Small businesses basically have complied with President Carter's volunatry price guidelines contrary to administration criticism earlier this year, according to an unpublished report by the Small Business Administration.
The report, completed last May and obtained by The Washington Post, states that, "From the data presented in this report, the small business community appears to be generally in compliance with the voluntary program. Based on reported price increases, most firms are in compliance prima facie."
The report was prepared by a Purdue University economics professor for the SBA in response to criticism last winter by Alfred Kahn, chairman of the Council on Wage and Price stability.
Last March, Kahn contended that a surge at that time in industrial prices showed that small and medium sized businesses weren't holding within the price guidelines.
A spokesman for Kahn said Friday Kahn's statement was based on "misleading data" and that "we no longer hold that view."
"We are monitoring companies and we have not uncovered widespread noncompliance," the spokesman said.
Kahn, however, has not publicly corrected his earlier statement against small business, the spokesman said. "I don't know if he's given any thought to correcting the record," the spokesman said. In addition, the council is still monitoring small business compliance, and recently cited one $15 million company for violating the voluntary guidelines, the spokesman said.
The report, which is critical of the president's guidelines, wasn't released in the past two months because SBA officials "haven't gotten around to it." an SBA spokesman said. "It's in the review process."
Although the report still is being reviewed, the spokesman said that the SBA "stands behind what it says."
What it says is that the guidelines are difficult to apply to businesses and that the small business community "for the most part" doesn't raise prices arbitrarily. They have virtually no control over the price of labor they hire or over the cost of the producer goods they acquire to use in their business. There is a large turnover in the community."
"Only price increases supported by factors common to all firms, such as an increase in the minimum wage or raw materials prices, can be maintained in a competitive market," the report continues.
Average price increases made by small businesses "closely follow changes in producer prices, suggesting some type of markup process which satisfies the price standard if earnings do not improve."
The report concludes that "there is little evidence" that earnings of small businesses have improved as a result of price increases, "especially since the earnings position of small businesses in 1978 may have deteriorated in comparison to the previous two years."
Firms that had poorer earnings most often blamed higher labor and material costs "and were more likely to raise prices substantially to recover losses," the report said.
Price increases were highest during the first quarter of last year when the minimum wage rose 15 percent and producer prices increased at a 13 percent annual rate, the report said.
Also following Kahn's remarks. Sen. Gaylord Nelson (D-Wis.) chairman of the Senate Select Committee on Small Business, asked the Federal Trade Commission to study whether small businesses were complying with the guidelines. Again exonerating small business, the FTC report said small business wasn't increasing its share of profits in the last year, according to Alan Chvotkin, the Small Business Committee counsel.
Kahn's statements "didn't seem right to us as far as what we'd been hearing," Chvotkin said. Nelson wrote Kahn a letter dated April 3 informing him of the FTC'S findings, but Kahn never responded, Chvotkin said.