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June 1995, Vol. 118, No. 6
Lisa Williamson and Phyllis Brown
Despite a generally robust economy in 1994, labor negotiators settled for modest gains in wages and compensation under contracts with the longest average duration in 23 years. Wage changes under major 1994 collective bargaining settlements (those covering 1,000 or more workers) in private industry averaged increases of 2 percent in the first year and 2.3 percent annually over the contract term, among the lowest gains recorded since the Bureau of Labor Statistics established this data series in 1968. Total compensation (wage and benefit) changes under 1994 settlements (computed for bargaining units of at least 5,000 workers) were also at or near record low levels. The year was the third consecutive one in which wage and compensation gains under major settlements in private industry were lower, on average, than those in the contracts they replaced. (See chart 1.)
Most major economic indicators pointed to a healthy economy in 1994. Gross domestic product grew 4.1 percent (in 1987 dollars), the largest gain in 10 years; unemployment trended downward from 6.7 percent to 5.4 percent over the year, and labor productivity grew by 2.2 percent for nonfarm business and 4.9 percent for manufacturing (the largest gain in 7 years). Consumer prices, as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), rose 2.5 percent in 1994, the smallest advance in 8 years.1
Settlements in 1994 occurred at a time when other measures of labor cost changes also showed moderate advances. The Employment Cost Index, a broad measure of the change in employers' cost for compensation, rose 3 percent in 1994, the lowest rate of change since the series began in 1981. In addition, reflecting substantial productivity growth and the moderate increases in compensation costs, unit labor costs increased 0.9 percent, the smallest annual rise since 1964.
This excerpt is from an article published in the June 1995 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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1 Because bargaining takes place throughout the year, this article uses the annual average change in the Consumer Price Index rather than the December-to December change, which was 2.7 percent for 1994.
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