BPEA | 1984 No. 1

Wage Concessions and Long-Term Union Wage Flexibility

Robert J. Flanagan
Robert J. Flanagan Brookings Institution and Stanford University

1984, No. 1

BY MANY INDICATIONS , the behavior of average union wages in the early
1980s contrasts sharply with their behavior over most of the postwar
period. During the 1970s the basic mechanisms of union wage determination
were in many ways solidified: the average duration of labor
agreements continued to increase as the reach of multiyear contracts
was extended, and there was a substantial expansion in the number of
formal cost-of-living adjustment (COLA) provisions; many large unions
adhered to a policy of negotiating an annual improvement factor plus
COLA despite the fact that the productivity trends that formed the
original justification for the annual improvement factor had greatly
deteriorated; and while there has always been considerable dispersion
in the results of individual negotiations, wage dispersion within the union
sector appeared to increase as labor agreements that included COLA
clauses ultimately yielded higher pay increases than those that did not.
In addition, average union wage increases consistently exceeded average
nonunion wage increases during the 1970s, raising the union-nonunion
wage differential to a historic high by the early 1980s.