Academic journal article Monthly Labor Review

Major Agreements in 1984 Provide Record Low Wage Increases

Academic journal article Monthly Labor Review

Major Agreements in 1984 Provide Record Low Wage Increases

Article excerpt

Major agreements in 1984 provide record low wage increases

In 1984, the size of wage adjustments under major collective bargaining agreements in private industry reached historic lows for the Bureau of Labor Statistics 17-year-old series.1 Settlements reached during the year provided adjustments (increases, decreases, and no wage change) averaging 2.4 percent for both the first year and annually over the life of the contracts. Adjustments peaked in 1981 and have declined steadily since. (See chart 1.) Wage adjustments actually put into effect during 1984, 3.7 percent on average, were also at a historic low.

Average wage adjustments under 1984 settlements were low because wages were frozen or reduced for a substantial proportion of workers, and average increases were the smallest ever. Such developments were not new, having first emerged as a result of 1981 negotiations. They were especially evident in 1982 settlements, and persisted in 1983 and 1984. (See table 1.)

When most of the parties involved in 1984 contracts last bargained in 1981 or 1982, the economy was in a recession and individual industries and firms was in a recession ficulty. By 1984, much of the economy had emerged from the 1981-82 recession, as reflected by major economic indicators. The gross national product increased 6.8 percent in constant (1972) dollars in 1984, following a 3.3-percent increase in 1983 and a 1.9-percent decrease in 1982; total industry utilization was 81.7 percent in December 1984, compared with 79.0 percent in December 1983, and up from 69.6 percent in November 1982; productivity (output per hour) in the business sector rose 3.6 percent in 1984, the largest annual average increase since 1976; the unemployment rate fell from a recession high of 10.7 percent in December 1982 to 8.1 percent in December 1983 and 7.1 percent a year later; the Consumer Price Index for All Urban Consumers (CPI-U) rose 4.0 percent in 1984, continuing the moderate rate of increase that started in 1982 (this index increased 13.3 percent in 1979 and 12.4 percent in 1980); the Employment Cost Index (ECI) showed a dampening of increases in employer costs for employee compensation, rising by only 4.9 percent in 1984, after a 9.8-percent increase in 1981, 6.4 percent in 1982, and 5.7 percent in 1983.

Despite the improvement in the overall economy in 1984, many negotiators continued to face problems stemming from import competition, deregulation of the airline industry, nonunion competition (particularly in the construction industry), and structural changes in some industries (for example, changing product lines or production methods). Thus, settlements reached in 1984 reflected the pressure on management to reduce or hold down labor costs, and the job security concerns of workers which continued to dampen union wage demands.

Settlements provide record low adjustments

Reacting to a variety of economic concerns, 1984 contracts provided record low adjustments, averaging 2.4 percent in both the first contract year and annually over the life of the agreement. (See table 2.) The previous lows, in 1983, were 2.6 percent in the first year and 2.8 percent over the life of the contract.

About 2.3 million of the 7.3 million workers under major agreements were covered by 1984 settlements. The last time parties to these settlements bargained (2 to 3 years ago in most cases), wage adjustments averaged 5.9 percent in the first contract year and 4.9 percent annually over the contract life. These averages reflect, in part, settlements reached in 1982, and to a lesser extent 1983, which provided smaller wage adjustments than in earlier years.

About 720,000 workers (or 31 percent of those covered under 1984 settlements) will receive lump-sum payments that are not incorporated into employees' wage rates during their contract term. Such payments are provided by 38 (7 percent) of the 550 agreements reached in the year. …

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