D. Dowd Muska


Big Labor Loses Another One

August 23, 2012

In a fiscally suicidal state with an unemployment rate higher than the nation’s, perhaps a “work stoppage” at a plant owned by a multinational corporation with numerous facilities in low-cost regions … isn’t a good idea.

So concluded many Caterpillar employees in Joliet, Illinois, a city 40 miles southwest of Chicago. On August 17, a majority voted to end their lengthy strike.

The previous contract for the 780-member “bargaining unit” expired on May 1. Management wanted the new agreement to permit greater shift flexibility, freeze wages for overpaid staffers, and raise the portion of health-insurance premiums borne by workers from 10 to 20 percent.

Steve Jones, business manager for “Lodge 851” of the International Association of Machinists and Aerospace Workers, denounced the company’s offer: “Essentially, Caterpillar is making record profits, $1.5 billion in the first quarter. They made a $4.9 billion profit last year, and their CEO received a 42 percent increase in compensation, but they’re taking away from the workers.”

Caterpillar set an April 29 deadline for ratification of the new contract, sweetening the proposal with a $5,000 bonus for each employee. The “brothers” didn’t go for it. The union claims that 94 percent voted to strike.

No unionized workforce? No problem. Caterpillar kept churning out hydraulic equipment, using salaried personnel and replacements. By the middle of August, it was clear that the Machinists’ media events, harassment, and inflatable rat were impotent. Production continued -- a spokesman bragged that non-union employees were “identifying inefficiencies, improving processes and meeting our customers’ expectations.” The company refused to cave at the negotiation table. More and more “scabs” returned to work. Union loyalists were low on morale -- it’s tough to man picket lines in the middle of a brutally hot summer.

Three and a half months after it started, the strike fizzled out. The new contract contained, The New York Times reported, “almost all of the concessions the company had demanded.” Management prevailed on both the wage freeze and the increase for health-insurance premiums. The $5,000 bonus it initially offered was cut to $3,100. Labor bosses could claim a partial victory on the shift-change demand, and workers hired since May 2005 will receive a one-year raise of 3 percent.

Why did the union’s rank and file relent? Press coverage and online commentary of the conflict suggest that an acknowledgement of economic realities played a decisive role.

Pay at the factory is not low. According to the Chicago Tribune, it ranges “from $11.50 to $28 per hour,” with fewer than 40 percent of union members clustered at the lower end. Production employees in the area, as computed by the U.S. Bureau of Labor Statistics, earn an average of $16.46 per hour.

A doubling insurance-premium obligation sounds steep, but data from the Kaiser Family Foundation reveal it to be a reasonable request. The nonprofit organization’s 2011 analysis found that nationwide, workers’ share of healthcare costs ranged from 18 percent for singles to 28 percent for families.

Another issue that weighed heavily on strikers’ minds is Caterpillar’s beachheads in right-to-work states. In addition to Illinois, where it is headquartered, the company manufactures and overhauls its products in Georgia, Mississippi, North Carolina, North Dakota, Texas, and South Carolina. And there’s a new possibility next door. Indiana’s gone right-to-work. The Hoosier State is already home to Caterpillar facilities, and more job opportunities are on the way, thanks to a Canadian union’s obtuseness. Employees at a locomotive works in London, Ontario wouldn’t bring their compensation down to affordable levels, so in February, the company closed the plant. Much of its work is likely to migrate to Muncie.

Finally, even in the era of “Occupy Wall Street,” greedy-executives agitprop is wearing thin. In April, the (Peoria) Journal Star listed the pay of Caterpillar’s CEO and five group presidents. Adding the value of their loot and distributing the wealth equally to company employees worldwide would generate checks worth $350.12. Not a sum anyone would turn down, of course, but it won’t rocket Joe Sixpack into “the top 1 percent,” will it?

Compensation must be tied to market forces. Jobs can flee to lower-cost locations. Profits today don’t guarantee profits tomorrow. Shareholders, not workers, own corporations. It’s encouraging to watch core economic laws influence bitter union-management throwdowns.

Since the 1930s, the federal government has showered privilege after privilege on unions.  America won’t be rid of labor cartelists for many years. But the Battle of Joliet demonstrates that class-warfare bluster can be ineffective when confronted with undeniable truths about the bottom line.

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

# # # # #