Contract Lengths
Most contracts cover more than one year, with three years most common. Some contracts provide for wage reopeners during the course of the agreement, especially when cost-of-living agreements are not included. Where management seeks to eliminate them, unions usually demand shorter contracts. Evidence regarding the effects of contract length on other outcomes is relatively sparse. Longer contracts are more likely to have COLAs to insure employees against the uncertainty of wage changes, especially when inflation rates at the time of labor negotiations are relatively high.
Employers try to avoid one-year contracts because they believe such contracts lead to more strikes, more contract administration problems, lower employee morale, and higher and more unpredictable labor costs. However, longer-term contracts may be more difficult to negotiate when the parties are involved in an uncertain environment. New agreements were more difficult to negotiate when a long-term agreement was expiring in conditions where foreign competition was great; where capacity utilization, selling price of the company’s products, and the rate of vacant positions varied substantially during the contract period; where buyer or seller concentration in the industry was high; among larger employers; and during periods of high inflation.
