Ask the President

Question:

The cost of living has increased significantly as a result of the increases in the price of a barrel of oil. As you well know, this has increased the cost of everything we buy, including food. Our COLA does not reflect the true cost of the increase in the cost of living, or even come close to it. I know that the “basket” [used to measure increases in the Consumer Price Index] has changed in recent years, but even this does not seem to explain the low COLA. Given the fact that the COLA has been such a major part of our pay in past years, are there any plans for APWU to seek changes in the formula?

Dan, Springfield MA Area Local

President Burrus:

Thank you for your inquiry on the subject of cost-of-living adjustments and their inadequacy in fully replacing income lost due to inflation. The COLA provisions in the APWU contract replace 60 percent of the actual increase in the Consumer Price Index. (A replacement of 100 percent would result in workers retaining the same buying power from one year to the next, with no improvement or deterioration in their standard of living.)

APWU contracts have included COLA protection since our initial collective bargaining agreement in 1971, and in subsequent negotiations we have sought to improve the COLA formula. In 1978, when a tentative contract agreement included a cap on future cost-of-living adjustments, APWU members rejected the agreement, negotiations resumed, and the uncapped COLA provisions were retained.

Our objective is to increase wages at a rate greater than inflation. Because fewer than 10 percent of American workers enjoy any COLA protection at all, however, it would be difficult to prevail in a debate over the adequacy of our COLA formula. And because it is unlikely that we would be able to persuade management to voluntarily agree to an improved COLA formula, the remaining option is arbitration, where the standard for postal wages is “comparability” to those earned by private-sector workers in similar occupations.

Over the past 24 years our contract negotiations have been clouded by the conclusion of prominent arbitrators that to comply with the comparability standard, postal salaries must be adjusted with “moderate restraint.” With this history, I would be reluctant to submit the improvement of our COLA formula to an arbitrator: Negative, unintended consequences could be the result.

During contract negotiations APWU officers attempt to win wage increases that exceed the rate of inflation by bargaining for general wage increases and cost-of-living adjustments. This is a balancing act that requires us to predict what future inflation rates will be. (The very best scenario would be zero inflation, so that our wage increases would be fully translated into increased buying power.)

We have been moderately successful over the years in increasing real wages from contract to contract. The buying power of a Grade 5 Step O worker in 2008 is greater than it was in 1998. We hope to continue this trend, but it will become increasingly difficult in light of the challenges of globalization, the political climate, and increased automation.

Postal employees have enjoyed real wage increases over the past 37 years — certainly not as high as we would like, but much greater than those achieved by workers in similar occupations. Under the old model of wage-setting, the significant improvements in productivity of the last decade would have resulted in substantial improvements for middle-class workers. However, in recent years industry moguls have increasingly separated wages from productivity and have set wages at the lowest possible levels. Millions of displaced workers have been forced to accept reduced wages and benefits.

Postal wages are not set in isolation. If they were, a case could be made to adjust wages or the COLA to keep pace with inflation. However, in today’s economy the possible reward is not worth the risk.

March 25, 2008