The Multinational Monitor



A New Social Contract

by David Kusnet

Less than two weeks before Labor Day General Motors devastated Norwood, Ohio, a small town of 26,000, by shutting down its 64-year-old Chevrolet-Pontiac plant and laying off 4,000 workers. The departure of Norwood's largest employer touched off a bitter debate over GM's obligations to the community that had housed one of GM's first factories.

In addition to being the town's largest employer, GM had been its major taxpayer, accounting for 28 percent of Norwood's city budget. Norwood, in turn, had provided GM with a dependable work force, public services from running water to sewers, sanitation services, fire protection and frequent improvements in and around the 59-acre plant. "What the City of Norwood has done is nurture a relationship with GM, accommodate them, and indulge them at every point assistance was requested," declared city law director Robert Kelly, who has filed a $316 million lawsuit against GM.

In many ways the events at Norwood are an example of a growing national debate over the unwritten social contract between the people and corporations. At stake is how much a corporation owes a constituency that has come to be called its "stakeholders" - employees, their families, their communities and others who are affected by corporate decisions.

Corporate stakeholders' demands are reflected in a number of bills before Congress that would require corporations to behave more responsibly toward their employees and the communities in which they operate. These bills call for:

  • Plant closing notification - requiring employers to give 60 days' notice of plant shutdowns or large-scale layoffs;
  • Minimum health benefits - requiring all employers to provide a basic level of medical coverage to all employees;
  • A higher minimum wage-raising the minimum from $3.35, the level at which it has remained since 1981, to $4.65;
  • Job hazard notification - requiring employers to notify current and former workers who have been exposed to health hazards on the job; and
  • Parental leave provisions - requiring employers to provide up to 18 weeks of unpaid parental leave on the birth or adoption of a child.

The clamor for this legislation reflects a growing anti-corporate feeling among the public, significant changes in the needs of the workforce and increasing sophistication among progressives and the labor movement.

Increasingly labor, consumers, state and local officials and middle and low income voters are concerned that corporations are not doing what they did in the past: providing a livelihood for working families and a tax base for their communities as well as offering social benefits. And a growing anti-big business sentiment is spurring widespread support for the new wave of social legislation; for instance, a Business Week - Louis Harris Poll found that 86 percent of the voters polled supported legislation requiring advance notice of plant closings.

Even middle class families are realizing that they need more wage-earners working longer hours to maintain a middle-class standard of living. Yesterday's headlines told the story of increasing numbers of women, including mothers of young children, entering the workforce. Tomorrow's headlines will tell the story of men and women taking second jobs to make ends meet. Today, more than 5.7 million people work at more than one job - a 24 percent jump since 1980. As middle Americans, including parents, work longer hours, there are growing demands for new benefits such as parental leave and workplace-based child care.

Progressives and unionists understand that there is still little support within Congress for extensive and expensive new government programs, but there is potential support for programs that do not increase spending or raise taxes but simply require more responsible behavior by corporations. Sen. Edward Kennedy (D-Mass.), who chairs the Senate Labor and Human Resources Committee, has introduced new proposals with a real chance of passing.

What is at issue is not merely a package of new social legislation but the social contract between American corporations and the American people. This unwritten social contract gives private U.S. corporations greater power than corporations in most other advanced industrial societies, where government provides services such as health care, owns and operates many major industries and takes a larger share of the gross national product. Rather than submit to European-style social democracy, business leaders in the United States prefer the American social contract which gives them more power and more responsibility.

Previous eras of social reform have enacted not only new government programs but also new standards for business. From the Progressive Era through the New Deal, businesses were required to pay a minimum wage, end child labor and bargain with unions chosen by their employees. During the 1960s and 70s, businesses were required to maintain health and safety standards in the workplace, provide employees with a minimum level of pension benefits and recognize consumers' rights to ', product safety and truth-in-packaging. While all of these reforms were passed over the objections of much of the business community, together they comprise the social contract between the people and corporate America.

In recent years there is increasing evidence that corporate America is not always living up to the most important part of the , social contract: providing well-paying jobs and job-related benefits such as health insurance. According to the Bureau of Labor Statistics, more than two million workers each year lose their jobs through plant shutdowns or mass layoffs. Two-thirds of these workers receive no advance warning that their jobs are ending. Meanwhile, largely as a result of the shift from unionized industrial jobs to non-union service jobs, 24 million Americans from working families lack health insurance coverage - an estimated 25 percent increase over the number of uninsured workers at the beginning of the 1980s.

These cutbacks came during a decade in which American corporations benefited from substantial reductions in federal taxes, as well as concessions by unions that scaled down increases in employees' pay and benefits. Moreover, in efforts to woo new industries and retain old ones, competing state and local governments offered immense tax breaks, special services and other inducements. Public opinion surveys show increasing numbers of voters believe that business has not shown similar consideration for the public. As John Dunlop, former Secretary of Labor in the Nixon and Ford Administrations, explains: "There have been an awful lot of people hurt in this process in the last few years, and there is a hell of a lot of resentment. There are a lot of coiled springs out there."

So far, the proposal that has come closest to being enacted, and that has generated the most controversy, is the requirement for advance notice of plant closings. As part of the 1987 trade package, the Senate passed a bill requiring employers of more than 100 workers to grant 60 days' notice before closing a plant or laying off more than one third of a workforce larger than 150. Employers who ignore this requirement would have to provide back pay to the workers and a$500-a-day fine to their local governments. However, the bill provides a number of exemptions for companies that cannot anticipate shutdowns and layoffs or that are trying to keep their factories open. Even the minimal requirements of the proposed legislation would change the way most companies do business. According to a recent study by Congress' General Accounting Office, of the companies that have closed factories in recent years, fewer than 20 percent gave workers more than a month's notice.

The advance-notice requirement has been advocated not only as a humanitarian measure but also as the logical way to maximize return on public investment in programs to assist the victims of plant closings. These programs to help workers deal with the problems of joblessness, learn new skills and find new jobs all work better if they get started before the plant closes. As former Labor Secretary William Brock's task force on economic development reported last December, "the earliest notification possible leads to more effective delivery of public and private services to dislocated workers."

The plant-closing legislation has become the target of determined opposition from much of the business community. "This is certainly the biggest labor-management battle of the year," declares Renee Raymond, an official of the National Association of Manufacturers (NAM). "This is the very beginning. If they get notice now, they'll come back with consultation and information disclosure. What we're going to here is the Europeanization of the economy."

The NAM official's statement reflects a widespread view in the business community that management should have the prerogative to close down a factory suddenly and without giving advance notice to, much less consulting with, the workers and the community. Business leaders view advance notice as a slippery slope that leads eventually to power-sharing with workers and the public - "the Europeanization of the community."

However, the business community is not monolithic in its opposition to the new social legislation. A number of large unionized corporations favor uniform requirements for corporate benefits and behavior as a way to eliminate unfair cutthroat competition. Meanwhile, some small business leaders also favor legislation setting minimum levels of worker benefits as long as the programs offer special assistance to hard-pressed employers.

For instance, during the hearings on the bill requiring all employers to provide health insurance coverage, support was voiced by representatives of two major corporations, American Airlines and Chrysler, both of which provide comprehensive employee benefits under their union contracts.

American Airlines President Robert L. Crandall said the company faced unfair competition from Continental Airlines, which recently used the bankruptcy law to cancel its labor contracts and "reduced or eliminated most employee benefits, including company-paid health benefits."

For business leaders - and, ultimately, for all Americans - the issue is not only how to reduce unfair competition but also how to provide basic human services. As sophisticated business leaders have come to understand, in the long run, the uninsured worker is no bargain. If health problems go untreated, they may become hospital emergencies, requiring hospitalization. The enormous costs of the uninsured are then paid by the taxpayers or by other patients through higher hospital bills and insurance premiums. Thus, a company like American Airlines pays twice for the health care costs of its cutthroat competitors: through unfair competition in the marketplace, and - along with other taxpayers - through higher taxes and medical costs.

The potential, therefore, does exist for a new consensus including business as well as labor, consumers and the public for minimal corporate standards such as the universal health insurance bill. As Francis R. Carroll, president of the Small Business Service Bureau, which represents more than 35,000 small businesses, said in support of the health insurance bill: "This bill is an important step toward making health insurance affordable for small business owners and their employees. It is not bureaucratic. It is not a mandate for socialized medicine. Instead, it builds on the strength of America's private-sector health insurance system."

Of course, there are many hard pressed businesses, from large corporations in basic industries to struggling smaller firms, that may have a hard time responding to new standards of responsibility toward employees and their communities. Allowances should be made for legitimate hardship cases, as do the plant closing and health insurance bills.

Americans have always had an implicit social contract with corporations - one that has been rewritten in the past to require companies to pay a minimum wage, protect workers' health and safety and safeguard the nation's air and water. The most recent proposals for a new social contract will protect responsible businesses from cutthroat competition - and protect the entire business communitv from a Norwood-stvle retaliation.

David Kusnet directed field publiciry for the American Federation of State, County and Municipal Employees (AFSCME). He was a speechwriter for Walter Mondale during the 1984 campaign and for the late AFSCME President Jerry Wurf.

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