Robert Samuelson
Robert Samuelson

Fellowship Title:

Nothing Fails Like Success

Robert Samuelson
May 19, 1983

Fellowship Year

FLINT, Michigan–At 34, Dave Pasco is a big, barrel-chested man with a few streaks of grey in his jet black hair and beard. He lives with his wife and her three children in a comfortable home on Flint’s outskirts. When Pasco was 18–precisely on his birthday–he went to work at one of the eleven General Motors plants that are the bedrock of this city’s economy. The factory lured him from a department store, where hours were long and job security negligible. GM jobs paid better, offered more security and earlier retirement. To Pasco, it was big money and the American dream.

It is now a distinctly tattered dream. Except for a few brief recalls, Pasco has been on indefinite layoff since December, 1978. Pasco belongs to the United Auto Workers, and his plight is symbolic of the union’s. The UAW today is a battered, besieged institution. More than 200,000 autoworkers remain on indefinite layoff, and dues-paying membership has dropped from 1.5 million in 1968 to about 1 million now. From championing progressive social legislation, the UAW has turned to protective measures–import restrictions–for its own members. At the bargaining table, it has abandoned some past gains. A few years ago, concessions were unimaginable.

What is so striking about the union’s slide is that it is a failure born mostly of success. In Michigan, the UAW helped create a workers’ paradise that represented the idealized hope of unions everywhere. At auto plants, hourly workers enjoyed pay rates nearly 50 percent above the national average and could, after 30 years, retire with full pensions. At GM, the average retirement age dropped below 60. In the state, the UAW was the most potent political force and the results showed. Michigan boasted a magnificent state university system, well-paid government workers and–for those bypassed by prosperity–relatively generous welfare payments (the third highest in the country in 1978).

The paradise is now a shambles. In Flint, more than a fifth of the work force is unemployed. Nearly a seventh of the area’s population receives some sort of government welfare, an indication that most have exhausted unemployment benefits. The state-wide figures are only slightly less gruesome. Unemployment has exceeded 10 percent since February, 1980. To cope with the twin burdens of a larger welfare load and a smaller tax base, the state has had successive spending cutbacks. The outlook for a sharp pickup in auto employment is slim: although sales are reviving, automation and imports may blunt a big increase in jobs.

To trace the UAW’s role in this economic and social collapse is to find a metaphor for the postwar economic experience. There is no denying the grandeur of the UAW’s accomplishments. From the violent, insecure 1930s, it helped establish a more peaceful and secure work place. But the very magnitude of its successes made the union less capable of adapting to change–intense import competition and the shifting nature of its own membership. Rich contract settlements made the industry less competitive and–by propping up local wage rates–frustrated the ability of auto-dependent regions to diversify their economies. The labor-management hostility of the 1930s became muted, but institutionalized. Because its triumphs made the union inflexible, it ultimately helped induce the very economic dislocation that it so strenuously opposed.

What happened to the UAW happened, in a larger sense, to America. Like the UAW, Americans pursued a broad-based prosperity that encompassed both rising living standards and protection against insecurities–unemployment, impoverishment in old age–once taken for granted. These ideals became institutionalized in activist government economic policies and a widespread network of welfare benefits. But even as they succeeded, these ideas created their own contradictions. Activist economic policies dramatically reduced the severity of postwar recessions, but simultaneously eased the insecurities–unemployment and bankruptcy–that held wages and prices in check. Inflation intensified.

If the story has a moral, it is the evolution of one era’s solutions into the next era’s problems. Expectations and institutions developed in one period became increasingly ill-suited for the next. The moral certainly applies to the UAW.

In retrospect, the postwar labor-management bargain was straightforward. Management lost its absolute control over the work place: the unchecked authority to set pay and working conditions and to deal with workers arbitrarily. In return, labor agreed not to interfere in most management decisions–the adoption of new technologies; the opening and closing of plants; the selection, design and pricing of products. And labor agreed to help maintain the peace. Except at contract renewal time–or for a limited number of local grievances–workers couldn’t strike.

Labor and Management extend hands across the bargaining table. UAW PHOTO
Labor and Management extend hands across the bargaining table. (UAW Photo)

No one really expected the bargain to be struck. But once it was, it worked remarkably well–satisfactorily, if not ideally, for both union and industry. And then, with little warning, it came completely unstuck–with disastrous consequences for both.

To visit Flint is to take a snapshot of this history. An hour and a half north of Detroit, it is where General Motors was founded in 1908–emerging from a healthy carriage industry that was then the mainstay of Flint’s economy–and it is the place where the UAW, in a series of violent sit-down strikes in 1937, won recognition from GM In many respects, the city is what it was a half century ago. “We are an auto town–period,” says a local banker. GM provides one third of the jobs directly and makes possible most of the rest.

Auto workers sitting on car seats inside a GM factory in Flint during 1937 UAW sit-down strike. THE ARCHIVES OF LABOR AND URBAN AFFAIRS, WAYNE STATE UNIVERSITY
Auto workers sitting on car seats inside a GM factory in Flint during 1937 UAW sit-down strike. (The Archives Of Labor And Urban Affairs, Wayne State University)

What now seems a simple and preordained bargain hardly seemed so at the end of World War II. The generational accomplishment can only be appreciated against the Depression’s backdrop of violence, working conditions and social conflict. Government officials, business executives and union leaders alike doubted the prospects for labor peace; they feared that continuing work disruptions would represent a permanent burden on economic growth and prosperity. Typical was the judgment of Alfred P. Sloan, Jr., GM’s longtime chairman, who felt the chances for labor peace were “remote.”

Going back to the 1930s, it is not difficult to understand why. What fostered unions was not so much wages (even in the Depression, for example, auto wages exceeded the average) as working conditions and workers’ sense of insecurity. The standard work week consisted of nine or ten days, with a half shift (five hours) on Saturdays. Machines or foremen, whose authority was almost absolute, dictated the pace of work. Complaints about speedups were widespread. “I got no kick on wages,” one Flint sit-in striker said, “but I just don’t like being drove.”

These complaints were hardly confined to Flint. When the sociologists Robert and Helen Lynd studied “Middletown” (Muncie, Indiana) in the 1920s, they reported that factory work was so physically exhausting that many men were spent by their early 40s. They were then either dismissed–being replaced by younger men–or assigned to less demanding jobs (watchmen, sweepers). Similar stories were heard in Flint. The Depression aggravated these pressures. If it made men more desperate for work, it also heightened their dependence on the employer and their sense of insecurity and vulnerability. Norman Bulley, a retired UAW official and veteran of the Flint sit-in, recalled his routine during one particularly desperate stretch:

We would start off / every morning / from my home in North Flint. We’d walk seven miles out to the Fisher Body plant in south Flint. We would stand at the gate and wait for the boss to tell you whether you, could work or not…And / if there was no work / we’d go from there to Chevrolet, which was about three miles more. And then we’d go back to the Buick plant and then home. Every day, we’d walk 15 to 18 miles, standing out in the yards trying to get a job, trying to get into personnel offices.

The effort to unionize rarely commanded widespread, open support, because workers feared losing their jobs for union activity. GM and other companies fanned these fears with spying and intimidation; the Pinkerton National Detective Agency performed industrial spying, and GM was a major customer. When confrontations occurred, violence often ensued. In Flint, the National Guard was mobilized after local police attempted to evict striking, workers from one GM factory. Even after GM’s recognition of the union–which amounted to little more than a pledge not to interfere with its organizing activities–anarchy continued sporadically. There was no formal grievance procedure, and workers had come to appreciate their new power. In the following three months, GM reported more than 170 separate local stoppages.

Bulley, who had been elected a shop steward, recollected:

We were really busy. We were taking care of all kinds of grievances and we were doing it the hard way…What would happen is that we would get grievances. and I would go to the management. And they would fire me. They fired me 11 times in the first year. I’d go in to see the superintendent, and he’d say. ‘Get out of here, we’re not having anything to do with you.’ ‘Oh yea,’ I’d say. ‘Well, okay.’ So I’d wave–and the guys were looking down the aisle–and the guys would shut the plant down. Everything would stop, just like that.

To an increasing extent, management could not halt these actions. The 1930s New Deal legislation permanently altered the economic balance between labor and management. The Wagner Act gave workers the right to organize; management couldn’t fire workers for union activities. The National Labor Relations Board was created to conduct and certify union elections. In 1938, the Fair Labor Standards Act established the minimum wage (the first minimum was 25 cents an hour) and, more importantly, required time-and-a-half pay for production work exceeding 44 hours a week. This was lowered to 40 hours in 1940, and, for all practical purposes, the six-day standard work-week had been outlawed. During the war, organized labor generally abided by a no-strike pledge, but, in return, participated in the government’s joint labor-management War Labor Board. Union membership swelled to 14.3 million in 1945, or 35 per cent of the non-farm work force. In 1930, it had been only 3.4 million, or 12 percent.

All this left an enormously bitter legacy. If unions had been legitimized by government, they hadn’t been completely accepted by business. The early postwar experience seemed to justify the worst fears of continuing strife. Once the ban against strikes was lifted, they broke out by the dozens. In the year after VJ Day, 5 million workers went out on strike, resulting in 120 million lost days of work.

Overlaying the accumulated tensions of the war and Depression were deep social and ideological divisions. The Depression has discredited business. Marxism, communism and socialism flourished among intellectuals and political activists. The UAW was typical. In the 1930s and 1940s, it was torn by fierce factionalism, as communists and socialists vied for power. To auto industry management, the union jeopardized the American free enterprise system. On their side, union leaders depersonalized business executives and stereotyped them as capitalist exploiters,

An exchange between GM executive Harry Coen and UAW leader Walter Reuther during the 1945-46 negotiations typified the split. Reuther argued that huge wage increases were required, in part to provide the purchasing power needed to sustain demand for GM’s cars. The argument left Coen cold.

Reuther: Unless we get a more realistic distribution of America’s wealth, we / the workers / don’t get enough to keep this machinery going.

Coen: There it is again. You can’t talk about this thing… / the contract / without exposing your socialistic desires.

Reuther: If fighting for equal and equitable distribution of wealth in this country is socialistic, I stand guilty of being a Socialist.

Coen: I think you are convicted.

Reuther: I plead guilty.

"Battle of the Overpass"–UAW organizers, including Walter Reuther (third from right) on an overpass near Ford Rouge factory just before they were attacked by members of the Ford Service Department on May 26, 1937. THE ARCHIVES OF LABOR AND URBAN AFFAIRS, WAYNE STATE UNIVERSITY
"Battle of the Overpass"–UAW organizers, including Walter Reuther (third from right) on an overpass near Ford Rouge factory just before they were attacked by members of the Ford Service Department on May 26, 1937. (The Archives Of Labor And Urban Affairs, Wayne State University)

The fashioning of an accommodation from these incendiary ingredients hardly seemed likely. Yet, it happened. The triggering event was probably the 113-day UAW strike against GM in the winter of 1945-46. “We learned a lesson,” recalled Louis Seaton, who became GM’s director of labor relations in 1947. “It was better to sit down at the bargaining table and talk and work it out.” The UAW learned a lesson, too. In the 1945-46 negotiations, it had gone beyond traditional union demands for better pay and working conditions by insisting that GM restrain car prices and open its books for public inspection. GM adamantly refused, Chairman Sloan believing that these demands dangerously trespassed on management prerogatives. By 1948, the UAW had relented.

The elements of the ensuing accommodation emerged with time. In the 1948 contract, the UAW agreed to a clause that codified management’s prerogatives. By the early 1950s, the union and companies had settled upon three year contracts–replacing the one-year agreements–in an effort to minimize the sense of perpetual conflict and crisis. To stabilize relations, the industry actually advanced many of the proposals that became standard features of the auto contracts. In 1948, for example, GM suggested a salary formula that incorporated an automatic cost of living adjustment clause (COLA) and an “annual improvement factor”–initially set at 2 percent and later raised to 3 percent. GM president Charles E. Wilson justified the scheme as a way to protect workers against inflation and to enable them to share the benefits of increased productivity.

If UAW-industry relations didn’t become routine, they did become ritualistic. Pattern bargaining emerged. Although the union negotiated separately with each of the three automakers, one company was typically selected as the “target.” It received the major demands and faced the threat of a strike. Having unsuccessfully wrestled with GM in 1946, the union concentrated on Ford and Chrysler, which were more vulnerable to a strike while the competitors continued producing. But, once an agreement was reached with the target firm, the rest of the industry followed suit. The union made it clear that it would not take less elsewhere. The whole object–and pattern bargaining also emerged in the steel, trucking, electrical and airline industries, among others–was to eliminate labor costs as a competitive factor. Workers would not be set against each other. Even GM accepted the union’s determination to enforce industry-wide labor rates.

And, in the main, the accommodation served everyone.

The bargaining gains for workers were dazzling. After the 1948 agreement, wages gradually disappeared as a negotiating issue. The formula simply became embedded in the contract, and disputes centered over new fringe benefits. By the late 1970s, the union had won provisions that allowed retirement after thirty years with full benefits. Workers who, like Dave Pasco, hired on in their teens could theoretically look forward to retiring before they were 50. Holidays, vacation time and sick leave expanded enormously. Under the 1976 agreement, a worker with five years seniority could count on roughly six weeks off: three weeks of vacation time; 13 official holidays; and six “paid personal holidays,” which could be spread over the year. A worker with 20 years seniority received five weeks of vacation. Health insurance covered all hospital and surgery costs, dental costs, drug costs for retirees (this closed a gap in federal Medicare) and eye glasses and hearing aids. In total, fringe benefits represented roughly a third of the industry’s total labor costs, up from a fifth in 1968.

But the industry wasn’t suffering either, and much of the union’s success represented a sharing of the immense market power enjoyed by the three major automakers. When firms couldn’t absorb higher costs through greater efficiencies, they could generally pass them along in higher prices. Nationwide strikes occurred; the longest included a 104-day walkout against Chrysler in 1949, a two month shutdown of Ford in 1967, and a 67-day strike against GM (which had been picked as the target for the first time) in 1970. But generally, the industry prospered. During most of the postwar period, GM’s profitability exceeded the average for all manufacturing industries by about one third. Even lowly Chrysler hovered around the average.

What went wrong? Just about everything.

In the 1970s, inflation accelerated, productivity gains declined, import competition increased and the work force changed. But the industry’s labor-management relations couldn’t cope with these new realities. The system had acquired an independent momentum that couldn’t easily be altered. The wage formula was the most conspicuous example. During most of the postwar period, it had maintained auto workers at a comfortable premium over the average level of private pay–about 30 to 34 percent higher. But by 1980, the gap had widened enormously to 49 percent.

No one planned that gain. It was not part of the negotiations, but simply resulted from the automatic application of the wage formula. A combination of factors gave the autoworkers a windfall; the jump in oil prices, technical peculiarities in the cost-of-living index and the difficulty workers elsewhere had in fully recapturing inflation. This gain coincided with a sag in the industry’s own productivity increases–weakening the companies ability to pay the extra “annual improvement factor”–and the rise of import competition–eroding U.S. firms’ market control.

The industry entered into a wage-price spiral that ultimately contributed significantly to its sales collapse. After the 1979 oil price increases, all the companies faced enormous investment requirements to buy new equipment and machinery for smaller, fuel-efficient cars. To offset higher labor costs and support their investment programs, the companies raised prices sharply. Between 1979 and 1981, the average car price jumped 27 percent. And there was no stopping the spiral. In the fall of 1979, even though Chrysler was appealing to the federal government to rescue it from bankruptcy, GM and Ford reached new settlements with the UAW that involved an estimated 35 percent increase in labor costs over the three year contract period.

Both the union and companies were lulled by past experience. The auto industry had always been cyclical, and the prevailing assumption was that the sales slump would soon end. The previous years had been highly profitable and, by custom, this meant the union would present stiff demands. In part, the boom of the late 1970s had been artificially stimulated and maintained. After the 1974-75 recession, the industry had lengthened the maturity period for the typical auto loan from 36 to 48 months. This lowered monthly payments, and sales were further fanned by inflationary economic policies, which caused people to buy large consumer goods as a hedge against future price increases. At Ford, executives were more worried about the costs of the settlement than at GM, which had been made the target company. GM did not apparently consider serious resistance to the union’s major demands: if it had, it almost certainly would have faced a long–and probably futile–strike. Vice chairman (later chairman) Roger B. Smith put the prevailing attitude of resignation this way: “A lot of things are literally beyond our control or the UAW’s.”

In short, the past conditioned the present and the future. It did so in another way, too.

Although the violent hatred of the 1930s had largely vanished, a huge social distance remained between managers and workers–a distance that had practical implications. By the late 1960s and 1970s, most of the workers who had actually experienced the Depression had retired.

In 1970, one third of the members had less than five years seniority. These younger workers increasingly took high wages and generous fringe benefits for granted. Being young, many were angry at work–just as their counterparts had been in the 1930s. Although automation had eliminated many of the most exhausting jobs, the newer workers often resented factory operations.

“In the assembly plant, you got a little crazy,” said James Faulkner, an auto worker in his early 30s who hired on in 1973. “It’s the same. It’s so repetitious. It’s boring more than anything. I took my wife in one day to pick up a check. She’d never been in a plant. People are hooting / at her /, hollering and whistling–anything to take your mind off the job.”

Absenteeism soared, social problems (particularly drugs) increased and work quality declined. If these problems naturally suggested union-management bargaining–both workers and companies were dissatisfied–they sailed right past the existing labor relations framework. Neither the company nor the union quite knew how to deal with them. Inevitably, they were mostly local issues, because the problems varied enormously from plant to plant. But, at the plant level as at the national level, the union and management maintained a correct distance and formal hostility that precluded any close cooperation. And many of the younger workers were as alienated from the union as from the company.

The sprawling Buick plant in north Flint was a good example of the worst consequences of this system. Under the standard UAW-GM contract, workers could file grievances over a number of plant-specific problems. These included work standards and job classifications, which determined what most workers did. The job classification settled pay rates by defining job activities: the operator of such-and-such a machine didn’t, for example, have to clean up the floor around the machine. The work standards determined how fast operations would move: the speed of the assembly line or the number of pieces required an hour. Typically, grievances centered on complaints that workers were being required to do jobs outside their classification or that the work standards were unreasonable.

Under the contract, local unions could strike over these plant-specific grievances. The Buick plant (which included assembly, engine-making and component operations) acquired one of the worst reputations within GM for coping with these problems. Typically, the local management and union allowed a backlog of grievances to accumulate. The management didn’t settle them, and the union strove to overload the system. Once the union felt it had enough grievances to warrant a strike, it would take a strike vote and crisis negotiations would ensue. So, sometimes, did a strike. Some grievances were settled, but many others were simply ignored in the compressed negotiations. “When you’ve got that many, you can’t remember them,” said Albert Christner, president of UAW Local 599 at the Buick plant.

If Buick’s problems were severe, they were not unique. At many plants, relations between local union officials and corporate executives were at best standoffish. “Top management felt that we were bastards–and we felt the same way / about them /,” said Christner. Although Christner had been a union official since 1948, a member of the local bargaining committee since 1955 and the local president since 1971, he never had met the head of the Buick division or, except for the personal and labor relations officials, any other top executives. The companies segregated labor issues from everything else. “The attitude was,” one senior industry executive said, “you’ve got your lives, we’ve got ours.” At Buick, this meant that the company never informed union officials of the plant’s costs, quality performance or future product plans.

What evolved was a system that boomeranged on itself. It generated as much as resolved conflicts. It distorted and inflated the industry’s costs. It was ill-suited to handling the price and quality problems posed by new import competition. As long as the domestic manufacturers maintained tight control over the American market, these deficiencies counted for little. Once that control began to slip, the deficiencies genuinely hobbled the industry’s performance. In short, arrangements that had so well quelled the open warfare of the 1930s couldn’t cope with the more subtle problems of the late 1970s.

To attribute the auto industry’s crisis exclusively to this breakdown would, of course, be misleading. The industry’s collapse resulted from the convergence of a multitude of disabling developments: tough government anti-inflation policies, including high interest rates; a dramatic shift in car demand caused by the 1979 run-up in oil prices; a deterioration in the industry’s management (by one study, a small car in the United States took an average of 84 worker hours compared with 53 in Japan); and the intensification of international competition. But a haywire system of labor-management relations contributed significantly.

Autoworkers like Dave Pasco are the collapse’s most obvious victims. As this is written, he lives on a monthly welfare check of $712 and a food stamp grant of $160. He says he’s getting by, and this is believable. He lives in a home purchased from his father, which allows him to miss mortgage payments. He has a large vegetable garden in the back yard and, for milk, he and his wife raise goats. The biggest problem has been meeting child support payments of $220 a month for his three children by his former wife. To Pasco, the court has been completely unsympathetic to his plight. He and his wife find welfare rules complicated, arbitrary and sometimes mysterious; dealing with the bureaucracy is often frustrating and humiliating. Pasco says he’s energetically looked for work, and except for odd jobs, found none. But, ultimately, he expects to return to GM and, given his seniority, his optimism seems reasonable.

But thousands of other auto workers will never recover their old jobs, and Flint will be a long time reducing today’s massive unemployment. There are huge ironies in this immense social and economic dislocation. Both the UAW and the auto companies, in their own ways, aimed for security and stability. But this very pursuit, by blinding them to fundamental changes in their industry and inhibiting them from adapting to them, actually undermined their economic strength. Paradoxically, the pursuit of stability and security produced instability and insecurity.

From this debris, both are now attempting a reconstruction. At the Buick plant in north Flint, Christner’s Local 599 and GM are engaged in an ambitious “quality of work life” program. Stripped of its trendy title, this simply means greater involvement of workers in planning and production. GM now shares more of its costs and quality data with the union. Workers in various departments meet frequently with management to discuss the endless production details: how to arrange machinery; how to correct and reduce defects; how to minimize scrappage. Both union and management report considerable success. Whether it will be enough–or whether the results can be generalized–remains to be seen. Recent contract concessions by the union still leave auto labor costs high, and it is possible the next round of negotiations in September, 1984 will simply drive them higher.

The uncertainty applies not only to the auto industry, but also to the economy at large. What the UAW and the auto companies are attempting on a small scale, the rest of the country is–in a more ambiguous and amorphous fashion–attempting on a much grander scale. It is the reconciliation of past expectations and habits with new, unanticipated realities. The postwar vision of prosperity offered a vista of stability and security that have, with time, simply proven unobtainable. Economic policies aimed at smooth, sustained economic expansion produced the opposite. Growing prosperity meant a growing dependence on world markets that were inherently unstable. And growth created harsh side-effects–both social and environmental–that have involved high, unexpected costs.

There were inherent contradictions in the postwar vision. Only with time have they begun to emerge and assail Americans’ natural optimism. Now the contradictions accumulate, and it is not clear whether Americans can grasp and master them. If the postwar’s glossy vision has vanished, it is not clear that Americans can find something more realistic and obtainable to put in its place.

©1983 Robert J. Samuelson

Robert J. Samuelson, economics reporter for the National Journal, completes his investigation of changes in the U.S. economy since World War II with this issue.

Robert Samuelson
Robert Samuelson