The Rise of Healthcare in Steel City

The Rise of Healthcare in Steel City

An interview with Gabriel Winant on deindustrialization, the care economy, and the living legacies of the industrial workers’ movement.

Postcard depicting the Montefiore Hospital in Pittsburgh (Wikimedia Commons)

Booked is a series of interviews about new books. For this edition, Nick Serpe spoke to Gabriel Winant, the author of The Next Shift: The Fall of Industry and the Rise of Health Care in Rust Belt America (Harvard University Press).

Nick Serpe: Let’s start with a figure in the book who stands at the inflection point between the industrial and postindustrial eras: Edward Sadlowski Jr. Who was he? What did he see changing around him? What did he get right and what did he get wrong about these major social processes that were underway?

Gabriel Winant: Eddie Sadlowski is a fascinating figure. A real heroic, doomed figure of the labor movement. A third-generation steelworker in Chicago, he rose through the ranks in his plant and then his local, District 31, becoming its director in the early 1970s. By then, there had been multiple waves of grinding industrial job losses. There were significantly fewer steelworkers than there had been twenty years before. And as their neighbors lost their jobs, the remaining steelworkers had to stretch their wages and benefits further in their communities. More people had to depend on kin networks.

Sadlowski tapped into the discontent over this—and the sense that the union was not really fighting it hard enough. The union had traded away the right to strike in return for guaranteed wage increases in 1965. He eventually ran for president of the entire union, in the late 1970s. He was also an intellectual, an autodidact, and quite radical: he opposed the war, which was an unpopular position in the industrial union world, and he was a kind of environmentalist. He especially got in trouble during the election campaign when he gave an interview to Penthouse magazine in which he said that he wasn’t sure if we actually need more steelworkers. In some ways, fewer steelworkers is better, he said. No man wants to wake up every day and face the blast furnace. There are poets right now who are draining out their lifeblood in the steel mills, and doctors who are working the cranes. Human capacity is being wasted by the degradation of the workers in this industry.

You can imagine why he caught flack for that. But he understood that structural, sectoral economic change was happening. He was trying to envision a world where that led to freedom and improved human conditions. He made a couple of references to doctors, which shows that he seemed to actually get which sector of the economy was growing. What he did not get was that this was going to be a low-wage sector, at least in its capacity to absorb displaced industrial workers. Instead, he shared the common view in the middle of the twentieth century about postindustrial society: it would reward knowledge, and knowledge would be widely accessible. It would become a society of professionals.

Serpe: Sadlowski had radical politics, but in other ways, he is a prototypical figure of the industrial era. What did this moment of transition look like for people who didn’t look like Sadlowski, or weren’t in the same social position?

Winant: From the mid-1960s to the mid-1980s, there was a very rapid expansion in all kinds of service-sector work. Healthcare was the leader within that. The people being drawn into this new labor market were overwhelmingly women, and the jobs in which they wound up were stratified by race. Early in this process, African-American women began to transition into healthcare work, from many sources, but especially from domestic work, which was shrinking as a category of employment by the 1960s. African-American women had always worked outside the home at higher rates than white women did, because African-American men always had less access to stable industrial employment of the Sadlowski type.

As economic dislocation and deindustrialization advanced, more and more white women joined African-American women in these new workplaces—hospitals, nursing homes, and so on. I found a document from a home health agency in the early 1980s in which a manager said that it’s great to have a workforce that’s been pre-trained by being mothers to meet rising demand. As white women entered this rapidly expanding workforce, they were often routed into occupational positions above African-American women.

Serpe: You cite a RAND Corporation study from that time that shows the number of high-wage industrial jobs were going down as the number of low-wage service-sector jobs were going up. But the study doesn’t establish a relationship between these developments. This seems to be a common problem: a kind of mechanical understanding of transition from one economic order to the next. In some ways, your whole book is an exploration of how interwoven these developments are, and how drawn out and uneven the transition is. What are some of the ways that the decline of the industrial order in Pittsburgh shaped the coming postindustrial order?

Winant: First of all, you have to understand deindustrialization as a generational process, a long-term secular dynamic rather than an episode of just a few years. Industrial employment in Pittsburgh peaked in 1950 at the apex of the military-industrial cycle of investment that joins the Second World War and the Korean War. At that point, basically half of all employment in Pittsburgh was in manufacturing, mining, construction, warehousing, trucking, and other sectors that we now recognize as blue-collar work. After this massive but transitory pulse of investment, employment steadily declined.

That had severe demographic consequences. For one thing, the population shrank. The labor market was organized around seniority, and it was very heavily unionized, which meant that, as opportunity shrank, that shrinking opportunity was going to be felt unevenly by age. Young people, particularly young men, decided to leave the region entirely. Today, the population of Pittsburgh is 300,000, less than half of what it was in 1950. Some of that is suburbanization, but a lot of it is regional out-migration.

The population also, for the same reason, aged profoundly. By the 1980s, the population was old and quite sick. Because job losses create sickness—both by producing an older and thereby sicker population, and because when people who depend on work for their survival lose that work, they become housing insecure, they become stressed, their relationships become stressed, and alcoholism and domestic violence tend to increase.

People cast about for whatever economic resources they could find. And the thing that came through, more than anything else, was health insurance. Steelworkers and other industrial workers were able to carry their collectively bargained insurance with them into retirement. People who weren’t yet retired also had very good coverage for a time. Medicare and Medicaid bulked up and rounded out the system built around collective bargaining. And a massive healthcare sector grew up in correspondence with the healthcare market of industrial workers and their families. All of that outlived the job losses, and it provided people who were suffering economic dislocation a way of securing some amount of social support.

The social and economic needs of this population were increasingly being processed as a public health problem by the healthcare system. That drove demand and income into that system and caused it to grow. So when healthcare labor expanded in the 1970s and 1980s, that was related to demand shunted into that system by steel’s decline. As was the labor supply: daughters and wives of laid-off steelworkers decided they needed a job because industrial work wasn’t bringing in income anymore.

Serpe: Across the industrial core of the Global North, this massive transition looked, from a high-up view, roughly similar from place to place. But there is a story in your book of path dependency: the U.S. postindustrial economy took the form it did in part because of how the private-public welfare state developed during the New Deal and the decades that followed.

Winant: We developed our healthcare system in this country through privatized collective bargaining because of the limitations and defeats of the New Deal. At the end of the Second World War, it was widely thought that the same political project that had achieved Social Security and the Wagner Act was going to bring us health insurance. Harry Truman tried to do this, famously, and his main social base was the industrial unions, the United Auto Workers and United Steelworkers and so on, which had formed and become strong in the previous decade. As Truman and his coalition began to hit various setbacks, related to the onset of the Cold War, industrial unions realized that they didn’t want to keep all of their eggs in this basket. They began to pressure General Motors and Ford and U.S. Steel and so on for private healthcare plans, which they won in the late 1940s. In 1949, in a pair of steel industry cases, the court system actually made “fringe benefits,” meaning health and pensions, a mandatory part of collective bargaining.

That was how health insurance through employment proliferated across the American labor market. It eventually came in other ways, too, but the central story is that the industrial union movement decided that it was going to win this for its members because it was failing to win what we would now call Medicare for All.

As a result, health providers expanded and invested and grew. Services improved over the course of the 1950s, but large sections of the population still didn’t have health insurance. Wealthy people could buy it for themselves, professionals could get it through their employment, but the elderly and the poor were increasingly left out because prices were rising in response to collectively bargained health insurance. By the late 1950s, there was a growing consensus that there was going to have to be some kind of federal action on this problem, which eventually led to Medicare and Medicaid. These programs did not displace any of the existing system; they simply extended its logic. The federal government stepped in not as a provider of healthcare, but as another buyer.

This reliance on private-sector labor markets for the provision of health insurance is unique to the United States. What it means is that we have a huge private-sector welfare state, which created all kinds of political problems when reliance on different kinds of social welfare grew due to industrial job loss.

Serpe: In addition to this national story, you explore how dynamics specific to the Pittsburgh steel era shaped the emerging healthcare sector. What were some of the cultural, social, and economic factors that produced the local hospital system, and how did that system change as healthcare became a more dominant part of the economy?

Winant: When the steelworkers won their health insurance plan in 1949, they enrolled every worker in the steel industry nationwide into Blue Cross of Western Pennsylvania, where they had their biggest concentration of members. They wanted everyone to be in one pool so they could negotiate better rates with providers. The steelworkers became a huge proportion of the local healthcare market. We can almost think of Blue Cross of Western Pennsylvania as the company welfare scheme in the company town that was Pittsburgh. It gave steelworkers and their families a large amount of say over the healthcare system and a sense of felt entitlement to it.

The hospitals that serviced them were nonprofit—they were often Catholic institutions—but people really felt like they owned them. It was this amazing thing: you could go any time, you didn’t have to pay much or anything at all, and it was your right to participate in the question of what kind of services you got.

There’s a story I tell about a hospital in Homestead—the steel town that’s the famous site of the 1892 battle—basically across the street from Homestead Steel Works. Because the population was aging, fewer babies were being born there, and the administrators decided that they probably didn’t really need obstetrics anymore. This unit was being underused, while other units were overcrowded because so much of their subscriber base was now elderly. When they moved to close it, there was an uproar in Homestead. A lawsuit was filed by an organization of women who volunteered at the hospital photographing newborns. And they won. The judge said that hospitals have obligations to their communities. There were rules that they had to follow; it wasn’t just a normal private enterprise.

This kind of thing happened again and again. The court system, the political system, and the economic organization of the healthcare industry ratified this sort of communitarian, social-democratic ethos, around which healthcare provision was organized. By the 1970s, steelworkers and their families used the hell out of this system. And they loved it.

I read a collection of interviews that were carried out by a group of sociologists in the 1970s, who you could tell were influenced by the women’s health movement. They talked to all of these older white ethnic women, many who had immigrated seventy years before, and it’s clear that they’re kind of looking for stories like, “I used the remedy from the old country that my nonna taught me.” Instead, what they hear again and again is, “The hospital? I love it! It’s so scientific. They know what they’re doing, they take such good care of you, you don’t have to pay.”

This was a raced experience; African Americans had a very different experience of the hospitals than Italians or Slovaks or Poles, in part because their insurance was less likely to be as good, and also because of institutionalized medical racism. But the largely white steelworker rank and file was large enough to sustain this huge market, around which hospitals expanded all through the 1970s and into the early 1980s.

Serpe: In the 1980s, we start to see a trend that has basically continued through the present day: the consolidation of major research hospitals, often affiliated with universities, that carry out expensive procedures and the decline of hospitals that are doing more labor-intensive, longer-term care, which are more community, or even neighborhood, rooted. How did this happen?

Winant: We need to understand healthcare inflation as a way of managing, displacing, and postponing the pressures brought about by industrial job losses and rising inequality. A lot of the social pressure that resulted from that flowed into the healthcare system. And prices rose. In 1979, the Federal Reserve began to try to shut off the overall macroeconomic inflationary dynamic with the famous Volcker shock. That threw people out of work across industrial America on a massive scale. It was like a Great Depression in Pittsburgh. But it didn’t touch the healthcare sector. In fact, the healthcare sector grew. You had this anomaly within the deindustrializing economy of an expanding healthcare system. And as the rest of the economy was deflating, it was inflating.

This became a political problem because the federal government was paying for a huge amount of this. There was a fiscal panic about the future of Medicare. Up until 1983, Medicare reimbursed hospitals retrospectively. A doctor in a hospital did a procedure, a patient stayed for some amount of time, and then the provider sent Medicare a bill. They said, “Here’s what we did; here’s how much it cost us, now give us 102 percent of that.” That’s a cost-plus formula, which basically meant that healthcare providers were writing themselves blank checks. It was a key mechanism of healthcare price inflation.

In 1983, Congress passed the most significant Medicare reform in the history of the program—a Volcker shock on healthcare. They switched Medicare to a prospective payment system. The Department of Health and Human Services was directed to come up with a list of hundreds of “diagnosis-related groups,” with a price fixed to each of them. Hospitals then decided which one the patient fell into. They could keep the patient as long as they wanted. They could intervene however they deemed necessary. But a given diagnosis came with a given reimbursement.

This was intended to enforce market discipline on hospital care. Hospitals would have to economize, do only what’s necessary. And they would also likely begin to specialize, and to compete with each other. What happened? Wealthy hospitals, which generally tended to be academic hospitals, often in the metropolitan core, were able to invest in expensive equipment and technical capacity and to develop specialties in high-reimbursing forms of care. Presbyterian University Hospital, which is the flagship of the University of Pittsburgh Medical Center, became the transplant capital of the world.

Serpe: Half of all liver transplants in the United States.

Winant: Yeah. And their margins increased because of this reform. However, community hospitals, like Homestead Hospital, which had been very prosperous for twenty years, since Medicare passed, found that they were unable to stay above water, because their bread and butter was a steelworker checking in for weeks at a time. He might have had some kind of ailment, but also his daughter couldn’t take care of him right now, because she had to go to work because her husband got laid off from the steel mill. I’m stylizing it, but this kind of “medium-term” care was a real specialty with these institutions, and it didn’t pay anymore after the Medicare reform. All these hospitals went into economic death spirals, which led to them being bought out by the much more prosperous ones.

Serpe: That created the stratification of the labor market as well. The hospitals whose margins grew have a higher-compensated, more technical workforce. But the lower-wage jobs in more care-intensive facilities didn’t disappear. What happened to them?

Winant: First, there was labor market stratification within the hospital industry. Hospitals like Presbyterian University developed a much more elaborately stratified occupational hierarchy, because the more complicated services you’re providing, the more you need complicated care teams—a doctor and a registered nurse, maybe a couple kinds of RNs, but also more types of paraprofessional and non-professional technical work, along with nursing assistants, all the way down to people who are cooking the food and cleaning the building and so on.

Most of the economically destabilized community hospitals, meanwhile, didn’t last more than a decade and a half after the Medicare reform. But the kinds of labor that happened in them spread out across different institutions and arenas for caregiving. Nursing homes grew really rapidly in the 1980s and 1990s and stepped in to provide some of the function that these community hospitals had once provided. The same happened with home care. So in addition to stratification within hospitals, there was stratification between hospitals and outpatient care. And by the late 1990s, outpatient care was increasingly the engine of employment growth.

Serpe: To help us understand the labor market that resulted from these developments, could you explain the service-economy trilemma?

Winant: If you accept that the transition out of manufacturing into a postindustrial labor market is going to bring downward pressure on productivity and employment—because service sectors don’t have the same room for productivity growth as industrial sectors—there are a whole set of implications for how welfare states are organized and how labor markets are structured.

Policymakers then face a choice—the trilemma. There are three kinds of goods that you want, and you can only have two of them: high wages, job growth, and fiscal restraint. (We may not think the last one is good, but from the perspective of policymakers it is generally desired.) If you deregulate your labor market, keep the minimum wage low, suppress collective bargaining, and make unemployment insurance difficult to get and insufficient to live on, you can have job growth with low wages. This is the American path since the 1980s. If you regulate your labor market through these same mechanisms, you can have high wages, but it will drive up your unemployment rate. This is the French path—traditionally, France has had a stubbornly high unemployment rate—and was seen as the German path until the early 2000s. Or you can take some amount of this low-productivity service-sector work into the public sector, which gives you a mechanism for increasing employment and having wages not stagnate. That means that the public is going to have to foot the bill, and that’s classically the Swedish path.

Because the transition from industrial to service-sector work creates these kinds of zero-sum problems in the context of a capitalist labor market, it forces some of these decisions on policymakers. But in the book I argue that, in fact, we already decided this way before welfare reform, way before the Volcker shock, through the uneven structure of the public-private welfare state. The whole healthcare industry was designed as an external adjunct to supply the things demanded through collective bargaining in manufacturing, which meant that downward pressure on wages and on working conditions were part of the basic institutional organizational makeup of healthcare.

You saw this really clearly after collective bargaining rights were finally extended to healthcare in the 1970s. Some unions won recognition, and they realized right away that they’re not actually bargaining with the administrators of their institutions. They’re bargaining with the state legislature, because that’s who is setting the reimbursement rates that determine the operating budget of their employer. Healthcare workers are in this trap of being informal public employees. It locks us into this low-wage path.

Serpe: The Next Shift helps us understand these specifics by taking social reproduction seriously. In the care-dominated economy, something that had previously happened largely within the household—intimately connected with the capitalist economy but unrecognized by it—moves into the world of formal employment. Social reproduction becomes newly visible—and all the more so during a pandemic. How does this process help us understand what we’re living through, and what’s possible?

Winant: In the book, I’m trying to figure out how the existing legacies of class formation and welfare state institutions, degraded as they are, can serve as points of solidarity around which to reorganize and recompose working-class power, rebuilding institutions of solidarity. That likely means going beyond just strengthening the Wagner Act.

The book tells the story of a long-term crisis of capitalist employment, a crisis in the relationship between the population and the labor market. That crisis has dramatically destabilized employment. That allows us to reimagine, or to imagine for the first time, very different worlds, possibly much more equal worlds, of work and cooperation. And in a certain way, that’s what we’re seeing—in an inverted and unequal form—in the rise of the care economy. We are moving toward a society where more and more of us are involved in taking care of each other.

On its face, that’s a good thing, right? As Eddie Sadlowski said in 1977, it’s a good thing for us to not be sending people into coal mines and blast furnaces, but instead to be engaged at the task of tending to the young and the old and the sick and the disabled, to one another. But it is happening in this highly unequal form, in terms of who is compelled by economic pressure to provide those services and to expose themselves to the risks that providing those services may expose you to. Simultaneously, there is inequality in who has access to real care. A profound irrationality is warping what could be a move toward a more solidaristic society.

That’s part of the reason the book insists that the origin of the care economy lies in the victories of industrial workers. There are still living legacies of the New Deal state, of the CIO, of the American workers’ movement. They are degraded as all hell, sometimes unrecognizable, but they nonetheless carry implicit norms of care as a right for working-class people. And we might be able to renovate those legacies for our own time.

Gabriel Winant is an assistant professor of history at the University of Chicago and the author of The Next Shift: The Fall of Industry and the Rise of Health Care in Rust Belt America.

Nick Serpe is Dissent’s senior editor.