Remaking Steel: Without Throwing Its Retirees on the Slagheap. (Dispatches)

By Moberg, David | The American Prospect, July-August 2003 | Go to article overview

Remaking Steel: Without Throwing Its Retirees on the Slagheap. (Dispatches)


Moberg, David, The American Prospect


HIS UNION'S MISSION, SAYS LEO GERARD, United Steelworkers of America's international president, is "saving these damn plants for our members, retirees and the next generation of workers"--not for corporate executives or nonunion subcontractors. With temporary import protections now providing a little stability for the battered American steel business, United Steelworkers is actively encouraging the reorganization of the fragmented, mainly bankrupt industry into fewer, stronger companies.

Many analysts have written off the steel industry as hopeless, and most of those who haven't assume that steel companies can only survive by dumping all of their responsibilities to retirees, drastically slashing employment of union workers, and cutting wages and benefits. But the union believes that the industry can be saved--and the living standards of both workers and retirees protected--if owners invest in newly consolidated operations, excess management is trimmed, and workers and the union are given a stronger voice, from a redesigned shop floor on up. In recent months, these changes are precisely what the union has been securing.

In Europe, government policies such as health insurance and income protection pick up much of the social cost of the recent steel-industry consolidation, rather than imposing it on either workers or the companies. But in the United States, the Steelworkers have had to create an industrial policy for steel through a patchwork of innovative union collective bargaining, bankruptcy-court negotiations and often inadequate government programs. Union leaders want to avoid shifting the social costs of reorganization to either the roughly 188,000 active employees or to the 600,000 retired steelworkers and their dependents who rely on contractually negotiated pensions and, until recently, employer-paid health insurance. But many retired steelworkers are still falling through holes in this makeshift safety net.

Take the case of 52-year-old Larry Ross, who retired a year ago after 32 years at National Steel in Granite City, Ill. Last December the Pension Benefit Guaranty Corporation (PBGC), the government pension insurance agency, took over the bankrupt company's retirement plan. The PBGC sets caps on retirement pay that especially penalize early retirees, and its rules will prevent Ross from receiving the full pension improvements included in the last union contract. That will cut his $1,800 a month pension by $400 and reduce his expected increases.

But health care is even more of a problem for Ross. Unlike National, which paid for a portion of retiree health insurance, the PBGC pays nothing. Last year, as part of the renewal of the federal Trade Adjustment Assistance act, Congress provided a tax credit equal to two-thirds of the cost for workers to continue their employer's health insurance after leaving employment. But it only applies to workers between the ages of 55 and 65, which leaves Ross out. He's shopping around for a new policy, which will more than double his current cost to at least $500 a month, and also thinking of doing without. "Hope I don't get anything that kills me until I can find work," he said. "There's no way I can pay the bills, eat and buy [health] insurance," he said, even though he needs expensive medicine for a heart condition.

Bruce Gerfen, just a year younger than Ross and still working at National Steel, faces a different retirement problem. Last December, in a move that angered the Steelworkers, the PBGC terminated National's pension plan prematurely, even though the sale of the company was still uncertain. Three weeks later, Gerfen reached his 30th anniversary of working at National and would have been eligible to retire early with benefits like Ross'. Now he will have to wait until he's 62--another 12 years--to retire and collect benefits. Also, because of the early pension-plan termination, nobody will be eligible to receive the special shutdown benefits that the union had negotiated. …

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