposal, employers have the upper hand and are using it to drive down the cost of labor.
For the last several decades, it was an article of
faith for unionized U.S. workers that, after a lifetime of employment, the
golden years would bring them financial security and a relatively comfortable
living thanks to pensions (89 percent of union workers have pensions) and Social
That is no longer the case, however, for increasing numbers who suddenly find themselves without pensions (or pensions sharply reduced), not to mention the loss of health care benefits after retirement. This has become an issue of primary concern for the AFL-CIO.
What happened? Let’s begin with the steelworkers,
whose plight has brought the issue so forcefully to the fore.
As of today, 34 steel companies, representing 30 percent of U.S. steel-making capacity, have filed for bankruptcy. Six hundred thousand retired steelworkers are in peril of losing their health care and other benefits, and, in fact, 150,000 have already done so. The pensions of these retirees are in jeopardy and would have been lost were it not for legislation that was enacted in 1974 creating the Pension Benefit Guaranty Corporation (PBGC) making the government responsible for picking up pension benefits where companies go belly-up or their pension plans go broke. But this legislation is only of limited value because the government pays a lot less to retirees than they were receiving (or entitled to) under the union’s negotiated collective bargaining agreements with the employers, and because the government’s agency for paying the pension checks is, itself, grossly underfunded.
With so many potential demands, PBGC is vulnerable to
large losses. Future claims are sensitive to stock returns, overall economic
conditions, and underfunding in large plans. Failure of a few large sponsors can
generate large dollar amounts of claims. Projections of what kind of assets the
PBGC will have in 2011 are all over the map, with the most extreme being that
the fund will have an $80 billion deficit.
The stock market’s meltdown and corporate corruption have greatly exacerbated the situation. Workers’ pension funds have been devastated by the loss of seven trillion dollars, in large part a result of the fallout from the Enrons and WorldComs. Of course, different people are affected in different ways. In the top 25 bankruptcies, the CEOs walked away with $33 billion while 100,000 workers lost their jobs. To cite one example, Enron’s 29 leading executives cashed in more than $1 billion in stock, while thousands of company workers joined the ranks of the unemployed, losing their life savings, health care coverage, and pension rights in the process.
Even where corporations have not filed for bankruptcy,
workers’ pensions are hardly secured. For example, General Motors’ pension
fund is underfunded by at least $9 billion and it has a potential $47 billion
shortfall in its retiree health care trust fund. Other major corporations, with
few exceptions, face similar problems—problems that will grow alarmingly worse
as the economy continues to plummet.
Meanwhile, more than half of all public pension plans
are underfunded and their shortfall is due to get far worse. According to a
recent study of 93 pension systems, which provide pensions to teachers,
firefighters, and other state and municipal employees, the percentage of
underfunded public plans will rise to 75 percent within a year (Wall Street
Journal, Aug. 16, 2002). What happens to pensions then? Where will the money
come from to replenish underfunded plans? The answer increasingly is to compel
active workers to pay more into the funds—workers who are already skeptical
that by the time they retire there will be any money available to provide them
Defined Benefits vs. Defined Contributions
In the past two decades, the whole structure of the
U.S. retirement system has changed. Traditionally, whether pensions were
negotiated by unions or voluntarily provided by employers, the amount a worker
received upon retirement was based on a formula: so many dollars per month based
on length of service and earnings. The amount was clearly defined and the
employer was obliged to pay it regardless of the profits or losses of the
business and regardless of the stock market’s gyrations.
But in the 1980s, a new kind of pension scheme became widely prevalent: “defined contribution” plans. These plans do not guarantee a certain payout; only the amount contributed is fixed. The most common variety of these is the 401(k), named after the section of the tax code that created it.
Under a 401(k), the employer contributes a fixed amount to the plan and is not obligated to pay anything more. The employer only contributes where a worker first chooses to do so. The assets of the plan are invested in the stock market by the individual worker and if the investment is wiped out, the loss is entirely the worker’s. The worker’s retirement fund could easily disappear completely as the stock market plummets, and the worker who retires could be left with nothing other than a monthly Social Security check—the average monthly payment now being $874—which is rarely enough to survive on.
The defined contribution plans are obviously fraught
with peril, as the current massive losses in the stock market make unmistakably
clear, yet 57 percent of the people who have pensions are now relying on
Employers favor the switch to defined contribution
plans and no wonder: their expenditures for pensions fell by 22 percent between
1978 and 1998. But workers who are forced to choose which stock to invest in are
placed at a distinct disadvantage. Regardless of how much financial education
they are offered, they simply do not have the time or expertise to enable them
to make the “right” decisions as to how to invest. And with the astronomical
losses the market has experienced—virtually across the board, but especially
in telecommunications—even trained financial advisers can’t be sure of the
“right” decision to make.
Workers as Stockholders
Aside from pension matters, another big change affecting workers’ living standards is their entry by the millions into the stock market as investors. This is a relatively new phenomenon. In past decades the stock market, with some exceptions, was for the wealthy to reap profits through speculative capital if they were lucky, or to suffer the consequences if they were not. Now workers are deeply involved and have absorbed horrific losses as a result.
Stock market ownership today has spread to more than half of all households in the U.S. The average investor has lost 40 percent of his or her money in the last two-and-a-half years. This figure could grow exponentially in the weeks and months ahead, as more and more workers sustain crippling losses which wipe out savings accumulated as a result of a lifetime of hard labor.
The realities of life in today’s U.S. are grim: Massive and growing unemployment, disproportionately hurting communities of color. Forty-four million people with no health care coverage and an additional 42 million with inadequate insurance, meaning their insurance does not pay for many vitally needed medical services. Personal and corporate debt at an all-time high. Personal and corporate bankruptcies at an all-time high (of the 20 largest bankruptcies in American history, ten have occurred in the last year alone). Retirement security, to the extent it ever existed, is largely evaporating. The education system in shambles, starved for funding it is not receiving either from federal or state governments. The safety net destroyed primarily as a result of Clinton’s welfare “reform” act passed by Congress in 1996. Decent paying jobs fleeing to other areas of the world where cheap labor and child labor can more easily be exploited. Adoption by Congress of the repressive USA Patriot Act, coupled with a whole series of measures undermining free speech and protection against unreasonable searches and seizures. Criminal neglect of the environment, including a near-catastrophic nuclear meltdown recently at a plant near Toledo, Ohio, where an extremely dangerous situation was known about but shrugged off by the electric utility involved, FirstEnergy, and the U.S. government’s Nuclear Regulatory Commission until the last moment. (The problem was boric acid escaping and eating a hole in the carbon steel head, which left only a thin liner from stopping a major leak of radioactive coolant.)
For the labor movement, these are clearly not the best
of times. The percentage of organized workers has shrunk substantially over the
past several decades. To maintain even the current diminished percentage of
organized workers, the AFL-CIO has said that a million new workers must be
organized each year, yet only about 135,000 new workers have been organized in
the first eight months of 2002.
From a legislative point of view, labor has suffered major losses. The worst one occurred in late July of this year when Congress passed Fast Track, which labor bitterly opposed. This bill prohibits Congress from amending trade deals negotiated by the Bush administration—it can only ratify or reject them. This eases the way for trade agreements without labor or environmental protections.
In the context of this overall negative situation, the
key questions as always are: What must be done to counter the
employers’/government’s many-sided assault on workers living standards? How
can labor use its vast and still untapped power to reverse its decline and take
the offensive to create a society where workers and their families enjoy at
least a measure of security and a decent standard of living?
The immediate answer, in this writer’s opinion, is
mobilizing the rank-and-file as never before in solidarity with two groups of
workers currently engaged in critically important showdown battles with their
bosses and the government. This must be coupled with labor’s reorienting its
political strategy to achieve real political power—meaning breaking at last
with the Democratic Party and building its own mass independent political party.
The Dockworkers’ Struggle
Over the past several years, shippers around the world
have targeted dockworkers’ unions for extinction. We have seen this in
England, Australia, Japan, and elsewhere. Now it is the dockworkers on the West
Coast of the U.S. who are under sharp attack. A labor war is looming there
which, if won, could lead to a real resurgence in the flagging fortunes of the
organized labor movement.
Some 10,600 dock workers are represented by the
International Longshore and Warehouse Union (ILWU). The union’s contract with
the Pacific Maritime Association (PMA) expired July 1 and the contract has been
extended since then on a day-to-day-basis. The parties now are at a total
The PMA is seeking to install new technology to speed
cargo handling and cut 400 jobs, computerize the union’s hiring hall bringing
it under PMA control, remove hundreds of workers from the bargaining unit,
outsource work, and shift some of the costs of health care benefits now paid
exclusively by the employer onto the backs of the workers.
As important as these issues are, they are being
overshadowed by the federal government’s aggressive intervention to prevent a
strike. The 29 West Coast ports handle $300 billion worth of cargo a year and
the government is determined that there will be no disruption of work at any of
The government has laid down the gauntlet to the
workers in no uncertain terms: either cave in to the PMA demands or face any of
a number of threatened measures, including a Taft-Hartley injunction forcing the
workers to remain on the job for at least 80 days; possible new legislation
placing the union under the Railway Labor Act, which would allow the government
to impose a contract if the union does not agree to the employer’s terms;
replacing striking workers with Navy personnel; and militarizing the ports with
the National Guard called in to maintain order. Overall, the government would
like nothing better than to put an end to coastwide bargaining and render the
All of the government’s bare-knuckled threats are
being justified in the name of “national security.” Since September 11, Bush
has been saying that the U.S. is at war and the war won’t end until all forms
of terrorism are extinguished. To promote that war, undermining unions has
become the order of the day.
Well before negotiations began, the PMA was busy forging the West Coast Waterfront Coalition with companies like Wal-Mart, Nike, Target, Best Buy, K-Mart, The Gap, Home Depot, Payless Shoes, and other mega-corporations. On the other side, the AFL-CIO adopted a strongly worded resolution pledging all-out support for the dockworkers. For their part, the Teamsters have promised not to transport any cargo to or from a struck port and to join the ILWU’s picket lines.
What is happening today is in many respects reminiscent of the 1981 Professional Air Traffic Controllers (PATCO) strike, which Reagan broke. Many people vividly recall union leaders in that strike being led away in handcuffs and chains. Democratic Party politicians at the time went along, with scarcely a whimper of protest. The AFL-CIO failed to mount a serious solidarity campaign and the PATCO union was busted.
More will be needed this time around to stave off a
crushing defeat. The dockworkers are a militant bunch with a fighting tradition
which dates back to their general strike in 1934. They are primed to fight, but
they will need all the help they can get from the rest of the labor movement,
not only in the United States but from around the world.
This is an extraordinary moment for the U.S. labor
movement—one that poses the gravest dangers to its survival but also one
offering the greatest opportunities for revitalization and a historic
demonstration of labor’s latent power. The need now is to respond in an
appropriate fashion, as the AFL-CIO did last year when it established a national
task force in support of the Charleston, South Carolina, longshore workers to
coordinate a successful campaign beating back the frame-up conspiracy directed
against five of their members. Also needed is a speaking tour of ILWU members
across the country; publication of a fact sheet on the crisis and its
distribution by the millions among workers and the population generally;
emergency trade union conventions and conferences to place all of labor on
record in solidarity with the ILWU; special outreach to dockworkers, trade
unions, and labor parties in other countries calling for worldwide solidarity;
the most massive marches, rallies, and mobilizations; financial assistance to
the dockworkers; and whatever else it takes to see this struggle through to a
Government Workers Under the Gun
Simultaneous with what is happening on the West Coast
with the dockworkers, the Bush administration is hell-bent on emasculating the
American Federation of Government Employees (AFGE) and other unions representing
government workers. This union-busting effort has come to the fore with Bush’s
proposal to merge several government agencies into the Department of Homeland
Security. Bush is demanding that the 170,000 workers expected to be transferred
into the new department be exempted from most civil service and union-negotiated
job protections. The new cabinet secretary overseeing the department would be
able to hire and fire workers more readily, ignore negotiated salary agreements,
and reassign workers as he or she sees fit to meet the agency’s mission.
Bush has categorically promised to veto any bill on “Homeland Security” which does not give him the “flexibility” he says he needs in this vast proposed governmental reorganization, so the battle lines have clearly been drawn.
Labor, of course, denounces the proposal—which is
soon to be voted on by the Senate after having already been approved by the
House of Representatives. The government unions see this as a fight for their
existence. It remains to be seen whether labor’s Democratic Party
“friends” in the Senate will rise to their defense and the defense of their
members’ job protections. Based on the shameful sellout by Senate Democratic
leaders on Fast Track, there is no basis for optimism to think that this battle
will be won, if the axis of the fight is dependence on Democratic Party
politicians. Absent a major campaign mobilizing huge numbers of workers and
labor’s allies in opposition to the bill, it could well pass the
Senate—where the Democrats have a majority—and become law, which would be a disaster not only for the workers immediately involved but for
all public employees in cities and towns across America.
Build an Independent Labor
Looking back over the last few years, labor’s
landscape is littered with one defeat after the other. From NAFTA, to
destruction of the safety net, to the one trillion dollar tax break for the
wealthiest one percent last year, to the “economic stimulus” package giving
big business billions of dollars more this year, to the airlines bailout package
giving the airlines companies $15 billion in grants and loans with the workers
getting nothing, to Fast Track, to the USA Patriot Act, to government
strikebreaking at PATCO, to Congressional breaking of the railway workers strike
and Clinton’s breaking of the American Airlines pilots strike—workers and
their unions have been taking a terrible battering. And that is just a partial
What about labor victories? There have been a few
paltry concessions granted workers in the last few decades, such as miniscule
raises of the minimum wage and the recently enacted 13-week extension of
unemployment compensation. However, these are few and far between. The 1960s and
‘70s did see adoption of Civil Rights and Voting Rights legislation, Medicare,
Medicaid, the Occupational Safety and Health Act, the Environmental Protection
Act, and the Employee Retirement Income Security Act. All of these are important
social measures, but the benefits of each have been whittled away as a result of
nonenforcemennt, underfunding, and in some cases deregulation. The last serious
effort at labor law reform was in the summer of 1993 when the U.S. House of
Representatives passed a bill that would have made it unlawful for an employer
to hire permanent replacements during a strike, but the Senate came up a few
votes shy in cutting off a filibuster, and the measure was killed.
In the years since then, labor’s struggles in the
legislative arena have been almost exclusively defensive ones. No one talks any
more, except for the Labor Party, about repealing Taft-Hartley, the most
repressive anti-union law on the books. Striker replacement has been put on the
As far as the AFL-CIO’s strategy is concerned, the overriding priority today
is to defeat the Republicans in the upcoming November elections and ensure
Democratic control of both Houses of Congress. They forget that labor took some
of its worst beatings when a Democrat sat in the White House and Democrats had
majorities in both Houses of Congress, as occurred when NAFTA was passed in
How much longer will labor stay chained to the Democrats? That is the question of all questions. One thing is clear: the current policy of relying on the Democrats instead of building an independent working class political party is leading labor to its ruination.
The Labor Party held its second Constitutional
Convention in July 2002. While the number of delegates was only one-third of
those attending the previous convention, a solid core of activists was there,
committed to building the party and pointing the way to an alternative course.
There is an old labor song called “Hold the Fort For We Are Coming.” That is
what the Labor Party is seeking to do today: maintain itself while doing what it
can to win over reinforcements from the rest of organized labor in the fight to
replace the corporate-run government with one run by and for the working class.
Let us hope that those reinforcements will not be too much longer in arriving.
There is an old labor song called “Hold the Fort For We Are Coming.” That is what the Labor Party is seeking to do today: maintain itself while doing what it can to win over reinforcements from the rest of organized labor in the fight to replace the corporate-run government with one run by and for the working class. Let us hope that those reinforcements will not be too much longer in arriving.