Weighing Jobs Against Benefits

Herb Rosenberg fairly gushes grievance. Bad enough he’s being laid off after 28 years with Hughes Aircraft. Bad enough that other Southland defense contractors are doing so much contracting--in the sense of shrinkage--that he’ll have to find another line of work.

What has him practically apoplectic is that the company offered a substantial severance package-- “They were being generous,” he sputters--and Herb can’t have it.

He can’t have it because of his own union, which urged the rank and file to reject the plan. Hughes workers did so, by a margin of almost 3 to 1, in a decision likely to save the company $21 million.

Why would a union urge rejection of severance pay for workers facing a layoff whether they take the money or not? Why would the workers themselves concur? The answers offer insight into the agonizing dilemma facing everyone in the battered defense industry, where unions must grapple with one of the worst industrial contractions ever to beset this state.

The unions are being forced to cut back even as their members need them most. Unions representing aerospace and defense workers were once stalwarts of organized labor in this part of the country, but since the end of the Cold War they’ve been forced to slash spending and eliminate staff at the same time that they must struggle to create employment centers and food banks. Membership in these unions has plummeted.

In Burbank, for example, District 727 of the International Assn. of Machinists, representing workers at Lockheed, Webber Aircraft and other companies, has seen membership dwindle from perhaps 9,000 six years ago to fewer than 3,000 today. The union has had to lay off many of its own employees, including one with 30 years on the job, and even put its union hall on the block. After two years, there are still no takers.

Simultaneously, District 727 has used government and Lockheed money to open a facility to help laid-off Lockheed workers find new jobs or skills. The union also gives out groceries.

At Hughes, Local 1553 of the United Brotherhood of Carpenters and Joiners and Local 2295 of the International Brotherhood of Electrical Workers were faced with a conflict between the interests of workers being laid off and those staying on.

Based in Westchester, Calif., Hughes is a leader in satellite and aerospace electronics and a big defense contractor that had 82,000 employees at its 1986 peak, most of them in California. Unlike its parent, General Motors, Hughes isn’t losing money, but it knew it would have to cut costs to compete in a post-Cold War marketplace. It’s been eliminating jobs for several years now.

Last year, with its work force down to 70,000, Hughes launched a plan to cut 12,000 more. To ease the blow and bolster the morale of those left behind, it offered salaried and hourly workers the same severance package. Remember that other aerospace firms have pushed out thousands of workers with no such send-off.

Hughes offered a week’s pay for every year of employment and an extra week for every year beyond 10, with a ceiling of 40 weeks. Hughes would also pay for six months of medical benefits and up to $5,000 for retraining.

But Hughes also wanted to cut costs beyond the layoffs, so for its salaried workers it eliminated the 75-cents-on-the-dollar company match for worker 401(k) contributions beyond 3% of salary. The first 3% would continue to be matched dollar for dollar.

If the unions wanted the severance package for departing workers, they would have to accept the 401(k) cut for those staying on.

Weighing the costs and benefits isn’t difficult. Hughes says its average hourly worker gets about $600 a week and contributes 4% to the 401(k). So the cut would cost the average worker 0.75%, or $4.50 a week, saving the company about $1 million a year for the 5,000 hourly workers left when the layoffs are done.

Now, the average length of service for departing hourlies at Hughes is about 11 years, which translates to severance pay and benefits worth about $11,000. Hughes figures on laying off 2,000 hourlies when all is said and done, meaning the severance plan would have cost $22 million.

Trading $1 million a year for $22 million now would seem a reasonably good deal, but the problem was that the people losing were different than the people who might gain. As a result, leaders of Local 1553 recommended rejection, and the members went along. Local 2295 rejected the plan without even putting it to a vote.

“The people on the executive board didn’t feel it was a benefit for anyone except the people being laid off,” explains Local 1553’s president, C.J. Jackson.

He’s right, of course, although that’s not much of a testament to worker solidarity. Jackson adds that those who took the package would have to give up their right to re-employment by Hughes until 1995, as if that matters in an industry shrinking the way this one is.

To Hughes, the unions seem extraordinarily short-sighted. To workers such as Herb Rosenberg, a senior electrical technician who will lose 40 weeks pay by forgoing the package, the unions seem insane.

Actually, it’s a little more cynical than that. The union leaders did what was best for the workers left behind--the ones who will be electing union leaders in the future. Who ever said unions were without politics, or workers without self-interest?

Maybe even more depressing is the outlook.

“We’re probably only a third of the way through the defense cuts we’re going to be facing in the next five years,” says Ann R. Markusen, a Rutgers University economist who has written extensively on defense industry conversion.

She adds, although she needn’t: “There aren’t any easy answers.”