Academic journal article Monthly Labor Review

Labor and Management Continue to Combat Mutual Problems in 1985

Academic journal article Monthly Labor Review

Labor and Management Continue to Combat Mutual Problems in 1985

Article excerpt

Labor and management continue to combat mutual problems in 1985

Labor-management relations in 1985 were about the same as they have been since 1982. Wage settlements continued to be modest, because of management's pressure for restraint to aid in overcoming competitive problems. Union priorities focused on preserving jobs or aiding displaced workers. Continued moderate increases in consumer prices and employment enhanced the bargaining environment. Major collective bargaining settlements (involving 1,000 workers or more) reached in private industry during the first 9 months of the year provided for wage adjustments averaging 2.9 percent annually over the life of the contract, compared with 3.4 percent the last time the same parties negotiated, generally 2 to 3 years ago.1

The competitive problems that have caused the difficulties in some industries in recent years include increasing penetration of U.S. markets by foreign competitors, aided by lower production costs and the "strong dollar' that has hindered domestic firms' ability to sell abroad; intense competition among companies in the deregulated transportation industries; and changes in production and distribution methods, and in customer preferences. All of these foreign and domestic pressures forced employers to extend their cost control measures beyond wage restraint, as they closed marginal facilities, cut employment, and adopted new technology and processes.

At the bargaining table, labor and management continued to adopt "two-tier' compensation systems to limit labor cost increases. Such systems provide for permanent or temporary lowering of wages and/or benefits for new employees while maintaining or increasing compensation for workers already on the payroll. Despite unions' contention that the systems are not good for morale, two tiers are acceptable to current employees when the only other method of aiding an employer would be to cut or freeze compensation for all employees. Unions' concern about morale stems from the fact that employees will be compensated at different levels for the same work and because of the problems that could develop when the lower tier workers in a bargaining situation attain majority control.

In 1985, two-tier systems were adopted in major settlements covering 700,000 workers (already on the payroll), compared with 800,000 workers in 1984.2 These totals are based on a definition of "two-tier' that includes both temporary and permanent systems. Some analysts would not include temporary systems because new employees do attain parity with current employees after a specified period. Of course, any system, whether temporary or "permanent,' is subject to modification or elimination in a future settlement.

Another cost-saving approach that continued in 1985 was the adoption of lump-sum payments in lieu of specified wage increases. Typically, a 3-year contract with such a provision might provide for one specified wage increase and two lump-sum payments, or two specified wage increases and one lump-sum payment, at 1 year intervals. One cost savings to employers results because lump-sum payments may not be taken into account in calculating the level of certain benefits such as pensions.

During 1985, major settlements for at least 700,000 workers established lump-sum payments, compared with 800,000 in 1984.

The third approach to holding down cost increases is adoption of contract provisions intended to hold down employer costs for health insurance. Typical measures include offering alternatives to "traditional' plans, requiring second opinions before nonemergency surgery, monitoring hospital stays and procedures, and increasing employee deductibles and co-insurance payments. During 1985, such measures were adopted in major settlements for at least 400,000 workers, compared with at least 500,000 in 1984.

These and other solutions to the problems faced by the employers and unions that bargained in 1985 reflected attempts by the parties to accommodate each other's needs. …

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