THE ECONOMY: Inflation, Creeping

Perhaps because it came the week after the income-tax deadline and in the still-blazing afterglow of the Humphrey flap over federal spending, the Federal Government's latest report on another rise in the cost of living curled the hair of many a U.S. businessman and wage earner last week.

Highlights of the report, released by the Bureau of Labor Statistics: between mid-February and mid-March the U.S. consumer price index (1947-49 = 100).jumped 0.2% over the previous period, to an all-time high of 118.9. The increase, seventh consecutive one in as many months, brought living costs 3.7% over what they were a year ago—and the U.S. dollar down to 81% of what it was worth in 1947-49. An immediate effect of the rise: automatic (1¢ to 3¢ an hour) wage hikes for some 1,400,000 industrial workers whose earnings are tied to the cost-of-living escalator. Hardest to be hit will be the millions of other Americans living on pensions or other forms of fixed income. Moreover, because prices rose and earnings edged off, March was the first month in more than 2½ years in which "real" spendable earnings of factory production workers declined from the year before.

In Detroit the latest evidence of creeping inflation promptly provoked a new hassle between management and labor over the question: Do wages push up prices or do prices push up wages? Ford Motor Co.'s Vice President John S. Bugas, eying Walter Reuther's promise to win his United Auto Workers a shorter work week and "a hell of a lot" more money in 1958, put much of the blame for the current inflation on labor's demands for ever higher wages and fringe benefits. Argued Bugas: since 1954 wage packages have exceeded 5% annually in key industries, and these increases have not been absorbed through greater productivity. The result: increasing cost pressure against prices. The ultimate result, if labor continues to ask not only for "an increased share of a growing pie, but actually to eat the pie before it is baked": the corrosion of not only "individual security but the underpinning of our social structure."

With this estimate Walter Reuther took angry exception. Cried he: "Our present inflation is a rigged inflation based on prices arbitrarily set by a handful of executives of the major corporations who fix prices to maximize their profits rather than production and employment." Even ex-Socialist Reuther knew better than that. But what was encouraging in the hassle was that both management and labor—each understandably edgy about the rising criticism of the upward spiral—were so anxious to defend their positions before the public. From such edginess could come a new caution which ultimately should benefit management, labor and the U.S. economy in general.