The Specter of Phase 1

FROM the moment that President Nixon slapped a three-month freeze on U.S. wages and prices, the chiefs of organized labor reacted with angry mistrust. Led by George Meany, the 77-year-old president of the A.F.L.-C.I.O., they briefly considered boycotting the Pay Board appointed to set post-freeze rules for wage and benefit increases. Last week, when the 15-member board finally started trying to negotiate what would amount to a master labor contract for the entire U.S. economy, the five labor members found themselves at odds with not only the five business representatives but also the five members representing the public. After several fruitless sessions, including an all-day Saturday meeting, the union leaders reported that no agreement was in sight. The board will try again this week, but its deadlock raises the possibility that the U.S. economy will not be able to enter Phase II on Sunday as scheduled.

The main dispute is over wage increases negotiated before the President's New Economic Policy began on Aug. 15. Union leaders regard these boosts as the hard-won fruits of negotiation, and are determined that their 19.4 million members will get the raises--both those that came due during the freeze and those called for after it ends. Management members of the Pay Board started out with a plan that would bar retroactive hikes and limit future increases to an average of 5%. To the surprise of the union men, the public members, instead of acting as mediators, put forth a suggestion almost as tough as management's. Apparently convinced that too much inflation is built into existing contracts, they proposed extending the freeze for two months, and requiring renegotiation of any labor agreements providing pay increases totaling more than 12% in the past 23 months. Growled Leonard Woodcock, president of the United Auto Workers: "This is an insult."

Powerful Tool. The issue took on partisan overtones when the House Banking and Currency Committee tried to write retroactivity of wage increases into law. While discussing the bill to extend Nixon's wage and price powers, the committee approved an amendment that would permit payment of raises agreed to before Aug. 15 unless they are "grossly disproportionate" to the national trend. The amendment was introduced by Democratic Representative Joseph Minish, a New Jersey A.F.L.-C.I.O. official for seven years before he won election to the House in 1962. It is far from certain that the amendment can pass Congress, but labor members of the Pay Board obviously saw it as a powerful tool in their bargaining.

The board was also prodded by the Committee on Interest and Dividends, which is made up of Government officials. Chairman Arthur Burns announced that he will ask corporations to limit dividend increases to 4%. The figure was largely political; it was below the 5% wage guideline being discussed by the Pay Board and thus would make the nation's stockholders appear to be doing more than labor in holding down inflation. Burns reiterated the Administration's view that there should be no controls on interest, but he promised that his committee would keep a sharp eye on sectors of the money market that might be "sluggish" in following the current downward trend in loan charges.

On Friday night, private contacts with some management members of the Pay Board led union chiefs to believe that they would be offered a 7% wage guideline on post-freeze raises and retroactive payment of all except a few egregiously high increases that were due during the freeze. Late Saturday, however, the management men came back with a proposal for a 5 1/2% guideline and no retroactivity, possibly because they could not rally corporate support for the earlier idea. The unionists refused even to consider these terms, and the meeting ended abruptly. Said Woodcock: "We have no agreement, in principle or any other way."

The stalemate made it increasingly doubtful that Nixon's Nov. 14 deadline for beginning Phase II can be met. After this week's scheduled Pay Board meeting Monday afternoon, Meany was planning to travel to Miami for union meetings preceding the A.F.L.-C.I.O. convention next week. He is not due to return to Washington until Nov. 24. Even if the board should agree this week, that would leave scant time for action by the Price Commission, whose guidelines must be based on post-freeze wage levels. Treasury Secretary John Connally's Cost of Living Council is empowered to set interim price and wage standards, but Connally is due to be in Japan all this week. Thus, unless a quick agreement emerges from the Pay Board, the freeze will likely continue. In short, the nation may be facing Phase 1 1/2.

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