The 31% Raise

Will there be a steel strike when labor contracts run out on July 31? Union President I.W. Abel has vowed to call a walkout unless he wrenches from the steelmakers at least as much as he recently got from the can industry --a 31% hike over three years. Last week Abel moved a step closer to his goal. His United Steelworkers Union won a 31%-plus package from the aluminum industry in a victory that seemed to set an immutable wage pattern for basic metals industries.

Take a Strike. Despite severely declining profits, Aluminum Co. of America, Reynolds Metals and Kaiser Aluminum not only matched the can industry's inflationary 31% settlement, but also agreed to additional sweeteners. Among them: enlarged pension funds and an extra $10 a week for employees who normally work weekends. To foot the bill, Alcoa will lift most prices by 6% as of Sept. 1, and other aluminum companies are almost sure to follow. Abel's next target is the copper industry, where wage contracts expire June 30, and there is little reason to believe that it will manage to settle for less than aluminum. "If the 10%-a-year trend is repeated in copper," says a top steel executive, "it's damn near a foregone conclusion that it will happen in steel."

In Washington, however, a Nixon Administration official commented: "Steel cannot afford that kind of an increase. If the industry does grant that much, it will have to raise prices, and the consumer will have to pay for it. That is what concerns us here." A strike in steel now, the official added, looks more likely than before because the industry is in no position to give the 31%-plus. The Administration currently thinks that manufacturers ought to get tougher and take a strike in hopes of lessening the final terms of the steel settlement. Otherwise the industry will become even less competitive in world markets.

Hard Third Quarter. Data Resources, Inc., a top economic consulting firm headed by Otto Eckstein, calculates that if a steel strike of eight weeks or more hits the U.S., there will be no real growth at all in the economy during the year's third quarter. Even without a strike, steel production is expected to dip by 20% below its present level in August and September. Customers have been stockpiling as a hedge against a strike. They have laid in enough extra supply that their buying surge is now waning. Last week U.S. Steel and Bethlehem announced that they were cutting production and would begin to lay off workers. Since steel's labor bill is certain to go up in spite of the slack demand and low profits, steelmen will raise their prices again in the fall. If so, they will make the increases gradually, one product at a time, in order to avoid vexing the White House.

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