Concessions, Profits and Militancy
The early 1980s was not the only period in U.S. economic history during which employees made wage concessions, but it was the first period since the Great Depression in which significant numbers of employees across several industries conceded economic gains. It was also the first time significant numbers of employees represented by industrial unions were required to give back past negotiated gains. The pervasiveness of the concessions is revealed in the cross section of those made by the middle of 1982.
Some of the concessions resulted from economic problems encountered by employers, but others were made because of advances in technology that radically altered the way in which products or services are produced. For example, changes in the printing industry have drastically lowered skill requirements for many occupations, enabling newly formed organizations to quickly hire and train employees to run sophisticated equipment, thus undercutting the costs of established firms. Wholesale wage concessions and the introduction of new equipment were necessary for older firms to remain competitive.
However, where employees have made concessions for employers to recapture their abilities to compete, some companies (for example, U.S. Steel) have chosen to invest the savings in other industries. In others, high profit levels partially related to wage cutbacks and to other efficiencies have led to historic profit records (for example, autos). Perceived imbalances in compensation practices reflected in large executive bonuses could indicate future militant union action.
Finally, unions have very little bargaining power to avoid concessions in some situations. A good example is the Greyhound bus line negotiations in late 1983. While the company could capitalize in the short run on the high unemployment rate of qualified drivers to hire strike replacements, it could also make the credible threat of selling off its intercity bus operations, which could not meet investment targets the rest of the corporation felt appropriate. The labor contracts offered by a less well-financed successor might have been lower than what Greyhound was willing to offer. And, in fact, Greyhound has divested itself of its interstate bus operations.
But these concessions may have been gained at a price. Employees might be expected to demonstrate low commitment to their employers and to take advantage of future bargaining power opportunities when and if the economic situation is to their benefit. This issue bears close watching as the labor surpluses of the early 1980s turn to likely labor shortages in the early 1990s. Evidence may already support this proposition, as auto workers have been able to return to pattern agreements with the negotiation of the 1988 UAW-Chrysler agreement.
