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Fehmida Sleemi, Phyllis Brown, and Lisa Williamson
L abor negotiators faced mixed economic signals as the 1991 bargaining calendar unfolded. Early in the year, some economic indicators pointed toward a rebound from the recession that began in 1990, but the recovery was not sustained as the year progressed. The annual rate of unemployment was 6.7 percent, up from 5.5 percent in 1990. Labor productivity improved slightly, but the gain occurred because firms cut labor hours more then they cut output.
Compensation cost increases slowed from 4.9 percent in 1990 to 4.3 percent in 1991. Inflation was not a concern, as prices and unit labor costs increased less in 1991 than in the previous two years. (See table 1.)
Despite this ambiguous economic backdrop, major collective bargaining settlements (those covering 1,000 or more workers) in private industry in 1991 provided wage rate changes that, on average, were higher than those specified, or guaranteed, by contracts that were replaced. The previous agreements were, for the most part, negotiated in 1988 or 1989, when the economy was more stable. Settlements in 1991, on average, called for wage rates to increase 3.2 percent annually over the contract term, compared with the 2.7 percent annually over the term of the contracts that were replaced. This marked the third consecutive year this pattern occurred. (See Chart 1.)
Annual changes in wage rates over the term of individual settlements ranged from a decrease of 6 percent to an increase of 19 percent, suggesting that conditions in specific industries and firms influenced bargainers. Competition from abroad or lackluster domestic business required some negotiators to focus on job security and containing labor costs. Increased exports, higher profits since the previous bargaining round, or efforts to attract qualified workers led other negotiators to focus on wage gains.
This excerpt is from an article published in the May 1992 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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