As the strike of 2,000 FairPoint Communications employees in northern New England stretches into its second month, the two sides at odds in the dispute find themselves in a bind brought on by major market transitions. It’s a reflection of a broader national conflict between economic competitiveness and survival of the middle class.
While North Carolina-based FairPoint tries to grow new segments of its business — broadband Internet and advanced data services — it’s saddled with the legal obligation of maintaining a telephone landline business that’s declining.
And while FairPoint tries to make inroads in competitive markets dominated by service providers with more flexibility, FairPoint’s northern New England divisions are structured — from a human resources perspective — to still function as the traditional incumbent, monopoly telephone carrier.
Under the contracts that expired Aug. 2, union-represented employees received health insurance paid for entirely by FairPoint, they participated in a defined benefit pension plan funded entirely by the company, and the company paid a 5 percent match toward employees’ 401(k) plans.
Maine residents earning the state’s median household income of $48,219 would jump at the chance to work for a company with such a generous benefit package and contract provisions that make it easy to earn well beyond one’s base salary.
When it comes to base salary, about 99 percent of FairPoint’s union-represented employees are at the top of their pay scale, according to the company. The union contracts that expired allowed employees to climb to the top of their respective wage scales after working for just three to three-and-a-half years.
A senior technician likely to respond to a service call in the Bangor area earns a base salary of nearly $75,000 annually, according to wage tables provided by FairPoint. At the same time, through the end of the third quarter of 2014, FairPoint had posted a $92.7 million net loss (down from the $99.6 million net loss it posted through the first nine months of 2013). The company carries more than $900 million in long-term debt.
When FairPoint declared an impasse in contract negotiations on Aug. 28, it was allowed to impose the terms from its latest contract offer. Those terms included no change in wage structure for current employees, though the company won’t say what the terms would be for new hires. The health care plan would change to one similar to what FairPoint managers have, and employees would have to chip in 20 percent of the cost. Current employees would lose their health insurance in retirement. The pension plan would be frozen, and new employees would not participate. And the terms would allow FairPoint more flexibility to hire outside contractors in emergencies and for specialized jobs, though the company says it wouldn’t use the contracting flexibility to lay off staff.
Some of the changes sought by FairPoint simply represent the norm today in corporate America. In 1998, 60 percent of Fortune 500 employers offered defined benefit pension plans to new hires, according to The Washington Post. By 2013, the number had dropped to 24 percent.
But union organizers have a point when they say they’re fighting to maintain disappearing middle-class jobs. The principle that someone — even without a college education — could earn a comfortable living in a secure job and be guaranteed a pension is one that applied through much of the 20th century and helped grow the American middle class.
Today, the market can punish an employer that guarantees its employees such a middle-class life.
It’s doubtful that phenomenon will be the topic of conversation among union and FairPoint negotiators when they meet Tuesday in Boston for a mediation session. But the outcome of that conversation, and possible future negotiations, will set the stage for another chapter in the tale of corporate competitiveness versus America’s declining middle class.