A Chance for a Phase II Deal with Labor

WITH unintentional symbolism, the bodies that will administer post-freeze controls on wages and prices began meeting last week--an hour late. Three of the seven members of the Price Commission were caught in rain-jammed Washington traffic. It hardly mattered; once they did get together, officials of the commission and the new Pay Board merely were sworn in and discussed agenda. They put off any policy decisions until at least this week.

That leisurely pace cannot last. By the end of the freeze on Nov. 13, the two groups must shape standards to limit rises in pay and prices. Demands for special treatment are already beginning to pile up. Automakers, for example, are clamoring to put into effect the 4% price boosts that they had wanted to make during the freeze. Ford executives point out that the company's third-quarter profits would have been $1.18 a share rather than 83-c- if it had not been for the freeze.

Fear of Strikes. The immediate crunch will come on the Pay Board, which is composed of 15 members representing labor, management and "the public" (five members each). Coal miners and East and Gulf Coast longshoremen are now striking for raises larger than the 5% to 6% increases that the White House has hinted should be the golden mean during Phase II. Last week employers made a tentative offer of an 8.3% raise to the coal union. The Pay Board has legal authority to veto any settlement that high, but it would do so at the risk of prolonging the already damaging strike.

Beyond these specific cases, the Pay Board faces two huge questions: Should it specify numerical guidelines for future wage raises, or let its rules develop out of case-by-case verdicts on individual contracts? And what should it do about second-year and third-year increases written into contracts signed before the freeze?

Union chiefs suspect the ability of the Pay Board's business and public members to frame fair guidelines. A.F.L.-C.I.O. President

George Meany further demands that all raises called for in existing contracts be paid in full--retroactively, if they happened to come due during the freeze. Failure to satisfy the unionists could lead to a walkout of the labor members from the Pay Board and a new wave of strikes. Businessmen and Government officials fear that that would do more than almost anything else imaginable to wreck the anti-inflation program and damage an economy that is not yet showing much vigor (see following story).

Front-End Load. There is a chance for compromise. The Pay Board clearly should promulgate specific wage guidelines for future contracts; the case-by-case approach could all too easily become a formula for all exceptions and no rules. In order to win labor's acceptance of guidelines, the board could well yield on retroactivity. It also could permit most--but not quite all--deferred increases specified by existing contracts to go through. That might sound like a violation of the whole restraints program. Union leaders argue persuasively, however, that contracts that were legally negotiated in good faith before the freeze should not be nullified ex post facto. And the economic impact of permitting contractual increases would be far from disastrous. Most major contracts negotiated before Aug. 15 have been heavily "front-end loaded"--that is, they provide for huge first-year raises in order to catch up with past inflation, but relatively moderate increases in the second and third years.

Of the 19.4 million unionized U.S. workers, only 1.6 million figured to get raises during the freeze period under wage or cost of living escalator clauses or both. Another 5.8 million have raises coming up in 1972 under existing contracts, but these wage and benefit boosts average a moderate 6.1%. The Pay Board could well announce that it will demand revision only of those exceptional contracts that call for second-or third-year increases of 10% or more,* and allow the rest to be fulfilled. The most important raise coming up right after the freeze is one scheduled for 700,000 auto workers on Nov. 22, but it amounts to only 3% in base wages; a cost of living escalator will bring the total increase to, at most, 7%. Auto executives would rather pay that amount than risk a strike against any Pay Board attempt to shave it down.

Hurry, Please. The most essential need is that both the Pay Board and the Price Commission quickly issue some unambiguous, sensible rules that will let workers, investors and consumers at last know what they can expect in the way of pay, prices and profits. The guidelines surely will not please everyone. Robert Nathan, a member of TIME'S Board of Economists, predicts that the guidelines and the cry for exceptions will usher in "one of the most divisive, loud, screaming, scratching, gouging periods in a long time." But failure to promulgate new standards by Nov. 13 or soon thereafter, and a dragging out of the freeze until whenever the guidelines do appear, could have even worse effects. It would prolong a period of uncertainty and confusion that is already hurting the economy and battering the stock market. So long as the doubts continue, says Nathan, business will suffer because builders, for example, will think: "Let's wait three months before we start this new apartment house and see how tough the new rent rules will be."

Harold Passer, Assistant Secretary of Commerce, gives the Administration's hopeful position: "A good deal of this uncertainty will vanish in the next two weeks as the outlines of Phase II become clear." For the Pay Board and Price Commission, his prediction should be not merely a hope but a principal goal.

*Most notable: a 10% raise, in two installments, scheduled for 350,000 Teamsters; increases of 10% to 11% for 400,000 railroad workers; a 12% boost for 20,000 truckers, not members of the Teamsters, who drive the rigs that haul autos from factories to dealer showrooms.

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