RELUCTANTLY and unhappily, the United Steelworkers have now taken a cut of $1.25 an hour in their wages. But reluctant or not, they have done the right thing. They have saved jobs, they may have saved some companies, and perhaps they have even saved their own union.
Wages in the American steel industry have become a cautionary example of the damage that is done when settlements run too high. That $1.25 will be cut from a cash wage that averages about $14 an hour, two-thirds higher than the average wage for all American manufacturing. The full cost of an hour's work, including the fringe benefits and payroll taxes, is about $24--the highest for production labor in any large industry. Steelworkers have become vulnerable not because American wages are high compared with other countries' but because steel wages are very high by American standards.
It has become fashionable to interpret the troubles of the steel industry, and the related troubles of the automobile industry, as signs of a general decline of American economic strength. Basic industry in this country has lost its ability to compete, the lamentation goes, and standards of living will inevitably decline with future employment lying mainly in low-wage service jobs. How seriously should you take that view of the future?
Steel and autos are important industries, and their losses have wide effects on the rest of the economy. But in many respects they are special cases. Wage settlements were not the only things that have gone wrong for them, but wages got seriously out of line with productivity and the economy's ability to pay them.
There are two common errors, equal and opposite, in current talk about the steel industry. One is the suggestion, promoted by the major companies and the union, that all of their distress is the result of one cause alone, unfair foreign competition. On the contrary, the big mills are under increasingly severe pressure from smaller operators in this country that have more flexible work rules and higher productivity. The other error is to assume that the American steel industry is sinking hopelessly and beyond rescue. That is absurd. Within the industry there are areas of high efficiency and great technical resources.
Most of the steel industry will survive. How much? That depends crucially on nothing more than wages. Steel has been traditionally a high-wage industry, with its demands for skilled labor, and it will pay well in the future. But wages have to be guided by productivity and the market. There's no pleasure in seeing wages come down, but it's a lot better than seeing mills close. The steelworkers' decision is not an occasion for celebration. But it's a wise choice, and sets a useful precedent.