By Lisa Baertlein and Bianca Flowers
(Reuters) - Workers at aerospace supplier Spirit AeroSystems (NYSE:SPR) were the latest U.S. union employees to reject a contract their leaders negotiated with their employer, joining freight railroad employees, airline pilots and others who are growing more fed up with stagnant pay, high healthcare costs, scanty sick time and uncertain scheduling.
In the past two years, Spirit employees, pilots at American and United airlines, factory workers at farm and construction equipment makers CNH Industrial (NYSE:CNHI) and Deere (NYSE:DE) & Co and freight rail laborers have all rebuffed deals despite pay raises that in some contracts appeared significant.
Union workers missed out on a frenzy of wage increases by employers desperate for workers during the height of the COVID-19 pandemic. U.S. government data shows that in the first quarter of 2021, labor shortfalls helped push wages for nonunion private sector workers higher than those of their union-represented counterparts.
That pay gap has shrunk as the worker shortage helped unions offset inflation and benefit from record corporate profits, KPMG chief economist Diane Swonk said.
"You're going to see catch-up in many of those contracts," she said.
Inflation has soared 18% from May 2019, according to the Conference Board, a business think tank. Low unemployment makes it easier for union workers to stand firm during negotiations.
"If it was harder to get a job, they might feel otherwise," Conference Board senior economist Erin McLaughlin said.
Union workers also want more affordable healthcare, paid sick time and more-flexible scheduling for greater work-life balance.
"We aren't going to settle for an economic package that doesn't recognize the heroic efforts and personal sacrifices" of U.S. West Coast dockworkers, union leader Willie Adams said this month ahead of reaching a new deal.
Those longshore workers will vote in coming months on a proposed contract that includes a 32% pay increase over six years and a one-time "hero" bonus.
DEAL BREAKERS: MEDICAL COSTS, SICK DAYS
Late Wednesday, about 6,000 workers represented by the International Association of Machinists and Aerospace Workers (IAM) in Wichita, Kansas, rejected Spirit AeroSystem's offer that included a compounded average pay increase of up to 34% through general wages increases, cost-of-living adjustments and a guaranteed annual bonus.
Some workers said the base wage increase was insufficient and balked at higher out-of-pocket medical costs.
There are cautionary tales even with finalized deals. For instance, some Caterpillar (NYSE:CAT) workers were not happy with a deal that they ratified in March.
Sam Johnson, 43, a machinist at Caterpillar's plant in Decatur, Illinois, voiced frustration that his union did not fight harder to bolster pay and shelter members from healthcare cost increases in the deal. "Even with the pay increase, I'm pretty much still in the same position that I was when I was making less money due to inflation," said Johnson, adding that nonunion machinists in his area can make almost $8 per hour more than his new hourly wage of $27.55.
Late last year, U.S. freight railroad workers rejected a five-year contract that included a 24% wage increase, citing lack of paid sick leave. Workers were angry after the deal was imposed by Congress and President Joe Biden. Unions later reached separate sick-pay agreements.
Union workers at CNH Industrial factories in Wisconsin and Iowa in January ended a nearly nine-month strike in return for wage increases of up to 38% over four years. That deal was sweetened after workers rejected the initial three-year deal.
In 2021, Deere workers in the Midwest rejected two contract offers before ratifying a deal to end a five-week strike.
"As long as the economy is chugging along — we're going to likely see these kinds of rejections," said Todd Vachon, Rutgers assistant professor of labor studies.
SEEKING HEFTY RAISE
Record employer profits strengthened West Coast dockworkers' position at the bargaining table. Other unions have taken note. Some 340,000 United Parcel Service (NYSE:UPS) workers represented by the International Brotherhood of Teamsters want a healthy raise. The union also aims to use the new contract terms to recruit members, including at Amazon.com (NASDAQ:AMZN) warehouses.
Another major contract negotiation set to begin is that of the United Auto Workers with the Detroit automakers, General Motors (NYSE:GM), Ford and Stellantis. That union has cited record profits as well. In-demand airline pilots are leaning on labor scarcity as a bargaining chip.
FedEx (NYSE:FDX) cargo pilots in July will vote on a tentative deal to give them a 30% raise as well as a 30% increase to their legacy pension.
American Airlines (NASDAQ:AAL) pilots rejected a company offer last year, and last month reached a deal to increase the value of their contract by about $8 billion.
Pilots at United, working without a new contract since 2019, overwhelmingly rejected a tentative contract last year. They are pressing for higher pay than what Delta provided in its new pilot contract and similar improvements in work-life balance. "The company's profitability certainly gives room for them to address pilot concerns," said Garth Thompson, head of United Airlines' pilot union. "The pilot marketplace has become more competitive. That has given us some leverage."