The Heavy Cost of Continued Inflation
Regardless of any mitigating qualifications that may be read into it, the unemployment of 6 per cent of the national labor force in December is a sobering commentary on the economic transition through which the United States is passing. Undoubtedly it does reflect in part the winding down of the war in Vietnam. In larger measure it is a product of the economic slowdown deliberately brought about to curb an alarming rise in inflation. The specific cause in any particular case will not lessen the distress of jobless families, however, and that distress is now sufficiently widespread to make corrective measures imperative.</br></br>The classical method of dealing with inflation has always had an ironic twist. The curtailment of economic activity to relieve the upward pressure on prices has exacted sacrifices from those least able to bear them. This time, moreover, the irony has multiplied. While 4.6 million unemployed are tightening their belts because of the scarcity of jobs, millions of other workers are taking advantage of the continued inflation to boost their incomes, with little or no regard for what the general consequences may be.</br></br>In addition to this special toll exacted from people who lose their jobs, the economic trends of the last year have been rough on a large majority of wage earners. Hourly pay has advanced over the last year by 5.8 per cent, but the cost of living in November was 5.6 per cent above the figure a year ago. In other words, almost the entire increase was eaten up by higher prices, with no allowance for the rise in worker productivity, which is now increasing again.</br></br>last year. Department of Labor statistics for the first nine months of 1970, the latest available, show ÛÏa mean wage and benefit package adjustment of 10 per cent a year.Û The average first-year wage and benefit change during that same period amounted to 14.7 per cent a year. Economists recognize these exorbitant wage increases in some key industries as a leading cause of continued inflation even in the face of lax economic activity.</br></br>One segment of labor, the unemployed, is taking a severe drubbing from the current economic situation while another, the large powerful unions, is riding the crest of excessive benefits for its own members. The sacrifice imposed on workers at the bottom of the scale for the sake of attaining a stable economy is proving to be ineffective in part because of the extraordinary power exerted by other labor groups at the top of the scale.