The Issues Dwarf the Arguments

STEEL NEGOTIATIONS

THE words from President Eisenhower had the ring of a command. "They must do it, and they must do it in such a way that the price is not compelled to go up." Rarely does the President use such strong words in matters of labor-management relations, but rarely are strong words more necessary.

In another month big labor, in the form of the United Steelworkers of America, will sit down with big business, in the form of U.S. steel company executives, to hammer out a new contract that will not only set the pattern for steel but also for dozens of other industries. As negotiations approach, the two sides are so far apart --and so adamant about it--that they may not be able to get together short of a long strike or a surrender by management, either of which would harm the recovering economy.

Since January, the United Steelworkers union has spent about $500,000 on ads in 40 major newspapers to make its case for an "extra billion dollars" in the pockets of 1,250,000 steelworkers. This is money, says the union, that will bring real benefits to the economy. Union Boss Dave McDonald is not so much interested in a hefty wage boost as in fringe benefits, whose cost is less evident. He is likely to emphasize pension terms, better hospitalization and medical plans, more generous unemployment benefits. But the big firecracker that is sure to set up a ringing in management's ears is a share-the-work plan to reduce the dangers of unemployment by giving each worker a three-month vacation with pay every five years; when the senior workers go off, younger men will fill in. Says McDonald: the idea will create 30,000 new jobs in the industry at a cost of only about 12-c- an hour.

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Actually, McDonald could accept much less. He has beaten down last year's dues revolt in his own union (TIME, Sept. 29), and need not act tough to impress his membership. Nor does he have to bring home a whole ham to keep pace with the wage gains won by other unions. The United Auto Workers' President Walter Reuther settled for a modest increase that poses no threat to steel's position as one of the best-paying big businesses. Steelworker gross earnings averaged $2.88 an hour last year, 35-c- better than autoworkers and 75-c- better than the average for all manufacturing; among production workers only bituminous coal miners ($3.02 an hour) and flat-glass workers ($2.91) averaged more.

Yet McDonald shows no sign of trimming his demands. One of the union's chief complaints is the fact that 80,000 Steelworkers are still unemployed despite the industry's rapid comeback. Employment is up only about 20% since last April, while monthly production has jumped 100%. The union insists that labor is the main factor in the rising productivity, and that the companies can afford to pay more.

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Management is not disposed to accept any such union demands. The companies have matched McDonald ad for ad, angrily point to the perils of domestic inflation and market troubles abroad if they are forced to a settlement that results in higher prices. Even worse, another round of price increases raises the specter of price controls from Congress if the industry cannot manage its own price structure. As for the union demands on productivity, steelmen cite a study by George Washington University's Dr. John W. Kendrick, who takes the view that output per man-hour is not a fair measure of productivity. Just as important, says Kendrick, are management's investments in new plant and equipment and the contribution of company executives.

Management's back is also stiffened by a rising level of inventories that would help ride out a strike. Inventory accumulation in February was at a $3 billion annual rate, more than half of it in industries using steel. The industry is currently producing at about 93% of capacity; once the warehouses are full, it faces the possibility of a slack third quarter, strike or no strike. Then there are all the other industries, particularly aluminum, that also negotiate new contracts in the months ahead, and want steel to stand firm. Aluminum's profit picture, for instance, has not yet recovered fully, and a big, pattern-setting settlement would mean serious trouble.

The fear of a strike is not that it will throw the recovery into reverse. It will not. But once started, a strike is likely to be a long, bitter affair--some experts predict up to four months--that will dampen the recovery just when new spurts are needed, add painfully to already troublesome unemployment problems. The clear call is for statesmanship on both sides. Warns George Humphrey, chairman of National Steel Corp. and former Secretary of the Treasury: "The economic forces at work are much bigger than any of the people who are involved in the situation."

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