Counterparties: Imposing pay cuts on unions

By Ben Walsh
July 24, 2012

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ArcelorMittal, US Steel and Caterpillar each want to push labor costs lower — and that might well mean pay cuts, even for unionized workers. It’s all part of a trend that even the most well-organized unions haven’t been able to alter: “Wage and salary income… has fallen steadily from close to 55% of GDP in the early 1970s to less than 45% today”, writes Edward Alden.

According to documents reviewed by the WSJ, ArcelorMittal is offering union workers a 36% pay cut and the elimination of retiree healthcare benefits for new workers. US Steel is likely pushing for cuts as well, although a similar specifics aren’t available. And Caterpillar is living up to its reputation for hard bargaining with labor, asking 780 workers to take a six-year pay and pension freeze.

In response, workers at Caterpillar went on strike. That, however, is a measure that has lost its former force:

Labor experts say that leverage has shifted to owners, who are increasingly willing to close unprofitable operations or bring in replacement workers… ”The strike is a weapon of the past,” said Gary Chaison, a professor of industrial relations at Clark University in Worcester, Mass.

If that’s the case, Robert Bruno, a labor relations professor at the University of Illinois, wonders “how can you counter a powerful multinational in this economy?” Eduardo Porter thinks the answer to that question is to move beyond “organizing work site by work site… Instead of negotiating for their members only, unions might do better pulling for better wages and conditions for all workers”. Acting globally, as Felix has advocated before, would be a good start to implementing Porter’s idea. Unite Here appears to agree: The union is calling for a global boycott of Hyatt Hotels. – Ben Walsh

On to today’s links:

EU Mess
Mario Draghi’s secret weapon: the ECB’s “risk control framework” – Forbes
Geithner: Euro crisis has caused “huge, really remarkable levels of deprivation” – Charlie Rose
Moody’s downgrades German outlook to negative – WSJ

The pointless debt ceiling standoff cost the US $1.3 billion – GAO

The Libor investigation now involves more than a dozen traders at nine banks – WSJ
Don’t look back: Barclays to formally review its “current” culture and practices – Reuters

Rebekah Brooks and Andy Coulson to be charged with phone hacking – Guardian

Patients routinely abused at for-profit brain injury treatment center – Bloomberg

New Normal
The winners and losers of the last three years’ “global political obsession with austerity policies” – Huffington Post

Data Points
Women are “more than 1/2 of the work force in the financial industry but are chief executives at fewer than 3% of US financial companies” – NYT

The strange price surges that inflated JPMorgan’s controversial trades – Bloomberg

Tett: Welcome to the new age of “disaster economics” – FT

Effusive coverage of Kazakhstan, brought to you by Kazakhstan – The Atlantic

Odd Couples
Driving enthusiasts: surprising supporters of high-speed rail – Motor Trend

Adding Value
Most share buybacks haven’t “added much value for remaining shareholders” – Credit Suisse



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How are unions going to boycott steel companies? I guess they can refuse to buy appliances and cars, but that’s going to happen anyway, as they make less money. They will probably spend less in their towns and cities, and the workers in those retail industries will earn and spend less. And let me guess, when domestic sales of cars, appliances, and steel companies decline, they will blame it on taxes and unions.

So do the executives of these companies that are so eager to slash wages ever really think about their end customer? Do they think it’s a car manufacturer, and not a car buyer? A real estate developer, and not an office worker or retail clerk? If less wages are paid, where do they think the decreased spending by those workers will replaced? If they cut wages, don’t they think other manufacturers will do the same, and their workers will spend less?

Cutting wages when a company is profitable is deflationary and short-sighted. Not that the guys running those companies care. They claim they have to cut those costs to be competitive, but it’s often more likely because they want to add to their cash hoard.

Posted by KenG_CA | Report as abusive

This is why you want to bring back the 90% tax bracket and raise corporate rates. When when most of the increased profit goes directly or indirectly to the government, corporations are less concerned with grabbing every penny and more concerned with growing their businesses. We had much higher growth overall and much higher wage growth back when taxes were higher.

Posted by Kaleberg | Report as abusive

Hmmmm … about this -

“Adding Value
Most share buybacks haven’t “added much value for remaining shareholders” – Credit Suisse”

Consider this -

“Credit Suisse to buy back $4.4 billion of securities | Reuters” 5/us-creditsuisse-idUSTRE8240CN20120305

Posted by MrRFox | Report as abusive

MrFox, that kind of shows how much CS cares about its shareholders.

Posted by KenG_CA | Report as abusive