The recent settlement between the naion's steel companies and the United Steelworkers will increase pressure on steel producers to raise prices by 4 per cent August 1, the Council on Wage and Price Stability said yesterday.
The Council, the White House agency which monitors wage and price developments, stopped short of saying that the April agreement will result in further price increases in the steel industry. But the council said that besides boosting production costs 4 per cent on August 1, when the pact takes effect, it will boost them another 3 per cent a year for the following two years.
Most of the nation's major producers recently raised prices on sheet and strip steel by 6 per cent. Sheet and strip steel is used heavily in making cars and appliances.
The council study estimates that the three-year pact will raise wages 11.6 per cent during the first year. Over the life of the agreement, the council study said, wages will increase 29.7 per cent, assuming an inflation rate of 6 per cent a year. The settlement includes a cost-of-living escalator.
The study said that as the "first major agreement of a heavy bargaining year, the steel settlement can be expected to influence negotiations in other industries." While the first-year increase is substantial, the council said, the steel agreement'e emphasis on employment security and income security may be more influential.
The pact increases the protection of wages through supplemental unemployment benefits (SUB) when workers are laid off and lengthens the benefit period under these SUB plans for workers with 20 years or more experience. It also improves life and health insurance for all employees and makes SUB plan benefit increases for all employees.
When these other benefits are included, the total cost of the pact is 12.8 per cent in the first year and 30.6 per cent over the life of the contract, assuming 6 per cent inflation.
If the companies want to preserve their profit margins, "the settlement alone created pressure to raise prices about 4 per cent in the first year and almost 3 per cent annually" after that.
But a council official said it is not clear whether steel companies anticipated some of the August labor cost increases in the sheet steel increases they announced earlier in the spring.