Too much of a good thing?

No , I don’t know all the details, I’m not an insider, but I have over twenty years experience negotiating labor contracts when it comes to pay and benefits. I have a pretty good idea of the above strategies.

The last company offer would have provided an hourly rate for the highest level union job at a rate equal to the US median household income. Overall its pay levels are very competitive for Illinois and the US for that matter. The benefits package by today’s standards is generous, especially the company offer to continue its pension plans and to give new hires a choice between pension and a 401(k) plan. Keep in mind when a company such a Deere give a raise it also increases its social security taxes, it’s pension and 401k) costs and any costs related to pay.

When times are good for a company, when inflation is on the horizon, when there is rhetoric about fair share and greedy companies, workers tend to seek the largest piece of the pie they can get. But that can be short sighted, too much of a good thing. The auto industry is a good example. Changes in pay and benefits create compounding costs and liabilities that don’t go away when times are not so good, when competition, especially foreign competition heats up. A fair share of the pie certainly, but unions and their members can be greedy too, often to their own detriment.

The pro­posal for a new six-year con­tract was voted down by a mar­gin of 55% to 45%, the auto work­ers union said. It would have given more than 10,000 Deere work­ers on strike an immediate 10% pay raise and an $8,500 bonus for each worker if the deal had been rat­i­fied Tues­day. The com­pany also of­fered 5% raises in 2023 and 2025. For the other three years of the con­tract, Deere em­ployees would re­ceive lump-sum bonuses amount­ing to 3% of their pay.

WSJ 11-3-21

In the con­tract workers re­jected Tues­day, Deere also agreed to provide lump-sum bonuses to em­ploy­ees’ pen­sions and backed off an earlier at­tempt to en­roll fu­ture em­ploy­ees in a 401(k)-style pension program. In the fu­ture, new Deere hires would have had a choice of enrolling in the com­pa­ny’s tra­di-tional pen­sion pro­gram for hourly work­ers that guar­an­tees in­come lev­els or the 401(k).

WSJ 11-3-21 Write to Bob Tita at robert.tita@wsj.­com

The contract also promises lump sum payments to workers when they retire. Employees who stay with the company for 10 to 24 years will get $37,500. Workers who stay at least 25 years will get $50,000. In addition, Deere agreed to put another five-figure sum in an account for workers when they retire. If workers approve the new contract, the company will give employees an extra $2,000 for each year they’ve worked at the company. A 25-year worker will see an extra $50,000.

Des Moines Register 10-31-21

4 comments

  1. Free market at it’s best. Deere is making (temporarily?) huge profits in the current markets. Why wouldn’t the unions do the same? Speaking from (my father’s) experience, labor does not take lightly the decision to strike. Lost current wages are immediate, measured against the possibility of future gain.*

    An interesting thing with Deere is that it is a “large employer” (500 or more) so their compensation will almost automatically be higher than average. Much higher. About 25 percent higher than the average manufacturing job and more than 50 percent higher than “small” companies ( fewer than 100).

    I am more concerned about those smaller manufacturing, and other jobs, paying much less than the median household income. Higher wages at Deere and GM, give some leverage to the lesser paid to bargain for more.

    https://www.bls.gov/news.release/ecec.t06.htm

    *Dad went on strike in 1965. He was a good worker, but I was stronger in math. After 30 days, I told him that, even if they got what they were asking for, it would take over 5 years just to earn back what they lost in that one month off. “That’s not the point.” He said. He was right.

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    1. So what cracks me up is the claim that greedy American unions are driving the off shoring of jobs, as if they could ever undercut the wages in Mexico, let alone Asia.

      Ironic that China is worried about losing jobs to South Vietnam because of lower wages there. Damn greedy Chinese workers?

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  2. I never understood why the argument that a company made “x” billion dollars profit is relevant. They never tell you their dividend liability to the “owners”. Example Ford just reinstated their dividend this week.
    I do find it offensive that a CEO gets a multi million raise and workers get laid off. I know that a lot goes into it but the optics look bad and demoralize the workers as not being valued.

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    1. I’ve calculated the impact on each worker of the compensation of the CEO for S&P 500 companies it’s insignificant and don’t forget most CEO pay is at risk stock awards of one type or another.

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