Business: ONE MAN'S PRICE IS ANOTHER'S INFLATION

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WHEN the steel industry reached agreement with the United Steelworkers of America last week on a new labor contract providing for annual wage-and-benefit increases of 6%, Federal Labor Mediator William B. Simkin lauded the settlement as "an outstanding achievement of bargaining." When Bethlehem Steel Corp. followed with price increases, Washington's reaction was far different. Labeling Bethlehem's price hikes "unreasonable," Lyndon Johnson said that they "should not be permitted to stand." To that end, his Administration took action to limit U.S. Government purchase of steel for defense purposes to those companies that hold the line on prices.

The first to raise its prices was U.S. Steel Corp., which announced increases on the price of its tin-plate products. The President, summoning reporters to the White House, said he could countenance such "selective" increases. By contrast, he said, Bethlehem's across-the-board boosts of almost 5% would have "dire economic consequences." Said the President: "Inflation in steel is inflation for the nation."

Appealing to other steelmakers for restraint, Johnson expressed hope that they "will not join this parade." Bethlehem insisted that its action, if adopted by other producers, would raise the cost of an automobile by only $12, a refrigerator by 720. Not so sanguine, the Administration estimated that across-the-board increases of the magnitude announced by Bethlehem would cost the nation's consumers $600 million, minimize the economy-cooling effects of the new federal income tax sur charge and, by raising prices of U.S. exports, further strain the nation's balance of payments.

Echoing the President's opinion that sweeping price increases were unwarranted, White House aides claimed that the higher cost of the steel settlement could be partially made up in higher productivity. They also noted that labor accounts directly for only 40% of the price of steel. In any event, suggested one Government economist, steel companies could help combat inflation by absorbing at least part of the cost of higher wages instead of "asking the American people to pay 100%."

Please Go Home. Although he considered Bethlehem's response excessive, the President granted that the cost of the industry's new labor contract was "high." Ironically, one consideration facilitating settlement was the knowledge that a steel strike, with its inevitably depressing consequences for both the economy and the Viet Nam war effort, would have provoked White House intervention. Union representatives and Chief Industry Negotiator R. Conrad Cooper of U.S. Steel shrouded their meetings in unaccustomed secrecy, avoided the usual inflammatory statements. When Federal Mediator Simkin showed up to offer his assistance, he was politely told to go home. He did so, and settlement was reached 28 hours before the strike deadline.