Labor Market Sees Sweeping Changes as Firms Restructure : Is Job Security a Thing of the Past?

The assembly line work was far from glamorous. Office workers often complained of a stifling bureaucracy. But there was a time when working for American Telephone & Telegraph Co. meant job security for hundreds of thousands of workers throughout the country.

“There was a feeling Ma Bell would take care of you,” says Delanie Henderson, who used to work at AT&T;’s giant telephone assembly plant in Shreveport, La.

Stung by deregulation of the telecommunications industry, AT&T; has been revamping its operations, making many jobs redundant. In August, the company announced the firing of 24,000 workers, including 15,000 administrative employees, 4,000 installers, 3,000 distribution employees and 2,000 hourly workers.

Among them was Delanie Henderson, who made $8 an hour soldering phone components but was let go when AT&T; transferred residential phone making operations to Singapore. Complains Henderson: “There’s no security working for a large corporation anymore.”

Experts say her lament underscores some of the sweeping changes in the labor market in recent years. “If you had suggested 10 years ago that workers for the phone company wouldn’t be employed for life, people would have thought you were going off the deep end,” says Alvin Bauman, chief of the division of Developments in Labor/Management Relations of the U.S. Bureau of Labor Statistics.

“Companies are restructuring their work forces as aggressively as they restructure their businesses,” Bauman adds.

The restructuring takes different shapes at different companies. Layoffs, early retirement programs, wage freezes and such cost-saving measures as two-tier wage systems have become commonplace--the result of major changes taking place in U.S. business as companies attempt to adjust to the tougher discipline of slow economic growth, limited inflation and intensified competition.

The upheaval in job security comes at a time when many workers already have seen their jobs eliminated or altered amid a series of takeover battles involving huge corporations.

The current wave of corporate restructuring “poses a real threat to the concept of job security,” says Robert Lefton, president of Psychological Associates, a St. Louis management consulting firm.

Such cutbacks, which companies maintain are acts of survival needed to make remaining jobs more secure, have prompted labor unions to put the goal of job preservation at the top of their agenda, particularly in the smokestack industries that face competition from abroad.

“These days, it would be foolish to push for big bucks,” says Peter Laarman, a spokesman for the United Auto Workers in Detroit. “We’re bargaining with the reality that the auto companies have the capacity to send our jobs overseas.”

Despite the auto industry’s record profits, “what we’re bargaining for is job security,” Laarman says. In lieu of fat wage hikes, the union has won commitments from the Big Three auto makers to retrain many employees who would have been laid off as a result of a decision to obtain cars or components from overseas affiliates.

The UAW’s concerns are easy to understand. Between 1979 and 1983, 5.1 million American workers were permanently displaced from their jobs because of plant shutdowns, moves and other factors, according a study by the Bureau of Labor Statistics. The displaced workers were largely men of prime working age, had lost typical factory jobs and were heavily concentrated in the Midwest and other areas with heavy industry.

Men between the ages of 25 and 54 accounted for nearly half of the displaced workers; women who were displaced from their jobs totaled 1.8 million, and about 600,000 of the displaced workers were black. The study found that, the younger the displaced worker, the more likely he was to find another job in another industry--generally at lower pay.

Companies are also shaving personnel costs by instituting two-tier wage systems and providing lump-sum payments in lieu of wage increases. Under two-tier systems, new employees receive lower wages and in some cases fewer benefits than were offered to employees already on the job.

Two-tier systems were introduced into contracts affecting 200,000 employees last year alone. So far this year, 9% of labor settlements have featured two-tier arrangements, up slightly from 8% last year, according to the Bureau of National Affairs, a research and publishing concern.

Lump-sum payments, provided primarily for workers in the aerospace and auto industries, benefit employers because the payments are usually made at the end of the year and don’t result in an increase in base pay rates. That means that the increases aren’t compounded in subsequent years and that benefits based on pay rates aren’t boosted.

There has been worry about these employment trends from some unlikely sources. Last month, in a speech at the AFL-CIO convention in Anaheim, U.S. Secretary of Labor William E. Brock III deplored what he called corporate strategies of cutting labor costs “regardless of cost” in terms of people and living standards.

The Reagan appointee said it was “stupid” for the nation to improve its competitive position “by reducing the standard of living now enjoyed by American workers and their families.”

Brock and other labor specialists say two-tier wage systems are unsustainable over the long term because of the tension they produce between old and new workers and because eventually the lower-paid workers will outnumber the higher-paid ones.

Indeed, the International Assn. of Machinists recently negotiated a contract with General Dynamics Corp.’s Pomona plant that eliminated a two-tier system established in the previous contract. “I am confident that our negotiators will have exorcised the evil from any other aerospace contracts that have it in place by the end of the next round of aerospace bargaining,” says union Vice President Justin Ostro.

But Allen Sinai, chief economist for Shearson Lehman Bros., contends that “there is no other choice for American business but to squeeze as much productivity as possible from the labor force” because of disinflation and the flood of cheap imports from abroad.

The squeeze on American workers is reflected in other government statistics. The Labor Department reported last month that major collective bargaining agreements reached during the first nine months of this year provided for annual wage adjustments of 2.3% in the first year of the contract--the lowest level since the department began tracking this figure in 1962.

Beyond the statistics are people, some angry and resentful, others confused when they hear of an economic recovery while their own standard of living declines, others resigned to an era of diminished job security.

Consider Frank Michelson, a 27-year-old flight attendant with American Airlines. Michelson hired on with American in August, 1984, shortly after the airline persuaded its unions to accept a “two-tier” wage system under which new employees would be paid about 50% less than existing workers.

American argued that the system, which has spread to other carriers and industries, is necessary for it to remain competitive against such low-fare lines as People Express and Continental, which entered Chapter 11 bankruptcy proceedings in order to abrogate its union contracts.

American, through a spokesman, says the establishment of “A” scales and “B” scales for pilots, flight attendants and ground personnel has had its desired effect.

But the B-scalers are less sanguine. “They’re staying competitive, but they’re doing it off my back,” says Michelson.

“The two-tiered pay scale makes you wonder why you should give 100% or equal effort when you earn only 66% or less of what your co-worker earns,” he continues.

More ominously, he adds that the two-tiered system “diminishes any sense of loyalty, good feeling and desire for success for the company” and leads to friction with the highly paid older workers, who sometimes refer to B-scalers as “the low-paid help.”

The wave of corporate mergers, acquisitions and divestitures is another source of insecurity for the nation’s work force. After corporate raider Irwin L. Jacobs took control of AMF Inc. earlier this year, he fired 350 of the 400 corporate staffers at the industrial and leisure products concern and put most of its units up for sale.

Gulf Corp.’s corporate staff was also decimated after the giant oil company was taken over by Chevron Corp. Jack Morris, Gulf’s former vice president for investor relations, thought he was through with merger wars when he took a similar position with Pillsbury Co., but now he isn’t so sure.

“I’m a survivor of Boone Pickens,” he says, referring to the raider who sent Gulf scurrying into the arms of “white knight” Chevron. But takeover mania has spread to the food industry, and Pillsbury, parent of the fast-growing Burger King chain and a maker of flour, baking mixes and Green Giant vegetables, may be a target.

“You get to feel a little insecure,” says Morris, echoing the comments of laid-off AT&T; assembler Delanie Henderson. “You begin to wonder whether you should unpack your boxes or not,” he adds wryly.

Some observers believe that the flip side of job security--employee loyalty--may be a victim of the new cost-cutting mentality.

“How do you motivate employees when you look at them as chess pieces on a chess board?” asks one disillusioned former middle manager at Gulf. “How do you get people to excel if they realize they’re nothing more than a part of your investment portfolio?”

Gulf’s 44-story Art Deco headquarters tower, which once housed 2,000 workers and was the nerve center for a worldwide empire of oil fields, pipelines, refineries and tankers, now stands practically empty.

But the loss to a community of a plant or a corporate headquarters often means the loss of more than jobs. Businesses help to make up the fabric of every community, and their loss can represent a tearing of that fabric.

“All of us feel the loss” of Gulf, says Justin P. Horan, director of the Greater Pittsburgh Chamber of Commerce. “Educational institutions, civic organizations, the arts--you name it. You could count on Gulf supporting it.”

Even the chamber was hurt by the acquisition. James Lee, Gulf’s chairman, had been scheduled to become chairman of the Pittsburgh chamber on Jan. 1 but moved to San Francisco to join Chevron instead.

But Gulf’s demise cost Pittsburgh more than leadership in civic organizations and Little League teams. It increased the anxiety levels in Pittsburgh and dozens of other communities in which Gulf operates, leading to tensions within families and, in at least one case, divorce.

“I spent a year and a half fighting Pickens, during which time my life was utterly disrupted,” says one former Gulf middle manager, who blames his impending divorce on the lengthy takeover battle.

Experts say such occurrences aren’t unusual. “Change generates a whole host of emotions,” says Lefton of Psychological Associates. “For some, it is exhilaration. For others, it’s fear, anxiety, even despair and depression.”

He says such stresses are common not only in mergers and takeovers but also in other types of restructurings that involve layoffs or cutbacks in wages or benefits. “Some companies are sensitive to employee feelings,” he says, “but they are in the minority.”

One of the more gentle ways to reduce staff and adjust to changing conditions is to institute generous voluntary early retirement programs. That was how Wells Fargo & Co. chose to anticipate the drastic changes besetting the banking industry in the wake of deregulation and greater competition from non-bank companies getting into traditional banking areas.

Wells Fargo, which sweetened early retirement benefits in 1983 just as the banking industry was being deregulated, used the device to get some fresh blood into the organization. “Bankers had been doing things the same way for years and years,” explains Stephen Enna, Wells Fargo’s senior vice president for personnel.

Instead of the old-style branch manager who grew up in an era of limited competition, Wells Fargo needed bankers “who were more marketing oriented,” Enna says. Tellers were also targeted as a result of the introduction of automated teller machines. So 927 workers over 55 years old were offered a special package that included a one-time bonus of 10 weeks’ salary plus up to $500 a month in additional pension benefits until they turned 65, and over 70% took it.

“Everybody benefited,” Enna says. “The people who left were pleased. And their departure opened up promotion opportunities and allowed us to bring in new people with different skills.” Only 40% of those who left early were replaced, Enna adds, resulting in annual savings of $5 million even after the additional pension benefits are considered.

Not all such special early retirement programs are as successful. Several years ago, Du Pont Co. offered such a generous early retirement package that it lost many highly valued employees and had to hire some back.

At the other extreme was Bank of America’s special early retirement program announced last year, which forbade participants from taking new jobs in the banking industry and drew fewer employees than expected, industry sources say.