With payments stretching literally from the cradle to the grave, fringe benefits earned by American workers now account for more than one of every four payroll dollars.
Benefits, many of them tax-free, have been rising faster than wages: a kind of middle-class tax shelter. Unions are scrambling to expand their benefit portfolio, fattening existing fringes and adding new ones covering everything from false teeth to open-heart surgery. Overall, wages have doubled over the past 10 years, while benefits have nearly tripled.
But success has its price, and the piper - in the form of President Carter and his inflation fighters - wants to be paid.
Hardly noticed at first in Carter's new anti-inflation guidelines was the fact that the proposed 7 percent ceiling on wage and benefit increases for next year includes any additional costs of maintaining existing benefits, even if the benefits do not change.
Administration officials, faced with strong union objections and warnings that inflexibility could shatter the whole program, are trying to find ways to modify the benefits rule without bending it too much. But the multibillion-dollar cost of benefits and their impact on inflation remain.
Inflation has made this a major problem, principally in the area of health care, where overall expenditures are rising at an annual rate of 12 percent, faster than the underlying inflation rate.
Another problem is government rules established before the anti-inflation plan was announced last month, including pension-funding requirements under the Employee Retirement Income Security Act (ERISA).
The problem is particularly acute for many of the big unions that will be bargaining for new contracts next year because they have either benefits contracts or severe benefit funding problems!
Except for the Teamsters union, whose ERISA funding requirements could eat up one-third or more of the allowable 7 percent, the cost of maintaining current benefits may not exceed 1 percent of any prospective compensation gain, according to a member of labor economists.
That's because health and pension benefits, while increasing proportionately to wages and wage-related benefits such as vacations, still constitute only about 15 percent of total compensation with variations in individual union contracts and non-union plans.
Thus, a 10 percent increase in a health and pension plan that constitutes 10 percent of an employe's compensation would amount to a 1 percent increase in overall payroll costs.
"But remember," said one sympathetic government official, "that's one-seventh - or 14 percent - of what they can get, and it's real problem for a lot of them."
Moreover, many of the unions that come to the bargaining table early in the year - and thus may set precedents for other unions to follow later in the bargaining round - have the richest roster of benefits.
For instance, an official in the rubber industry, which will begin negotiations with the United Rubber Workers in March, estimated that 40 percent of all payroll costs go to benefits, including, vacations and holidays.
In the auto industry, which bargains later in the year, a government analysis of the 1976 "Big Three" contract with the United Auto Workers showed that $1 of every $7 won by the union was used to maintain existing benefits. Nearly 1 of every 2 benefit dollars went to financing existing benefits. Nearly 1 of every 2 benefit dollars went to financing existing benefits rather than adding new ones. This year it would be 1 out of 1 if the 7 percent guideline is rigidly enforced, union officials said.
The UAW's problem is compounded this year by the fact that it hasn't renegotiated pensions since ERISA was passed in 1974, and thus still come to grips withits funding requirements. One UAW official estimated that this could mean a 10 percent increase in pension money, without any benefits increase.
For the Teamsters, the problem is even more acute.One official said the union will probably need at least 20 percent more in pension money alone, and others say that may not be enough. In addition, the union has deficiencies in its health plan financing.
Teamsters President Frank E. Fitzsimmons has said that, after plugging funding gaps for existing benefits, there would be next to nothing left for anything else - and made it clear he considers that "unacceptable."
Union critics of the Carter wage-benefit guidelines note their higher costs to maintain existing benefits were excluded from earlier pay ceilings, including the Nixon wage controls in the early 1970s.
While the administration denies that it intends to relax the guidelines to accomodate union objections, officials say it will be administered with "flexibility," leaving the door open to a possible discounting of costs that do nothing more than sustain current benefits.
One official said that, while no decisions have been made, proposals under study could mean some relief for the Teamsters, among others. Another cautioned, however, that a total write-off of such costs would add to inflationary pressures and reward workers with fat benefit plans at the expense of those with leaner ones.
Several sources suggested that the administration may be inclined to bend only enough to keep the program from shattering under one or two early blows from unions that decide the guidelines are so tough they might as well ignore them.
Already the International Association of Machinists, which is bargaining for about 40,000 airline ground crew workers, has said it will pretend they don't exist.
The union signed one contract with a 10-plus percent increase the day after the guidelines were announced.
But even if the benefit cost pass-through problem is resolved, it is considered highly unlikely that the unions will be won over to the program. "There are simply too many other problems," an AFL-CIO official said.