The Wages of Defense

LABOR

Last week a roomful of businessmen, New Dealers, bankers and labor leaders met in Washington to talk about the Re-employment of Labor and Capital. Host was the Savings Bank Journal's editor, Milton Harrison (TIME, Sept. 30), who has held six similar forums this year. Moderator was a quiet, dark Sullivan & Cromwell partner, Norris Darrell. By 10 p.m., after six hours of good-and ill-natured debate, the embattled forumists had not made much progress towards mutual understanding. The Government-spenders were still unashamed Government-spenders, the let-industry-do-the-job men were still for letting industry do the job. The expression on most faces registered "This is where I came in."

Then the moderator turned to Commissioner of Labor Statistics Isador Lubin, asked him about labor's angle on wage and price levels. Mild and scholarly, Lubin tried to head into non-controversial ground. He complimented business, labor and Government on having pushed National Defense without important strikes. Particular thanks were due the New Deal, for having managed to avoid the advances in living costs which usually accompany big rises in production, get labor angry.

Far from proving noncontroversial, the Lubin remarks set off a bomb. The bomber: John L. Lewis' general counsel and right-hand man, onetime Wall Street law cub, later New Dealer, now widely suspected of being a Communist fellow traveler, Lee Pressman. In his cold, incisive way, staring straight across the banquet table at middle-of-the-roader Lubin, Pressman told the New Deal (and, incidentally, John Lewis' recent allies further to the right) what to expect. His warning: that workers will not base their wage demands on the cost of living only; what they want is a share of mounting defense profits too. His explanation of the recent lull in strikes: union agreements in basic industries (coal, autos) have not yet expired. Next spring, promised Mr. Pressman, the fireworks will be resumed.

At this point the argument, like most discussion on wages and prices, became entangled in two-way semantic trouble. One difficulty: many labor men do not understand the difference between money wages and real wages, will jump at a small money-wage increase even though they would enjoy greater buying power if wages and prices would not race one another up. The other difficulty: many businessmen do not understand the difference between rising wages and rising labor costs, don't know that U. S. industry, by increasing the productivity of labor, has absorbed an average hourly wage-rate increase of 18% since 1936, and also increased its own profits, without raising prices at all.

The forum's misunderstandings were widely shared by U. S. labor and capital last week. Items worrying labor: the retail-price index rose 2 1/2% above November 1939, first time this year it has risen for a second successive month; a rise in textile prices means that clothing prices will follow: wholesale food prices have risen 1.5% in the past week; President Ward Melville of Melville Shoe Co. (Thom McAn shoes) talked last week of higher shoe prices. Items worrying business: White Motor Co. must spend an extra $300,000 this year on a 5-c--an-hour increase; Midland Steel Products must pay 3-c- to 10-c- an hour more to its line workers; Cleveland Chamber of Commerce announced that 75 representative firms were paying an average hiring rate of 56.2-c- an hour, the highest ever; average building labor wage rates for common labor had risen by 3% during the summer; the Auto Workers had struck Vultee (see p. 19) for an extra 25-c- an hour; there was a growing feeling that the worst of the wage Putsch was yet to come.

Up to last week, most of the complaining had been done by labor. Its statisticians do not like the comparative production, employment and payroll figures for the first half of 1940. Production, as measured by the Federal Reserve Board index, was back up to 96% of the flush first half of 1937; but employment had recovered to only 92% of the first half of 1937, and payrolls (reflecting skilled trades' overtime more than higher wages) to only 93%. One answer to this is the greater security labor now enjoys on the down side, as shown in the catastrophic first half of 1938, when production fell 33%, while employment fell only 19% and payrolls 28%.

Yet last week's labor market was dominated less by statistics than by one cold fact--the growing shortage of skilled labor. The National Industrial Conference Board reported that 13 of the 25 industries it surveys monthly are now forced to pay overtime wages because they haven't enough workers to go around 40 hours a week. (Latest industries to start operating over 40 hours a week: electrical manufacturing, lumber & millwork, paper & pulp.) Last week too the U. S. Civil Service Commission was scouting for 600 skilled workers for the Frankford (Philadelphia) arsenal. In Ohio, 4,500 production workers will be needed for a new shell-loading plant near Cleveland; at Cincinnati, Wright Aeronautical's new engine plant will shortly be looking for anywhere from 6,000 to 12,000 skilled machinists, other specialty metal tradesmen. This week Federal Security Administrator Paul V. McNutt reported that employers are waiving usual labor requirements, taking what they can get. He noted that one engineering company had hired an 89-year-old man from a State employment agency, that even the supply of migratory farm labor is shorter than usual.

Two men who should know summed up the skilled-labor problem last week. One was Alfred P. Sloan Jr., head of General Motors Corp. He flatly declared that U. S. industry should return to the six-day week as soon as "the slack of unemployment has been taken up." Said Mr. Sloan: "America today is working a shorter number of hours per week than any other nation--certainly any other involved in war or defense. Output can be increased 20% by working six days a week in place of five." Mr. Sloan also warned that the greatest source of inflationary danger is in the increase in the wage rate.

The other was William F. Patterson, chief of the apprentice division of the U. S. Department of Labor, who warned that 25 to 33% of the production workers used in defense will have to be highly skilled, called for the present number of apprentices in training to be upped from 100,000 to 500,000. Most economists (except the die-hard C. I.O.) agreed that by mid-1941 all who could readily be employed in factories would be working--and that anyone not employed by the end of 1941 probably never would be.

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