The "Guaranteed Annual Wage"

...Those firms that face failure because of their inefficiency cannot place all the blame on the costs of such things as insured funds...

...They assume the present boom, sustained largely by inflated credit, will continue indefinitely...

...Just as we have been able to build in Allis-Chalmers on the agreements negotiated earlier with other companies, we hope and confidently expect that other UAW-CIO units will be able to build on the Allis-Chalmers agreement to provide even greater security for their members," the UAW said...

...From the way the supplemental pay plan is spreading, it would appear that the NAM not only does not speak for the giants of the auto industry but is not even talking for the small firms when it claims American business is violently opposed to the GAW...

...Since 65% of his take-home pay is $48.17, his drag on the kitty is $18.17 Needless to say such arithmetic does not help to make the plan more popular in the shops...

...If it could be applied on a large scale, it might become yet another of the stabilizers built into the U. S. economy since 1932...

...Looking behind the settlements, one wonders why so much fuss is raised about the supplemental pay plan in relation to small firms...

...The New Statesman and Nation believes that whatever the outcome of the guaranteed pay plan, Reuther can't lose: In economic terms, the effect of the Reuther plan is harder to assess...

...if the economy sickens then Walter Reuther—who sees himself as a tribune of the people—has already begun to popularize some of the remedies...

...Although UAW leaders are convinced that more and more positive features of the GAW will unfold in the months and years ahead, the fact remains that the future of the GAW is tied up with the future of the economy in general and of the auto industry in particular...

...In a bulletin the AFL Machinists Union frankly tells its staff: "Think twice before proposing or accepting the Ford plan or similar plans...

...The publicity has blown the plan up out of proportion to its immediate value to most unions and there is a danger that some unions may be led to press for a similar plan before taking full account of its limitations...

...This was evident during recent Chrysler negotiations when management insisted on reducing the number of chief stewards in the automotive body divi sion from 432 to 49...

...Already a National Association of Manufacturers spokesman has publicly announced that the Attorney General's ruling will be tested in the courts...

...The June Automobile Worker, UAW's official organ, shows a group of auto workers struggling to hoist a flag marked "Guaranteed Annual Wage," their task still unfinished...

...II Reuther is often hailed as the outstanding labor statesman who has abandoned outmoded business unionism for broad social objectives like the GAW...

...With their enormous capital resources, Ford and General Motors can "rationalize" their production in a way which would be unthinkable for independents, who do not have the capital to build one automated plant after another, but must try to find other means to cut labor costs to survive in the competitive struggle...

...When my unemployment compensation and supplemental pay checks are used up—then what...

...The facts themselves warrant neither of these melodramatic conclusions...

...One does not have to talk very long with auto workers to realize that their dissatisfaction over the contract is by no means limited to the inadequate supplemental unemployment pay provision...

...But what happens if they put in automation and I get laid off for good...

...As it turned out, excepting the skilled trades increase and the five cents that was already in the improvement factor, the actual general wage increase ranged from one cent to 3.5 cents an hour...

...Concerning automation, the Bureau of National Affairs reports that Ford is building up supplemental pay funds at the rate of about $14 million a year...

...And it is to the facts that we propose to turn...

...Should another downswing hit the auto industry, as happened in 1954, touching off a wave of cutbacks, layoffs, and short work weeks, then the kind of labor discontent over the absence of a 40-hour guarantee expressed in the above-quoted Dodge Main News story could reach a boiling point, and much of the heat would be directed against the union leadership for events over which they have no control...

...This is all the more likely since, in a booming market, car manufacturers can pass on some or all of the increased cost to the consumer by means of higher prices...

...Compared to the GAW program as it was spelled out in steward classes and in carloads of union literature, the guaranteed pay principle nailed down in the Ford, General Motors and other contracts proved to be a considerably watered-down affair...

...20 to 25 years, two units...

...The real importance of Walter Reuther's success is that the precedents he makes are practical propaganda for social objectives, not simply for higher wages...

...It will not do to confuse the GAW with just another wage increase or fringe benefit or unemployment compensation boost...

...it is an ingenious marriage of Fordism—"the economy of high wages"—and the Keynesian doctrine of deficit spending to maintain demand...

...III When contract negotiations reopen in 1958, the UAW will know how much has been paid out of the fund and will be able to compute how much more the companies would have to grant to raise the supplemental pay from 65 per cent to 80 per cent of take-home pay...

...adds up to is this: Those workers who have jobs are increasingly supporting workers who don't have jobs...

...It is a far-reaching social economic and political philosophy and it should be discussed as such," writes the Wall Street Journal...

...Workers with at least one year's seniority will accumulate credits as follows: For each week (a week is defined as thirty-two work hours or more) worked between June 1, 1955 and May 31, 1957, a one-fourth credit...

...Admittedly the UAW will have a tough problem on its hands as long as skilled workers in the captive auto shops earn up to fifty cents an hour less than those in the outside shops...

...Maybe it will help the guy with little seniority but I've got lots of seniority so it can't mean much to me...

...ten to fifteen years, 3.33 units...

...No longer in the mood to accept "company-saving" concessions, the workers answered by an unauthorized strike...

...Last year it had sunk to about 32 per cent...

...One is married, with four children, and the other is single...

...Besides," UAW leaders say, "now that the principle is established, the nickels will come later...

...Can' other auto firms afford similar increase in labor overhead...

...Compared to this basic and vital trade union issue, the GAW seemed like a pale abstract principle to the workers...

...NAM ideologues fear that, unless blocked, the guaranteed pay plan will expand with each successive collective bargaining contract, with the eventual result that a cartel pattern will evolve in large-scale establishments like Ford and General Motors which have huge capital resources to plan production, allocate markets, manipulate prices to regulate year-round sales, standardize models, stabilize employment twelve months throughout the year—and in the process of doing all this, kill off marginal producers...

...Could it be that the GAW's use may be geared to the problem of severance pay...

...The married man draws $73.50 in take-home pay when he works...

...While editorial writers and union leaders praise the plan as the beginning of a new economic era, the men and women who machine the parts and assemble the cars are not so deeply impressed...

...The number of credits surrendered for a week's supplemental unemployment pay depends on the percentage in the trust fund at a given time and on the amount of seniority accumulated by the worker...

...However, one hears much skepticism expressed about this claim since under the new contracts automation may proceed for the next three years while the company has only minor obligations to its workers...

...The Ford and GM contracts provide that before the supplemental payments can go into effect, they must win clearance in states having at least two-thirds of each firm's workers...

...It has since been incorporated into other contracts...

...When laid off, the worker uses up credit units for each week of supplemental unemployment pay, and when lie exhausts his credits his supplemental benefits end...

...As against the calculations of UAW technicians who estimate the Ford package at twenty cents an hour, the Machinists say that independent observers consider the UAW price tag too high...

...If the magazine Iron Age is correct in its prediction that the market for new cars will equal or exceed 1955 sales for the next several years, employment will remain high and the UAW will undoubtedly force the corporations to increase supplemental payments to raise total jobless benefits from 60-65 per cent to 80 per cent of take-home pay...

...UAW officials scoff at the argument that marginal producers can't afford the guaranteed pay plan, pointing out that a nickel is a nickel whether paid out as a raise or set aside to build up a supplemental pay fund...

...By blocking liberalization of state unemployment compensation legislation, by inserting countless fishhooks in the form of eligibility requirements in the law, employers were able to reduce the ratio of benefits to wages and at the same time reduce unemployment benefit taxes from 2.8 per cent of company payrolls to 1.1 per cent...

...How do auto workers react to the guaranteed pay plan...

...A penetrating observation about the significance of the new kind of collective bargaining pattern for which the UAW is a pace setter was made by a tool and die maker who works at Budd Wheel Co...

...The UAW, for example, has backed candidates in elections, has indeed done more than most unions to swing its members behind sympathetic politicians and in doing so has seen how limited is the return for great effort...

...The assembly divisions, such as paint, trim, body shop final assembly, have not had a full forty-hour week since May...

...In their training courses UAW chief stewards are taught to "look for the gimmicks" when a grievance is referred to them...

...In such a context the GAW would be overshadowed by new problems, in response to which the union will be forced to struggle for new goals, perhaps a new principle...

...What this new kind of collective bargaining which goes in for fringe benefits, GAW, pensions, etc...

...Only time will tell how supplemental unemployment insurance will aggravate this problem...

...The original UAW program had specified that a worker called into work would have to be guaranteed 40 hours of work, or pay, for that week...

...Can any other industry, save perhaps steel, aluminum and aircraft...

...This rate will result in a fund much larger than necessary to provide the stipulated benefits if Ford's layoff experience continues at the same scales as in the past 6 years...

...Out-of-line labor costs always have been, and always will be, a pressing problem for the independents...

...These will expose the weakness of an already weak firm and accelerate its decline, but they will not be the basic cause of failure...

...What labor can't get from Congress and the state legislatures, Reuther will try to wrest from corporations which he believes can afford longer-term social benefits...

...To say that they are disappointed is to understate their mood...

...From this fund the company will supplement unemployment compensation benefits, beginning one week after the worker gets laid off, to reach a possible maximum of 65°J, of his take-home pay for four weeks and 60% of his take-home pay from then on up to twenty-six weeks...

...The same worker observed that with each new contract additional strings bind the worker more firmly to his place of work...

...Benefits will be paid out according to a highly complex system based on the amount of seniority and work credits accumulated by each worker...

...Reuther told reporters that the UAW is charting new avenues and is willing to sweat this period out to learn what the experience has to teach...

...five to ten years, five units...

...It took a court order to get them back to work...

...The July 16, 1955 issue of Dodge Main News, official organ of UAW Local 3, began its lead story like this: What Dodge workers need more than anything else is a guaranteed work week...

...For GM the fund is set at $150 million...

...Bring up the subject with men from the shop and soon you will hear remarks like these ranging from intelligent criticism to narrow-minded complaints: "The most important part of the plan we didn't get—the 40-hours callin pay...

...Time may prove that the chief merit of the guaranteed pay plan lies in its propaganda value for broader social objectives by making workers feel it is their right to have jobs and security...

...Michigan's Attorney General ruled that the payment of state unemployment compensation and supplemental benefits are valid without any change required in the state law...

...As Business Week, June 18, 1955, put it: The costs of insuring workers may prove a heavy burden, especially to inefficient companies . . . Increased costs have always been an acid test of management efficiency...

...The agreement between the Ford Motor Co...

...Actually two funds will be set up: one for auto workers and one for defense workers because the latter are more susceptible to layoffs...

...Worked out by Ford's Harvard Business School boys, the plan is officially titled "Unemployment Supplemental Pay" in the contract...

...To create a $55 million fund over a three-year period, Ford will earmark five cents for every hour worked by each employee...

...If any time in the future I leave this company, I will not only surrender my seniority but also my rights to supplemental pay based on my seniority...

...UAW leaders believe that the social troglodytes who braintrust the NAM are blinded by their 19th-century ideology, fearful that a guaranteed wage plan will hasten the trend toward "creeping socialism...

...For the plain truth is that, despite all the education that was conducted among the membership, most rank and file workers did not understand the union's GAW program and therefore were not too excited about it at any time...

...But how far can it go...

...We are told we'll get a guaranteed annual wage, but all we'll get is a little extra unemployment compensation...

...1 For Reuther the new agreements are important mainly because he sees them as a breakthrough toward the GAW...

...over 25 years, 1.67 units...

...The Union also confidently expects that since GAW payments are to be integrated with state unemployment compensation, corporations will put the heat on legislatures for higher jobless benefits...

...The demand for the GAW is a new deep-going demand upon capitalist society for security for the whole working class," wrote Ben Hall in Labor Action...

...If the company is not able to provide a forty-hour week then we should demand a 30-hour week with 40-hours pay...

...For example, the Ford Rouge skilled workers staged a prolonged stoppage when they learned that the contract granted them only eight cents an hour instead of the 40 cents needed to bring their wage rates into line with those prevailing in jobbing shops...

...they value the package at fifteen cents an hour and consider the unemployment plan worth not five cents but one cent...

...It might even turn out that so little will have been paid out by 1958 that workers may feel keenly disappointed at the five cents they could have had in wages if the money had not been fixed in a trust fund for three years...

...As the New Statesman and Nation observed...

...the resolution talks in terms of the union not sacrificing principles for money...

...After explaining that the GAW is hedged with countless restrictive qualifications, the AFL report shows that in industries where wages are considerably lower than in the auto industry, the 60-65 per cent of take-home pay for workers with a family may come to little more than is already provided by unemployment compensation, except in states with very low jobless benefits...

...Actually the UAW has already negotiated with Allis-Chalmers a supplementary plan which incorporates definite advances over the Ford and GM plans...

...Right away they began searching out the gimmicks in the guaranteed supplemental pay plan and they found problems like this: Two men with equal seniority, drawing approximately equal take-home pay, are laid off the same day...

...This is why some unions are re-examining the guaranteed pay plan...

...When Local 212, which has contractual jurisdiction over the 30,000 workers in Chrysler ABD informed its membership about the company's offensive against the shop level bargaining struc ture, the effects in the plants were electrical...

...Because of the high-powered publicity, they were led to expect much more than the supplemental pay provisions in the contracts...

...A young auto worker told how he felt about the entire UAW package: Most of it hinges on a big IF—IF I get laid off after a year from now I'll draw supplemental pay, IF I get sick I'll draw insurance, IF I work in this place long enough I'll draw pensions...

...Then why did Ford set the supplemental pay fund so high...

...and the Auto Workers Union is a landmark of industrial democracy," opined the New York Post...

...One possible answer is that the company foresees mounting permanent layoffs as a result of automation...

...Since higher public unemployment benefits would reduce the supplements paid by corporations, a similar drive will be undertaken to have state benefits raised, the UAW believes...

...So from right, left, and center the supplemental pay plan is seen as a first step in social pioneering...

...This is in Michigan...

...But 65% of his $73.50 is $47.78—so he is allowed $7.78 from the supplemental pay kitty...

...When the new contract between the United Automobile Workers union and Ford was signed last spring, Walter Reuther said, "It is one of the most historic agreements that we have written in the twenty years of our union...

...The more you read the fine print the less you think of the plan," one steward told me...

...Steady employment for Dodge workers has been an illusion, outside of skilled trades and parts of machine shop and foundry . . . Dodge workers working short work weeks will not be able to collect unemployment compensation, let alone the inadequate supplement to unemployment compensation...

...For contrary to what many people think, the GAW is not a stepping stone to full security, but a milepost in a social struggle that never ends because the ramifications of America's economy are such that with each new round of the class struggle something is almost always gained but nothing is ever solved...

...UAW officials believe that the principle of company responsibility toward laid-off workers won in the two big contracts is likely to seem more valuable to the auto workers if prolonged layoffs occur again...

...All in all it appears that the old fashioned wage raise is still more popular with wage earners than some complicated principle that workers feel may or may not pay off in the future...

...He gets $40 from public compensation...

...A delegate to the last UAW convention expressed in clear, forceful language the sentiment that is widespread among auto workers: Every time we get certain economic benefits from the corporation, we, back in the factories and the shops, find that the company tries to take our demands that we have gotten from them in hard-fought fights out of our hide, out of our back, out of our sweat...

...A confidential analysis circulated among AFL officials calls the UAW plan a modest beginning toward greater worker protection, but warns Federation affiliates to look twice...

...If prosperity continues, the objectives become politically respectable...

...In July 1955 Studebaker announced that in its South Bend plant it would continue to build sixty-six cars an hour but with the work force reduced from 10,200 to 8,500...

...Ford officials in Detroit and Washington have been reported to view the plan as a `green light' for automation," BNA states...

...But in states like New York, which pays jobless benefits of $36 a week, a worker with three dependents earning $62 a week receives 60 per cent of his take-home pay from the state already...

...Why is the NAM so up in arms over the guaranteed pay plan...

...Last year, after examining Studebaker's claim that its higher comparative wage rates placed it at a competitive disadvantage with the Big Three, Studebaker workers in UAW Local 5 voted for a voluntary 14 per cent wage cut and agreed to higher production standards, believing that the concession would save their jobs...

...Should Ford or General Motors funds for supplemental unemployment benefits become exhausted, state and federal authorities will be under great pressure to meet the standard set in private contracts...

...But far more basic is the discontent over what the contract fails to do about shop-level working conditions and wage inequities...

...Should fund reserves reach from four to twelve per cent of $55 million, laid-off Ford workers will surrender credit units as follows: less than five years seniority, ten units a week...

...We'll maintain our steward system even if we have to hit the bricks for the next 12 months," was the attitude expressed repeatedly around the union hall...

...Business Week, June 18, 1955, had this to say: Ford people believe they made a good deal because if the GAW issue had never come up they probably would have had to pay considerably more than five cents an hour across the board wage increase...

...The struggle to maintain an active shop steward system with ade quate grievance machinery can arouse auto workers to a higher fighting pitch than can the demand for a supplemental pay plan...

...The bulletin does not state how these figures are arrived at but clearly indicates that more unions are becoming skeptical over the UAW claims...

...The purpose of the funds is to induce the corporations to plan their schedules so as to assure steadier work, UAW members are told repeatedly...

...In the long run they, like Ford, may come to feel that they made a good bargain...

...Liability for the Ford company ends if and when the $55 million fund falls below 4% and until such time as it reaches that figure again...

...More than one visiting trade unionist from Europe has commented on Reuther's "Syndicalist" approach—the attempt to win political ends by trade union means...

...The foreign unionists believe that by forcing corporations to pay old age pensions and supplemental unemployment benefits there will be a demand for the federal or state government to underwrite private funds...

...Not until a year is up and not until the fund exceeds four per cent can any payments be made...

...How can the union claim we get that nickel when it goes into a fund...

...This lag behind wage rates, which had risen markedly since the law was first passed, shows up in greatly depleted purchasing power and hurts the entire economy," the magazine says...

...In the Detroit area seventy tool and die shops came to terms with two UAW locals in a contract which incorporates the guaranteed pay plan on a pool basis...

...We are told that the GAW will slap a financial cost on the company for not providing steady work but it will come out of the fund built up by our own nickels —we take from Peter to pay Paul...

...We build up pension funds to help support retired workers...

...beginning June 1, 1957, for each week worked a one-half credit...

...The UAW magazine Ammunition, May 1955, points out that unemployment benefits first drawn by jobless workers in 1938 amounted to an average of 43 per cent of the wages they had been earning...

...Admittedly it is a roundabout way of overcoming labor's weakness on the political field by its strength at the bargaining table...

...Union leaders keep reminding the membership that when industrial pensions were geared to social security, manufacturers put pressure on the government to increase social security allowances...

...Since the guaranteed pay plan is contingent on integration with state unemployment compensation, the NAM believes that blocking such integration will be a sure way to torpedo the plan...

...I'd sooner have it in my pay check...

...Shortly afterwards, General Motors also accepted a similar contract-and a flood of editorials and speeches broke loose in the country hailing or bemoaning the "Guaranteed Annual Wage" (GAW) . Much of this comment, it can be said without hesitation, was based on ignorance, both that which saw GAW as a long creep toward "creeping socialism" and that which saw GAW as proof that under our "dynamic democracy" the pressures of the class struggle had been removed...

...They remind union members that the UAW's original pension agreements envisioned a goal of integrated pensions of $200 a month to be reached in ten years from that time, but today, only five years later, the union has already exceeded that goal...

...But what will happen to the union's bargaining power if a recession as large or larger than the one in 1954 hits the auto industry three years from now...

...If skilled workers, who for the past five years have had steady work, with plenty of overtime thrown in, are not too impressed by the guaranteed pay provision because they feel it does not touch their basic needs, the same can be said for many production workers...

...the unions are likely to achieve more, and not merely for their own members, by industrial action than by pouring their funds and energies into the endless ramifications of the American political system...

...But how much security will be achieved by the plan...

...Public compensation pays him only $30 a week...

...As far as I am concerned I am in wholehearted agreement with that theory but that means to me that there is no point in getting any economic concessions or gain from the corporation unless our union is in a position to protect and retain the rights that we have in the shop...

...Five cents per labor hour put in a fund will cost companies less than if the money were paid out as a wage increase...

...The bachelor earns $74.10 in take-home pay when he works...

...Similarly, GAW payments can be raised substantially in the next round of negotiations, UAW leaders say confidently...

...It is feasible for Ford and General Motors because they have been running at full strength and have been making enormous profits, some of which will now be redistributed to their employees...

...But the competitive race in industry grows fiercer as the months go by...

...At UAW meetings, union officials freely admit that the collective bargaining pattern set by Ford negotiations falls far short of what the union demanded, but they stress that the contract was accepted to avert a long and costly strike...

...Another stoppage occurred in the GNI Willow Run plant when the cutter grinders failed to get into the skilled trades classification as they are at Ford...

...Speakers at a workshop session sponsored by the NAM urged industrialists to resist the GAW movement in legislative halls, at the bargaining table, and, if necessary, on the strike front...

...IV How shall we evaluate the UAW's guaranteed pay principle...

...At membership meetings called to get these men back to work, union officials were howled down and each time the strikers voted to continue their walkout...