2001-2 annual review for the USA

This record reviews some of the main developments in industrial relations in the USA in 2001-2.

Political and legal environment after 11 September

Political environment

The terrorist attacks of 11 September 2001 have greatly affected the American psyche. As a result, US politics over the remainder of 2001 and 2002 have to a large extent reacted to the continuing challenges created by those attacks as well as the economic downturn that the attacks accelerated. Politicians have had to develop proposals to reduce both the likelihood and effects of a future attack. They have had to propose the creation of institutions and procedures capable of mitigating the effects of another attack and to prepare their constituents to live in a world that is less carefree, less convenient and, ultimately, less naïve. At the same time, the long-term needs of the nation have not gone away and, as much as ever, politicians and the public they represent are worried about problems such as: consistently under-performing American schools; the skyrocketing cost of healthcare and prescription drugs; unease about the availability of retirement income for 'Generation X' (the cohort born between, roughly, 1963-79) - while the evidence is unclear, based on a volume of credible projections that social security will not be available for this cohort, its members tend to worry more about retirement income and, consequently, save and invest in a wide range of assets far more than previous cohorts; and persistent pockets of social and economic marginalisation among, inter alia, socio-economically challenged enclaves in the inner cities, Appalachia and American Indian reservations.

The unnerving impact on consumers and investors of the terrorist attacks of 11 September, combined with the great erosion in investor confidence in 'corporate America' in the wake of the scandals at Enron and other companies, has served only to accelerate an overdue and long-lasting correction to the technology-driven stock market excesses of the late 1990s. As a result of these economic (and hence, political) pressures, combined with the economic data outlined below, in the 2002 electoral season - November saw elections to the two chambers of Congress- political incumbents struggled to avoid blame and to promise the public a way out of the current economic malaise. Opposition candidates, for their part, also faced the formidable challenge of making themselves credible to a highly cynical electoral base that has been jaded by scandals such as Watergate and the Monica Lewinsky affair.

Following the 2002 elections, the Republican Party has control of both the House of Representatives and the Senate. While the causes of the Republican victories are manifold, and at the same time not entirely clear, it is clear that the issues of national security and economic growth played an unusually decisive role in 2002.

Legislative environment

In terms of the legislative environment, preoccupied with the urgency of the 'war on terrorism', Congress is expected to take longer than ever to pass the legislation to appropriate monies to enable the rest of the government to operate. The notable exception is the defence budget, which is expected to pass first and fast. Typical of the legislation since 11 September are laws providing immediate relief to distressed industries such as the airlines, extending the time limits for unemployment benefits, tightening the country's borders, and strengthening airport security. Apart from matters related to 11 September, President George W Bush has also pursued an active agenda in the area of international trade, generally promoting free trade bilaterally and multilaterally, especially with Latin America. A notable achievement for the President was winning congressional passage of Trade Promotion Authority, which gives him the authority to negotiate trade agreements and submit them to Congress for a yes or no vote, without any congressional alterations.

While generally promoting free trade, President Bush has also signed legislation to protect specific domestic sectors such as steel and farming. This reflects the ever-present connection between labour market policy and national politics. In this vein, the President's 2002 fiscal budget continued a high-level of support for US aid to developing countries to help them develop the institutional, legislative and social infrastructure to support the development of the core labour standards defined in the International Labour Organisation's 1998 Declaration on fundamental principles and rights at work. Cynics might view the President's continued support for such assistance as driven in part by the political expediency of persuading labour interests to be more supportive of free trade.

Regarding declining investor confidence in the wake of the corporate scandals of 2002, on 9 July 2002, the President issued an executive order establishing a Federal Corporate Fraud Task Force 'to provide direction for investigations and prosecutions of criminal activity. The Task Force is providing oversight and enabling improved inter-agency coordination of civil and criminal investigations.' On 30 July 2002, the President signed a strong corporate accountability bill that toughens penalties, provides transparency and holds corporate executives accountable for their behaviour. In a radio address to the nation on 20 July, President Bush identified corporate accountability, expanded trade and homeland security as priorities on his agenda.

With respect to labour relations, the issue of national security has driven the President's agenda as well. Concerning federal employees, on 7 January 2002 the President signed an executive order that exempted 'certain subdivisions of the Department of Justice from coverage under the Federal Labor-Management Relations Program' (referring to executive order 12171 of 19 November 1979, as amended). The goal was to enhance national security programmes. Earlier in his term, in February 2001, President Bush signed an executive order revoking an executive order of 1993 which had established a National Partnership Council with the aim of improving cooperation between federal agencies and trade unions. The new order dissolved the National Partnership Council and removed the obligation on the part of executive branch agencies to maintain labour-management partnerships, leaving it to the discretion of the agencies themselves.

The issue of alleged trade-offs between national security and worker protections came to the fore in 2002 in negotiations with Congress over the recently created National Transportation Safety Administration (employing, among others, airport screeners), as well as the President's proposed creation of a Department of Homeland Security (to provide comprehensive domestic defence, encompassing 18 previously independent federal agencies). The President claimed that, in order best to protect national security, these new federal agencies should give employees fewer trade union and civil service protections in terms of matters such as hiring and firing. As of the time of writing (late 2002), the National Transportation Safety Administration and the Department of Homeland Security has been granted added flexibility in hiring, firing and collective bargaining.

In autumn 2002, the confluence of national security and labour relations was played out in dramatic fashion in the private sector. Dockers (longshoremen) at 29 west coast ports were in dispute with management regarding issues which included automation of certain functions and a concomitant reduction in the number of workers. Following tense contract negotiations, on 29 September management locked the workers out of the ports. On 8 October, President Bush asked his Attorney General, John Ashcroft, to seek an injunction to order management to end the lock-out and to require the dockers to report back to work. The Attorney General obtained the court order the next day. Prior to the injunction, the work stoppage was costing the country an estimated USD 1 billion dollars a day. The director of the Federal Mediation and Conciliation Service (FMCS), Peter J Hurtgen, personally mediated in the dispute with the assistance of local FMCS commissioners. In his remarks explaining why he took this action, the President discussed the enormous economic impact of the strike, and added: '[t]he work stoppage also threatens our national defence. These ports load the ships that carry supplies to our men and women in uniform. These ports also receive parts and materials used by our defence contractors to complete projects and maintain military equipment.' The docks dispute was eventually resolved and a new contract concluded in late 2002.

Notable judicial decisions

On the judicial front, the United States Supreme Court decided two important cases in 2001 that affect employment relations. Incidentally , it should be noted that in the USA there is an important distinction between labour law and employment law. 'Labour law' generally refers to the legal and institutional framework for collective bargaining that was established by the Wagner Act of 1935, the Taft Hartley Act of 1947 and other related legislation, as well as analogous law governing federal employees. While labour law generally encompasses collective cases, it can also include individual cases by an employee against an employer or a union alleging a violation of rights under a collective bargaining agreement or other applicable law (known as a 'grievance'). In contrast, 'employment law' refers to a wide body of legislative and judicial authority governing the relationship between an individual employee and his or her employer. The rubric of employment law includes federal and state law prohibiting discrimination in the workplace as well as the law concerning, among other issues, wages and hours of work, pensions and retirement income, and occupational safety and health. While generally employment law cases are brought by individuals, it is also possible to bring a multi-plaintiff or class action suit. The main distinction is that labour law concerns collective bargaining, and employment law touches on all other aspects of the employment relationship.

In March 2001, the Supreme Court ruled in the case of Circuit City Stores, Inc v Saint Clair Adams (532 US 105 [2001]). In this important case, the Court held that an employee could be bound to waive his or her right to bring an employment rights case in court, and be forced to use the arbitration forum, if such a requirement is contained in the contract of employment. Prior to that decision, the courts had viewed employment contracts as reflecting unequal bargaining power that precluded the waiver of any legal remedy in the area of civil rights by an employer. This was especially true in light of the fact that employment contracts are almost always drafted by the employers themselves and often contain complicated 'boilerplate' (standard) language that many employees have trouble understanding, much less influencing. Civil libertarians decried the Circuit City decision as giving overarching power to employers to 'strong-arm' workers out of using the legal system to protect their civil rights.

In May 2001, the United State Supreme Court ruled in the case of National Labor Relations Board v Kentucky River Community Care, Inc, et al (532 US 706 [2001]). The Court held that an employer which claims that an employee is a supervisor, and therefore ineligible for representation by a trade union within the bargaining unit, carries the burden on proving such supervisory status. However, at the same time that it placed this burden squarely on the employer (thereby pleasing labour advocates), the Court appeared to lower that burden by saying that professionals who use 'independent judgment' to direct someone else's work may be considered a supervisor even if they do not have the power to hire or fire the people they oversee. In the past, the National Labor Relations Board had made the power to hire and fire to be the key determinant of supervisory status. The decision was seen by labour interests as continuing a trend in recent years to impede further their ability to organise.

Other labour and employment-related issues

In order to promote a forward-looking, 'holistic' labour market policy, early in his term the President signed an amendment to the Federal Advisory Committee Act (5 USC App 1, Public Law 92-463) to promote the study and the development of strategies to assist the American workplace to meet the challenges of the global, information-based economy. On that basis, the amendment established the Office of the 21st Century Workforce within the Department of Labor. The mission of the Office is to study trends and recurring issues within modern workplaces and develop workable strategies for resolution.

An issue that is becoming increasingly prevalent in US employment relations, inside and outside the collective bargaining context, is the issue of flexible work arrangements (see United States of America country labor profile, United States Department of Labor, Bureau of International Labor Affairs, Office of Foreign Relations, 2001). The purpose of flexible working arrangements such as 'flexi-place' and 'flexi-time' is to accommodate the needs of parents, traffic and special circumstances. Flexi-time allows employees to vary the time of their arrival and departure, usually around an established set of mandatory 'core hours'. Flexi-place allows employees to work at home or at a designated work facility near home. In addition, credit or compensatory time arrangements allow employees who accumulate overtime hours to apply those hours to future time off from work. Such arrangements allow employees to arrange work schedules around family, traffic and other necessary responsibilities, thereby producing a more efficient use of time and energy. Such arrangements are said to increase employee satisfaction and personal well-being, which affects overall production and output. Employees have also raised the issue of safety as a justification for flexible work arrangements in the wake of 11 September.

However, some employees are reluctant to use these flexible arrangements for fear of being perceived by management as less important to the organisation's operations. Conversely, many managers are still not comfortable with flexi-place arrangements, preferring instead to have 'instant access' to their employees. In 1997, 27.6% of all wage and salary workers were on flexi-time or flexi-place, and the figure has likely gone up since then due to greater availability of computer technology. However, such work schedule flexibility is not mandated by law.

Trends in the economy and labour market

General economic data

The nation's longest post-war expansion ended in 2001, as the US economy entered a recession in March, after an unprecedented 10 years of growth. Manufacturing's downturn started in the late summer of 2000 and deepened in 2001, as businesses sharply reduced spending on machinery, computers and other capital goods. However, retail sales and the housing market, both of which tend to be highly cyclical, held steady throughout most 2001. Consumers' steadfastness did waver in the fourth quarter, as rising unemployment coupled with the psychological and economic effects of the tragic events of 11 September depressed consumer confidence. Non-farm payroll employment fell by 762,000, or 0.6%, in 2001. Falling orders led factories to cut more than 1 million jobs from their payrolls. This retrenchment led to job losses in wholesale trade and transportation, and to a massive cutback in factories' use of 'temporary help' services. Construction and the retail trade had small employment gains, as hiring early in the year barely offset declines over the rest the year. Job cutbacks in the travel industry intensified in the aftermath of 11 September. In contrast, health services and public and private higher education stepped up hiring in 2001 (see 'US labor market in 2001: economy enters a recession', David Langdon, Terrence McMenamin and Thomas Krolik, Bureau of Labor Statistics Monthly Labor Review, February 2002).

The unemployment rate rose to 5.6% in the fourth quarter of 2001, an increase of 1.6 percentage points from the 30-year low of 4% in the fourth quarter of 2000. The number of unemployed persons, at nearly 8 million in the fourth quarter of 2001, was up by more than 2 million from a year earlier. More than two-thirds of those who lost their jobs in 2001 considered their lay-off to be permanent. Total employment fell by more than 1.3 million in 2001, the first over-the-year decline since 1991, and the downturn affected workers in a wide range of occupations.

As of the third quarter of 2002, leading economic indicators showed continuing sluggish growth in the US economy. Gross Domestic Product grew by 1.3% during the second quarter of 2002, the most recent period for which figures are available. The unemployment rate held steady at between 5.5% and 6.0% during 2002, a level exceeding that of the boom years of the late 1990s and 2000 by 1-2 percentage points, but about 2 points lower than that of the recession of the early 1990s.

There was also a small rise in the rate of inflation in 2002, with the Consumer Price Index projected to rise at an annual rate of just over 3.0%, 0.2 points higher than in 2001. In 2002, as in previous years, demand in the US economy was buoyed by consumers. While consumer confidence waned in 2002 (falling every month from July through October), consumer demand was kept afloat through an abundance of cheap credit in the automobile and consumer electronics sectors and, most importantly, in the housing sector. Despite the rising unemployment rate and the falling stock market, housing starts remained robust throughout 2002.

The leading economic indicators point to continued sluggishness in the economy into 2003, but there are some encouraging signs, namely a spike in productivity in October 2002, solid gains in the US stock markets, and a half-point interest rate cut by the Federal Reserve Bank (double the usual cut).

Vulnerable populations

Unemployment rates vary among racial and ethnic groups. In August 2002, for white people the unemployment rate was 5.1%. For black people it was 9.4%, whereas for Hispanics it was 7.4%. Regionally, the Appalachian region, especially the northernmost part of the region that encompasses the areas more dependent on mining and manufacturing, remains relatively the poorest and has the highest level of unemployment (Appalachia, as defined in the legislation from which the Appalachian Regional Commission derives its authority, is a 200,000-square-mile region that follows the spine of the Appalachian Mountains from southern New York to northern Mississippi, including all of West Virginia and parts of 12 other states - Alabama, Georgia, Kentucky, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee and Virginia). This is because in recent decades the US economy has gradually shifted from manufacturing to services and information technology. Northern Appalachia has lagged behind in making the transition to these industries, while factories have kept closing and mines have been shutting down in the face of alternatives to their output such as cheaper imports and more efficient and environmentally-friendly substitutes. These phenomena have had an adversely impact on workers in the states of West Virginia, Ohio and Kentucky, where the unemployment rate hovers over 7% (the national average is around 5.7%).

In addition, the unemployment rate in Appalachia is thought to be understated due to a labour force participation rate that is approximately 10% below the national average, as many people who have worked in mining and manufacturing have apparently given up trying to find jobs. According to a report by the US Department of Agriculture's Rural Information Center, the low rate of labour force participation in Appalachia is due to persisting poverty. The areas most affected by poverty include disproportionate numbers of economically at-risk people with characteristics that affect their levels of labour force participation. For example, people living in persistent poverty counties in 1990, compared with all 'non-metro' counties, were more likely to belong to a minority group (black, Hispanic, or Native American), live in a female-headed household, lack a high school education, be a high school drop-out and/or have a physical or mental disability.

However, the most economically marginalised population continues to be American Indians living on reservations. An internet search of unemployment rates on American Indian reservations reveals a range of unemployment rates that is anywhere from 30%-60% of persons actively seeking employment. When American Indians living off reservations are taken into account, the rate drops, but is still significantly above the national average.

An often overlooked but increasingly important sector of the US labour market is the rising population of migrant farm workers who enter the country both legally and illegally. The unauthorised migrant population alone is estimated to be growing at a rate of 275,000 per year, and is currently estimated to be approximately 6 million strong. These workers are at a high risk of employment abuses such as low wages and hazardous working conditions (see United States of America country labor profile, 2001, cited above).

The US government is also striving to increase the employment level of disabled workers: '[A]pproximately 70% of persons with severe disabilities are not working either full or part time and, according to the US Department of Labor, the majority of these persons would like to work' (according to United States of America country labor profile, 2001, cited above). To address this problem, the Bush administration has developed an Office of Disability Employment Policy (ODEP) at the US Department of Labor. The Office's mission is to provide national leadership to increase employment opportunities for adults and youths with disabilities while striving to eliminate barriers to employment. To this end, ODEP provides policy analysis, technical assistance, development of innovative practices and strategies, and education and outreach to employers, employees and the disability community

Wages and gender

Discrepancies in wages between males and females persist at all income levels above the minimum wage of USD 5.15 per hour (the minimum wage rate was increased to this level on 1 September 1997 for all covered, non-exempt workers). This gap in wages earned by men and those earned by women in comparable fields and positions has persisted since women first began to enter the workforce in large numbers in the 1970s. In 2000, considering median weekly earnings, among workers aged 45 to 54, women earned 72.7% as much as men. This gap increased to 68.5% among workers aged 55 to 64. The differential narrows, however, among younger segments of the labour force. For example, among workers aged 25-34, women earned 81.9% of their male counterparts' wages. Additionally, among workers aged 24 and younger, women earned 91.9% of the wages earned by males.

The gender discrepancy also runs along racial lines. In 2000, white people of either gender earned more than their black or Hispanic counterparts. However, the gap between white females and white males is the widest, with females earning 74.7% of the wages earned by males, whereas black females earned 85.2% of the wages earned by black males and Hispanic females earned 87.7 % of the wages earned by Hispanic males.

Looking at data over time, the aggregate wage differential between men and women has narrowed since 1979. For example, women within the 35 to 44 age bracket increased their earnings from 58.3% of the wages earned by males in 1979 to 71.1% in 2000

Trade union membership

In 2001, 13.5 % of wage and salary workers were trade union members, unchanged from 2000, as reported by the US Department of Labor's Bureau of Labor Statistics. The union membership rate has fallen from a high of 20.1 % in 1983, the first year for which comparable union data are available.

Some highlights from the 2001 data include the following:

  • in both 2001 and 2000 (US0112156F), about 16.3 million wage and salary workers were union members;
  • nearly four in 10 government workers were union members in 2001, compared with less than one in 10 private wage and salary workers; and
  • protective service workers, a group that includes police officers and firefighters, had the highest unionisation rate among all occupations, at 38%.

Union membership by industry and occupation

In 2001, workers in the public sector continued to have unionisation rates that were about four times higher than their counterparts in private industry. The unionisation rate of government workers was 37.4%, compared with 9.0% among private sector employees. Union membership rates of government employees have held steady since 1983, while those of private non-agricultural employees have declined. Local government, which includes many workers in the heavily unionised occupations of teachers, firefighters and police officers, had the highest unionisation rate, at 43.1%.

Among the private non-agricultural industries, the union membership rate was highest in 2001 in transportation and public utilities (23.5%). The construction and manufacturing industries also had higher-than-average unionisation rates, at 18.4% and 14.6% respectively. The non-agricultural industry category with the lowest unionisation rate in 2001 was finance, insurance and real estate, at 2.1%.

Among occupational groups, protective service workers continued to have the highest union membership rate in 2001, at 38.0%. Precision production, craft and repair workers and operators, fabricators and labourers also had above-average unionisation rates, at 21.5% and 19.9%, respectively. These workers typically are employed in the highly unionised industries of construction and manufacturing. Professional specialty workers, a group that includes teachers, also had a higher-than-average union membership rate, at 19.1%. The rate was lowest among sales occupations (3.5%).

Significantly, there were 1.6 million wage and salary workers represented at their place of work by a union in 2001, while not being union members themselves. Nearly half of these workers were employed in government.

Demographic characteristics of union embers

In 2001, union membership rates were higher among men (15.1%) than women (11.7%). This has been the case since 1983, but, because of a more rapid decline in rates for men than for women, the gap in unionisation rates has been closing since that time.

Black people were more likely to be union members (17.0%) than either whites (13.1%) or Hispanics (11.3%). Black men continued to have the highest rate of union membership among all the major worker groups, at 18.9%. Hispanic women and white women had the lowest rates of unionisation, at 10.7% and 11.1%, respectively. Workers aged 45 to 54 were more likely to be unionised than either their younger or older counterparts. Full-time workers were more than twice as likely as part-time workers to be members of a union.

Comparative earnings of union members and other employees

In 2001, full-time wage and salary union members had median usual weekly earnings of USD 718, compared with a median of USD 575 for wage and salary workers who were not represented by unions. The difference reflects a variety of influences in addition to coverage by a collective bargaining agreement, including variations in the distributions of union members and non-union employees by occupation, industry, firm size, or geographic region (for a discussion of the problem of differentiating between the influence of unionisation status and the influence of other worker characteristics on employee earnings, see 'Measuring union-nonunion earnings differences', Monthly Labor Review, June 1990).

Union membership by region

State union membership rates continued to show a clear geographic pattern in 2001. All states in the East North Central, Middle Atlantic and Pacific divisions had union membership rates above the national average of 13.5%, while all states in the East South Central and West South Central divisions had rates below it. Overall, 29 states had union membership rates below the US average, while 21 states and the District of Columbia had higher rates.

Four states had union membership rates over 20.0% in 2001 - New York, Hawaii, Alaska and Michigan (in rank order). Two states had membership rates below 5.0% - North Carolina and South Carolina. Half of the 16.3 million union members in the US lived in six states - California, New York, Illinois, Michigan, Ohio and Pennsylvania. These states accounted for only 35% of wage and salary employment nationally.

Shifting national demographics do not bode well for organised labour in the USA. According to 2000 census figures for net domestic migration, the 11 states with the lowest union density had a net in-migration of 3,350,108. The 11 most unionised states had a net out-migration of 2,984,007 (see Investor's Business Daily, 11 June 2002).

Major work stoppages

The number of days of idle workplaces and the percentage of estimated working time lost because of strikes and lock-outs were at historic lows in 2001, according to data from the US Department of Labor's Bureau of Labor Statistics. Twenty-nine 'major work stoppages' (which include worker-initiated strikes, as well as lock-outs of workers by their employers, involving 1,000 workers or more) began during the year, idling 99,000 workers and resulting in 1.2 million workdays of idleness (less than 1 out of every 10,000 available workdays). Comparable figures for 2000 were 39 stoppages, 394,000 workers idled and 20.4 million days of idleness.

Of the 29 major work stoppages beginning in 2001, 24 were in the private sector; the remainder occurred in state and local government. In the private sector, 13 stoppages occurred in goods-producing industries, including eight in construction. Eleven stoppages occurred in service-producing industries, including six in the healthcare services industry. Of the five stoppages in the public sector, four were in education.

Three work stoppages beginning in 2001 accounted for more than two-fifths of all workers idled. The first was between the State of Minnesota and the American Federation of State, County and Municipal Employees (AFSCME) and the Minnesota Association of Professional Employees, which jointly represent 24,900 state government employees who went on strike for 14 days. The other two stoppages included a 19-day strike at the State of Hawaii's Department of Education by 12,400 workers represented by the National Education Association (NEA) and a one-day stoppage at Seattle public schools involving 6,900 workers, also represented by NEA.

The private industries with the most days of idleness during 2001 due to work stoppages were air transportation (116,600 days), construction (115,000 days), healthcare services (109,700 days) and utilities (102,000 days).

Of the year's work stoppage days of idleness, 53% (608,300 days) stemmed from four major disputes, including two of the previously mentioned disputes: one between the State of Minnesota and AFSCME and MAPE (242,500 days); and the second between the State of Hawaii's Department of Education and NEA (161,200 days). The third was between ComAir and the Airline Pilots Association (116,600 days), and the fourth involved the Midwest Generation Company and the International Brotherhood of Electrical Workers (IBEW) (88,000 days).

The average length of work stoppages beginning in 2001 was 22 days, and a majority of the work stoppages (86%) lasted 30 days or less. Only 10% of stoppages extended more than 50 days. Work stoppages were concentrated in the 11-20 day and 21-30 day ranges. The longest stoppage beginning in the year was the previously mentioned dispute between Midwest Generation and IBEW, where 1,100 workers were on strike for 111 days. The dispute was also the longest stoppage in effect in 2001.

David Thaler, Federal Mediation and Conciliation Service

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