Contract negotiations between the U.S. Postal Service and unions representing more than 660,000 employees face a midnight deadline with the key issues of wages, health care and automation still unresolved.

"I cannot say that the outlook is encouraging," Senior Assistant Postmaster General David H. Charters said yesterday of the negotiations, which began almost three months ago.

Whatever the outcome of the talks, no disruption of mail service is expected. Postal workers are prohibited by law from striking. If agreement cannot be reached at the negotiating table, the dispute will be submitted to binding arbitration.

Terms of the final settlement are apt to have a direct impact on postage prices, however, because labor costs account for 83 percent of the Postal Service budget. Before the talks began, the Postal Service applied for a rate increase that would raise the cost of a first-class stamp from 25 to 30 cents.

Charters said the union proposals on the bargaining table would cost $50 billion over the next three years and raise the cost of a first-class stamp to 43 cents.

The four unions involved in negotiations are the American Postal Workers Union (APWU), National Association of Letter Carriers (NALC), National Postal Mail Handlers Union and National Rural Letter Carriers' Association. The APWU and NALC are the two largest unions, representing nearly 570,000 of the workers involved in the current negotiations. The two large unions are bargaining jointly.

For the Postal Service, the key to this year's negotiations is a reduction or elimination of work rules that would give management greater flexibility to move employees to other jobs, including geographic relocation, in response to automation. Over the next five years, the Postal Service wants to eliminate the equivalent of 79,000 jobs through automation and contracting out of work. The biggest impact would be on the APWU.

Key contract issues to be resolved include:

Wages. The unions have asked for a three-year agreement with a base wage increase of 8 percent the first year and 7 percent in each of the last two years. In addition, the unions have demanded continuation of cost-of-living protections. The Postal Service has offered a two-year contract with an average first-year increase of 3 percent through a combination of wages and lump-sum payments and a lump-sum payment in the second year. The average pay for a letter carrier or clerk is


Health Care. The Postal Service has proposed paying the full health care costs of career employees and providing part-time and casual workers with a "flexible spending account" that they could use to pay for medical insurance or to buy some other benefit. Although the Postal Service would pick up the monthly premiums and co-payments of career employees, it presumably would save considerable money by having to pay only a defined amount for the health care costs of part-time and casual employees. The unions have proposed leaving the current medical plan unchanged.

Work Rules. As part of its campaign for more flexibility, the Postal Service has proposed creation of a new class of part-time career workers for clerk and letter carrier positions. The Postal Service argues that this, along with the right to relocate workers, would give it the flexibility to automate. These workers would receive less pay than career employees and be without benefits for up to six months.

Charters said yesterday that "some progress" has been made in the work rules area. The unions declined comment on matters before the negotiators.