The Dull Compulsion of the Economic (#8)

by Dollars and Sense

A series of blog entries by D&S collective member Larry Peterson.

Last Wednesday, the United Auto Workers reached an agreement with General Motors, averting a strike that many thought would force General Motors into bankruptcy—or consign the union (and possibly the lion's share of the whole labor movement) into a position of irrelevance in the US. At issue was the skyrocketing cost of healthcare; and the very settlement, with greater costs passed onto employees, may in fact, as the Financial Times noted, hinder the possibility of serious health care reform in the US. For GM was one of a growing number of US mega-corporations whose cost structures were being seriously distorted by heath care costs (such costs tack some $1,600.00 on to the average vehicle produced by GM); and with GM cutting its own deal, it will no longer be there to bring political pressure on a polity that has shown that it will avoid serious change in healthcare provision at almost any cost. As for the deal itself, it goes something liker this: GM will stump up $35 billion to jump start a voluntary fund that employees will subsequently contribute to and use at their discretion, while receiving tax benefits. So it's essentially like a 401K for healthcare. And GM will kiss healthcare costs goodbye with as much relish as Argentina paid off (with Venezuelan help), and subsequently showed the door to, the IMF a few years ago.

And what does the union get? Not much, except that it will live on to fight (is that still the right word?) another day. Union leadership felt it had such a weak hand that it continued negotiations, as the Economist related, an unprecedented nine days after its contract expired. Indeed, the sloughing off of healthcare benefits will go a long way toward putting unionized workers on the same total compensation level as non-unionized auto workers who toil in foreign-owned US plants. This is hugely ironic: for it was the granting of healthcare benefits during World War II in lieu of wage hikes to a more unionized workforce (which wartime wage and price controls prevented) that, perhaps more than anything else, led to the creation of the tax-subsidized, two-tier, highly exclusionary employer-based healthcare monstrosity we are stuck with today; and now employers are being allowed to pass the buck onto workers who have less means of covering the higher costs—pay levels continue to stagnate, even in unionized industries, while corporate profits have soared (the domestic auto industry, of course, being an exception to this: but it wasn't too long ago, in the mid to late 'nineties, at the height of the SUV craze, that management at several domestic automakers used rapidly accumulating pension and other employee funds to pad company profits to meet Wall Street's extravagant, dot.com-crazed earning targets). The fact that a behemoth like GM has talked its way out of the problem will only make reform—and lower costs—all the more difficult for the rest of us to realize.

Beyond this, the settlement exacerbates the trend toward union disintegration inasmuch as it favors older members and retirees at the great expense of new workers. Now, no one denies that retirees and older workers deserve their due; but the settlement, which includes provisions which deny benefits to new workers so as to pay off older ones, will almost inevitably cause younger workers to look at union membership as more of a burden than a benefit, especially if the unions continue to fail to deliver on day-to-day issues, like pay and working conditions.

Finally, the settlement is troubling because it represents a continuation of another trend: the socialization of the costs of the financialization of the economy. It is in no small part due to the fact that insurance costs are so unnecessarily high that healthcare costs have reached their ridiculous levels; and it is in no small part that management costs of pension funds and 401Ks have been so high that people feel they have to become millionaires simply to retire (and never mind real estate...). Sadly, many unions see their future as glorified pension funds for insiders, providing capital to hedge funds and the like (who often act in ways diametrically opposed to union members), rather than organizations committed to the prevention of the further commodification and degradation of all workers. Last week's "settlement" will do nothing to reverse this trend.

Readers interested in these matters should refer to Dollars & Sense's interview with economist and auto industry expert Sue Helper. She makes important points that have been completely disregarded in debates about the industry in the mainstream press. For instance, she speaks of the absolute necessity for skilled (and hence-well paid) labor in the just-in-time manufacturing process that management (and consumers) have been so enthusiastic about in the last few years, and how that very success is being eroded by stingy, indeed dangerous, management practices. Check it out! 

Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!).
9/30/2007 11:25:00 AM