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AFTER CAT: WHAT DOES THE RIGHT TO STRIKE MEAN NOW?
The United Auto Workers, perhaps the country's strongest union, barely had tapped its $800 million strike fund six months into its Caterpillar Inc. walkout. Yet the union collapsed like a house of cards within days of Cat's threat to hire permanent replacements for strikers who didn't return to work on the company's terms. The recent showdown and its denouement raise a central question about labor relations today: Does the right to strike mean anything anymore?
Unions argue that management's ability to replace strikers permanently is crippling them. They support pending federal legislation that would ban the hiring of permanent replacements. Below, BUSINESS WEEK Washington Senior News Editor Stephen H. Wildstrom and Workplace Editor Aaron Bernstein debate the question raised by the Cat dispute: Should companies be permitted to hire permanent replacements?
WILDSTROM: Yes. A central tenet of U.S. labor law is that the government should remain neutral in collective bargaining. Obviously, the government should enforce the law by ensuring that workers have the right to form unions and bargain collectively. But taking the freedom to hire permanent replacements away from management would be uncalled-for intervention on the side of the unions.
BERNSTEIN: The bill in Congress doesn't stop management from hiring replacements. It only says that a company can't promise them a permanent job. Most companies weren't doing that when the Wagner Act, our basic labor law, was written in 1935. It's based on the notion that the right to bargain collectively exists only if workers can't be fired for striking. Permanently replacing striking workers, which became a widespread practice during the 1980s, is no different than firing them. By not banning the tactic, the courts and Congress have indeed intervened in the bargaining process--on management's side. It's denying workers the right to strike.
WILDSTROM: There's more at stake here than rights. Corporations competing in a global economy--such as Caterpillar--need a better way to settle labor disputes than a war of attrition with their own workers. After the UAW had been on strike for six months, the company found itself facing a Hobson's choice: Accept the union's demands--and therefore pay wages that would impair the company's ability to compete against Komatsu Ltd., its primary rival--or leave the production lines shut down and watch customers slip away, perhaps forever. Ending the strike while keeping its unionized labor costs in line was vital to Cat's international competitiveness.
BERNSTEIN: It's a big mistake to think that competitiveness is simply about labor costs. That's a game the U.S. can never win, unless we want to lower our living standards to Third World levels. U.S. companies should leverage off the high skills of their workers to beat rivals on productivity and quality. Caterpillar itself had taken this approach for six years. Then it abruptly reversed course and tackled the UAW head-on. What's more, it did so without ever providing a convincing explanation for how, when productivity is included, its unit labor costs are higher than Komatsu's, as management asserts.
WILDSTROM: No one wants Third World wages. But as you point out, competitiveness isn't just a question of pay, it's a matter of productivity. And that means realistic work rules--these days, that's as big a bargaining issue as pay. If management is going to pay skilled workers high wages, it needs the flexibility to use them as efficiently as possible. Often, this means reorganizing the work force into modern, high-performance teams.
BERNSTEIN: But the purpose of abolishing or amending work rules is not simply to gain flexibility in the manufacturing process. Team production systems depend on gaining workers' cooperation, tapping their knowledge of their jobs, and encouraging them to figure out how to work faster and smarter. You don't get that kind of performance by threatening people with permanent job loss. Cat's hard-nosed obsession with labor costs probably has set back its plant-level team effort by years.
WILDSTROM: True, a hangdog work force could turn Cat's victory into a Pyrrhic one in the long run. But, you're basically suggesting that the walkout was a no-win proposition for both sides. That raises the question of whether strikes have become obsolete as a bargaining tactic in today's economy. The UAW's capitulation to Cat suggests just that. Unions must find new ways to press
their case. Mediation, and in some cases arbitration, may be a substitute. Persuading consumers to vote with their feet through an industry campaign or boycott may be an alternative. And in global markets, industrial unions, which once mouthed the rhetoric of international worker solidarity, might seek ways to cooperate with their brethren who face similar problems in other countries.
BERNSTEIN: The best tactic for both U.S. managers and workers is cooperative work teams. But management is usually a bigger obstacle than labor to the cooperation this entails. Although too many unions remain reactive and unwilling to change the way they work, most of them increasingly realize that cooperation is vital if U.S. companies are going to compete globally. However, most of U.S. management is viscerally antiunion. And that animus leads managers to work against their own goal of higher productivity. Instead of fostering modern, cooperative work systems, many managers have realized that they can use permanent replacements to attack unions. That hurts our international competitiveness--which is why permanent replacements should be illegal.