Memorandum of Disapproval of Bills Providing Salary Increases for Postal and Other Federal Employees.

I AM WITHHOLDING approval of H. R. 2462 and H. R. 2474, bills providing increases in salary rates scheduled under the Classification Act of 1949, as amended, and the Postal Field Service Compensation Act of 1955, as amended, and providing salary increases for other Federal employees.

H. R. 2462 would increase salaries, under the Classification Act by about 11 percent, and would make the increases applicable to all except the most responsible jobs. H.R. 2474 would increase salaries in the Postal Field Service by $546. The increases would range downward from about 19 percent for the less responsible jobs to about 3.5 percent for the most responsible jobs.

I cannot approve these bills because: (1) they are not justified by considerations of equity; (2) they would materially accentuate existing disparities in the pay scales; (3) they would increase total Federal expenditures so as to make large supplemental appropriations necessary; (4) they would increase the rate of Federal expenditure so as to require in all probability an increase in the statutory debt limit; and (5) they would contribute unnecessarily to existing and incipient inflationary pressures in our national economy.

First, the claims that the increases provided for in these bills are justified by increases in the cost of living have not been sustained. From July of 1951, the effective date of the 1951 pay increases, to March of 1955, the effective date of the 1955 pay increases, the cost of living increased by slightly more than 3 percent. Yet the 1955 pay increases amounted to an average of about 8 percent for postal employees and about 7.5 percent for classified employees. Since March of 1955 the cost of living has gone up a little over 5½ percent, or a total increase since July of 1951 of about 8.9 percent. Against this increase of 8.9 percent in the cost of living, approval of these bills would result in there having been granted since 1951 to postal employees increases in pay averaging about 20.6 percent and to classified employees increases in pay averaging about 18.5 percent. During this same period, fringe benefits have grown substantially: low cost life insurance, unemployment compensation, liberalized retirement and survivor benefits. By no standard do the equities of the situation justify the increases provided for in these bills.

Second, Federal employees have the right to expect fair and equitable wage treatment in relation to each other and in relation to employees in private business. These bills disregard that fundamental principle. Both would widen existing pay discrepancies within the Federal establishment and aggravate existing inequities, and it has not been demonstrated that generally the present conditions of Federal employment are out of line with those of the millions of other citizens working in private industry.

Third, in the absence of any compelling justification on the merits, great weight must be given to the serious fiscal and economic implications of these bills. The bills would increase annual expenditures by about $850 million for increased base pay and increased benefits computed on base pay. To meet these increased costs, either drastic curtailment of postal services and programs covered by the Classification Act, or large supplemental appropriations would be necessary, notwithstanding our firm efforts to operate these Federal programs within existing resources.

Fourth, the bills, by increasing the rate of Federal expenditures in relation to receipts, would press the public debt upwards to a point so dangerously close to the statutory debt limit that an increase in the limit would appear unavoidable. The undesirable economic consequences of such action are apparent.

Fifth, these increased expenditures and the threat of increased public debt which they pose would have the effect of adding to the upward pressures on the prices of things Americans buy. I am firmly convinced that our people want orderly economic growth with reasonable price stability. The attainment of this goal lays heavy obligations upon us all. Of the Federal government it demands fiscal integrity, however hard the choices such a course may impose. There can be no doubt, moreover, that the health of our economy and the defense of the dollar require economic statesmanship of employers and workers, public and private alike, in determining how much we as a nation pay ourselves for the work we do. Government cannot in good conscience ask private business and labor leadership to negotiate wage adjustments with full regard to the whole nation's interest in price stability while at the same time approving the enactment of these wholesale salary increase bills.

My decision to withhold approval of these bills is made with firm belief that the Government's salary position must support recruitment and retention of able employees in the thousands of different occupations essential to our Federal operations. An inquiry into the need for adjustments in the structure of Executive Branch pay systems has been undertaken at my direction. In the event this inquiry demonstrates the need for logical, fair and discriminating adjustment, recommendations for appropriate action will be made early in the next session of the Congress.

DWIGHT D. EISENHOWER