In an exceedingly gloomy assessment of prospects for controlling inflation, Barry Bosworth, director of the president's Council on Wage and Price Stability, warned last night that escalating wages to catch up with double-digit food and energy price inflation "could lead to another recession."
He compared the present situation to 1973-74, when he said an effort to push wages up to match the industrial price increase triggered by the oil cartel led to an economic down-turn and high unemployment.
Bosworth is the first administration official to talk in recent weeks of the possibility of a recession. The official administration line is that the country faces a slowdown in growth, but not a recession.
"As we look ahead for the next year or two, all we see is that the real income of the factory worker is likely to decline, whether he gets 7, 14 or 21 percent wage increase. If he seeks higher income, prices will rise more," Bosworth told the annual meeting of the Society of American Business and Ecnomic Writers.
Bosworth said the root of the problem is that the county is not getting enough productivity from its labor force to offset food and energy price increases. He also said many corporations were fattening their profits by excessive price increases.
"We seem to have run out of ideas, and maybe we will have to consider radical or drastic ways (of controlling inflation)," Bosworth told the writers' group. Pressed to elaborate, Bosworth posed a rhetorical question: "Can we depend on the present system of collective bargaining to resolve our disputes?"
He answered his own question by saying "there must be other ways than threatening to shut down our basic industry."
Bosworth said that the present inflation is not traceable to excess demand in the economy, nor would it be susceptible to control through mandatory wage and price standards.