“Incompetent Managers”: Vulture Capitalism Ate Your Twinkies
What happens when vulture capitalism ruins a great American company?
The vultures blame the workers.
The vultures blame the union.
And vapid media outlets report the lie as “news.”
That’s what’s happening with the meltdown of Hostess Brands Inc.
Americans are being told that they won’t get their Twinkies, Ding Dongs and Ho Hos because the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union ran the company into the ground.
But the union and the 5,600 Hostess workers represented by the union did not create the crisis that led the company’s incompetent managers to announce plans to shutter it.
The BCTGM workers did not ask for more pay.
The BCTGM workers did not ask for more benefits.
The BCTGM workers did not ask for better pensions.
The union and its members had a long history of working with the company to try to keep it viable. They had made wage and benefit concessions to keep the company viable. They adjusted to new technologies, new demands.
They took deep layoffs—20 percent of the workforce—and kept showing up for work even as plants were closed.
They kept working even as the company stopped making payment to their pension fund more than a year ago.
The workers did not squeeze the filling out of Hostess.
Hostess was smashed by vulture capitalists—“a management team that,” in the words of economist Dean Baker, “shows little competence and is rapidly stuffing its pockets at the company’s expense.”
Even as the company struggled, the ten top Hostes executives pocketed increasingly lavish compensation packages. The Hostess CEO who demanded some of the deepest cuts from workers engineered a 300 percent increase in his compensation package.
“Wall Street investors first came onto the scene with Hostess about a decade ago, purchasing the company and then loading it with debt. All the while, its executives talked of investments in new equipment, new research and new delivery trucks, but those improvements never materialized,” explains AFL-CIO president Richard Trumka.
“Instead, the executives planned to give themselves bonuses and demanded pay cuts and benefit cuts from the workers, who haven’t had a raise in eight years,” said the AFL-CIO head. “In 2011, Hostess earned profits of more than $2.5 billion but ended the year with a loss of $341 million as it struggled to pay the interest on $1 billion in debt. This year, the company sought bankruptcy protection, the second time in eight years. Still, the CEO who brought on the latest bankruptcy got a raise while Hostess demanded that its workers accept a 30 percent pay and benefits cut.”
When BCTGM workers struck Hostess, they did not do so casually.
They were challenging Bain-style abuses by a private-equity group—Ripplewood Holdings—that had proven its incompetence and yet continued to demand more money from the workers.
“When a highly respected financial consultant, hired by Hostess, determined earlier this year that the company’s business plan to exit bankruptcy was guaranteed to fail because it left the company with unsustainable debt levels, our members knew that the massive wage and benefit concessions the company was demanding would go straight to Wall Street investors and not back into the company,” recalled BCTGM president Frank Hunt, who described why the union struck Hostess rather than accept a demand from management for more pay and benefit cuts.
“Our members decided they were not going to take any more abuse from a company they have given so much to for so many years,” Hunt explained. “They decided that they were not going to agree to another round of outrageous wage and benefit cuts and give up their pension only to see yet another management team fail and Wall Street vulture capitalists and ‘restructuring specialists’ walk away with untold millions of dollars.”
On November 6, American voters rejected Mitt Romney and Bain Capitalism.
But that didn’t end the abusive business practices that made Romney rich. They’re still wrecking American companies, like Hostess.
Instead of blaming workers, we should be holding the incompetent managers to account and cheering on any and every effort to rescue Hostess from the clutches of the vulture capitalists.
By: John Nichols, The Nation, November 18, 2012
“Combating Concentrated Wealth And Power”: The Right To Form A Union Should Be A Civil Right
In 1961, Martin Luther King Jr. spoke to the United Auto Workers about what the civil rights movement had learned from the labor movement. He said that, in the 1930s, “you creatively stood up for your rights by sitting down at your machines, just as our courageous students are sitting down at lunch counters across the South.”
When King was describing the “kinship” between the two movements, organized labor was strong, representing about a third of the non-agricultural private-sector workforce. The civil rights movement was still a fledgling campaign, not yet having won passage of the Civil Rights Act or the Voting Rights Act.
This Labor Day, the roles have reversed. The civil rights movement is the nation’s iconic cause. The gay rights movement, hardly a blip on the radar screen a half-century ago, is winning meaningful victories in the courts and in legislatures. But unions are on the road to virtual extinction.
Even public-sector unions, now a majority of the labor movement, are on the defensive. A new movie, “Won’t Back Down,” unfairly paints teachers unions as impediments to quality education for students of color. One character asks, “When did Norma Rae get to be the bad guy?”
To revive itself, labor must rediscover its roots as an early civil rights movement for workers. In some places, this is already starting to happen. On Aug. 11, the AFL-CIO held a massive rally in Philadelphia demanding a “Second Bill of Rights,” including the right to organize and bargain collectively. This summer, the UAW has been trying to organize a Nissan plant in Canton, Miss., where 70 percent of the workforce is African American, using a civil rights frame.
“The civil rights experience was fought on that very ground,” the UAW’s Gary Casteel told Reuters. “We’ve been saying that worker rights is the civil rights battle of the 21st century.”
In particular, unions should emulate three strategies of the civil rights movement.
First, labor must make clear, in word and deed, that it is part of a broader movement for social justice and against concentrated wealth and power, not just a special interest concerned only with its membership. The civil rights movement has succeeded when it has made a pitch for ending discrimination universally, and it has struggled when focusing on narrow, race-specific preferences. Labor has a good case to make: When union wages increase, nonunion employers respond by raising pay, too, to attract workers. And each percentage-point decline in the U.S. unionization rate has been accompanied by a comparable fall in the proportion of income going to the middle class.
Second, unions need to show that they are a vehicle for vindicating the individual rights that Americans hold dear against the power of large employers and the government. Just as King fought for individual civil rights as a fulfillment of the Declaration of Independence’s promise of equal opportunity, so the labor movement should fight for individuals’ First Amendment right to engage in the freedom of association, including the right to form a union.
Third, like the civil rights movement, labor needs to codify its notion of rights through strong federal legislation. The crowning glory of the civil rights movement is the Civil Rights Act of 1964, which through the force of law and sanctions helped delegitimize racial bias. Organized labor has the National Labor Relations Act of 1935, which institutionalizes the right to organize, but its sanctions are so weak that employers routinely flout the law and pay the penalties. In part because employers frequently fire or demote employees for trying to unionize, the watchdog group Freedom House rates the United States as less free for labor than 41 other nations.
The Civil Rights Act should be amended to outlaw employment discrimination not only on the basis of race and sex, but also for exercising the right to join a union. Doing so would allow employees to sue in federal court and to receive compensatory and punitive damages from employers. It would stigmatize employers who broke the law as civil rights violators. Without employers trying to block organization, polls suggest that many American workers would join unions, if given a free choice.
Organized labor has been written off before. But if a civil rights approach succeeds in strengthening the movement, more people will join it. And if part of the reason the gay rights movement is succeeding is that more people know someone who is gay, the growth of the labor movement could generate a similar virtuous cycle for American unions.
By: Richard D. Kahlenberg and Moshe Z. Marvit
“The Republican War On Labor”: Workers Face An Economic Power Gap
On Labor Day 2012, U.S. workers are in dire straits, and an increasing share of elite opinion says it’s their own damned fault.
Not quite so bluntly, of course. But it’s impossible to read the business press and the editorial pages without encountering the argument that the economy hasn’t perked up because of the “skills gap.” U.S. workers, this thinking goes, just don’t have the skills required by our advanced economy. If only our workers and schools were better, if only teachers unions ceased to exist, all would be well.
There are indeed some skills-gap problems plaguing the economy, but the downward mobility of U.S. workers results far more from their lack of power than their lack of skills.
Since the recession bottomed out in June 2009, median household income has fallen by $2,544, to $50,964 — a 5 percent drop — according to a new report by Sentier Research. It’s no mystery why wages are falling even during the recovery. In a study released last week, the National Employment Law Project found that 58 percent of the jobs created since 2010 pay between $7.69 and $13.83 an hour. New jobs in the mid-range of the wage distribution, paying $13.84 to $21.13, account for just 22 percent of the positions created since the recovery began, though they constituted 60 percent of the jobs lost in the downturn. Higher-wage jobs are just 20 percent of the newly created positions. The biggest increase in jobs has come in food preparation and retail sales.
These numbers underscore the question of whether our primary problem is the lack of skills or, rather, the lack of good jobs. And the problem isn’t just that mid-range jobs were offshored or fell prey to the construction bust. It’s also the declining or stagnating wages and benefits in a far wider range of sectors — even where U.S. workers have the skills they need and then some.
Is it really insufficient education that’s dragging down Americans? Since 1979, the share of U.S. workers with college degrees has increased from 19.7 percent to 34.3 percent, the Center for Economic and Policy Research found this summer. Yet the percentage of college graduates with good jobs — which the center defines as jobs paying at least $37,000 and providing health insurance and some kind of retirement plan — had declined from 43 percent in 1979 to 40 percent in 2010.
Are American workers becoming less productive? On the contrary, a Wall Street Journal survey of the Standard & Poor’s 500, the nation’s largest publicly traded companies, found that their revenue per worker increased from $378,000 in 2007 to $420,000 in 2010. The problem is that workers get none of that increase. As economists Ian Dew-Becker and Robert Gordon have shown, all productivity gains in recent decades have gone to the wealthiest 10 percent of Americans, in sharp contrast to the three decades following World War II, when Americans at all income levels shared in the productivity increases.
The primary plight of U.S. workers isn’t their lack of skills. It’s their lack of power. With the collapse of unions, which represented a third of the private-sector workforce in the mid-20th century but just 7 percent today, workers simply have no capacity to bargain for their share of the revenue they produce.
This is not to say that there is no skills gap or that U.S. schools don’t need improvement. But the decline of unions has both weakened workers’ bargaining power and diminished the kind of apprenticeship programs that the building trades unions have long (and ably) provided. Under increasing right-wing pressure to justify their very existence, however, some unions in other sectors are embarking on skills training or professional development programs.
The most notable is that of the American Federation of Teachers (AFT), which has created an interactive professional development Web site for teachers called Share My Lesson in response to school districts cutting back on their ongoing teacher education. “Teachers want and need to share best practices with each other,” AFT President Randi Weingarten told me, so her union is rolling out this site as the school year begins.
Unions can address the skills gap just as, in the days when they were larger, they could address the economic power gap. But if the war that business and Republicans are waging on labor isn’t defeated, good jobs will continue to dwindle and work in America will grow steadily less rewarding.
And a happy Labor Day to you.
By: Harold Meyerson, Opinion Writer, The Washington Post, September 2, 2012
“Deregulation And Worker’s Bargaining Power”: New Insight Into The Decline Of The Middle Class
The recently released 2012 Organisation for Economic Co-operation and Development Employment Outlook provides new insights into the decline of the middle class. The report documents the global shift from labor income to profits. Across the Organisation for Economic Co-operation and Development, known as OECD, the share of income going to wages, salaries, and benefits—labor’s share—declined over the last 20 years. The median labor share in OECD countries fell from 66.1 percent to 61.7 percent of national income. However, the decline in labor compensation was not equally shared by all employees; the wage share of top income earners increased while low-paid workers were hardest hit. On average, the wage share of the top 1 percent of income earners increased by 20 percent over the past two decades.
In the United States, where labor’s share began its decline in the 1980s, it fell a further 2.5 percentage points over the past 20 years. Excluding top earners’ income, the decline in the adjusted labor share was 4.5 percentage points.
The decline in labor’s share of national income did not result from a shift away from labor intensive industries to industries that employ a low share of labor. The OECD’s analysis found overwhelmingly that it is within-industry declines in labor’s share of industry value added that explains the fall in labor’s share. On average, the OECD found, real wage growth within industries did not keep pace with productivity growth.
Examining the causes of the decline in labor’s share, the OECD found that labor-saving technical change across most industries was associated with greater investment in capital and higher productivity growth as machines replaced workers in some jobs. The OECD found a strong association between technical change and the decline in labor’s share. It is important not to be hasty and jump to the conclusion that technological unemployment is to blame for the decline in labor’s share. In fact, the OECD did not find fewer jobs overall for less-educated workers.
Rather, what they found is not a decline in low-skill jobs, but a decline in jobs that pay middle-class wages. The share of the high-skilled in occupations such as manager or IT engineer increased as did jobs at the bottom of the wage distribution, typically low-paid precarious jobs. Unfortunately, this increase in demand and employment of workers in low-paying occupations did not improve the earnings of these workers. Increasingly, better-educated workers who in the past would have found middle-class jobs ended up low-paid employment. The OECD found that educational requirements increased quickly in low-pay occupations and that “workers in these jobs tend to be overqualified” (p. 124). A recent report from the Center for Economic and Policy Research found this to be true in the United States, where 43 percent of low-wage workers have some college or a college degree, 27 percent have a high school degree, and only 20 percent did not graduate from high school.
What, then, explains the failure of real wages to grow in line with productivity growth, and for increased educational attainment to translate into middle-class earnings? The evidence points to the negative effects of deregulation of some industries and increased globalization on workers’ bargaining power.
Deregulation of industries such as energy, transportation, and communication in which union density had traditionally been high opened these industries to new enterprises staffed by non-union workers. Increasing globalization—the delocalization of some parts of the supply chain as well as import competition from low-wage countries for blue-collar workers (but, notably, not for doctors, lawyers, and other high-paid workers) has led to the loss of well-paid unionized jobs. Both of these developments have led to a reduction in workers’ bargaining power vis a vis employers and have weakened unions, leaving workers to fend for themselves and employers to fix wages individually. The result according to the OECD has been to “decrease the bargaining power of workers, particularly those who are low-skilled, and thus their ability to appropriate their share [of productivity gains].”
The unequal distribution of labor income—with nearly all the gains in wages going to the top 1 percent while earnings stagnated or declined for the 99 percent—has gone hand-in-hand with the decrease in the share of national income going to labor and the shift from labor income to profits. Absent a countervailing force that enables workers to share fairly in the economy’s productivity gains, the decline in labor’s share appears likely to continue.
By: Eileen Appelbaum, Washington Whispers, U. S. News and World Report, August 25, 2012
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