Johnson and Poor Old New York

President Johnson last week called the settlement terms of the New York transit strike "disturbing" and "inflationary." He cited the national wage-price guideline of 3.2% and noted, accurately, that the New York contract exceeds the figure by a sizeable amount.

The President's statement is not at all well taken, for three reasons.

In the first place, it was neither tactful nor constructive for Mr. Johnson, who maintained a studied aloofness throughout the strike, to bicker the terms now, when it is much too late to affect the results.

Second, it is far from clear that the settlement was "inflationary" in the national context (presumably the President would not bother about it in any other context). The subway system is certainly not a key industry in the sense that steel or aluminum is. And the underlying assumption of the wage-price guideline is that excessive wage or price increases in key industries have an inflationary impact on the American economy. How great, really, is the danger that an "excessive" transit settlement in New York will transmit inflation to the economy as a whole?

Third, the President's statement continues a regrettable Administration practice: the almost ritual invocation, whenever a labor dispute develops, of the magic number, 3.2. Indiscriminate use is beginning to obscure the economic reasoning behind this figure. The reasoning is simple: To prevent inflation, no wage increase should exceed the percentage rise in labor productivity in the industry involved. Progress in productivity if of course uneven across the economy, varying considerably from industry to industry. Citing the national average of 3.2% during every dispute is simply not logical; nor is it fair to the workers involved, who may deserve more of a wage increase than the national guidelines would grant them.

The President's remarks did nothing to improve the New York settlement, and they further obscured the basic questions which are beginning to be asked on all sides about the guidelines system. In fact, the sole result of his statement was to add yet another irritant to a situation already quite irritating enough.