FedEx Pay Cuts Spark Union Talk

With the recession eating into profits, many employers are trying to cut costs however they can. At FedEx, pay cuts are prompting employees to consider the benefits of unionizing.

More often than not, companies choose to cut jobs rather than wages. They fear that slashing pay will backfire and the best employees will go elsewhere, while the least productive ones will stick around.

Thus, the average hourly wage has continued to rise, even though the unemployment rate shot up to more than 8 percent last month. Those who still have jobs are actually getting paid more for them.

But FedEx decided to take the risk. Late last year, it cut all management and professional salaries by 5 percent.

That didn't sit well with FedEx aircraft mechanic Billy Selph.

'The Morale's Pretty Bad There Now'

"When I first started 13 years ago, FedEx had a philosophy they called 'PSP' — people, service, profit — whereby you took care of the people, provided good service, the profit would come," Selph says. "They've given up on the people portion. The morale's pretty bad there now."

"We no longer feel that it's our company," he says. "At one time — or especially when I hired on — everybody felt a part of FedEx, and that feeling's just no longer there. It's just become a job and a paycheck to most people, and we never know what's just around the next corner."

Selph is an hourly worker, so he didn't take a pay cut during the last round. He says he's feeling the financial pinch in other ways.

"Overtime is cut back to zero now," he says. "Paid lunches, those sort of things, we no longer get."

"Health insurance, pension is where we probably took our biggest hit. Me personally, I took a cut of $20,000 a year after retirement. That's where we took our biggest hit for sure."

FedEx workers like Selph don't yet have a union, though the Teamsters are trying to create one.

The Union's Case Against Wage Cuts

Union leaders find themselves in a bind when it comes to the debate over cutting jobs or cutting wages and benefits.

Chris Chafe, head of the labor federation Change to Win, thinks that these cost-cutting strategies could be disastrous down the road.

"Look at what happened in Japan during the 1990s," he says. "They never pulled themselves out of recession there because they did not feed the most valuable drivers of consumer purchasing, which is workers."

"So what we see happening in the layoffs and the wage cuts, we believe is actually just following the worst possible model," he says. "If we continue to cut jobs in this country, if we continue to cut wages, we're actually taking money out of the pockets of the people who are going to spend that money and help drive our recovery."

Of course, this isn't the easiest time to tell companies that they ought to be raising wages. Even so, Chafe says, layoffs and wage cuts will only dig a deeper hole for the economy.

On the other hand, companies argue that wage cuts, while painful, save jobs by spreading the loss. Chafe says that if both the company and its employees agree that's the right idea, then that should be their prerogative. But the general trend of wage cuts, he says, is "actually worsening the spiral into an even greater depression."

"We believe that there are probably other pools of funds that could be looked at across the board," he says. "All these factors should be put on the table, not simply workers' pay. That's often the first thing that gets put on the table."

Chafe says the 20 percent salary cut that FedEx CEO Fred Smith took is a rare case of executives taking the same medicine that they advocate for their workers.

Harder To Unionize In A Bad Economy?

It's understandable that a worker might not want to anger his employer, particularly these days. But Chafe says it's always been hard to unionize.

"Obviously there's going to be challenges posed by our economic situation," he says. But ultimately, he believes that doesn't deter people from taking steps to help themselves by negotiating "a deal that the market can bear, that their employer can bear, that might provide their families with health care."

Union membership went up dramatically during the Great Depression, for example. "I think people saw that even in the times of the Great Depression — even in these times — you have enormous profits still being made," Chafe says.

Under President Franklin Roosevelt, it became much easier legally to form a union. "It's not a coincidence," he says, "that during that same period we saw the birth and nurturing and existence of a strong, vibrant middle class."

"I believe that that happened because workers' wages rose, and those same workers drove economic recovery across the country."

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