Presidential Statement No. 9 on Economic Issues: Promoting Price-Wage Decisions.

1. THE PRICE-WAGE guideposts were developed under President Kennedy and reaffirmed by this administration to facilitate decisions by business and labor that help us preserve price stability.

2. The guideposts provide the public with a means of judging whether the price and wage decisions made by business and labor are noninflationary and therefore consistent with the public interest.

3. They reflect the fact that overall stability of prices can be assured if wage increases do not exceed the economywide rate of gain in productivity and if industries with exceptionally high productivity gains reduce their prices.

4. With some exceptions, price and wage decisions have been within the framework of the guideposts in the 1961-64 period:

--Price increases in industries with below-average productivity gains have been offset by price decreases elsewhere.

--Average wage and benefit increases have not exceeded the long-run rise in the productivity of our workers, so that labor cost per unit of output has not risen since the beginning of 1961. In fact, it has fallen by 3.4 percent in manufacturing.

5. Our remarkable record of price stability has (a) protected consumers at home by maintaining the purchasing power of the dollar and (b) enabled us to strengthen the competitive position of our goods abroad and improve our balance of payments:

--Wholesale prices are, on the average, 0.1 percent below 5 years ago, and down 0.3 percent since the beginning of this year.

--Industrial wholesale prices have fallen 0.3 percent over the past 5 years.

--Since 1961 the wholesale price record in the United States is the best of any major country in the world. For example, while wholesale prices here were falling a bit, they rose in all the major European countries, from about 3 percent for Germany to 11 ½ percent for Italy.

--Consumer prices have also been more stable than in any other major country in the world. As compared to our consumer price increase of slightly less than 4 percent since the 1st quarter of 1961, major European countries experienced increases of 10 percent to 19 percent.

6. The guideposts are not compulsory and do not fix prices or wages. In our economy, those are matters properly left to free markets and free collective bargaining. The term "guideposts" conveys exactly what was intended--not hard and fast prescriptions for every wage settlement or price decision--but criteria for responsible action by both labor and business.

7. The guideposts are a sound basis for continued price stability and are increasingly important as our economy rises closer and closer to its full potential. They have made all of us--in business, in labor, and in Government--more keenly aware of the importance of our own actions for price stability and sustained prosperity. This increased understanding and sense of responsibility can strengthen our economy in the years ahead.