subcontracting- innovative labor strategies

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Labor Research Review

Volume 1 | Number 15Privatization & Contracting Out

Article 1

1990

Subcontracting: Innovative Labor StrategiesSue Helper

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1990 by Labor Research Review
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Subcontracting: Innovative Labor Strategies

Abstract

[Excerpt] Over the past 15 years, U.S. corporations have searched desperately for ways to turn back sti

foreign competition. One of their strategies has been subcontractingleing work out to outside rms, so asto gain access to both beer production techniques and cheaper, more docile labor. Responding tosubcontracting will be one of the principal challenges facing labor in the 1990s. e impact of subcontractinghas already been quite severe, particularly for unionized workers. Tens of thousands of workers have lost theirjobs, and others have taken pay cuts. Unions are responding to this challenge by using both collectivebargaining and public policy mechanisms. is article will focus on innovative eorts by two unions: theSteelworkers (USWA) and the Auto Workers (UAW). It is not surprising that both these examples come fromheavy manufacturing, since this was the unionized sector rst hit by foreign competition; other sectors havenot been faced with the problem as severely until recently. Even though the circumstances may dier, workersin sectors as diverse as hospitals, telecommunications and airlines can learn from the auto and steel industryexperience because in these industries, deregulation has intensied competition in much the same way thatthe rise of foreign competition has aected manufacturing.

Keywords

USWA, UAW, strategy

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Contracting OutIn the Private Sector

SubcontractingInnovative Labor Strategies

Sue HelperOv er the past 15 years, U.S. corpo rations hav e search ed desp eratelyfor ways to turn back st iff foreign competi t ion. One of theirs t ra tegies has been subcontrac t inglet t ing work out to outs idefirms, so as to ga in access to both be t ter product ion techniquesand cheaper , more doci le labor .Responding to subcontrac t ing wil l be one of the pr inc ipalchallenges facing labor in the 1990s. The impact of subcontracting has a l ready been qui te severe , par t icular ly for unionizedworkers . Tens of thousands of workers have lost the ir jobs , andothers have taken pay cu ts .

U nio ns are respo nd ing to this challenge by using both collectivebargaining and publ ic pol icy mechanisms. This ar t ic le wil l focuson innovative efforts by two unions: the Steelworkers (USWA) andthe Auto Workers (UAW). I t is not surprising that both theseexamples come f rom heavy manufac tur ing , s ince th i s was theun ionize d sector first hit by foreign com petition; oth er sectors ha venot been faced with the problem as severe ly unt i l recent ly . Eventhou gh th e circum stanc es m ay differ, w ork ers in sectors as diverse Sue Helper, a member of the Do llars & Sense ed itorial collective, will be an assis-tant professor in the School of M anagem en t a t Case Western Reserve Universi tyin Cleveland beginning in the Fall 1990 Term. For helpful discussions of thistopic, Helper thanks David Bensman, Bruce Nissen, Sheri Antonacci, Ann Martin,Steve Herzenberg and Mike Gaffney .


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90 Labor Research Review # i 5as hospi ta ls , te lecommunicat ions and a i r l ines can learn f rom theauto and s teel indust ry exper ience because in these indust r ies ,deregulat ion has in tens i f ied compet i t ion in much the same waytha t th e r ise of foreign co m pe ti t ion ha s affected m an ufa ctu rin g.

Why Firms SubcontractIn the short -l ived "Am erican C en tur y" b etw ee n 1945 and 1975,oligopolist ic firms l ike Ford, G en era l M oto rs an d U S Steel, un ch al

lenged e i ther a t ho m e or abroad, be cam e huge organizations w i thhighly capi ta l - in tens ive product ion processes . They were able tomake profi ts with such high f ixed costs only i f they maintaineda high rate of output . Disrupt ions to that rate of output , such assupply shor tages , became the manufactur ing execut ive 's wors tnightmare. Key to these firms' strategy for maintaining continuousoperat ions was establ ishing direct control over al l aspects ofproduct ion, f rom raw mater ia l to f in ished product .Manufactur ing execut ives knew that supply d is rupt ions couldbe caused not only by sloppy m an ag em en t a t a suppl ier fi rm, bu ta lso by unh ap py w ork ers in thei r ow n plan ts . To avoid th ispossibi l i ty , they were wil l ing to pay relat ively high wages toworkers throughout thei r ver t ical ly- in tegrated organizat ions inre tu rn for w ide la t itude in m ana ging the shopfloor . Becau se m ostlarge corporations concluded that organized labor was a lesser evil

than dis rupt ive work s toppages , they usual ly d id not opposeorganizing drives in their plants .While i t lasted, Big Labor and Big Capital had a fairly convenient arrangement . Big Capital made large profi ts by control l ingi ts markets , and Big Labor shared in some of those profi ts as theprice of labor peace.As U.S. corpo rations ha ve bec om e subject to foreign com petit ionduring the past two decades, they 've resp ond ed w ith tw o strategies(or sometimes with combinat ions of the two). The f i rs t s t rategy,innovation, involves developing new techniques to cut cos ts orimprove qual i ty by increas ing eff ic iency or "working smarter ."The second strategy, adaptation, aims to cut costs using existingtechniques suppliers an d w orkers do the sam e thing, only che aperand fas ter . Both of these responses may involve subcontract ing .Innova t ion ma y lead corporat ions to use mo re outs ide su ppl iersfor several reasons. First, as corp orations strive to im prove pro du ctquality, they find i t necessary to pay stricter attention to detailthan before. As a resul t , individual plants f ind they have to focuson just a few act ivi t ies . For example, automotive assembly plantsused to be responsible for assembling cars piece by piece; 5,000


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Privatization & Contracting Out dlsepara te par t s came in to the p lan t . Th i s number was more thananyo ne could really pay at tent ion to; m inor pro blem s we re ignoredin the interests of keeping the plant run nin g. Now, the au tom ake rsare moving toward modularizat ion having components suppliersdo some of the assembly themselves .A second reason that corporat ions which have adopted the innovat ion s t ra tegy use m or e outs ide suppl iers is that innovat ion m ayrequire the use of technologies that are not avai lable in-house. Inautom obiles, for exam ple, techno logy is chan ging in virtually everyaspect of the product : electronic systems (such as electronic fuelinject ion) are replacing mechanical devices (such as carburetors);mater ia ls such as p las t ics , ceramics , and a luminum are replacingsteel . One f i rm simply cannot keep up with al l the technologiesinvolved in making a l l the components of a car . Therefore ,au tom ak ers are decen t ra l iz ing. For exam ple , Ford has g iven TRWSafety Systems responsibi l i ty for al l safety devices on Ford cars:air bags and associated electronics, seat bel ts , etc. This arrrange-ment al lows Ford to focus on those matters in which i t has themost expertise, such as design of the car, final assembly, andmarke t i ng .

A th i rd reason tha t the innova t ion s t ra tegy leads c orpo rat ionsto choose outside suppliers is that in-house suppliers tend to takeup too much scarce top management t imethere i s no way fo rcorporate management to commit i t se l f not to in tervene in theaffairs of its subsidiaries, and it is hard to distinguish a good intervent ion f rom a bad in tervent ion ahead of t ime.Th e adaptat ion strategy can also lead to subc ontract ing. O utsidesuppl iers can of ten be found who wi l l do what a t leas t appearsto be the same work for far less cost , due to their avoidance ofun ion wages and work ru les .The adaptation strategy is likely to be profitable only in the shortrun, s ince there are l imits to how far one can squeeze. However,i t may be sufficiently profitable in the short run that i t appealsto managers and s tockholders who want to use the bus iness asa cash cow, driving out the possibi l ity of long-term im pro ve m en t .

Collective Bargaining Responses to SubcontractingR e s t r i c t i n g O u t s o u r c i n g

One approach to the problems caused by subcontract ing forworkers is to t ry to ban i t outr ight . The USWA has used thisstrategy, with some success.The USWA's contract is explicit : "the guiding principle is thatwork capable of being performed by bargaining uni t employees


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92 Labor Research Review #15shall be performed by such employees.' ' This statemen t is weak enedby severa l condi t ions , but remains qui te s t rong. The companymust notify the union before any outsourcing occurs. I f the unionlocal thinks i t has a case, i t can ask for "expedited arbitrat ion,"which means tha t a board of arbi ters is supposed to decide thecase w ithin 10 days; the w ork c ann ot be contrac ted out unt i l theboard has ruled.Th e effectiveness of thes e provisions varies a great deal, d epe nd ing on the degree of organization of the union local and the intrans igence of management .For example, Local 1010 in East Chicago, Indiana, a 10,000-member uni t wi th a his tory of rank-and-f i le ac t ivism, has kept300 jo bs in-house as a resul t of the ag reem ent . "W e ha veeliminated the problem of contracting out; i f we 're capable ofperforming the work, we do i t , " dec lares loca l president MikeMezo. The union's role has changed a great deal as a result of theagreem ent 30% of th e staff (3 people) w ork full- time m on itorin gthe agreement , and the union as a whole i s much more involvedin m an age m ent . In w ha t Mezo desc r ibes as "on-going w ar " w i thIn land S tee l m anag em ent , the union has forced th e com pan y tobuy a $600,000 mil l ing machine and other equipment ra ther thancontrac t out some work. "I t dr ives them crazy to have unionpeople making management dec is ions . They keep say ing theywant to co-manage the plant wi th usbut the only t ime they saythat is after we force them to."

In contra st , Local 1014 at the G ary W orks of USX has had evenless coopera t ive management to work with , and lacks a his toryof the rank-and-f i le activism necessary to achieve the constantvigi lance necessary to enforce the agreement . Paul Hashiguchi ,the contracting-out chairman, f i led 4,000 grievances himself in1987 an d again in 1988. (The n um b er w as do w n to 2,000 last year).First he had to fight a battle to get USX to notify him of plansto contract ou t. After m an y grievances over this issue, the co m pa nynow not i f ies him, but so many of the company's prac t ices viola tethe bargaining agreement tha t "expedi ted" arbi t ra t ion takes threemonths ins tead of the normal ten days .The proposed contrac t cannot be le t unt i l the arbi ter has ruled,so USX's in t ransigence hampers i ts day- to-day opera t ions andcosts "mil l ions and mil l ions" in back pay. In contras t to Local1010, Local 1014 ha s not ha d the luxu ry of f ight ing th e co m pa nyfor new equipment; Hashiguchi is st i l l t rying to get USX to in-source wo rk that w as il legally outs ourc ed be tw ee n 1983 an d 1986.Another ba t t le is to ge t the company to hire new workers asvolume increases and older workers re t i re , ra ther than use lack


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Privatization & Contracting Out 93of labor power as an excuse to subcontract .N e g o t i a t i n g I n c o m e S e c u r i t yAnother union s t ra tegy is to accept outsourcing, but to forceem ploy ers to pay the cos ts of d is locating wo rke rs . This app roa chhas been taken by the UAW in negot ia t ing the Job Opportuni tyBank-Securi ty (JOBS) Program at the Big Three automakers .Under th i s p rogram, the number o f ac t ive workers wi th moretha n a ye ar ' s senior i ty in 1987 de term ine d the in i tia l "se cu redemployment level" (SEL) for each plant . For every two slotsopened by a t t r i t ion , the SEL decreases by one. For every newworker hired or recal led from layoff after a certain number ofweeks, the SEL increases by one. Except for reasons of decl iningvolume, no worker wi th more than a year ' s senior i ty can be la idoff if it puts the plant below its SEL.If workers are not d i rect ly needed in product ion (due, forexample , to subcontract ing or technical change) , they go in to theJOBS Bank at full pay with no loss of seniorityat least until eitherthe contract ends or the automakers ' agreed-upon l iabi l i ty runsout. (GM's liabili ty is $ 1.3 billion for the 1987-90 contract.) In theJOBS Bank, employees may receive school ing or job t ra in ing,subst i tu te for another worker who is being t ra ined, or receive a"non-t radi t ional ass ignment ," which could be inves t igat ingcustomer claims of poor quali ty or f ixing up a park in the communi ty . In addi t ion , they can choose the Voluntary Terminat ionof Employment Program (VTEP), in which they are paid a lumpsum ranging from $12,000 (for workers with 1-2 years ' seniority)to $65,000 (for those with more than 25 years) .

A par t icular ly heavy user of the JOBS Bank program has beenthe AC Rochester p lant in Rochester , New York. This GM planthas been hard hi t , f i rs t by the obsolescence of i ts product , carbu reto rs . This chan ge took aw ay 1,132 job s be tw ee n O ctober 1985and February 1989; 379 more were los t due to product iv i tyim pro ve m en ts an d ou tsourc ing. At f irst th e local rel ied on the JobsBank program . 476 peop le re t i red un de r the VTEP program , and259 left u nd er oth er pro gra m s. By Fe bru ary 1990, 793 peo ple (21%of total employment at the plant) were left in the Bank.Local union officials call the JOBS Bank ' ' a fantast ic program. ' 'Not only has i t averted massive layoffs , i t has al lowed people togain new skil ls . Since the Bank began, 700 people have obtainedthei r GED; o thers have received t ra in ing in f inance and cos test im ation . C urren tly, 170 AC R och ester em ploy ees are full- timecollege s tude nts ( two-th i rds of w h o m are on the D ean 's Lis t) . Th eBank has provided the labor hours to a l low the p lant to take a


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94 Labor Research Review #15pro-act ive approach to heal th and safety issues, and to providesubs tance abuse and AIDS awareness p rograms. When sa la r i edjo bs be co m e vac ant, a JOBS Bank em ploy ee ca n fill in if qualif ied;for example, the plant used to hire a lot of temporary clerical help,but tha t prac t ice has been e l iminated .How ever , having such a large nu m be r of people in the ban k ha shad unant ic ipa ted consequences: equi ty i ssues are very d i f f icu l ts ince there is no comparable program for salar ied employees, andbec ause low-senior ity employees can ju m p direct ly from the Bankto prime first-shif t jobs. Resolving these issues has taken a greatdeal of union an d m ana gem ent t im e. A UAW new sletter proclaimedon Ma rch 1, 1989, 'T h e r e i s not a m anu factur in g p lant in theworld that is required to assign almost 800 people job assignmentstha t a re to ta l ly d i f ferent f rom what these union members werehired to perform!! Think about it! The size of our Bank has becomethe focal point of all m an ag em en t a nd un ion discussions, decisions,and future direct ion."Besides the adminis t ra t ive problems, the JOBS Bank provides"only in co m e security, not jo b securi ty," say s Bill Dell , th e UAW 'sjoint program coordinator . I f fewer act ive employees are neededdue to a volume decrease , then people cur rent ly working wi l lmove to the JOBS Bank, and those in the Bank will be laid off .' 'W hile the JOBS Bank pr og ra m h as al low ed u s to do a lot of niftystuff, un t i l th e peo ple in th e Bank hav e real jobs , we ' r e no t w he r ewe want to be ."I n s o u r c i n gBecause of the pro ble m s w ith the JOBS Bank, the AC R oche sterlocal has adopted a s t ra tegy in termedia te be tween the twoextremes of t rying to block subcontract ing completely and ofacqu iescing in it as long as the c om pa ny pro vide s inc om e security.This s t ra tegy leaves the f ina l sourc ing decis ion to management ,but provides a mechanism for in ternal suppl iers to b id to keepthe work in-house. In this s t rategy, the union t r ies to convincem an ag em en t to join in w h at ex-UAW staffer D an L uria cal ls a"productivity coali t ion." The goal is to increase (or at leastmainta in) both prof i t s and wages by means of changes whichredu ce costs or imp rove re ven ues . To im plem en t s uch a s trategy,the union offers to trade relaxation of work rules, suggestions forimprov ed opera t ions , and so m et imes wage concess ions in r e tu rnfor gu aran tees of job secu r i ty and increase d inv estm ent bym a n a g e m e n t .At AC Rochester , th e existence of the JOB S Bank ha s bee n keyto the imp lem en ta t ion of a prod uct iv i ty coal i tion . Th e protec t ion


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Privatization & Contracting Out 95provided by the Bank led the union to agree in 1986 to combinejo b classif ications, m ov ing from 112 pr od uc tio n classif ications toabout 20, and from six tooling trades to one. These changes havereduced costs by an est imated $20 mill ion. According to Dell ,"S om etim es you hav e to give up 200 job s to save 2,000. Th e al terna t ive is to s tay s tuck in the mud unt i l everyone drowns."The existence of the JOBS Bank has provided the labor toana lyze s ou rces of inefficiency. Two ye ars ago, an e nerg y task forcesav ed $5 m illion in its first we ek . A lmo st all of th e skilled w or ke rshave been t ra ined in cost es t imat ion, and internal shops nowrou tinely get to bid on job s wh ich use d to autom atically go outside.UAW Local 1097 has saved jobs at AC Rochester not only byreducing out-of-pocket costs , but by convincing management tofol low the logic of the ir own arguments about the impor tance ofqua l i ty improvement and inven to ry r educ t ion . Managementwanted to outsource deburr ing, but the union saved 80 j o b s w h e ni t pe rsuaded management tha t inventory reduc t ions of f se t thehigh er cost of doing the job in-ho use . A no ther 30 job s cam e backwhen a machin ing subcont rac tor had t rouble mee t ing the produc t ion schedule .In 1986, Local 1097 and AC Rochester established the Competit ive Edge prog ram , w hic h use s w ork er suggestions and up to $20mi l l ion in GM money to c rea te new bus inesses . However , theprogram has had "minimal" success , according to Del l , "becauseGM insis ts tha t the investments pay back in a year or sotoughto do if yo u'r e sta r t ing a ne w v e n tu re . . . If, as the y say, peop leare our greatest resource, then why not br ing work in even if i tjus t breaks even? Our re la t ionships are good with plant managem en t. But, unfortun ately, th e peo ple we talk with day to day can' tcure our i l l slocal management doesn ' t have the author i ty tobring in a new product l ine, or even to spend $100,000 for amach ine . "

What Should Unions Do?W he n a union i s f aced w i th a m ana gem ent dec ision to sub contract , which response should i t choose? There is no single answer.Each of the three strategies outl ined abovelimiting subcontracting, negot ia t ing income secur i ty , and insourc ingis appropr ia te

in some s i tua t ions and not others . I t a l l depends on why management has decided to subcontrac t in the f i rs t p lace .I f management is pr imar i ly fol lowing an "adapt ive" s t ra tegy,in pursuit of cheaper labor, it will be tough for the union to createa productivity coali t ion. This case is exemplif ied by USX, a


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company which has so l i t t le commitment to s teel that i t has takenth e wo rd o ut of i ts n am e. In suc h a case, i t is be t ter for the un io nto t ry to block subcontract ing ( i f i t is s t rong enough).The f ight against subcontract ing in s teel is faci l i ta ted by thetechnical difficult ies involved in spli t t ing up different parts of thes tee lmaking process . In cont ras t , an automobi le i s made up ofm an y easily sep arab le parts . But tech nica l difficult ies will no t sto pa determined company from subcontract ing. Since union victoriesin arbi t ra t ion h ave m ad e it ha rd for USX to br ing sub con trac to rsinto plants to work, US Steel m ana gem ent in Gary has begu n sending equ ipm en t ou t of the p lan t for m ain tenance inc luding hu gei tems such as a t ransfer car , which is used for haul ing i ron oreand weigh s as m uc h as two locomo tives . Th e moving process alonetook one day an d cos t severa l tho usa nd dol lars , no t inc luding thecos t of downt ime.

However, i t seems possible that i f the union is s t rong enough,i t wi l l be able to show management the wisdom of " i f you can ' tbea t the m , jo in them ," especia l ly if m an ag em en t is com m it ted tos taying in the bus iness of producing high-qual i ty products . AtUSWA Local 1010, the u nio n ' s pers is ten ce on su bco ntrac t ing ha sforced the i ssue higher in the organiza t ion, where there i ssomewhat more openness to the idea of a product ivi ty coal i t ion.Senior m an age m en t has acknow ledged tha t in som e cases , keepingthe wo rk in-house ha s saved the com pan y money. In addi tion, th eunion forced the company to keep open shops (such as a forge ,a foundry, and a motor shop) during a period of what local president Mezo ca l l s "panic de- indus t r ia l iza t ion," when other f i rmsclosed theirs . These operat ions are now profi table s ince they takein work f rom companies tha t c losed the i r shops .

I f management i s wi l l ing to cons ider innovat ive approaches toregaining compet i t iveness , then a product ivi ty coal i t ion may befeasible, as at AC Ro chester. This un ion strategy is tricky to im plement , however , because i t requi res cont inuous re-evaluat ion:When is i t bet ter to accept the loss of work than to make concessions? Is this concession real ly nec essary to mak e the co m pa nycom petit ive? Is a given ch an ge in wo rk prac tices (such as a com bination of trades) really a more efficient way of doing things, oris i t ju st a clever form of exp loitation w h ic h ha s large hi dd en costs(such as red uc ed safety du e to red uce d w ork er training)? If a u nio nlocal does not careful ly weigh the costs and benefi ts of eachconcession, an d is no t in close contact w ith o the r locals , a pro du ct ivity coali tion can deg ene rate into union part ic ipat ion in m anag ement ' s adapta t ion s t ra tegy. Whi le such a tac t ic may a t t imesbenefit an individual plant, i t will facil i tate management 's efforts


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Privatization & Contracting Ou t 97to p lay one p lant agains t another , thus weakening the unionizedsector as a whole .Som e unio n prac t ices wil l im pro ve the effectiveness of all thre estrategies . Firs t , unions need to become more involved in management . Grea te r knowledge of the sources o f cos t s and revenuesobvious ly he lps in des ign ing and implement ing p roduct iv i tycoal i t ions . But (somewhat to thei r surpr ise) unions pursuing theother two s tra tegies have a lso found them selves deeply en m esh edin w ha t t radi t ional ly ha s bee n m ana gem ent terr itory: par t ic ipat ingin cont ract ing decis ions in the case of a t tempts to prevent subcontract ing , par t ic ipat ing in workforce ass ignments in the caseof job banking.Second, unions need greater rank-and-fi le involvement , to comeup with suggest ions for improved product ivi ty, and to alert unionoff icers of m an ag em en t ' s use of outs ide pe rso nn el in v io la t ion ofthe contract . The USWA contract faci l i tates such rank-and-fi leact iv ism, because the back pay awarded for cont ract v io la t ionsgoes direct ly to the affected workers .Thirdly , the f ight agains t subcontract ing requi res unions tobecome effect ive leaders of thei r members on the shopfloor . Tothe extent that U.S. em ploye rs em pha size qu al i ty an d jus t - in- t imeproduct ion, workers wi l l gain new power through thei r abi l i ty towork together to perform smoothly a sequence of tasks that areno t ind iv idua l ly compl ica ted , bu t which requ i re t eamwork . I funions can harness the ski l l s of these teams, ra ther than a l lowmanagement to con t ro l them, they can ga in new leverage incol lect ive bargaining.

Public Policy Responses to SubcontractingEven if union s learn both to beco m e m ore adept a t m an ag em enttasks and to mobil ize the rank and f i le , their abi l i ty to mit igateth e effects of subco ntrac t ing w ill de pe nd on their abi li ty to cha ngepublic pol icy as well . As the USWA and UAW have recognized,the effect iveness of each of the three col lect ive-bargainingstrategies outlined above is significantly influenced by the politicale n v i r o n m e n t .Unions are using two basic pol i t ical s t rategies . Firs t , they havelobbied for quotas and "voluntary export agreements" to l imit thefore ign compet i t ion which p rov ided the impetus fo r subcont ract ing. Th is s trategy is be co m ing less an d less effective against sub contract ing in the au to ind ustry b eca use i t doe sn ' t preve nt foreignf i rms f rom set t ing up new, nonunion plants in the Uni ted Sta tes(although it does put l imits on firms' abil i ty to use super low-wage


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98 Labor Research Review #15

l abor abroad) .Th e UAW ha s a lso pro po sed , w i th less success , m ea su res to pu tn ew an d old pla nts on a level playing field b y stoppin g states fromtrying to outbid each other wi th subsidies to win new plants , andby social izing pension and health-care costs, which are far greaterfor older plants.The second poli t ical strategy is to t ry to reduce the benefi ts ofsubcontracting directly. A recent example is the passage of legislat ion requiring advance notificat ion for plant closings. The UAWis a lso working to s t rengthen the technical base of heavi ly-unionized areas . I t i s doing this by working wi th s ta te agenciessuc h as the M ichigan M ode rnizat ion Service and th e s ta te of N ewYork, and universi ty-based projects such as the Programs forEmployment and Workplace Sys tems a t Corne l l .

Th ese polit ical efforts inc reas e the effectiveness of th e collectivebarg aining s t ra tegies . To th e extent tha t sub co ntra ct ing is m ad em ore exp ensive (because com pan ies are forced to pay m ore of thesocial costs of thei r actions) or in-ho use op erat io ns be co m e m or eproduct ive ( through t ra ining programs) , management has lessincent ive to v iola te agreements b locking subcont rac t ing, and aproduct ivi ty coal i t ion has more of a chance to develop.Conclusion

Unions are adopt ing three col lect ive bargaining s t ra tegies forl imi t ing the impact of subcontract ing. The Steelworkers havepioneered wi th negot ia ted l imi t s on outsourc ing. The UAW hasdeveloped e labora te programs to provide income secur i ty . Andsom e unio n loca ls a re jo ining "pro du ct iv i ty co a l i t ions " to w inwork tha t management might o the rwise ou t source .W hich strategy shou ld a local un ion choose? U nio ns' ov erall goalshould be to take workers ' s tandard of l iving out of compet i t ion.When management is fol lowing an innovat ion s t ra tegy, t rying tobecome more compe t i t i ve by improving produc t qua l i t y andeff ic iency, unions should not a im to prohibi t subcontract ing forthree reasons. Fi rs t , management is unl ikely to agree to this .Second, to the extent i t does agree, efficiency is hurt , and long-term job p reservat ion is jeopardized. Finally, and most importantly,it m ake s unio ns look like a specia l- interest grou p w hich hin de rsthe development of the coal i t ions necessary for the pol i t ica ls t ra tegy to succeed. In part icular , unions should not t ry to blocksubcont rac t ing to o ther union f i rms.Unions should aim to protect workers from the effects of stupidor se l f- interested management , however. That i s , they should t ry


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t o s t o p s u b c o n t r a c t i n g o f t h e a d a p t i v e v a r i e t y .L a b o r p o l i t i c a l a c t i o n t o m a k e s u b c o n t r a c t i n g l e s s p r o f i t a b l e i sa n e s s e n t i a l c o m p o n e n t of a n y c o l l e c t i v e b a r g a i n i n g s t r a te g y .

F i na ll y , o r g a n i z i n g n o n u n i o n s u b c o n t r a c t o r s w o u l d g o a l o n gw a y t o s o l v i n g t h e p r o b l e m , t h o u g h i t ' s e a s i e r s a i d t h a n d o n e . T h eU A W 's r e c e n t c o m m i t m e n t t o s t e p u p o r g a n i z in g of n o n u n i o ns h o p s i s a n i m p o r t a n t s t e p i n t h e r i g h t d i r e c t i o n .

R e f e r e n c e sThe d is t inc t ion be tween innovation and adaptation strategies is

developed in Wil l iam Lazonick, Business Organization and the Myth ofthe Market Economy (Cambridge Universi ty Press, 1990). Other part icularly useful sources for subjects discussed in this art icle are: SheldonFr iedman and Lydia Fischer , "Col lec t ive Barga in ing and EmploymentSecurity," IRRA 41st Annual Proceedings, 1989; Candace Howes , "TheFu ture i s No w an d I t ' s All Going Wrong: Au tomo t ive R est ruc tur ing andthe Cost of Maturi ty ," UAW Research Department , Apri l 1989; DanielLuria , "New Labor-Management Models from Detroi t?" Harvard BusinessReview, Sept.-Oct. 1986; and Sally Klingel and Ann Martin, eds. A FightingChance: New Strategies to Save Jobs and Reduce Costs (Cornell UniversityILR Press, 1988.)

subcontracting- innovative labor strategies

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