THE AFL-CIO's Executive Council, meeting in Bal Harbour this week, has plenty to distract it from sun and surf. But if it focuses only on the issues to be raised by President Reagan's economic program tonight, it may ignore a real opportunity for leadership.
Organized labor feels threatened from both within and without -- with good reason. Widespread layoffs in basic industries and hefty defections to the Reagan ticket last November threaten its control over the diminishing portion of the labor force that it claims to represent. President Reagan's proposed budget reduction and regulatory rollbacks are likely to jeopardize some of labor's most cherished benefits and protections -- trade adjustment assistance and other unemployment benefit supplements, occupational health and safety regualtions and "prevailing wage" clauses -- as well as many of the basic social programs that labor helped initiate and expand.
But the AFL-CIO leadership ought to be looking at an issue much closer to the heart of the current economic crisis: the control of increases in wages and other compensation that exceed productivity gains. Labor costs accounts for about two-thirds of all production costs. Since procuctivity is now, on average, essentially flat, any overall wage increase automatically adds to price inflation. Most mulit-year private and public wage contracts embody fixed wage and benefit increases well beyond the productivity gains projected by the most ebullient supply-side economists. In many cases, cost-of-living adjustment (COLA) clauses provide a furthur hedge against inflation as well as an automatic mechanism for passing onshocks like jumps in oil and food prices. No improvement in the inflation rate, moreover, will affect the fixed wage increases built into long-term contracts. And COLAs are based on last year's inflation, so they will continue to pass on the effects of last year's prices into the next year.
A dozen precedents of the 1970s suggest that the recent downward adjustment in the Chrysler contract and a few others will not set a pattern for future wage settlements. Nor should wage trends here and in Great Britain make one expect wage moderation during periods of high unemployment.
Whatever the Reagan mandate meant in terms of tax and budget cutting, it clearly was a vote against inflation. In its claim to leadership, then, the labor movement must reconsider its habitual posture as the innocent victim, rather than the active co-conspirator, in the inflationary spiral. And if its leaders don't like the administration's plan for controlling inflation and stimulating economic growth, people -- including their own rank and file -- will be looking to them to come forward with a new and positive approach to their own.