Labor Rising

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?