1. FMCS IMPACT 2006-2007 Pittsburgh Field Office1

2. FMCS IMPACT 2006-2007 Pittsburgh Field Office2 Federal Mediation & Conciliation Service Impact on Labor-Management Relations 2006 / 2007

3. FMCS IMPACT 2006-2007 Pittsburgh Field Office3 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.

4. FMCS IMPACT 2006-2007 Pittsburgh Field Office4 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.

5. FMCS IMPACT 2006-2007 Pittsburgh Field Office5 F.M.C.S. Services  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

6. FMCS IMPACT 2006-2007 Pittsburgh Field Office6 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)

7. FMCS IMPACT 2006-2007 Pittsburgh Field Office7 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)

8. FMCS IMPACT 2006-2007 Pittsburgh Field Office8 Work Stoppages (U.S.) (all size bargaining units)

9. FMCS IMPACT 2006-2007 Pittsburgh Field Office9 Work Stoppage Trends Note: Preliminary data from FMCS-commissioned study

10. FMCS IMPACT 2006-2007 Pittsburgh Field Office10 Hot Topics at the Table  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

11. FMCS IMPACT 2006-2007 Pittsburgh Field Office11 WHY JOB SECURITY ?

12. FMCS IMPACT 2006-2007 Pittsburgh Field Office12 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

13. FMCS IMPACT 2006-2007 Pittsburgh Field Office13 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)

14. FMCS IMPACT 2006-2007 Pittsburgh Field Office14 Technology For whom the work gets done Who assesses the work How the work gets done Nature of the work being done

15. FMCS IMPACT 2006-2007 Pittsburgh Field Office15 Globalization Goods can be produced anywhere in the world… sometimes for less money. To compete, employers need to find ways to control their costs.

16. FMCS IMPACT 2006-2007 Pittsburgh Field Office16 WHY STAFFING IN HEALTHCARE INDUSTRY ? Source: Employment Policy Foundation 2005

17. FMCS IMPACT 2006-2007 Pittsburgh Field Office17 SOME UNDERLYING CAUSES OF NURSING SHORTAGE  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

18. FMCS IMPACT 2006-2007 Pittsburgh Field Office18 WHY STAFFING IN CONSTRUCTION / BUILDING TRADES? Source: Employment Policy Foundation 2005

19. FMCS IMPACT 2006-2007 Pittsburgh Field Office19 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.”

20. FMCS IMPACT 2006-2007 Pittsburgh Field Office20 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.

21. FMCS IMPACT 2006-2007 Pittsburgh Field Office21 WHY PENSION BENEFITS ?

22. FMCS IMPACT 2006-2007 Pittsburgh Field Office22 QUICK FACTS Pension QUICK FACTS Source: BNA 2/2006 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

23. FMCS IMPACT 2006-2007 Pittsburgh Field Office23 QUICK FACTS Pension QUICK FACTS Source: * Wilshire Associates 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: 1.Alaska 2.California 3.West Virginia

24. FMCS IMPACT 2006-2007 Pittsburgh Field Office24 The Long Term Threats to Pensions 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 Flawed Funding Rules Flawed Funding Rules Underfunding Shift to PBGC PBGC Deficit ERISA doesn’t guarantee safe funding levels by plan sponsors. E.G: UAL, in compliance with ERISA, but under-funded by $10 billion Level of under-funding in insured single employer plans is about $450 billion Financially weak plan sponsors shift unfunded pension costs to PBGC PBGC carried a $23.5 billion deficit at the end of 2005

25. FMCS IMPACT 2006-2007 Pittsburgh Field Office25 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”

26. FMCS IMPACT 2006-2007 Pittsburgh Field Office26 WHY HEALTH INSURANCE ?

27. FMCS IMPACT 2006-2007 Pittsburgh Field Office27 Health Care Costs and Labor Strife In 2005, health care costs were a strike issue in 66% of work stoppages

28. FMCS IMPACT 2006-2007 Pittsburgh Field Office28 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?

29. FMCS IMPACT 2006-2007 Pittsburgh Field Office29 The current system involves health expenditures that constitute over 15 percent of Gross Domestic Product (GDP) Projected National Health Expenditures and Percent of GDP Source: Centers for Medicaid and Medicare Services, 2003 * Estimated

30. FMCS IMPACT 2006-2007 Pittsburgh Field Office30 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% Source: Kaiser Family Foundation survey 2006 In 2000 - Total Annual Premium Family Coverage = $6,438/yr. In 2006 - Total Annual Premium Family Coverage = $11,480/yr.

31. FMCS IMPACT 2006-2007 Pittsburgh Field Office31 Rising Health Insurance Premium Increases Continue to Outpace Earnings and Inflation

32. FMCS IMPACT 2006-2007 Pittsburgh Field Office32 Labor Perspective – Union vs. Nonunion Average Monthly Employee Contribution Union employees contribute less, on average, to health insurance premiums than nonunion employees Source: BLS National Compensation Survey, 2005 Single CoverageFamily Coverage 21% lower 30% lower Average percent of premium contribution required: 19%10% 32%16%

33. FMCS IMPACT 2006-2007 Pittsburgh Field Office33 Relationship Development & Training  2006 U.S. Statistics  Active in 2,445 joint training/process cases

34. FMCS IMPACT 2006-2007 Pittsburgh Field Office34 Alternative Dispute Resolution  2006 U.S. Statistics  1,269 assigned cases  Federal agency ADR contracts, public sector and private sector employment mediations

35. FMCS IMPACT 2006-2007 Pittsburgh Field Office35 A.D.R. Growth (U.S.)

36. FMCS IMPACT 2006-2007 Pittsburgh Field Office36 Common reasons for not reaching agreement  Ineffective communications  Inaccurate info./data  Personalities / emotion  Morals differ  Internal/external political pressure  Un-realistic expectations (economic, status, etc.)  Perception of “Fair”  Pride

37. FMCS IMPACT 2006-2007 Pittsburgh Field Office37 WHY USE MEDIATION ?

38. FMCS IMPACT 2006-2007 Pittsburgh Field Office38 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

39. FMCS IMPACT 2006-2007 Pittsburgh Field Office39 Estimated Direct Financial Impact of Work Stoppages by Year Source: Employment Policy Foundation 2005

40. FMCS IMPACT 2006-2007 Pittsburgh Field Office40 Early FMCS Intervention is Key to Reducing Work Stoppage Duration Source: Employment Policy Foundation 2005

41. FMCS IMPACT 2006-2007 Pittsburgh Field Office41 When mediation may not be appropriate  Pre-determined, inflexible positions  When a “directed” decision is sought  “Principals”

42. FMCS IMPACT 2006-2007 Pittsburgh Field Office42 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

43. FMCS IMPACT 2006-2007 Pittsburgh Field Office43