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Four nations' policies toward displaced steel workers.

The steel industry in the Western World entered a period of crisis beginning in 1974 from which it has not recovered. Crude steel output in Western countries peaked at 494 million metric tons in 1974, and then fell off almost steadily to 398 million tons in 1982. A modest recovery began in 1983, but production is still well below 1974 levels.

Employment declines in the industry have also been heavy, especially in the United States and the United Kingdom. Not only has the cutback in production cut into employment, but the shutting down of older, less efficient capacity has further reduced employment requirements.

The following explains the benefits granted to laid-off or displaced workers in France, the Federal Republic of Germany, United Kingdom, and the United States.


Generally speaking, to deal with the displacement problem in the French steel industry, the companies and unions relied on attrition and early retirement.

Under the 1977 and 1979 agreements, when layoffs had to be made, early retirement of employees over 55 years was resorted to. Then at age 60, these people moved into regular retirement status. (Government helps meet the costs of their early retirement, and in some circumstances aid is also forthcoming from the European Economic Community.) Beyond this, if further layoffs are necessary, employees between 50 and 55 years of age are put into a status of "suspended activity," and then they go into early retirement at age 55. Employees in "suspended activity" receive approximately 75 percent of gross monthly salary (plus certain other compensation); in early retirement status, employees receive approximately 70 percent of their previous gross pay. (In each case, cost of living adjustments are also made every 6 months.) The employees usually continue to be eligible for sickness and accident insurance, company housing, company vacation colony rights, and so forth. Regular, social security retirement pay after age 60 usually replaces close to 80 percent of previous earnings.

In almost all cases, the companies have the option of offering employees transfers to other steel plants when displacement cannot be avoided. Separations are made by seniority, with the oldest workers going first unless they have indispensable skills, although priority in departure is also given to disabled employees, or those who have worked under unusually difficult physical conditions or been assigned to protracted, continuous shift work. (In most of Europe this usually involves regular shift rotations.) Transferred employees in the same company retain their previous wage classification at least for 24 months, as well as their seniority. After 24 months, employees transferred to lower classifications are indemnified up to 80 percent of their loss, and anyone over 50 who is transferred must suffer no loss. Special grants and loans are provided to help meet any moving expenses.

In actual practice relatively few transfers have been made, as steel employment has steadily weakened.

In a further effort to preserve employment, unions and employers reached an agreement in 1982 to use a "fifth shift" for continuous operations workers in the steel industry. Under the agreement, the 39-hour week was reduced to 33 hours, 36 minutes. Lower salary employees were fully protected from wage losses under this agreement, while higher paid workers received slight pay reductions, in some cases. Continuous operations workers in steel still work 8-hour days, but they are given enough free shifts in the course of a year to average out to a workweek of 33 hours, 36 minutes (multiplying the latter by 5 yields 168 hours, the full 7-day workweek, 24 hours per day).

These sweeping measures of social protection eased the burden on displaced steelworkers and their communities; however, the communities, and the unions within them, continued to protest as leading steel regions in the North and East declined, and young workers tended to migrate in the absence of decent job opportunities. Government programs to locate new plants and jobs in the areas had only limited success.

When, therefore, the socialist government of President Mitterand announced new long-term plans for additional restructuring of the steel industry, including the projected elimination of 20,000 jobs or so by 1987, a storm of protest broke out. Large demonstrations were organized, especially in the East of France where the bulk of the cuts were planned, as well as brief union strikes. Included in the plan were new investments of $2 billion in steel facilities which, it was hoped, would finally return the trimmed-down industry to profitability by 1987.

As the storms subsided, most of the unions finally reached agreement with the industry and, in effect, with the government whose continued financial support lies behind the benefits provided in July 1984. Early retirement and "suspension of activity" benefits for workers from 50 to 60 years old provided under the 1977 and 1979 (which had been extended till 1984) agreements, to relieve employment pressures, were continued under the 1984 accord. However, in recognition that new job cuts could not be absorbed by merely retiring workers over 50, management provided new retraining benefits for workers who are not eligible for "suspension of activity" or early retirement benefits. (Those facing "suspension of activity" were also eligible for retraining benefits. This reflected growing social discontent with taking relatively young workers out of useful activity at such an early age.)

Under these "reconversion" clauses, employees who are displaced are entitled to 2 years of training and benefits (70 percent of previous earnings--in line with those provided for "suspension of earnings" status). If these "trainees" have not found jobs by that time, their employers must, in the course of their training or at its expiration, make them two job offers (of a permanent type). At least one of these job offers must be within the steel basin in which they have been employed. The job offered is supposed to be one corresponding to earlier employment.

These far-reaching benefits have been largely confined to displaced steel and shipbuilding workers, although employees in a few other large companies have also been similarly protected, with government approval and assistance. So long as steel unemployment was seen as something special, this proved no great problem. But as unemployment has risen to new general heights in France in recent years, it has begun to provoke protest among employees facing displacement in some other industries. The weakness of the unions in small companies makes such protest less of a threat than in industries like steel where strong unionization and regional pressures combine to support what, to an outsider, at least, look like a formidable and costly array of benefits. It is difficult to believe similar benefits could be extended to the bulk of the French work force--the cost to government could be enormous. It should be added that this range of benefits was first begun under a conservative French government and then extended, and enlarged somewhat by the present Socialist one.

Federal Republic of Germany

To explain the benefits of displaced and laid-off workers in Germany, we will use, as an example, the Thyssen Co., a major steel producer.

Prior to 1979, Thyssen and the works council (representatives who perform basic negotiating functions within the plants, by law) had agreed upon an extensive work sharing plan under which the regular 40-hour week was reduced to as low as 30 hours in some plants, to avoid layoffs. Under this arrangement, workers received 30 hours of full pay. In addition, they would also receive unemployment compensation (approximately 68 percent of regular net pay) for the additional lost 10 hours, plus some small supplement from the company to close another part of the wage loss gap.

In 1979, the company was confronted with the necessity to make some absolute employment reductions. With the works council, it negotiated a Sozial Plan under which a number of workers were moved into early retirement at age 59. During their 59-60 year, employees would receive unemployment compensation, plus a supplement from the company which would leave them at about their previous net pay. During that year, too, they were eligible for the regular 13-month salary bonus, and they could continue in company housing (if they were in it) during retirement. Technically, employees might be offered nw jobs (outside of steel), which could jeopardize their unemployment compensation; however, several policies warded off this possibility. The labor market made new employment for a 59-year-old a dubious possibility. Moreover, government officials informally cooperate with these social plans so that serious job offers are not likely. At age 60, under German law, the employees would be eligible for early retirement benefits (the latter usually begin at age 63, but where restructuring is involved, the age drops to 60). In addition, employees would be eligible for modest company pensions on retirement.

Employees who were transferred to other jobs under the 1979 social plan, were guaranteed their old salaries for 1 year. Fuller compensation for longer periods was guaranteed to older and longer service employees.

These plans run for set fiscal periods and then expire. Presumably when and if a new "crisis" arises, a new plan must be negotiated.

Similar plans have been negotiated in other German steel plants, as employment cuts had to be made. In some cases, provisions for early retirement has been made for employees at ages as low as 56 and 55.

United Kingdom

Layoffs benefits. In 1979, the British Steel Corp. resolved to move forward with a policy of drastic closings of what it judged to be obsolete works, or parts of works. In the face of strong opposition to such closing by the Iron and Steel Trade Confederation, the corporations proceeded to negotiate special termination agreements on a works by works basis.

While some efforts were made to transfer displaced employees to continuing operations, several factors led to few such transfers. In the first place, the shutdowns were far reaching, and few opportunities were available. Secondly, union and management both stress the traditional resistance of British workers to moving even short distances. There have, however, been a number of cases in which young and old workers have changed places, permitting the former to retain his steel employment while the latter chooses layoff (with its benefits) or early retirement (not too many cases).

The agreements negotiated with the various unions (jointly, works by works) provide significant ex gratia (severance) benefits, beyond those provided under national legislation and by the European Economic Community (through its Coal and Steel Community).

Under national legislation (Redundancy Payments Act of 1965, amended in 1979), terminated workers's benefits are scaled to their previous service and age. Thus, for each year of service a worker has completed between ages 18 and 21, he could be entitled to 1/2 week of pay; for service between ages 22 and 41, 1 week per year; and for each service year between 42 and 64, 1-1/2 weeks of pay. Under the Act, for example, a worker who started his employment with British Steel Corp. at age 36, and terminated at 51, would be entitled to 19-1/2 weeks of pay (13-1/2 weeks for service years from 42 to 51, and 6 weeks for his service from ages 36-41).

As part of the various works' termination collective agreements, British Steel Corp. also agreed to increase the redundancy payments by an additional 50 percent.

A combination of regular unemployment benefits and special benefits for steel workers, under the European Economic Community is available for a displaced worker who takes a new job that pays less than his old (British Steel Corp.) job. He would be eligible for a make up benefit to bring his total compensation up to 90 percent of his previous earnings. This would be available for a maximum period ranging from 104 to 130 weeks, depending on the worker's age at termination. Those enrolled in "approved" retraining courses are eligible for benefits up to 52 weeks. Workers transferred to other steel works jobs are guaranteed pay equal to their last jobs, for a period ranging from 20 to 26 weeks (depending on their age) and thereafter from 70 to 122 weeks at 90 percent of their previous pay (again depending on their age). (Similar types of European Economic Community unemployment assistance are available to other member countries' displaced steel workers, including France and Germany.)

There is an additional tier of large ex gratia or severance payments for terminated workers, which was negotiated in the 1979 closure agreements. These payments vary moderately from works to works, as the company has sought to gear them to local labor market conditions in its negotiations with the unions. Under these provisions, employees have generally received payments usually varying from 16 to 26 weeks, but in individual cases, payments range as high as 48 or 50 weeks.

In addition to these recently negotiated ex gratia payments, there are some ex gratia payments carried over from earlier agreements in the industry, usually for 300 pounds (about $375).

Aside from formal ex gratia payments, the collective agreements also provide payments in lieu of notice benefits (which vary with years of service), and accumulated vacation pay benefits (usually 9 weeks) for terminated employees.

Job creation programs. All of the European countries under study here have made special endeavors to assist regions where steel shutdown have created serious unemployment problems. These efforts have been particularly notable in France, and especially in the Lorraine (Eastern) region, where the historic concentration of the industry has made the region particularly vulnerable.

The British Steel Corp. went beyond governmental efforts, however, and established its "own job creation agency, British Steel Corp. (Industry) Limited--a wholly owned subsidiary" whose purpose was "not simply to bring new job opportunities to closure areas," but to help "create a climate conducive to job creation." The board of directors of this new company included 6 trade unionists as well as the British Steel Corp. chairman. British Steel Corp. reports that although aid from several sources (the European Economic community as well as the British government) was already available for such stricken steel areas, the new company helped give "more executive muscle, considerably more power and access to substantial resources" to businessmen and depressed communities.

These efforts have had some useful results, but they have been made in a difficult economic environment, as unemployment has reached depression-like levels in Great Britain.

By 1982, the British Steel Corp. was indicating that it was planning to phase this program out, as it could "no longer . . . afford" its cost. The corporation recently reported as of April 1984 British Steel Corp. (Industry) Limited had "become self-supporting" and would no longer need funding from British Steel Corp. It reported having assisted 1,400 companies, and "forecast the creation of 30,000 new jobs by March 1986, well over half of which already exist."

United States

Interplant transfers. Under collective agreements negotiated between major basic steel companies and the United Steelworkers of America, typically, employees (with 2 or more years of service) who are on layoff, and who are not eligible for pensions are to "be given priority over other applicants" for hiring "at other steel plants of the company located within a limited agreed upon geographical region." On application, an employee and his family are eligible for relocation allowances ranging from $600 to $1,450 (single employees less), depending on the distance of the move. At the new plant, the employee is "subject to all the rules and conditions of employment" including the wage rates in effect there. Except for vacation pay computation, his seniority record begins anew. (Presumably his old seniority would also continue to apply to his pension status.)

Severance pay. Where a facility or department is permanently closed down, employees who are terminated (and are not entitled to other employment, by reason of their seniority), receive severance benefits ranging from 4 to 8 weeks pay, depending upon the length of company service, for example, 8 weeks for 10 years or more service. (Therefore, benefits are an alternative, not in addition to Supplemental Unemployment Benefits.)

Supplemental Unemployment Benefits. Under collective agreements in the major basic steel companies, typically employees who are laid off and have met eligibility requirements are entitled to special supplemental compensation benefits--these are in addition to State unemployment compensation benefits. While an employee's benefits are calculated in accordance with his previous earnings, in any week in which he receives a government unemployment benefit, the supplemental weekly maximum is $170 ($185 in August 1, 1985), plus $1.50 for each dependent up to four. For weeks when he is not eligible for government benefits (presumably after he has exhausted government benefits, usually from 26 to 39 weeks in duration, varying by States), the employee can draw supplemental unemployment benefits up to a maximum of $220 ($235 as of August 1, 1985), plus $1.50 for each dependent up to four. These benefits are available for most employees for a period of up to 52 weeks. Employees who have 20 years of continuous service are eligible for an additional 52 weeks of benefits.

Retirement benefits. Special early retirement benefits are provided for employees whose service is interrupted by a plant, department, or subdivision shutdown. Under the basic steel collective agreements, some six different combinations of company pension, regular unemployment compensation, and SUB options are available to employees whose jobs are terminated. One survey concludes that as a result of these options only workers "who are under age 41 and have less than 20 years of service" lack some kind of lifetime income protection. The others, by the combinations just referred to, with the addition of social security after age 62, "are afforded income security from the time of layoff through death." These benefits vary according to the option for which the employee is eligible.
COPYRIGHT 1985 U.S. Bureau of Labor Statistics
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1985 Gale, Cengage Learning. All rights reserved.

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Title Annotation:adapted from paper presented at Thirty-Seventh Annual Meeting of the Industrial Relations Research Association, Dallas, Texas, 1984
Author:Kassalow, Everett M.
Publication:Monthly Labor Review
Date:Jul 1, 1985
Previous Article:The new federal-state program to train dislocated workers.
Next Article:Comparable worth in the job market: estimating its effects.

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