(The following article is from the October 16-31, 2007 issue of People's Voice, Canada's leading communist newspaper. Articles can be reprinted free if the source is credited. Subscription rates in Canada: $25/year, or $12 low income rate; for U.S. readers - $25 US per year; other overseas readers - $25 US or $35 CDN per year. Send to: People's Voice, c/o PV Business Manager, 133 Herkimer St. Unit 502, Hamilton, ON, L8P 2H3.)
By Sam Hammond, Chair of the Central Trade Union Commission, Communist Party of Canada
I suppose if you were writing a book called Exploitation for Dummies, you could define socialism as a giant social "Defined Benefit Plan" (DBP) and capitalism as a giant social "Defined Contribution Plan" (DCP).
In our DBP the benefits are defined according to need, and paid for out of wealth created by social labour, where everyone contributes according to ability.
But a DCP, for the purpose of this dialogue, is where you give everything that can be squeezed out of you (labour power), for your whole life, for whatever the capitalist system deems necessary to keep you doing this, with a few shekels at the end to dispose of the exhausted residue.
In short, the Defined Contribution Plan is just that. The contributions are defined and applied to plans that will reimburse something at some time. The variations in investment returns, the stock market, the last known whereabouts of Santa Claus, etc., will determine the stability and reimbursement potential of the plan. Meanwhile the plan administrators - the trustees - will provide a nice pool of cheap capital for the investment sharks to play with, while charging nice fat fees for their intransigence.
What trade unionists would ever allow their members to fall into the open‑pit life‑feasting consumption of a Defined Contribution Plan, when labour has historically fought for Defined Benefit Plans that give some foreseeable guarantee to workers who have purchased future benefits with their working lives?
Perhaps trade union leaders who have been schooled in acquiescence, who fear the power not only of their class opposition, but perhaps even more so the potential of a membership out of control. Either way they lose value to both if they can't deliver. So the whole game becomes smoke and mirrors - substance is not real, promises are planted in the deck, the jokers are wild, and surviving until the next round of negotiations is the only goal. The real applicators of class power stir the pot with glee: watch how they run!
This is not an article to vent frustration, but rather an introduction to the UAW settlement with General Motors in the United States. In this settlement, the predicament of the UAW and its thirty years of concessions ideology (an ideology that actually sparked the backlash in Canada that created the CAW) has taken the next step and merged with a fiendish refinement and escalation of Defined Contribution called "VEBA."
A VEBA is a "Voluntary Employees Beneficiary Association" which contains little gems and compartments like the HRA, Health Reimbursement Arrangement. VEBAs have a history. After laying dormant like incipient cancer since the late 1920's, they were given new life early in this decade when the U.S. Congress approved significant changes to the rules.
This was a time when, in most capitalist countries, the fight over Defined Benefit and Defined Contribution Pension Plans was heating up. This is no small item, but until lately and outside the United States it has been, at least in the minds of trade unionists, restricted to pension battles.
Well, brothers and sisters, the U.S. employers, great innovators that they are, have kicked it up a notch or two. Under VEBA Plans every medical, health, severance, retirement and pensioner benefit will be covered by a single Defined Contribution morass called an HRA. But it gets worse. In the GM settlement, the VEBA is converted to a Union owned trust.
Employers are required to provide actuarial studies of "promise‑to‑pay plans", health care and pensions, that have a future liability and therefore affect the value of a company and its balance sheet. This is a bigger item in the U.S., which has refused historically to provide universal medicare, than in other capitalist states. The entire cost of benefits negotiated is a company expense and must be figured into the cost of production. The aging workforce, especially at General Motors which has healthcare and pension liabilities to over 320,000 retirees, becomes a cost factor that does not apply to new non‑union arrivals like Toyota and Volkswagen, whose young employees do not or may never have any future benefit claims on the company.
The whole nature of a VEBA changes when it is converted to a Defined Contribution Plan and a Health Reimbursement Arrangement (HRA) is added. This is how it works.
Every employee has an individual account within the VEBA called an HRA. The company deposits a negotiated amount at set periods into each employee's HRA. The employee draws from their HRA account what is needed to supply benefits. If the employee or their family is healthy, the account accumulates amounts that can then be retained in the pool and applied to other areas such as severance or pension accumulation. If they must draw heavily on their HRA account, there may not be any left over for severance, disability or pension.
Against this backdrop, we can more easily judge what the UAW negotiating committee did. General Motors had a stated $52 billion liability for retirees' health care. The union leadership, who are apparently committed to some kind of "save our employers" mentality, agreed to take over the ownership and liabilities of the VEBA, convert it to a defined contribution fund, and cover the 320,000 retirees as well as the 73,000 active employees.
To finance this Trojan Horse, General Motors will make a cash contribution of just over $24 billion and put up an interest-earning debenture of $4.5 billion, probably in GM stock. The union now becomes the owner and manager of an under‑funded defined contribution trust, which if it can't meet its requirements, will have to develop direct user fees or cut benefits. Who the trustees of the trust will be is vague. If they are (as is likely) appointed bankers and federal officials, they will tell the union when to demand user fees or cut benefits to keep the trust solvent.
But there is more. In 2006 the UAW agreed to temporarily postpone the AIF (Annual Improvement Factor) payment to employees and allow GM to put it into health care costs. In 2007 it was given up altogether. This will cost an assembly line worker about $7,200 over the life of the four-year agreement. The union has also agreed to allow GM to take money from the cost‑of‑living (COLA) plan amounting to about $6,200 per worker over this term, and put it toward health care costs. (Part of the $24 billion?)
The negotiators are selling the tentative agreement on the basis of an assembler gaining $13,000 over the four years of the contract: a $3000 signing bonus up front, and three annual lump sums of 3%, 4%, and 3%, which correspond to about $2100, $2800 and $2100, for another $7000. The rest is a guesstimate of COLA paid on overtime. My arithmetic tells me they have given up at least the equivalent of gains, and that the lump sums will not compound into wage‑related benefits like pensions, holidays, health‑care or supplemental unemployment benefits.
General Motors, and in a slightly lesser degree Ford and Chrysler, have aging workforces. In the proposed GM agreement "new‑hires" and so‑called non‑core jobs will be subject to special provisions that provide only half the wages. This two-tier system of negotiated discrimination will apply to all new hires, not only so-called non‑core. About 30 to 40 percent of jobs will be reclassified to non‑core, so that existing workers will be losing about $14 per hour. Non‑core workers and all new hires will have a distinct (worse) pension plan, and will not be eligible for post-retirement health care. This of course will have a big cost saving effect on the now union‑owned VEBA trust, which will have a vested interest in lowering pension and health care coverage.
The corporation has agreed to provide incentives to about 25,000 older (most at about $28 per hour) workers to help ease them out. Their new‑hire replacements will come in at $14 an hour less, with poorer health care and pensions. Many will never accrue seniority, but will become "permanent‑temporary" workers who have to bid for core jobs and never be fully eligible for health care, pensions or seniority.
For thirty years the UAW has not been in conflict with General Motors, except for some local strikes and minor rebellions. The concessionary mentality had taken root in the craniums of the leadership so strongly that they tried to bully and sabotage their way to concessionary agreements with Chrysler in Canada, so strongly that the Canadians under the leadership of Bob White left the International and formed the CAW in 1985.
This marked a major departure of ideology, not only in the new CAW. It was a beacon for those in Canada who had long strived for a Canadian trade union movement devoted to Canadian needs, recognizing our cultural‑historic differences, especially recognition of the nations within the Canadian state. The differences are worth noting, not because we are more militant, but because the U.S. workers have special problems from living in the heartland of imperialism.
The Canadian labour movement, including the branches of US unions, had supported the social democratic leaders who were fighting for medicare. The entire left and notably the Communist Party gave impetus to this struggle. The breakthrough was in Saskatchewan under Premier Tommy Douglas, who was recently voted the most famous Canadian in CBC polling. It took decades and a lot of effort to spread this across the country.
The problems faced by autoworkers date back to those times. The priority in the US for the then-powerful UAW, Steelworkers et al was for negotiated private health‑care purchased by employers as a contractual obligation to employees. That also took place in Canada, but in parallel with a campaign for public health care. We were negotiating private plans and trying to replace them at the same time. Tricky, but we did it.
The U.S. system left the corporations in control of the health of workers and their families, a mechanism to choke strikes and hinder the class struggle. It also made union members a sort of health care elite amongst the working class as a whole, which to this day is largely deprived of access to health care. The US unions should never have abandoned the struggle for universal health care, because it separated them from millions of working people left in the hinterland.
Once a union, like the UAW, develops a partnership mentality to "their" corporations, they are on a downhill slide, racing for the bottom as their corporate "partners" squeeze more and more out of them, until they finally rebel or become management's brokers within their own class. This is certainly not an American phenomenon, but it sometimes appears sharper because of the intensity of the attack against U.S. workers. We Canadians have it amongst us for sure, and it is home grown.
Even at this late date the UAW could have taken up the challenge, prepared for a fight with health care as a rallying point, escalated the threat by GM into a struggle for national medicare, using the strike as the beginning of a massive struggle consuming all the unions and the unorganized. Therein lies salvation and growth. People join a fight, but no one in their right mind would join a retreat. The membership would have grown in this struggle.
But UAW President Ronald Gettelfinger rode into battle waving a white flag. At the news conference beginning the strike, in front of the media, viewed by millions, Gettelfinger made the statement, "nobody wins a strike!" Clearly disoriented by the backstab of his corporate partners even after years of concessions, he continued, "but again, you can be pushed off a cliff, that's what we feel like happened here..."
Obviously in a strike situation he is not used to and doesn't believe in, Gettelfinger turned to his second‑in‑command, Cal Rapson, and asked if he wanted to say anything. Rapson shook his head, "no." No comment, nothing to say, when 73,000 of your members are on the street?
At the end of the day the UAW ends up owning an underfunded trust that will ultimately fail, a two-tier wage and seniority concession that costs the non‑core and all future hires $14 per hour, lump sum payments that do not even equal the givebacks in COLA and AIF, and a memorandum to prevent plant closures (except if there is market decline). Perhaps in the next contract the company could be given absolute title to the workers in return for food and housing.
We shouldn't feel smug here in Canada. The corporate cross-hairs are fine tuning on Canadian auto workers, who should be preparing immediately for next year. Start stocking up the pantry.
In fact, the entire labour movement should prepare for the 2008 auto negotiations. Probably the most important part of this preparation should be to end the foolishness of sectarian political agendas and get back into the Ontario Federation of Labour. This is a very large challenge, considering the absence of the OFL from any meaningful activity except the downhill momentum of "just being." Add to this the tendency of Buzz Hargrove to become the mouthpiece of the Liberal Party, and it's easy to see that we have no room to be complacent. The struggles are shaping just as surely as storm clouds on the horizon.