Carter's wage and price ceilings expected to crumble, without inflationary aftershocks
Voluntary wage-price controls, in effect since Oct. 24, 1978, will terminate quietly early in the Reagan administration. Removal of the once-controversial guidelines is not expected to have any appreciable impact on inflation and the national economy.
The controls -- which call for wage increases of no more than 7.5 to 9 percent annually -- have had only limited success at best. Wages and prices have risen sharply despite the arbitrary guidelines. Inflation has become more of a problem, not less, during the program's two years.
President-elect Reagan and his top economic adviser, George Schultz, a former labor and treasury secretary, oppose any form of controls program. Preferring a "hands off" policy toward collective bargaining and price-setting, they will move to end President Carter's guidelines. The times will be favorable for such a move: 1981 looms as a relatively light year for labor bargaining with good prospects for avoiding confrontations serious enough to force government intervention.
The United Mine Workers and the coal industry hope for a national wage agreement early in 1981. The International Brotherhood of Teamsters, which supported Mr. Reagan's candidacy, has reopening contracts but expects to settle without problems under the new administration. Generally, other unions bargaining in 1981 are smaller, weaker, and less solidly represented in their industries.
Thus, if controls are to be ended without sending shock waves through the economy, 1981 would appear to be the year to do it. Wages and prices will still go up (wages an estimated 10 percent, including benefits and cost-of-living, and prices a probable 12 percent), but the increases would be no greater than under President Carter's controversial controls program.
A General Accounting Office study of the guidelines program, undertaken for congressional Democrats and expected to be released in January, found "no convincing evidence that the standards have had any effect on the rate of inflation . . . . In our judgment, inflation would have been the same during the past two years if [the controls] had not been in place."
The study says that the Council on Wage and Price Stability has lacked the staff and money to function as it should. It says that guidelines were set arbitrarily, were loosely interpreted and sometimes bent to approve above-guidelines settlements, were inadequately monitored, and were rarely enforced.
Charles L. Schultze, chairman of the Carter Council of Economic Advisers, defends the guideline program, saying that it has held inflation "lower than it otherwise would have been." However, he too has acknowledged that "a simple continuation of this program would not be effective."
The basic restraints program, including the Council on Wage and Price, Stability, will end officially in December unless it is extended by the lame-duck Congress -- an unlikely possibility. Present Guidelines will remain in effect until Oct. 1, 1981, unless they are ended by an order from either the Carter or Reagan White House. Economic advisers to President Carter say he plans to leave the responsibility for ending controls to his successor.