For U.S. workers, anxious times

The UAW contract struggled with thorny issues facing the entire workforce.

A landmark labor contract reached last week carries a message that goes beyond Detroit and its struggling carmakers: From healthcare costs to global competition, American workers are looking for new answers, not just the status quo.

The central problem remains the same one that launched the labor movement in the first place: whether workers are getting their fair share of a growing economy.

In the heyday of American industrial might, the United Auto Workers set a standard for the rest of the economy with their pay and benefit victories. Now, with the auto industry on the ropes, the latest UAW deal may be a bellwether of tough choices in leaner times, as the union and General Motors Corp. found innovative approaches to pay raises, job security, and funding for retiree medical care.

The rest of America – with a private-sector workforce that is now 92 percent nonunion – won't be looking to replicate that agreement at any bargaining table. But for workers nationwide, similar issues of job guarantees are at stake, and pressure is on employers and government to find solutions.

"The disconnect between [economic] growth and living standards is something that's very much in the public debate," says Jared Bernstein, an economist at the Economic Policy Institute, a labor-oriented research group in Washington, D.C. "It's been a period of great productivity growth," he says, but "workers ... have some of the least clout of anyone in this economy."

Even in relatively good times, the ingredients of labor anxiety are very visible.

In recent years, per-hour productivity has grown faster than hourly compensation – pay and benefits – for US workers, according to government data tracked by the institute. Moreover, an increasingly large share of income has been flowing to upper-income Americans. The bottom 80 percent of households saw their share of the pie decline since the 1980s, according to research by the investment firm Merrill Lynch.

The pattern extends beyond the United States. In Japan, the European Union, and in many developing nations, the trend toward income inequality is the same.

This doesn't mean that the world's workers are on the verge of revolt.

In general, people with jobs are satisfied with them. And as much as ever, they know that their prosperity is linked to that of their employers. But concerns about health insurance, job security, and living standards are widespread.

The GM-UAW talks centered on these issues. With the carmaker losing money in North America, the union had to made concessions: accepting bonuses instead of official pay raises and taking up itself the responsibility for retiree healthcare costs. But the union insisted that GM pay billions into a new trust fund for those health costs. And it demanded guarantees that GM would continue to make cars at key US plants. Similar concerns are showing up in workplaces and in national politics:

•An index of worker confidence, tracked by the recruitment firm Hudson, fell in August by the largest amount in its four-year history. More workers are worried about being laid off, and fewer say their financial situation is improving.

•An annual survey by Sibson Consulting, released late last year, found that workers by several measures were less satisfied in 2006 than in 2003, even though the economy had strengthened considerably in that time.

• At a time when many employers are curbing coverage, how to expand healthcare insurance has become a top domestic issue in the race to win the White House in 2008.

•Voters have given Democrats, generally the party of labor, control of Congress. And the party also appears to have a strong shot at the White House. One result could be laws to make it easier for unions to organize new workplaces.

•This summer, after years of stalemate in Washington, the first nationwide hike in the minimum wage went into effect.

•The politics of free trade are changing. A pact to expand trade with Peru, now under review in Congress, will include new labor provisions. And lawmakers are considering bills that would crack down on China for alleged unfair trade practices.

"There's a very decent chance that labor-law reform will take place in some form or other after the 2008 election," says John Schmitt, an economist at the liberal Center for Economic and Policy Research in Washington. "That's a source of cautious optimism in the labor movement."

National healthcare reform, while facing difficult political hurdles, is also possible, he says.

In some cases, unions and employers have stood on the same platform to call for an overhaul. In the current system, many workers do without coverage, while many employers see their competitiveness threatened by rising insurance costs. Those costs were the prime concern for GM in the contract talks. It remains to be seen whether the deal will be ratified this week by the company's UAW workers. But the plan – centered around a healthcare trust that GM will fund and the union will manage – offers a creative effort to solve a difficult competitive problem. GM will still pay a lot, but it sheds a rising liability.

That could be vital at a time when lower-cost foreign carmakers have been gaining market share in the US.

While most economists believe that freer trade has been very positive for the US and world economies, concern about workers left behind has been growing. Even some of the strongest proponents of free trade are calling for more programs to help workers adjust to the pressure of a global job market – if only to prevent a protectionist backlash that might hurt the economy.