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Were We Too Easy on Lincoln Electric?

Paul Solman answers questions from NewsHour viewers and web users on business and economic news most days on his Making Sen$e page. Here are a few queries:

Making Sense
We received a flurry of worried responses to our Lincoln Electric story from Wednesday night. They deserve an airing and a reply.

First, from Dean Brown in New Hampshire:

“You spent a lot of time extolling a firm in Cleveland that offers piecework to its employees, along with some security concerning lifelong employment. I was, frankly, astounded at your cheerleading toward this firm. What is wonderful about creating an atmosphere where half the workers eat lunch and do their work at the very same time (we didn’t see the CEO cramming food down his throat while doing piecework, did we?)? Where 45 hours is a normal workweek load? Where the word “union” is never mentioned? It is your job, as I see it, to report with a broader perspective than this. Why do you rarely or never (as far as I know) cover German and other European factories and the incredibly advanced conditions, pay, and security they offer their workers? Or the guaranteed pensions ready and waiting for workers when they finish their careers? Somehow, German factories are highly unionized, labor-management relations are excellent and the products they churn out keep pace with the quality of other products around the world….By the way, I lived and worked in Germany for nearly 20 years, in U.S. and German environments.”

Paul Hopper of Layton, Utah, wrote:

“Your show on Lincoln Electric was interesting but being a safety professional, I was concerned about seeing a worker eating in the workplace. That is a direct OSHA violation. Curious the company didn’t catch that before you aired this segment.”

And finally, John Weyrich:

“$80,000 a year and no four weeks paid vacation, no three weeks paid sick leave, no 36- or 38-hour week, no long service leave, no free working clothes, no compulsive retirement funds, eat and work at your bench. Work til you drop? The American dream, just when are they supposed to enjoy life?”

First, here’s Lincoln’s response to John Weyrich’s email:

“Lincoln does have paid vacation, but not paid (8) holidays. If a production or hourly employee is required to work on a holiday, he or she is paid a premium rate.

No paid sick days for production hourly or piecework (who of course make up the vast majority of the workforce). Vacation days may be used to cover sick days. Sick leave is another matter and is taken under consideration based on the specific circumstance. Frank [Koller] cites one case in his book [“Spark”]. As you know, health premiums are paid by the employee. Included among the choices and plans is a disability insurance option.

Here’s the text from the original Harvard case:

‘Limited benefits. James F. Lincoln’s radical individualism also led him to minimize company-paid benefits under the rationale that fewer benefits enhanced profits and, thereby bonuses and worker compensation. While Lincoln employees received paid vacation, they had no paid holidays off, even Christmas. (They could, however, stay home on recognized holidays without their merit rating suffering.) Taking a day off for sickness also meant giving up a day’s pay. The company did not oppose benefits as such — it provided employees with access to a group health insurance policy if they
paid the full premium — but it preferred to pay employees with higher cash wages and bonuses, rather than fixed benefits, to give them maximum choice.’

Reading all of the above, I think it’s a fair criticism that we made Lincoln seem less onerous than it appears to many Americans. And yes, German manufacturing is a lot more appealing, though that’s made possible by a massive vocational education system that we’d love to report on, if we had the resources to report abroad. (We’ve longed to do a story on the Danish economy for years.)

But given that federal government investment in manufacturing is so much lower in the U.S. than Germany, aren’t Lincoln jobs a lot better than the alternatives, which would appear to be $14-an-hour factory jobs even at unionized GM (see the New York Times on the Chevy Sonic)? Or no manufacturing jobs at all?

Here’s Harvard Business School professor Norm Berg in a soundbite we would have liked to use, had the entire NewsHour been given over to our story:

“One of the most interesting comments I remember was in teaching [the Lincoln case study] to a group of our Advanced Management Program alumni out in Milwaukee, for one of their annual meetings, and I said: ‘To make it more interesting, why don’t you see if you can’t get some of your union executives to come?’

Well, six of them showed up, and we had this discussion about Lincoln and what’s good, what’s bad and so on and so forth. None of them said a thing until the very end when finally, what obviously was the senior person, spoke up and said: ‘Well, we don’t see any need for our union in Lincoln Electric because they are giving their workers much of what we fought for, and sometimes died for, in the 1930(s). Better pay, a share in the profits, job security as best they can. But I’m not worried that unions are going to become irrelevant because most of you are too dumb to run your companies this way!’

Go back to the issues! You’re going to compete in world markets in Cleveland, of all places, [with] its high wage costs, high energy, it snows a lot. There are no raw material advantages to being there, there’s no shipping advantage to being there, but they’re going to compete on a cost basis with people from all over the country and all over the world, and they’re going to pay 50-100 percent, substantially more in wages, and what’s more they’re going to say: ‘We’re not going to lay you off like virtually everybody else does when there are hard times; we’ll keep you around.'”

Given the extent of un- and underemployment in this country, which we track monthly here, and given the devastation it causes to the millions of Americans who have had to endure it, isn’t Lincoln an alternative worth considering?

This entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions _Follow Paul on Twitter._

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