Union Should Consider Bonuses
Posted on: Friday, 9 May 2008, 00:00 CDT
By Jack Markowitz
Barring a surge of common sense, a strike by 350 workers at Latrobe Specialty Steel Co. goes into its second week today.
By the lights of organized labor, the company made an offer that drove its people right out the shop -- only $16,000 in lump sum payments over the next three years. Six thousand the first year, $5,000 each the second and third years. Per worker.
Bad, bad, according to the union, not necessarily in amount but in form. The same money ought to be divided up and spread through the year in higher hourly pay rates.
Somehow, to an outsider, the difference of opinion doesn't pass the walkout test. Especially with the country in or near recession. When some of the company's biggest specialty steel customers, the airlines, are dying of fuel costs. And when Mexico, Brazil, China, Russia and India are going to be exporting here, cheaper, if they aren't already.
The management and the union spin certain facts differently. The company says its workers -- at $42 an hour total labor costs, including $18.50 wages -- are already paid more than its competitors pay. No, says United Steelworkers Local 1537, only more than the cheapest competitors pay.
But both sides agree business is pretty good right now. The company's carefully mixed and melted alloys go to defense, aerospace and energy end-uses. They become critical parts in helicopters and jet engines, for example. Supervisors and "temp" workers are being employed now to fill the orders. But nobody doubts that, eventually, customers could go elsewhere.
It's no mystery why the union prefers higher pay rates to a "signing bonus." Contractual pay levels work out to higher overtime, vacation pay and pension calculations, too. Managements like the flexibility of a lump sum. It keeps fixed labor costs down for future years when business might turn bad. A one-shot payment also is a handy way to reward an upturn. It's like a special incentive, a bonus.
True, for the worker, a windfall of $6,000 might be blown on a single purchase. The temptation would be there. Higher pay, on the other hand, continues all year, the equivalent in this case of a $2.88 per hour raise. The income tax unfortunately reduces both take- home results. Now that's something workers could kick about. The employer tries to give them $6,000 and the government skims off $1,500!
But there's another way to look at a bonus, and unions ought to consider it: a rare, painless boost to their members' long-term savings. Sock away what's left after taxes in a Roth IRA (Individual Retirement Account), add the second and third years -- and watch it all grow, tax-free.
Millions of workers in and out of unions never manage to compound a nest-egg of that size and it could be right in front of the folks at Latrobe Specialty Steel. When they come in off the picket line.
(c) 2008 Tribune-Review/Pittsburgh Tribune-Review. Provided by ProQuest Information and Learning. All rights Reserved.
Source: Tribune-Review/Pittsburgh Tribune-Review
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