http://www.newyorker.com/fact/content/articles/060828fa_factMust read this.
THE RISK POOL
What’s behind Ireland’s economic miracle—and G.M.’s financial crisis?
by MALCOLM GLADWELL
Issue of 2006-08-28
Posted 2006-08-21
The years just after the Second World War were a time of great industrial upheaval in the United States. Strikes were commonplace. Workers moved from one company to another. Runaway inflation was eroding the value of wages. In the uncertain nineteen-forties, in the wake of the Depression and the war, workers wanted security, and in 1949 the head of the Toledo, Ohio, local of the United Auto Workers, Richard Gosser, came up with a proposal. The workers of Toledo needed pensions. But, he said, the pension plan should be regional, spread across the many small auto-parts makers, electrical-appliance manufacturers, and plastics shops in the Toledo area. That way, if workers switched jobs they could take their pension credits with them, and if a company went bankrupt its workers’ retirement would be safe. Every company in the area, Gosser proposed, should pay ten cents an hour, per worker, into a centralized fund.
The business owners of Toledo reacted immediately. “They were terrified,” says Jennifer Klein, a labor historian at Yale University, who has written about the Toledo case. “They organized a trade association to stop the plan. In the business press, they actually said, ‘This idea might be efficient and rational. But it’s too dangerous.’ Some of the larger employers stepped forward and said, ‘We’ll offer you a company pension. Forget about that whole other idea.’ They took on the costs of setting up an individual company pension, at great expense, in order to head off what they saw as too much organized power for workers in the region.”
A year later, the same issue came up in Detroit. The president of General Motors at the time was Charles E. Wilson, known as Engine Charlie. Wilson was one of the highest-paid corporate executives in America, earning $586,100 (and paying, incidentally, $430,350 in taxes). He was in contract talks with Walter Reuther, the national president of the U.A.W. The two men had already agreed on a cost-of-living allowance. Now Wilson went one step further, and, for the first time, offered every G.M. employee health-care benefits and a pension.
Reuther had his doubts. He lived in a northwest Detroit bungalow, and drove a 1940 Chevrolet. His salary was ten thousand dollars a year. He was the son of a Debsian Socialist, worked for the Socialist Party during his college days, and went to the Soviet Union in the nineteen-thirties to teach peasants how to be auto machinists. His inclination was to fight for changes that benefitted every worker, not just those lucky enough to be employed by General Motors. In the nineteen-thirties, unions had launched a number of health-care plans, many of which cut across individual company and industry lines. In the nineteen-forties, they argued for expanding Social Security. In 1945, when President Truman first proposed national health insurance, they cheered. In 1947, when Ford offered its workers a pension, the union voted it down. The labor movement believed that the safest and most efficient way to provide insurance against ill health or old age was to spread the costs and risks of benefits over the biggest and most diverse group possible. Walter Reuther, as Nelson Lichtenstein argues in his definitive biography, believed that risk ought to be broadly collectivized. Charlie Wilson, on the other hand, felt the way the business leaders of Toledo did: that collectivization was a threat to the free market and to the autonomy of business owners. In his view, companies themselves ought to assume the risks of providing insurance.
FULL excellent article at link above.
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