Tying wages to an industry's health: bargaining trend?
If Harry Katz is right, a revolution is brewing in the auto industry, and it has nothing to do with fuel efficiency or air bags.
Instead, Dr. Katz, a Massachusetts Institute of Technology economist, sees a new trend developing in contract bargaining between American automakers and the United Automobile Workers Union (UAW).
Unless there is a sharp rebound in domestic new-car sales, he predicts in the latest issue of the quarterly Sloan Management Review, the impetus behind future contract settlements will be the competitive positions of General Motors, Ford, Chrysler, and American Motors - rather than such traditional factors as automatic wage increases and cost-of-living adjustments (COLA).
Not only are United States automakers at a competitive disadvantage against their Japanese counterparts, but there also are wide variations in financial health among them. While all have been struggling, GM is the healthiest; Chrysler and American Motors have been trying to keep bankruptcy at bay.
One likely result of the new bargaining strategy, if implemented: far wider differences in hourly wage scales among workers at each of the four domestic automakers.
Already, says Katz, signs of the revolution are evident in this year's GM and Ford settlements and in the tentative Chrysler agreement. The latter agreement, however, was so narrowly endorsed by the UAW Chrysler Council that ratification by the rank and file is considered anything but certain.
The union has asked for new discussion of a provision in the agreement that cracks down on unexcused absences. That provision and the lack of a guaranteed wage increase in the one-year pact are particularly annoying to many Chrysler workers. Only if the company makes a profit of at least $20 million in any quarter over that year, would money be set aside for wage increases.
The chief obstacle in tying contract settlements to an automaker's competitive position, Katz says, is the popularity of the existing formula with the union members.
''I wouldn't suggest that a lot of these changes will happen immediately,'' says Katz. ''But the industry is concerned with getting more flexibility into its labor relations.''
There is a catch, however. In return for giving up its traditional negotiating formula, the UAW will demand increased worker involvement in management decisionmaking and a broader bargaining agenda, Katz says. He suggests this would chiefly involve shop-floor production problems, not usually discussed at the bargaining table. GM and Ford already are experimenting with worker involvement in decisionmaking.
COLA clauses and the so-called ''annual improvement factor'' - the latter a measure of US economic productivity - have been integral parts of auto-industry contract settlements since 1948. In that time, the average auto assembler's hourly wages have increased from $1.44 to $11.45.
But rigid reliance on the traditional formula is no longer possible, Katz argues, because of the disparity in hourly production costs between US automakers and those of Japan. In 1980, according to the US Bureau of Labor Statistics, the average US hourly production cost was $14.79, vs. $6.98 in Japan.
Japanese automakers are restricted to exports of 1.68 million units to the United States per year. But Japanese car sales now account for about 30 percent of the US market, and some American economists think the rate would quickly climb to 40 percent if exports were unrestricted.
Repeated efforts to elicit UAW reaction to the Katz theory were unsuccessful. But sources at the Bureau of National Affairs in Washington, a widely known publishing service that watches labor issues, say the theory is largely a response to the current state of the US economy, and pressure to return to traditional collective bargaining strategies will mount as the economy improves.