Economix Blog: The Search for an Era of Labor Peace

When the Boeing Company announced its far-reaching, precedent-setting agreement with the machinists’ union last week, all the talk was about the ushering in of a new era of labor peace between a company and union that were long known for their horrendous labor relations record. That record included five strikes since 1977, among them a 58-day walkout in 2008 that cost Boeing $1.8 billion.

When I wrote about the Boeing deal, I realized that there were some uncanny parallels with another far-reaching contract — and far more precedent-setting one — reached in 1948 between General Motors, then by far the nation’s largest company, and the United Automobile Workers.

Both Boeing now and General Motors then were eager to ramp up production, but both companies worried that another round of painful strikes would throw a wrench into their expansion efforts. In late 1945, a 113-day strike by 175,000 workers had paralyzed G.M., with the union demanding hefty raises not just to enable workers to keep pace with raging inflation, but to help stimulate the overall national economy. One of the strike’s slogans was “Purchasing power for prosperity.”

G.M.’s president at the time, Charles E. Wilson, feared another walkout by the militant U.A.W., then headed by Walter Reuther, especially because G.M. had ambitious plans to invest $3.5 billion — about $30 billion in today’s dollars — to expand production to take advantage of the huge pent-up consumer demand from World War II and the flood of Americans moving to the suburbs.

Fearing new union conflagrations, both Boeing and General Motors agreed, in essence, to buy labor peace by offering unusually generous contracts.

In 1948, G.M. signed a two-year contract — often called a “grand bargain” — that offered the auto workers an 11 percent raise over two years, an annual cost-of-living adjustment to help workers keep up with inflation and a newfangled notion: an additional 2 percent annual raise, called the annual improvement factor, intended to let G.M.’s workers profit from the company’s steadily improving productivity. (I write about this landmark contract in my book, “The Big Squeeze, Tough Times for the American Worker,” pages 73-76.)

Boeing, too, has been eager to expand, with its current backlog of 3,500 planes valued at $273 billion. (Like General Motors, it should be noted Boeing worried that a new, prolonged strike would give a big boost to its competitors, especially Airbus.)

Boeing’s four-year contract — its grand bargain with the International Association of Machinists and Aerospace Workers — contained many elements similar to those in the 1948 G.M. contract: annual wage increases of 2 percent, cost-of-living adjustments, a productivity incentive program intended to pay bonuses of 2 percent to 4 percent. In addition, Boeing gave the union something it badly wanted — it pledged to add several thousand jobs in Washington State (rather than another state) as it moves to expand production of its 737 Max passenger jet to 42 aircraft a month from 35 a month.

Tom Wroblewski, president of the machinists local that represents Boeing workers in Washington State, spoke for both sides when he said the agreement “signals the start of a new relationship that can both meet our members’ expectations for good jobs, while giving Boeing the stability and productivity it needs to succeed.”

For Boeing, one big, additional benefit of the “grand bargain” is that the newly happy machinists union has promised — assuming the rank and file ratifies the deal — to push the National Labor Relations Board to drop its complaint against Boeing for building a $750 million assembly plant in South Carolina rather than Washington State, a complaint originally brought at the machinists’ behest.

(I should note that Boeing, like G.M. six decades ago, can afford to be generous to its workers because it is in an oligopoly situation with few competitors, making it easier to pass on increased labor costs to its customers.)

Because G.M. was the largest and most influential company in the nation, its 1948 contract generated a cascade of large me-too raises at companies across the United States. Not only that, its two-year bargain for labor peace was so successful that it caused G.M. and the auto workers to reach an even more generous five-year contract in 1950 that assured five years without strikes. In that agreement, G.M. promised the auto workers the highest employee pensions in the country. (In the new Boeing deal, the company — at a time when many companies are freezing traditional pensions and not giving them to new hires — agreed to make its pension formula more generous for current employees and to continue providing traditional pensions to new hires.)

Like G.M.’s 1948 agreement with the U.A.W., its 1950 contract caused a flood of copycat deals in which hundreds of other companies agreed to provide generous raises and benefits in exchange for years of labor peace — a wave of contracts that went far to create America’s great middle class during the 1950s. As Nelson Lichtenstein wrote in his biography of Walter Reuther, “The Most Dangerous Man in Detroit,” Business Week hailed the 1950 deal as “industrial statesmanship of a very high order” and The Washington Post declared it “a great event in industrial history.”

Professor Lichtenstein, a labor historian at the University of California, Santa Barbara, sees the Boeing deal as far different from the G.M. deal in one important respect. He does not believe other companies are going to rush to copy the Boeing deal. Indeed, Boeing signed its generous contract in an era when many companies are reluctant to deal with labor unions, and those that do often seem to be demanding concessions.

Professor Lichtenstein said, “This kind of successful private-sector bargaining is so unusual today — and the Boeing situation is so different from the rest of the economy — that it will set no ‘pattern.’”

This post has been revised to reflect the following correction:

Correction: December 5, 2011

Article source: http://feeds.nytimes.com/click.phdo?i=de6551252523119d7b8e0f8afc9cdef0