ECONOMIC

led to large first-year catchup increases in 1976 (for example the absenceof the COLA provision or a limit to it, as in the United Rubber Workersand Teamsters contracts) will be less significant in 1977. For example, twothirdsof the w r orkers covered by contracts expiring in 1977 are alreadyunder cost-of-living adjustments and thus have been well protected fromthe effects of inflation in the past 3 years. The only major contract expiringin 1977 in which there has been a cap on the COLA is in the railroadindustry.The effective wage rate change that is likely to occur in 1977for all persons covered by major collective bargaining agreements maybe projected on the basis of current contract information. Wageschange because of scheduled or deferred increases written into previous contracts,automatic cost-of-living adjustments, and first-year or currentlynegotiated wage increases. A tabulation of deferred wage increases, excludingCOLA, scheduled for the 5 million workers in the second and third years oftheir contracts shows an average increase of 5/2 percent for 1977, comparedwith 6 percent for such agreements in 1976. This implies a contribution of2/2 to 3 percentage points to the expected wage rate increase in 1977 for allworkers covered by major collective bargaining agreements. Cost-of-living adjustmentsare expected to add another 1 percent, while first-year settlementsare likely to be in the neighborhood of 8 percent. The effective wagerate increase in 1977 for workers covered by major collective bargainingagreements is thus expected to be about l l /i percent. Increases of thismagnitude are consistent with our projected overall growth in compensation.2. Food prices. Food prices are not expected to be a source of inflationarypressure in 1977. Though errors in forecasting food prices are large, onemay expect the consumer price of food relative to nonfood items to fall asit did in 1976. Commodity futures prices on organized exchanges are consistentwith a food component of the consumer price index (CPI) about 3percent higher in 1977 than a year earlier, about the same increase as in1976. This projection is roughly in line with forecasts by the U.S. Departmentof Agriculture. While futures prices are often inaccurate predictors, theydo incorporate all the currently available information and therefore providea useful point of reference for next year's outlook for wholesale food prices.There are important uncertainties in the outlook for food prices. Meatprices were primarily responsible for the stability of consumer food prices in1976. However, the supply conditions that led to lower meat prices lastyear are unlikely to persist throughout 1977, particularly for beef. Exactlywhen and how much prices for all meats will be affected is not yet clear forseveral reasons. First, it is uncertain how long farmers will go on reducingcattle inventories. Marketing of breeding stock could continue to sustaintotal beef production. Second, continued large supplies of pork and poultrywill dampen upward pressure on the overall price of meat. Ample pork andpoultry production seems assured through the first half of 1977, althoughlow prices could cause this supply to taper off later in the year. Third, the43