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 Tuesday. 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.

Retirement Security

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 Security.

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 with pensions.

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 401(k)’s.

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.

Today’s Realities

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 impasse.

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 them.

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 ILWU impotent.

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 successful conclusion.

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 Party—Now!

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 list.

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 back      burner. 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 1993.

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.