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See generally, Draft Pay Specialists's Manual, Chapter 6, pp. 49ff, January 31, 1972; Pay Board Issue Paper, "Intra-Plant Inequities," February 10, 1972 and revision dated April 6, 1972.

1126 CFR Section 201.18, 37 FR 24960 (November 23, 1972).

113 6 CFR Section 201.17, 37 FR 24960 (November 23, 1972).

1185 Stat. 743, PL-210, Section 203 (g), December 22, 1971.

115

Pay Board Press Release No. 51, February 23, 1972; 6 CFR Part 201, Subpart C, 37 FR 7615 (April 18, 1972.

116 85 Stat. 743, PL-210, Section 203 (g), (December 22, 1971.

117 See Cost of Living Council Issue Paper, "Definition of Unreasonably Inconsistent for Fringe Benefits," (undated and reportedly never considered by the Council). Pay Board Press Release No. 51, February 27, 1972, 6 CFR Section 201.59, 37 FR 24960 (November 23, 1972).

118

Pay Board Issue Paper "Exempt Benefits and Unreasonably Inconsistent," February 3, 1972.

119

Pay Board Press Release No. 73, April 14, 1972, re: "Public Hearings on Pay Board, Recodified Regulations Slated." See also "Notice of Proposed Recodification of Regulations and Holding of Public Hearings" published in the Federal Register on April 15, 1972 (37 FR 7557).

120 The policy decision on merit increases was published as a proposed regulation of March 22, 1972 (37 FR 5833), and the policy decision on productivity incentive programs was issued as a proposed rule on April 19, 1972 (37 FR 7696); see also Pay Board Minutes, February 8, 1972, Exhibit III, paragraph

8.

1215 U.S.C. $553 (d), 80 Stat. 383, PL- 89-554.

See "Revision of Chapter," 37 FR 24960 (November 23, 1972).

123 See "Staff Summary, Public Comments Concerning Recodified Regulations," September 12, 1972, and Memorandum from R. T. McNamar, re: "Recodification Policy Changes," dated September 6, 1972.

124

125

6 CFR Sections 201.62 and 201.63, 37 FR 24960 (November 23, 1972). Pay Board Minutes, September 27, 1972.

128 Pay Board Minutes, September 27, 1972 and November 2, 1972, 6 CFR Sections 201.31 (c) and 201.35 (c), 37 FR 24960 November 23, 1972).

127 6 CFR Section 201.10 (c), 37 FR 24960 (November 23, 1972); Pay Board Minutes, November 2, 1972.

128

Pay Board Order No. 3, Revision 1, "Supplementary Substantive Policies," paragraph 2, effective April 25, 1972.

129 See for example A. Weber, In Pursuit of Price Stability, and Grayson, Confessions of a Price Controller, p. 93.

130 Joint statement of Stein, H. and Whitman, M., before the Joint Economic Committee of Congress, April 18, 1972.

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133 Irwin Ross, "The Pay Board Finally Pulls Itself Together," Fortune Magazine, April, 1972.

134 Conversation with A. Weber, July 22, 1974 and J. Dunlop, July 23, 1974. 135 See Statement of George H. Boldt, March 22, 1972. The fifth case was the State of Ohio Civil Service Employees Case.

136 Statement of George H. Boldt, March 22, 1972.

137 Oral Testimony before the Joint Economic Committee, April 20, 1972 by George Meany, President of the AFL-CIO.

138 Statement of George Meany before the Joint Economic Committee, April 20, 1972.

139 The lack of administrative direction of the Pay Board in general is contrasted with the relative effectiveness of two offices, the offices of the Executive Secretary and the General Counsel. Permanent directors for these offices were the earliest appointees.

140 See for example memorandum from Robert Tiernan, Executive Director, to Millard Cass, Administrative Director, dated January 6, 1972, re: Recruitment of Staff.

141 Memorandum for the Record, November 23, 1971, by Douglas M. Johnston, re: Pay Board Meeting, November 22, 1971; Memorandum for the Record, December 1, 1971, by Douglas M Johnston, re: "Pay Board Meeting, November 30, 1971.

142 Pay Board Portrait, pp. 7-8. Approximately 50 of the 230 were temporary employees in primarily clerical positions.

PHASE III-IV WAGE
STABILIZATION POLICIES

Introduction

The Phase III wage and price control program went into effect on January 11, 1973. It maintained most of the Phase II wage and price standards and regulations but made their implementation selfadministered except for the food, health, and construction sectors, in which mandatory controls remained in effect. The administration of the Program was consolidated into a single staff under the Cost of Living Council (CLC), and a new Labor-Management Advisory Committee was established to advise the Chairman of the Council on methods for improving the collective bargaining process and for assuring wage settlements consistent with gains in productivity and the goal of stemming the rate of inflation.

There were a number of reasons why the Administration changed the Program. One was that Administration officials believed that as economic conditions changed it was also necessary to change the controls program. The year 1972 had been a time of economic expansion. As the economy moved toward capacity in many sectors, it was becoming evident that there was a need for more flexibility than was provided by the Phase II price regulations.

Another reason for the change was the diminishing support of labor for the Phase II program. The Phase II wage stabilization agency had started as a tripartite organization and informal cooperation of labor had continued even after labor withdrew from the Pay Board in March, 1972. However, labor's cooperation was weakening toward the end of the year as its dissatisfaction grew. Some Administration officials foresaw a serious clash developing between labor and the Internal Revenue Service over what labor believed were unduly restrictive interpretations of wage regulations combined with a time consuming review process. The Administration wanted labor cooperation in the stabilization program and felt it necessary to establish a new program that would get labor re-involved.

A third reason for the change was a feeling that economic tensions building up as a result of controls might have led to a blow-up of the Program had Phase II continued. Such a blow-up probably would have ended the controls program and might have discredited

controls as a stabilization mechanism. Administration officials did not consider that to be responsible policy.

Additional reasons for the change include the perception by top level policy planners that friction between the Pay Board and the Price Commission was growing. Also, the planners expected difficulty in attracting new members of sufficient stature to replace several Pay Board members whose resignations were imminent.

These reasons were considered strong enough to warrant a change in the controls program but not to end it. Growing inflationary pressures in the food industry and concern over medical care costs and construction costs dictated against the total elimination of controls.

This paper will briefly outline the objectives of Phase III-IV wage controls, the philosophy behind the Phase III-IV wage control program, and the policies and organizational structure which evolved. Finally, some rudimentary comparisons of the Phase III-IV wage program with that of Phase II will be made. For this paper the phrase "Phase III-IV" refers to the entire post-Phase II period as one phase, because there was a continuous wage program in operation during the two periods. The price control program, in contrast, contained a second freeze at the end of Phase III, and a distinct new program was developed for Phase IV. (A paper on the Phase II wage stabilization program may be found elsewhere in this collection.)

Objectives

In contrast to the Phase II program, the objectives of the Phase III-IV wage stabilization program were both short-term and longterm. The immediate goal was, of course, to moderate the rate of increase of compensation. This was seen as requiring, among other things, the cooperation of organized labor and its active re-involvement in the Economic Stabilization Program. Beyond the immediate goal of moderating wage and benefit increases was that of a smooth transition out of controls and back to labor markets in which wage rates are determined by the collective bargaining process.

Since it was felt that the collective bargaining process had been weakened during Phase II, another objective of Phase III-IV was to strengthen collective bargaining. Accomplishment of that goal was seen to involve a number of longer-term objectives and activities aimed at making improvements in the structure of collective bargaining. These included the development of new sources of wage and benefit data, encouraging the joint study and introduction of new technology and changes in work rules, the development of voluntary dispute settling machinery, and other activities which over the long

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