Reasons for Rises

Speaking to a meeting of AFL-CIO price monitors in Washington last week, Price Commission Chairman C. Jackson Grayson made a startling admission: it is impossible for ordinary consumers to know whether increases on the products they buy are legal or not. Indeed, added a top official of the Internal Revenue Service, the widely displayed invitations for customers to inspect "base price lists" are "largely psychological." Customers who take the trouble to pore through a store's all-but-unintelligible price lists still have no way of knowing whether any single price increase conforms to Phase II guidelines.

The reason is that the Government reviews price increases--as well as wage hikes--by large groups of products (or workers) rather than by individual units. Thus, just as some employees may receive pay increases that exceed the 5.5% wage guideline, the prices of some items in a store may go up more than the 2.5% price guideline--so long as "aggregate" or total increases among groups of products (or employees) do not violate the guidelines.

Does that confusing system work? In reply, Grayson cited the ultimate aggregate: the Price Commission has already held some 200 firms that account for a quarter of the entire U.S. gross national product to increases averaging only 1.5% over the next year. Another indicator was the index of industrial commodities, many of which are controlled. They rose .3% in December, the first full month after the freeze, compared with an average .5% in the six months before the freeze. As expected, though, there was a much bigger bulge in overall wholesale prices. They went up .7%, largely because of uncontrolled farm prices, which Grayson promised to "look at" as candidates for price ceilings if they continue to rise sharply. He also asserted, with more than a touch of indignation, that hints by some Nixon Administration officials that controls might soon be lifted could be "damaging" to economic stabilization.

Customer Ahead. The auto industry drove out last week with a price increase above the guideline. In their second round of rises since Phase II began two months ago, U.S. automakers won permission to pass along to car buyers the cost of new anti-pollution and safety equipment required under federal law. The ticket price of an average General Motors car will go up about $40; other automakers will probably post similar increases. For GM, the industry price leader, the combined hike of 3.4% is about $20 below that planned shortly before the freeze. Thus customers came out ahead under the controls--but not by much.

On the wage front, there was a move toward retroactive payments. Some 2,000,000 workers who were unable to get raises scheduled to take effect during the freeze were authorized by the Pay Board to collect them retroactively, with some limits. Workers whose employers had already raised prices or taxes in anticipation of the wage increases, including many schoolteachers, may receive all back wages due them. For most others, retroactive pay will be permitted up to 7%. The decision unfreezes some $1 billion in back pay. The Pay Board had originally voted to ban retroactive payments, but had to change that position after Congress ordered that all such payments had to be made, except for those "unreasonably inconsistent" with the guidelines.

On another matter, the board continued an aggressive approach. After rejecting an aerospace contract that provided a 12% first-year pay boost, its first turndown of a major labor agreement, a majority of the board voted to set the limit that it will eventually accept at 8.3%. But it will permit the disallowed balance --that is, about 3.7%--to go into effect along with the regular second-year increase, thus letting some 200,000 aerospace workers end up at the wage levels originally negotiated. In the interim, they will lose about $340 each in wages. Union officials, however, threaten to contest the board's rejection in court.

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