The Corner

Economy & Business

Verizon Strike No Morality Play

Today, 36,000 Verizon employees went on strike. Prominent liberals see this as a morality play. The truth is much more prosaic: Verizon’s former landline monopoly matters a lot less in the wireless era.

Anyone looking at this strike should note a few important facts:

1. Only some employees are striking: the union representing landline workers. The rest of Verizon’s workers remain on the job.

2. While Verizon is quite profitable, its landline division is not.

3. Verizon’s landline workers are very well paid. The average striking Verizon employee makes $130,000 a year in wages in benefits.

These facts are related.

Verizon was one of the Baby Bells (Bell Atlantic) formed when the Justice Department broke up AT&T’s telecom monopoly. Verizon inherited part of AT&T’s landline network. If other firms wanted to compete against Verizon, they had to first build their own (expensive) network. This severely limited Verizon’s competition.

Verizon is also unionized. In a competitive market, unions cannot do much to raise pay. If they do, their company will have to raise prices, driving customers away. But in a non-competitive market, companies such as Verizon enjoy inflated profits. The Communications Workers of America (CWA) used its leverage to redistribute some of those inflated profits to its members (hence the $130,000 a year compensation packages).

However, Verizon’s former landline monopoly matters a lot less now than it used to. Wireless technology allows Americans to make calls and use the internet without ever connecting to a landline. More and more Americans do just that. So Verizon’s wireless services have boomed even as demand for their landlines has stagnated. But Verizon’s landline employees still enjoy benefit packages negotiated in the monopoly era.

Consequently, Verizon does not make much on its landline services. Last year, landline-related sales accounted for 29 percent of Verizon’s revenues, but just 7 percent of its profits. Verizon wants to fix that by trimming expensive health and pension benefits. The CWA doesn’t like that idea. So negotiations hit an impasse, and the union called a strike.

Some liberal politicians see the strike as a battle of good and evil. Senator Bernie Sanders told Verizon strikers: “I want to thank you for standing up to the outrageous greed of Verizon and corporate America. When you do that, you’re not just standing up for your own members — you’re standing up for working people all over this country.”

He’s wrong on both counts. This is a standard labor dispute without heroes or villains. Both sides are simply trying to protect their positions in a changing economy. And most “working people all over this country” make quite a bit less than $130,000 a year.

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