larger than for the years 1969, 1970, 1971, and 1973. This is not the response one would expect from firms in an industry with excess capacity while prices are rising rapidly. As is also evident from the same table, little has been done to increase rapidly the number of employees in the industry. As a result, employment in 1972 was less than in 1961. It is true that there was an increase of 15. 6 thousand men between 1969 and 1970 12.5 percent but this rate of increase has not been sustained. Between 1970 and 1971, the Bituminous coal workforce increased by 3.9 percent, whereas between 1971 and 1972 the increase was only 2.5 percent. Thus, although the rate of price increase was greater in the 1972-1973 period than the 1969-1970 period, the rate of employment increase diminished. This evidence does not support the contention that the coal industry was increasing supply in response to price increases. If the demand for coal is price inelastic, that is to say, if the quantity of coal demanded by the market is not sensitive to price increases, then coal producers can pass cost increases on to coal consumers directly. During the so-called energy crisis, the substitutes for coal (oil and natural gas) have been in very short supply, so that the argument that the demand for coal is price inelastic appears reasonable. The important issue here, thus, is the extent to which increases in coal prices can be explained by increases in the cost of production.

Source: Bituminous Coal Data, National Coal Association

a Eleven month average; July is excluded because of vacation.

An important element of the total cost of producing coal is wages paid to coal miners. Average hourly wages paid are reported by year in Table II. 8. As may be seen, average hourly wages increased from $3.75 to $5.73, or by 52.8 percent, between 1967 and 1973. It is perhaps more interesting to consider the year-to-year percentage changes which are reported in Table II. 9.

Between 1965 and 1966, the average hourly wages increased by 4.9 percent, even though the price index of All Bituminous coal increased by only 3.6 percentage points (see Table II. 1). Clearly, the rate of price increase was less than the rate of wage increase. The rate of wage increases then decreased to 2.5 percent between 1966 and 1967 and to 2.9 percent between 1967 and 1968. Between 1968 and 1969, the average hourly

wage increased by 9.8 percent and was accompanied by an 8.9 percentage point increase in the All Bituminous coal price index. In sharp contrast, an 8.0 percent rise in wages between 1970 and 1971 was associated with a 33.0 percentage change in prices. Even a casual review of these data indicates that the relationship between wage and price increases is substantially different in the post-1969 years. Although one can assert that increasing wage rates are a factor in increasing the price of coal, it is clearly not possible to justify the substantial increases in recent years on the basis of wage increases alone. For it is obvious that in recent years price increases have outstripped wage rate changes many times

over.

A second factor which has led to increased costs in mining of Bituminous coal is the Federal Mine Health and Safety Act of 1969. After the passage of the Act, labor productivity in underground mines diminished. This is seen by consulting Table II. 10, which provides recent information on the output (in tons) per man/day in underground mines, strip mines, and auger mines. As may be seen, output per man/day for underground mines increased throughout the period 1967-1969, though decreasing thereafter. Output reached a maximum of 15.61 tons per man/day in 1970, decreasing to about 12 tons per man/day two years later. Regarding 1971, it should be recalled that this was a strike year for the coal industry and also a year of economic slow-down; both factors may have

exerted a downward push on productivity. This represents a decline in

labor productivity of approximately twenty percent. Productivity in strip mines, however, has not been affected at all by the Act. Indeed, productivity in 1972 remained at an all time high of about 36 tons per man/day. Output per man/day at auger mines has fluctuated over this period. Bituminous coal produced by auger mines, however, is an insignificant proportion of total production - between 2 and 3 percent of total Bituminous output (see Table II. 11). Thus, one can conclude that the health and safety regulations have only increased the cost of the extraction of coal from underground mines.

Source: Bituminous Coal Data 1972, 1973. National Coal Association.