Labor pacts may hurt Reagan war on inflation

Double-digit wage settlements for union workers are expected to be a serious problem as the incoming Reagan administration moves to curb inflation in 1981. Fewer workers will be involved in major contract negotiations next year, but union wages and benefits now appear likely to rise at double-digit rates -- an average 10.2 percent --Bureau of Labor Statistics began indexing hourly earnings in 1964.

Even so, wages are expected to lag behind increased living costs for the third year in a row. Many forecasters predict that consumer prices will continue to rise at double-digit rates well into Ronald Reagan's term, an average 11 percent or higher in 1981.

For the nation's union members, the short-term outlook looks gloomy for progress against inflation next year. Mr. Reagan's economic advisers are cautioning that simply paring federal spending will not be enough. Something more drastic will be necessary -- but not wage guideline or control policies, according to George P. Shultz, Reagan's top economic adviser. The guidelines initiated under the Carter administration have not worked and will be allowed to fade out.

In the longer term, concern is growing that a year of high wage settlements and rising living costs will lead to larger contract goals for auto, steel, electrical manufacturing, and trucking unions in 1982 and 1983. Thus, cost-push inflation, where consumer and industrial prices keep rising owing to continuing demands by organized labor for higher wages, could become even more firmly fixed in the national economy.

Bargaining in the US runs in a three-year cycle, with 1981 a relatively light year. Contracts covering 2.5 million workers in major industries run out next year, compared with 4.2 million in 1979 and 3.7 million this year. In 1982, the start of a new cycle, some 4 million to 5 million workers in traditionally hard-bargaining unions will be involved in negotiations with the settlements of 1981 the base for bargaining.

Unions negotiating this year are not major pattern-setters. The biggest negotiations and possibly the most difficult will be by unions representing 600, 000 employees of the US Postal Service, with a July 21 deadline. The two largest postal unions have new presidents committed to militant bargaining, raising the possibility of strikes.

Major railroads have bargaining dates with unions representing 500,000 workers. Industry contracts limit cost-of-living adjustments, and workers say this has cost them 68 cents an hour over the past 18 months. Their negotiators have served notice that they will bargain to recoup this money and to eliminate the 8 percent a year limit on adjustments. Contracts run out March 31 but provisions of federal railroad labor laws would bar a strike.

The United Mine Workers (UMW) and the coal industry already are discussing new contracts to cover 138,000 miners. The parties hope for their first settlement without a nationwide strike since 1964, but talks so far have been disappointing. UMW is insisting on a 30 percent-plus wage increase over three years. The deadline is March 27.

Airlines and unions representing 100,000 workers have contract deadlines spread through the year. Because of poor conditions in the industry, "moderate" settlements are predicted.

Other major bargaining will cover 258,000 construction workers on a local or regional basis. Talks involving 33,000 supermarket chain employees are on a similar basis. Contracts to be renegotiated also involve 22,750 shipyard workers, 34,350 can workers, 34,100 maritime workers, and 11,000 West Coast longshoremen.

Wages for nonunion workers generally rise a little less rapidly than the pay of union workers. The gap has been less in 1980, when the nonunion group got increase of about 9 percent and union settlements averaged 9.5 percent. Nonunion workers are expected to get at least 10 percent in 1981, a gain that will add to union pressure for even larger raises.