Wage Issue Splits Union, Industry

IF the strike that began this week at Canadian steel mills is protracted, it could bring huge job losses and result in more imports from the United States, industry analysts say. More than 15,000 members of the United Steelworkers of America went on strike against Stelco Inc. and Algoma Steel Corp. Ltd. The walkout idled a dozen mills in Quebec, Ontario, and Alberta that produce 46 percent of Canada's steel. Stelco is the big target, with 10,000 employees out.

The union demands that the wage and benefit package be increased by what employers calculate to be 75 percent. The companies offers vary from mill to mill, ranging from no increase up to 17 percent.

High-paid workers

Canadian steelworkers are among the highest paid in the world, second only to those in the US. Ed Ghering, a research economist, at the United Steelworkers headquarters in Pittsburgh, said the average hourly wage for steelworkers in the US is US$15.34. Canadian wages are US$14.72.

But that doesn't include benefits, which bring the American pay to US$27 an hour and the Canadian hourly rate to about US$24, according to Donald Barnett, President of Economic Associates Inc. of Maclean, Va.

Demands by the steelworkers in Canada include an immediate 4 percent raise to cover the cost of the Goods and Services Tax, a 7 percent federal sales tax that begins Jan. 1, 1991.

They also want a US$2.60-an-hour wage increase over two years, more vacation pay, pensions indexed to the cost of living, and increases in the existing inflation safety net. Every time the Consumer Price Index goes up 0.3 percentage points, Canadian steelworkers get an extra cent an hour. They want more.

Stelco estimates the union package is worth US$17.40 an hour, or an extra US$34,800 a year for each unionized employee.

``There are people all over Canada who would like to make [US$17.40] an hour, let alone have a [US$17.40]-an-hour increase,'' said James Noonan, lawyer and negotiator for Stelco, one of the companies involved.

``We will strike Stelco for as long as it takes,'' said John Martin, chairman of the central bargaining committee of the steelworkers union.

And it could take a long time. Stelco has a three-month stockpile of inventory, built up in anticipation of a strike. Dofasco, Canada's largest steelmaker and the owner of Algoma, can ship to some of Algoma's customers.

Steel analyst Jay Gordon of McLean McCarthy Ltd. in Toronto says the steel firms could wait to see if the Canadian Auto Workers strike the auto companies in Canada next month. If they do, the demand for steel could drop further and the strike could be even longer.

``The longer this strike lasts the worse it is going to get for the steel companies,'' says Mr. Gordon. ``Stelco was going to lose [US$26 million to $43.5 million] this year. A long strike will further hurt profits and its competitive position.''

Canadian firms produced steel 22 percent below US costs in 1980. By 1987 the advantage was 3 percent and today it is just 1 percent.

Mr. Barnett says Canadian success and American failure in steel was part of the problem. ``The Canadian companies spent a lot of money modernizing, but they have not had the benefit of going bankrupt to force concessions from labor, suppliers, and lenders.''

Strong dollar and imports

Barnett says companies such as LTV are able to ship low-cost steel into the Canadian market. In addition, new mini-mills with non-union workers can produce steel at lower costs. The Canadian dollar, trading at a nine-year high of almost 87 US cents, has hurt steel companies as imported US steel becomes cheaper.

``It would be an understatement to say that [meeting the union's demands] would make Canadian steelmakers uncompetitive,'' says Barnett. ``This is not the time to go on strike, with steel prices down and the economy in a slump.''

In 1981 there was a 125-day strike at Stelco. Since then the labor force has been reduced from 26,263 to 16,147. Analyst Jay Gordon says a long strike could mean Stelco would lose customers to Dofasco, a nonunion company. And he says it will certainly mean a further restructuring of the Canadian steel industry with the permanent loss of thousands of jobs.