American consumers aren’t spending much these days, given the widespread insecurity and the drop in family income that comes with a 9.6% unemployment rate. Nonetheless, Corporate America has amassed a huge reserve of $1.6 trillion to $1.8 trillion in cash, and profits are rising strongly. What accounts for this astonishing success despite the lean times?
The trick turns out to be based less on financial wizardry than brutal arm-twisting. Major corporations have learned how to squeeze more work from shrunken workforces, creating what Robert Reich calls a “decoupling of profits from jobs.” They have engaged in the biggest wave of wage-cutting since the 1930’s, with pay reductions often extorted by threatening to close plants and relocate jobs.
KOHLER THE LATEST TO PUSH FOR MASSIVE CONCESSIONS
The Kohler Co., a the Wisconsin-based maker of plumbing, bathroom, kitchen, and other product lines, is the most recent corporation to launch a campaign for lower wages, as reported here recently.
Although Kohler’s style has softened in recent years, Local 833 members and the local community vividly recall Kohler’s history of ruthlessness — including the murder of workers by company guards in 1934 and a nine-year strike, the longest in U.S. history.
Negotiations continued this week with United Auto Workers Local 833 on a new contract covering some 2,300 workers at Kohler’s two plants in Sheboygan County, reported Dave Strohschein, Local 833 union’s head trustee. The old contract expired September 1.
Kohler is pushing hard for lower wage costs and “flexibility,” a concept much applauded by the corporate world and business professors (and detailed here and here).
This version of “flexibility” calls for unions to surrender hard-won rights and stand by passively to allow the workforce to be divided into two classes of union members with a 35% differential in pay, and a third segment of easily-disposable non-union permanent temporary workers – “perma-temps” – who also earn lower wages.
- Tier A — composed of currently employed workers — would face a five-year wage freeze, with current wages averaging $22.54 an hour..
- Tier B — new hires and those on layoff for more than 90 days — would earn 35% less (about $14.70 an hour) and be burdened with a high-deductible healthcare plan offering minimal coverage.
- The “perma-temps” in the lowest caste could work up to 25% of total
hours in the plant under the company’s demands. They would also
receive $14.70. Ineligible for union membership, they could be discarded at any time.
Retirees would also be ravaged under the Kohler proposal. They would
face increases in healthcare payments, with costs for “a typical
retiree with 30 years seniority rising from “approximately $250 per person to $700 per person,” The Shboygan Press reported.
Such sacrifices by workers are essential for “economic competitiveness,” the business professors, CEOs, and editorial writers argue. Wage cuts and multi-tier structures are good for the economy, by which they of course mean maximized profits for major stockholders.
This call for one-sided sacrifices by working people raises profound questions about the very purpose of our economy. Is the economy being shaped to meet human needs for meaningful, secure work at decent wages where workers have a voice? Or are workers’ lives being bent and contorted around the demands of their economic masters, with no economic rights and no security?
KOHLER PHILOSOPHY CLEAR
The business philosophy embraced by the Kohler Co. has long been obvious. The Kohler family started its business‘137 years ago, running its operation in a highly paternalistic but overbearing fashion, building a company town for its workers.
But the workers eventually rebelled against the constant management presence in their lives, coupled with wage cuts, much like the Pullman Palace Car Company workers did in Chicago in 1894 while living in a another company-built community.
When Kohler workers began to organize a union in the 1930s, company
president Herbert Kohler I was no more welcoming than the Pullman
Co. Kohler responded by hiring a 400-member security squad. With Kohler resisting the union, the workers were forced to stage a strike to win recognition from Kohler.
KOHLER FORCED LONGEST STRIKE IN U.S. HISTORY
On July 27, 1934, members of the Kohler para-military squad fired into a crowd of strikers, workers, family members — including women and children — and other union supporters. Two workers were killed, and 43 others were wounded.
The United Auto Workers eventually won a contract, but faced
continual battles with a management unable to live with a situation
where it could not exercise its customary dictatorial powers. This
situation heated up in the mid-1950s, as Kohler executives ordered
the stockpiling of weapons—despite the tragic outcome of its 1934 use of force — to stave off an imagined union assault on the company.
Kohler Co.’s intransigence forced the longest strike in U.S. history,
running an incredible 9 years, mainly because of its unwillingness
to accept the principle of seniority. While the union sought compromise, the Kohler Co. provoked conflict. As even conservative Time magazine reported,
Faced with Herbert Kohler’s granitic resistance, the U.A.W. trimmed its demands. But he kept on balking at even a seniority rule, and U.A.W. called a strike. Kohler laid in an arsenal of submachine guns, shotguns, clubs and tear-gas bombs, settled down for a long siege.
Apparently, tough-fibered Herbert Kohler welcomed the strike as an opportunity to shake off Reuther & Co. [President Walter Reuther and the UAW] A high Kohler official predicted that the strike would bring the company 20 years of peace, as had the broken 1934 strike.
The corporation hired a huge army of strikebreakers, and the area broke into a local civil war with widespread violence between strikers and scabs. But the UAW dug in its heels for the long haul, patiently executng a massive national boycott of Kohler products and gained support from numerous city councils.
Eventually, the UAW’s never-say-die tenacity paid off and the union finally won a new agreement nearly a decade later.
‘JOBS, JOBS, JOBS’ – OUTSIDE WISCONSIN
Kohler has long remained one of the most dynastic firms in Wisconsin, operating as a family-owned corporation that possess vast wealth. (As a non-stock corporation, executive pay and profits are not required to be disclosed). Two of the Kohler scions became governors of Wisconsin.
A third family heir, Terry Kohler, ran unsuccessfully for governor during the 1982 recession on a program of “jobs, jobs, jobs.” Part of his defeat may be attributed to my old and now departed labor weekly, Racine Labor, which beat the state’s big daily newspapers in uncovering more and more information about Terry Kohler’s firm, the Vollrath Co., which hypocritically relocated “jobs, jobs, jobs” from Wisconsin to low-wage plants in Tennessee and Mexico.
The Kohler Co. has similarly dispersed production. It has built over 50
plants around the world, including low-wage factories in China and
Mexico. Only 43% of its workforce is employed in the U.S.
In the current round of negotiations, Kohler maintains that it is not threatening to relocate manufacturing from the Shebogyan area. Kohler appears confident that it will eventually get its way, sweetly announcing that it is not threatening to close the plant, as have a couple other Wisconsin firms that successfully extorted major
concessions.
But a spokesman added in a not-too- subtle statement: “The company is not threatening to relocate. We are trying to avoid getting to that point by seeking solutions during these negotiations.” In other words, the implicit Kohler message still amounts to: “Don’t push us to ‘that point’ so that we don’t have to pull out our big gun and threaten to blow you away.”
WAGE-CUTTING PRODUCES LONGER RECESSION
But the strategy of Kohler and so many other corporations will lead
to a much more prolonged recession, with all its far-reaching social
devastation.
While wringing more profits out of workers creates impressive quarterly retruns for individual corporations, this pattern of driving down wages further reduces domestic buying power and demand for the products of Kohler and the rest of Corporate America.
As United Electrical workers Western District President Carl Rosen remarked about the broader economic situation, “This economy is failing because workers cannot buy back what they are making.”
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