Economy & Business
1:03 pm
Wed July 25, 2012

Milwaukee Caterpillar Workers Watching Labor Dispute in Illinois

Workers at the Caterpillar factory in South Milwaukee are closely watching a labor dispute at the company plant in Illinois. Caterpillar employees in Joliet have been on strike for three months. The company is seeking steep wage and pension concessions, and the union representing nearly 800 workers refuses to accept the demands. WUWM’s Erin Toner reports on speculation that the outcome of the dispute could be a bellwether for labor relations across the country.

Credit Mark Sardella, Flickr

Caterpillar is the global leader in producing earth-moving equipment, such as mining machines and skid loaders. The company is reportedly seeking a six-year wage freeze and a pension freeze for workers in Joliet. Caterpillar would not comment for this story. But on its website, the company says workers in Joliet are paid well above market wages, making the facility uncompetitive.

Cheryl Maranto, a management professor at Marquette, finds that “competitiveness” argument disingenuous, given Caterpillar’s record profit of $4.9 billion last year. There are also reports that the company significantly raised its executives’ salaries.

“I think it’s essentially an issue of bargaining power. It’s not that the company needs those concessions. They just want them,” Maranto says.

Maranto says with union membership on the decline, and the worst labor market in decades, corporations have the advantage. “What they’re clearly trying to do…I mean, they have a two-tier wage system…and they’re really trying to force out some of the senior people who are at the higher-level pay so that they can hire in new workers at the lower-pay levels,” Maranto says.

There can also be a desire to satisfy shareholders by maximizing profits, and labor is often the major cost of doing business.

At the Caterpillar factory in South Milwaukee, workers are wondering about the implications of the Joliet dispute on their contract. It’s up for renewal next spring.

Barry Lewis is a gear cutter at the plant, and vice president of United Steel Workers, Local 1343.

“Some people are very worried. We’re not sure how it equates to us, I mean, we’re aware that they’re United Auto Workers, we’re Steel Workers. The product lines are completely different,” Lewis says.

The South Milwaukee plant makes massive mining machines. Lewis says if push comes to shove in contract talks next year, he would hope to leverage the highly skilled local workforce.

“We have 860 people. They’re all…I mean, when we try to hire, it’s very difficult. There’s very few people that possess the skills, because industry in Wisconsin has not trained…I mean, it’s no big secret that there has not been a lot of training being done,” Lewis says.

Lewis credits the previous owner, Bucyrus International, for creating the high-quality workforce in South Milwaukee, and he cannot imagine Caterpillar would want to change that.

“We’re well paid. We’re well compensated in benefits, etc, to make us a desirable place to come to work. Now if they want to tear that down – I don’t know that they do – but if they want to, that’s not going to behoove them at all. It would amaze me if they tried to,” Lewis says.

Bob Bruno agrees that Caterpillar’s desire to freeze wages for some senior workers may backfire. Bruno is a professor of labor relations at the University of Illinois. He says there can be severe consequences for imposing steep wage and benefit cuts. For one, Bruno says, you attract lower-quality employees.

“And in addition, when you’re paying workers less, you’re less inclined to train them. You’re less inclined to invest in their raising their skill level. And so what Caterpillar is likely doing, it’s not only finding cheaper labor, but they essentially degrade the quality of their labor force and they’ll thereby reduce their level of productivity. Technology can only do so much,” Bruno says.

Bruno says decades of research shows that once key unions and corporations make concessions, they tend to become the “new normal.” He says in this case, the outcome has the power to define what emerges from the recession as the new middle class in America.

“The labor movement plays a very considerable role in establishing the wage levels and total compensation levels and working conditions that establish a floor, if you will, for where the middle class really begins. And this battle here in Joliet I think is really over determining what that criteria, if you will, for the new middle class will actually look like,” Bruno says.

Caterpillar has said in news reports that paying market-based wages will preserve job growth in Illinois and the U.S. A spokesman told the New York Times Monday that the company believes it has exhausted the negotiating process in Joliet, and will continue operating with replacement workers as long as the strike continues.