Saturday, December 10, 2005

Winners and Losers 2005--But The Game's Not Over Yet

The Labor Department reported this week that productivity of American workers rose at an annual rate of 4.7 percent in the July-to-September quarter, the best showing in two years and the fastest productivity growth over a five-year period since World War II.

Good news? For corporate America, it is the best Christmas gift ever. The big jump in worker efficiency helped to push labor costs down 1 percent at an annual rate in the third quarter. Corporate profit growth in 2005 is, to say the least, robust, with year-on-year comparison showing that strength, up 36%. Even hurricanes and high energy prices have had little affect on profits. For investors, too, stronger productivity and falling labor costs have rallied the market and should ease fears at the Federal Reserve that overall inflation is not worsening because of rising wage pressures.

For workers, though, the 1 percent drop in unit labor costs marked the second consecutive quarter that labor costs have fallen. On an inflation-adjusted basis, real hourly and weekly earnings have fallen for six out of the last seven months. Indeed, the average hourly wage of blue-collar worker in manufacturing and non-managers in the services sector was $15.65 last month. These employees represent about 80% of the private-sector workforce. When the recovery began in November 2001, their real wage was $15.69, slightly higher than the real value in June 2004. For weekly earnings, the relevant values are $530.17 in November 2001 and $525.84 last month (November, 2005). In other words, after adjusting for inflation, both hourly and weekly earnings are below where they were when the current economic recovery got underway more than 4 years ago.

To add insult to injury the reality of declining wages on an inflation-adjusted basis did not stop the binge of corporate layoffs. Led by sharp cuts in the automotive industry, planned job reductions by major U.S. corporations increased 22% in November, 2005 to 99,279, according to Challenger, Gray & Christmas. Planned layoffs have increased three months in a row. So far in 2005, corporations have announced 964,232 job cuts, up 3.6% from the year-to-date total a year ago.

It should not be surprising that more employees are turning to organized labor as a last resort to stop the bleeding, with NLRB petitions filed by unions up in 2005. Even though just 8 percent of private-sector workers are members of unions today, organized labor is fighting back and their argument is plain and simple – “You’re getting hosed.” In some areas, the argument is resonating like Houston, Texas, where Service Employees International Union won big in their effort to organize thousands of downtown janitors. Likewise, the Communications Workers of America have been organizing at Cingular Wireless, adding more than 13,500 new members this year. And, the AFL-CIO has kicked off its largest worker-rights campaign in 15 years with rallies this week leading up to Saturday's International Human Rights Day and focused on workplace organizing.

Although few are betting on organized labor’s rebirth, don’t count them out yet. If wages continue to decline, health insurance continues to be out of reach of more employees, and pension plans become a thing of the past, unions will be the last resort of many employees who find it hard to make ends meet and harder to stomach the fact that things may never get better.
Employers that fail to provide their employees a fair and competitive wage and benefit package, fail to communicate an accurate picture of global, national, and local competition, fail to explain how wages and benefits are set within their companies, fail to answer employee questions about their workplace, and fail to provide employees creative ways to participate in the success of their organizations are putting out the “Union Wanted” sign and by all appearances organized labor is ready to fight.

Ongoing communications at the floor level, to include a dynamic Q&A database, is an important part of the Credible Connections system and CrediblyConnect Online™. For more information on how your company can participate, contact us at


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