Thursday, August 22, 2013

The New CIO Wage Drive

Preparing to soften up industry for its new wage drive, the CIO leadership has laid down a greater barrage than ever of statistics, theories, and fulminations. What stands out in the “study” made by Robert R. Nathan for the CIO is the double standard used in making wage and price comparisons.
Average hourly earnings of manufacturing labor in October of this year reached $1.13. This is the highest hourly wage for any month in American or world history. Average weekly earnings in October, at $45.83, though higher than those for any month since V-J Day, were, however, $1.50 less than those of January 1945. The Nathan report makes all its weekly wage comparisons with this January 1945 figure. It does not trouble to remind the reader that this was the absolute wartime weekly wage peak. Nor does it remind him that manufacturing labor worked an average of five hours more a week in January of 1945 than it did this October. Is it consistent to ask for higher pay for a longer week while rejecting lower pay for a shorter week? Mr. Nathan himself admits that hourly labor costs, even with considerably less overtime, were 8.6 cents higher in October this year than in January 1945.

When Mr. Nathan is discussing corporation profits, however, 1945 is promptly abandoned as the basis for comparison. That basis then becomes 1936 to 1939. In taking these four years as a norm, Mr. Nathan neglects to point out that nearly half of all corporations had no profits whatever to report then, and that there was an average of 8,000,000 unemployed throughout the period. Is that the sort of era the CIO now wishes to restore?

Incidentally, if that period were also taken for measuring wages, Mr. Nathan would have to point out that weekly money wages have since doubled. After full allowance for the increased cost of living, “real” weekly wages are still 33 percent higher than 1936 to 1939 levels.

If Mr. Nathan had written down corporation earnings, as he does wages, to their comparative purchasing power, he would have had to make drastic reductions in his calculated percentages of increase. But he does not even compare money corporation earnings in 1936 to 1939 with actual corporation earnings today. He compares them with his own very high forecast of what these earnings are going to be. His guess may possibly be right; but he has hitherto not done well as a prophet. It was he who was responsible for the official OWMR forecast in October of 1945 that unemployment would rise to 8,000,000 in the spring of this year.

Suppose, however, that the profit forecasts of Mr. Nathan and the CIO leaders prove to be correct. How do they decide what profits are “enough” and what are “too much”? The unprecedented wages of American workers have been made possible by our national accumulation of capital and our willingness to risk it in enterprises that give jobs. Capital always runs the risk not only of losing its return, but of being lost itself.

Does the CIO know exactly how great a return is necessary not only to permit capital savings, but to induce investors to risk them in creating jobs? Profits as a percentage of the national income are today even—if we accept Mr. Nathan’s high guesses—actually below the level normally attained in prewar years of reasonably good employment. Corporate profits are normally about 9 or 10 percent of the national income. Would that be too high a price to pay for full employment and the highest general living standard in the world?

Mr. Nathan and the CIO leadership look at wage rates only from one side—as the basis of labor’s purchasing power. They refuse to look at them from the other side—as management’s costs of production. They know that goods priced too high must mean a reduction in sales. They try to ignore or deny what is equally true—that labor priced too high must mean a reduction in employment. When wage rates force up production costs to a point where business cannot operate, or force up prices to a point where consumers can not or will not buy goods, neither purchasing power nor production is increased. Both, on the contrary, are destroyed.

That a new wave of wage increases will force this result is the real danger the country faces today. It is precisely the opposite of the danger that Mr. Nathan and the CIO leadership now profess to fear.

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