Transit strike's high stakes

It's a collision America is seeing more often: Management tries to have workers move back their retirement age and pay more for healthcare, while workers try to keep their benefits and make up for lost ground on wages.

This labor-management clash forced 7 million commuters in New York Tuesday to resort to bicycling, rollerblading, or just plain hoofing it to work after a 3 a.m. strike shut down the transit system for the first time in 25 years. Bundling up in 20-degree weather, some commuters piled in, four to a taxi, or got caught in traffic gridlock at checkpoints designed to ensure at least four people were in each vehicle.

Some of the issues in the Big Apple - especially the effort to diminish pension and healthcare benefits for future employees - will be watched carefully by other unions. Management teams around the nation will also be watching to see what succeeds and what doesn't.

"The surprise is that it's only now that not just unions but [their members] are starting to cry, 'Where's mine?' " says Ken Goldstein, a labor economist at the Conference Board, a business research organization in New York. "We're paying the price for keeping the lid on wages and costs."

The transit workers in New York started by asking for a 24 percent pay raise over three years. Since the Metropolitan Transportation Authority (MTA) has a $1 billion surplus, the union felt it was entitled to a significant increase.

However, the MTA replied that the surplus did not come from operations but from selling assets. Management's last offer was reportedly for 10-1/2 percent over three years. This would be above the 3 percent settlement for each of the next four years that the Philadelphia transit workers received after a one-week strike at the end of October.

"Three percent per year for three years is considered a good settlement," says Gary Chaison, a professor of industrial relations at Clark University in Worcester, Mass.

Aside from wages, the major issue facing municipal unions is healthcare and retirement costs. In Philadelphia, SEPTA, the Southern Pennsylvania Transportation Authority, started negotiations by asking workers to pay 20 percent of their base pay toward the cost of medical premiums.

The workers eventually agreed to pay 1 percent of their base pay. "It will defray 4 percent of SEPTA's medical costs," says Richard Maloney, a spokesman for SEPTA.

In July in San Francisco, a transit strike on the Bay Area Rapid Transit (BART) was averted after the workers agreed to increase their healthcare contributions from $25 to $75 a month starting in January. Their contributions will continue to increase 3 percent annually.

"The trend is to pay more. There is not a lot of sympathy from the public," says Bill Adams of Adams, Nash, Haskell & Sheridan, a Cincinnati-based consultant that acknowledges an antiunion bias.

The unions, of course, view the battle quite differently. "It's a plan to shift the cost to the employees," says Steven Kreisberg, collective bargaining director at the American Federation of State, County and Municipal Employees (AFSCME) in Washington. "It's an all-out assault on benefits and a shifting of risks to workers who can't afford those risks."

The unions are also opposed to the concept of two-tier labor agreements, which give lower benefits or wages to newly hired workers. In the New York transit talks, the MTA is asking that new workers pay a larger amount toward their retirement.

"Two-tier agreements hurt morale and inhibit recruitment for the union," says Kate Bronfenbrenner, director of labor education research at Cornell University in Ithaca, N.Y. "It's bad for union solidarity."

The union is hoping that the city and its officials will back down since the strike is coming during the crucial holiday shopping season. Mayor Michael Bloomberg says the economic impact of the strike is $400 million per day. "That could probably fund the settlement: They can't be much further away than that for 33,000 workers," says Mr. Kreisberg.

Unions are worried that any concessions by the transit workers' union will affect other negotiations next year. For example, AFSCME will be negotiating with Mayor Bloomberg in late March on behalf of 120,000 workers.

For its part, New York City officials have the leverage of the Taylor Law, which makes public employee strikes illegal and fines workers two days' pay for each day not worked. In addition, the city has a court order that enacts massive fines on both the union and the workers.

"If the city enacts these fines, the workers will go bankrupt, lose their homes," says Ms. Bronfenbrenner.

In the past, says Mr. Chaison, the fines have become part of the negotiations. The city has forgiven the penalties on the workers but not the union. But this year, there is an added element: Gov. George Pataki (R) is already positioning himself for a presidential campaign in 2008. "It may give the governor a sense he has to prove something - establish his reputation to not back down," says Chaison. "I am afraid the parties are really digging in. This has become a first-class dispute, a bitter dispute."