To Keep Wages Restrained, Executives Ought to Start With Their Own Paychecks

You can hardly pick up a newspaper these days without reading that economists, especially those tied to the business and financial communities, are alarmed by the specter of accelerating U.S. labor costs.

Unless this trend can be headed off, they suggest, inflation will return to troublesome levels and recent gains in the global competitiveness of U.S. industry will be put at risk.

There is an element of truth in the prognosis. But the idea that U.S. wage and salary earners are obliged to keep on forgoing decent pay increases--as they have for several years--is unrealistic. It is also unfair.

Consumer prices are now increasing at an annual rate of close to 5%, well above the levels of recent years. If you exclude the volatile food sector, the price surge largely disappears.

Most of the experts nonetheless expect the upward trend in the inflation rate to continue.

With unemployment near a 14-year low and factories operating near capacity, the experts feel that employers will pay more to get workers, than pass along the costs in higher prices. That in turn would create pressure for higher wages, and so on.

The Federal Reserve, by pushing up interest rates, apparently hopes to cool the economy, thereby dampening the demand for workers and nipping the wage-price spiral in the bud.

A strategy of continued restraint on take-home-pay has a theoretical appeal. But it won’t go down well with the average family, whose sacrifices up to now have drawn precious little appreciation from--or emulation by--the movers and shakers of our society.

Most families are a little better off now than 10 or 20 years ago--but only because so many wives have gone to work to make ends meet.

The average hourly pay of blue-collar and clerical workers is lower in purchasing power than it was 15 years ago. Pay increases, such as they were, have failed to keep up with even the moderate inflation of recent years.

Many workers have not only been forced to forgo pay increases, but have actually had to accept pay cuts or “give-backs.”

Last year U.S. manufacturers managed to hold hourly compensation gains to a minuscule 1.3%--the lowest for any industrial nation. Labor costs per unit of production actually went down.

(In dollar terms, West German manufacturing workers are now paid more than their American counterparts, and Japanese workers get only a shade less.)

There are many reasons for the timidity of the U.S. work force in recent years. One, affecting even the best intentioned corporations, is the pressure of competition in an increasingly global economy.

Another is the declining power of unions, and the anti-labor tilt of the Reagan Administration. Still another is the large pool of temporary and part-time workers whose availability for permanent employment dampens the militancy of unhappy workers. Then there is a proven willingness of employers to move operations overseas if their U.S. workers don’t “cooperate.”

Finally, although there are many honorable exceptions, more and more big companies are run these days by new-breed executives who couldn’t care less about fair play and equity.

Wages now are creeping up a little faster. But many economists believe that the psychological scars are burned so deeply into the U.S. work force that, even with a growing labor shortage, employees will remain docile for a long time to come. Others predict, perhaps more realistically, that supply and demand will soon produce “catch-up” pay raises to make up for the years of stagnant or falling incomes.

In the long run the health of the U.S. economy and the ability of American industry to hold its own with foreign producers is consistent with pay and benefits that at least keep up with inflation.

The key ingredient is productivity, which depends not just on avoidance of excessive pay and benefits, but on the willingness of business to invest in new products, markets and production technologies.

Still, average citizens, not wishing to experience double-digit inflation or see America lose further ground to Japan, might be willing to sacrifice a while longer if they thought the burden would be shared.

Unfortunately, no one who has watched the explosive growth of executive compensation--during the very years that worker pay has been so mercilessly squeezed--can have much faith that that will happen.

The average president of a big corporation earns $800,000 or more. Last year Business Week listed 87 executives whose salary and bonuses exceeded $1 million. Five years earlier, only 14 executives made the list.

The pay of chief executive officers has risen much faster in the past 10 years than the pay of blue-collar or white-collar workers, faster than inflation, even faster than profits.

According to the Wall Street Journal, the U.S. corporate boss earns 40% more than one in Japan and twice as much as one in Britain--at a time when American companies have been out-managed by foreign competitors.

As long as the people in charge are setting that kind of example, persuading the average fellow to tighten his belt a few more notches will surely be a tough sell.