Workplace Wire

On October 15, 2011, workers at US Steel’s “Hilton Works” in Hamilton voted to accept the Company’s final offer, ending a lockout that had begun over 11 months earlier.  This lockout represented the longest labour-management confrontation in Hamilton labour history, and ended in a settlement that many regard as a foregone conclusion, despite the Union’s long and determined struggle to maintain the status quo.  (The best descriptions of the ongoing dispute can be found in the Hamilton Spectator, including the most recent article written by Steve Arnold). 

A copy of the terms of the agreement can be found here: US Steel-USW Tentative Agreement Oct 2011.pdf

At some level, USW Local 1005 members and its executive “took one for the team” by holding out for so long, in what many outsiders (including this author) regarded as an impossible struggle.

The defining issues in the lockout were economic, the largest one being the Company’s demand for concessions on the pension plan.  The Company wanted to de-index pension benefits for current and future retirees under the existing defined-benefit pension plan, and close the defined-benefit plan to any new employees.  Instead, new employees would have their retirement security provided through a group RRSP, and the company’s liabilities would be capped at its per-hour contributions.

There were other issues as well, including a reduction in the level of wage increases granted by the “Cost of Living” provisions, but the reason that the outcome was ultimately predictable was that US Steel is facing the same battle relating to its defined-benefit pension plans in the United States with the same union.  US Steel wants to obtain similar concessions relating to its defined-benefit plans in the United States, and could not possibly have bent under the pressure applied by the Steelworkers Local 1005 unless it was prepared to abandon the goal of obtaining them.

By the same token, in addition to answering to its own members, Local 1005 had to shoulder the burden of showing that the Steelworkers Union would fight back in the face of these demands, to send a signal to US Steel that these concessions will not be easily obtained wherever they are sought.  Whatever the outcome in the United States, members of the Steelworkers in that country owe their Canadian counterparts a debt of gratitude for the effort and sacrifice that they invested in the fight.

The economic problem that US Steel (and other employers) have to face is that defined-benefit pension plans are often based on promises that cannot be fulfilled, in part because investment returns have not been as high as hoped, people are living longer, technology has vastly improved productivity, and consequently the ratio of retirees to current workers has exploded.  Global competition means that prices cannot simply be increased to cover pension shortfalls, and employers need predictability in their labour costs.  In any case, for a variety of legitimate business reasons, defined-benefit pension plans are becoming a thing of the past.

In fact, the idea that employers are responsible for ensuring their workers’ welfare past their retirement and throughout their lives is dying a slow and painful death under the pressure of globalization and economic stagnation.  Unions are fighting a rearguard action to keep the idea alive for as long as possible, but are losing time and again.

Unions are in a difficult position.  First of all, whatever one thinks of the economics behind the Steelworkers’ quixotic insistence on maintaining unaffordable pension promises, there are real people whose retirement plans have been based on these promises and who cannot re-enter the workforce to adjust to the new reality.  Unions feel a responsibility to these people.

Second, Unions regard defined-benefit pension plans and retiree benefits as major bargaining achievements reached at the cost of considerable effort and struggle.  To surrender these achievements is not only painful, but also calls into question Unions’ very raison d’être.  If, at the end of the day, workers can’t have a better livelihood during their working lives and in retirement as a result of having a union, what’s the point?

The issues raised in this labour dispute are larger than the parties themselves and, in this author’s opinion, throw into high relief many of the issues facing workers and employers alike: globalization, poor investment returns, and the confrontational/adversarial nature of our labour relations system.

This author believes it is possible to regard the Union’s battle in this particular dispute as an ultimately pointless tactic in a proxy war between a US-owned employer and a US-headquartered union, while still acknowledging that the larger question of how to provide security for ordinary workers in their retirement remains unanswered by its outcome.