THE AMERICAN steel companies, badly shaken by the rising competition from abroad, proposed a wage freeze to hold down costs. The United Steelworkers refused. There's a lot of labor union tradition behind that decision. Over the years, in many industries, unions have been confronted with a choice between pursuing higher wages and protecting existing jobs. Generally they have reached for the wages, and generally it has worked out well for the economy as a whole, leading to more automation and higher productivity. Whether the steelworkers' story will have a similarly happy ending is open to substantial doubt. But in any case, they have made their choice. Who's to pay for it?
Wages and fringe benefits for production workers in the steel industry now average just over $23 an hour, the highest in any industry in the country--or, of course, in the world. The average compensation for all non-farm workers in the United States is now around $11 an hour. The steelworkers' latest increase, effective last weekend, will further tilt the market toward the imports. The companies and the unions will once again come to Washington, hands joined, to cry for protection from foreign competition.
But protection means forcing consumers to pay for more expensive domestic steel--more expensive, largely because of those wages. Management and the union heartily agree that the government has no business interfering in their wage settlements. That's true; it's a bad idea. But it follows that the government also has no business intervening to protect them from the consequences of those settlements. The industry has an obligation to live with the consequences of its own decisions.
The pattern of sky-high steel wages is a recent one. Hourly compensation in steel a generation ago was about a third higher than the national average in all manufacturing. By 1973, it was higher by one half--but that's the year when it began to soar wildly and disproportionately faster than other American wages. It was a boom year, and the steel companies, with not much thought for the future, signed a no-strike agreement with escalators that have turned out to be extremely expensive. That agreement has now lapsed, and a nationwide steel strike may well begin when the present contract expires a year from now.
There are three major American industries with unusually high wages--coal, automobiles and steel. Coal is protected by this country's position as an exporter of a scarce resource. Cars and steel are another matter. Both industries always thought of themselves as world leaders and therefore invulnerable. But as other countries developed these technologies, wages suddenly became a crucial factor in international competition. The steel industry is now caught in a drastic squeeze from which it will probably emerge much smaller and much more efficient. There will be surviving companies, and they will pay high wages--but not necessarily twice the national average.