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The Politics of Economic Security: Employee Benefits and the Privatization of New Deal Liberalism

Published online by Cambridge University Press:  27 April 2009

Jennifer Klein
Jennifer Klein
Affiliation:
Yale University
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Extract

Since the late nineteenth century, American employers have relied on a program of welfare capitalism to deflect incursions into the workplace from the regulatory state or organized workers. Welfare capitalism encompasses social welfare benefits and health, safety, or leisure programs offered through the workplace—programs established and directed by the employer. In periods of labor upheaval and political social reform, American firms have relied on workplace social welfare as a private, managerial response to political pressure from the state and workers—particularly when workers sought to use the state to improve working conditions and guarantee economic security. Where or when employers no longer faced these threats, managers reasserted their control over the terms of work, compensation, and security. Out of this conflict emerged a public-private welfare regime, heavily tilted toward private sources and based on the exclusion of those who most needed economic assistance. Any narrative of the American welfare state, therefore, belongs within the century-long story of welfare capitalism.

Type
Articles
Information
Journal of Policy History , Volume 16 , Issue 1 , January 2004 , pp. 34 - 65
Copyright
Copyright © The Pennsylvania State University, University Park, PA. 2004

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References

Notes

1. Generally, the historical work on welfare capitalism fixes this phenomenon in time, seeing it as one point along a modernization trajectory. Welfare capitalist programs proliferated among large employers during the 1910s and 1920s but collapsed during the Great Depression. The modern welfare state supplanted premodern welfare capitalism. See, for example, Brandes, Stuart, American Welfare Capitalism, 1880–1940 (Chicago, 1970)Google Scholar; Brody, David, “The Rise and Decline of Welfare Capitalism,” in Workers in Industrial America: Essays in the Twentieth Century Struggle, 2d ed. (New York, 1993)Google Scholar; Bernstein, Irving, The Lean Years: A History of the American Worker, 1920–1933 (Boston, 1960), 144–188Google Scholar; Lubove, Roy, The Struggle for Social Security, 1900–1935 (Cambridge, Mass., 1968)Google Scholar; Patterson, James, America's Struggle Against Poverty, 1900–1994, 3d ed. (Cambridge, Mass., 1994)CrossRefGoogle Scholar; Cohen, Lizabeth, Making a New Deal: Industrial W orkers in Chicago, 1929–1939 (New York, 1990)Google Scholar. More recently, Sanford Jacoby and Elizabeth Fones-Wolf have shown how welfare capitalism flourished after the New Deal and World War II. Jacoby, Sanford M., Moder n Manors: W elfare Capitalism Since the New Deal (Princeton, 1997)Google Scholar; Fones-Wolf, Elizabeth, Selling Free Enterprise: The Business Assault on Labor and Liberalism, 1945–1960 (Urbana, 1994)Google Scholar; Andrea Tone, whose book covers the Progressive Era and ends in the 1920s, argues similarly that welfare capitalism needs to be seen as a political strategy to counter state expansion. Tone, , The Business of Benevolence: Industrial Paternalism in Progressive America (Ithaca, 1997)Google Scholar.

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15. Greenbelt Health Association News (1 April 1940), file 17, box 1, Harriet Silverman Papers.

16. Strand Baking Company Case No. 3107-AR (17 November 1942). The first set of WLB decisions involving employee benefits did not pertain to the wage stabilization issue. U.S. Cartridge Company Case No. 111–1445-D (30 November 1943); Basic Steel Cases, Carnegie-Illinois Steel Corporation et al. Case No. 111–6230-D (25 November 1944), as reported in National War Labor Board, Termination Repor t of the National War Labor Board, 12 January 1942–31 December 1945, 3 vols. (Washington D.C., 1947), vol. 1, chap. 33, “Insurance PlansGoogle Scholar.” Skinner, Clarence O., Alternate Industry Member, “The Fringe Issues,” in Trends in Union Demands (New York, 1945).Google Scholar

17. Philadelphia Transportation Company Case No. 3056-AR (11 Feburary 1943), in National War Labor Board, Termination Repor t, 1:384; On labor trying to use the state to obtain collective-bargaining demands, see Atleson, James B., Labor and the Wartime State: Labor Relations and Law During W orld War II (Urbana, 1998), 72.Google Scholar

18. Western Union Company Case No. 2516-CS-D (18 January 1943); West Coast Airframe Cases No. 2301-CS-D (3 March 1943); Tidewater Oil Company Case No. 111–5206-D (24 January 1945); Davis Engineering Corporation Case No. 111–7172-HO (7 February 1945); Edison Sault Electric Company Case No. 111–7549-D (6 March 1945), all in Termination Repor t, 1:384; 2:1190–92.

19. Termination Repor t, 1:382.

20. Atleson, Labor and the Wartime State, 59. Despite the official no-strike pledge, thousands of job actions erupted during the war. Between 1942 and 1945, seven million workers took part in more than fourteen thousand strikes. In 1943, the number of strikes rose by 25 percent and increased again in 1944. Zieger, Robert H., The CIO, 1935–1955 (Chapel Hill, 1995), 150.Google Scholar

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22. William J. Graham, “Complete Group Protection for Employees: Its Need and the Prospect of Achievement,” 3–4, file 11, box 33b, Acc. 1984–050, William Graham Papers, RG 4, Historical Collection, Equitable Life Assurance Society Archives (hereafter ELAS).

23. The Spectator, 24 January 1935; William J. Graham, “Incidental Notes on a Group Annuity Retirement Plan to Supplement Federal Old Age Benefits of the Social Security Act” (address to Milwaukee chapter, National Association of Cost Accountants, file 1, box 18D, Graham Papers, ELAS; N. E. Horelick to Sales and Service Staff of the Group Department, 19 September 1939, file 4, box 35A, Group Insurance Division, Acc. 1984–050, RG 4, ELAS; Graham, “Social Security,” radio address, 17 December 1936, file 2, box 18D, Graham Papers.

24. The National Under writer, 19 March 1943, 2; The National Under writer, 16 July 1943, 6.

25. “$12.00 Every Thursday,” Economic Security Bulletin, National Association of Manufacturers, vol. 5, no. 3 (March 1941), Hagley Museum and Library; “Keeping Up with the Social Planners,” The National Under writer, 1 January 1943, 10.

26. The National Under writer, 5 November 1943; Eilers, Robert D. and Crowe, Robert M., eds., Group Insurance Handbook (Homewood, Ill., 1965), 65–66Google Scholar; The Spectator, September 1946.

27. On compulsory health insurance bills, see, for example, Derickson, “Health Security for All?” JAH; Gordon, Colin, “Why No National Health Insurance in the U.S.? The Limits of Social Provision in War and Peace, 1941–1948, Journal of Policy History 9, no. 3 (1997): 277–310CrossRefGoogle Scholar; Hirsfield, Daniel, The Lost Reform: The Campaign for Compulsory Health Insurance (Cambridge, Mass., 1970)CrossRefGoogle Scholar; Fox, Daniel M., Health Policies, Health Politics: The British and American Experience, 1911–1965 (Princeton, 1986).CrossRefGoogle Scholar

28. Journal of American Insurance, May 1947, 5; National Underwriter, 9 January 1948, 6, and 13 February 1948, 2. Although Blue Cross was supposed to be an intermediary between patients and hospitals, it increasingly functioned as the advocate of the hospitals. At the end of the war, Blue Cross had 19 million subscribers. Health Benefit Plans Established Through Collective Bargaining, Bulletin No. 841, United States Bureau of Labor Statistics, 08 1945 (Washington D.C., 1945).Google Scholar

29. Harris, Howell J., The Right to Manage: Industrial Relations Policies of American Business in the 1940s (Madison, 1982)Google Scholar; Sanford Jacoby, Modern Manors; Workman, Andrew, “Manufacturing Power: The Organizational Revival of the National Association of Manufacturers, 1941–9145,” Business History Review 72 (Summer 1998): 297–317CrossRefGoogle Scholar; Nelson Lichtenstein, Most Dangerous Man in Detroit, chap. 13; idem, “Taft-Hartley: A Slave-Labor Law?” Catholic University Law Review 47, no. 3 (Spring 1998); Stebenne, David L., Arthur J. Goldberg: New Deal Liberal (New York, 1996), chap. 3.Google Scholar

30. Businessweek, 13 May 1950.

31. Other historians have argued that this moment had long since passed for organized labor. See, for example, Fraser, Steven, Labor Will Rule: Sidney Hillman and the Rise of American Labor (New York, 1991)Google Scholar; Brinkley, Alan, The End of Reform: New Deal Liberalism in Recession and War (New York, 1995).Google Scholar

32. Derickson, “Health Security for All?” 1345; Lewis quoted in Steven Fraser, Labor Will Rule, 563; Munts, Bargaining for Health, 30–41; Berkowitz, Edward, “Growth of the U.S. Social Welfare System in the Post–World War II Era: The UMW, Rehabilitation, and the Federal Government,” Research in Economic History 5 (1980): 236Google Scholar; Dubofsky, Melvyn and Van Tine, Warren, John L. Lewis: A Biography (New York, 1977), 458–468.Google Scholar

33. Berkowitz, “Growth of the U.S. Social Welfare System,” 236.

34. Krajcinovic, Ivana, From Company Doctors to Managed Care: The United Mine Workers Noble Experiment (Ithaca, 1997), 29–38.Google Scholar

35. Berkowitz, “Growth of the U.S. Social Welfare System,” 236–37; Krajcinovic, From Company Doctors to Managed Car e, 54; Starr, Social Transformation of American Medicine, 315–18; Moreover, Berkowitz writes that “the UMW sought to shift the financial burden of caring for disabled miners from the private to the public sector by referring all applicants for cash disability benefits and all recipients of emergency medical care to the public program. The greater a miner's disability, the more eager the fund was to have the public program pay for his rehabilitation counseling and training,” 240; Krajcinovic, From Company Doctor to Managed Care, 33–37, 51–54.

36. National Ford Negotiating Committee, Ford UAW-CIO Workers Security Program, Part II: Health Security Program, July 1949, file 5, box 60, Acc. 317, UAW Social Security Department Collection, Walter P. Reuther Library (WPR); Nelson Cruikshank, “Labor Looks at the Problem of Health Services,” Statement to the President's Commission on Health Insurance Needs of the Nation, 7–8 October 1952, file: Pres. Commission, box 11, M66–15, Nelson Cruikshank Papers, SHSW. For the United Steelworkers version of this ideal model plan, see Derickson, Alan, “The United Steelworkers of America and Health Insurance, 1937–1962,” in American Labor in the Era of World War II, ed. Miller, Sally M. and Cornford, Daniel A. (Wesport, 1995): 75Google Scholar; Munts, Bargaining for Health, 64–66.

37. Falk to Elizabeth Paschal, AFL, 17 November 1939; Paschal to Falk, 20 November 1939, file: hospital and health, box 3, series 8E, Thorne Papers, SHSW; SSB to Richard Neustadt, 25 May 1940, file: 056.1, box 35, RG 47, Social Security Board Papers, National Archives–College Park, Md.; The United Mine Workers and the United Auto Workers directly consulted with Falk and the SSB in designing their “trade union social security” programs. I. S. Falk to Walter Reuther, 15 October 1946, including a fifteen-page analysis of the proposed UAW plan, file 2, box 46, MSS 789, Wilbur Cohen Papers, SHSW; Berkowitz, “Growth of the U.S. Social Welfare System,” 233–47.

38. Sanders, Barkev and Klem, Margaret, “Services and Costs in a Prepayment Medical Care Plan: Comparison with Other Plans and with the General Population,” Medical Care (07 1942): 221Google Scholar; Klem, Margaret, Prepayment Medical Care Organizations, SSB, Bureau of Research and Statistics, memorandum 55 (Washington D.C., 1945)Google Scholar.

39. “What the Labor Health Plan Offers You and Your Family,” Baltimore, box 5, Cruikshank Papers; Summary of Legislation Relating to Health and Welfare Funds, 9 September 1954, box 5, ibid.; Minutes of the Meeting of the AFL-CIO Committee on Social Security, 26 November 1957, p. 3, Box 8, ibid; Executive Council Report, 17 August 1959, Box 8, ibid. Representative Wolverton introduced such a bill in the House, HR 7700, in 1954, and Senator Hubert Humphrey introduced a bill, S. 2009, in 1959.

40. CIO News, 9 December 1946, 2.

41. NAM, Industry's View on the Lewis Coal Royalty, March 1945, box 3, Acc.1412, National Association of Manufacturers Collection, Hagley Museum and Library (hereafter NAM Collection); Industrial Relations Department, NAM, Employee Benefit Plans in Collective Bargaining, 7 June 1946, box 1, ibid. The “royalty tax” issue was of far greater importance than even the question of contributory versus noncontributory financing.

42. NAM, Industry's View on the Lewis Coal Royalty.

43. Those covered by group surgical insurance increased from 5,537,000 to 11,103,000. U.S. Senate, Committee on Labor and Public Welfare, Health Insurance Plans in the United States, Report no. 359, 82d Cong., 1st sess. (1951), 26.

44. Outstanding American Companies Insuring Their Employees Through Equitable (New York, 1946), file 5, box 2A, Insurance Affairs/Group Operations, Acc. 82–45, RG 4, ELASGoogle Scholar; Dvorsky, Robert William, “The Development of Negotiated Health Insurance and Sickness Benefit Plans of the Steel, Automobile, and Electrical Equipment Industries” (Ph.D. diss., University of Pittsburgh, 1956)Google Scholar; Derickson, “The United Steelworkers of America and Health Insurance,” 74. Sanford Jacoby shows how nonunion companies were willing to spend extraordinary amounts of money on welfare benefits to stave off unionism—often more than they would have had to spend had they been negotiating with a union. See Modern Manors, chaps. 2–5.

45. Dvorsky, 32; The National Under writer, 23 April 1948, 1, 23 and 29 April 1949; NAM, Minutes: NAM Labor-Management Relations Committee, 20 March 1947, p. 4, box 3, Industrial Relations Division, Acc. 1412, NAM Collection; “Summary of War Labor Board Decisions Affecting Management Functions,” 1945, box 3, ibid; “NAM Position with Regard to Employee Benefit Programs,” 28 February 1947, box 75, Acc. 1411, NAM Collection.

46. The National Under writer, 27 August 1943, 3; The Spectator, September 1943, 64; National Industrial Conference Board, Company Group Insurance Plans, Studies in Personnel Policy, No. 112, 1951, p. 48; Handy, Albert, “Private Pension Plans and the Federal Revenue Act,” New York University Law Quarterly Review (1939): 5Google Scholar; Research Memorandum: Employee Rights in Benefit Plans, Arthur L. Berger, Esq., to Jennifer Klein, August 2000 (in author's possession); T. C. Boase v. Lee Rubber & Tire Corp., 437 F. 2d 527 (1970); Conison, Jay, “Suits for Benefits Under ERISA,” 54 University Pittsburgh Law Review 1 (Fall 1992).Google Scholar

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48. Statement, Enders M. Voorhees, U.S. Steel Corporation, Before the Presidential Steel Board, 22 August 1949; Text of the Presidential Steel Fact Finding Board's “Findings and Recommendations: General Summary,” September 1949, both in box 202, Acc. 1411, NAM Collection.

49. “Claims Expense Limitation,” n.d., box 3, Acc 1984–050, ELAS; Metropolitan Life Insurance Company, Tailored to Fit: A Group Insurance Plan Designed for the Employees of Your Company (New York, 1953), box 19 06 04, Group Insurance, Metropolitan Life Insurance Company ArchivesGoogle Scholar; ibid., Employee Security Founded on Group Insurance Safeguards Employee Morale and Loyalty (New York, 1952), ibid.

50. Joe Swire to Jim Parker, 11 March 1958, and Swire to Gordon Parker, 28 September 1955, file 13, box 2017, Secretary-Treasurer's Office, Swire Files/Correspondence, RG 1, Records of the International Union of Electrical, Radio, and Machine Workers, Rutgers University (hereafter IUE); Dvorsky, 118.

51. Ibid; ELAS Group Insurance Department, Fifty Representative Examples of Equitable Low Cost in Group Life Insurance: “Our Cost is Your Cost” (New York: Equitable Life Assurance Society, n.d.) box 3, Acc. 82–45, Policyholder File-Sales Ads, ELASGoogle Scholar; “Memorandum to Dave Lasser,” 27 February 1957, file 16, box 2109, IUE; Westinghouse Electric Corporation, “Social Insurance Plan for Employees,” Effective 1 November 1950, file 44, box 6, Conf. Bds and Negotiations/Westinghouse, RG 1, IUE; Office Employees International Union to George Meany, 30 March 1955, file: Health and Welfare, box 11, Cruikshank Papers.

52. It is interesting to note Kirkland's position here, since in the 1980s he served as the rather conservative president of the AFL-CIO. Lane Kirkland, “Service versus Indemnity Plans,” paper presented at the Health and Welfare Conference, California State Federation of Labor, Santa Barbara, 22 July 1957, file: California, box 24, Cruikshank Papers. In 1955 Blue Cross covered 50,000 persons for hospitals coverage and 39,000 for surgical, so it did continue to be a considerable competitor of the commercial companies.

53. Klein, For All These Rights, chap. 6.

54. Health Insurance Association of America, Source Book of Health Insurance Data (New York, 1959, 1963, 1965, 1967, 1972–73, 1980–81)Google Scholar; Ford UAW-CIO, Workers Security Program, Part II: Health Security Program, 1949, p. IV-1, WPR Library.

55. The story of private pensions essentially mirrors that of health insurance. As with health insurance, the labor movement at first sought entirely independent pension funds. After losing on this issue, they often supported the idea of a jointly-run board of trustees, equally staffed by management and labor. Most corporations managed to block even this goal, for as management saw it, pensions involved the investment of company assets (not workers' compensation) over an extended period of time. Even the United Automobile Workers had to make significant concessions and accommodations to managerial control. Throughout the 1950s and 1960s, union demands for access to pension plan information and control were fiercely resisted and denied by management. As with health insurance, unions or workers' representatives usually had to depend on employer-provided cost estimates, budget and forecasting, and benefits formulas. The ground rules of welfare capitalism remained in place: employers maintained control over benefits formulas, final eligibility rules, long-term service requirements for vesting, and how the pension would be funded. Employers' discretion in pensions extended not only to benefits but to investment of the pensions reserves as well. Ghilarducci, Teresa, Labor's Capital: The Economics and Politics of Private Pensions (Cambridge, Mass., 1992), 23–24, 29–30Google Scholar; Sass, Steven A., The Promise of Private Pensions: The First Hundr ed Years (Cambridge, Mass., 1997).Google Scholar

56. On the use of tax policy to buttress welfare capitalism, see Brown, Race, Money, and the American Welfare State, part II, and Howard, Christopher, The Hidden Welfare State: Tax Expenditures and Social Policy in the United States (Princeton, 1997).Google Scholar

57. NAM, “Review of Position on Collective Bargaining of Health, Welfare and Pension Plans,” Action of Collective Bargaining Subcommittee, 23 June 1952, box 105, Acc. 1411, NAM Collection. These firms included Kohler, Thompson Products, Cone Mills, Lone Star Steel, Sears Roebuck, and Timkin Roller Bearing Company—also key players in campaigns for right-to-work laws. See Lichtenstein, Nelson, State of the Union: A Century of American Labor (Princeton, 2002), 138.Google Scholar

58. Witwer, David, “Westbrook Pegler and the Anti-Union Movement,”paper delivered at the Organization of American Historians Conference,Los Angeles(April 2001)Google Scholar; Perlstein, Rick, Before the Storm: Barry Goldwater and the Unmaking of the American Consensus (New York, 2001), chap. 2.Google Scholar

59. U.S. Department of Labor, Legislative History of the Welfare and Pension Plans Disclosure Act of 1958, as Amended by Public Law 87–420 of 1962 (Washington, D.C., 1962)Google Scholar; Isaacson, William J., “Employee Welfare and Pension Plans: Regulation and Protection of Employee Rights,” Columbia Law Review 59, no. 1 (1959): 104.CrossRefGoogle Scholar

60. U.S. Senate, Welfare and Pension Plans Investigation: Final Report of the Committee on Labor and Public Welfare Submitted by its Subcommittee on Welfare and Pension Funds Pursuant to S. Res. 225 and S. Res. 40, 84th Cong., 2d sess., 16 April 1956, 2, 54, 136. The subcommittee included another labor-liberal, Senator James Murray of Montana. The committee itself was staffed by Democratic liberals, including Murray, Herbert Lehman, Pat McNamara, and John F. Kennedy.

61. Legislative History, 14; 45–49; Senate Final Repor t, 7; Isaacson, “Employee Welfare and Pension Plans,” 103–4.

62. Senate Final Report, 158–59.

63. Ibid, 7, 158–59.

64. Ibid, 54.

65. Stebenne, Arthur J. Goldberg, 160–63; Lichtenstein, The Most Dangerous Man in Detroit, 348–49.

66. Schiller, Reuel, “From Group Rights to Individual Liberties: Post-War Labor Law, Liberalism, and the Waning of Union Strength,” Berkeley Journal of Employment and Labor Law 20, no. 1 (1999): 6, 8–9.Google Scholar

67. Senate Final Report, p. 8.

68. Stebenne, Arthur J. Goldberg, 160–63, 441. These senators supported a national ban on the union shop.

69. Legislative History, 91–95; Isaacson, “Employee Welfare and Pension Plans,” 124; Sass, The Promise of Private Pensions, 192–93.

70. On Landrum-Griffin and the substitution of individual rights over group rights, see Schiller, “From Group Rights to Individual Rights.” Tax recodification occurred simultaneously with the Disclosure Act hearings and the McClellan Hearings. The new code made permanent some of the wartime tax breaks and added others. It included a formal exemption of health and accident benefits and sick pay and a new tax credit for retirement income. The tax code would be structured to sustain that political settlement: private benefits, private welfare state supplementation. Zelizer, Julian, Taxing America: Wilbur Mills, Congress, and the State, 1945–1975 (New York and Cambridge, 1998), 93.Google Scholar

71. Klein, “Managing Security,” 506.