Federal Mediation & Conciliation Service

1. Pittsburgh Field Office

2. Federal Mediation & Conciliation Service Impact on Labor-Management Relations 2006 / 2007 Pittsburgh Field Office

3. F.M.C.S. Creation • Independent agency under Taft-Hartley amendments in 1947. • Resolve collective bargaining disputes which threaten the free flow of commerce. • Neither a regulatory nor an enforcement agency, but a neutral designed to assist Labor & Management. Pittsburgh Field Office

4. F.M.C.S. Mission • Promote sound & stable L/M relations. • Prevent/minimize work stoppages through mediation assistance to parties. • Advocate collective bargaining, mediation & voluntary arbitration. • Develop the art, science & practice of conflict resolution. • Foster constructive joint L/M processes. Pittsburgh Field Office

5. Collective Bargaining Mediation Private, Public, & Federal Sectors Relationship Development & Training Customized training Education, Outreach & Advocacy Of collective bargaining processes Alternative Dispute Resolution In-lieu of litigation Arbitration Services International Program F.M.C.S. Services Pittsburgh Field Office

6. FMCS Impact on U.S. Economy • FMCS mediation in CBM disputes saved U.S. workers & businesses $9 billion from 1999-2004 by averting work stoppages • Reduced number of impacted workers by 43.2% (~4.3 million vs. 2.4 million) • Prevented 1,265 work stoppages between 1999-2004. (Source: EPF 2005 Study) Pittsburgh Field Office

7. Collective Bargaining Mediation • 2006 U.S. Statistics • 23,002 Intake cases • 4,486 closed (active) • 86% closed/agrmt. • 1,632 grievance mediation cases • 266 work stoppages (all size B.U.’s) Pittsburgh Field Office

8. Work Stoppages(U.S.)(all size bargaining units) Pittsburgh Field Office

9. Work Stoppage Trends Pittsburgh Field Office Note: Preliminary data from FMCS-commissioned study

10. Job Security Subcontracting Off-shore job losses Technology Staffing issues Healthcare industry “Foreign” nurse recruiting Construction building trades Mandatory O/T State legislation Pension Benefits Defined benefits vs. defined contributions Two-tier systems “Freezing Plans” (IBM, HP, Verizon, Alcoa, Motorola) Health Insurance Active employees & retirees Plan costs & design Co-pays & cost sharing “Fair Share Health Care” legislation introduced in 31 states Hot Topics at the Table Pittsburgh Field Office

11. WHY JOB SECURITY ? Pittsburgh Field Office

12. JOB SECURITY CONCERNS • Continuing decline of manufacturing sector jobs (GM, Ford) • Bankruptcy escalation • Off-shore job losses mounting • Lower wages overseas attractive to bottom line Pittsburgh Field Office

13. Job Security Issues at the Bargaining Table Competition and cost-cutting are driving the following issues: • Technology Adoption (Jobs lost to automation) • Outsourcing (Jobs contracted out) • Globalization (Jobs move overseas) Pittsburgh Field Office

14. Technology Nature of the work being done How the work gets done Changes Who assesses the work For whom the work gets done Pittsburgh Field Office

15. Globalization • Goods can be produced anywhere in the world… sometimes for less money. • To compete, employers need to find ways to control their costs. Pittsburgh Field Office

16. WHY STAFFING IN HEALTHCARE INDUSTRY ? Pittsburgh Field Office Source: Employment Policy Foundation 2005

17. Hospital Acuity “Specialty” demand continues to rise Insufficient number of faculty in nursing programs to accommodate enrollment demands Low retention rates for younger workers Aging workforce Within 10 years, 40% of RN’s will be 50 years old or older ½ of working RN’s will reach retirement age in next 15 years SOME UNDERLYING CAUSESOF NURSING SHORTAGE Pittsburgh Field Office

18. WHY STAFFING IN CONSTRUCTION / BUILDING TRADES? Pittsburgh Field Office Source: Employment Policy Foundation 2005

19. A Mounting Labor Shortage • The NAHB reported in the Builders’ Economic Council Survey in May 2006 that, “every sector of the construction industry is experiencing some labor shortage. The numbers are highest in the need for finished and rough carpenters.” Pittsburgh Field Office

20. A Mounting Labor Shortage • According to the Home Builders Institute, the industry employed 6.7 million workers in 2001 and an additional 1.5 million are needed by 2010 just to sustain productivity. • According to the National Center for Construction Education and Research (NCCER), the average age of craft workers is 47. Pittsburgh Field Office

21. WHY PENSION BENEFITS ? Pittsburgh Field Office

22. Pension QUICK FACTS • 90% of CBA’s provide some form of pension and retirement benefits • 62% of unionized mfg. & 67% of unionized non-mfg. employers offer traditional defined benefit plan • 62% of unionized employers offer tax-deferred retirement savings plan (e.g., 401K) • 12% of unionized employers offer a cash balance plan • 38% of all union employers offer defined contribution plans • 32% of employers will consider pension increases in 2006 Pittsburgh Field Office Source: BNA 2/2006

23. Pension QUICK FACTS • Pension plans of companies in the S&P 500 were 92% funded; and in State Retirement plans 81% funded as of 12/31/04. * • Some States with pension fund deficits have attempted to switch from defined benefit plans to defined contribution plans with mixed results: • Alaska • California • West Virginia Pittsburgh Field Office Source: * Wilshire Associates

24. Flawed Funding Rules The Long Term Threats to Pensions ERISA doesn’t guarantee safe funding levels by plan sponsors. E.G: UAL, in compliance with ERISA, but under-funded by $10 billion PBGC carried a $23.5 billion deficit at the end of 2005 Underfunding PBGC Deficit Shift to PBGC Level of under-funding in insured single employer plans is about $450 billion Financially weak plan sponsors shift unfunded pension costs to PBGC Pittsburgh Field Office Source: Bradley Belt, executive director the Pension Benefit Guarantee Corporation, remarks to Federal Reserve Bank of Chicago's Bank Structure and Competition Conference, May 10. 2005

25. PENSION PLAN DEBATE • Fiduciary litigation • Plan investment returns below expectations • Bankruptcies (Steel, airlines, glass) • PBGC liquidity ($23.5 billion deficit) • Pension Plan “freezes” and “terminations” Pittsburgh Field Office

26. WHY HEALTH INSURANCE ? Pittsburgh Field Office

27. Health Care Costs and Labor StrifeIn 2005, health care costs were a strike issue in 66% of work stoppages Pittsburgh Field Office

28. The Classic Debate at the Table • Who’s covered? • What’s it going to look like? • Who’s going to pay for it? • How much are you going to pay? Pittsburgh Field Office

29. The current system involves health expenditures that constitute over 15 percent of Gross Domestic Product (GDP) Projected National Health Expenditures and Percent of GDP * Estimated Source: Centers for Medicaid and Medicare Services, 2003 Pittsburgh Field Office

30. Rising Health Care Costs: A National Pain • Cumulative weight of premium increases since 2000 = 87% • Cumulative inflation rate since 2000 = 18% • Cumulative wage growth rate since 2000 = 20% • In 2000 - Total Annual Premium Family Coverage = $6,438/yr. • In 2006 - Total Annual Premium Family Coverage = $11,480/yr. Pittsburgh Field Office Source: Kaiser Family Foundation survey 2006

31. Rising Health Insurance Premium Increases Continue to Outpace Earnings and Inflation Pittsburgh Field Office

32. Labor Perspective –Union vs. Nonunion Union employees contribute less, on average, to health insurance premiums than nonunion employees Average Monthly Employee Contribution Single Coverage Family Coverage 30% lower 21% lower Average percent of premium contribution required: 19% 10% 32% 16% Pittsburgh Field Office Source: BLS National Compensation Survey, 2005

33. Relationship Development & Training • 2006 U.S. Statistics • Active in 2,445 joint training/process cases Pittsburgh Field Office

34. Alternative DisputeResolution • 2006 U.S. Statistics • 1,269 assigned cases • Federal agency ADR contracts, public sector and private sector employment mediations Pittsburgh Field Office

35. A.D.R. Growth(U.S.) Pittsburgh Field Office

36. Ineffective communications Inaccurate info./data Personalities / emotion Morals differ Internal/external political pressure Un-realistic expectations (economic, status, etc.) Perception of “Fair” Pride Common reasons for not reaching agreement Pittsburgh Field Office

37. WHY USE MEDIATION ? Pittsburgh Field Office

38. Why mediation can be an effective tool for conflict resolution • Parties retain control of resolution • Voluntary (in most cases) • Informal vs. formal process • Time efficient • Cost effective Pittsburgh Field Office

39. Estimated Direct Financial Impact of Work Stoppages by Year Pittsburgh Field Office Source: Employment Policy Foundation 2005

40. Early FMCS Intervention is Key to ReducingWork Stoppage Duration Pittsburgh Field Office Source: Employment Policy Foundation 2005

41. When mediation may not be appropriate • Pre-determined, inflexible positions • When a “directed” decision is sought • “Principals” Pittsburgh Field Office

42. Federal Mediation & Conciliation Service Robert S. Ditillo Commissioner One Oxford Centre, Suite 2570 301 Grant Street Pittsburgh, PA 15219 412-644-4110 rditillo@fmcs.gov Pittsburgh Field Office

43. Pittsburgh Field Office