Arbitrators ruled yesterday that Metro's 5,000 transit workers must continue to receive the best protection against inflation of any local government employes.

The decision by the three-member panel, which is final and binding on both Metro and Local 689 of the Amalgamated Transit Union, will increase the current year's operating budget and will not provide as much relief for future operating costs as Metro had hoped.

The decision also means that local governments and taxpayers, who already pay more than $110 million in subsidies to Metro, will have to increase their contributions or cut bus and subway service. Metro already has secheduled a fare increase in January to partially offset rising labor and diesel fuel costs.

Metro's operating subsidy is second only to public education as an item in most local government budgets, and labor costs represent about 80 percent of Metro's budget.

The new Metro contract approved by the panel will give the transit system's workers quarterly salary increases that match the first 9 percentage points of increase in the national Consumer Price Index. Then, Metro will have to pay 2/3 of 1 percent for each point over 9. The contract will be retroactive to last May 1. Two increase have been paid since then while the new contract was in arbitration.

From Metro's point of view, the final settlement represents a slight improvement over the labor contract that expired April 30, but only if inflation climbs over 9 percent, as it has done in recent months. That is because the old contract required full CPI percentage pay raises four times a year regardless of the rate of inflation.

On one recent occasion under the old agreement Metro was forced to pay a quarterly increase equaling 18 percent annual inflation. A fully experienced bus driver is paid at least $21,860 annually today (on an hourly rate of $10,51) and has seen his salary increase in the last 15 months from $9.60 per hour, a gain of 9.5 percent.

Thereare two breaks for Metro in the new contract:

Salary increases will be based on the national CPI, which has been running slightly lower than the District of Columbia CPI, the basis for the old contract.

Metro will not have to pay an increase that would have occurred in March under the old contract. The next pay raise after January will occur in June. Under the old contract the March increase would have been followed by one in July.

The first new pay raise for members of Local 689 ineffective Jan. 1 and will take them to $10.78 per hour. Underr the old contract they would have received $10.81 per hour.

Metro General Manager Richard S. Page chaacterized the ruling as shocking and said "I am extremely disappointed in the potential cost of the decision to taxpayers and local governments." Page said the "full fescal impact" of the agreement for Metro could not be predicted until budget analysts have had an opportunity to study it in deatail.

Charles Boswell, union president, said, "I don't think anybody is ever satisfied after an arbitration. What we got is what we're going to have to live with . . . If the rate of inflation drops to 9 percent, we're just as well off today as yesterday, but if it goes up to 18 or 20 percent, we'll lose a lot of money."

Boswell's representive to the arbitration process voted for the settlement; Page's representative voted against it. Philadelphia arbitrator Lewis Gill, the neutral party in proceedings that have dragged on for nine months, voted with the union.

No other public employes in the Washington area -- teachers, firemen, policemen -- have done as well negotiating with their local governments as transit workers have done in arbitation proceedings with Metro. Local governments have been increasingly restive about that fact and the cost and fairness issues it raises. The District of Columbia, for example, is holding its employes to a 5 percent increase this year.

Metro had sought an 18-month moratorium on wage increases for its transit workers, a ceiling of 6 percent in any one year, and semiannual rather than quarterly adjustments in salary after the moratorium. While that admittedly was a negotiating position and not a realistic expectation, Page clearly hoped to do better than he did.

In addition to the cost-of-living adjustment, the union members will receive another increase in take-home pay when their contribution to the union pension fund is reduced from 7 percent of their salaries to 6 percent. Metro will continue to pay 14 percent. Page said the change is not supposed to cost Metro more money out of pocket, but "I am skeptical about that," he said.

Boswell said that provision may not cost Metro more in the future, but that "if some time in the future more money will have to be put in there [the pension fund], then it will be shared 1 to 2 by the authority and the members." That has the potential of being expensive for Metro.

There were other changes in vacation benefits and sick leave for union members, although Page said they were not cost items.

Metro won some lesser points. The time it takes for some employes to advance to the top salary bracket was increased slightly, and there was a change in the bus driver work rules that will permit the use of more part-time drivers. However, Metro's part-time roster will continue to be limited to no more than 10 percent of the full-time list, and Metro will continue to be prohibited from hiring as part-timers people who have full-time jobs.

Metro is required by the interstate compact under which it was created to submit all unresolved labor issues to binding arbitration, a method that management proponents have held almost always accrues to the benefit of labor.

Page said yesterday that the experience of this arbitration proceeding convinced him that binding arbitration "is an outrageous process." He said he will consider recommending that the binding arbitration requirement be stricken from the Metro compact.

That would require idential actions by Congress, the Maryland and Virginia legislatures and the D.C. City Council. The Virginia legislature would approve such a change instantly; its future would be less certain in the other three places, where labor traditionally has received a warm welcome.