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Campaign Workers Form Union, Announce First Bargaining Agreement With Randy Bryce’s Campaign

Hundreds of campaign workers form union,
demanding a living wage, basic protections

Meg Reilly, Vice President of the Campaign Workers Guild (in white shirt) with newly organized campaign workers from Randy Bryce’s campaign.

WASHINGTON, DC — Today, campaign workers across the country publicly launched a new, independent union and announced their first-ever bargaining agreement with candidate Randy Bryce’s campaign in Wisconsin’s 1st district. The Campaign Workers Guild (CWG) is a national union representing non-management workers on electoral and issue-based campaigns.

CWG’s mission is to ensure that campaign workers have reasonable work hours, fair wages, workplace rights, and basic labor protections. This announcement comes just months before the 2018 midterm elections, while many progressive candidates are just recruiting their campaign staff.

Although many progressive candidates advocate for pro-union policies, they fail to practice what they preach. Campaign workers frequently work close to 80 hours a week, get paid far less than fifteen dollars an hour, and face workplace hazards like sexual harassment. Despite the enormous sums of money spent on elections—a combined $6.5 billion during the 2016 cycle—the workers entrusted with running candidates’ campaign are too often underpaid, overworked, and undervalued. CWG believes that it is time for candidates and elected officials to support the working people who put them in office.

CWG is calling for a party-wide collective bargaining agreement covering campaign workers on all local, state, and federal Democratic campaigns as well as progressive ballot measures. In the meantime, they are organizing campaign by campaign.

In CWG’s first organizing victory, CWG members working for congressional candidate Randy Bryce secured a union contract guaranteeing fair working conditions. Bryce is an ironworker challenging House Speaker Paul Ryan in Wisconsin’s 1st congressional district.

CWG is ready to work with more campaigns and urges campaign workers to visit their website (campaignworkersguild.org) to learn more.

Statement from Laura Reimers, President of the Campaign Workers Guild:

“We will build stronger campaigns and a stronger movement when we treat campaign workers with respect. It is time for candidates to practice what they preach.”

Statement from Meg Reilly, Vice President of the Campaign Workers Guild:

“We refuse to allow candidates across the country to continue to identify themselves as pro-union or pro-worker when they fail to guarantee the same labor rights they claim to support.”

Statement from Nate Rifkin, Randy Bryce for Congress Union Steward:

“Unions fight for worker rights and dignity. They help facilitate more equal relationships between labor and management. Every worker deserves the right to join a union, and that includes campaign staffers. The workers on our now unionized campaign are proud to work for Randy Bryce, a person, and candidate, who practices what he preaches.”

Students To Hold ‘UNH Solidarity Rally for Lecturers’ After University Lays off 18 Lecturers

In a very quiet announcement, the administrators at the University of New Hampshire sent a letter to 18 lecturers informing them that their contracts would not be renewed for next year.

On January 19th, the Union Leader reported on the story.

“The contracts of 18 lecturers in the College of Liberal Arts at the University of New Hampshire were not renewed, and one affected man says he’s heartbroken after receiving the news in the mail over winter break.

English lecturer Nathan Webster, of Stratham, a veteran who served during Operation Desert Storm and then worked as a photojournalist in Iraq, teaches first-year writing and introduction to creative nonfiction, he said.
“I’m the only war veteran in the English Department, and the letter I got (just a letter, no call, no personal contact at all) was dismissive and blunt and the reasons given are contradictory and unclear,” Webster said via email Friday.
“The letter claimed a severe budget shortfall but a new announcement said it was to enhance program strength by ensuring the highest degree in the field,” he wrote.
A copy of the letter Webster received this week from Dean Heidi Bostic said his employment ends May 18.

“The reason for this non-renewal is that the College of Liberal Arts is currently confronted with a substantial deficit,” Bostic wrote. “With future programmatic needs forecast in mind, we have been forced to make some painful reductions and strategic realignments in teaching faculty.””

Within a week of the non-renewals being sent out, the UNH Lectures Branch of the American Association on University Professors (AAUP) sent a letter to Dean Bostic requesting details on why the lecturers were not renewed.

Dear Dean Bostic,

The recently announced cuts of Lecturer faculty were dramatic and unanticipated.  Many of us across the University have questions about this decision, and we write to you now to ask you to provide more information to the community about these cuts.

In particular, we request the Deans’ office address:

  • The College financial situation.  We call on you to provide specific details about the COLA finances.  Detailed financial reports for the college would allow for the transparency needed to understand the context of recent cuts to the teaching faculty.
  • An articulated plan for how the more than 100 sections of courses taught by the non-renewed faculty members will be covered.  We request you address the following questions: Will COLA be reducing the number of classes?  Will upper-level classes be eliminated? Will faculty teaching those upper-level classes be moved into lower-level courses?  Is the intention to renegotiate faculty workloads or to hire more faculty?  Cuts to teaching faculty compromise programs, as well as students’ experiences and opportunities; therefore, your plan here is a matter of concern for all community stakeholders.
  • The otherwise unannounced and unexplained new requirement for Lecturer Faculty to possess the terminal degree of a PhD. Your January 19 email stated that the affected faculty “were not renewed as the result of a desire to enhance program strength by ensuring that faculty members have the highest terminal degree in their field.”  We request explanation for why this criterion is cited now, when it has never been a factor of the hiring, review or renewal of these faculty. As you are aware, many of these faculty members were repeatedly reappointed on the basis of their teaching experience and performance in the classroom. In addition, these lecturers have been reviewed by your office as meeting or exceeding your expectations annually. Further, seven of the affected faculty had been promoted to the ranks of Senior or Principal Lecturer, and their degrees did not play a role in these promotion decisions.  How does your own recent assessment and promotion of these teachers connect with the notion that they are suddenly unqualified? We request explanation for the logic and soundness of this new criterion.
    These are among the many questions raised by the recent cuts of Lecturer Faculty.  We call on you to provide answers.


UNHLU-AAUP Executive Committee

Now the students are rallying behind the educators.  

The student groups, Humans of UNH and UNH Young Democratic Socialists of America, are teaming up to hold a rally on Friday Feb 16th,  in support of reinstating these educators.

The University of New Hampshire has just made significant cuts to lecturer positions in several departments in the College of Liberal Arts. Cuts to lecturer positions will directly affect the quality of education at the University as well as the course options available to students. Students at UNH should expect to have access to a wide-range of courses that will prepare them to succeed in an increasingly global economy.

Long-serving and committed lecturers in French, Spanish, Arabic, ESL, English, History, and Political Science have been informed that their contracts will not be renewed.

Stand in solidarity with affected lecturers and UNH employees. Come and listen to the testimonies of students and alumni directly affected by the recent lecturer cuts.

Join them if you can.

UNH Solidarity Rally for Lecturers

Friday, 16 February 2018 11:00 am

@ Murkland Hall

Creator: Humans of UNH

23 Senators Blast DOL Sec Acosta For Concealing Evidence About Stealing Tips From Workers

Shaheen, Hassan Blast Labor Department for Hiding Evidence Showing Tip Proposal Would Steal Billions from Workers

Last week, news reports revealed the Department of Labor concealed the deeply damaging impacts of its proposed change to the tip rules 

Senators: “This is a stark example of how far the Trump Administration is willing to go to appease business interests at the expense of working families”

Washington, D.C. – U.S. Senators Jeanne Shaheen (D-NH) and Maggie Hassan (D-NH) joined with a group of 23 Senate Democrats to send a letter to Secretary of Labor Alexander Acosta, criticizing the Department of Labor’s decision to hide evidence showing its proposed change to the tip rules would result in employers stealing potentially billions of dollars from their workers.

“We write to express our deep concern regarding reports that the Department of Labor (DOL) concealed evidence from the public showing that DOL’s proposed tip rule would result in employees losing billions of dollars in tips,” wrote the senators. “DOL is forcing through a regulation that would take money out of the pockets of low-wage workers and, even worse, it covered up the potentially catastrophic impacts from workers and advocates. This is a stark example of how far the Trump Administration is willing to go to appease business interests at the expense of working families.”

In December 2017, the Trump Administration proposed rescinding Obama Administration rules that ban employers from taking workers’ tips, potentially allowing employers to keep these tips. The DOL reportedly withheld an official economic analysis from the public record that indicated that the Trump Administration’s plan would drastically cut American workers’ wages.

In addition to Senators Shaheen and Hassan, the letter was signed by Senators Murray (D-WA), Schumer (D-NY), Feinstein (D-CA), Wyden (D-OR), Durbin (D-IL), Reed (D-RI), Sanders (I-VT), Cardin (D-MD), Brown (D-OH), Merkley (D-OR), Gillibrand (D-NY), Blumenthal (D-CT), Baldwin (D-WI), Murphy (D-CT), Hirono (D-HI), Kaine (D-VA), Warren (D-MA), Markey (D-MA), Booker (D-NJ), Van Hollen (D-MD), Duckworth (D-IL) and Smith (D-MN).

A PDF of the letter can be found HERE and included below.

02062018 - Acosta - Tip Rule Analysis Concealed Letter

Leo W Gerard: Kimberly-Clark Uses GOP Tax Break to Sucker Punch Wisconsin Workers

David Breckheimer

Early Wednesday morning, David Breckheimer, a United Steelworkers local union president at a Neenah, Wis., paper factory, was gathering the last of his gear for a snowmobiling vacation.

At 7:45 a.m., less than two hours before he planned to leave, he got a call. It felt like a punch to the gut, he told me later that day.

Kimberly-Clark was closing its Cold Springs facility in Fox Crossing where David had worked 37 years, where 500 men and women earned a good living. Kimberly-Clark also was shuttering its Nonwovens factory in Neenah, costing another 100 workers their jobs.

The closures mean the virtual disappearance of Kimberly-Clark production in Neenah, the town along Lake Winnebago where the company was founded by John Kimberly and Charles Clark 146 years ago. It moved its corporate headquarters to Texas in 1985.

The terminations are part of a life-shattering pattern in Wisconsin’s Fox Valley, where Neenah and other paper mill towns are located. Once dotted with dozens of paper plants providing good jobs and middle class livelihoods, the valley had been devastated over the past decade and a half as paper companies failed or fled, one after another.

The rise of digital communications is partly to blame. But more significant is government policy. The corporate tax breaks that Congressional Republicans said would create jobs are being used by some, like Kimberly-Clark, to kill jobs. And the government’s failure to enforce international trade law bankrupted many of the Fox Valley plants as China plastered the U.S. market with underpriced, illegally subsidized paper.

The result is pain for blue-collar workers in blue states like Wisconsin that went red in 2016 to give Donald Trump the presidency. Workers who voted for Trump believed his promises to crack down on Chinese currency manipulation and impose 45 percent tariffs on unfairly traded imports from China.

None of that has happened, however. The most those workers got from Trump in his first State of the Union address on Tuesday was more vague pledges to ensure fair and reciprocal trade.

Voters in the Fox Valley had good reason to hope for the bold change that candidate Trump proposed. Between 2000 and 2013, Wisconsin lost more than 90,000 factory jobs, including 17,000 paper mill positions as 34 paper factories closed. In that time, Wisconsin experienced the largest in the country decline in the percent of households making a middle class income, according to a study by the Pew Charitable Trusts.

In Fox Valley, the demise continues. In 2016, Graphic Packaging closed its Menasha factory, putting 228 workers on the street.

Last September, Appleton Coated closed in a bankruptcy, rendering 600 out of work. Appleton Coated sold the factory to Industrial Assets Corp., which allowed 38 workers to remain to maintain the machines. Also, in December, Industrial Assets recalled 50 to run one paper line.

In October, another paper company, Appvion, also in the town of Appleton, filed for bankrupcy. In November, it announced 200 of the company’s 800 workers in Fox Valley would lose their jobs. Also in October, U.S. Paper Converters, another Fox Valley paper company, announced it would close its factory in Grand Chute, eliminating 52 jobs.

Kimberly-Clark, maker of paper-based products such as Kleenex, Viva paper towels, Cottonelle bathroom tissue and Huggies disposable diapers, announced earlier this month that the corporation would use its tax cut windfall to pay the costs of closing 10 factories and dumping as many as 5,500 workers worldwide.

It wasn’t that Kimberly-Clark was insolvent. Just the opposite. Last year, its profit was $2.28 billion or $6.40 a share. For 2018, the corporation is shooting for more, at least $6.90 a share, by “reorganizing,” that is, ditching factories and workers.

The USW workers at the Cold Springs factory thought they would be spared. Their plant was profitable and over the past several years, workers had collaborated with managers to reduce costs. Just a few weeks ago, corporate officials told the Cold Springs plant that it achieved the best overall cost reduction.

Also, the Cold Springs plant had been hiring, 53 last year and eight in January. It had given job offers to workers who were supposed to start this month.

The bad news caught the plant manager off guard too, David said. On Wednesday, as that shell-shocked supervisor notified workers of the corporate decision, he suffered a tongue-lashing. Workers were frustrated, upset and angry.

Some Cold Springs workers have been through this trauma before. They had worked at other Fox Valley paper plants that shut down. One told David on Wednesday that the Cold Springs shut down would be the fourth time that his life was turned upside down by a plant closure.

In 2016, another Neenah mill, Clearwater Paper, silenced two paper machines and laid off 85 workers. Some of them got jobs at Cold Springs. Now they’re out in the cold again.

David is worried about his co-workers, especially the young ones, those just recently married, who have big mortgages and little children. He’s concerned for the couples at the plant who had two good incomes and soon will have none.

With so many factories closed in the area, getting a good job is tough, he said. Walmart and fast food wages won’t support a family.

And then there are the older guys like David, with 25, 30, 35 years at Cold Springs. David is 57, an age at which getting a new job is particularly difficult. Cold Springs workers who are 55 or older and have 30 years in the factory can retire early, but they forfeit a quarter of their pension.

David and other local union officers began talking to Kimberly-Clark officials on Thursday about what the corporation will provide to the workers whose jobs it is eliminating, for example, whether it would offer them positions at other Kimberly-Clark factories in the United States.

David said he thinks the workers in Wisconsin’s Fox Valley who voted for Trump want to see some follow through on his promises to create jobs, raise incomes and establish fair trade.

None of that is accomplished by the GOP tax scam that promoted off-shoring by granting corporations lower tax rates for overseas factories and that gave massive breaks to job-cutting corporations like Kimberly-Clark.

None of Trump’s promises are accomplished by speeches about fair and reciprocal trade when no action follows.

Photo is of 2013 razing of KimberlyClark pulp and tissue plant in Everett, Wash.


“Right to Work” Rears Its Ugly Head Again

It must be Groundhog Day. There’s another Supreme Court case that could “deal a major blow to labor unions.”

Yes, the National Right to Work Foundation is getting another chance to impose “Right to Work” on the entire nation through Supreme Court fiat.

Nevermind how voters may feel about it. After Maine lawmakers passed “Right to Work” in 1947, voters repealed the law by a two-to-one majority. In 1958, California and Colorado voters refused “Right to Work” by three-to-two margins; Ohio voters turned it down two-to-one; and voters in the state of Washington said “no” by a margin of nine-to-five. Ohio lawmakers ignored the 1958 ballot results and passed “Right to Work” in 2011; and voters repealed the law by an overwhelming margin. Missouri lawmakers passed “Right to Work” last year; but the law is now on hold, and voters will have the final say in a referendum this fall.

Nevermind the state legislatures that have had second thoughts about “Right to Work.” In both New Hampshire and Delaware, state legislatures adopted “Right to Work” in 1947 – and then repealed it in 1949. Louisiana’s legislature passed “Right to Work” in 1954 and repealed it in 1956 (and then passed it again in 1976). Indiana passed “Right to Work” in 1957 and repealed it in 1965 (and then passed it again in 2012).

Nevermind that conservatives are supposed to be opposed to judicial activism. The National Right to Work Foundation wants the Supreme Court to make “Right to Work” the law of the land. The Foundation has been using court cases to chip away at labor unions since 1968 – and they’re proud of it. You can read a list of the court cases they’ve brought against unions here.

If they succeed, what happens next? All the press coverage has been about the potential damage to labor unions. But what about

Government contracting? The National Right to Work Foundation wants the Supreme Court to rule that government contracting is an “inherently political” process. That may sound good to the Foundation, in the context of union-busting, but what about the rest of government contracting? At last report, the federal government negotiated more than 3.8 million contracts a year, totaling about $440 billion in spending – and about 2% of the federal workforce was made up of “contract professionals” (who are not union members). What happens if the Supreme Court adds “politics” to the list of reasons a procurement decision can be challenged? Will taxpayers or business competitors be able to challenge contract decisions on the basis of politics? (For instance, the $24 million refrigerator upgrade to Air Force One – was that decision tainted by the $16.7 million in lobbying that Boeing paid for, last year? The more than $1 million its PAC has “invested” in this year’s federal campaigns? The more than $2 million it spent on the 2016 campaigns?)

Employers’ rights? The National Right to Work Foundation wants the Supreme Court to rule that an employee’s “right” to not associate with the union takes precedence over his employer’s right to determine conditions of employment. That may sound good to the Foundation, in the context of union-busting, but what about the rest of employer-employee relations? What happens when an employer requires a security clearance, but the employee wants to associate with terrorist organizations? When an employer wants to maintain a mainstream “brand” but the employee wants to use Facebook and Twitter to advertise his association with the American Nazi Party?

States’ rights to decide the terms and conditions of their workers’ employment?

40 years’ worth of judicial precedents, not just in labor law, but also First Amendment interpretation? (If workers’ First Amendment rights trump their public employers’ interests, won’t that open the floodgates for “leaks” to the press?)

What about all the other potential ramifications of this case?

Yep, it’s Groundhog Day. Another opportunity for the Supreme Court to overlook long-term consequences, in a case brought by political insiders.

Remember Citizens United? Citizens United President David Bossie is on the GOP’s National Committee and a “veteran conservative operative.” The Supreme Court used his court case to overturn campaign finance laws. Now Congress is openly doing what their donors (not voters) want. Read the Brennan Center’s How Citizens United Changed Politics and Shaped the Tax Bill.  Read Politico’s Big donors ready to reward Republicans for tax cuts. Is this really what the Supreme Court had in mind, when it ruled in Citizens United?

Remember Hobby Lobby? Salon describes how Hobby Lobby is “quietly funding a vast right-wing movement.” The Supreme Court used its case to give religious rights to for-profit corporations, and now we’re beginning to see the consequences. Cardozo Law Review explored how employers could use the Hobby Lobby decision to sidestep employment-discrimination laws. And at least one federal court has already allowed a corporation to fire an employee for “religious” reasons, notwithstanding the 1964 Civil Rights Act.

Notice how “Right to Work” is being pushed by special-interest organizations? The Koch-connected American Legislative Exchange Council (ALEC). The Koch-funded Americans for Prosperity. The Koch-affiliated US Chamber of Commerce. And, of course, the Koch-funded National Right to Work groups. Notice how it’s not being pushed by actual businesses? Not in New Hampshire. Not in Ohio. But the ripple effect of this court case could be huge.

Groundhog Day. Janus v. AFSCME. Another chance for the Supreme Court to reinforce the impression that it’s an extension of the Republican Party. After all the headlines about Merrick Garland and Neil Gorsuch, what are citizens supposed to think? Both President Trump and Senate Majority Leader Mitch McConnell claim Justice Gorsuch as “an accomplishment.” The RNC based a fundraising campaign on his confirmation. The Court just blocked a lower court’s order that North Carolina redraw its election maps, because the old maps were unconstitutional partisan gerrymandering that favored the GOP. (And now Pennsylvania’s GOP legislators want the Court to block a similar ruling in their state.)

Groundhog Day. Another attack by the special interests that have been transforming our government into an oligarchy. (“Oligarchy” – government by the few, especially despotic power exercised by a small and privileged group for corrupt or selfish purposes)

Voters’ view, last election day: 72 percent agree “the American economy is rigged to advantage the rich and powerful.” 75 percent agree that “America needs a strong leader to take the country back from the rich and powerful.”

Granite Staters’ view, now: only 14% think voters have more influence than special interests.

Groundhog Day, the movie, reminds us that we can be doomed to repeat the same thing over and over until we “get it right.” (How fitting that the movie is now back in theaters for its 25th anniversary.)

It’s supposed to be our government. When are we going to get this right?

At Cheshire Career Center, Kuster Discusses Efforts to Support Workforce Development Initiatives


(Keene, NH)- Today, Congresswoman Annie Kuster (NH-02) met with community, business and education leaders at the Cheshire Career Center to discuss efforts to support skills training and workforce development programs in the Monadnock Region. Kuster has introduced the Workforce Development Investment Act, which would create tax incentives to encourage companies to partner with education providers to develop workforce training programs for skills that are in demand within their community or region. It would also create a separate credit for the cost of direct training conducted as part of an educational partnership or licensed apprenticeship. This spring, Kuster will be announcing a workforce development agenda which will include comprehensive legislative solutions to increase economic opportunity in New Hampshire and across the country.


“Today’s rapidly changing economy demands that workers are able to access the training to fit the jobs of the 21st century,” said Congresswoman Kuster. “The Cheshire Career Center, River Valley Community College and Keene State College are spearheading the types of workforce development, on-the-job training skills, and business and education partnerships that are going to help the Granite State continue to grow and succeed. Their insight is critical as I work with my colleagues to develop policies that will increase opportunity for people across New Hampshire and around the country.”


Kuster was joined by Lisa Danley, Director of the Cheshire Career Center; Phil Suter, President/CEO of the Greater Keene Chamber of Commerce; Dan Osborn, Coordinator of Workforce and Community Education at River Valley Community College; Kate Hickey, Program Director at the Hannah Grimes center; Dan Henderson, Director of Corporate Partnerships and Strategic Initiatives at Keene State College; Ana Gonzalez, Human Resources at Bensonwood, and Cheshire Career Center students, among others.


Complaints of Systemic Wage Theft at General Dynamics Information Technology

CWA Estimates Federal Contractor May Owe $107 Million in Back Wages

The Communications Workers of America is calling on the Department of Labor’s Wage and Hour Division (WHD) to investigate systemic and serious wage violations being committed by General Dynamics Information Technology Inc., (GDIT) at its federally contracted call centers.

CWA filed a complaint with the WHD on behalf of GDIT employees providing evidence that GDIT misclassifies its call center agents at a lower prevailing wage rate than their job duties merit.

GDIT workers from call centers in multiple states are meeting today and tomorrow with leading Senators and Members of Congress, including Senator Bernie Sanders (I-Vt.) and Representative Keith Ellison (D-Minn.), and congressional staff about this alleged systemic wage theft. These GDIT employees answer questions, help enroll, and provide other assistance to callers about Medicare programs and the Affordable Care Act under a contract for the Centers for Medicare and Medicaid Services (CMS).

GDIT currently employs about 10,000 workers at 11 call centers under this contract with CMS. These jobs are covered by the Service Contract Act (SCA), a federal law that sets prevailing wage standards for federally contracted service work. But CWA has uncovered an extensive pattern of misclassification of workers under the SCA to avoid paying workers the wages they deserve.

As many as 2,000 workers at the Hattiesburg, Miss., call center, for example, would see their wages increased by $3,682 to $6,572 annually if they were classified properly and received the correct pay rate.

The Hattiesburg workers and workers from other GDIT locations have substantiated their claims with the Wage and Hour Division, supplying proof of their misclassification at lower wage grades that have resulted in their underpayment.

(A video from Good Jobs Nation highlighting some of the people who are being hurt by GDIT’s wage theft and wage suppression)

Adrian Powe is a durable medical equipment specialist in Hattiesburg, Miss., working with customers and equipment suppliers to make sure the Medicare recipients get the oxygen, wheelchairs, hospital beds and other equipment they need.

“It’s a paradox. I love my job, and love helping customers get the help and peace of mind they need. I talk to as many as 60 callers every day.  But the company doesn’t provide us with any peace of mind, because we’re being cheated out of our wages and have no job security.”

“I’ve had two rounds of extensive training to get to my current job. It’s a lot responsibility and a lot of work. But I’m being paid at a much lower rate. I’m being cheated, and the federal government must hold GDIT accountable. GDIT needs to follow the contract it agreed to.”

Powe earns $9.64 an hour, and drives nearly three hours round trip every day for work. He and his wife have an eight-month-old.

Kathleen Flick is part of the internal support group at the Bogalusa, La., call center. She said that GDIT’s wage theft “makes me feel horrible. Stealing from the working poor is really low.”

“I can’t run my air conditioning in the summer because I can’t afford the electric bills. When I needed a major car repair, I had to take the money out of my 401k retirement plan. I’d like to visit my kids, both of whom are active military, but I can’t afford to do it.”

Like Powe, Flick loves her job. But she doesn’t like being cheated of her rightful wages. “GDIT told us that ‘the federal government sets your wages.’ So we’re calling on the federal government to have real oversight of contractors like my employer so that it stops cheating workers out of their rightful wages. We shouldn’t be treated as cut-rate employees.

“This will be a real test of whether laws that safeguard working people are actually enforced under the Trump administration,” said CWA President Chris Shelton. “We’ve heard a lot of  promises from this president about defending American workers. It’s time for action, not rhetoric.”

If WHD agrees that there is widespread misclassification, CWA estimates that tens of thousands of current and former GDIT employees at CMS call centers stand to recover more than $100 million in back wages since the contract with CMS was signed in 2013. Such a sum would be the largest SCA recovery in history.

“We want the government to enforce the law,” said CWA General Counsel Jody Calemine. “We’re asking the Department of Labor for an enterprise-wide investigation, to make sure all workers are paid what they’re owed at all 11 call centers covered by this contract.”

GDIT and Vangent, a call center company acquired by General Dynamics in 2011 and merged into GDIT, have a history of wage theft and since 2007, have agreed to pay $4.2 million in back wages based on Wage and Hour Division investigations. GDIT also has been the focus of unfair labor practice charges for illegal threats, surveillance and interrogation of workers seeking to exercise their freedom to join together and negotiate improvements in their wages and working conditions.

Leo W Gerard: America Needs Cops On The Trade Beat

The Trump Administration placed tariffs on imported washing machines and solar cells this week, provoking wailing and gnashing of teeth worldwide.

The same over-the-top beating of breasts can be expected if the administration penalizes steel and aluminum imported from countries that violate trade regulations.

Every time the United States enforces trade law, the recrimination starts. America, the free traders say, has no right to shield its domestic manufacturing from the onslaught of unfairly traded imports. There should be no cops on the trade beat, free traders say. It should be the Wild West when it comes to international trade, with the last factory standing the winner, no matter how many trade rules it defied to get there.

American manufacturers – including those that make steel, aluminum, solar panels and washing machines – can compete and win against any challenger in the world when the contest is fair, when all firms that export follow trade rules. But American manufacturers lose when foreign producers export underpriced products after receiving loans that don’t have to be paid back, government-subsidized raw materials and other massive state aid.

American manufacturers shouldn’t be patsies in a rigged game. That’s why they are demanding trade law enforcement. They’re not seeking protectionism, which is shielding domestic manufacturing from fairly traded imports. Instead, they want prosecution, which is punishing trade violators whose cheating destroys American manufacturing and jobs.

China, probably the most flagrant trade rule violator in the world, was among the first to cry “protectionism” after the Trump administration announced the washing machine and solar panel tariffs on Monday. Chinese president Xi Jinping’s chief economic advisor, Liu He, said at Davos this week that his country stood against protectionism and for globalism.

Sure, China wants globalism after its trade violations have destroyed every other country’s industrial base, leaving the Asian giant standing as the only producer globally.

And it’s close to achieving that in the manufacture of solar cells and panels after more than a decade of trade violations. China issued a renewable energy law in 2005 including measures to promote solar manufacturing. Then in 2010, the China State Council listed renewable energy as one of seven industries eligible for special government incentives and loans.

Before China began giving solar manufacturers special perks in 2005, its share of global production was 7 percent. Now, it makes 60 percent of the world’s solar cells and 71 percent of solar modules.

In 2011 the U.S. Commerce Department determined that China was improperly subsidizing its solar producers and that they were selling panels and cells in the United States for less than fair market value, both of which violate trade rules.

As a result, the United States imposed penalties on the imports. Chinese manufacturers ducked the tariffsby moving production to Taiwan.  When American producers asked the Commerce Department in 2013 to deal with this dodge, Chinese companies moved production again.

The Commerce Department concluded that from 2012 to 2016 imports of Chinese solar cells and panels grew 500 percent and the price declined 60 percent, bankrupting and driving out of business American producers. Between 2012 and 2017 – a period of just five years – 25 American solar manufacturers closed. And now, another has shut down and declared bankruptcy.

Last May, two U.S. solar companies asked the U.S. International Trade Commission (ITC) to investigate. The ITC recommended tariffs even higher than those that the president ultimately imposed this week. They penalties are worldwide this time, preventing Chinese companies from evading them by shifting production again.

This kind of trade law flouting by China is exactly what is ravaging the American aluminum and steel industries.

Twenty years ago, there were 23 aluminum smelters in the U.S. Now there are five.

Similarly, in the steel industry, thousands of good, family-supporting U.S. jobs were lost and mills and parts of mills closed as China ramped up production, flooded the world market and drove down prices. Between 2000 and 2014, Chinese steel production rose 540 percent. U.S. production, a mere fraction of the Asian giant’s, fell 13 percent.

As with solar, China put government money into its aluminum and steel industries, improperly tipping the trade scales in its favor. And as with solar, when U.S. aluminum and steel companies won trade cases, some Chinese producers moved or falsely marked products as made elsewhere to skirt American tariffs. The European Union’s anti-fraud office determined the same thing – that Chinese steel was shipped through Vietnam and given fake certificates of origin to evade EU tariffs.

At just about the same time the solar and washing machine trade cases were filed last year, the Trump administration announced it would investigate whether the damaging effects of unfairly traded steel and aluminum were threatening national security. If so, the administration could impose import quotas and tariffs. Initially, Commerce Secretary Wilbur Ross said these investigations, under Section 232 of the Trade Expansion Act of 1962, would be completed by June 30, 2017.

Integral to every jet, submarine and military weapon, steel and aluminum are vital for defense. Infrastructure is part of national defense as well, from interstate highways to pipelines. The inability to produce these metals in sufficient quantities and qualities domestically jeopardizes national security.

The Commerce Department report was delayed for months, during which time foreign producers flooded as much steel and aluminum as they could into the United States before the anticipated tariffs. Steel imports rose almost 20 percent. Aluminum and bauxite imports rose nearly 32 percent.

The Commerce Department finally delivered the steel report on Jan. 11 and the aluminum report on Jan. 19. Neither was made public, and the administration can, under the terms of the law, wait another 90 days to act. White House Deputy Press Secretary Lindsay Waters said the administration would announce its decision at an appropriate time.

That time is now. It is great that the administration punished the trade-violating exporters of solar products and washing machines. The American steel and aluminum industries and workers want that same enforcement immediately from the nation’s top trade cop.

Deindustrialization In The Granite State

Written by MARIE DUGGAN. 
This article first appeared in Dollars and Sense

The central room is 65,000 square feet with a high ceiling. This room is noisy, with large machines emitting loud hums and whirrs. The machinists are dwarfed within the canyons between the rows of equipment. Many of the machines have plastic housings, so that each looks like a giant photocopier, a rectangular plastic box taller than a person, and perhaps the length of two or three people. There is a window on the side of each one. Inside, the drilling/lathing/milling operation is performed on the metal. However, someone peering in through the window doesn’t actually see a metal tool hitting the material. The surprising sight of water gushing furiously meets the eye. The tools themselves operate at tremendously high speeds (2,000 inches per minute, or 20,000-50,000 rpm). The water pushes metal debris away, as human hands or air flow did on the previous generation of machines. But water also acts as a coolant to put out sparks and to counteract the tremendous heat created by the friction of metal tool on metal part.

This scene is not from Germany or South Korea, but rather from the southwest corner of New Hampshire, only fifteen miles from the borders with Massachusetts and Vermont. The high-tech machine shop described was Knappe and Koester—in 2011, before it was sold to GS Precision, which has since expanded the operation. Manufacturing industry in Keene specializes in the production of capital-goods—products used as parts or machines at other businesses in other production processes: ball-bearings, diamond turning machines, lens producers, lubricants for machinery, and inks and date-stamp printers for food and pharmaceutical plants around the globe. These factories are so clean and relatively small (employing about a hundred, not hundreds or thousands) that newcomers to New Hampshire, like myself, tend to notice the cows at the dairy farms and the fresh ice cream stands, not the manufacturing plants tucked behind real estate offices or next to hardware stores.

In an effort to repair the connection between economic theory and industrial activity, I picked up the phone and contacted some local managing owners to ask if my undergraduates could tour the plants. The industrialists were excited that someone at “the college” showed interest in what they did. We saw a high-tech machine shop unloading the latest computerized five-axis machines from Japan in 2011. We watched young computer-savvy machinists assemble diamond turning machines by hand, and saw a demonstration of how the machines drill plastic molds for producing touchscreens in factories around the globe.

Keene lies in the Connecticut River Valley, which in the mid-19th century witnessed the birth of the machines that make replaceable metal parts. Machinists from Hartford, C.T., to Lebanon, N.H., drove up global productivity during the industrial revolution, and since that time the machinists’ skills had been passed down from father to son (and occasionally to daughter). This chain was damaged with the layoffs and plant closings between 1980 and 1990. In those years, few fathers told their eighteen-year-old children to become machinists. As a result, there is now a shortage of computer-savvy machinists, so local firms donated funds to build a computerized machine tools laboratory at Keene State and have offered a $1,000 scholarship to train at the local community college, which shares the lab. Many of Keene State’s staff and students are from Connecticut, Vermont, and New Hampshire, and come from families with connections to machining.

The economic forces impacting the machining jobs that continue to sustain local families are hard to see using standard economic datasets. Most databases provide information only on publicly held firms—those that issue shares that are traded on the stock exchange. Ownership transitions between 1998 and 2012 shifted some of the local plants into the hands of large, publicly-held corporations. Yet some of the local manufacturing firms, including some of the most dynamic in the United States, remain smaller in scale and independently owned, and so are absent from standard databases. My students and I began conducting oral histories of owners and workers in order to learn more about the private firms that do not appear in the data.

The Elephant in the Room

In November 2016, Trump started to pick up a surprising amount of support in many parts of the nation. As it turned out, even though Clinton won the popular vote, 2,026 counties went for Trump, while 447 went for Clinton. As I began to pull together my research about deindustrialization in my new hometown, the Trump phenomenon was getting hard to ignore. It suddenly dawned on me: Keene, N.H., wasn’t the only place to have experienced an attack on its export-competitive industrial base between 2000 and 2012. Was it all of New Hampshire? Or was it just about everywhere but San Francisco, Boston, and New York City?

Manufacturing Jobs in the United States

Figure 1 is what I found in five minutes. The crushing loss of manufacturing jobs between 1980 and 1985 is a vivid memory for me, because I graduated from California’s Berkeley High School in 1981, where 90% of my peers were not going on to four-year college. When I arrived at Tufts University in Medford, Mass., I saw storefronts boarded up and watched people in line at the convenience store pay with food stamps. The baleful glares at us privileged college students only got worse as the unemployment rate reached 10.9% in November 1982. When I moved to Brooklyn in 1990, I often drove by the empty industrial buildings along the waterfront.

So, when I saw on this graph that the manufacturing job loss of 2001-2009 was triple that of 1979-1985, my jaw dropped. And why didn’t I know this? I read the New York Times, the New Yorker, the Financial Times. I hang out with heterodox economists, for goodness sake! I now suspect that industry left our intellectual centers between 1979 and 1985—out of sight, and so out of mind—but remained a powerhouse in so-called “rural” areas until 2001, only to suddenly and precipitously decline. I realized how lucky I was to be living in a place that is like a good bit of the United States.

Many economists have been focusing on macroeconomics—the ups and downs of the entire national economy, measured in “aggregate” data—for the past twenty-five years. The instability of the financial sector and rising income inequality could both be analyzed through economy-wide data, so we all rightly got our heads in that game by 2007. If one takes manufacturing jobs as a percent of total employment, there has been a continuous decline since the late 1960s, and one would therefore see little new between 2001 and 2009. Some people point to China’s accession to the WTO in 2001 as the cause of the U.S. decline in manufacturing. However, my own research inside firms suggests that competition from China is not the main story

Keene’s capital goods producers do not compete with producers in low-wage nations, but rather with firms in Europe and Japan, and unit labor costs have generally been higher in those places than in the United States since 1990. The decline in U.S. jobs has less to do with external forces than Americans seem to think, and more to do with the policies taken (or not taken) inside the United States itself. If a firm was going to collapse in the face of cheap labor overseas, that happened in 1982 (as in shoes and textiles). The manufacturers who survived until 2000 were made of sterner stuff. Monetary policy that promoted financial bubbles turns out to be another ingredient in the decline of manufacturing jobs between 1978 and 2012. I will analyze this in a three part-series by exploring three different moments in recent U.S. economic experience: 1980 to 1990, 1990 to 2000, and 2001 to 2012. I use case studies from Keene to illustrate the arguments.

Deindustrialization Part I:

Jim Koontz, CEO of Kingsbury, 1983– 1998, in white shirt presenting an award, 1987.
Photo courtesy of the Historical Society of Cheshire County, N.H.

The Connecticut River Valley Machine Tool Sector, 1980-90 Hank Frechette purchased Kingsbury Machine Tool from his father-in-law, E.J. Kingsbury, in 1963. That year, Frechette also hired the entire graduating class of Wentworth Tech in Boston. “I had never heard of Keene,” relates Donegan, an electrical engineer in that class. But it would become his home and his life for the next forty- odd years. Machinists from Vermont and New Hampshire considered Kingsbury to be one of the most exciting places to work in New England. Their work ethic and skills, plus the innovations of the young electrical and mechanical engineers, plus the management by Hank Frechette and Charlie Hanrahan—a co-owner who was also a member of the founding family—grew the company threefold between 1963 and 1976, so that it employed around 1,000 people. Many machinists commented that, in those days, Kingsbury was like a family. Charlie Hanrahan worked hard to keep it that way. He had a notebook in which he wrote down every man’s name and the names of his wife and children, with their ages. (Yes, all the workers at Kingsbury—indeed, all the machinists in Keene—were men. That is no longer the case, but it was in those days.) He trained new supervisors to make similar efforts to know each member of the shop personally. Once a man got a job at Kingsbury, he was set for life—until 1984.

Hank Frechette made a name for himself nationally and became a leader in the National Association of Manufacturers. There he met another rising executive, Jim Koontz, who was based in Detroit. When Frechette died suddenly in 1976, his astute widow Sally Kingsbury asked Koontz to come to Keene and take the helm of the business. Koontz’ wife had doubts about leaving the community of executives in Ann Arbor for remote Keene, N.H., but the couple made the move with their four children. Between 1978 and 1982, Kingsbury was employing three shifts of workers to keep up with continuous orders as Detroit auto companies tried to re-tool to compete with small cars from Japan. Koontz became CEO in 1983.

Profits in Machine Tool Sector, United States, in Millions of Dollars

In 1984, Kingsbury had its first layoff: over 200 people. This was a shock to the community and many blamed Koontz as an outsider with no local ties—compared to Charlie Hanrahan, for example, who had gone to grade school with many of the men. But this wasn’t just a personality issue—there were larger economic forces at work. In 2012, Jim Koontz related to me that it felt in 1983 as if the company had gone off a cliff, one minute producing three shifts a day with paychecks chock full of overtime and bonuses—to suddenly a period of six months with no orders. It was only in early 2017 that I actually saw in Figure 2 that machine tool industry profits for the nation as a whole dropped in 1983 from nearly $4 billion to $1.5 billion—a drop which does indeed look very much like a fall off a cliff. What was causing that massive decline in industry-wide profits in U.S. machine tools? One factor was a dramatic technological shift from mass production to flexible production, precisely in the 1980s. Jim Koontz explained it:

Kingsbury made machines that could produce one million to two million parts for the Big Three auto manufacturers. After a while, volumes went down. At one point, those three auto makers produced all the autos in the world. By 1980, there were thirty companies producing for the world, but by now [2012], there are three hundred auto companies worldwide. Each automobile has 30,000 parts, and 80% of them today are produced by suppliers, so there must be tens of thousands of suppliers, globally. Because of this, the volumes that auto makers needed their machines to produce went down from one million to 100,000. This changed the style of the technology that the manufacturers needed.

Few businesses today need a machine that can produce millions of identical parts, like Kingsbury produced back in the 1970s. Instead, they need machines that can be reprogrammed to produce different parts. The name for such machines is “CNC”—computer numerical control, which means that the computerized machines are run by software. The modern machinist enters the dimensions of the parts to be produced, and then listens as the machine chooses the tools and goes about making the parts. Kingsbury had purchased such a machine by 1987. Machinist Phil Hilliker thought it was the finest piece of equipment he had ever worked with. The gossip among owners of plants in and around Keene is that Jim Koontz never adopted CNC technology—Kingsbury never adapted to changing technology in changing times—and this is why Kingsbury failed to make profits after 1983. As one financial wizard told me, the reason U.S. machine tool makers did not survive until the 21st century is that they were, “Fat, lazy, and stupid.” But there is evidence that this judgement is far too hasty.

Over time, a couple of reasons—more solid than gut instinct—emerged to challenge the conventional argument that U.S. machine tool firms just didn’t adapt. For one thing, Kingsbury acquired the machine tool firm Hillyer, and Hillyer did make CNC machines. Secondly, the CNC machine Phil Hilliker stands in front of was made by Jones and Lamson (J&L). (One day, a student in my class magnified a photo of the machine and found the company’s name.) J&L was a machine tool maker in Springfield, Vt., a town about fifteen miles from Keene. The company filed for bankruptcy in 1986, so the “can’t adapt” argument had been applied to them, too. But there in front of us was clear evidence that J&L had produced a computerized lathe by 1986, and machinist Phil Hilliker said he was using it by 1987, and it was the finest machine he had ever worked with. Thirdly, the machine shop next door to J&L in Springfield was Bryant Grinding, and it was in decline by 1990. Yet at a recent lecture a computer scientist told me he had applied for a job as a computer programmer at Bryant in 1981, and they were using what he considered a “nifty” program for machine tools. These are three hints that the Connecticut River Valley machine tool sector was adapting. Financial changes were a second factor exacerbating the pressure inherent in a period of technological change and low profits. It was not until 1983 that Jim Koontz became managing owner of the company. He did so by means of an internal leveraged buyout (LBO). That is, Koontz did not have the personal wealth necessary to purchase the company. However, Sally Kingsbury and the rest of the board felt that he had demonstrated the managerial skill in 1978-1982 to take over, and they wanted the manager of the firm to have an ownership stake to tie him to the community. In an LBO, a consortium of banks puts the money up to purchase the company. Specifically, they put the money into a fund, and the fund purchases the company. The profits that the firm makes are then earmarked to pay off the banks. Once the bank loan has been paid off, the fund is owned by management. In this case, Koontz was not the only one “in on” the fund. Some of the engineers wound up being part-owners of the fund, as did members of the Kingsbury family.

Charlie Hanrahan (far right) with other Kingsbury executives. His management philosophy: “Treat people as you would want to be treated.”
He retired as CEO in 1982.
Photo courtesy of the Historical Society of Cheshire County, N.H.

The use of an “inside LBO” to transfer ownership of Kingsbury from one generation/owner to the next was not new. Hank Frechette had done the same thing when he purchased Kingsbury from his father-in-law E.J. Kingsbury. Yet it seems that something went wrong with this second LBO. LBOs were more common by the 1980s, and it is likely that the leverage was higher—meaning a smaller down payment, and a larger amount lent. Everyone who was in on the LBO considers Jim Koontz to have been an outstanding executive who did his best in difficult times. The workers on the shop floor and the supervisors who were not part of the LBO, however, consider Koontz to have been their worst nightmare. As an educated guess, I would say there were two problems: First, paying off an LBO with profits from the firm would be difficult when the profits of the entire industry suddenly fell by 60%. That, in itself, may have increased pressure to cut costs in 1984.

And the second problem was that the stock market rose continuously from 1987 to 1999. Between 1969 and 1982, an investor in the stock market would not have made capital gains, but only dividends. Those ambitious for more dramatic returns (such as the Kingsbury family and Hank Frechette) put their money into physical plant and talented labor, and made profits by expanding market share through quality products. After 1982, industrial profits were hard to come by, while Alan Greenspan kept interest rates relatively low between 1987 to 1999, which made capital gains in the stock market the new normal. At Kingsbury, managers “in on” the fund initially used to pay off the LBO received profits out of production, and invested them into the rising stock market where they must have reaped consistent capital gains—while workers on the shop floor lost their bonuses because the profits made from producing and selling machine tools were meager in the 1980s and the 1990s. At the time, gains made in shares of other companies on the stock market may not have seemed to come at the expense of the workers inside Kingsbury. But a wedge had emerged between the interests of owners and the workers on the shop floor. Supervisor Kenny Johnson described “a change in how [Jim Koontz] handles his people.”

It was his way and no other way. There was a period of time where he managed by fear, in the sense that if people didn’t go along with his idea he would put fear into them and he wanted to make them into a ‘yes’ person. That’s one of the ways he changed and didn’t listen to people. For instance, when the union was being introduced at Kingsbury’s, he’d come up to me and he’d ask me some questions, he thought I was being too easy on some of my employees but my philosophy hasn’t changed then, hasn’t changed today, you treat people how you like to be treated. I’m not a ‘yes’ person. So I told him how I felt. I felt like he had really loyal employees and he thought I was treating the employees—he said I had too much compassion for my employees, ok? I had too much compassion for my employees, that’s not the way management was going to go in a sense of compassion, and I told him the truth, told him how I felt, I know it wasn’t the way he felt and we got in a discussion and he almost fired me on the spot, ok?

Putting his job on the line to stand up to Jim Koontz for the employees in the late 1980s was a turning point in Kenny Johnson’s life, a moment that took great courage and won him the respect of the workers—to this day nearly thirty years later. He had been trained by Charlie Hanrahan to know and care for his employees and their families, as the way to motivate the highest effort from the machinists. But now Koontz was pressuring him to lay off good machinists because they supported a union. Kenny Johnson was not a fan of unions on the grounds that “you don’t need a union if you treat your people right, ok?” However, Koontz was not, in Johnson’s opinion, treating the shop floor right. Koontz hired Jeff Toner as vice president, and the general view was that Toner was a hatchet man to get pro-union workers fired. With considerable struggle, soul searching, difficult conversations, courage and solidarity, the machinists voted for a union in 1991.

What did the union get for the workers? Largely it was access to the gains from the stock market by means of the pension. As one retired machinist put it recently, “I have been retired for eight years, I am getting a pension from that place, and it’s going to keep on going. I mean, the guy who set up the 401k plan or whatever you want to call it, the guys knew what they were doing with this thing.” The trick was to keep your job. The industry’s profits were down, so only half kept those jobs into the 21st century. But that’s 300 or 400 workers gainfully employed for forty years. Many machinists from Kingsbury still meet for breakfast every Thursday, driving from 45 minutes away even when it is ten below and icy road conditions, to gather outside the restaurant at 6:45—similar to their old commute for the 7am day shift.

The layoffs at places like Kingsbury in 1984 broke a social compact between owners and workers, and from 1983 to 1991, the Connecticut River Valley felt like a war zone. Workers lost confidence in management’s intention to look out for product quality and the labor force, and that loss of confidence broke some unspoken taboo. The ratio of owner compensation to worker compensation at the firm was much lower in 1983 than it is today. One form of compensation to the owner was the respect (tinged with fear) of the community and the workers on the shop floor. Kingsbury was also a major philanthropic giver, cementing the owner’s sense of responsibility for and ownership of the entire community.

When the workers at Kingsbury mobilized for a union, they were publicly demonstrating that they had lost confidence in Jim Koontz. At stake was really who owned the plant: the legal owners, or the men whose skill gave the machines their reputation? Machinist Phil Hilliker was one of the first to wear a union shirt. He related to my students in 2015 the pressure he was under:

They would send my work out to have it done somewhere else. ‘I’ve got no work for you Hilly, got to lay you off.’ They didn’t have to lay me off, I had so many things I could do around there. I was their whipping boy. They wanted to break me down because I was an older one. But it couldn’t be done. I said, If B-52s didn’t kill me during the Korean thing, when they bombed me, you sure as hell ain’t gonna be able to do it.

Most of the male workers had served in war, either World War II, Korea, or Vietnam, so a comparison of the tensions on the shop floor to war was not made lightly.

Divisions That Wore People Down

The 1980s were an intense time of technological change, as Kingsbury began to use computerized machine tools to make products, and then also acquired Hillyer Machine Tool to have their own line of computerized products. The loyalty that supervisors like Kenny Johnson exhibited to older workers meant the young were fired first, even though they might have young children to support at home. One of the men laid off in 1984 had lost a finger at Kingsbury’s. Yet, as a young man, he had never favored the union, because unions supported seniority rights. He felt that the younger cohort to which he belonged was better able than the old timers to learn new technology and turn the firm’s prospects around. This younger man hates unions, and blames Kingsbury management for acting like a unionized shop in 1984, though no union was voted in until 1991.

The toll the decade took was not only on the shop floor. Charlie Hanrahan was the managing owner who had gone to elementary school with the men and knew every man’s family members by name. Hanrahan had been Hank Frechette’s right-hand man, and ran the company from 1978 to 1982, teaching Jim Koontz the ropes, before retiring. He gave the speech of his life trying to prevent the vote for a union. He had a heart attack during this period, and his children believe it was caused by his divided loyalties. He respected Jim Koontz, and he developed close ties to the shop-floor workers. That was his way of inspiring people to give their best effort. Though Hanrahan passionately believed a union was the wrong way to go, every machinist I have spoken to goes out of his way to explain the confidence, affection, and appreciation they had for him. Hanrahan may have been caught between a manufacturing world that viewed the workers’ skills as the source of profits (1958–1982) and the new era (1983–2012, at Kingsbury) when the source of wealth was capital gains on the stock market, which could be harvested best by laying workers off from time to time.

The tragedy of the tensions in the 1980s is that both managing owners and machinists cared deeply about the future of the firm. For all the flaws that the workers saw in Koontz, he had virtues also, especially compared with his successor. Koontz was a man who was trained to work with machines—he did not have an MBA—and most machinists prefer working for someone who knows technology. He lived in Keene, rather than the distant corporate ownership of a conglomerate. The pension contributions papers demonstrate that he maintained the workers’ pension with utmost regularity. As auto production went global, he traveled the world from South Africa to Brazil to sell Kingsbury Machine Tools. He used Kingsbury retained earnings to acquire Hillyer to keep up with technological change.

The Volcker Shock Makes Imports Cheap

U.S. Federal Funds Interest Rate

Technological change does not seem adequate to explain the number of firms that closed in the Connecticut River Valley between 1980 and 1990, given that they had weathered so many changes during the previous one-hundred years. What else was going on between 1979 and 1984 that could explain the massive drop in U.S. machine tool profits of 1983? I have taught macroeconomics four times a week for seventeen years, so of course, the hike in the U.S. interest rate between 1979 and 1983 came to mind. Figure 3 is shown with the pink area to indicate that time period.

During the 1979 to 1983 time period, this base nominal rate of interest rose from 9 to 19%. The Federal Funds Rate is what banks pay to borrow from each other for overnight loans, and banks pop a markup on top of that before they lend to consumers, so the interest rate for a credit card to a person of sound credit was probably 29% when the Federal Funds Rate was 19%. The reason Fed Chair Paul Volcker raised the interest rate so high was in order to kill off inflation, which was about 10% per year in the late seventies. He did reduce inflation, but using the interest rate to fight inflation is like using chemo to fight cancer: it killed off a lot more than inflation.

Everyone knew that a high rate of interest would reduce business investment in fixed capital equipment like machine tools. The logic by which high interest rates reduce new capital spending is based on the idea that such spending is financed largely by debt. When interest rates are high, the cost of borrowing rises. U.S. firms probably made the rational decision to delay new capital spending in the hope that the interest rate would come down.

Index of Unit Labor Costs in the U.S., Germany, and Japan

Figure 4 illustrates unit labor costs—the cost of wages and benefits employers incurred in the making a hypothetical widget in various countries. While U.S. unit labor costs (the black line) had long been higher than German (light gray) or Japanese (medium gray), that gap widened precisely between 1979 and 1984. This was due to two factors:

First, U.S. manufacturers may have delayed purchasing new equipment until after interest rates came down, while their Japanese and German counterparts did not. Instead, they invested in new machinery that meant workers could produce more units in the same amount of time.

Second, what U.S. policymakers may not have realized is how much the exchange rate for the U.S. dollar would appreciate in response to the rising rate of interest. Exchange rates had been flexible only since 1971. A rising interest rate pulled wealth from around the globe into U.S. bank accounts and this drove up the value of the U.S. dollar relative to every other currency in the world. The dollar appreciated relative to the German deutsche mark and the Japanese yen, and competitors using those currencies were the ones that the machine tool sector faced. Suddenly, the prices of U.S.-made products went up when converted to deutsche marks or yen, and the prices of German and Japanese products went down when converted to dollars.

This drop in relative unit labor costs gave the Germans and the newly industrializing Japanese an opening they needed into the U.S. market for machine tools. To see how this worked, consider a hypothetical tool such a CNC lathe, produced by a U.S. company. It is 1979, and the tool costs, say, $100,000 in the United States. Let’s say that in 1979, a customer is considering buying a CNC lathe. They have been buying from the U.S. company for fifty years, so they stick with the U.S.-made machine, even though the Japanese or German import costs the same.

Hypthetical Competition Between U.S. and Imported Machine Tool, 1979–1984

However, by December 1984, U.S. machine tools experience inflation of 36%, so the US machine costs $136,000. Meanwhile back in Japan, rising productivity reduces costs by 12%. If productivity rises more slowly in United States than Japan, then the U.S. dollar should depreciate, which would hold steady the price that U.S. buyers pay for a Japanese machine. However, Fed Chair Volcker tries to control inflation by raising U.S. interest rates to 19% in 1981, and the high interest rate drives up the value of the dollar, and the import is now “on sale” for only $85,500. That is a $51,000 savings! Under these circumstances some firms decide to try out the import. In short, the U.S. Federal Reserve gave imports an opening into the U.S. market by creating a 38% discount on the price of an import relative to a U.S.-made machine tool in 1984.

By 1986, Volcker had realized his mistake and did depreciate the dollar by around 38%, so that the Japanese import would cost the same as the American machine. By then 400 people had already been laid off from Kingsbury in Keene, N.H., and Jones & Lamson in Springfield, Vt., sold out in 1986.

Financial Engineers Finished the Job

By 1988, the Goldman Industrial Group had purchased J&L out of bankruptcy, and began applying “financial engineering” techniques to extract value from the firm. “Financial engineering” is used to make profits from dying companies by taking them apart. Of course, many times it’s not clear that the firm was going to die if the financial predator had not attacked. By 1990, Goldman had purchased another once-fine firm, next door to J&L, Bryant Grinding. And in 1998, Goldman protégé Iris Mitropoulis purchased Keene’s Kingsbury from Jim Koontz, where Phil Hilliker still had his job. Mitropoulis owned Ventura Industries, a separate company which owned only one thing, Kingsbury Machine Tool. By 2001, it was clear that she was not investing the retained earnings she had acquired along with the plant into new equipment. “Ah, she took the retained earnings!” erupted one retired executive in sadness and frustration.

By 2007, half of the pension fund was missing as well. Indeed in 1983, the IRS had ruled that a firm facing bankruptcy had the right to use the workers’ pensions to try to keep the company open. In 2016, I submitted a Freedom of Information Act (FOIA) request to the Federal Pension Benefit Guarantee Corporation, and there was a very fat file on Kingsbury. Up to 1998, Jim Koontz ran the company and the accountant Tom Cookson filed nice neat forms verifying the financial health of the workers’ pension fund. He made it through ups and downs of the stock market with only a few bumps, so that $45 million dollars was in the fund by 1998 when Koontz sold it. Mitropoulis, on the other hand, filed messy and incomplete pension documents, and by 2007, the fund had only $26 million in it. Maybe it was all the 2001 decline in the stock market, but maybe not. In addition, she went out tirelessly asking the federal government to lend the company money earmarked for woman-owned businesses. It appears that all the money that was ever granted to Kingsbury by its previous owners, its employees, or lenders was transferred to Ventura Industries, so that Kingsbury declared bankruptcy in 2012. Financial engineering should not be legal. But it is.

When Keene looks at Mitropoulis’ actions 1999-2012, the reign of Jim Koontz at Kingsbury appears in a more nuanced light. Mitropoulis was easy to get along with, and so friendly to the union men, that she disarmed them while she probably transferred value to Ventura Industries. She never traveled overseas to find any customers, she did not invest the retained earnings in the company, half the pension fund vanished on her watch, and she borrowed money at subsidized interest rates and then declared bankruptcy so she wouldn’t have to pay it back. If we step back to see what Kingsbury’s story tells us about U.S. deindustrialization, it’s not only that Volcker’s high interest rates tilted the scale toward imports. There is a second more insidious aspect: it appears that the easy money provided by new Fed Chair Alan Greenspan after 1987 created a rising stock market that rewarded people who took value out of industrial production. Koontz and people of his era stumbled upon those capital gains, while financial engineers such as Mitropoulis actively extracted value from industry to shift the wealth into other assets. Class struggle was nothing new to factories, but between 1980 and 1990, unstable monetary policy was a new pressure hard for either owners or workers to see. They wound up turning on each other. Indeed, the influence of changing monetary policy has been hard for left economists to see, and we are only now, thirty-five years later, beginning to understand what a sea change in the institutional context for industry was taking place.

 is a professor of economics at Keene State College in Keene, N.H. You can follow her and her students’ work on these issues at: industrialsurvival.wordpress.com.

  • On the machine tool firms of the Connecticut River Valley, see Robert Forrant, Metal Fatigue: The Rise and Precipitous Decline of the Connecticut River Valley Industrial Corridor, Baywood Publishers, 2009.
  • On financial engineering, see Eileen Applebaum and Rosemary Batt, Private Equity at Work, Russell Sage (2014).
  • On how an independent firm is affected by rise of stock market, see John Hacket, Race to the Bottom. Author House, 2004. This is a novel, but the author was a PhD economist and chief financial officer at Cummins Engine for decades, so his insights are worth reading.
  • On pensions, the following is still a good overview: Theresa Ghilarducci, Labor’s Capital, MIT Press (1992).
  • Part II of this series will take a closer look at how U.S. industry was damaged by monetary policy in the 1990s.

Republished with permission from Dollars and Sense

NH Looks To Raise The Minimum Wage To $15.00* By 2021

This week, the New Hampshire State Senate held a public hearing on SB 554, a bill to raise the minimum wage to $15.00* per hour by 2021.  This bill, is different than any of the previous bills to raise the minimum wage because the bill does give a generous reduction in the lowest allowable hourly wage to employers who provide healthcare to their employees.

“New Hampshire has one of the lowest unemployment rates in the country, but when it comes to paying decent wages, we are at the very bottom of the scale. All of the other New England states pay at least $10.00 per hour, putting New Hampshire at a competitive disadvantage. People working full-time in New Hampshire should be able to earn enough to support their families, not qualify for public assistance. This legislation is a creative solution to provide workers with a livable wage while giving employers an incentive to provide their employees with much needed health benefits. I call on my Senate colleagues to join me in passing this bill to address the long overdue need for a livable wage for our state’s workers,” said Senator Donna Soucy who sponsored the legislation.

Currently New Hampshire’s minimum wage is set the federal government minimum of $7.25 per hour.  Senator Soucy’s proposal would raise the minimum wage, effective July 1st, to $9.00 per hour, or $7.50 per hour if employers offer health insurance to their employees. By 2021, the minimum wage would rise to $15.00 per hour, or $12.00 per hour for those employees provided benefits.

Inside the proposed legislation is how the “employer provided benefits” would work.

“Employer-sponsored plan” means health benefits offered by the employer to the employee and his or her dependents at a total cost to the employee for premiums not to exceed 10 percent of the employee’s annual gross taxable income from the employer.”  

Here is an example of how this would work.  Bob makes $15 per hour, which equates to $31,200 annually for full time employment.  That means if his employer offers him healthcare benefits where the premium does not exceed $3,120 per year then they would be eligible to reduce their minimum hourly rate to $12 per hour. That works out to about $60 per week.

The National Conference of State Legislators reported that the annual employee contribution for employer provided healthcare in 2017 was $5,714. That means that there is a very small likelihood of an employer qualifying for this reduced hourly wage.

The question is will the New Hampshire Legislature finally do what all the other New England states have already done, increase the minimum wage?

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