Industrial relations in the USA 2003-4
This record reviews 2003-4's main developments in industrial relations in the USA, and focuses on the topical issues of migration and pensions reform.
The US economy grew impressively throughout 2003, with GNP expansion averaging 4.7% over the four quarters. Steady growth continued into 2004, standing at an annual 4.5% in the first quarter and 2.8% in the second. Slower growth in the second quarter has been attributed to a deceleration in consumer spending, which fell to just 1% from a first-quarter level of 4.1%. Overall, however, the US economy has performed fairly well since the 2001 recession, averaging 2.4% annual GNP growth over the last three years.
There are, however, sharp differences among analysts and commentators about the country’s recent economic performance. Conservatives have hailed it as an economic miracle, while liberals maintain that the recovery has been purchased by way of wasteful tax cuts and government borrowing that has converted the Clinton-era budget surplus into a USD 7.5 trillion deficit.
Inflation fell to just 1.2% in 2003, half the 2002 level. However, in the first half of 2004 rising oil prices threatened to drive up the level of inflation, and both consumer and producer indexes recorded levels of inflation at around 3.5% for the first half of the year. After subtracting food and energy prices, inflation rose 2.4%.
Recent US unemployment figures have fluctuated between rates of 6.3% in June 2003, and 5.4% in September 2004. Job growth picked up noticeably in early 2004, (averaging 295,000 per month for March-May) but slowed dramatically in the summer months (well under 100,000 for June-August).
Political and legislative developments
The fiercely contested 2004 presidential election ended on 2 November with the re-election of President George Bush. The Republican Party also strengthened its position in the Senate, winning 19 or the 34 seats contested, four of which had been previously held by the Democratic Party. The Republicans now have a 55-45 majority. Not since 1928 has the Republican Party enjoyed an 11-seat advantage in the Senate. In the House of Representatives, where all 435 seats are up for election every two years, Republicans won 231 races, expanding their 22-seat majority by four seats.
In the 2003-4 period, the Bush administration pursued a number of initiatives that sought to change the industrial relations environment in one way or another. In May 2003, the administration unveiled the details of a plan (originally announced in 2002) to eliminate as many as 850,000 federal jobs and contract out the work to private companies. In September 2003, the President announced his intention to limit the pay raises of federal workers to 2% in 2004, citing executive authority that allows the President to limit increases in times of 'national security or serious economic conditions'. Under a law passed in 1990, federal employees covered by the government's general schedule pay system should have received a two-part pay increase at the start of the year, a 3.1% across-the-board increase plus a pay hike based on private-sector wage changes in the areas where they work. In his announcement, President Bush said that granting the full raises would cost about USD 13.6 billion in 2003, or USD 11.2 billion more than he proposed for the year. 'A national emergency has existed since 11 September 2001', he wrote in a letter announcing the decision, adding: 'Such cost increases would threaten our efforts against terrorism or force deep cuts in discretionary spending or federal employment to stay within budget. Neither outcome is acceptable.' John Sweeney, the president of the American Federation of Labor and Congress of Industrial Organisations (AFL-CIO), strongly criticised the President’s decision: 'Bush is making federal employees pay for his own fiscal recklessness ... While Bush is cutting workers’ wages in the name of fighting terrorism, he has meanwhile pushed through unaffordable millionaire tax cuts that do nothing to create jobs and which worsen our nation’s long-term economic prospects.'
By far the most significant and controversial development, however, was the administration’s effort seriously to amend the Fair Labor Standards Act (FSLA). The FSLA became law in 1938 during the New Deal era, establishing for the first time clear rules with regard to minimum wages and working hours, notably overtime. The administration regards the FSLA as out of date and working against the interests of both employers seeking greater flexibility in a competitive global marketplace, and workers who seek more control over work schedules.
Under the FSLA, workers must be paid overtime pay (at a rate of time and one-half) for hours worked over 40 hours per week. In March 2003, the Department of Labor (DoL) announced its intention to reclassify some jobs into overtime-exempt categories such as 'professional' or 'executive'. The number of workers already affected by these 'white-collar exemptions' (detailed under Section 13 (a)(1) of the Act) has already increased dramatically in recent years. A General Accounting Office (GAO) study in 1998 disclosed that somewhere between 19 million and 26 million workers were already overtime-exempt, between 20%-27% of the total workforce. More than 44% of these exempt employees worked over 40 hours per week. The administration began 2003 with the goal of expanding the range of exemptions still further.
The overtime exemptions issue has always presented something of a battleground between employers and trade unions. Employers have complained that no allowance is made, for example for management training or the need for more flexible work schedules. However, employer-driven pressure for change has grown in concert with the rise in non-traditional employment and the 'broadbanding' of tasks within companies. Unions have warned of a need to hold the line on the exemptions in order to stop the drift towards longer working hours and its numerous knock-on effects, such as a decline in earnings for workers who rely on overtime, as well as health and safety issues.
The DoL initially claimed that roughly 750,000 workers would lose overtime protections under the new rules, but others would now be entitled to overtime pay because of adjustments in the minimum salary level that a worker would need to earn in order to be overtime-eligible. Critics of the proposals claim that more than 8 million workers will lose overtime entitlements, and will thus be negatively affected by the changes. Most agree, however, that the DoL’s proposals are more than a minor tinkering with the FSLA exemptions, and amount to a radical revision of the 66-year old Act. Under the new rules, any worker who performs supervisory duties some of the time will now not be entitled to overtime pay, even if most of the time he or she is performing non-supervisory work. For example, an assistant manager in fast-food, grocery or retail may spend most of his or her time performing 'line' duties, such as 'burger flipping' or operating the till, but still be 'in charge' of other workers at the same time. Under the old rule, many of these workers still received overtime pay. Under the new rule, they may very well lose their overtime pay (as reported by the Economic Policy Institute, June 2003)
The DoL’s proposal sparked a major battle in Congress as unions and other constitutencies mobilised public pressure to halt the intended changes. Despite four disapproving Congressional votes, the new rules nonetheless went into effect in August 2004. However, in early September moderate Republicans joined with Democrats in the House of Representatives to approve an amendment to restore overtime pay rights. The President, however, has threatened to veto the bill.
Part two of the administration’s reform of the FLSA began in earnest in September 2004. During his acceptance speech at the Republican National Convention in New York on 3 September, President Bush said: 'In this time of change, government must take the side of working families. In a new term, we will change outdated labour laws to offer comp-time and flextime.' The President was referring to the Family Time Flexibility Act which intends to provide compensatory time for employees in the private sector. According to the Bureau of Labor Statistics (BLS), one in three private sector workers with flexible schedules operate in a formal flextime arrangement. The main feature of the proposed legislation is to allow an employee to work, for example, 50 hours per week without overtime pay, and to be compensated by working 30 hours the following week - thus compensatory time or 'comp-time' The proposal has been supported by employers and opposed by the labour movement and its Congressional allies, including Senator John Kerry.
Under the 1935 federal National Labor Relations Act (NLRA, or Wagner Act), workers in the US gained the right to bargain collectively over wages, hours and other terms and conditions with their employers. The NLRA, along with other federal, state and local statutes, extends bargaining rights to 78% of US workers. Many of the remaining 22% of workers without bargaining rights are supervisors, managers and independent contractors. However, public sector workers in 12 states also have no bargaining rights, and domestic workers and roughly 300,000 agricultural workers are similarly excluded (Collective bargaining rights: information on the number of workers with or without bargaining rights, GAO, 13 September 2002).
The end of the 2001 recession and impressive productivity gains has not yet shown up in improved wage and benefit settlements for workers in the USA. In 2003, the average first-year wage increase in settlements bargained was 3.4%. For the first half of 2004, first-year settlements rose slightly to 3.5%. The median first-year increase for settlements was 3.1% in 2003, and 3.0% for the first half of 2004. Across the different sectors, pay settlements in manufacturing lagged behind construction and the state and local government sectors by about 0.5 percentage points in both 2003 and 2004 (Bureau of National Affairs Daily Labor Report, 15 June 2004). Negotiated wage increases had actually been a little higher during the recession period (3.9% both in 2001 and 2002) during a time of serious downsizing in manufacturing and slower economic growth. See above (under 'Political and legislative developments') for information on federal employees' pay in 2004.
Collective settlements continued to more or less hold their own with inflation, but median annual family income fell some USD 1,300 (1.2%) during 2001-2. This fall was almost entirely due to the reduced number of hours worked as the result in the increase in unemployment during the recent recession (State of working America, 2003-4, EPI). However, an August 2004 Census Bureau report found that real median household income remained unchanged between 2002 and 2003 at a level of USD 43,318 a year, suggesting that the economic recovery had not yet resulted in a rebound in family incomes. The same report pointed to persistent wage inequality between men and women. During 2003, the female-to-male earnings ratio fell from 0.77 to 0.76, the first reversal since 1995. The median annual wage for women in full-time employment presently stands stands at USD 30,724. For black and Hispanic males, median annual earnings still fall far behind those of non-Hispanic whites, at USD 30,000 and USD 33,000 respectively.
The number of people regarded as living in poverty also rose by 1.3 million to 35.9 million, or one in eight people, in 2003. Moreover, the number of Americans without health insurance rose by 1.4 million to 45 million, or 15.6% of the population. Both sets of figures rose for the third successive year (US Census Bureau, August 2004).
No relevant data are available on collectively agreed working time in the USA, where the issue currently seems to have a relatively low profile in collective bargaining. According to BLS statistics, the average weekly working hours of production workers in private industry stood at 33.7 in both 2003 and 2004 (preliminary figures), down from 33.9 in 2002.
Spiralling healthcare costs dictated the general tone of collective bargaining in 2003-4, thus continuing the pattern laid down in 2001-2 (US0311101F) when healthcare costs jumped 25% over the two years. In 2003, health costs jumped again by 12%, and were expected to go up another 13% in 2004. During 2003, in large collective agreements covering 1.5 million workers health costs were centre-stage and this usually involved cost-shifting and some wage trade-offs (when unions agree to lower wage increases in order to preserve health and other benefits). Indeed, healthcare cost-shifting was at the centre of one of the USA's largest strikes in decades (see below under 'Industrial action'), and remains the most contentious bargaining issue (Mercer Human Resources Consulting, December 2003). The number of American residents without health insurance coverage rose to 45 million by September 2004, an increase of 4 million since 2000.
The Federal Mediation and Conciliation Service (FMCS) reports that 46% of the more than 6,000 disputes it handled in 2003 involved health insurance disputes, surpassing wages and job security as the top concern. The FCMS notes, 'With the rising costs in healthcare, the parties are really reduced to fighting over that which is beyond their control. They are simply pushing costs back and forth, from one side to the other, making it a very frustrating process for all involved.'
The average employee will pay USD 1,565 in health insurance premiums in 2004, or 22% of the total premium cost, according to one estimate (Hewitt Associates, October 2003)
The organisation and role of the social partners
The labour movement in the USA continues to decline. Falling overall density and a weak presence (if any) in new industries suggest that efforts over recent years to revitalise the unions have not been successful. In 2002, industrial unions suffered heavy losses due to the recession and its aftermath. Among those hardest hit were: the United Steelworkers of America (USWA), which lost 50,000 members; the International Association of Machinists and Aerospace Workers (IAM) lost 44,000; and the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) lost more than 40,000. By the end of 2002, union density had slipped to 13.2% of wage and salary workers, down from 13.4% in 2001. In 2003 density fell yet again, to 12.9%, with private sector density falling to 8.2% from 8.6% in 2002 (in 1983, union density stood at 20.1%).
While the number of workers in unions fell to 15.8 million in 2003 from 16.1 million in 2002, an additional 1.7 million workers were organised in a 'union-typical' manner, such as members of certain employee associations. This number also includes those who report no union affiliation but whose jobs are covered by a union or an employee association contract. Therefore the number of workers represented at the bargaining table stood at 17.5 million, or 14.3% (Union members summary, BLS, 21 January 2004)
The union density variation across sectors remains quite striking; local government workers (which includes teachers, police officers and firefighters) are heavily unionised - 42.8% - while in the finance, insurance, and real estate sector, only 1.9% are in unions. The number of public sector workers covered by a collective agreement has held steady since 1983 and stood at 37.8% in 2002, more than four times the density level in the private sector. In 2003, public sector density fell 0.5 points to 37.2%.
Unions continue to win more recognition elections (US0311101F) than they lose, but the number of the Labor Relations Board (NLRB) elections continues to decline. According to its annual report, the NLRB conducted 2,937 conclusive representation elections in 2003, down from 3,043 in 2002. The 2003 elections included 2,516 collective bargaining elections and 421 decertification elections. Unions won 1,579 elections, or 53.8%.
The steady fall in union density has sharpened the debate within the labour movement with regard to what it can do to arrest its decline and launch a resurgence. Prior to the re-election of President Bush, AFL-CIO officials and many union leaders had concluded that union revival would be unlikely without a change in the country’s labour law. Throughout 2003, the AFL-CIO was engaged in a major Congressional campaign to win support for the Employee Free Choice Act. The proposed legislation seeks to overcome the most serious obstacles to union organising and first-contract negotiations. If it were to become law, the legislation would make it easier for allow for unions to be recognised by submitting cards signed by the majority of workers in a potential bargaining unit indicating that they wished to be recognised ('card check' recognition). The legislation also seeks to stiffen the penalties on employers that refuse to bargain in good faith, and to ensure, via mediation and arbitration, to resolve first-contract disputes. As of early October 2004, more than 240 members of Congress (34 senators and 207 House representatives) had signed on as sponsors to the legislation, including then presidential challenger John Kerry.
The Republican victories in the 2004 elections put an end to any hope that the Employee Free Choice Act would be passed at any time in the foreseeable future. However, the AFL-CIO will continue to use the proposed legislation as a way of drawing attention to what it feels is the serious erosion of workers’ rights to organise and bargain collectively.
The defeat of presidential candidate John Kerry came as an enormous blow to the US labour movement. Its electoral effort, particularly in the 'swing states' where thousands of trade unionists worked for the Democratic challenger, was without precedent in terms of the effort and resources committed to the task. Not since the 1936 election of President Roosevelt to a second presidential term had organised labour been so determined in its support for a presidential candidate and so opposed to an incumbent. Senator Kerry’s defeat, however, means that unions will likely remain in a defensive posture as the labour movement seeks to rethink the future.
The Kerry defeat has reignited speculation that the AFL-CIO may soon split. In 2002, several prominent union leaders formed the New Unity Partnership (NUP) around a programme of radical structural change. The group has proposed consolidating the 66 unions of the AFL-CIO into 20 or so larger unions that would each seek to represent and organise in specific sectors, industries and labour markets (see Three steps to reorganising and rebuilding the labour movement, Stephen Lerner, in Labor Notes, December 2002, and also New Labor Forum, summer 2003). The result of the 2004 elections has seemingly strengthened the reform position of the 'NUPsters' and weakened the authority of the AFL-CIO president, John Sweeney. At a post-election meeting of the AFL-CIO’s executive council, the leading figure behind the NUP, Andrew Stern, the president of the Service Employees International Union (SEIU), reiterated the call for an immediate and radical restructuring of the US labour movement. He also called on the AFL-CIO to return half of the membership dues money it receives from its affiliated unions in order to fund organising drives - and to use royalties from the AFL-CIO’s credit card to finance a union drive at Wal-Mart, the world’s largest corporation. The SEIU is one of the few unions in the USA that has grown appreciably in recent years (adding 700,000 members over 2000-4), making it the largest union in the AFL-CIO with 1.6 million members (see Can this man save labor?, Aaron Bernstein, Business Week, 13 September 2004)
Andrew Stern’s strongest critic is the IAM president, Thomas Buffenbarger, who has vowed to pull his union out of the AFL-CIO if Mr Stern’s proposals are imposed.
It is generally not possible to talk of employers' organisations, in the sense understood in most other advanced economies, in the USA. There is no national employers' body with an industrial relations role. Major business organisations do not deal with trade unions, and there are few national sectoral employers' bodies with any bargaining role.
Strikes in 2003 were again low by historical standards, even though the number of major work stoppages was slightly up on 2002 (according to BLS figures). Fourteen major work stoppages began during the year, 'idling' 129,200 workers and resulting in 4.1 million working days of idleness (about 1 out of every 10,000 available working days). Of the major work stoppages beginning in 2003, 12 were in private industry and two were in state and local government. Five work stoppages beginning in 2003 accounted for 82% of all workers idled. The largest was between three supermarket companies - Albertsons, Ralphs Grocery Company and Vons- and the United Food and Commercial Workers (UFCW), with 67,300 workers idled, and 3.3 million days of idleness (BLS figures).
The 145-day UFCW supermarket strike took place in southern California and ended (on 29 February 2004) in a total defeat for the union, as well as the 'early retirement' of the union’s president. After absorbing USD 500 million in lost sales, the employers won a 'two-tier' hiring policy whereby all new recruits will be paid significantly less than current employees. They also won their demand to exclude new recruits from health insurance coverage for the first year of employment. In addition, the employers capped healthcare contributions, meaning that as healthcare costs rise above the cap the employee will be expected to pay the difference.
Migration and industrial relations
Migration to the USA has risen sharply in recent years. In fact, more immigrants arrived in the USA during the 1990s than in any previous decade. The USA's foreign-born population reached an all-time high of 32.4 million in March 2002, with almost half having come to the country during the 1990-2000 period (Current Population Survey [CPS], March 2002). The number of legal migrants arriving in the USA averaged 935,000 per year from 1991-2002. In 2001 and 2002, some 1,064,000 were admitted in each of the two years, but the number fell to 705,000 in 2003 as a result of new checks and restrictions introduced after 11 September 2001.
Immigrants presently make up 11.3% of the US population, a percentage that is still somewhat lower than the levels of a century or so ago, when close to 15% of US residents were born overseas. Today, immigrants make up 14% of the US labour force, more than double the 1980 percentage. According to the 2000 Census, of the 18 million foreign-born workers in the labour force, 4.9 million or 27% were born in Mexico. In addition to these 18 million workers, there were 5.8 million people who were admitted to the USA on a short-term basis in 2003 for business purposes. An additional 990,000 entered as 'temporary foreign workers', according to Department of Homeland Security figures.
Roughly two-thirds of immigrants enter the USA as immediate relatives (mostly spouses, children and parents) of other immigrants who have already settled. 'Employment-based' immigrants make up roughly one in six new immigrants each year. These are primarily skilled professionals with 'exceptional ability' and other priority workers who fill jobs for which the US Department of Labor has certified that no qualified US worker is available (see below). 'Diversity' immigrants total 55,000 per year under the present lottery system that makes immigrant visas available to nationals from 'undersubscribed' countries. Refugee admissions are determined annually. They presently total approximately 120,000 per year, with nearly half these places being assigned to nationals from the former Soviet Union and one-third to Southeast Asian refugees.
Nearly three-quarters of all new immigrants reside in six states - California, New York, Texas, Florida, New Jersey and Illinois - although some studies show that immigrants are settling in increasingly numbers in states like North Carolina, Georgia, Nevada and Arkansas. These states more than doubled their immigrant populations in the 1990s.
The number of illegal immigrants presently in the USA remains unknown. The government’s Immigration and Naturalization Service (INS - now part of Homeland Security and renamed the Citizenship and Immigration Services,USCIS) estimated that in January 2000 there were 7 million illegal aliens living in the USA, with the number thought to be growing by 300,000-400,000 a year. The Census Bureau put the figure at 8 million in 2000, or roughly 26% of the total immigrant population. The USCIS, however, put the 2002 figure at 9.3 million (CPS, March 2002).
Of the estimated 7 million-9.3 million illegal immigrants living in the USA, 6 million are thought to be working. The manufacturing sector employs nearly 1.2 million undocumented workers, the services sector employs 1.3 million, and 1.4 million undocumented workers are employed in agriculture. Some 600,000 more work in construction and 700,000 in restaurants (according to the National Employment Law Project).
Mexico is by far the largest source country of unauthorised immigration to the USA, with 69% of the illegal immigrant population coming from the USA’s southern neighbour. Indeed, there were 1.1 million apprehensions of unauthorised foreigners by government authorities in 2002, of whom 95% were Mexicans attempting to cross the Mexican-US border. However, roughly half of the illegal immigrant population arrived in the USA legally and became illegal by staying in the country after their non-immigrant visas expired. An estimated 1.9 million illegal immigrants came to the USA from other countries in Latin America, and 1 million from Asia.
Employers and immigration - technical and professional workers
In recent years, employers have tended to favour a generally 'open-door' approach to immigration and have resisted political efforts to reduce the inflow of new immigrants. This is true for employers that tend to hire technical and professional workers, as well as those that rely on a steady supply of low-wage unskilled labour, such as the large agricultural growers ('agribusiness'). However, at the same time employers have often shown support for state and federal cuts in social spending that remove or reduce benefits for immigrants (such as President Clinton’s welfare reform measures in 1996).
US manufacturers have also looked to immigration as one way of attracting sufficient numbers of sufficiently trained workers. They point to the failure of the US educational system to develop enough 'home-grown' workers to satisfy this need, along with the maturing of the 'baby boom' generation that will soon retire from careers in the manufacturing sector (see National Association of Manufacturers, April 2003).
Employer efforts to ensure a steady supply of highly-skilled technical and professional workers have rested on the argument that the borders of the USA should not be allowed to stop the world’s 'best and brightest' coming to the country. They maintain that foreign professionals help US companies survive and prosper in the global marketplace, and thus remain leaders of the high-end knowledge-based sector. With the BLS estimating that 15 million new jobs were created between 1990 and 2003, political and public opposition to this position has remained for the most part muted. As a result, immigrants now have a disproportionate presence in high-level occupations such as computer scientists (18.6%) and engineers (16.4%). According to data from the 2000 Census, the foreign-born accounted for 16.6% (or 1.2 million) of the 7 million science and engineering workers in the USA.
Many higher-skilled workers are admitted by way of employer sponsorship under what is known as the 'H1-B' visa programme. Fully one-sixth of US immigrants are admitted to the USA in this way. An employer must demonstrate to the DoL that the prospective employee has 'extraordinary ability' and will hold a position that can not easily be filled by a non-immigrant. The application process is simple. Under the H-1B programme (named for the part of the immigration law that authorises it), an employer submits a Labor Condition Application (LCA) for an identified foreign worker who can help it 'to meet urgent, short-term demand for highly skilled, unique individuals who are not available' in the USA. The H1-B programme during the 1990s became the largest channel for professional migrants in the advanced industrialised world.
Employers do not have to go to great lengths to prove that the person being sponsored is a unique individual, however. The INS (now USCIS) has normally let individual employers determine their own needs without fear of government cross-examination. Companies that have needed technical or professional workers have, therefore, had no real difficulty acquiring them from abroad when US nationals have been apparently unavailable.
The 'unavailability' of US workers has been a controversial issue for some years. A 1996 DoL audit revealed that a significant number of workers receiving visas were probably not 'uniquely qualified.' During 1988-96, 40,000 housekeepers, 5,000 cooks and 3,000 auto repair workers were among those workers who had acquired visas because their employers had convinced the DoL that US workers were not available (see 'Audit by DoL Inspector General faults employment-based immigration programs', Deborah Dillings, BNA, Daily Labor Report, 15 April 1996).
The 1990s saw a trend towards increasing numbers of technical and professional workers coming into the USA from abroad. The Immigration Act of 1990 had set a ceiling of 65,000 employer-sponsored immigrants per year, but hi-tech and computer-related companies pressed Congress to raise the annual ceiling to 115,000. Legislation in 1998 raised the ceiling still further, to 142,500 for three years, only to be raised to 195,000 with the passage of the American Competitiveness in the 21st Century Act of 2000. However, with 11 September 2001 and the recession, this trend has recently been arrested by Congressional action. H1-B visa applications had themselves fallen 15% after 11 September 2001, but in late 2003 Congress reintroduced the 65,000 annual cap that had been in place in 1990. Employers objected to the new restrictions and argued that 'the current limits on the H-1B programme may be undermining the preeminence and international competitiveness of the United States in a wide range of scientific and technical fields that are vital to the economy and security of the nation' (according to the American Immigration Law Foundation). In October 2004, the USCIS announced that it had already received the full quota of applications for the 2005 financial year and would not be handling further applications.
This political reversal is clearly the result of the post-11 September climate in the USA and fears persist that the nation is vulnerable to terrorists entering the country as respectable professional workers. This fear has been exacerbated by public concerns that high-end employment is being outsourced to countries like India, leaving a dwindling number of opportunities for US nationals.
Employers and low-paid immigrant workers
While immigrants have made headway in terms of breaking into higher-paid occupations, they remain disproportionately represented in lower-paid ones. Immigrants make up 14% of the labour force, but 20% of the lower-paid workers. Half of the immigrant workforce earns less than 200% of the minimum wage, compared with one-third of native-born workers. The average low-paid immigrant worker earned USD 14,400 in 2001.
In the public discourse around low-wage immigrants, the reputation of some US employers remains considerably tarnished. Over the last 10 years or so the 'sweatshop' has reportedly once again become a national institution and compelling stories about immigrants being abused by employers, injured as a result of employer negligence or fired for trying to form a union are commonplace. Studies indicate that employer violations are quite widespread. A GAO report disclosed that denial of labour rights is almost routine in the sweatshops that have proliferated in cities like New York during the last two decades. Other studies have found that immigrants are disproportionately exposed to violations of occupational health and safety laws as they are less likely to receive necessary safety equipment and training. The National Academy of Sciences reports that foreign-born Latino men are nearly 2.5 times more likely to be killed at work than the average worker. In 2000, construction fatalities involving Hispanic workers increased by 25% while Hispanic employment was up only 6%. A DoL survey found that in 2000, 100% of poultry processing plants were non-compliant with federal wage and hours laws (Poultry processing compliance report 2000, DoL and other studies cited by the National Employment Law Project, NELP). Studies and anecdotal evidence also point to pervasive wage and hour violations committed by day-labour employers and temporary agencies (reported by NELP). These violations have occurred despite the fact that legal immigrants are protected under state and federal employment and labour laws.
Immigrant organisations and advocates have also criticised what they regard as a lack of employer-provided training programmes available to workers who are poorly educated or lack English proficiency in order to improve their skills and prospects. Studies show that 40% of foreign-born US residents have not finished secondary schools (less than 12 years of education) and nearly two-thirds of immigrants in low-paying jobs are not proficient in English. Overall, 5.3 million immigrant workers do not have a high-school diploma, accounting for 39% of all US workers who have not completed high school. The 3.3 million immigrant workers who have not completed the ninth grade represent about 75% of all workers with so little education. By comparison, there are 8.3 million native-born workers without a high school diploma, 1.1 million of whom have not completed the ninth grade.
The lack of education has contributed to the fact that in certain job categories - such as farm labourers and homecare workers - immigrant labour makes up a high percentage of those employed, over 70% in some regions of the USA. More than half of 800,000 garment workers are immigrants.
Criticisms regarding the lack of training opportunities have also been levelled against government workforce development programmes. The 1998 Workforce Investment Act (WIA) is the major source of federal funding for job training, adult basic education, and English as a second language (ESL) classes. Immigrant rights organisations claim that the law has been ineffective in serving immigrants and people with limited English proficiency. Most job-seekers have been prevented from participating in training programmes under the WIA because of the 'work first' rules. These rules ask those seeking training to demonstrate that they have been unable to find work and thus need training services. For immigrants, poorly paid work requiring little English is normally available, but the real struggle is to become skilled enough to move into better-paid positions. As one organisation puts it: 'A 'work first' approach means that workers are allowed to access intensive services such as training only after they prove they cannot find a job without additional skills. Because they must support their families, workers will accept jobs that do not pay a living wage and thereby close off the possibility of publicly funded training to help them find a better job' (National Immigration Law Center, June 2003).
For immigrants, the inability to receive training is significant. Immigrants who are fluent in English earn approximately 24% more than those who lack fluency, regardless of their other qualifications. Advocates complain that even when immigrants are given the opportunity to enrol in training programmes, there is a dearth of programnes that meet their training needs. Most training programmes, for example, require an eighth-grade English reading level (in the USA, an eighth-grade student is normally 13 or 14 years old). Extensive research demonstrates that programmes that integrate skills training and education with English proficiency are more effective than those providing skills training or education alone (see National Immigration Law Center and A profile of the low-wage immigrant workforce, Urban Institute, October 2003).
Employers and illegal immigrants
The estimated 6 million illegal (sometimes called unauthorised or undocumented) immigrants are normally not entitled to job-training and work-support programmes. Indeed, eligibility for most government-sponsored programmes is restricted to legal immigrants under federal law. Legal status is also associated with limited English-language skills and low education levels: undocumented immigrants are more likely to lack English proficiency and have only a ninth-grade education (Urban Institute, October 2003).
Employers in certain sectors (agriculture, construction and low-end manufacturing) routinely hire immigrants who are not authorised to work in the USA. Under US law - sometimes referred to as the I-9 system after the appropriate forms used in the process - an employer is violating the law only if it knowingly hired a worker who was not authoriaed to work. Illegal immigrants routinely make up social security numbers in order to gain employment, and employers, often desperately in need of workers, have turned a blind eye. Eventually, the employer will receive a 'no match' letter from the Social Security Administration (SSA), which asks the employer to check for errors. The employer is not legally required to take action against the employee - in fact, the employer is explicitly warned by the SSA not to do so; rather, the employee is asked to check for errors and forward the correct information to the SSA.
Some employers have also been found to be using immigration law to break unionisation efforts. A number of incidents have occurred where employers have informed on workers seeking to form a union or being involved in union activity, by calling the USCIS and inviting federal agents to take action against suspected illegal immigrants. The SSA 'no match' letter, therefore, has often become a weapon in the hands of employers, a means of threatening suspected illegal immigrants not to protest at poor pay or working conditions that may themselves be illegal. Unions and immigration advocates have noted that in such instances the employer goes unpunished while the worker often suffers arrest and deportation.
There are signs, however, that the USCIS is beginning to crack down on large employers that hire illegal workers. In a high-profile case, federal agents raided Wal-Mart’s headquarters and 60 of its stores across the USA in October 2003. Some 300 immigrant workers were arrested, all of whom were members of cleaning crews hired by outside contractors. According to Associated Press, taped conversations between the contractors and Wal-Mart executives revealed that the company knew that the contractor was hiring illegal immigrants, a charge Wal-Mart denies (AP, 24 October 2004). In November 2003, nine of the arrested workers filed a suit against the retailer and its cleaning contractors, accusing them of paying lower wages to aliens, offering fewer benefits, and withholding overtime payments ('Illegal workers sue Wal-Mart', CBS News, 10 November 2003). If found guilty of the charges, Wal-Mart faces fines for employing unauthorised aliens that can range from USD 275 to USD 2,200 per alien for a first offence to USD 3,300 to USD 11,000 per alien for third or more offences. In addition, fines for paperwork violations (for failing to fill out and properly maintain I-9 forms) can range from USD 110 to USD 1,100 for each I-9 (Lessons and risks from the Wal-Mart immigration raids, Scott Wright). Meanwhile, the arrested immigrants face deportation proceedings.
Illegal immigrants were again the focus of public attention in January 2004 when, in his State of the Union Address, President Bush asked Congress to reform US immigration laws in order to match 'willing foreign workers with willing employers when no Americans can be found to fill the job', a proposal immediately endorsed by the US Chamber of Commerce. In his address, the President said that a new temporary worker programme 'will be good for our economy because employers will find needed workers in an honest and orderly system. A temporary worker programme will help protect our homeland, allowing Border Patrol and law enforcement to focus on true threats to our national security.'
The programme would also grant temporary worker status to currently working illegal immigrants but would require temporary workers to return to their home country after their work was finished. Supporters of the Bush proposal argue that giving legal status to undocumented workers makes sense for employers and the economy, and allows immigrants to work without fear of arrest and deportation. Critics of the proposal, including leading Congressional Democrats, warn that the Bush plan would create a '21st Century Bracero programme'- ie a modern-day equivalent of a programme introduced in the 1940s that many claim deprived immigrants of basic rights. The Bracero programme was closed down by the Johnson administration in 1964. The AFL-CIO warns that the new proposal threatens to 'create a permanent underclass of workers who are unable to participate in our democracy' and supports Congressional bills that would reform immigration law in a way that offers undocumented workers and temporary workers a wider range of rights and services.
Immigrants and the labour movement
In 2002, trade unions in the USA took an unprecedented turn towards immigrant workers, thus opening up the possibility of more immigrants joining unions in larger numbers in the coming years. Historically cool towards immigrants out of fear of labour market competition, many unions now regard an alliance with immigrants around civil and worker rights issues as a potentially critical dimension of labour’s revival. At a meeting of the AFL-CIO’s executive council in August 2002, labuor leaders resolved to organise a national mobilisation of immigrant workers in 2003, to be called the Immigrant Workers Freedom Ride and modeled on the freedom rides of the civil rights movement during the late 1950s and early 1960s. The subsequent October mobilisation in New York City put the labour movement on the side of full citizenship rights for immigrant workers, registered clear opposition to civil rights abuses and discrimination against immigrants, and called for enforcement of immigrant workers’ rights in the workplace. The 125,000-strong gathering seemed to mark the beginning of a new relationship between unions and immigrants.
Perhaps the most visible sign of unions becoming more closely identified with the needs of immigrants is being reflected in the impressive growth of the Service Employees International Union (SEIU). This union, which now has 1.6 million members, has been at the cutting edge of immigrant organising and relatively militant workplace actions. The union’s 'Justice for Janitors' campaign during the 1990s merged civil and workers rights with community issues in order to unionise tens of thousands of office-building cleaners in major cities such as Los Angeles, a struggle that was captured by film director Ken Loach in his award-winning movie Bread and Roses. However, the recent defeat of the UFCW in the southern California supermarket strike marked a major setback in organised labour’s effort to be seen as the champion of the immigrant worker, a defeat that saw 60,000 mainly immigrant workers lose pay and health benefits (see above under 'Industrial action')
In 2002, concern in the USA about the stability of employment-based pensions was heightened dramatically by the Enron crisis. Since then the pension plans (most of them 'defined-benefit plans') of many large companies have become seriously underfunded. For a short period, the debate around the long-term health of the state pension system - provided by social security - was pushed into the background and proposals to privatiae the system appeared to lose ground as the stock market declined and many employees’ individual '401k plans' (see below) became seriously devalued.
During 2003-4, however, the question of pension reform and proposals to privatise social security again began to resurface as the economy and the stock market showed signs of recovery.
The state sector - social security
Social security is the broad term for the range of financial benefits available to virtually all workers from the US federal government. Benefit levels are set by law and are based on a worker's earnings. The system was not designed to provide an adequate retirement income by itself, but over 70 million of today’s workforce rely on these benefits completely. Of course, workers may have personal savings, but personal savings levels in the USA are extremely low by both historical and comparative measures.
Social security is administered by the Social Security Administration (SSA), which administers social security survivors benefits and social security disability benefits as well as security retirement benefits. These three programsmes are all funded by payroll tax deductions. Once in the system, a person begins accumulating credits towards future benefits.
Social security taxes, also known as FICA (Federal Insurance Contribution Act), are usually withheld from an employee’s pay at a rate of 7.65%, which covers both social security and Medicare (the government health insurance programme providing coverage to people age 65 and over). The social security part of the tax is 6.2% of gross wages (wages before any deductions) up to USD 76,200. The Medicare tax is 1.45% of all earnings. Employers are required to contribute an additional 7.65% to match an employee’s contribution. A self-employed person must pay social security taxes equal to the combined employee/employer tax (15.3%), which must be remitted to the Internal Revenue Service (IRS) on a regular basis (although half of this tax is deductible as a business cost).
Social security is governed by Congress. Trade unions are not involved.
Pressure for reform
There has been no change in social security for some time. Indeed, the last reform occurred in 1983 when the retirement age was raised to 66 (starting in 2005) from 65.
However, proposals for reform - including privatisation - have surfaced in recent years. In 2001, President Bush's Commission to Strengthen Social Security proposed to redirect large parts of social security into individual accounts. However, the scandals in 2002 around Enron and other corporations forced the public and policy makers to question the security of company savings plans.
The recent push for reform has emerged despite the fact that, in their 2004 report, the SSA’s trustees state that the fund is solvent until 2042, at which point it will still be able to pay 70% of the promised benefits. However, the trustees project that expenditures will exceed income in 2017. The trustees' report predicted that maintaining the programme in its current form would mean cutting benefits by 13%, or raising the payroll tax by 15%. Other experts say even more drastic changes could be needed, depending on the economy and the state of the federal budget. Advisory groups and public officials have repeatedly warned that 'hard choices' and realistic measures are needed to ensure the long-term stability of social security.
Social security was designed as a 'pay-as-you-go' insurance programme, with the current workforce paying for the benefits of retirees. In 2001, there were an estimated 3.4 workers paying social security payroll taxes for the benefit of each retiree; by 2030, the ratio will fall to an estimated 2.1 workers per retiree. Benefits are supported by a 12.4% payroll tax, shared equally by employees and employers. Since the programme began, the number of workers has substantially outnumbered retirees, producing surpluses that have been used to buy Treasury bonds in a 'trust fund'. That ratio will change rapidly, beginning in 2011, when the first baby-boomers reach the age of 65. By the time the entire baby-boom generation retires, America's elderly population will double from its current size to about 80 million.
To meet this challenge, political conservatives have proposed some degree of privatisation, while liberals tend to prefer a relatively small adjustment in benefits or a tax increase. Conservatives tend to stress the need for immediate and radical reform, while liberals argue that the system is basically sound and that, while reform is necessary, crisis measures are unwarranted. Conservatives argue that individuals want and should have more control over their retirement funds, while liberals maintain that social security has been enormously successful for decades due to the fact that the risks are shared by everyone in the system.
In late 2004, the Bush administration has revived its push for the creation of private tax-free investment accounts within social security, turning the proposal into an election issue (albeit a secondary one). In his acceptance speech at the Republican convention, M. Bush said: 'We must strengthen social security by allowing younger workers to save some of their taxes in a personal account.'.Under the Bush proposal, workers can divert some of their social security taxes into personal investment accounts in exchange for agreeing in advance to receive a much-reduced guaranteed government benefit when they retire.
The main business/employer organisations, such as the US Chamber of Commerce and the National Association of Manufacturers (NAM), also support reform based on the creation of individual accounts. The NAM strongly opposes raising payroll taxes (which it believes are already too high) to fix social security, a move that it claims would be 'devastating' to the US economy. The US Chamber of Commerce’s position is that social security needs to be 'substantially revamped' in order to contend with the changing demographics, arguing that social security reform should avoid unnecessary tax increases or benefit cuts and should include a private savings account option. The Bush proposal has the support of right-wing policy groups like the Cato Institute and the conservative media. According to USA Today: 'Tax-free savings accounts would encourage individuals to save more, spend less and be responsible for their own future. The accounts could earn higher returns than social aecurity contributions do now' (Establish tax-free personal investment accounts, USA Today, 4 October 2004).
Congressional Democrats and most liberal commentators claim the Bush proposal will neither provide retirement security, nor take care of the solvency of the social security system. The President’s proposal promises to retain the current benefits for today's retirees and for those who are nearing retirement. Younger workers will therefore be making deposits into their accounts with tax money that - under the current system - would have been used to pay the benefits of those who are retired. The government would have to make up the difference, which is estimated to be at least USD 1 trillion.
The US labour movement, too, is completely opposed to individual plans and any degree of privatisation. The AFL-CIO argues that the crisis in social security is as much fiction as it is fact, and it views proposals for privatisation as driven by the interests of Wall Street profiteers rather than by any concern to protect retirement income for American workers. The union federation does propose reform, however: 'The (social security) system’s long-term financial needs can be addressed through modest, progressive changes, such as raising the payroll tax cap.' (AFL-CIO, 2001)
In general, proposals to privatise social security appeared to have had more support during the 'bull market' in stocks of the late 1990s, particularly when employee 401k plans (see below) were generally making impressive gains. In the view of the New York Times, 'Personal accounts within social Security would perpetuate the wrongheaded notion that the stock market can bail everyone out. It can't' (How not to save social security, New York Times, 23 September 2004).
However, according to a bipartisan poll conducted in 2002, support for partial privatisation is above 50%, and over 60% among people under 65 years of age.
Recent analysis of census data show that in 2003 the percentage of workers participating in an employment-based retirement plan was 42%, while the level for full-time, full-year workers aged 21-64 was 57.1%. The number of workers stood at 63.5 million, up slightly on 2002, but down from the 67.1 million recorded in 2000.
In the last two decades, a large coverage or participation gap has opened up between public and private sector full-time workers. In the public sector, 15.2 million workers participated - a record high. Most public sector workers participate in retirement plans run by their respective state legislatures. From 1985 to 1998, public sector coverage grew slightly from 96% to 98%. If public sector workers are removed from the picture, the fall in the level of private sector coverage becomes more striking. In 1985, 91% of private sector full-time employees in medium and large establishments participated in a retirement plan, a figure comparable with the public sector. In 2000, the private sector participation level had fallen to 70%.
Also widening is the gap between the retirement prospects of the well educated and those with a high school diploma or less. For example, the data show that participation in retirement plans among workers ages 21-64 without a high school diploma has declined markedly from 31.5% in 1987 to 21.9% in 2003. For those with no formal education after high school, the decline was less severe, from 43.9% in 1987 to 42.6% in 2003. By contrast, participation levels rose among those who have attended college. For those with a bachelor’s degree, the participation level increased from 52.1% in 1987 to 59.3% in 2003. Workers with an additional degree saw a rise from 65.6% in 1987 to 69.8% in 2003. The only income group showing an increased participation rate in 2003 was those whose income exceeded USD 50,000 annually. It rose from 73.3% in 2002 to 74.5% in 2003.
Coverage in small and large companies
Workers employed by small companies remain less likely to be covered by employment-based retirement plans, but participation levels have increased. In companies with 25-99 employees, the level rose from 28.2% to 39.4% between 1987 and 2003. At firms employing between 100 and 500 workers, the level rose from 42.5% to 49.4% over the same period. The percentage of workers participating at the smallest firms (fewer than 10 employees) was 16.5% in 2003. By contrast, the participation rate was 60.3% among those working for firms employing 1,000 or more (Employee Benefit Research Institute, October 2004).
Small companies offer a number of explanations for their non-participation in a pension plan. According to a 2001 survey of companies employing five-100 employees, 43% said that employees prefer wages or other benefits such as health coverage. Almost one-third said that non-participation was driven by the fact that their employees were seasonal or part-time, or had high turnover. With regard to business-related reasons for non-participation, 48% said that revenues were simply too uncertain to commit to a plan (Small Employer Retirement Survey, 2001).
The 'perfect storm'- the decline of defined-benefit plans
Over the last two decades there has been a decisive shift in occupational pensions away from defined-benefit plans (DBPs) towards defined-contribution plans (mostly 401k plans).
The DBP is the kind of plan that has traditionally been most central to the system of collective bargaining. DBPs presently cover 44 million workers, and provide a set monthly payment that is usually based on a combination of the workers’ age, years of service and final average earnings. The benefits tend to vary from plan to plan, however. Within the private sector, 69% of union members have DBPs, but only 14% of non-union workers.
DBPs have suffered a sharp decline over the last 20 years, as measured by both the number of plans that have been terminated and the number of workers covered. DBPs covering 7 million workers have gone bankrupt since the mid-1980s. Of the estimated 32,500 remaining plans, many are underfunded as a result of low interest rates and the decline of the stock market. The actual number of DBPs has fallen 75% since 1983.
Te declining stock market, low interest rates, and a falling active worker-retiree ratio have combined to make DBPs less attractive to employers. As the Teamsters Union puts it: 'There are fewer active employees making contributions to the (Teamsters’) pension plan. There are more retirees collecting cheques and they are starting earlier and doing it years longer. Right as this is happening the stock market tanks and interest rates fall to their lowest rates in decades, so the pension plans see their funds shrink. It really is a perfect storm' (Teamster, March-April 2004)
A significant portion of DBPs are multiemployer plans. These plans are created by collective agreements covering more than one employer, and are generally operated under the joint trusteeship of labour and management. Multi-employer plans provide coverage to 9.7 million of the 44 million participants federally insured by the Pension Benefit Guaranty Corporation (PBGC), or 4.1% of the private sector workforce. The termination of several large single-employer plans has, however, raised concerns about multi-employer plans.
The key difference between these plans and single-employer plans is that, in the event of a company bankruptcy, the remaining companies in the plan assume the additional funding responsibility. In its 2003 annual report, the PBGC estimated that many multi-employer plans had also become underfunded, the number of plans had declined, and that participation levels had fallen by 1.4 million active workers. Because of risk-sharing, multi-employer plans are generally more stable than single-employer DBPs and have seldom required PBGC assistance. However, multi-employer plans face many of the same problems as single-employer plans - such as declining assets and increased liabilities.
Federal insurance of defined-benefit plans
DBPs are insured by the federal government. Employers pay regular premiums to the PBGC, a 'federal corporation' established to protect the nation’s retirees. The PBGC was created in 1974 when Congress passed the Employment Retiree Security Act (ERISA). When a pension plan fails, the PBGC takes over the insolvent fund and assumes financial responsibility for paying retiree pensions.
Currently, the PBGC covers the 44 million workers in the 32,500 remaining DBPs, and thus protects pension assets worth a total of USD 1.5 trillion. The failure of more than 3,000 plans has meant that the PBGC, by the end of 2003, will have to cover the pensions of roughly 1 million new retirees. The PBGC’s 2003 deficit reached USD 11.2 billion, and there is growing speculation that, with the bankruptcy of United Airlines and the crisis in the airline industry generally, a Savings and Loans-type Congressional bail-out may soon become a distinct possibility (US pensions agency issues warning FT.com, 7 October 2004).
PBGC coverage, however, is often at only a fraction of that promised by the failed plan. As a result stories of retirees facing financial devastation now feature regularly in the U media, as tens of thousands of companies have exempted themselves from plan requirements by terminating their pension funds and offering other types of retirement benefits. According to the New York Times: 'And of the companies that still sponsor traditional pension plans, hundreds have gone bankrupt and defaulted, including giants like Bethlehem Steel and Polaroid.' (New York Times, 'Pension failures foil 6-Figure retirements, too', 5 October 2004, and 'New rules urged to avert looming pension crisis', 28 July 2003)
Shifting risk - the growth of defined-contribution plans
As defined-benefit pension plans have declined, defined-contribution plans (DCPs) have increased dramatically - especially in the private sector. Unlike DBPs, DCPs do not promise a fixed benefit. Money is deposited into an account and is then invested. If the returns on investment are healthy, the employee wins. If the returns are poor, the employee loses. In other words, all of the risk is shouldered by the employee, not the employer. Unlike DBPs, DCPs are not protected by the federal government’s PBGC.
Participation in DCPs has almost trebled from 20 million participants to 59 million, involving over 650,000 plans. The most common form of DCP is the 401k plans, whereby employees accumulate money for retirement by making pre-tax contributions from their salary. Employers often make a limited contribution to the plan, but monthly contributions are not required. During the bull market in stocks in the late 1990s, millions of workers saw spectacular growth in their 401ks, only to see it plummet with the sharp fall in the stock market in 2001. With DBPs, companies are obliged to continue making contributions regardless of the revenues earned on the plans investment - even if revenues fall below levels needed to keep a plan adequately funded. With a DCP, a company is responsible only for establishing the plan and deciding whether to match a percentage of employee contributions. The rise of DCPs is therefore not difficult to understand. Companies are free to select the type of pension plan they offer to employees. The overwhelming majority of newly established companies are setting up DCPs, and older companies are switching from DBPs to DCPs.
Despite the risks involved, DCPs are attractive to some employees. They are more portable than DBPs because the administrative costs associated with employee turnover are lower and accumulated funds can be easily transferred to a new employer.
Occupational pensions and the social partners
Congress has taken a number of measures to facilitate the expansion of occupational pension coverage, by offering various incentives for companies to establish plans. Republicans have fought to make government authorisation of a plan easier to achieve by making it possible to exclude certain categories of employees from coverage, measures that Democrats generally oppose. The administration has also proposed a new way of calculating pension obligations that would take employee demographics into account. The method would recognise that pension payments owed to workers retiring soon would need to be funded more securely than those for younger workers. Low interest rates have led to an increase in liabilities, which remains a problem for distressed DBPs. In April 2004, Congress passed legislation to change temporarily the way these liabilities are estimated, thus reducing the impact of low interest rates on the level of plan underfunding.
Companies have pressured Congress for changes that would let them make smaller pension contributions and smaller payouts when people retire. However, because employers are not legally obliged to provide pension coverage to their employees, the incentive to exert concerted political energy in order to shape policy outcomes is not strong. Employers simply 'vote with their feet', and enough are either not offering pension coverage or offering severely reduced coverage that individual companies can avoid any major negative consequences. In certain industries, a good pension plan is one way to attract and retain employees, but this positive aspect needs to be weighed against the financial cost of contributing to a plan incurred by the company.
Unions have been eager to stress the need to preserve DBPs, and to point to the risks involved with DCP participation. The AFL-CIO has also pointed to a need to pass the Employee Free Choice Act (see above under 'The organisation and role of the social partners'). Making it easier to join a union will, says the federation, strengthen the collective bargaining system, which might over time bring more contributors to pension plans.
Pensions and collective bargaining
Pensions remain a central issue in the collective bargaining process, although disputes around healthcare coverage have been far more visible than disputes around pensions. That said, the plight of the unions at United Airlines and the impact the crisis in the airline industry has had on employee pensions has put unions on their guard in terms of seeing off threats to existing plans and contribution arrangements.
As general rule, during contract negotiations companies have in recent years sought to reduce employer contributions and unions have sought to preserve or increase them. In non-union workplaces, employers can reduce contributions or change plans more or less at will; not so in a unionised environment.
The trend towards reduced coverage reflects the general decline of collective bargaining, but many view the survival of remaining DBPs as a living testimony to the need for a stronger collective bargaining regime in the future.
This is particularly true in the public sector, where workers are mainly covered by defined-benefit plans. Pension plans for public employees are strictly regulated and are run by the legislatures in the different states. However, the durability of the DBPs in the public sector is due in large part to the union density in the public sector itself - which remains roughly four times the density of the private sector. The federal government has not targeted public employee pension plans for a concerted reform effort, largely because pensions come under the jurisdiction of state-level politicians.
Industrial relations outlook
President Bush was re-elected on 2 November 2004 on a programme that includes further reform of the Fair Labor Standards Act to introduce flextime, social security privatisation, and the introduction of some kind of special 'guest worker' status for certain categories of immigrant workers.
Trade unions are already bracing themselves for what they see as a series of Bush administration attacks on what remains of New Deal worker protections. Meanwhile, in a major ruling on 19 November 2004, the Republican-dominated National Labor Relations Board (NLRB) overturned the four-year-old precedent set in the MB Sturgis case, which allowed temporary workers supplied by staffing firms the right to form a combined union with employees of the company using the temporary workers. Under the new ruling, temporary workers now must have the permission of both employers before there can be a vote on whether to form a union. The three Republican members of the NLRB voted for the change, while the two Democrats, Wilma Liebman and Dennis Walsh, dissented strongly. They accused the majority of 'accelerating the expansion of a permanent underclass of workers' and charged that the 'result - which exalts business flexibility at the complete expense of employee rights - is the opposite of what Congress intended'. The decision marks another setback to unions trying to find a legal way of organising the large number of 'temp agency' workers in the US labour force, and thus respond to changing employment patterns. This reversal came on the heels of a July 2004 NLRB decision to deny university teaching and research assistants the protections of the National Labor Relations Act, which include the right to form unions.
There are also clear signs that pensions crisis will deepen over 2005, and create even more difficulties for unions. On 15 November 2004, the Pension Benefit Guaranty Corporation (PBGC) announced debts of USD 23.3 billion, more than double the deficit for 2003 (see above under XX). The sharp rise in PBGC debts was driven in large part by the restructuring of the airline industry. ('Deficit sours at agency that insures pension plans', New York Times, 16 November 2004). On 12 November, US Airways asked a US bankruptcy court to wipe out the collective agreements of 20,000 employees, terminate the pensions of 53,000 existing and former workers and slash the health benefits of almost 11,000 retirees ('US Air asks court to end labor contracts', New York Times, 13 November,2004).
The labour relations environment can be expected to remain tense for the foreseeable future as the Bush administration moves ahead with its proposals. The problems of spiraling healthcare costs and the crisis of the pension system will probably overshadow collective bargaining in 2005 and beyond. Moreover, there are fresh concerns that the US economy might also be facing difficulties, as the dollar continues to slide against other major currencies. The dollar’s decline has triggered speculation that the US economy faces a huge capital flight if interest rates are not raised in order to make the dollar more attractive - a measure the Bush administration is reluctant to consider because of its likely impact on levels of inverstment and consumption at home ('Japan threatens huge dollar sell-off', Observer (London), 5 December 2004). Indeed, just one week after the election, former Treasury secretary Robert Rubin accused President Bush of 'playing with fire' for allowing the dollar to weaken alongside continuing federal deficit spending, a combination which would generate 'serious disruptions in our financial markets'.
It is impossible to predict how the US economy will perform in the coming years, or how that performance might affect the industrial relations climate. However, the political arrangements that once allowed productivity growth to fuel increased in real wages and improved benefits have all but disappeared. The weakness of trade unions means that many workers no longer benefit from a sustained economic recovery in ways that they might have done in the past.
Sean Sweeney, School of Industrial and Labor Relations, Cornell University