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Ask President Burrus

Question:

While extolling the virtues of our new contract with a fellow union member, a question was brought up: Are we keeping up with the cost of living? My co-worker believes we are going nowhere or losing money when we get raises because of other “give backs” (such as the recent requirement that we pay a larger share of our healthcare premiums, or past reductions in night differential).

What is your opinion? Does the recent contract take back more than we get during the life of the contract? Where do we stand relative to real wages and benefits compared to 10 years ago?

Steven, Honolulu (HI) Local

President Burrus:

Thank you for raising an important question. As I explained in a previous response, our contract provides for two types of pay adjustments: wage increases and cost-of-living adjustments (COLAs). Together, they are intended to improve the standard of living of our members.

Two times each year, COLAs capture approximately 63 percent of increases in the Consumer Price Index, (CPI) which measures inflation. Examples of items included in the CPI are food, furniture, appliances, homes, and automobiles. Whether or not an individual purchases these items, their salary is adjusted to retain their buying power. For example, if the price of gasoline increases 30 cents per gallon and the CPI is adjusted accordingly, the employee will receive a COLA adjustment, even if he or she uses public transportation.

In addition to the COLAs, APWU contracts have included percentage-based wage increases. These raises help to make up for the 37 percent shortfall in the COLA raises (100 percent minus 63 percent).

By negotiating both fixed wage increases and COLAs, we receive dual protection against the erosion of our wages.

If we received 100 percent of the CPI only, instead of COLAs and percentage raises, and the CPI declined (as occurred in the March 2007 measuring period) employees would not receive any pay adjustment. (One hundred percent of zero is zero.)

If the union focused only on the percentage-based wage increases, our raises would depend on our ability to accurately forecast inflation. If our estimates were too low, the result would be a reduction in buying power. Of course, the bargaining process itself limits the amount of negotiated increases. Employers simply will not agree to wage increases in the range of 8, 9, or 10 percent, yet a flat 7-percent yearly increase would result in a loss of buying power if the CPI increased at 8 percent and there was not a corresponding COLA adjustment.

I am not aware of any workers whose collective bargaining agreements provide COLAs of 100 percent, plus general wage adjustments. In fact, fewer than 8 percent of contracts contain cost-of-living adjustments of any kind.

Over the past 25 years, the wages of APWU-represented employees have remained constant with the real wages that were in affect in 1982. The decisions of arbitrators following contract negotiations in 1990 and 1994 retarded the salaries of APWU-represented employees by creating new entry-level wages (1990) and by failing to provide annual wage increases each year of the contract (1990 and 1994). In the first year of each of these arbitrated contracts, COLAs were paid in a lump sum and did not become a part of salary. The negotiated contracts in the ensuing years closed the gap created by the arbitrated rulings of 1990 and 1994.

During the period covered by the last Collective Bargaining Agreement, from 2000-2006, APWU members received “real” wage increases, i.e. pay raises greater than inflation. On average, our members beat inflation by 0.3 percent per year, for a total of approximately 2.2 percent over the term of the agreement. If we look at the weighted average wage (which contains all the changes from new hires, retirements, changes in level, step increases, etc.) the results are even more impressive: Wages exceeded inflation by approximately 0.9 percent per year, or about 6.4 percent over the life of the agreement.

Assuming there is moderate inflation (about 3 percent) during the term of the 2006-2010 contract, our members once again should experience “real” wage increases. Such increases would be more than enough to counterbalance the 1 percent shift in healthcare premium costs. Of course, if inflation accelerates, “real” wages would be negatively affected.

Our contract provides a balance against inflation using both COLAs and percentage-based wage increases. Standing alone, each is often viewed as miniscule, but when taken together they have provided protection against the wage erosion caused by inflation. As a result, postal employees can purchase more in 2007 than they could in 1987.

May 3, 2007

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