Prices may have exploded in 1979 but wages have not.
The highly publicized new contracts for the Teamsters, the automobile workers and the rubber workers, which far exceeded the Carter administration's basic 7 percent voluntary pay standard, give the strong impression that wages are soaring.
In fact, by almost every measure wages generally are rising no faster this year than last year -- and perhaps even less -- while consumer prices are shooting up at a 13 percent annual rate compared to the 8.5 percent increase during 1978.
The pay standard undoubtedly contributed to this surprising situation. The lack of a significant acceleration in the size of wage increases has surprised economists both in and out of government. Even presidential inflation adviser Alfred Kahn says "I am persuaded the wage-price standards had a greater effect (on wages) that I would have expected."
The Labor Department's index of hourly earnings rose only 7.9 percent from September 1978 to last month. That's actually down from the 8.5 percent increase between September 1977 and September 1978.
(The hourly earnings index, which covers production and nonsupervisory workers and nonagricultural payrolls, is the measure of wage changes preferred by many economists. It is not affected by changes in the length of the average work week, and it is adjusted for changes in overtime hours and for shifts in the mix of hours worked in high-wage and low-wage industries.)
Of course, employers provide fringe benefits to most employes in addition to straight wages. When the cost of fringes is added to wages, the numbers do not look much different.
The Labor Department's figures for compensation per hour worked, which are available only through the second quarter of this year, show no acceleration and perhaps even the same sort of decline picked up by the hourly earnings index.
Compensation for persons working in the non-farm business sector of the economy rose 9.2 percent from the second quarter of 1978 to the second quarter of this year. That was exactly the same as the increase between the same quarters of 1977 and 1978.
Moreover, the rate of increase in the first two quarters of this year was less than that of the first two quarters of 1978, suggesting that the full-year comparisons may be masking a recent slowing in increases in compensation.
These numbers make it clear that those standard-bursting union contracts so far have not started dragging up wages throughout the economy. And they are also evidence that this year's burst of inflation is not the result of those large settlements.
Nevertheless, said Tilford Gaines, chief economist of Manufacturers Hanover Trust Co., "Among many businessmen and in parts of the general public there is a belief that excessively large negotiated labor settlements are at the root of our inflation problem.The facts do not support that position.
"Take-home pay usually lags behind the rate of price inflation, which could not be the case if pay increases were the cause of the problem," Gaines explained.
"At the same time, industry is justified in pointing to rising labor costs as a principal element in the need for it to get higher prices for its products," he added. After all, "The single biggest cost item for most businesses is labor cost . . . "
Food and energy price increases may have been responsible for pushing this year's inflation rate into the double-digit range. But so long as total compensation is rising 9 percent or more a year, inflation will not drop much below that 9 percent level.
Kahn and other Carter administration officials are painfully conscious of that basic relationship between wage increases and prices, particularly when the outlook is dismal for offsetting much of the higher wages through productivity gains.
However, they also are concerned about fairness. A 7 percent wage standard hardly seems fair when prices are shooting up 13 percent a year. Nor is it particularly fair for stronger unions -- which even with the standards find loopholes to exploit -- to get increases so much larger than workers generally.
For those reasons, they set out to modify the 7 percent standard, a job that has been turned over to the new Pay Committee.
Many economists expect wages to go up faster in 1980 than they have so far in 1979 no matter how the committee may modify the pay standard. On the other hand, the behavior of wages this year has surprised those same economists.
Next year's major negotiations will be between the steelworkers and the steel, copper and aluminum industries, and there is little likelihood that the settlements will be much less than the pattern that was set last month by the United Automobile Workers' contract with General Motors Corp., 33 percent or more over three years.
But as the experience of the past year is demonstrating, there may be no direct link between such settlements and the increase in wages elsewhere in the economy. A recent study by Marvin Kosters, a labor market economist at the American Enterprise Institute, explicitly makes this point.
Looking at data covering the last 10 years, Kosters concluded that one union's new contract often affects the terms under which another union will be willing to settle. Patterns are set as unions seek to hew to established wage relationships with other unions.
"However," Kosters added, "the view that wage settlements in highly organized industries exert an important pattern-setting influence on wages in other sectors is not supported by the evidence."
In other words, the big increases won by the UAW will mean that prices for new cars will be higher, and that the steelworkers, as has been the case in the past, will seek to match those increases.
But it does not mean that wages of workers in weaker unions and unorganized industries will be going up by a like amount.