Why the Verizon strike is the perfect economic morality play for Bernie Sanders

About 36,000 Verizon workers went on strike at 6 am Wednesday morning. And they've got a powerful ally: Bernie Sanders, who has joined workers on the picket line and called out Verizon as exemplifying everything he hates about corporate America.

Then Verizon's CEO, Lowell McAdam, fought back in a blog post on LinkedIn, calling the presidential candidate's views "uninformed" and "contemptible":

Sen. Sanders speaks of a "moral economy" for America – one that respects and maintains the dignity inherent in good, middle-class jobs… But nostalgia for the rotary phone era won’t save American jobs, any more than ignoring the global forces reshaping the auto industry saved the Detroit auto makers.

So the Verizon strike isn't just about a labor dispute. It's about how a company is responding to the changing economy that's gutted its core business. And that's turned it into a proxy war in the 2016 presidential campaign.

The reason for the strike: Verizon workers can't agree on a new contract

Spencer Platt/Getty Images

The 36,000 striking employees — 20 percent of the company's workforce — are mostly on the East Coast and work in Verizon's wireline division, which includes its high-speed FiOS Internet, landline phones, and business services. They're represented by two unions: the Communications Workers of America and the International Brotherhood of Electrical Workers.

Tension between labor and management isn't new at Verizon. This time, workers have been without a contract since August. Negotiations are hung up on several specific issues:

• Health care and pensions: Verizon wants wireline workers in the union to pay more for their health care, bringing them in line with the company's other employees, and to freeze pensions for some employees. The company says that it's offering 401(k) benefits instead.
• Requiring workers to relocate: Under the old contract, Verizon can't relocate workers to jobs more than 35 miles away. Verizon wants to be able to move jobs farther and require workers to work away from home for up to two months.
• Allowing Verizon Wireless workers to negotiate: A small group of Verizon Wireless employees unionized in 2014 through the Communication Workers of America, and the wireline workers say those employees aren't being allowed to collectively bargain.
• Outsourcing jobs: The unions say the new contract doesn't do enough to protect job security and stop the company from sending their jobs overseas.

Verizon has argued that the unionized workers are very well-paid — $130,000 on average, including benefits, the company said in a press release — and that they're turning down an offer of a 6.5 percent raise by rejecting its offers on the contract.

The underlying reason for the strike: Verizon's business is changing

Verizon has now been the source of the two largest strikes in the US in the past five years: In 2011, amid negotiations over the last contract, workers walked off the job.

That's not a coincidence. The wireline workers who went on strike represent the older part of Verizon's business, and Verizon is focusing more on its mobile business and less on the broadband and phone lines that are the backbone of wireline workers' jobs. It's no longer aggressively expanding high-speed FiOS internet service, something that would create more demand for workers covered by the union contract.

The company wants to send more customer service calls to other call centers, elsewhere in the US or overseas, sending jobs away from the northeastern cities represented by the union.

And so the unions and Verizon are fighting the same battles today that they did five years ago: What does the company owe to its employees in a shifting economy? Verizon argues that it needs to change with the times, and that requires workers making concessions — like being willing to work farther away from home for two months, or allowing the company to transfer jobs more than 35 miles away.

"Legacy constraints that may have made sense in the Ma Bell era of phone booths and Princess phones don’t make sense in today’s digital world with high-speed connectivity and dynamic customer demands," Verizon's chief administrative officer Marc Reed said in a press release.

The unions argue that Verizon is just being greedy, and that it's engaging in business practices they hate, including avoiding taxes, sending jobs overseas, and creating jobs for part-time contractors rather than union work.

Verizon, meanwhile, has trained thousands of non-union workers to take union workers' jobs while they're on strike. The New York Times reports that much of the work will be done by supervisors who aren't in the union filling in for the union workers they usually supervise. The companies also created an app for those nonunion workers to quickly report any misbehavior by workers on strike, such as harassment or vandalism.

In other words, both sides came to the strike ready for a fight. And the bigger issues at play means it's turned into a proxy war in the presidential race.

The strike turned into a fight between Verizon's CEO and Bernie Sanders

Verizon has been a target of Bernie Sanders' rhetoric for a long time. And the Vermont senator and presidential candidate has walked on picket lines with striking workers and visited a demonstration in Brooklyn on Wednesday to show his support.

"Verizon is one of the largest, most profitable corporations in this country, but they refuse to sit down and negotiate a fair contract," Sanders said to cheers. "They want to take away the health benefits that you have earned. They want to outsource decent-paying jobs. They want to give their CEO $20 million a year in compensation. They want to evade federal income taxes. In other words, this is just another major American corporation trying to destroy the lives of working Americans!"

Verizon is a natural target for Sanders. Besides the fights between labor and management, the company has paid out growing dividends to its shareholders — meaning it's passing profits to investors rather than workers. And according to an analysis from Citizens for Tax Justice, Verizon paid a very, very low rate of federal taxes between 2007 and 2011, paying no tax at all in 2009, 2010, and 2013. (Its tax rate has been much higher since — 18 percent in 2014 and 23 percent in 2015, according to the group.)

In other words, Verizon exemplifies everything Sanders criticizes about big business. But Verizon's CEO, McAdam, is tired of being a punching bag. His LinkedIn post argued that Sanders' attacks were untrue and outdated, that the company was asking for reasonable concessions, and that its dividends benefited the "millions of average Americans who invest in our stock":

We’re generating the profitable growth that allows us to invest in America and innovate for the future… But in return, we’re asking our represented employees to look at the facts and engage in an honest conversation about what needs to be done to ensure these opportunities will be around for future generations.

"'Feeling the Bern' of reality yet, Bernie?" McAdam asked.

It's not clear how long the strike will last

Verizon is promising the strike won't affect customers. But although it's been preparing for a strike, it doesn't have replacements for the 36,000 employees who are out. So it's possible that, as the New York Times noted, less experienced workers and general shorthandedness will mean longer waits for repairs or on customer support calls.

But even if workers and management are able to reach a deal, the lessons from the 2011 strike suggest that this won't settle the core issues for long. The tension between Verizon and its workers isn't about specific health care contributions or pensions. It's about how the company is responding to changes in the broader economy — which is both why it's resonated with Bernie Sanders, and why the argument is unlikely to end any time soon.

Update: This article has been updated with more current figures on Verizon's tax rates, released Thursday by Citizens for Tax Justice.

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