THE COAL miners' wage settlement provides another illustration of the way that past inflation get transmitted into the future. The miners' contract would raise pay and fringe benefits about 36 percent over the next three years. Why 36 percent? It's roughly the same as the 39 percent that they got three years ago, after that long strike. It's also roughly the same as the inflation rate over the past several years. Wage demands generally reflect past experience and past inflation. That's why wages tend to lag the inflation rate when it's accelerating -- but that's also why inflation is excruciatingly hard to slow down.
There are two conventional ways to try to break this cycle. One is to use the government's power to hold wages down, through controls or guidelines. Mr. Reagan has renounced that path as ineffectual, and you'd have to agree that there's a great and depressing weight of recent experience to support him. The other possibility is to use the government's power to impose fiscal and monetary restraint. That will reduce inflation, but it will also reduce the country's real economic growth -- and there's a great and depressing weight of recent experience to suggest that the cost will not be small.
The miner's contract continues a pattern, visible since the mid-1970s, of wage increases in the basic industries -- especially steel, automobiles and coal -- that are sharply higher than the average. Two of these industries are now in serious trouble, struggling to fend off competition from abroad. Coal is in a better position, at least for the present, because its principal competitor is oil and the price of oil has been rising even faster. But high coal costs will feed steadily into higher prices for steel and autos. The competitive performance of American heavy industry is related to wages. That won't be cured by tax breaks.
The crucial element in Mr. Reagan's economic strategy is an expectation that inflation will fall. The president is depending on his tax bill and his budget to change people's expectations about the future. But the miners' wages are going to keep rising under this contract, regardless of tax bill or budget. What does that suggest for expectations?
The miners are neither more to blame, nor less, than other Americans pressing for higher wages. The miners' case is better than many, for their work is harsh and dangerous. Their wages are not nearly as high as the steelworkers' or the auto workers'. But if everybody's wages keep trotting upward, nobody is going to expect lower inflation. Then the only part of the president's economic strategy that remains effective is tight money and high interest rates. It will be effective because it will discourage people from buying cars, which will cut the demand for steel and coal, which in turn -- slowly, and painfully -- will restrain wages by demonstrating to people that their jobs are in jeopardy. It's not a very happy prospect. But that's apparently the anti-inflation program on which the country is embarking.