In the real world there are no job guarantees.
United Auto Workers President Owen Bieber admitted as much this week after negotiating a benefits-rich contract that guarantees the income of union workers at General Motors Corp. in the event they are laid off. Asked why he hadn't gone for a straightforward guarantee of a specific number of jobs, Bieber replied: "There's a difference between fantasy and the real world."
The reality for Bieber and the millions of union workers in the nation's manufacturing industries is that, particularly when times are tough, the notion that a company can promise its workers some form of job guarantee is an idea whose time has passed.
The impact of job cutbacks has hit every sector of the American work force in the past decade, even within the federal government. Particularly for white-collar workers, the reality of downsizings, acquisitions, takeovers and leveraged buyouts has fundamentally altered the implied contract that used to exist between employer and employee: loyalty in exchange for a job.
The UAW was forced to acknowledge that its ability to keep jobs is only as good as GM's ability to sell cars. "I think GM has made a commitment to grow the business," said UAW Vice President Steve Yokich, reflecting the new attitude. "They're on a rise, the only auto company that gained market share."
The change to a market share philosophy is not confined to the UAW. The United Food and Commercial Workers, the nation's third-largest union, has begun to preach to its members that the fortunes of the workers are tied directly to the success of their employer.
"In a way it's a sea change for the labor movement," said UFCW spokesman Allen Zack. He said the union figures the average UFCW member in the supermarket industry earns an extra 35 cents to 40 cents an hour for every 10 percent of the market the employer controls.
"Lifetime security becomes a moot point if you are not competitive in the marketplace," said Earl S. Landesman, principal with the management consulting firm A.T. Kearney Inc. "You ask a company to pay your salary, but if a company goes out of business, there is no money to pay employees."
Dave Chandonais, UAW shop committeeman at Local 659 in Flint, Mich., and a member of the union's GM bargaining council, agreed. "If people don't buy your product, it doesn't matter what business you're in. If people continue to buy foreign products and we continue to lose market share, we're going to have to go down."
The $4 billion job security package worked out by the UAW at GM is the culmination of a 36-year effort by the union to achieve a guaranteed annual income for its members. In the contract, layoffs are limited to 36 weeks over three years. Laid-off workers receive 95 percent of their pay under a supplemental unemployment benefits program for up to that period and then they go back to full pay whether they work or not for the balance of the contract.
From the start, the union wanted to differentiate between normal business cycle layoffs and unemployment resulting from structural changes in the company work force. The new contract makes that distinction.
Along with the income guarantee, the company has offered lucrative buyouts to try to rid itself of up to 60,000 of the 280,000 active UAW employees during the life of the contract. The goal is to not only trim the size of the work force, but also to reduce the age of the work force to make it more competitive with employees at the U.S. plants of the Japanese car manufacturers. The average UAW worker at GM is 44 years old with 18 years of service.
The company is also offering up to $72,000 for any worker who will simply go away, and it enriched incentives for workers already laid off never to come back.
This dream of a guaranteed annual income was first raised by the UAW in the summer of 1954. Through supplemental unemployment benefits, training programs and other income guarantees, it has been steadily pursuing that goal ever since. This year, it finally won, agreeing in exchange to let the company try to buy out older workers, many of whom would not have to be replaced under the new contract.
Both the company and the union are gambling that enough people will leave voluntarily to stabilize the GM work force at a smaller, younger level and to even allow it to grow if the company continues to improve its share of the domestic auto market.
"I think everyone agrees that short of doomsday, GM will hire new workers before the end of this contract," Bieber said. GM last hired a production worker in 1986.
Audrey Freedman, an economist with the Conference Board, a business research group in New York, said the new GM contract was merely an expansion of an old theme: paying people not to work.
"The union is locked into past practice pretty much," she said. "This is the union that created supplemental unemployment benefit plans in the 1950s. This is a great extension of that kind of income guarantee."
D. Quinn Mills, a professor at the Harvard Business School, called the income guarantees "outrageous." He said the contract was little more than "an extensive severance program. All it's really doing is paying the people off."
Harvard Business School assistant professor Charles C. Heckscher said the agreement compromises the union's long-term goal of keeping people at work. "At most," he said, "this is a short-term solution for dealing with immediate shocks."
Former labor secretary W.J. Usery said the new program doesn't offer job security. "It's pretty hard for me to see how you get job security," he said. "I don't know how you do that."