With the new Medicare bill encouraging employers to dump retirees from health coverage, ongoing fiscal crises at the state and local levels and a growing national pension funding crisis, union members face tough contract negotiations in 2004.
By James Parks
Rafael Morga has worked as a clerk for Ralphs supermarket chain in Chino, Calif., for 30 years and is looking forward to retiring in six years. But now he and his co-workers are fighting to save two of their basic benefits: health care and pensions.
Members of seven United Food and Commercial Workers locals are taking a stand for health care benefits that could affect collective bargaining throughout the country. Teamsters drivers also honored the picket lines by not delivering products to the stores. When employees at Vons grocery stores in southern California walked out Oct. 11, the Albertsons and Ralphs chains locked out their workers, putting some 70,000 people on the picket lines. The supermarket chains, negotiating jointly, are demanding workers accept a 75 percent cut in health care benefits for new employees and a 50 percent cut for current workers, along with reduced pension benefits. Another 15,000 workers struck Safeway, the parent of Vons, and Kroger, which owns the Ralphs chain, in Ohio, West Virginia and Kentucky, mainly over the cost of health care.
Although Safeway generated more than $10 billion in profits in 2002, the company is proposing full-time workers who make an average $19,176 a year pay an average $4,944 per family to maintain their current health care benefits.
Morga, who is a full-time employee and was named Ralphs employee of the year, says keeping his health care coverage is crucial for the 46-year-old father of 11 children, the youngest of whom is five years old. “If we lose our health care, what do I do if my little one gets hurt?”
Morga says the grocery workers’ struggle is sending a message to other employers that workers will not accept the destruction of hard-won health care benefits. “If we allow corporate greed to continue, it will have a domino effect and every worker’s health care will be in danger. We are willing to pay our fair share, and with these companies making big money, we ought to be able to work out something.” The grocery workers’ struggle also underscores workers’ efforts to preserve family-supporting jobs in the face of giant nonunion companies such as Wal-Mart, whose poverty-wage, poor-benefit practices are contributing to a low-wage economy (see story).
The strike and lockout, which began Oct. 11, 2003, ushers in a long, difficult year of bargaining for the UFCW. The union has 27 contracts, mainly with Kroger and Safeway, which will expire between April and October this year covering nearly 200,000 workers.
“These strikes are not just about UFCW members, because if the giant supermarket chains can kill health care in southern California, then all employers will think they can get away with eliminating benefits,” UFCW President Douglas H. Dority says.
The nation’s health care crisis: Issue No. 1 at the bargaining table
Across the country this year, workers face tough contract negotiations with health care, job security and a secure retirement as the top bargaining goals. “We are in a tight economy. We have lost more than 2.7 million jobs since 2001, and they’re not coming back,” says Michael Belzer, associate professor of labor relations at Wayne State University in Detroit and chairman of the Labor Research Association’s collective bargaining section. “The economy is growing, but the jobs it is creating are low-paying service jobs, while good union jobs are being lost. Add to that the rising costs of health care and the budget crises in the states, and this looks like a very difficult year for bargaining.”
The grocery strike may be a harbinger of the collective bargaining environment this year, experts say. “Health care costs are the number-one issue at the bargaining table,” Belzer says. “It’s a bad situation. Nobody can afford it.” Employers will try to pass along the skyrocketing cost of health care to employees, but workers cannot accept these higher costs when their real wages are in decline.
Almost two-thirds—65 percent—of large employers increased the amount employees paid for health insurance in 2003, and half plan to increase it this year, according to a survey by the Kaiser Family Foundation. In a separate study, the Health Research and Educational Trust found the cost of employee premiums rose an astounding 13.9 percent last year, the largest jump since 1990 and the third consecutive double-digit increase. According to the Kaiser survey, workers now are paying 50 percent more in health care premiums than three years ago, despite hourly wage increases of only 3.8 percent in 2001 and 2.9 percent in 2002. Despite this trend, working families can still negotiate improvements in health insurance benefits. As of December, 4,000 UAW workers at two Freightliner plants in North Carolina no longer pay any share of their health care premiums after winning a strong first contract.
One of the most pressing health care bargaining issues is the cost of retiree health care. Christian Weller, senior economist with the nonpartisan Center for American Progress, says negotiations over retiree health care will be tough, because a vicious cycle of cost shifting has begun. When health care insurance premium costs increase for retirees, employers shift those costs to the retired workers. As a result, workers stay in their jobs longer to avoid paying the higher premiums in retirement. That leads to an older workforce and higher costs, which leads to higher premiums and more cost shifting.
The cost of prescription drugs for retired Longshoremen rose 25 percent in the past year, and other health care costs also skyrocketed, says ILA President John Bowers. In negotiations for a master agreement with the U.S. Maritime Alliance, an association of all the carriers from Maine to Texas, the union is seeking to keep co-pays down while providing quality care for a growing number of retirees, Bowers says.
Health care for retirees could become even more expensive for workers after the Medicare prescription drug plan Congress passed last year becomes effective in 2006. The bill provides a minimal prescription drug benefit for retirees, but does nothing to curb the high costs of medications and forces retirees to pay higher out-of-pocket expenses for the drugs they need. The bill gives powerful incentives to employers to drop prescription drug coverage for retirees, says Steven Sleigh, director of strategic resources for the Machinists. “I expect you’ll see companies saying they will discontinue prescriptions for retirees starting in 2006, because the government will take care of it.”
To better address the health care crisis, unions are fighting hard in bargaining to prevent increased co-pays and, when possible, to negotiate cost-cutting measures that do not affect the quality of care (see box, page 17).
Health care costs played a major role in the UAW’s negotiations last year with the Big Three automakers. The new four-year contracts with Ford, General Motors Corp. and DaimlerChrysler do not shift the cost of insurance premiums to workers. But collective bargaining only provides a temporary Band-Aid on the health care crisis, says UAW President Ron Gettelfinger. “The current health care crisis cannot be solved at the bargaining table,” says Gettelfinger, who encouraged automakers to push for a national health care plan, adding that by the end of 2003, some 44 million Americans were without health insurance. “If we can provide health care for members of Congress and those in prison, then we should be able to provide it for all Americans.”
Fighting to retain secure retirement
Another tough issue at the bargaining table will be pensions. Pension costs are growing as the baby boomer generation begins to retire and fewer younger workers are being hired to take their places. To offset these growing costs, many companies are moving from defined-benefit plans, in which retirees receive a guaranteed monthly payment, to defined-contribution plans, which only guarantee the company will pay a certain amount each year into the overall company pension fund.
More employers may move away from defined-benefit plans, Weller says, because Congress failed to act on pension plan funding legislation. The benchmark interest rate employers use to determine how much to contribute to defined-benefit plans expired Dec. 31. Unions and pension fund managers had urged Congress to set a new rate and to provide funding relief for multiemployer pension plans and plans hard hit by poor stock market performance and historically low interest rates.
By failing to act, Congress has left many funds underfunded. The combination of a sluggish economy and low interest rates has reduced the return on pension investments. Corporations are required by law to contribute sufficient funds to make up the deficit, sometimes within five years. But with health care costs rising, both sides will have to be creative to maintain good pension plans, Weller says.
The ILA is confronting the problem of an aging workforce coupled with a declining number of workers contributing to the union pension fund because of technological changes that require fewer workers on the job. The ILA now has more pensioners than active workers and the situation will worsen if nothing is done to enhance the pension fund. “We have been taking care of our pensioners, and we will continue to take care of them. Our major goal is to protect our members’ benefits,” Bowers says.
Along with health care and pensions, job security is high on the list of bargaining issues for the Communications Workers of America in negotiations this year with SBC Communications and Bell South Corp. in contracts covering some 221,000 workers nationwide. The union wants to ensure family-supportive jobs are not lost and is seeking guarantees that current union members can get jobs being created in the new and growing sectors of SBC.
“This round of bargaining is about creating union jobs for the future,” CWA President Morton Bahr says. “We are living in a time when outsourcing, layoffs and union jobs shifting to management have become all too common. Bringing work back into the company for our members must be our highest priority.”
Several entertainment union contracts also expire this year, including the Screen Actors’ pact with the Alliance of Motion Picture and Television Producers (AMPTP), covering 44,500 actors, and the American Federation of Television and Radio Artists’ deal with the television networks, covering 20,000 actors. The contract between AMPTP, the Writers Guild of America East and the unaffiliated Writers Guild of America, which covers 11,000 writers, also expires this year, as does Actor’s Equity’s Broadway production contract, covering some 16,000 actors and stage managers.
States’ fiscal crises mean tough public-sector bargaining
Across the country, states are suffering from the worst budget crises since World War II because of declining revenues from a sluggish, jobless economy. At the same time, states are trying to pay for an increased number of needs and federally mandated programs such as homeland security that are not funded by the U.S. government.
To balance their budgets, lawmakers are cutting back on services all citizens depend on, such as education, transportation and public safety. Forty states were forced to make across-the-board budget cuts or drop some programs in fiscal 2003, according to the National Governors Association. The cuts totaled $11.8 billion, the second largest cuts in history, exceeded only by fiscal 2002, when 38 states cut their budgets by nearly $13.7 billion.
“This is the toughest bargaining environment I’ve ever seen,” says Jewell Gould, AFT research director. In September 2003, employment at the nation’s public schools dropped by 44,000, the largest one-month loss since 1982, suggesting state fiscal difficulties are leading to significant education cuts, according to the nonpartisan Economic Policy Institute.
The largest public-sector contracts up this year are SEIU and the Los Angeles County Personal Assistance Council, covering some 74,000 employees, and an AFSCME contract with the state of Illinois, covering 42,250 workers. More than 17,000 AFSCME city workers and 15,000 AFT school employees in Philadelphia will go to the bargaining table this year as well.
Behind the budget crises crippling state and city coffers are the tax and spending policies of the Bush administration, Belzer says. After forcing through massive tax cuts for the wealthy, the administration shifted responsibility—but not funding—for several major programs to the cities and states. At the same time, the White House has run up the federal deficit to record levels, while following policies that eliminate good jobs. “They are the ‘free lunch’ party. They think you can have everything government provides and more, but that you don’t have to pay for it. The fact is there’s no free lunch. The tragedy is that when their drunken spending spree is over, the workers are left with a hangover,” Belzer says. @
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The Bottom Line on Bargaining Retaining health care and pension benefits at the bargaining table requires long-term member education, building support within the community, educating the public on the issues—and a lot of determination, according to several bargaining leaders whose unions last year successfully negotiated contracts that maintained benefits. The first step: Build solidarity among members and community support for your position well before contract talks begin, says Louise Novotny, CWA assistant research director. During its talks with Verizon last year, CWA found the union was most successful when it: Communicated quickly with members, mobilizing them through e-mails, newsletters and its website. Involved members and built publicity through informational pickets and other mobilizations. Boosted public support by visiting editorial boards and community meetings and placing public service announcements on local radio stations. Formed coalitions with other unions that have contracts with the company and held joint actions with them.
Once at the table, former IUE-CWA President Ed Fire, who headed the successful 14-union bargaining coalition at General Electric, and UAW President Ron Gettelfinger, who led the talks with the Big Three automakers, say negotiators should: Maintain member mobilization throughout negotiations to ensure employers understand the depth of workers’ support for the union’s bargaining stands. Let the employer know early on the union will stand firm on the central issue of cost shifting to employees and remain true to that commitment. Identify areas in which cost savings can be achieved. The UAW worked with the automakers to find savings through methods that maintain quality health care and do not place cost burdens on its members, such as preferred provider networks and mail order prescriptions.
Union leaders say ultimately the nation’s health care crisis cannot be solved at the bargaining table. One goal in the contract talks should be to encourage the employer to join with the union in fighting for a national health care plan. “America’s health care crisis is a national problem which demands a national solution,” Gettelfinger says.
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