Wage Adjustments in Contracts Negotiated in Private Industry in 1987

By Lacombe, John J., II; Sleemi, Fehmida R. | Monthly Labor Review, May 1988 | Go to article overview

Wage Adjustments in Contracts Negotiated in Private Industry in 1987


Lacombe, John J., II, Sleemi, Fehmida R., Monthly Labor Review


Many of the measures were up slightly from the historiclows of last year; time will tell if this merely reflects the mix of industries reaching agreement or if the declines that began in 1982 are reversing

Average wage adjustments under major collective bargaining settlements in private industry were somewhat higher in 1987 than the historic lows of 1986. Specified adjustments (the net effect of decisions to increase, decrease, or not change wages) for the 2,049,000 workers under 1987 settlements averaged 2.2 percent the first contract year and 2.1 percent a year over the contract term. (See table 1.) These adjustments were next to the lowest ever registered by the Bureau of Labor Statistics' 20-year-old series on major contract settlements covering 1,000 workers or more in private industry.' This was the sixth consecutive year in which settlements provided record or near-record low adjustments. (See table 2.)

The 2.1 -percent average annual wage adjustment specified over the term of 1987 settlements was the same as in the contracts they replaced, which typically had been negotiated in 1984 or 1985. This is the first year since this comparison was introduced in 1981 that settlements did not call for lower adjustments than the contracts they replaced. (See table 2.)

The Bureau also measures compensation (wage and benefit costs) adjustments in settlements covering 5,000 workers or more. In 1987, compensation adjustments averaged 3.0 percent in the first contract year and 2.6 percent annually over the contract term. (See table 3.) These adjustments also were higher than the record low averages in 1986.

Replaced contracts

In 1987, bargainers replaced contracts that had provided total effective wage adjustments (specified adjustments plus cost-of-living adjustments) of 2.6 percent a year. About the same time that most of these contracts were in effect (between December 1983 and December 1986), the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) also rose 2.6 percent a year. Inflation, therefore, was not a prominent concern among bargainers, even though the CPI-W increased 4.5 percent during 1987, compared with 0.7 percent in 1986.

Total wage adjustments were smaller, on average, under contracts that were replaced in 1987 than under those replaced in 1986. This was the fifth consecutive year in which this occurred, reflecting recent declines in both specified wage adjustments and cost-of-living adjustments (COLA'S). COLA'S declined because of the slowdown in the rate of inflation in the last few years and the drop in the proportion of workers under major agreements with COLA clauses. COLA coverage fell from 57 percent at the end of 1985 to 38 percent at the end of 1987. Settlements in 1987

About 2,049,000 workers, or one-third of those covered by major agreements in private industry, were under 1987 settlements. Terms were mixed, reflecting conditions in the various industries. In some industries (for example, steel and automobile manufacturing), negotiations were influenced by competitive pressures from abroad. In others (particularly, construction and food stores), regional conditions, such as the strong economy in New England and the weak economy in the South Central States, played a dominant role.

About 1,490,000 workers had first-year wage increases averaging 3.5 percent, 474,000 had no wage change, and the remainder suffered wage cuts averaging -8.5 percent. Subsequent increases for 259,000 workers with a firstyear wage decrease or freeze will yield a net gain over the contract term. Thus, by the end of their 1987 agreements, 1,749,000 workers will receive average annual wage increases of 2.6 percent, 221,000 will experience no wage change, and the remainder will have an average decrease of--3.7 percent a year. Wage increases and freezes were negotiated in a variety of industries; cuts, however, were concentrated in retail food stores, steel manufacturing, and construction. …

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