The director of the Council of Wage and Price Stability said yesterday that even if the nation cooperates with President Carter's soon-to-be-announced anti-inflation program, workers cannot expect any real wage gains for several years.
Barry Bosworth said that food and housing costs will continue to rise sharply in coming years and that inflation in these areas cannot be affected by lowering wages and prices and increasing productivity in the industrial sector. It was one of Bosworth's most presimistic forcasts to date.
Nevertheless, Bosworth said, in a luncheon address to the National Economists Club, failure to cooperate with the program will mean even worse inflation and lower real incomes for workers.
If the program, which President Carter is expected to announce next Tuesday, does not work, Bosworth warned, the only alternatives "are the cruel choices of a severe recession or mandatory wage and price controls."
He admitted that it will be harder to sell the public on cooperation with the program because "we cannot promise" real income gains, and noted that voluntary programs have not worked in the United States before.
But Bosworth said the "chances are greater now than ever before. In the 1970s (when President Johnson and Kennedy tried to maintain wage guideposts), people were not concerned about inflation. Today, people are worried about it."
In what may be this most pessimistic statement yet, Bosworth said that meat prices, which have already risen substantially since late last year, "are going to go through the roof."
Bosworth admitted that he, as well as many other government economists, early this year "dismissed" the sharp increases in beef and other food prices, thinking that as the year went on food price rises would moderate. "Now we've found that the agricultural problems are more fundamental than we thought and they will remain serious for years to come."
Early in the year, economists claimed beef prices were rising because cattle producers were holding back young for breeding purposes, rather than sending them to slaugher, in order to rebuild their herds.
"It is now clear, he said, that cattle producers were not rebuilding their herds last winter but that at some point they will. When they do, beef prices will rise sharply.
He also noted that there has been a substantial increase in interest rates "accompanied by an explosion of home prices," as consumers, anticipating a long seige of inflation are buying durable goods, including houses.
Already, he noted, all the industries that supply construction (such as cement) are operating at full capacity and their prices are rising rapidly. If the long-awaited increase in business investment occurs, prices in these industries will accelerate even more.
So, he conceded, even if price increases in the industrial sector are moderated, whatever gains in productivity occur will be absorbed by higher food and housing costs as well as by increases in Social Security taxes. "There is no room for improvement in workers' real incomes," he said.
Nevertheless, Bosworth said, there has been a substantial acceleration in inflation in the industrial sector, from about 6 percent in 1976 and 1977 to 7 percent this year, while wage increases have accelerated from 7 percent to 8 percent.
He said this occurred during a year of light collective bargaining. Next year will be "one of the heaviest. And it occurs against a backdrop of terrible performance of real incomes."
He said if the major bargaining agreements start out at 10 percent, as they did in 1975. it will be difficult to ask the average American to moderate his or her wage demands, and, because of low productivity, those wage hikes will immediately be translated into price increases.
He noted that despite the heavy wage and price increase of recent years, neither labor nor business are improving their relative situations. "The share of income going to labor and capital has been constant," he said.
He also said that while inflation is gaining momentum in the private sector, government is also adding to the problem by its regulatory policies and by granting special interest legislation.
He said the anti-inflation program will try to deal with both. He said regulatory bodies must find ways of accomplishing national goals more efficiently.
He noted that when many special interest groups run into trouble in the economic arena, they "go into the political arena to get the rules changed." He cited both the steel and sugar industries as examples of this.