THE EMERGING PATTERN of wage settlements gives some hope of progress in the struggle to bring down the inflation rate. The evidence is still preliminary--the recent economic downturn and the fortunate but perhaps temporary stability in oil and farm prices accounted for most of the drop in inflation over the last year--but the assumption that wages must rise steadily and automatically seems, at least, to be in question. This point is crucial because while wage increases did not start this cycle of inflation, they are the mechanism by which it is perpetuated.
Thus far, total labor cost increases remain above the most optimistic forecasts of productivity gains. Gains in pay and benefits that are not offset by greater output per worker necessarily add to prices. Higher prices, in turn, promote demands for further wage increases in the next year and so on.
Still, there are signs of softening in organized labor's normal resolve to catch up with past losses and gain more besides. The years of economic stagnation since the first OPEC oil shock, the increasing inroads by foreign competitors and the dawning realization that the heyday of some basic industries is permanently passed have even made some job-threatened workers willing to accept cutbacks in previously bargained wages and benefits.
Worker concessions have mostly been confined to single plants or companies on the verge of closing. This is not an uncommon pattern for recessionary periods and in the past such give-backs have not proved to be trend-setting. There is an important difference this time, however, in the expressed willingness of powerful labor unions-- notably the United Auto Workers--to renegotiate major industry contracts. It is also possible that labor's new willingness to tailor contract terms to the particular conditions of individual companies may erode the practice of industry-wide settlements that has boosted average wages in recent years.
A pattern of concessions--or at least moderated demands--would be particularly important in the coming year in which multi-year contracts covering about 40 percent of unionized workers are up for renegotiation. Most workers aren't unionized, but major union negotiations indirectly influence compensation practices for other workers, particularly those in companies resisting unionization.
It's too soon to tell whether next year's negotiations will make a real dent in the base inflation rate. Some tightening of work rules and trimming of benefits can be expected, but the unions may demand expensive guarantees of job security as well as a stronger role in management in exchange for any rollbacks in basic compensation. Union attitudes are also likely to be influenced by the extent to which workers feel that they have a fair share in the benefits of the administration's economic program. If the renegotiation process works well, however, it could provide real progress in controlling inflation. It could also provide a basis for more permanent cooperation between management and labor in revitalizing American industry.