***** Journal of Policy History 13.3 (2001) 391-396
Book Review
Labor, Business, and the Politics of the Welfare State
Elizabeth Fones-Wolf
Marie Gottschalk, The Shadow Welfare State: Labor, Business, and the Politics of Health Care in the United States. Ithaca: ILR Press, 2000, x + 288 pp.
...Marie Gottschalk argues that the institutions of the private or "shadow" welfare state limited labor's capacity to mobilize effectively for universal health care. After World War II, the "shadow welfare state"--that is employer-provided nonwage benefits like paid vacations, health insurance, and pensions--expanded dramatically. Labor was initially ambivalent about company-funded pension and health schemes that evoked images of paternalism. But when a powerful coalition of business and conservative forces blocked passage of legislation that would have liberalized and federalized the American social welfare system, unions began bargaining successfully for job-based benefits. These benefits, combined with high wages, were the central features of the postwar social contract or accord between big labor and big business.
Several pieces of legislation shaped a private welfare state that ultimately bound the interests of organized labor closely to large employers and the insurance industry. Of importance here was the Taft-Hartley Act of 1947, which authorized the creation of what became multi-billion-dollar joint union-management administered health, pension, and welfare trust funds. Common in industries like construction, where union members worked for several employers each year, the Taft-Hartley fund plans "helped cement the commitment of the building trades and other unions to private sector benefits" (44). The Taft-Hartley Act put some unions in the insurance business, thus weakening potential labor support for a national health insurance system. The passage in 1974 of the Employee Retirement Income Security Act (ERISA) was the second act that helped keep labor attached to a job-based system of health benefits. It exempted self-insured employers and Taft-Hartley union funds from state-level insurance regulations. Finally, the insurance industry's "experience rating" system, which enabled large employers and Taft-Hartley funds to benefit from lower health insurance premiums, tended to create a community of interests between unions with Taft-Hartley plans, large employers, and insurance companies. Gottschalk identifies the legacy of the postwar labor-management accord as yet another institution that pushed labor toward cooperating with business on health-care reform.
For thirty years, despite these institutional imperatives, unions were one of the foremost advocates of national health insurance. Labor recognized the inequities of the private employment-based health insurance system, which excluded many citizens and provided limited coverage of health costs. National health insurance, financed by a payroll tax and general revenue tax, would sever the link between health care and employment and cover all Americans while reducing medical costs by eliminating commercial insurers. During this period, for reasons that Gottschalk fails to adequately explain, labor's structural attachment to the private welfare state did not prevent unions from advocating fundamental reform of the health-care system. In the late 1970s, however, labor took "a major step away from the principle of universalism" when the AFL-CIO embraced the idea of an employer mandate. This proposal required employers to pay part of their workers' health-insurance premiums and left the private welfare state of job-based benefits with all its inequities intact. According to Gottschalk, while the institutions of the private welfare state (the Taft-Hartley funds, ERISA, and experience rating) predisposed unions to back the employer mandate, political and economic factors, especially worries about escalating government spending and inflation, ultimately triggered labor's shift in policy.
Throughout the 1980s, the AFL-CIO leadership maintained its commitment to employer mandates, hoping to foster an alliance with big business that would ensure passage of health-care reform. Still influenced by the legacies of the social contract, some unionists accepted the business community's contention that escalating health-care costs were impeding American corporate competitiveness. It seemed possible to form a constructive partnership with the elements of the business community, especially the unionized sector, that had expressed interest in greater government involvement in health care as a way of reducing costs. Moreover, the institutions of the private welfare state made some labor leaders antagonistic to the growing interest in a single-payer health-care system.
The 1993-94 struggle over Clinton's health-care initiative revealed the extent to which labor was misled by business and the ineffectiveness of its political strategy. In reality, there was minimal business support for any kind of comprehensive health-care reform, even the employer mandate. Indeed, the AFL-CIO had placed its faith in business at a time when corporations were attempting to weaken their bonds with labor by outsourcing or hiring part-time or contingent workers who were not eligible for benefits. Moreover, the labor movement was divided over the Clinton plan. Angry at the Clinton administration's support of NAFTA, suspicious of business, and attracted to the single-payer solution, rank-and-file activists from unions such as the Oil, Chemical and Atomic Workers joined with public-interest groups like Ralph Nader's Public Citizen in rejecting employer mandates. The hoped-for winning coalition never emerged.
Gottschalk seeks to show how the institutional contours of the private welfare state constrained labor policy on health care. She builds a strong case for the importance of institutions and acknowledges the powerful barriers to the creation of a universal health-care system. Yet, throughout the book, Gottschalk scolds unions, perhaps too vehemently, for failing to challenge these institutional restraints and laments that labor was unable to use the issue of "universal health care as a pillar on which to build a wider critique of the role of corporations in the United States" (147)....
Elizabeth Fones-Wolf is an Associate Professor of History at West Virginia University. She is the author of Selling Free Enterprise: The Business Assault on Labor and Liberalism, 1945-60, and is writing a history of labor, business, and the mass media during the CIO era.
<http://muse.jhu.edu/journals/journal_of_policy_history/v013/13.3wolf.html> *****
***** One for All (Spring 2001, Number 8)
Unions and the Prospects for Universal Health Care
by Marie Gottschalk
The 2000 campaign largely neglected the plight of the uninsured, in part because a powerful social movement or reform coalitions has yet to form around the issue of widening health care inequities. Unions, which in the past played a critical part in the passage of a number of major pieces of social welfare legislation, notably Medicare, will be essential to a universal health care coalition. However, a commitment from organized labor to sweeping health care reform will not come easy.
Starting in the early 1980's, organized labor sought to forge an alliance with business on health policy. In doing so, unions acquiesced to a redefinition of the terms of the health care debate. Whereas earlier struggles for universal health care, notably in the 1940's and early 1970's, were waged around issues of social justice, concerns about the economic competitiveness of U.S. companies predominated in the 1980's and 1990's as organized labor staked its strategy on working closely with business.
In contrast to what the Canadian labor movement and Canadian advocates of national health insurance had done on behalf of universal health care in the 1950's and 1960's, unions in the United States did not embed their health care strategy in a longer-term political strategy derived from a comprehensive and independent analysis of the rapidly changing political and economic context that addressed broader issues of equity.
The 1993-94 debacle over President Bill Clinton's Health Security Act helped fuel an insurgent movement within the AFL-CIO. In 1995, after assuming the presidency in the federation's first contested election, John J. Sweeney attempted to present a more complex understanding of the U.S. political economy. Instead of simply blaming escalating medical costs for pricing U.S. workers out of the international market and hurting their economic livelihoods, he castigated U.S. firms for taking the low road and for believing
that "the best way to compete in the global economy was by driving down labor costs."
However, despite labor's new political activism and its greater willingness to embed its social and economic policies in a more nuanced understanding of the U.S. economy and global economy, it is not championing universal health care. During the 2000 campaign, Sweeney and other labor leaders did not publicly challenge the ever-so-modest proposals to increase health care coverage advanced by their candidate, Al Gore.
Moreover, unions are continuing to become more significant health-care providers. This will further strengthen their attachment to the private welfare state of job-based health benefits and to private-sector solutions for health care reform.
If the past tells us anything, as unions invest heavily in HMO's that they create, seize opportunities to expand the Taft-Hartley funds (the union-run benefit plans that provide health care coverage to tens of millions of union members and their families), and enter the lucrative health-insurance market in other ways, they will be less likely to embrace calls for an overhaul of the health car system to make it more equitable.
At the same time, there are some unions that single-payer advocates can look to as allies. The Service Employees International Union (SEIU) renewed its commitment to a Canadian-style, single-payer solution after the defeat of the Clinton health care plan. The recently formed Labor Party has developed a detailed proposal for national health insurance called "Just Health Care" and designated universal health care a top priority.
The AFL-CIO has yet to make a campaign for universal health care the centerpiece of its political activities, however. It is deja vu all over again as the AFL-CIO works side-by-side with business and consumer groups for a "patients' bill of rights" to regulated managed care. All the political brouhaha that this issue has generated obscures the fact that this measure amounts to little more than a Band-Aid on a health care system that remains in critical condition.
Success for organized labor in both the workplace and in the wider political arena must depend on a simultaneous revitalization at both the top and within the ranks. The grass roots just do not have the resources to do it on their own, though admittedly some of labor's greatest victories in the battle to reduce health care inequities have come at the state and local level in recent years.
Today the health care crisis is worsening. Confronted with double-digit hikes in premiums this year, employers are shifting even more of the costs of health care onto employees and reducing coverage. Predictions are that the number of the uninsured could reach 50 million or more if the economy goes into recession.
These inequities in health care coverage have the potential to ignite a broader debate about widening inequalities in other areas of American society. Labor unions, though they face significant obstacles, have the potential to be pivotal actors in that debate and in mitigating health care and other inequities in the United States.
Marie Gottschalk is an assistant professor in the Department of Political Science at the University of Pennsylvania. She is the author of The Shadow Welfare State: Labor, Business, and the Politics of Health Care in the United States (Cornell University Press, 2000) and is currently working on a book tentatively titled, Black Flower: The Politics of Mass Incarceration in the United States.
<http://www.healthcareforall.org/newsletter/spring_2001/unions_prospects.html> ***** -- Yoshie
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