THE AFL-CIO does not care for President Carter's wage-insurance plan. It is complex in design and uncertain in effect, the AFL-CIO correctly observes. Since wage insurance is a device invented solely to reassure labor, and since most unions don't like it, why bother?
Wage insurance would serve a political purpose in the best and largest sense of the term. It is not essential to the president's strategy for reducing the inflation rate. But it could make that strategy more effective. Any government's basic weapons against inflation -- a tight budget and high interest rates -- are harsh and undiscriminating in their impact. In a society as highly organize as this one, most people are pretty well equipped to fight for their accustomed raises in income. The result is that the gains in reducing the inflation rate are likely to be small, under conventional policy, in relation to social distress in terms of lost jobs, shrunken profits, business failures and declining production.
Mr. Carter is not engaged in a theoretical exercise in pure economics. He is trying to hold the country together, more or less, as he does it. He has committed himself to using the wringer -- the squeeze on the budget and the money supply -- but to use it with moderation. The next question is whether political intervention cannot shift the effects of the wringer away from employment and more directly onto prices. That is what Mr. Carter's wage and price guidelines are calculated to do. If the strongest companies and unions can be persuaded not to seize quite as much in higher profits and wages as they are capable of getting, deflations's effects on the weak and least protected will be less severe than otherwise. The guidelines are merely a voluntary agreement that everyone shares some of the burden of the economic slowdown ahead so that the full weight of it does least able to bear it.
But it's very hard for a union to agree to moderation in a wage settlement. That kind of settlement might turn out to be lower than the coming year's inflation rate, leaving union members' purchasing power actually lower next year than it is now. The wage-insurance scheme, for all of its shortcomings, attempts to give unions some assurance that those who cooperate now will not suffer for it later.
If Congress does not push wage insurance along fast enough to influence this coming spring's labor negotiations, the ultimate outcome of the bill will be irrelevant. Even the guidelines offer a great deal less than comprehensive coverage. The Congressional Budget Office points out that they effectively cover only about 40 percent of the average consumer's budget and perhaps fewer than half of all workers paid by the hour.
But if you don't like the guidelines, and the wage insurance to support them, what would you prefer? The AFL-CIO has a simple answer to that one. It wants mandatory controls on all wages and prices. But controls didn't work well the last time, in 1971-73, and probably left prices higher than they would have been with no controls at all. The president has refused to consider controls, and he's right. The only real choice is whether to go into the coming slowdown with the limited protection of guidelines and wage insurance, or with no protection at all.
The most sensible answer so far is the one advanced by the United Auto Workers. The UAW acknowledges the defects in the plan. It proposes specific remedies. It supports the wage-insurance concept. And it urges Congress to make up its mind on the bill, one way or the other, promptly and clearly.