Back-Door Raises

A back door to wage increases, without regard to present ceilings, was thrown open last week by a panel of the Wage Stabilization Board. Last February the board ruled that increases in pension and welfare benefits be restricted along with ordinary wage increases. But Economic Stabilizer Eric Johnston hastily asked the board to think again. In a majority report, the board's experts did so. They recommended that, with certain minor exceptions, no restrictions be set on new pension plans up to the "limits of accepted industrial practice" (e.g., those of American Telephone & Telegraph, General Motors, etc.), and that there be no restrictions at all on health and welfare plans.

If these recommendations are accepted, pension schemes will spread faster than ever-raising industry's costs, and eventually prices. WSB released some up-to-date estimates on the number of workers affected. Nearly 10 million U.S. workers are now covered by private pension schemes, and their number is growing by 2,000,000 yearly. Employers' contributions alone now total over $2 billion yearly. About $1.8 billion of this is currently going into the funds' invested reserves serves, more than half of it through insurance companies (and thence into the bond market), and the rest into trust funds with more liberal investment policies. By the end of this year, the pension funds' invested reserves, in employers' contributions alone, are likely to reach $10 billion. Employees' contributions, plus health and welfare reserves, will boost the total much higher.

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