Blame the Non-Goods

Widespread among economists and politicians are two standard beliefs about the behavior of prices in the U.S. in recent years: 1) from 1952 through 1955 the Government's cost-of-living index held steady only because an increase in the price of manufactured goods was balanced by a decrease in food prices; 2) today the main inflationary factor in the economy is a vicious circle in which big unions keep pushing up wages and big corporations keep pushing up prices.

The facts, as New York Timesman Edwin L. Dale Jr., 33, reported this week: 1) in 1952-55, retail prices of manufactured goods, as well as food prices, declined a bit on the average; 2) the main inflationary factor is not a wage-price spiral so much as the fact that service businesses (mostly small), along with landlords, doctors and dentists, keep pushing up prices of "non-goods"--services, utilities, rents, transportation fares.

Wide of the Mark. What really happened in 1952-55, reported Dale, after prowling through Government statistics, was that rising prices of non-goods--accounting for one-third of the average family's expenditures--balanced declines of other prices. And what happened in 1956, when the cost-of-living index zipped up a worrisome 3%, was that non-goods prices kept on rising, while prices of food and manufactured goods reversed their downward trend and inched upward, too.

"Big business and big labor have been blaming each other for the rise in prices," writes Dale. "It appears that both are wide of the mark." Big unions do indeed push wages up, but the boosts have been just about canceled by rises in productivity brought about by use of more and better machines. Corporations do up their prices, but trade-ins and retail discounts partly make up for the list-price increases. As a result, actual retail prices of goods average about the same now as four years ago. Some items are up, e.g., new cars and toilet articles, but others are down, e.g., furniture and toys. But non-goods prices are all up: laundry, 11%; rent, 12%; haircuts, 14%; transit fares, 20%; movie admissions, 20%; TV repairs, 25%. Non-goods are the "real villains" of the inflation story.

Missing Assembly Line. Why, amid the ups and downs of other goods, do non-goods prices creep steadily upward? Partly because they are still catching up with the steep rises of food and manufactured-goods prices in 1945-52. But partly--and more significantly, in a long-range view--because productivity rises more slowly in the service field than in manufacturing. The assembly line is missing, the possibilities of automation scant; machinery can do little to speed up the output of the barber, the bartender, the cop, or the bureaucrat. Yet, in order to hold workers in a period of full employment, the service field has to. raise wages as industrial wages rise. And the result of higher wages without higher productivity is higher prices. "The trouble," concludes Dale, "is that our society, more than any other in all history, spends its money on non-things."

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