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Contract Negotiations
Numbers
"Crunching"
for Negotiations

Costing Out a Contract
(the Easy Version!)

Here are the basics of costing out a contract. Print this page and use it to  familiarize the entire negotiating committee with "number crunching" issues. We've also included some statistics which may be useful in backing up a demand for a fair wage increase, and calculating increases or decreases in real wages.

CONTENTS

Calculating Wages
Holidays, Sick Days, etc ...
Vacations
Medical Insurance Premiums
Facts You Need to Know
Useful Statistics for Bargaining
Poverty Level Wages?
Calculating Against Inflation
Warning! "Package cost"


WAGES

• To calculate the percentage amount of a flat cents per hour raise: divide the wage increase by the average wage in the shop.

EXAMPLE #1: If the average wage is $9.00, and the wage increase is 30 cents, what's the percentage increase?

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• To calculate the total wage increase over the life of a 3-year contract: multiply the first year wage increase (in cents per hour) by the total number of work hours over the life of the contract, or 3 x 2080; multiply the second year increase by 2 x 2080, and multiply the third year increase by 1 x 2080. Add these three numbers to find the total.

EXAMPLE #2: If the wage increases are .20, .30 and .40 over the life of the contract, what's the total amount of the increase over 3 years?

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EXAMPLE #3: Now reverse the numbers: .40, .30, .20 and do the same calculation—this gives us a good idea of the difference to the members of a "front-loaded" vs. "rear-loaded" wage offer, i.e. higher wage increases early in the contract vs. higher increases later in the contract.

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HOLIDAYS,
SICK DAYS, ETC ...

• To calculate the cost per hour to the company of a holiday (or a sick day or paid personal day): multiply the average hourly wage by 8 hours, and then divide into 2080 hours.

EXAMPLE #4: If the average wage is $9.00, what's the cost of an additional holiday?

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VACATIONS

• To calculate the cost to the company in cents per hour of an additional week of vacation over the course of a year: multiply the number of workers eligible to get the extra week to get 40 hours, then multiply this figure by the average wage of those eligible employees, then divide by 2080 hours, then divide by the total number of employees in the shop.

EXAMPLE #5: If 3 members would be eligible to receive the extra week of vacation out of a plant of 80 workers, and their average wage is $9.50, what's the total cost in cents per hour?

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MEDICAL
INSURANCE PREMIUMS

• To calculate the cost to workers of a monthly medical premium in cents per hour: divide the monthly premium by 173.33 hours.

EXAMPLE #6: If the monthly premium cost to workers in the company's proposal is $45, what's the cost in cents per hour?

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Facts You
Need to Know

Based on a 40-hour
work week:

  • Hours in a work year: 2080

  • Hours in a work month: 173.33

  • Average wage: add all wages, divide by total # of workers

Useful Statistics
for Collective
Bargaining

While no negotiations were ever successfully concluded because we had better statistics than the company, there are some calculations which can provide us with useful weapons. Two of these include the effect of inflation on our members' wages, and the relationship of the shop wage level to the federal poverty level. Among the obvious potential uses for these numbers:

  • At the bargaining table to back up our demand for a fair wage increase

  • With the membership, to fire people up for the fight to raise wages

  • With community and political leaders and the media to enlist potential allies in our fight.

Is the Company
Paying Poverty-
Level Wages?

A potentially useful statistic in many lower-wage contract negotiations is a comparison between the company's wage levels and the federal poverty level. The U. S. Census Bureau annually calculates the poverty level, primarily based on the cost of food. While it is UE's position that the "official" poverty level seriously underestimates the amount of income required for a family to live a decent life, the poverty level statistic can be a useful benchmark, as well as an important weapon in our public relations arsenal.

According to the 1997 figures from the U.S. Census Bureau, the poverty level is:

For a family of four: $16,276 annually, or $7.83 an hour

For a family of five: $19,154 annually, or $9.21 an hour

Additionally, it's worth keeping in mind that we should be flexible in our calculations of the existing wage level in the shop. For example, if there is a monthly insurance co-payment of $30, we should deduct this amount (which equals 17 cents an hour) from the wage level in the shop. Any other amounts deducted from the worker's checks for benefits (pension or 401(k) contributions, etc.) can also be deducted from the wage level to help make our case that poverty-level or near poverty-level wages are being paid.


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Calculating Increases or
Decreases in Real Wages

Another important statistic is the effect of wage changes over the life of the current contract over members' "real wages" (wages adjusted for the effect of inflation). For example, if we won an increase of 9% over the past three year contract, but inflation rose 11% over the same period, we suffered a drop in real wages of 2%.

In order to perform this calculation, we need to know two figures: the inflation rate over the life of the contract, and the percentage change in wage levels in the shop over the same period.

National inflation rates CPI-W, urban wage earners and clerical workers) for the calendar years were:

1988: 4.0%
1989: 4.8%
1990: 5.2%
1991: 4.1%
1992: 2.9%

1993: 2.8%
1994: 2.5%
1995: 2.9%
1996: 2.9%
1997: 2.3%

EXAMPLE: The Union contract from January 1995 to January 1998 included wage increases of 3%, 2.5% and 1.5%. What was the effect of these increases on the workers' real wages?

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Important Reminder!

Don't fall into the trap of negotiating economics on the basis of how much the overall "package" costs the employer! These calculations can be useful tools for us to understand the cost to the employer of the different components of our economic demands, but should never substitute for negotations that are based on addressing the real needs of the members.)

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ANSWERS
EXAMPLE #1: Wages
.30/9.00 = .033 or 3.3%

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EXAMPLE #2: Wages
.20 x 3 x 2080 = 1248
.30 x 2 x 2080 = 1248
.40 x 2080     =  832
  Total:        $3328 (1248+1248+832)

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EXAMPLE #3: Wages
.40 x 3 x 2080 = 2496
.30 x 2 x 2080 = 1248
.20 x 2080     =  416
  Total:        $4160 (2496+1248+416)
  (25% more money!)

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EXAMPLE #4: Holidays, Sick Days, etc ...
9.00 x 8 = 72
72/2080 = .035 or 3 cents per hour

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EXAMPLE #5: Vacations
3 x 40 x 9.50 = 1140
1140/2080 = .548
.548/80   = .007, or 7/10ths of a cent/hour

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EXAMPLE #6: Medical Insurance Premiums
45.00/173.33 = .259, or 26 cents/hour

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