Modest labor-management bargains continue in 1984 despite therecovery Despite an expanding economy, labor-management settlementscontinued to be low in 1984.
Negotiators grappled with pressures toreduce or eliminate labor cost increases in the face of growing importcompetition, the spreading effects of domestic deregulation intransportation, and structural changes in other industries. Inaddition, moderate inflation and concerns over job security continued totemper union demands for large wage increases. During the first 9 months of the year, major collective bargaining settlements (covering 1,000 workers or more) in private industryprovided average wage adjustments of 2.5 percent in the first contractyear and 2.
8 percent annually over the life of the contract. 1 Thiscompares with 8.6 percent and 7.2 percent the last time the same partiesbargained (2 to 3 years earlier, in most cases). Part of the decline inthe “adjustments’ (the combined net result of wage increases,decreases, and no changes) was traceable to settlements in construction,which covered 420,000 of the 1.4 million workers under settlements inprivate industry. In construction, settlements provided average wageadjustment of 0.
9 percent in the first year and 1.2 percent annuallyover the contract life, compared with 3.2 and 3.5 percent, respectively,in the other industries. In the fourth quarter, settlements in the auto industry covered anadditional 450,000 workers, and negotiations were continuing for 350,000workers in the railroad industry. 2 As part of their efforts to improve their competitive position,some companies that settled in 1984 won several types of contractprovisions designed to limit labor cost increases. One of these was”two-tier’ compensation systems, which grew in popularity in1984.
Under such systems, which vary considerably in operation, newemployees are paid less than current employees, receive lesser benefits,or both. Two-tier systems are often agreed to after employers firstdemand reductions in wages and/or benefits for all workers in thebargaining unit. Such systems must be agreed to by current employees,who are usually not adversely affected by them. During 1984, two-tierpay systems were introduced into contracts covering about 200,000employees, all of them already on the payroll. Another approach to moderating labor costs that continued in 1984was lump-sum payments in lieu of wage increases. Such payments helpemployers in several ways. For example, they usually are paid at theend of a contract or calendar year, rather than in regular paychecks;they do not increase base pay rates and so do not increase the cost ofbenefits that vary with base rates, such as vacation pay or overtimepremiums.
Lump-sum payments are currently provided for about 650,000workers, mostly in the aerospace industry and in the automobileindustry, at General Motors Corp. and Ford Motor Co. Efforts to hold down cost increases for health insurance also wereimportant in 1984. These efforts took several forms, such as increasingemployee deductible and coinsurance payments, requiring a secondsurgeon’s opinion on nonemergency operations, and offeringemployees coverage by Preferred Provider Plans and Health MaintenanceOrganizations as alternatives to “traditional’ insuranceplans.
During the year, at least 500,000 workers were covered bysettlements that included one or more of these cost containment provisions. A question that continued to be asked–but apparently was notanswered–during 1984 was whether the historical practice of patternbargaining was ending in the industries where it existed prior to theeconomic difficulties and increased competition of the last few years.These difficulties had impelled some companies to press for contractterms tailored to their individual needs. The fate of patternbargaining was uncertain because of incomplete or contradictorydevelopments in some industries. These included General Motors’and Ford’s essentially identical settlements with the United AutoWorkers, followed by uncertainty regarding the outcome of theunion’s request of Chrysler Corp. for unscheduled bargaining in1984; the continuation of pattern settlements in the soft coal industrydespite the withdrawal of a large number of employers from theirbargaining association; prolonged negotiations in the railroad industry(which has traditionally settled on a pattern basis); and continuingdefections from the employer association in the steel industry thatincreased uncertainties regarding the degree of wage and benefituniformity that would be attained in 1986 settlements.
Auto settlements Negotiations between the Auto Workers and General Motors Corp. andFord Motor Co. commenced in July amidst improved economicconditions–both companies were expected to post 1984 profits exceedingthe record levels of 1983. On the surface, this presaged”large’ settlements, particularly because new UAW leaderswould presumably want to prove their bargaining mettle by restoring someof the wage and benefit cuts the union had agreed to in 1982. However,there were countervailing factors, including the domesticmanufacturers’ need to invest large sums in plant and equipment tohelp counter increasing competition from exporters to the United States;and the possibility that Japan’s voluntary limit on shipments tothe United States would not be renewed when it expires on March 31,1985.
Foreign producers currently hold a 25-percent share of thedomestic market. In the end, the overriding consideration appeared to be the unionleaders’ conclusion that the workers’ primary need wasincreased job security, rather than substantial increases in wages andbenefits. One reason UAW President Owen Bieber and the other officersemphasized job security was that 40,000 GM and 21,000 Ford workers werestill on layoff, in spite of the high production levels. Another reasonwas an internal GM document obtained by the union early in 1984, inwhich the company projected possible future cuts in its work force,varying according to estimated increases in productivity. There was substantial opposition to the first of the settlements,with General Motors, as workers approved it by a vote of 138,410 to102,528 announced on October 14. The essentially identical Fordagreement was approved by a 33,312 to 18,386 vote announced on October29. The major innovation in the GM contract was a Job OpportunityBank-Security Program financed by a company obligation of $1 billionover the life of the new 3-year contract and the succeeding contract,also expected to run for 3 years. (At Ford, with fewer employees, theobligation was $300 million.
) The program, administered by joint committees at the national,area, and local levels, guarantees that workers with at least one yearof service will not be laid off as a result of the introduction ofimproved technology, “outsourcing’ (procuring parts from othermanufacturers), negotiated productivity improvements, shifting of workfrom one plant to another within the company, or the consolidation ofcomponent production. Layoffs resulting from declines in sales,disposal of facilities, or other reasons are not covered. Eligible employees facing a layoff will participate in an employeedevelopment bank and will continue to receive the pay rate for theirlast job or, if assigned to another job, the rate for that job. Theyalso will continue to accrue pension credits and receive all otherregular benefits until the funds are exhausted. Other assignments forbank members include job training, replacing other workers undergoingtraining, and moving to a job at another company plant, if there is noqualified worker with recall or rehire rights.
If the national committee determines that there are more bankmembers at a plant than anticipated local and area openings, it isauthorized to set up special programs under which departing bank memberswho are age 55–61 and have 10 years of service will receive pensionscalculated at unreduced rates, plus various supplements. Departing bankmembers who do not meet the age and service requirements will receivepayments of $10,000 to $50,000, varying by seniority. Other improvements in job security included– Increased company funding of the existing SupplementalUnemployment Benefits (SUB) program under which laid-off employeesreceive weekly payments for up to 2 years. Increased company funding of the Guaranteed Income Stream (GIS)program established in 1982, under which laid-off employees with 15years of service who exhaust their SUB entitlement continue to drawbenefits until their return to work, retirement, or the company’smaximum financial obligation is reached. The maximum GIS benefit is thelesser of 75 percent of gross earnings or 95 percent of after-taxearnings, minus $12.50 a week ($17.
50 beginning January 1, 1985) forwork-related expenses not incurred during layoff. Establishment of a venture capital plan under which GM willprovide up to $100 million ($30 million at Ford) to start businesses incommunities hit by closing of company plants, with hiring preferencegiven to the displaced workers. A provision intended to cut overtime work by penalizing thecompany 50 cents per hour for all overtime hours worked in excess ofstraight-time hours worked. The penalty money will go into an existingskill development and training fund. A company promise to try to reduce average weekly overtime by 2hours per worker. Unlike the 1982 accord, the new 3-year contract provides aspecified wage increase, ranging from 9 to 50 cents an hour, effectiveimmediately. In a departure from tradition in the industry, theemployees will receive lump-sum payments at the close of the second andthird contract years, rather than specified deferred pay increases atthe beginning of those years.
Each of the “performancebonuses’ will equal 2.25 percent of pay for all compensated hours,including overtime hours (but not overtime premium pay) and paid timeoff. The union estimated that the specified increase, the two bonuses, a$180 immediate “special payment,’ money resulting fromcontinuation of the profit-sharing plan, and cost-of-living payadjustments would yield GM workers $11,730 over the term, assuming a5-percent annual rate of increase in the Consumer Price Index andcontinuation of the projected 1984 profit level. Under the 1982 accords, profit-sharing distributions averaged about$700 for each GM employee and $440 for each Ford employee, and employeesof both companies received cost-of-living adjustments totaling $1.
05 anhour. Other terms included– Adoption of a plan under which employees can receive bonuses ofup to $500 a year for regular work attendance. This supplements a planadopted in 1982 under which employees with excessive unwarrantedabsences lose part of their benefits. Addition of a third type of health insurance option,Preferred-Provider-Organization, some improvements in the existing”traditional’ and Health Maintenance Organization coverage,and adoption of “preauthorization’ and review procedures toprevent unnecessary surgery and shorten hospital stays.
During thenegotiations, GM said that restrictions were vital because its healthcare costs had been rising about 15 percent annually in recent years andtotaled $2.2 billion in 1983. Following the GM and Ford settlements, the UAW asked Chrysler Corp.for an unscheduled reopening of negotiations under its contract(scheduled to expire in October 1985) to return to the same bargainingcycle as the other companies and eliminate a disparity in pay andbenefit levels.
Chrysler had been at the same levels until 1979, whenthe UAW accepted the first of three concessionary settlements (theothers were in 1980 and 1981) to aid the financially stricken company.In both 1982 and 1983, Chrysler and the UAW negotiated some narrowing ofthe disparity. Elsewhere in the industry, American Motors Corp. raised thepossibility that it might close its only car assembly plant in theUnited States if labor costs at the Kenosha, WI, facility are notreduced. The company said the plant was not competitive with GM andFord operations because of higher average hourly earnings, morerestrictive work rules, and a higher ratio of union representatives toworkers. The possibility of a shutdown was reinforced by a companyannouncement that it will spend $587 million to build a car assemblyplant in Canada, where it already has a small car plant. The current American Motors-UAW contract for 7,300 hourly employeesin Kenosha is scheduled to expire in September 1985. Soft coal New United Mine Workers President Richard Trumka enterednegotiations with the Bituminous Coal Operators’ Association (BCOA)with a simple mandate from his union: “No backward steps.
Notakeaway contracts.’ On the management side, BCOA head Bobby R.Brown said that too much coal was being produced and, “This hasresulted in some harsh realities–depressed prices, closed mines orcurtailed production, thousands of coal miners laid off.’ Becauseof these bleak conditions, Brown said that any negotiated economic gainsfor the 160,000 miners (including 55,000 on layoff) would have to beoffset by productivity gains to prevent any further deterioration of thecompanies organized by the UMW.
Much of the organized industry’sdifficulty has resulted from the growing share of the market held byforeign producers and by nonunion domestic producers and the easing ofthe petroleum crisis, which has slowed the increase in coal use that hadstarted to develop. In addition to these conditions, the bargainingalso was complicated by the fact that 100 of the 132 member companieshad dropped out of the BCOA, apparently expecting to negotiate morelenient individual settlements with the UMW. The union countered thisstrategy by announcing that it would not bargain with the dropout companies until the BCOA settled, which led many of the companies toagree to be bound by the BCOA contract. Others who did not so agreenevertheless settled immediately after the BCOA, on the same terms. Thenet result was continuance of uniform pattern settlements in the Easternand Midwestern coal fields, where the UMW holds sway. The 40-month contract provided for revisions expected to increasejob opportunities for UMW members: New language ensures that miners will not lose their biddingrights to a job at their mine if it is leased to another company. Mine owners are now required to give local union officials copiesof warranties covering on-site work, enabling the officials to determineif employees of outside firms are improperly performing warranty work. The contract now provides that UMW members will perform all work”of the type’ customarily done at the mine.
This replaced aprovision that the union claimed the operators had misused to improperlycontract out work. Companies are now required to notify the union of the sale of amine where a UMW contract is in effect and to furnish proof that thebuyer will abide by the contract. In addition to a number of improvements in benefits, the Octoberaccord provided a total of $1.
40 an hour in wage increases, comparedwith $3.60 over the 40-month term of the prior contract. The $1.40increase ranged from 11.2 percent for the lowest paid workers to 9.9percent for the highest paid workers. The problems of the soft coal industry paled in comparison withthose in the hard coal fields of Eastern Pennsylvania, which have beenin decline for many years. The UMW bargained early in the year for the1,100 remaining workers it represents and accepted a 1-year contract,instead of the usual 3-year contract, to give the operators some”breathing room.
‘ Terms included improvements in vacation andsick pay and a 12-cents-an-hour increase in pay, which ranged from $9 to$15. Airlines In 1984, some air carriers operated at a profit, while otherscontinued to experience financial difficulties. As in trucking, Federalderegulation of the industry was a major reason for these difficulties.Under the Airline Deregulation Act of 1978, routes were deregulated onJanuary 1, 1982, and fares were deregulated on January 1, 1983. Thishas led to the formation of a number of new, nonunion, low-cost carriersthat offer intense competition to established carriers, triggering farewars, rapid shifts in operating areas, bankruptcies, and cuts inemployment. One result has been a spate of concessionary wagesettlements, as workers acceded to employer requests for aid inimproving their competitive ability, and employers gave workers partownership, a share of profits, or a voice in management. Some of the1984 settlements that included concessionary provisions (while usuallyresulting in an overall increase in compensation) were at– United Airlines, where three unions were involved. The 37-monthcontract for 8,500 members of the Association of Flight Attendants included a two-tier pay system under which pay rates for new employeeswere cut 25 percent during their first 7 years in the 14-year payprogression schedule.
Mechanics and related employees, represented bythe Machinists, agreed to a 3-year contract that cuts pay rates for newemployees during their first 5 years on the job. Pacific Southwest Airlines, where 3 1/2-year contracts for 3,600members of the Teamsters, Air Line Pilots, and other unions called for a15-percent cut in employee compensation and changes in work rulesintended to increase productivity 15 percent. In exchange, the companyagreed to place 15 percent of its stock in a trust fund for the workersand to make annual payments to a profit-sharing plan equal to 15 percentof pretax profit before interest expenses. Northwest Airlines, where a settlement for 3,000 flightattendants represented by the Teamsters provided a 6-month wage freeze,followed by wage increases of 6 percent on July 1 of 1984 and 1985 and 3percent on July 1, 1986. The 3-year contract also established a dualpay system under which attendants hired after January 1, 1984, will bepaid 30 percent less than the current rates for employees already on thepayroll. After 6 years of service, the new employees will move up tothe higher pay schedule. Health insurance was revised to cover 80-90percent of “usual and customary charges.
‘ instead of 100percent. Piedmont Airlines, where settlemtns for 3,000 members of fourunions provided for establishment of two-tier pay systems. Thesettlements also changed work rules–such as by increasing maximummonthly flying hours to 85, from 80, for members of the Air Line PilotsAssociation– and deferred the first of three pay increases to the sixthmonth of the contracts, which are subject to modification in 1987. Republic Airlines, where members of 6 unions approved a”partnership plan’ that called for extension through 1986 of a15-percent pay cut and deferral of scheduled pay increases that had beenscheduled to end on May 31, 1984.
In exchange for the extension,adoption of a twotier pay system, and planned productivity improvements,Republic agreed to establish profit sharing and to give the workersshares of stock, increasing their share of ownership from 20 percent toabout 30 percent. Western Airlines, where members of four unions agreed to a22.5-percent pay reduction extending through 1986, in place of a10-percent cut negotiated in 1983 scheduled to expire in November 1984.Members of another union, the Air Line Pilots, agreed to extend through1986 the temporary 18-percent cut they had accepted in 1983.
All fivecontracts, involving 10,000 workers, also called for changes in workrules to increase productivity. In exchange, the unions gained twoseats on the carrier’s board of directors (bringing their total to4), shares of company stock, and a profit-sharing plan. Frontier Airlines, where 5,000 workers represented by severalunions agreed to decreases in pay and benefits, and adoption of two-tierpay systems. The pay reduction was 11 percent for the workersrepresented by the Air Line Employees Association, while the Air LinePilots agreed to a 3.
5-percent cut and continuation of an 8.1-percentcut negotiated in 1983 and scheduled to end in 1984. Despite thesechanges, Frontier requested additional cuts later in 1984 and the unionswere considering the possibility of buying the company. Eastern Air Lines, where 6,200 flight attendants, represented bythe Transport Workers, in January 1984 agreed to modifications of a2-year contract negotiated in November 1983. In the major change,employees were required to put 18 percent of 1984 earnings in a WageInvestment Program in return for shares of Eastern stock.
Late in 1983,members of three other unions reached similar modification agreements,all of which specified that employees would receive all wage increases(which varied by union) already scheduled for 1984. All of themodification agreements called for changes in work rules to improveproductivity and for the unions to have a total of 4 members (out of 19)on Eastern’s board of directors. In September 1984, there wereindications that Eastern planned to ask the unions to continue theinvestment requirement, at the 18-percent rate or at another levelthrough 1985 and possibly beyond. Braniff Airways, which resumed operations in March, 22 monthsafter it had filed for protection under Chapter 11 of the Federalbankruptcy code. The 1,900 employees, members of five unions, returnedunder 5-year contracts with the Hyatt Corp. (the new owner) that calledfor substantial cuts in pay and benefits. Despite these concessions,Braniff lost $80 million during the next 8 months and pared operationsand employment. In other developments– Pan American World Airways, after losing $120 million in thefirst half of the year, froze employee pension service credits at theircurrent levels, drawing bitter criticism from leaders of five unions,who pointed out that the carrier had also not made required payments tothe pension plan in the two preceding years.
Continental Airlines rebounded, showing a profit of $17.6 millionfor the third quarter, compared with a loss of $77.2 million a yearearlier. Continental’s ability to earn a profit was apparentlyenhanced by its actions in 1983, when it sought protection under Chapter11 of the bankruptcy code, abrogated all labor contracts, reduced itswork force by two-thirds, and reduced pay by about 50 percent. Inmid-1984, the contract abrogation was upheld by the bankruptcy judge.
American Airlines in October raised its inducement to employeesfor retiring or quitting to one year’s pay, from $10,000, for thoseon the payroll when two-tier pay systems were negotiated in 1983.Departure of these employees will save money for American because theyare paid substantially more than those thired after the 1983 settlement.Unlike some of the other airlines, American is profitable; it earned$227.9 million in 1983. Aircraft, aerospace Settlements in 1984 for aircraft and aerospace workers generallyfeatured two contract provisions negotiated by the Boeing Co. and theMachinists in October 1983–two-tier pay systems and lump-sum paymentsin lieu of specified wage increases. A smaller number of workers wereunder settlements that also followed Boeing’s lead in giving somecost-of-living pay adjustments only to higher-paid workers. This wasdone to restore at least part of the percentage pay differential betweenthe lowest and highest grades that had narrowed over the years as aresult of all employees receiving the same cents-per-hour adjustments.
All of the settlements increased employee compensation, moderated tosome extent by the new features. Companies that negotiated lump-sumand/or two-tier pay systems in 1984 included– McDonnell Douglas Corp., which negotiated 3-year contracts withthe Machinists and the Auto Workers that provided for two-tier pay andannual lump-sum payments equal to 3 percent of earnings during thepreceding 12 months. In addition, pay compression will be relieved bypaying cost-of-living adjustments only to the highest paid 75 percent ofthe workers or by providing specified pay increases only for skilledworkers. Rockwell International Corp.’s Space Division, whichnegotiated a 3-year contract with the Auto Workers that provided for3-percent (of earnings) lump-sum payments in August of 1984 and 1985 anda 3-percent specified pay increase in July 1986.
Under the accord, newemployees have to wait longer before progressing to the maximum rate fortheir job grade and will not receive automatic cost-of-living payadjustments during their first year on the job. General Dynamics Corp.’s Aerospace Division, whichnegotiated a 3-year contract with the Machinists that provided for3-percent lump-sum payments in the first and second years and a3-percent wage increase in the third. Skilled employees will receivethree additional lump-sum payments. Cessna Aircraft Co., which negotiated a 38-month contract withthe Machinists that provided for September 1985 and September 1986lump-sum payments equal to 1.
5 percent and 2 percent, respectively, ofearnings during the preceding 12 months. United Technologies Corp.’s Sikorsky Aircraft Division,which negotiated a 3-year contract with the Teamsters that provided for3-percent pay increases at the beginning of each your, plus andimmediate lump-sum payment equal to 3.5 percent of 1983 earnings. Construction Construction settlements were the primary factor in holding downwage settlements in private industry during the first 9 months of theyear (see above). There was, however, no single reason for the smallwage increases–or the decreases –in the industry, because bargainingin construction, generally conducted on a State, part-State, ormetropolitan area basis, is particularly sensitive to local economicconditions.
Among the factors that affected the size of 1984construction labor contracts were the demand for real estate in the areaand the intensity of competition from nonunion firms, which usually havelower pay and benefit levels and less restrictive work practices thanunionized firms. The variation in the reasons for low settlements was matched by thevariation in the provisions of the settlements. In some cases wagesand/or benefits were cut for all workers, in others, only for newemployees, for projects started after particular dates, for allemployees on particular projects, or for employees only while engaged inresidential building. Petroleum refining The Oil, Chemical and Atomic Workers entered 1984 negotiations withthe major oil companies in a weakened position stemming from then-risingpetroleum prices and shrinking markets. The lower demand had led theoil companies to close 83 refineries in the preceding two years, to cutemployment–and to take a stronger-than-usual stand in bargaining withthe union. The union also faced a longer-standing problem, the highdegree of automation in the industry, which severely curtails the effectof strikes by permitting a limited number of management employees tomaintain operations. The Gulf Oil Corp.
settlement, in January, set a pattern forsettlements with other companies. Wages were increased by 20 cents anhour immediately and 35 cents at the beginning of the second year.Based on the reported previous average hourly earnings of $13.61, theincreases amounted to 1.5 and 2.5 percent, respectively. The OCAW did not win its demand that Gulf assume the full cost ofhealth insurance premiums, but the company did agree to raise itsmonthly contributions toward family coverage by $10, effectiveimmediately, and by an additional $5 a year later. Gulf had been paying$151.
50 of the $174 a month cost, which was expected to rise to $212 onFebruary 1. Gulf’s obligation for single employees remained at $57a month, which covered the full cost for these workers. The difficult conditions in the industry also were reflected in thereported delays the union experienced in settling local issues with somecompanies, which apparently pressed to cut costs by revising work rules.
Overall, the bargaining involved 338 contracts and 50,000 workers. Longshore settlements Early in the year, the International Longshoremen’sAssociation (ILA) settled with East and Gulf Coast stevedoring companiesfor 50,000 workers. This was followed by an August settlement betweenthe International Longshoremen’s and Warehousemen’s Union(ILWU) and the Pacific Maritime Association for 10,000 dockworkers onthe West Coast. Revisions of pay guarantee plans were important in bothsets of negotiations, but particularly in the ILA talks, whereemployers’ longstanding complaints of excessive costs and resultingloss of business led to some changes in their Guaranteed Annual Incomeplan (GAI). The changes included ‘tightening of eligibilityrequirements’ at the port of New York and New Jersey (where theguarantee is 2,080 hours of work or pay per year for eligibleemployees); and cuts in the guarantee, to 1,500 hours’ pay or workper year, from 1,800, in Hampton Roads, VA, and to 1,500 hours, from1,900 in Philadelphia. At ports from North Carolina to Florida, GAI wasraised to 1,725 hours a year, from 1,250, but now is reduced by theamount of holiday and vacation pay. These changes were specified in supplements to a 1984″master’ contract for all ports that included terms that theparties had already agreed on in 1983, including $1-an-hour wageincreases on October 1 of 1983, 1984, and 1985 and a $1.25-an-hourincrease in employer payments to benefit funds.
In midyear, the ILA filed suit against Delta Steamship Lines afterthe ocean carrier started shifting its calls to non-ILA ports,contending that cargo handling was too costly at ILA ports. The ILAviewed Delta’s action with concern because it could, if upheld bythe courts, induce other carriers to follow suit. The ILA’s legalcontention was that Delta was bound to call only at ILA ports underterms of a contract the ILA had reached with an employer bargainingassociation when Delta was a member, although it subsequently wthdrew.
In November, another dispute was under way in the port of New Yorkand New Jersey, as a Federal Maritime Commission administrative lawjudge said that local firms were subject to excessive costs becausetheir assessments for employee benefits were based on the volume ofcargo handled, rather than hours worked. Both the ILA and the employerassociation then appeared before the Commission to begin an appeal ofthe opinion, which resulted from an action initiated by the portauthority. On the West Coast, the settlement was more routine, as the ILWU andthe PMA agreed on a total increase of $2.50 in straight-time hourly payrates: This will average out to more per work hour because workers arepaid 6 hours at straight-time rates and 2 hours at time-and-one-halfrates for a normal 8-hour workday.
The pay guarantee also was improved,to 38 hours a week (from 36) for “fully registered’ workersand to 28 hours (from 24) for others. Railroads Bargaining for 350,000 rail employees was initiated in April, when13 unions, acting under provisions of the Railway Labor Act, filed”Section 6′ notices with the major railroads, specifying theirwage and benefit demands. The demands included six 5-percent wageincreases over a 3-year period that would begin on July 1, continuationof the automatic cost-of-living pay adjustment formula without theexisting “cap,’ increases in overtime pay and improvements inpaid holidays, personal leave dyas, health and welfare benefits, andpensions. Some of the unions also prposed contract changes that wouldbe limited to their members, such as adoption of restrictions oncontracting out work. Management’s reported goals included a freeze on pay, adoptionof a two-tier pay system under which new workers would start at 56percent of the current starting rate, and revision of work rules toenhance the railroads’ ability to compete with the deregulatedtrucking industry. The Interstate Commerce Commission’s role inrail rate setting was reduced by the Staggers Rail Act of 1980, but therailroads are still more regulated than trucking or airlinetransportation. As the year was closing, the unions and management were stillbargaining. This followed the usual practice in theindustry–protracted negotiations that finally end in settlementsseemingly just before the time for serving new Section 6 notices.
Trucking Although the Teamsters’ National Master Freight Agreement isnot scheduled to expire until March 31, 1985, there were a number ofmajor developments in 1984 that could cause a break in the 20-yearhistory of pattern bargaining in the industry. Many of these changeswere attributable to the Motor Carrier Deregulation Act of 1980, whichended most of the Interstate Commerce Commission’s authority toregulate the entry of new firms, operating areas, cargos, and rates.This has led to an influx of small nonunion carriers whose loweroperating costs have altered the industrywide bargaining relationshipbetween the Teamsters and Trucking Management, Inc., the industry’sleading employer association. This, in turn, has led to the demise ofmany unionized carriers and substantial layoffs of Teamsters members.
There was a continued increase in the number of firms the union hasallowed to reduce wages and benefits below levels required by the masterfreight agreement, viewing this as preferable to a shutdown or loss ofjobs. The reductions took a number of forms, including cuts in wagesand benefits, and cuts made in exchange for company stock. Another development that will complicate the 1985 talks wascontinued growth in the number of unionized firms establishing separatecorporate entities to reduce costs by employing nonunionowner-operators. Management’s unity also continued to deteriorate, as TruckingManagement, Inc., reported that many member companies had quit theassociation during the preceding 30 months, apparently because theybelieved that TMI was dominated by larger, more profitable companies andthat they could negotiate more lenient terms on their own or by formingnew associations. The Teamsters did negotiate one important–and controversial–trucking contract in 1984.
The accord reached for 90,000 employees ofUnited Parcel Service supersedes the balance of a contract negotiated in1982 that did not provide for any specified pay increases. Thecontract, which was similar to the master freight agreement, had beenscheduled to expire on May 31, 1985. Teamsters’ President JackiePresser said the early negotiations were undertaken with UPS–whichearned $490 million in 1983–to give the workers some immediate money tooffset 93 cents an hour in scheduled 1982, 1983, and 1984 cost-of-livingpay adjustments that had been diverted to help the company meet costincreases for maintaining benefits, as required in the 1982 contract.He also said that the workers had probably gained a better contract nowthan they would have by following past practice and waiting to patterntheir settlement after the 1985 master freight settlement.
The UPS settlement met immediate opposition, led by the Teamstersfor a Democratic Union, a longstanding dissident group within theTeamsters’ ranks that accused Presser of negotiating the contractin secret and accelerating the ratification process to prevent the unionmembers from thoroughly studying the terms. The accelerated vote chargewas upheld by a judge in a court test, and he ordered a revote, in whichthe contract was approved 44,337 to 18,989. The contract provisions included immediate lump-sum payments of$1,000 for full-time employees and $500 for part-timers, pay increasesof 68 cents an hour on September 1, 1984, 50 cents in September of 1985and 1986, and benefit improvements backed by a guarantee of any furtherchanges needed to match any benefit improvements in the master freightagreement. The contract also provides for continuation of dual pay systemunder which part-time workers earn about $4 per hour less than full-timeworkers.
Much of the opposition to the contract had centered on thisprovision. Reportedly, half of the employees are part-timers. Steel Although contracts between the United Steelworkers and steelproducers do not expire until 1986, there were a number of developmentsin 1984 that will have a bearing on forthcoming negotiations.
In the economic area, profits at the producers where the unionholds bargaining rights were generally small or nonexistent. PresidentReagan rejected an International Trade Commission recommendation toimpose quotas and additional tariffs on countries exporting steel to theUnited States, but he did pledge to negotiate with the exporting nationson voluntarily reducing their share of the market to 18.5 percent, fromthe current 25 percent. There were moves by Japanese producers to buyinto domestic firms; and more plant closings.
Also, “minimills,’ which are specialized producers–usually having nonunionwork forces–now hold about 20 percent of the market and are expanding. In the labor relations area, one fact that will bear directly onthe 1986 talks was further erosion in the number of firms in theCoordinating Committee Steel Companies, the association that has set thesettlement pattern for the industry. The withdrawal of National SteelCorp. increased the possibility that the pattern would be lesswidespread in 1986. As National Steel President Robert D.
McBride said,”We want greater flexibility to deal with issues most important toour company.’ (One example of the kinds of contract variationsthat could occur in 1986, or earlier, was Wheeling-Pittsburgh Steel Corp.’s announced plan to offer shares of company stock toemployees if they agreed to continue cuts in wages and benefits that hadbeen scheduled to end in 1985.
The cuts, negotiated in 1983, weresimilar to those the union negotiated with other steel companies.) Another reduction in the association’s membership occurredwhen LTV Corp. merged its Jones and Laughlin Steel Corp. unit withRepublic Steel Corp. to form the Nation’s second largest steelconcern, LTV Steel Co. This left only five companies in thecoordinating committee, down from 10 a decade earlier, with thepossibility that there could be more defections. The five companieswere U.
S. Steel Corp., LTV Steel Co., Bethlehem Steel Corp., InlandSteel Co., and Armco Inc.
On the union side, there was new leadership, as Lynn Williams waselected president, succeeding Lloyd McBride, who died in 1983. Williamsfaced the daunting problems of declining membership and maintaining orincreasing worker compensation in a troubled industry. West Coast forest products More than 14,000 employees were covered by 32-month contractsbetween the Association of Western Pulp and Paper Workers and severalpulp and paper companies that called for an immediate lump-sum paymentof $1,000 to each employee, followed by specified wage increases of 4percent at the beginning of the second year and 4.5 percent at thebeginning of the final year.
The union also agreed to give up mandatoryshutdowns on Christmas and Independence Day and to changes designed tohold down the company’s health insurance costs, including adoptionof higher deductibles and coinsurance payments. In the lumber industry, uncertainty increased regarding the futureof pattern bargaining after Louisiana-Pacific Corp. employees voted toend union representation at 17 of 19 mills that had been on strike for15 months. As a result, the 1,700 workers continued to work at thecompensation levels Louisiana-Pacific had put into effect in 1983, whichwere lower than those the other companies had negotiated with the union,an affiliate of the Carpenters and Joiners.
Prior to 1983,Louisiana-Pacific had accepted the same terms as the other companies.The company’s decision to go-it-alone in 1983 was based on itscontention that wage and benefit concessions were necessary to enable itto compete with lower-cost mills opening in the South. This led to thestrike, which became less effective over time, as more and more strikersreturned to work, joining management employees and new hires inoperating the mills. Meatpacking During the last few years, labor-management relations in themeatpacking industry have been chaotic, and will apparently continue sountil the industry’s level of employee compensation stabilizes andmarginal firms either improve efficiency and profitability, or shutdown. During 1984, there were further developments in the difficultmovement toward stability, which might be aided if uniform wage andbenefit levels are agreed to when contracts for several major porkprocessors expire in August 1985. Contract expirations in beefprocessing, which are less concentrated in the year than those in porkprocessing, began in January 1985. Wilson Foods Corp.
, which drew much attention in 1983 when itused the provisions of Chapter 11 of the Bankruptcy Code to shed itslabor contracts, emerged from Chapter 11 proceedings in March 1984 whenthe court approved a reorganization plan. The plan included terminationof a salaried employees’ pension plan, which Wilson said wasoverfunded, and establishment of a new plan. In November, leaders ofthe Food and Commercial Workers union accused the company of hiding thefact that its officers had received large salary increases after the5,000 workers represented by the union had reacted to the contractabrogation by negotiating new 2-year contracts in 1983 that cut pay by25 percent. Wilson, located in Cedar Rapids, IA, is the Nation’slargest pork processor. In Waterloo, IA, a Federal bankruptcy judge approved the decisionof employee-owned Rath Packing Co.
to abrogate its labor contract andcut pay and benefits. The January ruling cleared the way for the porkprocessing firm to seek an infusion of money from new owners. InNovember 1983, when it filed for protection under Chapter 11, Rathlisted $56.
7 million in assets and $91.6 million in liabilities. InOctober 1984, the plant had about 375 production employees, down 700from a year earlier. The workers are represented by the United Food andCommercial Workers. In Billings, MT, Pierce Packing Co. reopened a pork processingplant after members of the United Food and Commercial Workers andOperating Engineers unions agreed to wage and benefit cuts.
Pierce hadshut the plant down in 1983 after the unions had refused to indefinitelyextend a 1-year, $1.90 an hour wage cut negotiated in 1982. At the timeof the reopening, Pierce was operating under the Chapter 11 bankruptcyprotection it had petitioned for in 1983. Another plant reopened, in Independence, IA, financed in part by$3,000 investments by each employee. The balance of the financing camefrom city and State grants and from private investors. The newoperation, Iowa Ham Canning, Inc., succeeded Cudahy Specialty Foods,which closed the plant in 1983.
The new, nonunion operation wasexpected to employ about 100 people within a year. In Madison, WI, Oscar Mayer imposed a 23-percent pay cut for2,600 workers that opened the way for George A. Hormel and Co. to lowerwages for 1,800 workers in Austin, MN. The Oscar Mayer reduction of$2.44 an hour in base wages came after Food and Commercial Workersmembers had three times rejected a demand for adoption of the $8.25 rateprevailing at other companies.
The cut will continue until thecompany’s current contract expires in August 1985. Imposition ofthe pay decrease will also lead to a reduction at Hormel, whose contractpermits a reduction when a lower wage becomes an “industry-widestandard.’ Under a 1984 arbitration decision, Hormel won the rightto implement a lower wage based on the average of reduced rates at threeof the five major companies in the industry, with the union to selectthe three companies. Farm and construction equipment The only major firm that bargained in this industry in 1984 wasInternational Harvester Co., where a contract with the Auto Workersexpired on September 30 but a settlement had not been attained at thiswriting. When a settlement is reached, it could influence theunion’s 1986 bargaining with Caterpillar Tractor Co. and Deere& Co. Historically, these companies, and others in the industrywhere the union holds bargaining rights, have bargained more or lesssimultaneously and agreed to similar contracts but this pattern wasdisrupted in 1979, when most firms settled, but International Harvester,hit by a 172-day strike, did not settle until 1980.
Postal service Bargaining for 600,000 postal employees began in April but ended upin binding arbitration, with a decision expected to be announced atyearend. The United States Postal Service led off the unsuccessfulbargaining with four unions in April by calling for a cut in wages,asserting that the average postal worker earned $23,031 a year ($27,920including benefits), 10 to 25 percent more than workers in comparablejobs in private industry. Later, the USPS made a specific 3-yearproposal that included a pay freeze for current employees, a lower payscale for new hires, a less liberal cost-of-living pay adjustmentformula, and other changes, all of which were denounced by the unions.
Negotiations continued intermittently until after the current contractsexpired on July 20, when the quasi-government agency announced that itwas going to reduce the pay rates for new employees by more than 20percent. Before the scheduled August 4 effective date, Congress enactedlegislation prohibiting the cut. Despite this easing of the tension, the parties were unable toreconcile their differences, leading to the first broad use of thearbitration procedures of the Postal Reorganization Act of 1970. Government workers During the year there were several developments affecting Federalworkers’ pay.
In January, 1.4 million white-collar employees received a3.5-percent pay raise that would normally have been effective in October1983 but was delayed by President Reagan under authority of the FederalPay Comparability Act of 1970. Later in 1984 the increase was raised to4 percent, as Congress legislated a 0.5-percent increase retroactive toJanuary. The 2 million military personnel also received the equivalentof a 4-percent increase in January, under laws linking increases intheir pay levels to those for white-collar workers.
About 450,000blue-collar workers also received up to a 4-percent increase sometimeduring the fiscal year ending September 30, 1984. Their pay is raisedat various times during the year based on the results of local surveysof wages for similar private industry jobs. However, their potentialincrease was “capped’ at the level for the white-collarworkers.
In August, the President’s Pay Agent (a triad consisting ofthe Secretary of Labor, the Director of the Office of PersonnelManagement, and the Director of the Office of Management and Budget)reported that an 18.2-percent pay increase would be necessary to bringthe white-collar employees to pay parity with employees in similar jobsin private industry, based on the annual National Survey ofProfessional, Administrative, Technical and Clerical Pay conducted bythe Bureau of Labor Statistics. However, the President again used hisauthority under the law to propose a 3.5-percent increase and to deferit from October 1984 to January 1985. Blue-collar workers received amatching increase, while military personnel received a 4-percentincrease.
Wage and benefit increases for State and local government workerswere larger in fiscal year 1985 than in the preceding fiscal year. Thisis apparent from the Bureau of Labor Statistics’ Employment CostIndex, which showed that during the third quarter of the calendaryear–when most governments begin their fiscal year–State and localgovernment workers’ pay increased 3.4 percent in 1984, comparedwith 3.
0 percent in 1983. Similarly, their compensation–pay plusbenefits–rose 3.5 percent during the third quarter of 1984, comparedwith 3.2 percent in the third quarter of 1983. Legal developments Perhaps the most important legal ruling in 1984 from the viewpointof both labor and management came in February, when the Supreme Courtheld that employers filing for reorganization in Federal bankruptcycourt may temporarily terminate or alter labor contracts even before thejudge has heard their case.
In the case, NLRB v. Bildisco &Bildisco, the Court also held that the termination or alteration couldbe made permanent if the employer can persuade the judge that theagreement burdens chances of recovery. The ruling drew sharp criticism from AFL–CIO President LaneKirkland, who viewed it as giving management an unwarranted tool forousting unions or forcing compensation concessions on them.
Later, Kirkland endorsed legislation that modified the bankruptcycode to require a firm or bankruptcy trustee to attempt “to reachmutually satisfactory (contract) modifications’ before going to thecourt. If they are unable to agree on modifications, the judge ispermitted to put the employer’s proposal into effect only if theunion has rejected it “without good cause’ and “thebalance of the equities (among the union, management, and other vestedparties) clearly favors’ the proposal. From organized labor’s point of view, things did not turn outas well at the National Labor Relations Board, as it handed down aseries of rulings favoring management. Labor’s charges ofpro-management bias were countered by defenders of the rulings, whoclaimed that the board was simply correcting a pro-union bias that haddeveloped during the Carter Administration. In the decisions, the board held that– The National Labor Relations Act did not preclude managers fromasking workers about union activities. The board cannot order an employer who has committed unfair laborpractices to negotiate with a union that is not supported by a majorityof the workers in a bargaining unit. An employer may shift operations to a nonunion plant it owns toescape the higher labor costs of a union contract, if the contract doesnot specifically ban such relocation.
It is contrary to Federal labor law for the board to intervene ina labor-management dispute before the parties have exhausted their ownarbitration procedures. Employers are no longer required to publicize the fact that anemployee can solicit another employee for union activities while at workif both are on their own time, such as during a lunch period. 1 Preliminary statistical information for all of 1984 is scheduledto be released on January 24, 1985. Both the first 9 months and fullyear figures exclude possible pay adjustments under cost-of-livingformulas because such adjustments are contingent on the future movementof a consumer price index. 2 This article is essentially based on information available inearly December for bargaining units of 1,000 workers or more.