LABOR : Postal Service, Unions Split Over Familiar Issues : Job security and productivity are debated in largest contract talks in the nation this year.

The 664,000 unionized workers of the U.S. Postal Service are prohibited by law from striking, but as their old labor contract nears expiration next Tuesday, negotiations on a new pact are nevertheless being watched intently.

The terms of the contract--the largest labor agreement being negotiated in the nation this year--will indirectly determine how high the price of a letter soars later in the decade. They will also provide another stage for the endless debate about how to balance management’s demand for higher productivity with organized labor’s demand for ironclad job security.

Postal Service officials, who have already proposed increasing the price of a first-class letter to 30 cents next year, say they will be under pressure to hike rates even higher in subsequent years unless they are given greater flexibility to use cheaper, part-time workers.

BACKGROUND: Leaders of four postal workers unions, who have been negotiating since August, complain that the concessions the Postal Service wants would eliminate thousands of jobs through attrition. Many of these jobs are in the $15-an-hour range and represent the kind of high-paying unionized jobs that have become increasingly scarce in the American economy, weakening organized labor.

Under the 1970 Postal Reorganization Act, which established collective bargaining for postal workers, management and labor must reach a new accord before the old contract lapses. If they don’t, a new contract will be designed by an arbitrator.

Standing in the way of a settlement are a myriad of questions: How rapidly should the Postal Service introduce automated machines? Should it be allowed to increase the proportion of part-time employees? Should it use private firms to perform some work now performed by postal employees?

These questions color virtually all labor negotiations in an era in which holding down wages to increase profit has become a primary business strategy. But few businesses spend as high a proportion of their budget on labor as the Postal Service. About 83% of the agency’s $39-billion budget goes for wages and benefits.

OPPOSING FORCES: Postmaster General Anthony M. Frank has promised to hold postal costs below the rate of inflation through 1996 with a five-year, $5-billion automation program. The program relies on a nine-digit bar code similar to the type used in grocery stores. This technology, already in limited use, allows sorting of mail by machines. It provides the opportunity to contract some business to private firms with similar equipment.

The unions want contract language limiting this private contracting. But that’s not their only fight. The Postal Service also wants to weaken work rules that restrict the use of part-time workers, and it wants more freedom to reassign workers as automation changes the nature of some jobs.

These demands have put the unions on the defensive.

“Primarily, we’re trying to maintain what we have without giving up any concessions,” said Willie Thompson, president of the Los Angeles local of the 53,000-member union that represents post office mail handlers.

The Postal Service’s introduction of automated equipment is a management prerogative that the unions have no direct power to block. What is being negotiated is how much authority management will have to take advantage of the money-saving technology, through which it hopes to cut up to 81,000 career jobs by 1995.

OUTLOOK: Without a high level of flexibility, Frank has said, the Postal Service will lose increased business to private package delivery services. “Union leadership and postal management must appreciate the dangers of non-competitiveness to our survival,” he said.

Until this week, both sides had kept quiet about the content of negotiations. But on Tuesday, the two largest postal unions, representing letter carriers and clerks, held rallies in Washington, where Morris (Moe) Biller, president of the 334,000-member clerks union, called the most recent Postal Service offer “a piece of garbage.”

On Thursday, the mail handlers union plans to release a national study claiming that mail handlers suffer higher job stress levels than other types of American workers and that the Postal Service has not lived up to promises to improve working conditions.