Truth Suffers as Candidates Fire at Business

It is becoming clear that the big political issue of the 1988 Presidential primary campaign is the resentment of working people toward big business and Wall Street as the U.S. economy promises less security.

Richard Gephardt rode that issue to victory in the Iowa Democratic caucuses. Jesse Jackson has been preaching against the “economic violence” of corporations that lay off blue-collar workers while rewarding executives, and his sermon is winning votes--most recently in Maine and Vermont. Others are taking up the issue, including patrician Albert Gore, who calls himself the “friend of working men and women.”

Gephardt made his rhetoric specific the other day when he jumped into the labor dispute between Eastern Airlines and its machinists union. The issue there is wage reductions. Eastern’s owner, Texas Air Corp.--which also owns non-union Continental Airlines--says it needs wage cuts to make Eastern competitive. The machinists, who represent the skilled mechanics as well as the unskilled baggage handlers and cleaners, contend that Texas Air is trying to destroy the union and gut the airline--which it purchased in near bankruptcy in 1986.

Self-Serving Managements

Gephardt accused the management of seeking to make “quick paper profits out of the hides of the employees” and said he’d put a stop to such things if he were President.

Strong words, strong issues. But also, unfortunately, spreading confusion. Instead of speaking plainly to the people of the cost of becoming competitive, and how hard things get when the pie is no longer growing, the politicians are speaking half-truths--exploiting an understandable feeling among working people that the U.S. system is not working fairly.

Meanwhile, business and the unions don’t help. Managements engage in puzzling and self-serving financial maneuvers; the unions act publicly as if nothing had changed in the U.S. economy.

And that could mean trouble in the next Congress, if instead of adapting to a changing world, we waste time debating false solutions to problems--such as those at Eastern Airlines--that are more complex, and more poignant, than they’re made out to be.

At Eastern, management wants to alter the wage relationships of the skilled and unskilled workers. Through the years, dating back to when airlines were regulated, the pay of baggage handlers had risen along with that of mechanics, so that a baggage handler’s income, at $15.60 an hour, or $28,000 a year, was not too far from a skilled mechanic’s at $18.83 per hour, or $35,000 a year.

World Has Changed

But now Eastern wants to reduce the top mechanics’ pay by 4% but the baggage handlers’ pay by 40% and more. Why? Because it lives in a harder, deregulated world and wants to pay the market rate--that is, a rate reflecting the fact that skilled mechanics are in greater demand and shorter supply than baggage handlers.

Could such harsh reality have been avoided? Probably not. Even under regulation Eastern lost money as often as not. It was poorly managed, and its labor costs, taking 40 cents of every sales dollar, didn’t help. When deregulation came, in the 1970s, low-cost airlines, with labor costs half those of Eastern’s, pushed it to the wall.

Eastern’s response to deregulation, under Chairman and former astronaut Frank Borman, was to ask its unions for wage concessions and promise them rewards when things got better. At the time, it was hailed as a model of labor-management relations. But it was also a failure because it didn’t deal with the real issue, which was that the airline business had become permanently more competitive--that the world had changed.

Finally, in extremis , the airline was bought by Texas Air, whose chairman, Frank Lorenzo, has understood and prospered in deregulation. His managers at Eastern make no promises to employees. His tactics are brutal, threatening to transfer the profitable parts of Eastern to Texas Air’s direct ownership, so that the subsidiary would be weakened and the union along with it.

So what is happening? Say this for the law of the jungle: Both sides understand it. Eastern’s unions and management are negotiating seriously, under federal mediation. The union doesn’t want to strike because skilled mechanics may not want to walk picket lines to benefit unskilled baggage handlers. The company doesn’t want a strike because it needs Eastern’s revenues to pay debt.

Would regulation be better than that? Can we go back? Despite political talk, we won’t. There are 50% more jobs in the airline industry today than before deregulation and more than double the number of passengers flying because the fares are lower.

So it’s a harder world, but not necessarily a worse one. Yet, as the primary results indicate, a lot of people don’t appreciate that. And they seem prepared to blame business and Wall Street for their troubles--as they often have before.