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Walking Out on Wages

July 29, 2005
Related Topics: Labor Relations, Featured Article

Serious labor strife hurts everybody involved in the organization--labor, management, suppliers, customers, stockholders. What to do about the pain, however, is easy: Keep everybody out of the fight except labor and management by instituting a "virtual" strike, in which only labor and management suffer.

    In a virtual strike, worker wages and management salaries, not to mention company profits, go into a kitty from which neither side gets anything back unless they settle within a certain period of time. Production goes on during a virtual strike, so the suffering hits only those directly involved--and things get hot indeed if they don’t settle quickly. For everybody else, life goes on as usual.

    There’s really nothing new about the virtual strike. Known as the non-stoppage strike before computers made everything virtual, the technique enabled the U.S. Navy to put an end to a strike at a valve plant in Bridgeport, Connecticut, during World War II. The Navy simply ordered the company to turn its receipts over to the Navy itself, along with the wages it would otherwise have paid to its workers, effectively turning a traditional strike into a virtual one.

    Italy uses the virtual strike in its transport industry. In 1999, Italian pilots and flight attendants staged a virtual strike against Meridiana Airlines, wearing white bows on their sleeves to signal their participation and telling passengers that the action would not interrupt service. The airline, meanwhile, donated its revenues to charity, including the wages it would have paid to the cabin crews. In 2000, the Italian transport union scored a public relations coup when it donated 100 million lire forfeited in a virtual strike by 300 pilots to a children’s hospital to buy medical equipment. Israel’s National Labor Court allows the use of virtual strikes as well, though with less notable results so far.

    In the U.S., the virtual strike seems to become a topic of discussion every time labor strife hits professional sports: the National Hockey League in 1994 and 2004 and Major League Baseball in 1995 and 2002. The idea surfaced in the 1970s as an option to settle labor unrest among U.S. dockworkers, and it often attracts attention in strikes involving essential public services including schools, hospitals, police protection and firefighting.

    Which is not to say that labor and management in the United States embrace the idea.

    For one thing, both sides must agree in advance to the limitations of a virtual strike, and individual managers--who, unlike union members, don’t lose income during traditional strikes--naturally resist the idea.

    For another, virtual strikes don’t have a history of success in the U.S., so labor tends to resist the idea too. In 1960, after a three-day walkout by bus drivers in Miami, both sides agreed to turn the dispute into a virtual strike. The drivers went back to work for no pay, and riders got free service. After another four days, however, the bus company found that riders were giving drivers tips, and it ordered the buses off the streets. The strike lasted another 33 days.

    More recently, child care workers in Wisconsin staged something like a one-day virtual strike in 2002 to protest wages and to lobby for government support. In reality, however, this was a public relations event, not a virtual strike, since the workers gave up no wages on the day in question and their employers no profits. The action brought about no noticeable change in conditions or government support, either.

    There is no question, however, that the virtual strike could save the economy great pots of treasure. In a study titled "Why Not? Discovering Simple Methods in Everyday Ingenuity," Yale law school professors Barry Nalebuff and Ian Ayres estimated that the 10-day lockout of West Coast dockworkers in fall 2002 cost more than $10 billion. At stake were 400 union jobs that management wanted to eliminate to save $20 million in wages. As Nalebuff and Ayres point out, the $10 billion in collateral damage to the U.S. economy was 500 times the $20 million at issue between management and labor.

    The virtual strike could eliminate such colossal waste. The idea threatens only the wages and profits of those directly involved, thus giving both management and labor a powerful incentive to settle their differences. And because it eliminates the role that public pressure can play in a strike, it frees the two sides to focus on those differences. In plain English, in a virtual strike, neither side gets to use the club of public opinion to beat up on the other.

    The idea would seem particularly fruitful in labor disputes involving essential public services, and it is flexible enough to allow for a wide variety of practices. In the case of hospital nurses, for example, the two sides might agree in advance that the hospital would give up certain revenues derived from insurers or government, while nurses might give up a proportionate amount of their wages. Schoolteachers, police officers and firefighters could come to similar arrangements with their own employers, each with an eye toward keeping the pain of their disputes from spilling into the public arena.

    In all such cases, both sides would have to decide a number of questions beforehand: How much of their wages should workers risk? Which managers standing on what steps of the corporate ladder should risk how much in salary? How much in profit should the company risk? Who watches over the kitty into which all this money flows? What deadlines should the parties face, and what part of their money will they forfeit if they fail to reach a settlement?

    Clearly, labor and management would have a great deal of ground to cover in adopting the virtual strike as their method of choice in settling disputes. That would not be an easy task. But the virtual strike would bring a new clarity to the relations between labor and management, making it plain to both sides that they alone have a stake in any serious tussle and that it is to everyone’s advantage to settle--and soon.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

Workforce Management
, August 2005, pp. 12-13 --Subscribe Now!

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