The Economy: A Flexible Guide On Wages

Labor leaders had to swallow some of their more blustery words when they agreed to stay on the Pay Board even after losing the key vote on overall wage standards for Phase II—but it may prove a profitable meal. The board's guiding rule that most future increases should be held to an average of 5.5% looks simple enough, but what it will mean in practice will be determined largely by case-by-case decisions in which labor will be an articulate participant. One thing, however, is entirely clear: the guideline emphatically does not mean that pay raises next year, where they occur, will total exactly 5.5%.

To begin with, the guideline is an average for all of a company's employees. A boss can give 10% raises to some workers and only 3% to others, so long as the increases taken together do not come to more than 5.5%. Equally important, the standard applies to the total of wages and fringe benefits. A union demanding a costly increase in benefits, such as an extra week of vacation, might have to ask for wage raises lower than 5.5% in order to stay within the guideline. The 5.5% standard is supposed to cover not only contract boosts but merit raises for salaried employees, increases in bonuses and salesmen's commissions and the like; the Pay Board, however, has not yet issued specific rules on these subjects.

What Is "Unreasonable"? The board left itself free to improve wage and benefit increases totaling more than 5.5% if its members should feel that the circumstances warrant such a move or that equity demands it. It could well grant higher raises, for example, to unions that agree to abandon featherbedding work practices. Low-wage workers who organize themselves into a union might also get clearance for raises larger than 5.5% that would bring their pay into line with previously unionized employees.

The largest number of increases higher than 5.5% that will be paid out in the next year or so will probably be those written into contracts that were signed before the pay-price freeze. Some 5.8 million workers are scheduled to get contract raises averaging 6.1% during 1972. The board decided to let all such deferred increases go through unless they are "unreasonably inconsistent" with the general rules—but did not say how much would be unreasonable. Most deferred raises, including the boost of about 7% due to 700,000 auto workers later this year, are likely to be paid; only a few as high as the 10% increase scheduled for 350,000 Teamsters might be challenged. Challenges can be raised by the employers involved, or by any five members of the Pay Board itself.

The 1.6 million unionized workers who had raises come due during the freeze itself will start collecting them this week, but as a general rule they will not get back pay. The board, however, will permit retroactive increases for workers whose employers had raised prices before the freeze in anticipation of higher wage bills. Depending on how the board defines "prices," this exemption could possibly apply to teachers in school districts where taxes had been hiked in order to pay the raises that were then lost in the freeze. Retroactivity also will be allowed to correct undefined "severe inequities."