Outline

1. Outline • Bargaining Subjects • Pensions • Healthcare • Grievance Procedures • Again…more things that you’ll need to know even if you never think about unions again after our final exam

2. News of our Class • April 4, 2011 Unions Rally, Linking Their Cause to Dr. King

3. After WW II the Bargaining Table Expands • 1949 Supreme court rules non-wage matters were legitimate subject of collective bargaining • United Mine Workers win medical in 1947 • Steelworkers get Pensions in 1949 • These benefits set standard throughout economy for union and union-union companies • “The unions role in developing this system…was central. By the early 1970s, pensions, health insurance, and the like had become so commonplace that millions of Americans took these hard-won benefits for granted. Few remembered the generations of militancy that paved the way…”(Zieger, p.153) • These subjects have become MAJORsources of conflict in collective bargaining today

5. All Societies Must Grapple with the Questions? • What happens when workers are too old to sell their labor power? • “When you’re too young to die but too old to work.” • Victor Reuther, in movie we saw earlier this semester • Pensions Provide…but who should provide pension? • In America…where do we get the money that keeps alive when we’re too young to die, but too old to work?

6. Old Age in America • Pensions Provide…but who should provide pension? • Govt. Provides a pension via1935, Social Security • Federal Insurance Income Contribution Act (FICA • Born after 1960…Full at 67 • 1972, COLA provided

7. Social Security & Poverty

8. How does Social Security work? • “Pay as you go” • Current generation taxed to pay current retirees • In 2010: 6.2% payroll tax on earnings up to $106,800 • Employer and Employee both pay • Benefits as Percent of Past Earnings • Typical low-wage workers will receive annual benefits that are 57% of their average yearly earnings (EPI 2005 • Benefits for high-wage workers are on average 38% of their annual earnings (EPI 2005) • Note graph…most people are very dependent on social security for their income during retirement

9. Pensions • If state pensions are not enough, then unions will pursue via the employer through collective bargaining… • If state provides bulk of pension, unions will pursue politically • Recent Greek and French General Strikes

10. Social Security • Current Situation: • 1950, 16 contributors for each recipient • 1999, 3 contributors for each recipient • 2020, 2 contributors for each recipient • 2007 Social Security Trustees report that it will be able to pay full benefits until 2041 and about 75 percent of promised benefits after that, if no changes are made to the program (CBBP 2007) • Then what???  

11. All Solutions: Someone Takes a Hit • Cut benefits and/or raise retirement age • Future Senior citizens (me and you) take a hit • Raise Payroll Taxes • All workers & employers take a hit • Lift $106,800 cap & tax more or all earnings • Top income earners takes a hit (15% or so of population) • Change entire system to Personal Retirement Accounts & bet that market investments grow to cover gap • Workers invest % of payment in stock market • Problems: • How fund current retirees as money is diverted? • $2 to $4 trillion dollar gap • What if retire when market is down?

12. Collective Bargaining & Pension Plan s • Government Provides Social Security but it isn’t enough for workers to maintain standard of living • Post War: Unions Push for Supplemental Pensions • Inland Steel v. NLRB…Becomesmandatory subject of bargaining • At present 55% of Americans have pensions but they are provided by almost all CB agreements • 87% of union members get vs. 49% of non-union • There are different types of pension plans…anyone?

13. Pension Types: Defined Benefit • Defined Benefit Plans • Union 78% vs. Non Union 19% • the employee gets a specific guaranteed or “defined” monthly retirement benefit, typically for the rest of his/her life (Cutler, 2005) • Employer creates separate account that employer and employees pay into • Account administered by bank or board • Invested to provide future benefits to worker

14. Service Requirement • Most pensions require minimum years of service for eligibility • Age 55 or 60 • 20 and out… • Both • Currently something Police and Fire fighters are being confronted over • Vesting • Time required for employees to accrue an irrevocable right to pension contributions made by an employer • My first job…needed 7 years…I only worked 3…so I lost everything

15. Benefit Formula • Amount of $ known in advance of retirement • $= years of service x base pay x ____% • % usually 2 or 3 • Base pay often yearly average salary for last 3 or 5 years • Post 9/11 retirement wave by cops, firemen, construction workers… Anyone guess why? • Pensions are usually not indexed to inflation • Permissive Bargaining Topic…but not mandatory • So retirees sometimes get jammed • Formula becomes important • Christie wants to change the formula in NJ…lots of retirements to beat changes

16. Defined Benefits • Why do workers like these pensions best?

17. Defined Benefits • Advantage to Workers • Guaranteed pension for life • Promise workers a specific monthly benefit • Employer bears the investment risk • Even if employer goes out of business or their pension plan runs out of assets pensions are provided by Federal Government’s Pension Benefit Guaranty Corporation (PBGC) • But worker may take a big hit…note next slide

18. Good Pensions + Bad Business + Cut Taxes + Wall Street Declines = Pension Problems • Private Problems • Judge clears United Airlines pension takeover • A federal judge ruled Tuesday in Chicago that United Airlines can walk away from 6.6 blnusdworth of retirement obligations to 119,000 current and former union employees, handing the program over to the government in a move the company argues is essential to getting out of bankruptcy. The ruling also paves the way for the federal Pension Benefit Guaranty Corp's biggest retirement plan takeover yet and will result in lower benefits for thousands of workers. The PBGC caps annual payouts at 45,600 usd a year. http://www.forbes.com/feeds/afx/2005/05/10/afx2016620.html • General Motors Corp. may no longer be the world's biggest automaker, but it still operates the country's largest pension fund. The threat to its pension plans has always been an issue, but it took on a new urgency when GM disclosed April 7 that its plans were underfunded by more than $27 billion, with more than half of that being owed to U.S. workers and retirees Read more: http://www.time.com/time/business/article/0,8599,1981958,00.html#ixzz1IZBVPTeA • Federal Government assumed $3.7 billion in unfunded pensions from Bethelem Steel in 2003(PI, 4/10/05) • Public Sector Problems • Last year, the Pew Center on the States estimated that state and local retiree plans had unfunded liabilities of $1 trillion, based on 2008 data • In response, dozens of states have already cut benefits for new employees while raising mandatory contributions to pay for expected future-liabilities. http://blogs.wsj.com/economics/2011/03/31/public-pension-holdings-continue-to-recover/?mod=google_news_blog

19. Defined Benefit Pensions • Advantage to Workers • Guaranteed pension for life • promise workers a specific monthly benefit • Employer bears the investment risk • In theory, even if employer goes out of business or their pension plan runs out of assets • Pension Benefit Guaranty Corporation (PBGC) • Why might employers like these plans?

20. Defined Benefits • Advantage employers • Retains workers… • Employees are hesitant to leave if will lose vesting • Employees want to stay at same place to get larger pension • Creates Loyalty

21. Defined Benefit Plans • Why might employers dislike these pensions?

22. Defined Benefit Plans • Why might employers dislike these pensions? • Employer Disadvantages • Guaranteed pension for life • Complex…must plan for future • Contributions fluctuate according to the current & future funding needs • Costs may increase substantially • If plan investments produce lower returns than assumed • Number of retirees keeps growing…firm’s profits may not and taxes may not

23. 1. One of the topics getting a lot of attention is that of pensions. How much money can the average government worker and teacher expect to get from their pension? • Polls show that the public would like to ditch pensions. What do they want to replace them with?

24. From Defined Benefit to Defined Contributions: Meet the 401 (K)

25. Pension Types • Recent years have seen emergence of a different type of pension • Defined Contribution (401 k; 403 b)?

26. Pension Types • Defined Contribution (401 k; 403 b)? • Employees contribute to a private account • Employer may or may not match it • Employee responsible for investment decisions • Shifts risk from employer to employee • Accordingly, unions resist changes from DB to DC • Amount that is contributed and that accrues is what you get

27. Pensions • Why do employers like…?

28. Pensions: Defined Contribution • Why do employers like…? • Not providing any specified future benefit. • Not responsible for retirees • May be no cost • Only employees contribute • If match, costs are fixed and predictable. • Less complex…just fund them

29. 4.. Briefly describe some of the reasons this article suggests that the counting on being provided for by the retirement plans that many American’s now have is as risky as a counting on a bet in a Las Vegas casino. Be sure to cite the text in your answer

30. Risk Shift combined with Inability or Unwillingness to Save for Retirment • Risk Shift • “The problem is that even if you do everything right and save at a respectable rate, you’re still relying on the market to push you to the finish line in the last decade before retirement. • But if you’re dealt a bad set of returns during an extended period of time just before you retire or shortly thereafter, your plan could be thrown wildly off track. Many baby boomers know the feeling all too well, given the stock market’s weak showing during the last decade. • “The way the math really works out is unbelievably dependent on the final few years,” Mr. Kitces said. “I just don’t think we’ve really acknowledged just what a leap the very last part really is” (Bernard 2011: 11) • Most Americans are woefully unprepared for retirement • BLS Data

31. Pension Types: Defined Contribution • Plusses and Minuses for Employees?

32. Pension Types: Defined Contribution • Plusses and Minuses for Employees? • Plusses for Employee • Potential for Growth • Portability: can take it with you if you leave • I would not have lost my pension • Disadvantages for Employee • Hard to put enough money away • Assume risk of investment • Market decline before retirement…you’re in trouble • No guarantee for life

34. National Health Care in US • Proposed as Part of Social Security Act of 1935 • Taken off the table as part of compromise with American Medical Association and Business Community • Some unions Create Own Insurance Funds • Pure and Simple Unionism…getting benefits for “our” members • During WWII, when wages increases were controlled by government, some employers began to offer as way of retaining workers

35. President Truman Proposes National Health Care (11/19/45) • Called for the creation of a national health insurance fund, to be run by the federal government. • Fund would be open to all Americans, but would remain optional. • Participants would pay monthly fees into the plan, which would cover the cost of any and all medical expenses that arose in a time of need. • The government would pay for the cost of services rendered by any doctor who chose to join the program. http://www.trumanlibrary.org/anniversaries/healthprogram.htm

36. President Truman Address to Congress (11/19/45) • In my message to the Congress of September 6, 1945, there were enumerated in a proposed Economic Bill of Rights certain rights which ought to be assured to every American citizen.One of them was: "The right to adequate medical care and the opportunity to achieve and enjoy good health." Another was the "right to adequate protection from the economic fears of . .. sickness ...." • I recommend solving the basic problem by distributing the costs through expansion of our existing compulsory social insurance system. This is not socialized medicine.Everyone who carries fire insurance knows how the law of averages is made to work so as to spread the risk, and to benefit the insured who actually suffers the loss. If instead of the costs of sickness being paid only by those who get sick, all the people--sick and well--were required to pay premiums into an insurance fund, the pool of funds thus created would enable all who do fall sick to be adequately served without overburdening anyone. That is the principle upon which all forms of insurance are based. http://www.trumanlibrary.org/publicpapers/index.php?pid=483&st=&st1=

37. President Truman Proposes National Health Care (11/19/45) • AFL and CIO support • American Medical Association vehemently opposes • Labeled as communist plan • Called Truman White House staffers "followers of the Moscow party line“ http://www.trumanlibrary.org/anniversaries/healthprogram.htm • Truman ultimately withdraws bill

38. Health Care Benefits • Absent national program, unions pursue subject at bargaining table • Mandatory Subject • Most Expensive Benefit • 11% of payroll and rising • In 2007, 60% of employers offered…down from 69% in 2000 • More common in union employers

39. Health Care Benefits • Both union and non-union employers are not happy about having to shoulder the rising cost of healthcare… • Teachers Union to Widener Faculty…

40. Who Pays the Premium is Increasing Source of Conflict in Collective Bargaining

41. In New Jersey, a new playbook for union negotiations March 18, 2011|By Matt Katz, Inquirer Trenton Bureau • Currently, CWA members pay an average of 8.5 percent toward their premiums; the CWA says its new plan would have members paying the equivalent of 22 percent, including increased costs for doctor visits and prescriptions. There would be total savings of $240 million in the final year of the four-year contract, which is set to start in July. • Christie won't even consider the proposal, he said. He wants the Legislature to pass a law that would require all public workers in New Jersey, including teachers and police officers, to pay 30 percent of their health-care premiums, plus co-pays for doctor visits and prescriptions • “Sorry, it's a new game in town, and they're going to have to get used to it," Christie said Thursday

42. Legacy Costs: An issue for Auto, Airlines, Steel and others • Detroit's carmakers have been under siege from foreign competition, which have lower costs in their factories…U.S. Health-care costs have sapped $1,400 from the profit of any vehicle.(Business Week, 9/07)

43. Other Benefits…Union Advantage

44. Public Workers, Taxes and Benefits • Income Inequality Today • 3. Briefly summarize what has been happening to police and firefighters across the state of NJ. One way to improve the situation of public safety workers was to raise taxes in NJ. As the articled notes: “Democrats will criticize the governor for refusing to raise taxes on those earning more than a million dollars while Republicans, led by Gov. Christie, will argue that Democrats are kowtowing to public employee unions and never met a tax they didn't like, Dworkin predicted.” • Who do you agree with? Why?

45. Outline • Grievance Procedures • Impasse • Economic vs. Non-Economic Strikes • Tyson and the UFCW • Teamsters, Motts • Lockouts • ILWU and PMA • I’ll be changing the readings for next week so RQ and Readings will not be posted until later today or tonight

46. Wisconsin union debate reaches court election race • A Wisconsin Supreme Court election that turned into a referendum on Republican Gov. Scott Walker's polarizing proposal restricting union rights remained too close to call Wednesday as a little known prosecutor tapped into voter unrest to mount a serious challenge to the incumbent tied to Walker. • Unofficial results showed challenger JoAnne Kloppenburg ahead by a scant 311 votes over incumbent Justice David Prosser, a former Republican speaker of the Assembly who served with Walker. The results were based on 99 percent of precincts reporting, with just five precincts outstanding

47. Public Workers, Taxes and Benefits • Income Inequality Today • 3. Briefly summarize what has been happening to police and firefighters across the state of NJ. One way to improve the situation of public safety workers was to raise taxes in NJ. As the articled notes: “Democrats will criticize the governor for refusing to raise taxes on those earning more than a million dollars while Republicans, led by Gov. Christie, will argue that Democrats are kowtowing to public employee unions and never met a tax they didn't like, Dworkin predicted.” • My Hometown and the Angry Cops • Who do you agree with? Why?

48. Selling Labor at market… • Labor market leads to yet more questions…How should day to day relations in a firm be governed? • rules, discipline, contract interpretation • Employers want a free hand to manage their organization • Pursue Goals & Maximize profits • Employees want to be protected from the arbitrary whims of management • Maintain standard of living and plan for the future • Work with dignity

49. Governing the Workplace • Non-union • Management free to do what it wants within boundaries of law • Civil Rights, Sexual Harassment, Fair-Labor Standards Act, etc. • Union Contract Sets new Boundaries: “Workplace Rule of Law” • But getting a contract is just the start…governance of the workplace becomes an ongoing, daily phenomenon

50. Contract Administration • Disagreements between Union & Management will inevitably arise • Impossible to foresee all circumstances when crafting a contract • Language may be unclear about certain issues • Situation may be unclear…does the contract address?