The Price Advisory Committee yesterday recommended relaxation of the Carter administration's voluntary standard for price increases to take account of the recent easing of the wage standard.
The committee proposed allowing most businesses to increase their prices this year by three-quarters of a percentage point more than would be permitted by the present standard, which allows an average increase of about 6.75 percent.
Meanwhile, the Council on Wage and Price Stability, to which the committee made its recommendation, also announced that Ford Motor Co. was back in compliance with the wage standard.
COWPS had found the new contract signed last fall between Ford and the United Automobile Workers Union violated the wage standard.
Without admitting the contract was out of compliance, Ford agreed to hold this year's pay increases for management personnel well below this year's standard to offset some of the wage increases for workers covered by the contract.
Ford promised to limit average pay increases for management to less than 7.5 percent, which COWPS said would be more than enough to offset the amount by which the first-year increases in the UAW contract exceed the pay standard.
General Motors, which negotiated a similar contract with the UAW, also was found to be out of compliance earlier. GM got back into compliance by promising to raise prices less this year than it otherwise would be allowed to if it were to pass the full cost of the contract on to consumers. R. Robert Russell, director of COWPS told the price committee the administration would study the new proposal and make a decision about it as rapidly as possible.
The committee suggested the less restrictive price standard be applied only to the last six months of the COWPS program year, which covers the April-September period.
Specifically, it proposed that "the price guideline be adjusted upward from 6.75 percent (the present rate for the second program year) to 7.5 percent to take account of the changes in the wage guideline, and to take reasonable account of the probable rate of productivity change.
"Companies complying with the price guideline would thus be required to limit their rate of price increase to 1.25 percentage points above their rate of price increase in the base period" which is 1976-77, the committee said.
Similarly, the committee recommended using the higher percentage increase in the same way for companies using the profit limitation standard instead of the direct limit on price increases. Companies generally have switched to the profit margin limit when their costs have risen far more rapidly than they did in 1976-77.
The committee also proposed that COWPS consider adopting an alternative to the present gross margin standard used by wholesalers and retailers, principally to recognize the big jump in interest costs for such companies.
The present standard for wholesalers and retailers allows companies to project to the present year any upward trend in their gross margins during those base years. As an alternative, the committee said these companies might be allowed "a dollar-for-dollar pass-through of some portion of interest costs, in excess of normal interest costs. . . ."