Embattled Guidelines

Few economic experiments of recent years have been more controversial than the Government's economic guidelines, those rule-of-thumb efforts to tell U.S. workers and businessmen how much they can raise prices and wages without bringing on inflation. The Council of Economic Advisors created the guidelines* three years ago, basing them on the doctrine that U.S. wages should rise only as fast as improving technology allows industry's output per man to grow. The council's conclusion, based on long-term estimates of productivity: prices and wages should not rise more than 3.2% annually. The guidelines have remained as official policy under both Presidents Kennedy and Johnson. Last week they won their biggest victory when Lyndon Johnson invoked them to help squeeze a steel settlement out of labor and management.

Though the President was clearly delighted that the crucial wage rise in steel equalled 3.2% (see THE NATION), he could not take much satisfaction in other recent settlements. Over the past twelve months, pay increases of between 3.5% and 4% have been won in such major industries as aluminum, cement and glass. Container workers won a 3.5% increase, auto workers a 4.8% boost, California construction workers a 6.1% raise for each of the next three years. Last week's maritime-strike settlement, while adhering to the 3.2% formula for its first year, will actually hike the cost of employing masters, mates and pilots by 8.26% a year over the four-year life of the contract, because subsequent (and larger) pay boosts will be added to the first year increase. In the first six months of this year, 1,200,000 workers won pay raises averaging 4%.

Strong Criticism. Such breaches have caused a growing debate about the whole idea of guidelines. Missouri's Republican Congressman Thomas B. Curtis, ranking minority member of the Joint Economic Committee, calls the guidelines "ineffective in practice and dangerous in theory." The danger, he says, is that they shift to labor and management the Government's burden of fighting inflation.

Labor seems equally unhappy--for quite different reasons. A.F.L.-C.I.O. President George Meany has warned that enforcement of the guidelines "would lead to the end of free collective bargaining." Labor also believes, as A.F.L.-C.I.O. Chief Economist Nathaniel Goldfinger put it last week, that "all the heat of the guidelines has been on the wage side--a one-sided pressure."

Indications are that the presidential economists early next year will raise the guideline figure from 3.2% to 3.4%--as labor contends they should--to put it in line with new statistics showing that the U.S. total output and productivity are much higher than had been thought.

Purpose of Consequence. Whatever the guidelines' demerits, the economic council stands by its controversial yardsticks. "The guideposts are always embattled," says Council Member Otto Eckstein. "It's still a free economy, with no wage or price controls." Best of all, he notes, industrial labor costs per unit of output are lower than they were five years ago. All the guidelines can do, after all, is guide. Even as wages and prices respond to the upward push of dwindling unemployment and fuller use of industrial capacity, each fracture serves a purpose of consequence: exposing who and what is joggling the nation's economic stability.

-So known today, but originally, and still, called guideposts by the Council of Economic Advisors in its annual reports.

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