Wage Hikes in Union Contracts Fell Slightly in 2017

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By Robert Combs

First-year pay raises negotiated by U.S. unions dipped to 2.7 percent in 2017, despite a strong fourth-quarter showing, according to a year-end analysis of Bloomberg Law’s database of wage settlements.

The 2.7 percent average wage increase was down from 2016’s average of 2.8 percent, but still higher than any other year since 2008.

First-year pay raises in union contracts have stayed in the 2 percent to 3 percent range in each of the past five years. Before that, the impact of the economic downturn kept wages nearly stagnant. First-year increases averaged no more than 1.6 percent from 2010 through 2012.

The average in 2017 would have been lower if not for an unusually large leap of 3.1 percent in the fourth quarter. This was the highest quarterly jump in first-year wages in nine years.

Geographically, the highest-paying union contracts (other than multistate agreements) were negotiated in West Coast states, where first-year raises averaged 3.2 percent. The Rocky Mountain region had the lowest first-year average, at 2 percent. Even so, it was one of only three regions that reported a higher average in 2017 than in 2016, along with the Midwest and North Central states.

The analysis is based on data from 715 collective bargaining agreements ratified in 2017, covering more than 1.5 million U.S. workers.

Weighted Averages, Deferred Wages Also Slipped

The analysis also revealed a lower weighted average increase for 2017 contracts than in 2016. Weighted averages take into account the number of workers covered under each union contract.

The first-year weighted average increase for 2017 contracts was 2.7 percent, down from 3.2 percent in 2016. The drop was because of fewer high-paying contracts among the largest employers: In 2016, 25 percent of workers received raises of 4 percent or better in the first year of their contracts; in 2017, only 7 percent of workers received raises that high.

Meanwhile, the number of contracts that called for a first-year wage freeze rose from 9 percent in 2016 to 16 percent in 2017.

Wage increases that were deferred to a contract’s later years also slipped in 2017. Pay raises averaged 2.5 percent for both the second and third years, down from 2016’s averages of 2.6 percent and 2.7 percent, respectively.

Weighted averages for second- and third-year increases were higher than in the previous year.

Lump Sums Had Lower Impact on 2017 Wages

Lump-sum payments—in the form of ratification bonuses, stipends, or other one-time payouts—were written into about the same number of contracts in 2017 (103) as in 2016 (102). But on average, these payments were smaller in 2017.

When lump sums were added to the analysis, first-year wage increases in 2017 averaged 3 percent, down from 2016’s average of 3.2 percent. Weighted averages, with lump sums factored in, showed a steep decline—from 4.1 percent in 2016 to 3.1 percent in 2017.

Private-Sector Unions Showed Negotiating Gains

Despite the overall dip in wage increases, private-sector unions in 2017 actually managed to fare slightly better than they did previously.

First-year wage hikes in manufacturing averaged 2.5 percent in 2017. That’s lower than the overall average of 2.7 percent, but up slightly from 2016’s average of 2.4 percent. Wage hikes in the second and third years of factory contracts were also higher.

Wage hikes were up in private nonmanufacturing-sector contracts as well. The average first-year increase in 2017 was 3.6 percent, compared with 3.5 percent in the previous year. (Second- and third-year averages were lower.) First-year pay raises also showed a year-over-year increase in the construction industry.

The main driver of the overall decline, then, was the public sector. Unions in state and local government contracts (including those covering public school districts) negotiated first-year wage increases that averaged 2.2 percent in 2017, down from 2.4 percent in 2016. Second- and third-year increases also were smaller, both with and without lump sums included.

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