Legacy Costs

When production and service demands were high, unions strong, and wage controls inhibiting, companies added medical and pension benefits to their compensation packages in order to attract workers. Recently, many of these same companies have begun complaining that the weight of these “legacy costs” are threatening not only their profits but their very existence. The people who generate the costs by claiming the benefits long promised them now represent onerous burdens to be shed by eliminating either the benefits themselves, the employees making use of them, or both.

Many non-unionized companies, Wal-Mart perhaps the most notorious example, deal with the burdens of legacy costs another way, by creating as few of them as possible in the first place. One important result has been the voluntary servitude naively entered into by hundreds of thousands of poorly paid and benefits deprived company “Associates.” Some may remember the scathing description of their condition that Barbara Ehrenreich conveyed in her best selling book, Nickel and Dimed.

If the major and proper goal of business is the generation of profit, then it is clearly a more ethically defensible means of attaining the goal not to offer adequate benefit packages to workers at all than to promise the packages and then not make good on the promises. But neither of these means to an otherwise approvable end comes close to meeting even the most rudimentary of ethical precepts. Let’s take up the second approach first.

We read a lot these days about the hard choices that business leaders are having to make in order to secure their respective companies in the face of uncontrollable market factors, such as rising fuel costs in the airline industry. (Apparently, the hits that many airline employees have already taken are not going to be enough; the tattered remnants of their remaining, inadequate health benefits and pensions are getting sucked into still firing jet engines even as I write.) One problem with these supposed tough choices is the difficulty of determining just what cause is served by them. Golden parachutes and stockholder satisfaction? Perhaps. Survival? Naaah. Another problem is who pays the principal costs of these choices --- basically, the working stiffs, “consulted” almost always after and not before the fact.

With respect to the other means of achieving strong profits in business, there is at least a semblance of honesty in being up front about a commitment to keep employee costs as low as possible. An obvious problem, though, is that not all employee costs are held to the same standard, and that very few business leaders are willing to acknowledge this troubling detail. Executive over-compensation has been the rule and not the exception in corporate America. A not so obvious, but no less serious problem is the unwillingness to engage in honest reflection across business and industry about what a just profit is, what profits everyone involved in the creation and delivery of goods and services --- producers, consumers, workers, managers, and investors alike.

Until this kind of really serious, really honest, and really beneficial reflection gets underway, a vignette might help keep the ethical questions and issues in proper perspective. Many years ago, I had a memorable conversation with one of my parishioners, Clara, on her front porch as we watched her husband steer his tractor into their fields for a couple more hours of work following our dinner together. “Preacher,” she said to me, “Ken wouldn’t want me to tell you this, but you need to know just what kind of man he really is.”

A decade ago, she went on, just as migrant workers were arriving to harvest their 700 acres, lightning struck the barn and started a fire which the wind quickly spread across their fields, destroying their entire crop. Realizing what the loss of the harvest would do to the workers he had been hiring for so many years, Ken went to the bank the next day and with his wife’s concurrence mortgaged enough of their land to pay the workers what they would have owed them had the crops been harvested. It took the couple years to pay off the loan, even by kicking in a portion of their savings for retirement. To the fellow farmers who challenged their sense of obligation in those unexpected circumstances, Ken replied, “Well, we made a promise, and the people we made it to had needs too.”

After I told Clara that I had learned something about what kind of a woman she was as well, I took my leave. To this present generation, she and Ken would have had a lot to say about legacy costs.