In the wake of the stock market meltdown, investors have been admonished by many financial advisors to lower their expectations to reflect the realities of the current business climate in the United States and around the globe.
Now that United Airlines has declared bankruptcy the same advice might apply to labor unions and their members - get real about wages and benefits.
It appears that members of the International Association of Machinists killed their own golden goose by rejecting their part of a pay cut designed to keep the financially ailing airline out of bankruptcy. As a result, the airline mechanics are facing the ultimate pay cut ... jobs that are going away forever.
Of course the airline mechanics had plenty of help in pushing their employer over the brink. Two years ago the pilots staged a slowdown that cost the airline an estimated $700 million. For that lack of cooperation the pilots won a salary increase of 28 percent, plus a 4.5 percent annual raise through 2004. Not bad for a profession whose senior members are pulling down as much as $342,000 a year. There aren't many occupations enjoying that kind of increase.
In the meantime the company has been losing an estimated $8 million a day, largely because it is paying too much for labor.
What strikes us as bizarre about this case is that UAL employees own 55 percent of the company. As the majority stakeholders they have the greatest incentive for the company to succeed. Yet it appears they would rather let their company go belly up than forego some pay to keep it alive, which doesn't make sense unless they were betting on the federal government to bail them out.
Unfortunately, pride of ownership and customer service have never been strong suits at UAL. The company has amassed one of the worst on-time records in the industry, frequently "bumped" passengers because flights were overbooked, and gained a reputation for cramming people into seats that are too small. Add to that employee-owners who are taking more out of the company than it can afford and bankruptcy is inevitable, the golden goose's fate sealed.
Much the same thing has happened here in Oregon where an unprecedented budget crisis is unfolding in large part because the state can no longer afford a pension plan for the Oregon Public Employees Union. The pension system's costs have risen dramatically as the stock market's collapse has forced state agencies, counties, and schools to make up the difference. On the one hand, public employees fight any attempts to change the pension program or hold the line on salaries. On the other hand, they complain to high heavens when the school board, city council, or county commission has no choice but to lay people off or cut programs because they are out of money. When is the last time the teachers union accepted a pay freeze?
What is disturbing in both instances is the level of indifference that the unions and some of their members have shown toward the financial burdens of their employers in a tough economic downturn. They do not seem to care than revenues are down substantially, and they are certainly do not appear willing to share in the financial sacrifices that are necessary to help their employers - and themselves - weather the storm until happier days return. That miscalculation will likely come back to cost them dearly in the very near future.
- Rick Swart, editor, Wallowa County Chieftain