The Future of American Wage Controls

by Daniel Mitchell

Fall 1974

Volume 17
Issue 1

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The U.S. economy is still in the midst of an experiment with wage and price controls, income policy. To date, the experience with the overall experiment suggests that there is still much to learn about the use of controls. The price inflation problem, particularly with food during Phase III, obscured observation of the wage side of the program. Wages did not "take off" during Phase III, despite the foreboding of many industrial relations experts. Naturally, there was little official bragging about wage restraint in the face of rapid price inflation. But the episode does suggest that our ability to control wages is more advanced than our ability to control prices. Whatever the final outcome of the current experiment with controls, there will be other episodes of incomes policy in the future. The same forces that led to the adoption of controls in 1971 will recur in the United States, just as they have in other countries. Both political parties are willing to dabble in controls. The program that began in 1971 was authorized by what was essentially a Democratic bill, the Economic Stabilization Act of 1970. This bill was intended to be as much an embarrassment to a Republican administration as it was an invitation to an incomes policy.

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