Gotham Gazette

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Sorting Out The Transit Contract

The typical endgame to a labor settlement is very straightforward. Management and the union declare that the contract is “fair” and “good for both sides” while acknowledging that neither side got everything they wanted. Both sides urge ratification by union members and the governing board. Although reporters may get some union members and outside observers to critique the terms of the contract, the main actors on both sides stand firmly behind ratification.

This has not been the case with the settlement between the Metropolitan Transportation Authority (MTA) and Transport Workers Union (TWU) Local 100, announced on December 27 and now going to union members for a ratification vote.

Dissent and Disagreement

The first break in the usual script came on December 30, when Sewell Chan of the New York Times reported that Governor George Pataki was inclined to veto a key provision of the contract. That provision would give 16,000 workers refunds of pension contributions they made in the late 1990s. The governor’s spokeswoman said that, “The union leadership broke the law, and we will not reward those who break the law … We will not allow the union leadership to benefit from their illegal acts.”


The next day, a Pataki spokesman added that no one in the governor’s office had been told of the refund provision before the settlement was announced.

Then in the New York Times of January 5th, MTA Chairman Peter Kalikow, while praising the agreement, also indicated that he was unsure whether he would advise the MTA Board to approve the agreement.

On the union side, TWU Local 100 President Roger Toussaint stood behind the contract and called for its ratification. Some union dissidents, however, urged members to vote it down, noting in particular that workers will have to pay 1.5 percent of their salary toward health coverage under the new contract.

Questions and Implications

Understanding the contract and post-settlement developments raises questions about the terms of the contract and its implications for transit employees, the MTA and subway and bus riders.

Did the union gain from striking?

The MTA’s final wage offer stood in the final deal: three percent in the first year, four percent in the second year and 3.5 percent in the third year. But the union got management to drop demands to merge job certain titles and add duties for some workers. The union also won improved health coverage for pre-Medicare retirees; Martin Luther King Jr. Day as a holiday; assault pay for bus operators, train operators and conductors; improved disability insurance and a modest maternity benefit. And the union got the pension refund.

The union got management to drop its demands to require new workers to pay six percent of their wages into the pension system instead of the two percent that workers pay now. However, the union accepted the 1.5 percent health benefit payments for all workers, current and new. So the TWU upheld Toussaint’s stance that he would not “sell out our unborn,” but at a cost to today’s members.

So did the Metropolitan Transportation Authority yield as a result of the strike?

The MTA vehemently says no. It argues that its overall labor costs will rise by $400 million over the next three years as opposed to the $477 million cost of its final offer before the strike.

Much of this savings is from the switch from six percent pension contributions by new workers to 1.5 percent health contributions from all current workers. Over the next three years, the difference is about $82 more from the health contributions. In the long term, however, the higher pension contribution might have produced a higher return; one estimate quoted a figure of $70 million a year two decades from now. On the other hand, an escalator clause on health coverage may substantially boost its yield.

Of course, the authority's calculations do not include the $132 million cost of the pension refunds. When that amount is counted, the contract is more expensive than the authority's final pre-strike offer over the three-year contract term.

While the pension refund is a one-time payment, the health payments will presumably continue indefinitely. In that sense, the MTA agreed to a relatively large upfront expense in exchange for long-term savings. Of course, future labor negotiations could erase – or increase – those savings.

What are the pension refunds and what role do they have in the contract?

From 1994 to 2000, upwards of 20,000 of the 33,000 union members paid 5.3 percent of their salary into the pension system instead of the two percent that they paid prior to 1994. The higher payments were in exchange for joining an upgraded pension plan that allows workers with 25 years of service to retire at age 55. Employees could voluntarily elect this pension upgrade, or they could stick with the old system’s later retirement age and two percent pension contribution. Evidently, most chose the upgrade.

With the stock market swelling pension system assets, in 2000 the state legislature approved pension changes that included a cost of living adjustment and reduced pension contributions from the 5.3 percent back to two percent. The transit contract now calls for the legislature to approve refunds of the “excess” that workers paid into the system from 1994 to 2000. According to news reports, depending on employees’ salaries and overtime earnings, the refunds will range from $8,400 and be as high as $14,000 for some transit workers. (The pension terms are detailed in articles on the settlement and pension refund in the Chief-Leader, the civil service newspaper.)

The governor’s objection is that transit workers receiving $8,000 or more in refunds wouldn’t feel any pain from the roughly $1,000 per striker fines for the illegal strike. The refunds make it appear that the contract rewards workers for striking. This hardly burnishes Pataki’s conservative credentials as he contemplates a run for the presidency. It also might make another strike when the contract expires in three years more likely.

Pataki had twice vetoed bills that would have granted refunds, so on that score it seems that he is being consistent. But in vetoing those bills, the governor said they should be subject to collective bargaining – as they were after the strike.

How does this settlement affect the likelihood of a strike when the new contract expires?

There is one clear bit of good news for transit riders in the new contract: it lasts for 37 months. That means that the new contract expires in January 2009 rather than December 2008. January is still a cold month to walk, bike or car pool to work, but at least it’s past the holiday rush.

Beyond that, it is difficult to be optimistic that this experience reduces the chance of a future strike. The Taylor Law penalizes transit strikers two days pay for every day they are on strike. But the law discourages striking only if workers feel the pain in their pocketbook. The governor and other critics are correct that many union members are coming away better off, both short-term and long-term, after the strike.

But that is only part of the picture. Also critical to the prospects for a future strike are non-economic aspects of the contract. As I discussed previously, transit employees were negotiating for respect -– meaning improvements in their daily experience of the workplace -– as well as higher wages, better pensions and other economic gains.

This contract addresses the workplace issues by promising an independent study of the Metropolitan Transportation Authority's disciplinary system. Before the strike, much was made of the fact that there are about 15,000 disciplinary actions a year, or about one for every two workers. A close look at the disciplinary system is thus an important part of the contract.

It is doubtful, however, that a study focused on the disciplinary system will take the edge off the deep feelings of transit employees that caused many of them to be predisposed to walking out. Disciplinary actions are the tip of an iceberg that involves work rules, supervision and employees’ ability to be effective on the job and be treated as valued members of a team. The contract does not address those larger issues.

Does the contract address the MTA’s non-economic needs?

Here too, the contract seems to come up short. The needs of the transit system are slowly but surely changing. The tremendous improvements to the subway system over the last two decades, plummeting crime rates and introduction of the Metrocard fundamentally change what employees need to be doing. “Token clerks” were once sealed inside their booths for their own protection and to allow them to concentrate on selling tokens. Most subway stations are now safer than the street corners under which they sit, and tokens are no longer sold anywhere in New York. The Metropolitan Transportation Authority has talked about making token clerks into customer service agents who roam the station helping riders and keeping the station tidy. But the agency dropped demands for station attendants to do station cleaning.

Technological changes also make it possible for trains to be operated by one person instead of two, as currently. The MTA proposed to merge train operator and conductor titles and allow additional one-person train operations, thus negating an arbitrator’s decision that prohibited one-person train operation on the “L” line.

The potential labor cost savings are quite important in a context in which the authority's debt service payments are slated to rise rapidly in coming years. The idea of one-person train operation is hardly new; it’s used on some shuttle trains in New York already. There are in fact some train operations that are completely automated: the monorails at JFK and Newark airports are a local example. A newly built subway line that runs through the heart of Paris is another example. Yet the MTA dropped its demands to implement more one-person train operations.

What is the bottom line about the transit contract?

Calculating the bottom line is difficult because the contract involves short-term and long-term as well as economic and non-economic considerations and is somewhat contingent on future events. However, several things are evident.

First, transit employees who get pension refunds are substantially better off with the contract than they would have been with the MTA’s final pre-strike offer. An immediate payment averaging $8,400 trumps both the fines they will pay and the annual wage increases – even if it is taxable, as union members are beginning to realize.

Transit employees hired since 2000 are somewhat worse off, having to pay 1.5 percent of wages for health coverage starting with the contract, and probably a higher rate as health costs rise.

Future hires are better off, since they will not have to pay six percent toward their pensions.

The Metropolitan Transportation Authority got long-term health cost savings that in the short term surpass, and in the long term may rival, the savings from the six percent pension contributions that were dropped. But the $132 million pension refunds is a sizable upfront expense.

Subway and bus riders are better off than if the strike continued past three days, but worse off because there is little in the contract that will relieve pressures for biannual fare increases that are currently planned.

Bruce Schaller, who has been in charge of the transportation topic page since its inception in 1999, is head of Schaller Consulting, which provides research and analysis about transportation. 

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