Outsourcing & the Unions

Against the Current, No. 110, May/June 2004

Malik Miah

“Offshoring’s giant target: the Bay Area. Silicon Valley could face export of 1 in 6 jobs–worst in nation” (San Francisco Chronicle)

“Outsourcing: stop the hysteria” (Business Week)

“The future of jobs: new ones arise, wage gap widens. Outsourcing technology cut need for rote workers; brainpower is in Demand” (The Wall Street Journal)

WHY ARE OUTSOURCING and offshoring hot button issues? The Bush administration defends it; the Democratic challenger John Kerry attacks it.

What is the truth about these issues? How should labor respond to the challenge of low-wage workers at home and abroad?

The Argument For

Outsourcing of course is not new. It involves moving work from one company to another that can do the same job at a lower cost. Generally, it is domestic movement: from a union shop paying $20 an hour with benefits to a nonunion shop paying $10 an hour with few benefits.

The “jobless recovery” and the loss of higher paying tech and engineering jobs to India and China has added the new term “offshoring”–outsourcing in new clothes–to the front pages of the media.

While many pro-outsourcing executives blame the educational deficiencies in the United States, the actual issue is much less complex: Engineers in India are paid one-tenth or less as in Silicon Valley or Boston. This is cheap labor power, not inferior brainpower.

The corporate executives, who are not politicians, are not used to speaking double talk. They are very clear in why they support outsourcing and offshoring.

“There is no job that is America’s God-given right anymore,” said Carly Fiorina, Chairman and CEO of Hewlett Packard, to the March 7 San Francisco Chronicle in a center-spread business section with interviews of Silicon Valley executives on the issue.

“What’s an American company? We do half our business internationally. Does that make us an international company or a U.S. company?” added Scott McNealy, Chairman and CEO Sun Microsystems.

“When you can get great talent at twenty percent of the costs, it isn’t about waving the American flag. It’s about doing what’s right to have a good company,” said Carol Bartz, President, Chairman and CEO AutoDesk.

”U.S. corporations’ first responsibility is to their shareholders. You cannot say, `I’m going to put national interests ahead of shareholders interests,” declared John Thompson, Chairman and CEO Symantec Corp.

In addition, Robert Crandall, a former CEO at American Airlines, told USA Today, “Labor can either work for rates that allow for very low pricing, or they won’t be working for very long.”

“The unpleasant possibility, acknowledged even by those firmly in the trade-is-good camp, is that jobs will proliferate at both ends of the barbell–and fewer in the middle,” reports David Wessel in the April 2 WSJ. “The result would be an ever-wider gap between well-paying jobs and poorly paid jobs. That too, has happened before, as recently as the 1980s when unionized skilled manufacturing jobs evaporated.”

The attitude of corporate America, of course, is not new. Capitalists are not generally so open and honest about their true views toward country, flag and the welfare of the average working person. They are, however, on the hot seat today with the loss of nearly three million jobs since Bush took office.

The challenge for the employers is to keep working people fooled while protecting the interests of big business. The “hysteria” is not really about protectionism versus free trade. It is the potential backlash by labor against corporate America that concerns the editors and “enlightened” capitalists. Profits are up, but so is anger in working-class communities.

The Argument Against

A pro-labor policy begins with rejecting protectionism. Blaming foreign workers or nonunion American workers let’s the bosses (and government) off the hook and causes deeper divisions.

I’ve seen it first hand as a union representative for the Aircraft Mechanics Fraternal Association (AMFA) at United Airlines. It is not an easy task. The conditioned response is to argue for protectionist walls and adopt legislation to prevent foreign outsourcing. Some workers advocate labeling nonunion domestic companies as “the enemy” too.

But the bosses are right, capital is international and so is labor. The answer is not building walls, but increasing solidarity for common goals. The big picture is necessary.

My job as a fulltime Area Representative for the AMFA at United’s Maintenance Center puts me in a position to see how one corporation outsources work, and how labor responds.

For ten years the response of the union formerly representing mechanics, the International Association of Machinists (IAM), to concessions and attacks by management was to follow a policy of capitulation based on secrecy and militant rhetoric.

In 1994, the IAM adopted the strategy of “employee ownership” (ESOP) to protect jobs and build wealth for the employees, as they called it. The ESOP strategy disarmed the workers and led to a massive increase in outsourcing. The contract granted twenty percent outsourcing without monitoring. Thousands of jobs were lost.

In December 2002, United filed for bankruptcy. As part of a restructuring agreement that workers approved with a gun to our heads, all heavy maintenance was contracted out, leading to the closure of two maintenance bases in Oakland and Indianapolis. The work is still being done but by lower waged mechanics at nonunion facilities.

AMFA won representation for mechanics and related workers in July 2003. The internal revolt was partially fueled by the failed leadership of the previous union and a desire for change in policy. [See our editorial statement in ATC 105, July-August 2003, for additional background–ed.]

AMFA’s Policy

AMFA’s policy is to fight for insourcing of new work and opposing attempts to outsourcing work we are still doing. Instead of arguing for “ownership” or partnership with management as occurred in the 1990s, AMFA pushes for mechanics’ involvement and control of the work process itself.

We seek the opportunity to learn new job skills. We press management to train and retrain mechanics who are pushed out of one job or area into another. Our view is that if new technology is used to do business in aviation, mechanics currently employed should be trained to do the new work.

We do not focus on jobs that are not possible to save. The focus is on work that the airline is doing and seeks to be doing in the future. This approach recognizes that the clock cannot be turned back to another era.

Aviation will never again function as a vertical industry. This means explaining to mechanics that our advantage is based on understanding how the system works, how profits are made, and why mechanics are key to making the airliner stay in business.

It is with knowledge of our role that workers gain more advantage and potential leverage to win higher wages and better job security during contract negotiations.

AMFA’s policy avoids a false debate about competing with and seeing lower-wage workers at home or abroad as the source of our problems, as Crandall and others say airline workers must do.

Our argument is that workers’ wages did not cause United to decline and fall into bankruptcy, but poor management. The fact that mechanics at Southwest Airlines, a low cost carrier, are paid up to thirty percent an hour more than at United proves our point.

The AMFA policy means no illusions are advanced on issues like “employee ownership” or partnership. Instead, our starting point is the workers themselves and what we deserve. Our dealings with management are open and above board.

Whatever inevitable compromises occur are based on the relative strengths and weaknesses of the contract, and on members’ willingness to push back on grievances.

Outsourcing and offshoring are issues that will always exist as long as the profit motive drives labor/capital relations. The challenge for labor is understanding this relationship without falling prey to protectionist ideology and blaming other workers for the loss of jobs.

ATC 110, May-June 2004