President Carter's Pay Advisory Committee agreed in principle yesterday to recommend that the administration scrap its 7 percent wage guideline in favor of new standards that would permit pay raises of 7 1/2 to 9 1/2 percent a year.
The proposal, which must be refined before being submitted to the White House for consideration, was regarded as relatively stringent, considering that inflation is running at 13 percent a year.
However, officials cautioned that would depend on what criteria the pay board works out to decide which kinds of settlements must come in at the low end of the range and which may end up higher.
The group earlier had been expected to recommend an upper limit of 10 percent, but there had been word that might meet resistance from the administration. Yesterday's plan was endorsed by both labor and business representatives.
Meanwhile, separately, a top administration economic official estimated yesterday that the economy may have grown at a moderate 2 to 3 percent annual rate last quarter instead of sliding into recession, as earlier had been thought.
Yesterday's agreement marked a major accomplishment for the tripartite panel. The committee will meet Jan. 22 to consider details of how the plan would work. The pay standard is the last of the basic decisions the panel must make.
Adherence to the wage guidelines is strictly voluntary for American workers. Although the administration has the power to deny federal contracts to errant unions, it never had done so. Several locals have violated the standards.
The pay committee also agreed tentatively yesterday to tighten the way it accounts for cost-of-living allowances. It would compute them in the future as if inflation were running at 7 1/2 percent rather than 6 percent as now.That would make them count for more in computing the total cost of a wage settlement.
The panel also agreed to study the feasibility of developing separate guidelines to apply to pension programs, which often are too complex to calculate as part of a wage package. Firms and unions would be able to choose which method to use.
The agreement was worked out among the various sides by John T. Dunlop, former Ford administration labor secretary, who serves as chairman of the panel, in a series of private bargaining sessions.
Dunlop noted yesterday that, symbolically at least, the proposal would recognize the "midpoint" of the new pay range as 8 1/2 percent, a simpler way of expressing the new standard than using the double set of figures.
However, Lane Kirkland, president of the AFL-CIO, head of the panel's labor delegation, said the 8 1/2 percent figure would serve only as a way of evaluating the program, not as a guideline.
The panel also agreed to draw up criteria for deciding when a pay settlement may exceed the 9 1/2 percent upper limit. The committee would make exceptions for broad categories of pay contracts.
The current wage guideline is 7 percent, with an extra 1 percent boost allowed for contracts that do not call for automatic cost-of-living increases. However, escape clauses allow some pay settlement as high as 12 percent.
Current pay guidelines also do not count the cost of higher pension payments to retired workers or of extra pension benefits needed to comply with new government regulations.
The committee is expected to complete work on the pay standard at its Jan. 22 meeting, and formally recommend the plan to the Council on Wage and Price Stability, which over-sees the guidelines program.
Although the council technically does not have to agree to the panel's recommendations, it would be hard pressed to reject them categorically. The guidelines program could well fold if the pay committee broke up in disarray.
Dunlop told reporters yesterday that the various components of the new proposal -- not only the general pay standard, but other changes the panel has suggested -- "are all highly interdependent" and cannot be separated. p
The tripartite committee, comprising 18 representatives from labor, business and the public, was set up in October at the request of organized labor as part of a "national accord" between labor and the administration.
Carter is looking to the symbolic agreement to keep labor in his camp during the 1980 campaign. So far, top union leaders generally have not strayed, although there is no telling how long this will last.
Robert R. Russell, director of the Council on Wage and Price Stability, declined on the new proposal yesterday until the panel agrees on the criteria to decide where settlements fall in the 7 1/2-to-9 1/2 percent range.