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ANY attempt to predict the economic and political organization of a country engaged in a major war under modern conditions must necessarily contain a large element of conjecture. The extent of the country's participation in the conflict and the duration of the conflict are both problematical. We cannot prejudge the temper of the people. Economic conditions are now changing so rapidly and so radically that it is more than ever hazardous to venture anything but a guess as to the future trend. The relations of government to economic policy are likewise undergoing such unprecedented transformations that before long we may accept, as normal and satisfactory, forms of economic organization now deemed alien and unworkable. In these circumstances, to formulate a practical wartime labor policy for the United States obviously requires consideration of prevailing trends in labor relations and policy, some estimate of the military and industrial requirements of a great war, and some appreciation of the effect on us of the ideas and practices now common in other countries.
In no country are labor problems isolated phenomena. They are affected by, as they themselves powerfully affect, general economic conditions, and consequently must be considered in connection with them. Among the most important of these conditions is a country's fiscal position. This is particularly true in time of war. One of the most difficult problems in any war is how to finance it. For this reason many observers give a high rating to England's capacity to wage a prolonged war. Of the military and industrial power of France they were in doubt until the Daladier Government began taking steps to bring its income and expenditures under control. And they still claim to see in the fiscal policies and position of Germany and Italy the most vulnerable spots in the armor of those two states. Moreover, during the last twenty-five years all of the countries named increased their burdens of taxation and public debt so tremendously that the added costs of a new war would in all likelihood force them to resort to direct inflation or capital levies, or both.
However much we may allow for our superior wealth and resources, the case of the United States is essentially the same. Since 1914 the debt of the Federal Government has multiplied forty-fold -- in round numbers, from one to forty billions of dollars. During the last ten years this debt has been steadily mounting, and there is no sound reason either to expect the present trend in expenditures to reverse itself in the near future or to anticipate a radical rise in the Government's income from taxation. On the contrary, the probabilities are great that the next years will see the continuance of large annual deficits and a further substantial increase in the amount of the public debt. If, therefore, our Government should be called upon greatly to raise its present rate of spending because of a war, it would soon be exposed to severe and unusual financial strains and would be forced to weigh carefully the costs of its various undertakings.
Labor costs are, of course, a large and indispensable item in the expenditures required by war, as they are in the normal expenses of business. But how far and under what conditions improving standards of labor conditions can be said to increase the cost of doing business and of producing goods is a complex question, for there are often compensating factors which tend to offset a rise in the rate of wages, a reduction in the hours of work, or other direct and indirect charges on the payroll. It is clear enough, however, that the advances in the living standards of American labor during recent decades, and particularly since 1930, and the forces that now determine their direction, will, taken together, materially increase the Government's expenditures.
In the quarter century since 1914 labor standards in the United States show the greatest advance ever recorded for a period of that length. From 1914 to 1938 the money rates of wages (hourly earnings) of four important classes of labor -- manufacturing, railroads, bituminous coal mining and building -- nearly tripled. The hourly earnings of factory labor in 1938 were 189 percent greater than in 1914; of railroad labor, 193 percent; of soft coal miners, 180 percent; and of union labor in the building trades, 169 percent. Taking the period as a whole, the cost of living has lagged far behind money wages, so that real wage rates, or the purchasing power of hourly earnings, just about doubled in these twenty-five years. A large part of this advance was made between 1929 and 1938, when the real hourly earnings of factory labor rose 45 percent; of railroad labor, 38 percent; of coal miners, 50 percent; and of union building labor, 28 percent. During the World War money wages likewise advanced enormously, though for many groups of labor they barely kept pace with the cost of living.
These changes in wages fail to measure the total increase in the wage bill. Recent legislation and the growth of collective bargaining since 1933 have been sources for added charges. The Federal Social Security Act imposes taxes on the employer, now amounting to 4 percent of the payroll, for financing unemployment compensation and old age insurance, not to speak of the other taxes required to finance the various grants-in-aid provided for in this law. The very considerable expansion in trade unionism in recent years and in collective agreements has also added more expenses. The most important and most general of these have arisen out of the various concessions necessarily made in the process of recognizing a union and making a contract with it. Such concessions have been granted widely and cover a great variety of conditions, but it is impossible to estimate their aggregate cost. Yet it is fair to say that the rise in the price of labor and the various restrictions on output which invariably accompany collective bargaining contribute most heavily to lifting the costs of doing business.
Meanwhile, the forces most vitally affecting the American labor market, now and in the predictable future, will probably raise present wage levels and other labor standards even higher. The federal Fair Labor Standards Act is one of these. This law (adopted in 1938), together with the increasing number of state minimum wage laws, is gradually but materially lifting the general wage level by fixing minimum rates substantially higher than those now in effect for the lowest-paid classes of labor. While these directly touch only a small fraction of the total working population, it rarely is possible in practice to raise minimum rates without adjusting the differentials of the higher paid employees at the same time. The growth of unions is at present an even more potent force in lifting rates of wages. The expansion in American trade unionism since 1935 has surpassed the spectacular growth of the labor movement from 1914 to 1920, and present union membership exceeds that of 1920 by more than 1,000,000, perhaps 2,000,000. Not only has there been this increase in aggregate numbers, but the labor movement of 1939 includes many groups of employees hitherto wholly unorganized, so that the area of rising wages is constantly spreading. Most unions, moreover, continue their organizing campaigns, all the time gather new members, and thus add to their strength. Since the most popular of union policies is to raise wage rates whenever possible, as well as to defend existing rates against all efforts to reduce them, it may be expected that the present upward trend in wages will persist for some time to come. Once established, rates of wages in unionized industries are extraordinarily difficult to revise, as the long experience of the building trades eloquently testifies.
It should be noted also in this connection that this extraordinary movement in wages since 1933 has taken place in the face of conditions of business and employment wholly unfavorable to rising wages and improved standards of work. Throughout the period, as everyone knows, there has been a large standing army of unemployed, averaging perhaps some 15 percent of the employable population, and rising in some years to 30 percent. A spell of good business, brisk enough to require the employment of a large fraction of the unemployed, would therefore quickly set in motion forces tending to bid up the price of labor still further. If we remember how swiftly the war of 1914 made itself felt in American markets, we will see -- particularly in view of present wage levels -- how important rises in wages and prices would become under like conditions in the future.
There are compensating factors which may tend, in time, to offset rising wages and labor costs. The most obvious of these is the saving in relief expenditures which would probably attend a war boom with its reëmployment of the unemployed. Germany's "solution" of the unemployment problem -- not to mention her much advertised shortage of labor -- derives from the reintroduction of conscription and the expansion of war industries. Similarly in Great Britain the acceleration of the rearmament program was followed by a substantial reduction in the number of unemployed (although the rate of unemployment is still much higher than before the World War). In the United States, those who had been thrown out of employment by the depression of 1914 were, not long after the outbreak of the World War, reabsorbed into gainful employment by the flood of war orders from abroad. The repetition of this sequence of events would no doubt materially lighten the fiscal burdens of our Government, as anyone familiar with current relief expenditures must admit; but economies from this source could hardly suffice to convert a deficit into a surplus or even wholly to offset the added expense of several of our labor policies. Many of our existing social services, including various forms of relief, the cost of which is being increasingly assumed by the Government, are reform measures aimed at raising standards of living and as such may be expected to remain in force even during a war boom.
The behavior of a second compensating factor -- the efficiency of labor -- is easier to describe under peacetime than under war conditions. Experience has taught that increasing wages and other charges on the payroll, associated with progress in living standards, have usually been absorbed by advances in the efficiency and productivity of industry. But, if the rise in wages and labor costs is uncommonly steep and swift, and if surrounding conditions are not altogether propitious, the period of absorption may be quite long and for a considerable period costs may fail to decline. In wartime many influences are at work to reduce the efficiency of industry and labor. The expansion of the new war industries requires considerable labor shifts, many of them into new and unfamiliar jobs. More active business promotes a more rapid turnover of labor. The relative shortage of young men leads to the employment in their place of women and older men, and this for a time at least reduces efficiency and raises costs. The very intensity and speed of wartime industrial operations impair the physical vitality of the labor force and soon lead to diminished effort and output.
The chances of a general shortage of labor would seem to be greater now than they were in 1917. One of the principal reasons for this is the drastic reduction in the length of the work-week, made since 1933. The average full-time week of factory labor has been cut by roughly 8 hours, or one whole working day, during the last five years. In the bituminous and anthracite coal industries the work-week has been reduced from 48 to 35, or by 13 hours. From 1914 to 1920 the full-time week of factory employees declined 5 hours, from 55 to 50 a week. But a large portion of this reduction took place during the first postwar inflationary boom of 1919-1920.
While it would seem absurd, in the face of unemployment which even at the peak of business in 1937 amounted to more than 5 millions, to speak of a labor shortage, it is not too much to say that a war which drew heavily upon the resources of American industry would soon tax our available labor supply. This conclusion should not be surprising when it is recalled how severely the general introduction of the 40-hour week by the Blum Government crippled the productivity of French industry. Furthermore, the average prevailing hours in Great Britain in the summer of 1939 were 47 a week; and, whatever they were in Germany, they were longer than they used to be and were constantly being increased.
It also ought not to be surprising if, in addition to a general shortage of labor, there should develop critical shortages in the classes of highly skilled and specialized workmen. Because of the depression and the unusual persistence of large-scale unemployment, the training of apprentices has virtually been suspended in this country during the last ten years. At the same time an increasing number of men with skill and experience have grown older or have lost their skills through unemployment. In many industries the opinion prevails that it would be impossible to recruit adequately trained and qualified labor for any great expansion of production. As long as apprenticeship regulations are conceived in terms of an overcrowded labor market and a permanent unemployment of from five to ten million persons, proper planning for a future supply of skilled workmen will be difficult.
It is hardly necessary to say that the means for the preservation of peace in labor relations is an essential element in any plans this country may make in order to insure the most effective use of its resources in time of war. During the World War, in spite of haste and inexperience, the Government managed to achieve the efficient mobilization of its industrial resources. Considering the magnitude of the enterprise, the labor problems were on the whole handled expeditiously and fairly. There was close coöperation between organized labor and public agencies. In the main, organized labor acted as a unit. The sole important jurisdictional dispute between two rival unions was limited to one industry, and that not a crucial one. Even the rivalry between the trade unions and company unions failed to arouse bitter antagonism. The boards of labor policy and adjustment, created to deal with both general problems and specific disputes, made a notable contribution to the methods of industrial peace. All things considered, the formulae applied to situations involving the relations between unorganized men and their employers worked remarkably well. Although there were strikes and lockouts, the number of persons involved in labor disputes was not excessively large in 1917 and 1918, and in each of these years was materially lower than in 1916. There were signs of deep unrest only in 1919 when the number of strikers climbed to a new peak in this country. The Government's success in carrying out its program was attained -- by and large -- without the general use of threats or force.
But if we were to gauge the outlook for peace in labor relations in terms of present conditions, the prospects would seem far from bright. First of all, the labor movement itself is divided into two rival organizations -- the American Federation of Labor and the Congress of Industrial Organizations -- each of them powerful and bitter towards the other. A difference which began as a relatively minor and limited dispute in 1935 has since grown into a major conflict, involving not only the parent bodies but more than fifty constituent unions. The inter-union disputes affect the country's most basic industries, such as coal and metal mining, electrical appliance, automobile and machinery manufacturing, and the lumber, petroleum, shipbuilding, and electric light and power industries. All efforts to bring the two organizations together have failed, and they now seem farther apart than ever. It has become a common practice of each organization to raid the other's membership and territory. The fears which this conflict has engendered and the lengths to which warring unions will go are illustrated in the accusations made against the National Labor Relations Board by the A. F. of L. and by the recent countrywide strike of coal miners. The latter was merely one phase of the fight being carried on by the United Mine Workers, the leading union of the C. I. O., against the Progressive Miners, a relatively new union affiliated with the A. F. of L. Any substantial improvement in business is likely to bring on new strikes by rival organizations against each other. Neither Presidential intervention nor the policies of the Government's labor agencies have so far been effective in settling disputes. The secret elections held under the auspices of the National Labor Relations Board in order to enable the men in the shop to choose which union they prefer seem only to have exacerbated existing differences. In a crisis it would therefore be impossible to assure any plants that its workers would not go out on strike. The nearest approach in intensity to this conflict is the split which occurred between the Communist and anti-Communist factions of German labor under the Weimar Republic.
There are numerous indications that American labor is greatly dissatisfied with the way in which industrial relations are being handled. This attitude is partly a reaction to the increasing power of organized labor in this country. As we have already remarked, in the past several years American unions have experienced one of the most successful periods of expansion in their history. Some of the most famous non-union industries have been unionized and have entered into contractual relations with labor organizations. Others, covering a large segment of American industry, have sought to remain non-union and have thus been the object of successive organizing campaigns. Because of the vigor of these organizing activities and the efforts of the unions to win recognition, violent strikes and lockouts, some of long duration, have become quite common. In view of the large number of these conflicts and the widespread bitterness which they have engendered, the efficacy of our governmental machinery for the settlement of labor disputes has been called into serious question.
Since 1933 we have had an unprecedented expansion in the number and size of agencies empowered to handle labor relations; nevertheless, their various functions have been so strictly defined, either by the law or by the agencies themselves, that many serious disturbances in recent years apparently fell outside the jurisdiction of any of them. Thus the National Labor Relations Board, the most powerful of the federal labor boards, restricts itself to hearing certain types of complaints against employers and to enforcing the law with respect to them. Consequently, in the settlement of the major strikes of this period, such as the General Motors strike, as well as in proposed suggestions for composing the differences between the C. I. O. and the A. F. of L., the National Labor Relations Board has so far played little or no part. No provision has been made for the creation of an agency with equal prestige and with the function of winning the confidence of all parties concerned -- employers, employees, unions, and the public -- and of exerting its influence to prevent strikes or at least to settle them promptly.
Without such an agency, endowed with authority to intervene in all labor disputes and, more important still, composed of experienced and impartial members, the present trend in labor relations, and particularly the virulence of inter-union conflicts, may well lead to increasingly bitter struggles. And the bitterness of these struggles is likely to be aggravated under the crisis conditions of wartime. For in critical times a powerful labor movement, accustomed to having its own way, spurred on to more extreme measures by the competition of rival factions within its own ranks, and impatient of discipline, may find difficulty in maintaining satisfactory relations with the Government in submitting to the requirements of a war economy. A condition of this sort cannot be resolved easily and quickly. The most effective way to handle it would be through public agencies whose aims are conciliatory and whose temper and methods enlist public support as well as the confidence of the interested parties. If we plan to set up such machinery, we ought to do so at the earliest possible moment, however radical a departure from our present labor policy such a step might be.
None of these problems would materialize unless a war imposed extraordinary strains on our economy. But such strains seem inevitable. Within less than two years after the beginning of the World War, and before our own military preparations had materially expanded, American factory production had increased 45 percent, largely as a result of the purchase in this country of military supplies and essential commodities by European governments. By any standard this was an extraordinary achievement in production. American participation in another war would make even more formidable demands upon our productive resources. Moreover, the tremendous damage which modern weapons can inflict on European centers of supply will undoubtedly still further increase the demand for American goods.
It follows, then, that all the problems involved in the mobilization of industry and labor -- the control of prices and wages, the allocation of capital and labor among competing industries, the retention of efficiency, the maintenance of industrial peace, and the protection of labor standards -- are bound to arise in the early stages of our participation in another war and to grow more complex the longer the war continues. For the handling of several of these problems, the United States is better prepared than it was in 1917. As part of our system of unemployment insurance a national network of employment exchanges has been created. These exchanges are already an important factor in the organization of our labor market, and in time of war they might serve as the foundation of machinery for shifting labor from nonessential to essential industries as well as for facilitating the movement of labor generally. Our elaborate relief and public works undertakings have been the source of numerous inquiries concerning the occupational histories of a large segment of the American population. No one knows how precise the resulting records are, but they certainly afford more information than we have ever had in the past. At the same time both employers and labor have been acquiring experience with public administrative boards engaged in fixing the wage rates of important classes of labor under the authority of the Walsh-Healey and Fair Labor Standards Acts and of numerous state minimum wage laws. While these laws have encountered some opposition, they have on the whole been easily enforced and violations have been unusual. But like much of our other labor legislation, these measures have been aimed at raising wages and working standards. There is no assurance that control of wages and working conditions, the object of which was to prevent wage increases (or even to lower wages and lengthen the work-week), would be so willingly accepted.
Organized facilities for rehabilitating unemployed skilled workers as well as for training new entrants into industry, except such as are used by industry itself in the normal course of business, hardly exist in this country. Continued unemployment has acted to restrict training and apprenticeship and has, thereby, reduced the supply of specialized and skilled labor. We might wisely have used a portion of our relief moneys for this purpose; and it may now be sound policy to set up training centers similar to those established by the British Government, although these have not been used nearly so generally as was hoped. Perhaps the most effective means of recruiting skilled labor of the types required is to encourage industry to resume training and to persuade labor to withdraw its opposition -- not an easy task so long as many millions remain out of work.
At bottom, however, the handling of these problems is less a matter of machinery than of fundamental policy. Our participation in another war in Europe would presumably entail the full utilization of our economic resources at the highest possible levels of efficiency. In this case, by what authority could labor be transferred from one industry to another? Who would fix wages, hours, and standards of output? And how would the multitude of disputes common to an industry working at capacity be settled? These are questions which strike at the heart of war labor policy. In Germany they have been answered by what amounts to the conscription of all labor, the government arbitrarily assigning men and women to their appointed posts in industry, fixing wages and hours, and prohibiting strikes. In France during the past summer, under the exigencies of a pressing munitions program, the government undertook to lengthen the work-week by executive mandate and in the process was forced to break a general strike.
Under present conditions the solution of these questions would inevitably prove more urgent and more stubborn than it did in the last war. The example of the totalitarian countries has already made a deep impression throughout the world. Their policies and methods of organization are widely supposed to have reached an unparalleled degree of efficiency, at least for the waging of war. Many informed people in Great Britain, France and the United States hold that, in fighting the totalitarian Powers, the democratic states must inevitably resort to the use of totalitarian measures also.
Every major war inevitably produces arbitrary actions by the government -- restrictions on the normal activities of the civilian population and limitations on the freedom of industry and labor. We had experience to this effect during the last war. But it is a far cry from such mild and temporary measures as we knew then to the thoroughgoing regimentation of all life which already in the summer of 1939 prevailed in large sections of Europe. We have in the United States at the present time a gainfully occupied population of some 55 million souls. In wartime all but the unemployables can reasonably be expected to be fully employed. It is inconceivable that American workers would voluntarily surrender their traditional rights and modes of work to any central authority in the making of whose policy they failed to retain a voice and the right of protest. Nor would authoritarian policies and methods operate to sustain the morale or efficiency of American labor. It is worth recalling that, despite the achievements of regimented German industry, Britain's recovery from 1932 to 1937 -- in aggregate increase of industrial production and in growth of employment -- substantially exceeded that of Germany during the same period.
If we are to plan our wartime labor policy and administration in democratic terms we must act today to put our labor relations on a more harmonious basis, and we must realize more clearly than at present the magnitude of the economic burdens imposed by modern warfare. These are not intrinsically war measures, but they are necessary preliminaries if we are to achieve peaceful labor relations and efficient production in another war.