Tackling the Sticky Ones

Ever since Phase II of President Nixon's economic program got under way three months ago, the Pay Board and Price Commission have found it especially difficult to set rules for some parts of the enormously complex U.S. economy. Last week each group tackled one of its stickiest problems. In a surprise move, the Price Commission suspended all pending rate increases by privately owned utility firms. Its move temporarily froze prospective boosts that would have added billions of dollars annually to consumers' telephone, electric and gas bills. The Pay Board issued new rules governing merit raises, the form of pay increase that affects the vast majority of nonunion workers, including high-salaried executives and professionals.

Utility rates became a problem in large part because many of the increases that federal and state regulatory agencies have been allowing are not even close to the Price Commission's overall goal of holding price hikes to 2.5% annually. Commission Chairman C. Jackson Grayson said that many of the 900 rate increases pending around the country are over 10%, and some top 30%. The commission's seven members initially adopted a policy that all but rubber-stamped any utility increases authorized by regulatory agencies. However, when they discovered that 40% of the commission's mail involved utility rates--a share exceeded only by inquiries about rent rules--the members decided to reconsider.

The sudden freeze does not necessarily foreshadow large numbers of rate rollbacks. Grayson has pointed out that some of the large increases were due to the cost to the utility companies of new antipollution equipment. Such costs can legally be passed on to consumers. Later this month the commission will hold hearings in Washington giving company officials, members of regulatory agencies and customers a chance to make known their points of view. Then in March the commission will issue a comprehensive set of guidelines for the various utility concerns.

Third Try. The Pay Board's ruling on merit increases was its third. It stated that existing provisions for merit increases, whether written into labor contracts or applied as part of a company's general salary policy, can result in pay boosts of no more than 7% annually. Moreover, most new merit contracts or plans must conform to the even lower 5.5% guideline for overall pay increases. The board's last previous position had made union merit raises exempt from the guidelines while holding nonunion employees to the 5.5% rule.

Right now, few workers are covered by contracts that lay down rules for merit raises. Such contracts may provide, for instance, that a new employee will receive a specified merit raise at some time during his first year when his boss decides that he has successfully completed a trial period. The new ruling is of greatest interest to salaried workers who bargain individually for pay raises. The board decided that in general, merit raises under old or new plans can increase the aggregate compensation of an "employee group" by 7% at the most.

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