Strike Aftermath

August 13, 1956

It may seem at first blush that no matter who lost by the steel strike, at least the workers immediately involved must have gained, because they won larger increases than they were offered. But let’s see. In May, before the strike, steelworkers’ earnings, according to official statistics, averaged $100.28 a week. Counting the five weeks of the strike itself, and the man-days lost just before and after (to bank and refire blast furnaces, etc.), the steelworkers lost an average of about six weeks, or an average of, say, $600 each under the old wage scale. But had the companies’ offer been accepted without a strike, the steelworkers would have earned in those six weeks more than $600 each.

TO MAKE UP THE LOSS

Now the companies offered the workers for the first year an average increase in basic wage rates of 7.3 cents an hour (not counting “fringe” benefits, etc.). The union won for the first year an average basic wage increase of 9.5 cents an hour—or 2.2 cents an hour better. Assuming approximately a 40-hour week for the eleven months to end next July 1, a steelworker will then have made up $41.80 of this loss. In the following year the union won an increase of 3.2 cents an hour above the companies’ offer. So he will then make up $64 more. In the third year, with an average hourly increase of 4.2 cents above the companies’ offer, he will make up $84 more.

At the end of the three-year contract, in sum, he will have made up, in basic wage rates, only about $190 of the $600 he lost in the strike. So at the end of his three-year contract, he will still be $410 worse off than he would have been if the companies’ offer had been accepted and there had been no strike.

Such a calculation is of course only approximate, necessarily involves assumptions about the future, and cannot be made indisputably precise. Many steelworkers, for example, had paid vacations of two or three weeks coming to them anyway. And there can be dispute concerning the impact of incentives and overtime on the exact amount of the loss. But it seems probable that even if the two complicated “full packages” are compared, including all fringe benefits, it will take more than five years for the individual worker to make up the losses he incurred during the strike.

If the workers directly involved in the strike did not gain, who did? Certainly not the companies. Their earnings will be cut by six weeks’ idleness and by future increased labor costs. The idea that the companies can pass the increased labor costs—or more—along to the public, simply by raising prices, overlooks the fact that higher prices tend to reduce sales and production. In the long run higher costs of production will slow up steel industry expansion and mean less employment of steelworkers.

The buying public, and workers outside the steel industry, will lose by the strike in more than one way. Projects were held up during and shortly after the strike through lack of steel. Workers were laid off. When steel is in full supply again, the buying public will have to pay higher prices for everything using steel. The real wages of other workers will be reduced because they must pay higher prices for what they buy. But as the steelworkers’ weekly earnings of more than $100 even before the strike were already more than $20 a week higher than the average weekly earnings of all manufacturing workers, the settlement will not make for less distortion, more balance, or more overall real purchasing power in the economy. It seems likely, on the contrary, to increase strain and imbalance, and to set off a new round of wage demands.

INFLATION RATCHET

In fact, the outcome of the steel wage settlement must either be less employment or more inflation than otherwise. The latter is more probable than the former, at least between now and Election Day. Inflation now works on a built-in ratchet principle. Existing Federal legislation creates industrywide unions and makes it all but impossible for employers to resist demands for higher wages. Then the government follows inflationary money and credit policies to make the higher wage-costs payable. This further increases prices, leads to further wage demands, and so ad infinitum.