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Bargaining Climate in 1998 (1998)

The year 1997 was a major bargaining year for AFSCME affiliates representing state employees, especially in the Midwest. As reported in previous issues of the Collective Bargaining Reporter, many affiliates negotiated across-the-board settlements of 3 percent per year. In the year ending July 31, 1997, AFSCME members received, on average, a 2.6 percent increase.

Leading the way, were Indiana state workers represented by Council 62, with increases averaging 6 percent in the two years covered by the agreement, and Maryland Council 92, with increases averaging 5 percent in the next two years beginning in July 1998. Both states have gained bargaining relatively recently and worker pay is only now catching up with the more established bargaining states. In Maryland, state workers are enjoying collective bargaining for the very first time.

Negotiated settlements in all states reflect a real increase in wages, reversing a negative trend established earlier in the decade. The moderation of inflation, combined with the very healthy fiscal condition of states and tight labor markets, have created a favorable bargaining climate. However, despite this positive fiscal climate, in many cases we have not recovered the ground lost during the lean years. This is attributable to the political climate in the states favoring tax and spending reductions. With the exception of Maryland and Indiana, state affiliates are dealing with Republican governors, or very conservative Democrats, and Republican-dominated legislatures. In many cases, the political leadership has been openly hostile to public employees.

The most significant private-sector collective bargaining development in 1997 was the Teamsters dramatic victory over UPS last summer. The strike highlighted the plight of part-time and contingent workers and, for the first time in years, public opinion polls indicated support for the strikers and their issues. The settlement provided for an increase in the number of full-time employees and a significant narrowing of the pay gap between full-time and part-time employees. In earlier negotiations, the Auto Workers negotiated provisions to maintain employment at 95 percent of the current level. The UPS strike, combined with the Auto Workers’ agreement with the "big three" to restrict outsourcing, demonstrate the relationship between employer interests in flexible production and staffing schemes and union members’ need for economic and job security.

An emerging trend in the private sector, especially in the airline industry, are profit sharing and employee stock ownership plans. Private employers are continuing to seek ways to make compensation more variable and dependent upon organizational success. In the public sector, gainsharing programs, though not yet common, are slowly gaining favor among employers, especially in circumstances where funding is tight.

In contrast to 1997, relatively few AFSCME contracts covering large numbers of workers expire in 1998. Those who do bargain in 1998 can expect to continue to see a difficult political climate. However, if inflation continues at a moderate level as expected, and there is no economic downturn affecting revenue collection, we should generally negotiate modest real wage growth. A survey conducted by the Bureau of National Affairs (BNA) indicates that private-sector employers intend to negotiate very modest wage gains. Forty-four percent of the respondents to the BNA survey indicate that they plan wage adjustments of between 2 percent and 2.9 percent on average over the life of the contract. An additional 17 percent of respondents plan wage increases averaging less than 2 percent in each year of the agreement. According to the Fiscal Survey of the States, released by the National Governors’ Association and the National Association of State Budget Officers, states are recommending increases for their employees averaging 3.7 percent.

On the benefits front, despite low-cost increases in 1997 (see "Health Benefit Costs") many health care analysts are predicting a resurgence of health care inflation. Increased utilization associated with an aging workforce as well as diminishing returns from managed care are the primary factors. Already, affiliates in Iowa and Minnesota have been informed that utilization trends indicate that double-digit percentage increases in premiums are likely in the coming year. The Federal Employees Health Benefit Plans experienced increases averaging 8.5 percent for the plan year beginning Jan. 1, 1998. The acceleration of health care inflation will affect bargaining over health benefits and we may see employers renew their efforts to institute greater employee co-pays, premium sharing, and managed care restrictions at the bargaining table. Twenty-six percent of BNA survey respondents indicate that they will seek to increase deductibles, co-payments or employee premium contributions. In addition, we should expect to see employers and unions negotiating new health care purchasing arrangements such as coalition purchasing and direct contracting with doctors, hospitals and other health care providers. Even as costs rise, the rapid growth of for-profit managed care continues to raise concerns as to the quality of care and access to care.

With respect to pensions, conservative groups, led by the American Legislative Exchange Council, are organizing efforts to attack employee defined benefit (DB) pension plans (see "Working Perspectives"). Much like the effort to privatize Social Security, these groups are capitalizing on the unprecedented, prolonged bull market to argue that workers are better off under defined contribution (DC) plans. Michigan was the first state to replace a DB plan with a DC plan last year. We should expect some fierce battles over this issue in the year ahead.

Finally, we should also expect attacks on union security arrangements and fair share fees in the legislatures and at the bargaining table. California voters will decide by referendum whether unions should be required to obtain approval from members before using dues revenues for political purposes. This referendum — which is being championed by California Gov. Pete Wilson and former Vice Pres. Dan Quayle — as well as organized opposition to union security for state workers in Ohio are priorities for anti-worker groups seeking to weaken labor as we head into the 1998 and 2000 elections.

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