Daniel Becker | July 25, 2012 4:05 pm



Update: spelling corrected in title.

I heard and then went to look see that Caterpillar is working hard to control it’s costs.

“Despite earning a record $4.9 billion profit last year and projecting even better results for 2012, the company is insisting on a six-year wage freeze and a pension freeze for most of the 780 production workers at its factory here. Caterpillar says it needs to keep its labor costs down to ensure its future competitiveness.”

It has purchased 17 other business since 2008, 9 were non US companies. Two companies were purchased in 2011. Here’s the thing, a 6 year freeze? I guess there will be no inflation? I mean like zero. Though economist are saying inflation is needed as part of the solution to our slow economy. Of course, Obama having frozen government wages, I guess Caterpillar is just being patriotic. Nothing like We the People blazing the trail for how we want the private sector to treat We the People.

Caterpillar made $4.9 billion profit. If they raised these people’s pay $10,000 each, your only talking $7.8 million. It is 0.159% (0.00159)of Caterpillar’s profit. Inflation has averaged since 2008 about 2.075%. Giving the worker $10,000 more per year does not equal the inflation rate as a share of the profit. If the worker were getting their due based on inflation they would get a piece of $101,675,000. This would be $130,352.56 each for the 780 workers. Caterpillar would still have $4,798,325,000.00 profit. Imagine what that $130,352.56 would do for the economy in Joliet! I’ll bet Caterpillar equipment sales would rise do to demand for construction.

I just picked $10,000 for the heck of it. It’s a lot of money for the worker at Caterpillar. Unfortunately it is less than the $15,300 per family I calculated and posted about over the years that is now in the hands of the top 1% EACH AND EVERY YEAR!

The article notes that these workers average $55,000/yr before overtime. A $10,000 raise is 18.18% of their pay for what is 0.159% of Caterpillar’s profit FOR ONE YEAR! Imagine what Joliet’s economy would be with $7,800,000 more in it’s community.

Why is labor not allowed to consider inflation? Using the above wage and inflation, we get a $1141.25 increase in annual income. This is for the worker to stay even for 2011. It totals $890,175 for the 780 employees. This is 0.01817% (0.0001817) of Caterpillar’s profit. Do you know how much that is? Do you have any idea of how insignificant this cost would be to Caterpillar?

The moon is 238,900 miles from the earth. 0.01817% of that distance is 43.4 miles! People drive that daily round trip to work. The earth is 24,901 miles in circumference, times 0.0001817 is 4 and 1/2 miles! It’s a leisurely 1.5 hour walk compared to a 41.23 hour flight around the earth in a Cessna Citation X at its cruise speed of 604mph (201 times faster than the walk).

Here is the real twilight zone/catch 22 fun house these and all workers are in.

“Last winter, Caterpillar locked out about 450 workers at its locomotive plant in London, Ontario, and then closed the factory after the union rejected its demand to cut wages by 55 percent.” Robert Bruno, a labor relations professor at the University of Illinois, said Caterpillar was trying to drive compensation down to a new floor. “Caterpillar sees this as ‘the new normal,’… Carlos Revilla, the plant’s operations manager, defended the push for a pay freeze, saying the top-tier workers were paid 34 percent above market level. “A competitive and fair wage package is a must,” he said in a statement. “Paying wages well above market levels makes Joliet uncompetitive.” “The company had profit of $39,000 per employee last year.”

First, no one asks for a 55% cut without already having plans to close the factory. Obviously Caterpillar’s offer was your typical flea market (“swap meet” for you car people, yard sale for the rest) low ball, I don’t need it but if your willing…bogus offer. Oh, what is “market level”? Is this the average of Walmart/retail and food service industry jobs thrown in? The phrase used to be: industry level. Cute game they are playing.

First, no one asks for a 55% cut without already having plans to close the factory. Obviously Caterpillar’s offer was your typical flea market (“swap meet” for you car people, yard sale for the rest) low ball, I don’t need it but if your willing…bogus offer.

How is it, that one party can drive down the market and then is allowed to use the new market level they created as the reason for why they need to drive down the market and society not see the self serving nature of the argument? Law calls such power “contracts of adhesion”. If we had an actual functioning Department of Labor, they would not let such monopolistic activities take root. This is not free market capitalism as we idolize it. Where is the negotiating power of labor so that the declining wage base driven by the employer is not used as the reason to further decline wages? You wonder why those charts of declining union numbers correlate with declining average wages? Caterpillar et al.

Of course, part of the issue is that the workers are being handled as if that one plant is all there is to Caterpillar. Mr. Revilla’s position is that the plant shall not be considered part of the whole operation and thus Caterpillar’s profit is not a serviceable fact during the negotiations. Only the unique profitability of that one plant is of concern. So, what happens to the customary answer of “globalization” by corporations such as Caterpillar when ask why? The globalized profits are not to be considered? Is Caterpillar only selling the product from the Joliet plant in Joliet? The Joliet situation is a closed market, independent from all else around it with no influence to or from the outside?

Lets go one step further: taxes. I’ll bet Caterpillar gets some kind of a break. Maybe payment in lieu of taxes? Does Illinois have any kind of job creation tax incentives? Inventory tax reductions? No sales tax paid? The proverbial catch 22 is your local property taxes. You can’t afford them, right? They keep going up, right? The state is not sending your town the same amount of money it used to, right? And companies like Caterpillar keep driving down wages to a new base, while they off load the tax burden to labor’s wage base with arguments that they are doing their part by creating jobs.

Citizens of the US…WAKE UP!