Wage-Price Controls

October 27, 1978

Report Outline
Political Effects of Inflation
Economic Controls in the Past
Other Anti-Inflation Proposals
Special Focus

Political Effects of Inflation

Carter's New Plan for Voluntary Controls

The rising cost of living is the problem that seems to concern Americans most — whether they are consumers, manufacturers or federal officials who decide how the economy is run. Public opinion polls this year have indicated repeatedly that a majority of Americans believe inflation to be the No. 1 national problem. President Carter announced in April that curbing inflation was his top domestic priority, and in a nationally televised address Oct. 24 revealed his long-awaited program to fight inflation based on voluntary wage-price guidelines, or “standards.”

Carter set a “basic target for economy-wide price increases” at 5.75 percent annually. The president asked businesses to hold price increases to at least one-half of one percentage point below what they averaged in 1976 and 1977. If those increases were extraordinarily high, the price increase would be limited to 9.5 percent. Carter urged that wage and benefit increases — except for workers earning below $4 an hour and those under wage contracts already signed — be limited to a maximum of 7 percent a year. Since the president does not have authority to impose mandatory wage-price controls — that authority must be granted by Congress — the new plan's chance of success rests largely on his ability to rally public opinion.

However, Carter as head of the executive branch, does possess some formidable weapons in addition to verbal persuasion, or “jawboning.” The new plan, unofficially called “Phase II” to distinguish it from Carter's earlier efforts to control inflation, envisions the use of “government responses” to ensure compliance by business and labor. For instance, the administration could withhold specific government purchases or construction contracts as a means of punishing recalcitrant companies, or it might threaten to raise import levels to gain leverage in an uncooperative industry. Carter said that the administration will also attempt to speed the process of deregulating various industries to increase competition and lower prices, following a pattern set by the airlines at the urging of Civil Aeronautics Board Chairman Alfred E. Kahn.

ISSUE TRACKER for Related Reports
Cost of Living and Wages
Apr. 17, 2020  Inequality in America
Sep. 08, 2017  Universal Basic Income
Apr. 08, 2016  Future of the Middle Class
Apr. 18, 2014  Wealth and Inequality
Jan. 24, 2014  Minimum Wage
Jun. 19, 2009  Rethinking Retirement
Mar. 06, 2009  Middle-Class Squeeze
Mar. 14, 2008  Gender Pay Gap
Dec. 16, 2005  Minimum Wage
Sep. 27, 2002  Living-Wage Movement
Apr. 17, 1998  Income Inequality
Oct. 27, 1978  Wage-Price Controls
Jun. 16, 1978  Military Pay and Benefits
Mar. 23, 1966  Rising Cost of Living
Oct. 25, 1961  Price-Wage Restraints in National Emergencies
Jun. 21, 1961  Wage Policy in Recovery
Jun. 11, 1958  Prices and Wages in the Recession
Sep. 18, 1957  Control of Living Costs
Nov. 02, 1955  Wages, Prices, Profits
Jan. 26, 1954  Minimum Wage Raise
Jan. 02, 1954  Cost of Living
Jan. 21, 1953  Guaranteed Annual Wage
Dec. 17, 1952  Future of Price and Wage Controls
Nov. 19, 1951  Fringe Benefits and Wage Stabilization
Dec. 06, 1950  Wage Control
Jun. 13, 1949  Wages in Deflation
Jun. 04, 1947  Guarantees of Wages and Employment
Oct. 29, 1946  Decontrol of Wages
Dec. 01, 1945  Minimum Wages
Sep. 29, 1945  Wage Policy
Oct. 27, 1944  Wage Security
May 17, 1943  Incentive Wage Payments
Aug. 25, 1941  Prices, Profits, and Wage Control
Apr. 28, 1941  Wartime Changes in the Cost of Living
Sep. 21, 1940  Two Years of the Wage-Hour Law
Nov. 01, 1938  Industry and Labor Under the Wage-Hour Act
Jan. 20, 1938  Wage Rates and Workers' Incomes
Apr. 11, 1935  The Cost of Living in the United States
Sep. 01, 1930  Wages and the Cost of Living
May 24, 1930  The Anthracite Wage Agreement
Feb. 20, 1925  Measure of Recovery in Profits and Wages Since 1920–21 Depression