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Sunday, February 26, 2006

Falling Wages

It's not getting any easier for middle class workers:

Two Tiers, Slipping Into One, by Louis Uchitelle, NY Times: Rick Doty is a 30-year veteran of Caterpillar, the big tractor and earth-moving equipment manufacturer. He is paid $23.51 an hour as a machinist, and he receives additional benefits worth almost as much. That sets him far above newly hired workers consigned to a much lower wage scale. To these fellow workers, Mr. Doty, who is also a local union leader, struggles to justify an inequality that he helped to negotiate. ... arguing that $12 to $13 an hour is good pay here. "And I assure them that five years down the road, when the present contract expires, we in the union are going to improve their lot in life."

That does not seem likely. After more than a decade of failed strikes and job actions ... the U.A.W. reluctantly accepted a two-tier contract that provides for significantly lower wages and benefits for newly hired employees. ... The trade-off is the promise of a manufacturing revival at long last in the old Rust Belt, as new hires come aboard at much lower labor costs. "What we've done is reposition ourselves to actually grow employment in our Midwestern plants," said Jim Owens, Caterpillar's chief executive. "We finally have a labor cost that is viable."

Caterpillar is adding a significant chapter to the labor cost-cutting that is widespread in America... Until recently, cutbacks in the wages and benefits of hourly workers were limited mostly to money-losing companies... They have said that their survival was at stake. Now, however, even healthy and highly profitable companies like Caterpillar are engaging in the practice, and as they do so, the longstanding presumption that factory workers at successful companies can achieve a secure, relatively prosperous middle-class life ... is evaporating. ...

As Caterpillar's managers see it, they have no choice. ... The new contract reflects the company's success in imposing a "market competitive" pay scale; that is, wages and benefits that attract enough qualified workers by being slightly better than the packages offered by others in each community or region where Caterpillar has operations. ...

In the new lower tier, ... easily replaceable workers will no longer earn more than $12.50 an hour, or $26,000 a year. They must work their way up toward middle-class jobs, Mr. Owens argues ... "I want people to have a higher income," Mr. Owens said. "But you do that by starting out maybe driving a forklift or working in a warehouse and then you get new skills. ..." Beyond that, he says, talented workers are encouraged to take courses to qualify for promotion to salaried jobs ... outside the union. ...

The trade-off for lower wages, Caterpillar's top executives counter, is more jobs for the region. ... But the company itself, he says, cannot succeed without the concessionary U.A.W. contract... Caterpillar, meanwhile, is prospering. ... Net income was up 40 percent last year, to $2.85 billion; it has nearly tripled since 2003. Tens of millions of dollars have gone into research to develop a great variety of Caterpillar products that sell against those of Komatsu and Volvo, the two biggest foreign competitors...

Fixed monthly pensions go now only to veteran workers, like Mr. Doty, and job security is effectively canceled for new hires, who must work 12 years without interruption to become immune to layoffs. Mr. Glynn notes that the arrangement gives Caterpillar leeway to shed the new workers when demand turns down for the company's products. ...

    Posted by on Sunday, February 26, 2006 at 12:42 AM in Economics, Income Distribution | Permalink  TrackBack (0)  Comments (25)


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