Breaks in the Wage-Price Spiral

AFTER overseeing the nation's key wage decisions for two months, the federal Pay Board seemed well on its way to becoming the laughingstock of Phase II. Having set a guideline of 5.5% annually for wage increases, board members proceeded to approve labor contracts that called for first-year pay boosts of at least 15% for coal miners and 14% for railway signalmen. Last week, however, the board decided to show some New Year's resolve. By a vote of 9 to 5, the labor-business-public group rejected an aerospace agreement that would have provided an immediate 12% wage increase for some 150,000 workers.

The Difference. Board Chairman George Boldt said that the contract terms were "obviously unreasonably inconsistent" with the guideline. In fact, what made the aerospace agreement different from those of the mining and railroad industries was the lesser likelihood of a strike. At the time of the earlier decisions, coal miners had already been off their jobs for six weeks, seriously depleting the nation's coal supply, and signalmen were clearly ready to begin an economy-crippling shutdown of U.S. railroads. By contrast, the nation's ailing aerospace companies have been forced to lay off more than 180,000 workers in the past three years, leaving most of the rest grateful to have any kind of job at all. The board's next major contract review will be a much harder test of its new-found will: it will soon have to consider a 41% pay increase called for in a three-year contract covering some 45,000 members of the tough-talking International Longshoremen's Association.

Labor Member Leonard Woodcock, whose United Auto Workers Union is one of the main labor groups that bargained with aerospace employers, described as "cynical" the board's decision to hold the line on workers employed by a depressed industry. But he also acknowledged its efficacy by pointedly omitting any mention of a strike. Public members suggested a compromise formula that would trim the first-year wage boost to 8.3% but increase the second-year raise from 3% to about 7%. That seemed equitable enough, but labor members, still smarting from their first real defeat on the board, were in no mood to take advice. Said U.A.W. Official Pat Greathouse: "Right now we'd like for the Pay Board to keep its mouth shut." The board complied, declining for at least a week to take a formal vote on the compromise plan. However, since the public members' terms of 8.3% apparently had the support of some of the five business members as well, union leaders had a reasonably clear picture of just how large a settlement could pass.

Storehouse Style. Although the aerospace decision was a welcome first sign of toughness, the Pay Board still showed all too much evidence of disarray. Its formal meetings, which convene around a T-shaped table in a brand-new Washington office building, are often only short voting sessions. The real business is conducted, statehouse style, in caucuses among members of one or more of the three groups. These are attended not only by the official members, but also by a bewildering array of aides and alternates.

One aide to General Electric Vice President Virgil Day, the informal business leader, is onetime U.S. Steel Chairman Roger Blough, a dirty word to many unionists. The labor men, for their part, have taken to sending alternates to most meetings. The choice of AFL-CIO President George Meany, who has been recovering from an attack of chest pains, is Nathaniel (Nat) Goldfinger, his acerbic director of research, whose constant needling frequently infuriates Chairman Boldt, who is a Federal judge from Tacoma.

This week the board is scheduled to begin considering its third position in six weeks on employee merit raises, after members decided that their first two decisions would prove unworkable or unfair. Such backtracking has convinced many critics that the board lacks top leadership. Woodcock, for one, has said that Boldt "may be an excellent Federal judge but in my opinion he is not qualified to be chairman of such an important body" as the Pay Board. Boldt strenuously rejects such criticism. "I have not just been sitting on my fanny around here," he told TIME Correspondent Mark Sullivan. "I am confident that from now on we are going to have a majority of individuals voting to tighten things up to hold down inflation." The tightening should also be applied to the board's own operation. After labor members freely discussed the aerospace vote with newsmen waiting in the lobby last week, P.R. Man Herbert Wurth was nonetheless forbidden by the board's new executive director, Robert Tiernan, to write a press release about it until the rejection had been framed in legalese. Furious at such mindless rules, Wurth quit.

Worn Welcome. Meanwhile, one of the fonder dreams of C. Jackson Grayson, chairman of the Price Commission, was realized with stunning speed. When he announced a 21% yardstick for price increases in November, Grayson said that he hoped that some prices would go down while others went up. Last week, after several days of unpublicized price fighting in the steel industry, U.S. Steel Corp. announced that it will reduce prices $5 to $25 a ton on several major products, including some that the company had been given permission by the Price Commission to increase. As a result, the price hike in key items like cold-rolled sheet steel, which is used in the manufacture of cars and household appliances, will be cut by one-third to one-half.

The U.S. Steel move was aimed at heading off plans by Inland Steel Co. to offer discounts on large sales. Both companies were reacting to strong pressure from automakers, who must get approval from the Price Commission in order to pass on any large increase in steel prices to their customers. For General Motors, such an application would have been the third one for a price hike since Phase II began; for Ford and Chrysler, the second. None are anxious to wear out their welcome on Grayson's doorstep, and they thus began demanding relief from their suppliers.

Both the aerospace wage decision and the steel price rollback provided encouraging signs of a slowdown in the wage-price spiral. In recent years, unions have justified exorbitant wage settlements by pointing to ever higher cost of living increases, and companies have been able to pass along higher costs to the consumer almost with impunity. That game of economic leapfrog now has some new rules. As aerospace workers and steel executives learned, those who jump too far are apt to land out of bounds.

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