Wage Issues under Collective Bargaining

Almost all contract negotiations pivot upon, and most grievances and arbitration procedures thus ultimately deal with, four major areas : (1) wages and issues that can be directly related to wages; (2) employee benefits or economic “fringe” supplements to the basic wage rate; (3) “institutional” issues that deal with the rights and duties of employers and trade unions; and (4) “administrative” clauses that treat such subjects as work rules and job tenure.

Probably no issues under collective bargaining continue to give rise to more difficult problems than do wages and wage-related subjects. When negotiations reach a stalemate, they frequently do so because management and trade union representatives are not able to find a formula to resolve wage disputes. And wage controversies are, for that matter, by far the leading overt cause of strikes; Over the past decade, for example, they have accounted for over 40 percent of all such work stoppages.

Wages and Collective Bargaining

This record highlights the vital character of wage issues under collective bargaining and also suggests that in the area of wages much can be done to decrease management-labor conflict substantially. In any area of human relations, ignorance breeds suspicion, distrust, and conflict; this principle of human behavior is fully applicable to wage negotiations under collective bargaining. To the extent that understanding is substituted for ignorance, there will be a greater opportunity for peaceful settlement of wage controversies, even if conflict of interest in such matters never disappears.

It is not difficult to understand why wages do play such an important and controversial role in labor relations. For workers, wages are normally the only source of income, and the standard of living of the employee and his family is determined almost exclusively by this source. For workers’ families, the weekly paycheck establishes the character and quality of their dwelling, food clothing, education, recreation, and all other items that are included in the concept of standard of living.

But if, from the point of view of the worker wages are income that establishes a standard of living, from the viewpoint of the company wages are a cost of production. And here is the heart of the wage controversy. On the one hand, employees press for higher and higher wages with the objective of raising their standard of living; on the other hand, employers are confronted with increasing pressures on the cost of production. When wages are a significant element of cost of production, when wage increases are not offset by such economic phenomena as increased efficiency, and when the union has been unable (or unwilling) to extract equal wage concessions from all competitive firms, wage increases tend to place the firm in an undesirable economic position. A company so placed might not be able to survive for long in the competitive struggle. Under such a state of affairs, union wage policy, instead of advancing the standard of living of its members, could plunge them into economic oblivion.

In fact, as is the case perhaps with no other area of collective bargaining to that extent, wage problems test the skill, understanding, and attitudes of negotiators. The latter are, as we know, now confronted with a legion of wage issues, including the establishment of the basic wage rate, wage differentials, overtime rates, and wage adjustments during contractual periods, as well as with the thorny problems involved in the negotiation of the so-called fringe, or supplemental wage payments.