Verizon: Good News And Bad

The strike against Verizon Communications has been portrayed as a referendum on the place of unions in the New Economy. What role can they play in the frenzied 24/7 world of options-driven work incentives? With most, but not all, of Verizon's Communications Workers of America members returning to work, it's time to parse the new contract. And the news for the New Economy is not good.

Not for the obvious reasons. The pay hike negotiated, 12% in wages over three years, goes to workers who are already the best paid in the telecommunications industry. But it is in line with probable productivity gains and is therefore not inflationary. Union workers will also receive a grant of 100 stock options, tying a bit of their compensation to the long-term performance of Verizon. That's good.

The union won five 30-minute breaks each week for stressed-out customer reps. That's good, too. Be it mass customization, the explosion in product choice, or the drive to build brands, companies are striving as never before to satisfy increasingly finicky consumers. This is putting tremendous strain on employees.

The union also won the right to try to organize in the fast-growing nonunion wireless divisions of Verizon by using a simplified way for employees to decide to join or not. This is perhaps the most important test for labor's future in the New Economy. It, too, is good, for now old-style unions will get the chance to persuade workers in the fastest-growing segments of the high-tech economy that they can offer them something special. Will a focus on work-related stress, job security, and benefits outweigh the wired world's nonunion attractions of high pay, big options, technology training, and job mobility? It's time to see.

The bad news for the New Economy in the Verizon settlement comes from labor's victory on job stability. Only a tiny percentage of employees can be transferred from one region to another as a result of the Bell Atlantic-GTE merger that produced Verizon. This job rigidity undercuts Verizon's competitiveness and could ultimately result in the very thing it is designed to stop--big layoffs. Saving Old Economy jobs by freezing them in place has crippled European economic growth for decades. It's a terrible precedent, and it outweighs much of the good that comes out of the settlement.

The CWA and other unions should be training their members to have the skills to be mobile and more productive, not using strikes to force companies to keep uncompetitive workers in place. Labor flexibility is a major reason behind America's successful transition from an industrial to an information-based economy. It boosts productivity and growth. The Verizon contract inhibits that flexibility. That's not good.

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