Who Started the Third Round?

June 14, 1948

As pointed out in this column last week, any widespread application of the General Motors wage-settlement formula would put further strains on our economy. It would either force the creation of enough additional inflationary bank credit to meet higher payrolls and support higher prices, or it would result in unemployment.

A third round of wage increases being so harmful to the economy and to the long-run interests of labor itself, who started it? Other employers, big and small, privately blame General Motors for capitulating to the union demands. But the causation must be traced farther back. Who is it, or what is it, that made it almost inevitable from the start that employers would capitulate to a third round?

Part of the answer can be found in the White House. President Truman and his advisers always affect to deplore something they call “inflation.” But this always turns out to be primarily an objection to high industrial prices. They ignore the basic fiscal and monetary causes of inflation, for which they themselves are largely responsible, and the high prices of farm products that their own policies have helped to bring about. And they have never been willing to put wages in the same category as prices. Prices are to be held down, controlled, frozen, rolled back; but in wages it appears that there are always “inequities” still to be adjusted—of course never by lowering any wage, but always by raising the wages that are still “submarginal” or have not yet “caught up.”

Mr. Truman has again and again intervened to push up wage rates. He did so in late 1945 and early 1946 by imposing a thinly disguised form of unilateral compulsory arbitration when he appointed a “fact-finding” board that in effect ordered General Motors to pay an increase of 19½ cents an hour. Later, without even waiting for a report from his own fact-finding board, he rewarded Philip Murray for tying up the nation’s steel industry by recommending an increase of 18½ cents an hour in wages in that industry.

Then he set aside the 16-cent-an-hour increase for railway engineers and trainmen, recommended after a month’s study by his own fact-finding board, and awarded them 18½ cents. When John L. Lewis scorned even an 18½-cent-an-hour increase and struck, Mr. Truman stepped in, seized the coal mines, and made the government itself grant wage increases, royalty payments, and other benefits to Mr. Lewis’s union far in excess of Mr. Truman’s own previously announced “wage line.”

Mr. Truman is still not cured. On the very day that General Motors made public its latest wage boost, he again urged Congress to raise legal minimum wages from 40 to 75 cents an hour. This would be an increase of 87½ percent. And union insistence on maintenance of existing wage differentials would put further upward pressure on wages all along the line. Congress, however, must share responsibility for inflationary wages. For the Wagner Act, though improved by the Taft-Hartley amendments, is still retained in essence. It builds up and greatly strengthens industrywide unions. It compels employers to bargain with the leaders of those unions, no matter how extravagant their demands. If those unions resort to mass picketing, intimidation, or violence, the Wagner-Taft-Hartley act takes no cognizance of it. Yet the act abridges the employer’s right to discharge or replace strikers, to bargain with individuals or with other union representatives, or to exercise other previous rights of management.

The act, in brief, takes the risks out of strikes. The Administration and Congress endow great private organizations with the power at any time to bring the nation’s industry to a halt, and then express surprise and regret that these private organizations use this power not primarily for the public weal but for their own private ends. We set up a legal mechanism which makes employers virtually powerless to refuse increased wage demands, and then see no connection between this and the fact that strong unions then impose wage demands so great as to imperil the whole economy.