WAGE‐PRICE GUIDEPOSTS IN THE U. S. A.*
| DOI | http://doi.org/10.1111/j.1467-8543.1967.tb00515.x |
| Date | 01 November 1967 |
| Author | MYRON L. JOSEPH |
| Published date | 01 November 1967 |
WAGE-PRICE GUIDEPOSTS
IN
THE U.S.A.*
MYRON
L.
JOSEPH^
PRICE and wage decisions are not simply private affairs. Each wage bar-
gain and price decision is an element in the overall economic machinery.
To
some degree, the private decision-makers serve only as a transformation
unit through which the harsh realities of powerful economic forces are
translated into wages, working conditions, prices and profits. But as cor-
porations and unions have become more powerful, as they have developed
the strength and ability to exercise discretionary power over wage and
price decisions, the process has been modified and the economy has had to
adjust to negotiated wages and administered prices. When economic deci-
sions are made by thousands of anonymous small units we have no choice
but to accept the results or complain about the system. Indeed, we can
demonstrate on theoretical grounds that the competitive pressures of such
a system will result in the most efficient allocation of resources. But when
the decision units are large and the important wage, cost, and price deci-
sions can be identified and observed, any discontent need not be directed at
the system. It becomes possible to question whether
or
not the private
decision-makers are acting in the public interest.
The shutdown of a major industry dramatizes the public interest in
effective collective bargaining, but we should be equally aware ofthe public
stake in the outcomes. Private labour agreements have broad public impli-
cations and both aspects of collective bargaining must be evaluated, We
must weigh limits on productive efficiency against improvements in work-
ing conditions. We should consider that the relative cost
of
construction
will affect progress against slum housing, that wage costs affect employment
patterns, that wage increases in strongly organized industries may increase
income inequality, or that strong unions may reduce monopoly profits.
Similarly, individual price decisions by large firms in key industries
frequently have a broad public impact. When competitive forces are not
strong enough to guard the public interest, we must examine the effects of
price decisions on the allocation of resources, the distribution of income and
economic stability.
The guidepost approach was a response to the potential inflationary
impact of private wage and price decisions. The American public is highly
sensitive to the spectre of inflation and objects strenuously
to
higher prices
*This paper
was
presented at the first World Congress
of
the International Industrial Rela-
tions Association, Geneva,
1967
t
Professor
of
Economics, Graduate School
of
Industrial Administration, Carnegie-Mellon
University.
31
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