Commentary: Needed: A New Union For The New Economy

When the local phone giant Verizon Communications reached a new labor pact with 50,000 workers on Aug. 20, the unions couldn't help but crow. "I would say this is one of the biggest victories in the labor movement in recent years," says Robert Master, a legislative and political coordinator for the Communications Workers of America. "We were able to get the best possible solutions in all of the key areas."

No question, the CWA and the International Brotherhood of Electrical Workers cut a sweet deal for their members. Workers, who already earn an average of about $42,000 a year, will get 12% raises over the life of the three-year contract. Job security? The contract includes a no-layoff provision and strict limitations on shifting jobs to other parts of the company. Some 35,000 CWA workers in the mid-Atlantic states even held out for more: an overtime cap of 8 hours a week.

SKIPPING ELECTIONS. Most important, the unions are gaining a foothold in Verizon's fast-growing new businesses. The CWA won the right to have its workers install the digital subscriber lines (DSL) that give users blazing-fast access to the Net. That business is projected to grow from $200 million in revenues this year to nearly $600 million next year, according to Sanford C. Bernstein & Co. In addition, the CWA can use "card check" in recruiting workers at Verizon's largely nonunion wireless unit. That makes organizing easier because workers simply sign a card in support of the union, instead of voting in a contentious election. At SBC Communications' wireless operation, the CWA has used card check to sign up 5,000 of its 15,000 employees.

But in the wake of their victory, union workers need to be careful not to cripple Verizon as it moves into the Internet Age. The company, created from the merger of Bell Atlantic Corp. and GTE Corp., is hardly the unassailable monopoly it was once upon a time. Competitors are expected to swipe as much as 15% of the 22 million local business phone lines in Bell Atlantic's territory by the end of this year, up from 10% at the end of 1999, according to Bernstein. And in the wireless and Internet markets, Verizon is going up against swarms of fast-moving rivals. "The unions should start thinking about being something more than just anticompany," says Daniel P. Reingold, an analyst with CS First Boston.

NO LAYOFFS. Already, the labor pact hampers Verizon's flexibility. Under the current deal, the company has agreed not to annually shift more than 0.7% of the jobs in each work group to another part of the company. That means that in a unit of 1,000 workers, only seven jobs can be moved from one district to another. Verizon also pledged not to lay off workers--so the only way to cut headcount is through attrition or by offering workers incentives to leave.

Constraining as all that may sound, union workers can still help Verizon by being flexible in other areas. Perhaps most important, the company will have to respond quickly to competitive threats by rolling out new products and services. For example, Nextlink Communications, which has no union workers, took a mere three months to roll out 24-hour, seven-days-a-week customer service. That probably would not have been possible if it had had to contend with union workers who were sticklers for job categories. "This industry is changing so fast that [companies] don't know where the new jobs will be three months from now," says Nate Davis, Nextlink's president and chief operating officer.

The CWA and the IBEW have certainly secured their members' place in the New Economy. But if their new contract undermines the company they depend on for their jobs, the celebration could be short-lived.

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