TWO AMERICAS

Posted in Rants on April 4th, 2011 by Ed

When the American auto industry collapsed and came crawling to Washington for handouts in 2008, major restructuring was a precondition for receiving billions in tax dollars. Cutting labor and legacy costs was a priority (shockingly) and GM management presented the United Auto Workers with two alternative scenarios. In one the UAW could maintain its current wage/benefit structure but face the loss of large numbers of U.S. jobs – in other words, better jobs but fewer of them. In the other, existing jobs would be maintained but at lower compensation. Both choices are undesirable. If only there was a way to obtain the best of both worlds, to satisfy existing members while allowing management to cut labor costs.

Thus for the first time in its 70+ year history the UAW agreed to a contract with tiered wages. Tier 1 employees were those employed at the time the contract was signed; they were essentially grandfathered into the wage/benefit package in place at the time of their hire. Tier 2 employees were those hired from that point forward; they received considerably lower wages and minimal benefits. The UAW had previously resisted this scheme for obvious reasons. It's hard to build solidarity when a clear caste system is created in the workforce wherein one guy makes $28/hour and the guy next to him doing the same job makes $13.50/hour. I mean, what could go wrong? Yet the UAW and other unions have been accepting more and more contracts with tiered wages under the threat of losing jobs to sad, low wage hellholes like rural Mexico, Indonesia, or Oklahoma. From the employers' perspective, the beauty is that eventually every Tier 1 employee retires, dies, or quits and the whole workforce is ever-so-slowly transitioned to lower wages without incurring the costs of moving factories or pissing off the existing labor force.

The manufacturing sector is hardly alone. Academia is increasingly divided among secure, well compensated tenured or tenure-track faculty and at-will adjunct or other temporary employees who make 1/3 the salary with no benefits. As tenured faculty retire, of course, they are replaced by the cheaper alternative. My father, a career civil servant, is among the employees of the State of Illinois grandfathered into a generous pension system (although changes have been made to it as well) while all subsequent new hires will receive a much cheaper benefit package with hard caps. The entire business world now runs offices in which older, salaried employees with benefits work alongside temps – including the baffling "permanent temp" – supplied by outside contractors.

Unsurprisingly, GOP budget whiz (*cough*) Paul Ryan's proposal to put Social Security and Medicare – primarily the latter – on the chopping block takes a similar approach. While proposing enormous cuts in benefits, the politically savvy GOP leadership takes great care to exclude anyone currently over the age of 55. And why not? We know that the entire political system is focused on the needs and wants of the Boomers and more specifically the elderly, who vote and complain far more reliably than younger Americans. Besides, those of us under 40 have long since accepted the reality that we will be the first generation that won't "do better" than its parents. Twenty- and thirtysomethings understand how the deck has been stacked; we work to pay for the lifestyle of our elders with the explicit promise that nothing we see ahead of us will ever be ours. The political mantra is "Austerity for thee, not for me."

When John Edwards talked about the "two Americas" in the 2004 and 2008 elections he meant a rich one and a poor one. It is hard to dispute the validity of that argument. Increasingly, however, we are a society bifurcated by age and generation. Those born before 1960 will go cradle-to-grave with the benefits of the New Deal: a social safety net, job security, pensions / benefits, and good wages. Anyone unfortunate enough to be born since then – especially Carter babies and beyond – will have an entirely different standard of living.

It feels great to know that the 55-and-under set is carrying the burden of paying for the existing standard of living of our predecessors even though we'll never reach the Promised Land ourselves. It's like making 20-30 years of monthly payments for a shiny new Ferrari and being rewarded with the keys to a fire-damaged 1977 Ford Ranchero.