New factory jobs -- for a price

  • Article by: LOUIS UCHITELLE , New York Times
  • Updated: December 29, 2011 - 9:12 PM

U.S. manufacturers are hiring again. But new hires are working for much lower wages than the veterans next to them on the line.

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General Electric’s assembly area was being prepared for new production at GE’s Appliance Park in Louisville, Ky. Manufacturers such as GE are hiring again, but for a new generation of blue-collar workers, even those protected by unions, the price of employment is likely to be lower wages stretching to retirement.

Photo: Angela Shoemaker, New York Times

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LOUISVILLE, KY. - Manufacturers are hiring again in the U.S., softening a long slide in factory employment. But for a new generation of blue-collar workers, even those protected by unions, the price of employment is likely to be lower wages stretching to retirement.

That is particularly true of global manufacturers like General Electric. With labor costs moving down at its appliance factories in Louisville, the company is bringing home the production of water heaters as well as some refrigerators, and expanding its workforce to do so.

The wages for the new hires, however, are $10 to $15 an hour less than the pay scale for hourly employees already on staff -- with the additional concession that the newcomers will not catch up for the foreseeable future. Such union-endorsed contracts are also showing up in the auto industry, at steel and tire companies, and at manufacturers of farm implements and other heavy equipment, according to Gordon Pavy, president of the Labor and Employment Relations Association and, until recently, the AFL-CIO's director of collective bargaining.

"Some companies want to keep work here, or bring it back from Asia," Pavy said, "but in order to do that they have to be competitive in the final prices of their products, and one way to be competitive is to lower the compensation of their American workers."

The shrunken pay scale for newcomers -- $12 to $19 an hour vs. $21 to $32 an hour for longtime workers -- threatens to undo the middle-class status of even the best-paid blue-collar jobs still left in manufacturing. A similar contract limits the wages of new hires at a nearby Ford Motor Co. stamping plant, but neither GE's 2,000 hourly workers nor Ford's 2,900, nor their unions nor the mayor, Greg Fischer, have objected.

Quite the contrary, all argue that job creation must take precedence over holding the line on wages, given that the unemployment rate in this Ohio River city is above 9 percent and several thousand people apply for every unfilled, $13-an-hour factory job.

"The trade-off is absolutely worth it," Fischer said, arguing that while the city is actively subsidizing GE's expansion here, mainly through tax rebates, that is not enough. "You must have a globally competitive wage to create jobs," the mayor insisted.

The generational setback implicit in a "globally competitive wage" is evident at GE's Appliance Park, the complex of factories where GE makes refrigerators, washing machines, dishwashers and other household appliances. Six years into the adoption of lower wages for new hires, half of the hourly workers are paid at the reduced scale.

In an earlier era, that would have been a source of friction, perhaps protest. Now it isn't, and in an interview William Masden, 62, earning $31.78 an hour after 42 years at Appliance Park, attempted an explanation. The younger workers still get annual raises, he noted, and by the time they top out, he and his peers -- the oldest baby boomers -- "won't be here any longer to remind them of what they are missing."

Linda Thomas, 37, one of the first to be hired in 2005 under the new arrangement, amends that explanation. Her hourly wage, $18.19, has almost topped out, although it is nearly $14 an hour less than Masden's. But she keeps silent. Too many unemployed people, she explained, would clamor for her job and her wage if she were to protest. "You don't want to rock the boat," Thomas said. "You take a chance on losing everything you have if you do."

Masden's final years at GE, doing safety checks, and Thomas' willingness, however reluctant, to do equivalent work as a forklift driver at a much lower wage illustrate a big reason that General Electric decided to expand production here. A new hybrid electric water heater will be manufactured in Louisville in a factory now being renovated, rather than in China, where GE makes its current model. And some production of refrigerators is being repatriated, mainly from Mexico.

"We have gotten to a point where making things in America is as viable as making things anyplace in the world," said James P. Campbell, president and chief executive of GE's appliances and lighting division, citing the drop in labor costs as a crucial reason. "They are significantly less with the competitive wage," he said, "and that is a big help."

The revival is in an early stage. By 2005, GE's employment in Louisville had fallen to 2,300 hourly workers from a high of 17,000 in the 1970s. At that point, with the company insisting on concessions, Local 761 of the IUE-CWA union, representing the hourly factory workers, agreed to the lower wage scale for new hires. The union has ratified it in subsequent contracts.

Employment, in turn, has finally stopped falling and is beginning to inch up from a low of 2,000 early this year as new hires start to come aboard faster than older workers leave. But the new people are always at the lower wage scale, except for some specialists -- like machinists, who earn up to $26 an hour.

"We are getting from the company an $800 million investment in Appliance Park over the next two years, and what we had to do for that investment was accept the 'competitive wage,'" said Jerry Carney, president of Local 761.

Neither the nation's unions nor the government has tracked the number of jobs downgraded to the equivalent of a lower-tier wage scale, or the number of people who, like Thomas, have gone through the experience of a downgrade: in her case, from $19 an hour at the Ford auto body stamping plant -- until she was laid off in 2005 -- to a starting wage at GE a few months later of $12 an hour.

"At the time I was very angry about the comedown," she said, "but then I asked a couple of others who had gone through the same experience how they felt and they said, 'We're thankful to have a job.'"

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  • William Masden, left, 62, earns $31.78 an hour after 42 years at Louisville’s Appliance Park. New hires make $12 to $19 an hour. Jerry Carney, right, president of Local 761 of the IUE-CWA union, explained, “We are getting from the company an $800 million investment in Appliance Park over the next two years, and what we had to do for that investment was accept the 'competitive wage.’”

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