Bad News from Big Labor

Carter's anti-inflation tactics stir grumblings by union chiefs

In fighting inflation, everybody has to do his share. Government must curb spending, companies must hold down prices, unions must settle for smaller pay increases. That, in brief, is Jimmy Carter's three-sided strategy. For the past two months, the White House has been lecturing Congress on spending and badgering business to put a lid on prices. Last week it was labor's turn in the spotlight, and the results were not encouraging.

Wage talks moved into the hard-bargaining phase for the U.S. Postal Service and its 570,000 mail carriers, sorters and other employees. Their three-year contract is due to expire on July 20. A reasonable settlement with the postal workers would put pressure on the nation's 475,000 railway workers, who are demanding a three-year contract with some 30% in pay increases, and have been locked in federal mediation talks since last January.

The Administration is particularly anxious for moderate postal and railway settlements for several reasons. It badly needs to erase the unfortunate precedent that it set earlier this year when, to get coal strikers back on the job, the White House pressured the coal operators to accept an inflationary 38% increase in wages and benefits over the next three years.

The postal and railway settlements are certain to have an impact on next year's round of wage talks. There are no other big union contracts expiring this year, but several important ones come up for renewal in 1979. Among them are the United Auto Workers (with 800,000 members), the Teamsters (900,000 members), the International Union of Electrical Workers (200,000 members), and some 80,000 rubber, cork, linoleum and plastic workers. These unions have three-year contracts that now provide an average of 10% in annual pay increases, and White House officials hope to see the yearly raises cut to perhaps 7%. The Administration will have little hope of success with next year's heavy bargaining calendar if it cannot make inroads with this year's light calendar.

Though the Postal Service is a quasi-Government organization, the union leadership is infuriated by the Administration's blunt intrusion into the contract talks. Instead of quietly urging the chiefs to hold down wage demands, the White House has publicly and repeatedly insisted that they settle for no more than 5.5% a year--the same raise that Carter has said he will approve later this summer for 1,350,000 civil service workers. In fact, postal workers already earn an average wage of $15,423 a year, nearly 50% more than the national average for private nonfarm workers.

White House officials had predicted that the postal workers would cooperate, but the demands that the union placed on the table last week were not exactly encouraging. In addition to an increase in a cost-of-living escalator that offsets 65% of the prevailing inflation rate, the union called for a 7% wage increase in the first year and 5% in the second--all in all, a good bit more than the Administration had been hoping for. Said James LaPenta, a key postal union negotiator: "What the Administration has done is self-defeating. Management now feels that it is backed up all the way by the White House, and under those circumstances you can't get constructive bargaining."

If the talks become deadlocked, the mailmen may strike next month. That would be illegal, but the Postal Service is so worried that it has drawn up crisis plans to have important mail such as Social Security checks sorted and delivered by the military, including the ROTC. There is also a somewhat remote possibility of a railway strike early this autumn if a new contract cannot be achieved by the time the federal mediation period expires.

Officials on the Council on Wage and Price Stability admit that Carter's anti-inflation policy has no hope of succeeding unless unions begin accepting smaller pay increases than they have come to expect in the past several years. Says COWPS Director Barry Bosworth: "Labor groups did not cause the food and energy price increases that initiated this inflation, but they are part and parcel of the process that keeps it going. We will just never achieve deceleration if each group waits for the others to act first."

Since 1974 many unions have been winning annual pay increases of 9%, 10% and sometimes more, to cushion members against inflation. Because the raises typically have been built into three-year contracts, employers have to pay the large annual increases even when the inflation rate goes down; since 1975, union wages have tended to go up faster than the inflation rate. Meanwhile, nonunion workers have begun to expect similar-sized raises, and companies pay them--often simply to keep skilled employees from quitting. Since productivity has not come near staying even with the growth of the paychecks--output per hour worked has risen about 2% on average since 1970 --companies have had to cover their costs by raising prices. With inflation mounting at an alarming rate of 11.4% in April, it has become more difficult than ever to break the cycle.

Union leaders complain that far more is being asked of wage earners than of anyone else. One contentious point is Carter's request that top company executives restrict their salary increases to 5% as a symbolic gesture for rank-and-file workers to follow. Complains United Auto Workers President Douglas Fraser: "A 5% limit for people like General Motors Chairman Thomas Murphy, who makes just short of $1 million a year, is no great concession to fighting inflation."

The gulf between Carter and the union leaders has been especially wide and deep since the President met with AFL-CIO Chief George Meany several weeks ago and tried--in vain--to sweet-talk him into supporting a general wage hold-down. As a union official who attended that White House session told TIME Correspondent Richard Hornik: "Carter came in with his little sermonette, and when we did not accept everything he said, he stopped listening to us. He should realize that meetings like these are not Sunday school."

To enlist labor in the battle against inflation, the Administration must fight much harder and more effectively on the other fronts than it has so far. There is a hollow ring to calls for businessmen and workers to settle for less so long as the Government keeps pumping up inflation through its unchecked spending. Next year's federal budget deficit, which is now projected to top $50 billion, is at least an improvement on the $60.6 billion that Carter had originally proposed in January, but it is still far too large for an economy in the fourth year of expansion. Cutting the budget is the most effective way to hold down prices, and that in turn would be the best persuasion to stop labor leaders from demanding inflation-fueling pay rises.

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