Despite inflation, union wages and benefits stay low. If rate drops, pressure may be off negotiators to get higher wages
At the end of January, shipbuilders in Pascagoula, Miss., agreed to no increase in wages, but they got a $1,000 lump-sum payment not included in their wage base. After two years without a wage increase, the carpenters' union in New Jersey agreed to a three-year contract giving members a 2 percent increase per year.
Unions in contract negotiations this year are not keeping pace with the inflationary pressures squeezing the economy. According to the Bureau of Labor Statistics, unions won wage increases of just 0.9 percent in the first year of their contracts and only 1.7 percent over the life of their contracts.
Unions are getting these small increases in spite of the fact that the consumer price index, widely considered an inflation gauge, is up at an annual rate of 6.1 percent so far this year. This trend should continue when the government today releases the May CPI, which is expected to show another rise of 0.4 percent.
Because union wages are not rising with the price of commodities, economists believe inflationary pressures in the US may be just temporary.
Lyle Gramley, the former Federal Reserve Board governor who is chief economist for the Mortgage Bankers Association in Washington, points out that commodity prices frequently spill over to wage rates, starting a new cycle of wage-price inflation.
Because this has not happened this year, he says, ``I am relatively optimistic the inflation rate is not going to worsen dramatically.'' In fact, Mr. Gramley is expecting the inflation rate next year could be lower than this year.
If Gramley is correct, this could take some pressure off union leaders who have had difficulty negotiating wage increases. According to the Labor Department, more than half of the workers whose contracts expired in the first quarter continued working without agreements.
In large measure this results from changes in the United States economy. Thomas Kochan, a professor of industrial relations at the Sloan School of Management at the Massachusetts Institute of Technology, blames the generally lackluster economy.
``There is a weakness in product markets for most firms,'' he explains.
Unions are also splintered, hindering their effectiveness. Economist Audrey Freedman of the Conference Board, a nonprofit, business-sponsored, research organization, says the era of mega-negotiations with gigantic unions is over. Many locals negotiate their contracts instead of relying on national models. ``It's as if a drop of mercury has been spilled, and it goes in all different directions,'' Mrs. Freedman says.
Freedman used to keep a calendar listing all the major contract negotiations for the year. It would be dominated by such unions as the United Steelworkers of America. Now, she points out, the steelworker union is down to 120,000 workers, who don't all negotiate at once. Instead, her calendar, which is based on size of the negotiation, is filled with negotiations with food unions or utility workers.
At the same time, many of the nation's basic industries have been deregulated, resulting in tougher competition.
For example, Roger Sheldon, editor of the Carpenters Union magazine, complains about the increased use of nonunion labor in construction. The construction trades are trying to get Congress to pass legislation this year to halt the spread of this trend.
One closely watched negotiation will be between the United Automobile Workers and the ``big three'' automakers. But wage issues are not likely to be that important when the UAW opens negotiations in July on its contract, which expires in September.
Professor Kochan expects the bargaining to be centered on job security. The auto companies would like more flexibility in the production process so they can lower their labor costs as they use new technology. The unions don't want to lose jobs.
Harry C. Katz, a professor of labor relations at Cornell University, expects the UAW to negotiate for a return to a 3 percent annual wage increase on top of its cost of living adjustment (COLA). ``I'd be flabbergasted if they don't get close to 3 percent,'' he says.
The auto workers may also want to renegotiate their profit-sharing agreement. Last year Ford workers received $2,100 in profit sharing while General Motors workers got nothing. ``When a company pulls ahead,'' Freedman explains, ``it puts pressures on the UAW.''
How the UAW contract turns out will be watched carefully. Gramley notes that trends in the manufacturing sector frequently spread to the government and service sectors.
``It gives the employer a great deal of bargaining power to point to low wage increases in the unionized sector,'' he explains, adding, ``once wage restraint becomes the name of the game, it spreads.''