It’s an anniversary London, Ontario, did not celebrate. It’s been a year, and the shock has yet to wear off in the Canadian city just an hour’s drive east of Detroit. All that remains is the hardship of carrying on through mass joblessness, and its hand-in-hand partners, surges in poverty, mental health crises and addiction.
It’s a story many American communities will recognize — but this one involves an American company wooed with a sweetheart deal by the Canadian government for a factory the Americans likely never intended to keep. What they really wanted, it seems, is to bust the union.
The lockout began on New Year’s Day, 2012, when Caterpillar Inc., a U.S. company, left 465 union workers on the pavement. At the Electro-Motive Diesel factory, they made engines and parts for diesel locomotives; Caterpillar subsidiary Progress Rail Services bought up the company in 2010.
The workers had refused the company’s demand of a 50-percent wage cut and slashed pensions and benefits. Then the workers of Canadian Auto Workers Local 27 voted to strike. They were prepared to fight hard bargaining with people power.
But on February 3, the company essentially told them all to go to hell, and permanently closed the plant.
“All facilities within EMC, Electro-Motive Diesel and Progress Rail Services must achieve and maintain competitive costs, quality and operating flexibility to win in the global marketplace,” read a carefully-worded corporate statement. “The London plant, primarily because of an antiquated labor contract, faced serious competitive disadvantages."
Had the Canadian government examined the deal beforehand, they might have learned what CAW President Ken Lewenza says his union knew from the beginning — that the fix was in. “We learned from internal [Caterpillar] documents that the corporation had planned to close the plant before they ever negotiated to buy it,” Lewenza says.
Then Lewenza asked for a government review under foreign investment laws of Caterpillar’s 2010 takeover of the London plant, saying it should have been examined at the time to ensure that the corporation’s intent was not simply to strip the plant of its assets and move the operation to another country. The government said no, claiming the sale did not meet the $299 million threshold to trigger a review. The actual numbers, however, were never made public.
Seeking a buyer for the plant, the Conservative government of Prime Minister Stephen Harper sweetened the pot for Caterpillar, showering the company with tax breaks and demanding nothing in return — no job guarantees, no promise to stay — when it approved the sale. In its relentless pursuit of profit, and Caterpillar is highly profitable, the corporation had no incentive to keep it in Ontario. So eager was it to leave London that Caterpillar spent $38 million to shutter the plant. Local 27 President Tim Carrie said a status quo agreement with the union would have been far cheaper.
So why leave?
A New, Anti-Union Paradise for Corporations
In its closure announcement, Caterpillar said it was shifting operations to other facilities in North and South America. Among the newest Caterpillar facilities is a factory in Muncie, Indiana. The welcome mat Indiana set out was generous. Millions of dollars in tax breaks and grants, plus millions more from the county, would seem like a lot of money, but it still doesn’t add up to the $38 million cost of closing the factory in London.
No, the real incentive was the anti-union law signed by Indiana Gov. Mitch Daniels (R) less than 36 hours before Caterpillar shut down the Canadian plant.
“Right-to-work” (RTW), as the Indiana law and others like it are known, is one of those Orwellian phrases conservatives like to use when they want to paint a smiley face on some horrible thing they do. It is actually nothing more than a union-busting law, slowly starving collective bargaining representatives of the dues that keep them alive.
It works like this: Unions are obligated by law to fully and diligently represent everyone within their bargaining unit, even if they are not union members. Union members pay dues; non-members are required to pay a proportional fee based on the amount necessary to negotiate and enforce the union contract. This proportional fee eliminates “free riders,” i.e., those who pay nothing, yet receive all the benefits.
But RTW statutes strip unions of the authority to collect any fees from anyone, union member or not, essentially leaving them to run on a “donations only” basis. Since RTW laws require unions to provide a service to people who cannot be required to pay for it, these laws act as a disincentive to organizing a union, because who’s going to pay for something they can get for free?
Anti-union advocates say RTW is the alternative to “forced union membership.” This is a lie. Section 7 of the National Labor Relations Act protects the right of workers to refuse to join a union. Lack of candor pervades the RTW message, and experience shows that it permeates the movement.
RTW is an effort of anti-union forces going back to the Taft-Hartley Act, the 1947 law that authorized it, along with a slew of other anti-union regulations. These measures place limits on union activities—First Amendment-protected speech conduct like certain strikes and pickets—that would be unconstitutional in any other context. But in the name of “worker freedom,” they have been allowed stand. Since 1947, 24 states have adopted RTW, the most recent being Michigan, birthplace of the modern industrial labor union.
What happened in Michigan last December is highly instructive about whom, exactly, RTW is intended to help, and who is behind it.
ALEC’s Reach Widens
Union leaders in Michigan say they were stunned by the shocking speed with which the bill was passed and signed into law, particularly since Republican Gov. Rick Snyder had previously said RTW was “not on [his] agenda.” But it has long been on the agenda of the American Legislative Exchange Council (ALEC).
In fact, it’s little surprise that much of the Michigan laws’ language comes verbatim from ALEC model legislation. As the Center for Media and Democracy shows, ALEC’s model has also appeared in the union stronghold of Pennsylvania, with backing from the Koch-funded Americans for Prosperity and cheerleading from union-busting fanboys like Stephen Moore of The Wall Street Journal (subscription req’d). With further support from the U.S. Chamber of Commerce and untold secret financing from corporations—thanks to the corporation-friendly Supreme Court’s Citizens United ruling— Ohio appears to be next on the RTW chopping block.
You may recall that Ohio enacted anti-public-union legislation in 2011, but that this was overturned by public referendum. Likely in fear of a similar rebuke by their constituents—many of whom owe their livelihoods and standard of living to the state’s union legacy— Michigan legislators attached an appropriation to their bill, which means it cannot be overturned by popular vote. But the anti-union forces haven’t given up on having their way in Ohio.
Make no mistake, workers will suffer if RTW laws spread across what’s left of the industrial heartland, whether they belong to a union or not. It’s a well-known fact that union workers make more money and have better benefits than similarly situated non-union workers. What’s less well known is that unions lift wages for everyone in the labor market, as non-union employers must compete with unions’ higher wage standard to attract better employees.
As former Clinton advisor Eric Liu writes in Time, “Even if you aren’t a member your pay is influenced by the strength or weakness of organized labor. The presence of unions sets off a wage race to the top. Their absence sets off a race to the bottom.”
This race to the bottom is, no doubt, a strong incentive to RTW’s corporate sponsors. The lower the wages, the worse the benefits, the more profit they can pocket. Of course, lower wages also mean less demand and a stagnant economy, and hurt the middle class, but this is of no concern to the corporations because HIGHER PROFITS, DUDE.
Last Bulwark Against Corporate Political Power
Another, likely more powerful, incentive is that weakening unions removes the only organized opposition to complete corporate dominance of the political landscape.
Conservatives like to pretend that unions are equivalent to corporate super-PACs in the political arena, but that’s nothing more than a convenient myth. “Corporations support Republicans, generally, as unions support Democrats, generally. So it all balances out,” says the myth. But that, according to the Center for Responsive Politics, is plainly false; in the 2012 election, business outspent unions 15:1.
But campaign spending is just one way unions influence politics and activate their members (who may elect not to contribute to a political fund). Educating members about issues and encouraging them to share the knowledge and get out the vote—the activist model of trade unionism that has surged in recent years—are unions’ real strength.
Both of these efforts are good investments for unions. While Democrats leave much to be desired in protecting workers’ rights, the GOP is affirmatively hostile. What do you get when Republicans control the legislature and the governor’s mansion? You get Wisconsin, you get Michigan. You get a rollback of progress earned from decades of struggle, jammed through the lawmaking process and rammed down the public’s throat.
As Andrew Downs of the Mike Downs Center for Indiana Politics said of Republican super-majorities in the state legislature in 2012, "In this situation now, there's no reason for any Republican to pay any attention to any Democrat." Or, he might well add, any union, working family, or anyone who can’t fill their campaign war chests.
And that is why Caterpillar spent $38 million to pink-slip 465 Canadians. The company’s unconscionable demand for 50-percent wage cuts and slashed benefits was no negotiating tactic—of course the union workers would not accept it. It was an insult that preceded the injury.
But Ontario’s loss is Indiana’s gain — after a fashion. The Canadians were made an example of; here’s what sticking up for your labor rights will get you in an RTW world.
Competing For the Bottom
So congratulations, Muncie. Remember when American factories started closing, and we all raged about how good American jobs were getting off-shored to Third World sweat shops with no labor standards? Guess where you are now.
Jim Stanford, CAW economist and author of Going South: Cheap Labour as an Unfair Subsidy in North American Free Trade (1991), lays it out thusly: “U.S. workers are among the most productive in the world, yet wages in the U.S. are lower than most other industrial countries, including Canada,” which he attributes to “the uniquely regressive nature of U.S. labor and social policies.”
“These regressive trends in the U.S. labor market are pulling down conditions in its trading partners– and since Canada is the closest, we are feeling it most powerfully.”
CAW President Lewenza has a more blunt take.
“Corporations are multinational, located throughout the world, they can go anywhere and exploit workers to increase their bottom line,” Lewenza says. “Capital can move from one province to another country, from one state to another state, chasing lower wages. And what we’re seeing is, they’re whipsawing workers from one end of the map to the other. You’re getting whipsawed.”
There you have it, Indiana workers. As the Caterpillar episode shows, thanks to your Republican super-majorities and their immunity to any opposition from Democrats or unions, you’ve won the race to the bottom.