American workers, especially union members, are winning bigger paychecks despite the current recession. But they still are losing their fight to keep up with higher prices.
The workers are the victims of an economy in which "both wage and price behavior have become resistant to recessions," according to labor specialist John Schappi of the Bureau of National Affairs Inc. (BNA), a private, Washington-based publishing and research company.
Consider the following:
Unionized construction workers posted median wage gains of up to 10 percent -- a half percentage point higher than the 9 1/2 percent ceiling set by the Council on Wage and Price Stability -- during the first six months of this year.
Organized workers in the service sector won median pay increases of up to 9 1/2 percent.
Unionized workers in the manufacturing industries -- steel, cars and rubber, for example -- also received median pay hikes in the 9 1/2 percent range.
Cost-of-living-adjustment (COLA) clauses, some of them designed to return up to 95 percent of wages lost to inflation, were included in 26 percent of all contracts negotiated during the first half of 1980, according to the BNA specialist.
Nonunion workers also won increases, but the pay gains of the unorganized usually were smaller -- by one to two percentage points -- than those put into the checks of their organized brethren. Also, nonunion workers were less likely to receive cost-of-living benefits, according to economists and labor officials interviewed by The Washington Post.
Wages negotiated in the construction industry so far this year have surprised some economists who thought that the sharp decline in housing starts would depress pay demands. But Robert McCormick, vice president of the National Constructors Association, said the relatively high wage gains being made in the industry -- the largest pay increases won by construction workers in the last four years -- have come about because of a West Coast building boom.
Huge industrial and commercial complexes are going up in California and adjacent states, and unions are cashing in on the action by asking for and receiving pay boosts of $2 to $3 an hour, McCormick said. In the Midwest, Northeast and Southeast where the building is slower, unions are getting increases of about $1.25 an hour, he said.
Still, labor leaders complain with apparent justification that their members are having a hard time making ends meet.
Real income, inflation-adjusted dollar value, is on the skids for the third straight year, said Rudolph Oswald, the AFL-CIO's director of research. And this year's decline is shaping up as the worst of the lot, he said.
"We've had a 7.7 percent drop in real wages from May of 1979 to May of this year. This is a continuation of a long period of decline in real earnings, and I don't think it's going to get significantly better any time soon," Oswald said.
He added that workers also are losing money because employers are cutting back on overtime work and are reducing operating hours in an attempt to reduce costs.
All of this means that American workers could become locked into a futile, inflationary game of chasing prices by running after higher wages, according to Albert T. Summers, chairman of the White House Price Advisory Committee.
"We (on the committee) agree fully that wages do not explain, or cause, this current inflation (at a 12.4 percent annual rate in June)," Summers said. "But we are concerned that wages may not go down along with the inflation rate," he said.
Summers said the 1979-1980 inflation rate, which reached a high of 18 percent in the first quarter of this year, is "an abnormal inflation" largely caused by the cost of importing petroleum products. Like other economists, he predicted that the rate of inflation would drop to around 10 percent in the near future.
"But if that happens, and if wages are still in the 10 percent range or higher, they could become a major contributing factor to inflation," Summers said.