The Press., 1921-10-27
Propose to Reduce Wages and Return All the Saving by
 Reduction in Charges.
FULLTEXT OF THE PROPOSAL
Statement by Thomas de Witt CuyIers Chairman of the Association of
 Railway Executives on
 the Situation.

CO0AASS NIT. 4AOu1dS uC WALC SuJ Ter, Chairman of the Association ol Railway Executives, made the follow ing statement:
 At a meeting of the Association oi Railway Executives today, it was de- termined by the railroads of the Uni ted States, to seek to bring about 8 reduction in rates, and as a means to that end to seek reduction in present railroad wages which have compelled maintenance of the present rates.
 An application will be made imme diately to the United States Railroad Labor Board for a reduction in wages of train service employees sufficient to remove the remainder of the increases made by the Labor Boards decision of July 20, 1920 (which would involve a further reduction of approximately ten per cent), and for a reduction in the wages of all other classes of railroad labor to the going rate for such labor in several territories where the car riers operate.
 To Reduce Rates as Wages Go Down
 The foregoing action is upon the un derstanding that cOncurrently with such reduction in wages the benefit of the reduction thus obtained shall, with the concurrence of the Interstate Com merce Commission, be passed on to the public in the reduction of existing railroad rates, except in so far as this reduction shall have been made in the meantime.
 The homogeneous have decided up on this course in view of their real iZation of the fact that the wheels of industrial activity have been slowed down to a point which brings depres- sion and distress to the entire public, and that something must be done to start them again in operation.
 The situation which confronts the railroads is extremely critical. The railroads in 1920 realized a net rail way operating income of about $G2, 100000, upon a property investment of over $19,00O, 100000, and even this amount of 62 millions included back mail pay for prior years received from the government of approximately $64, 100000, thus showing, when the opera, tions of that year alone are considered an actual deficit before making any allowance for either interest or divi- dends.
 The year ended in serious depres- sion in all branches of industry, and in marked reduction of the market de mand for and the prices of basic com modities, resulting in a very serious falling off in the volume of traffic. Roads Forced to Defer Maintenance
 Work
 In this situation a policy of the most rigid economy and of postponing and cutting to the bone the upkeep of the properties was adopted by the rail roads. This was at the price of ne glecting and for the time deferring work which must hereafter and in the near future be done and paid for. This is illustrated by the fact that, as of 15, 1921, over Is per cent or 374,431 in number, of the freight cars of the carriers were in bad order and needing repairs, as against nor nal of bad order cars of not more than 160,000, as is further illustrated by the deferred and inadequate main tenance of other equipment and of roadway and structures.
 Even under those conditions, and with this large bill charged up against the future,-which must soon be pro vided for and paid if the carriers are to perform successfully their transpOr tatiOn duties,-the result of operations for the first eight months of this year. the latest available figures, has been at a rate of net railway operating in. come, before providing for interest Or dividends, amounting to only 2.6 per cent, per annum on the valuation of the carrier properties made by the Interstate Commerce Commission iii the recent rate case, an amount not sufficient to pay the interest on their outstanding bonds.
 Roads Earnings Far Below Reason.
 able Return
 It is manifest, from this showing that the rate of return of 51A or per cent for the first two years after March 1, 1920, fixed in the Transporta- tion Act as a minimum reasonable re- turn upon railroad investment, has not been even apprOximated--m less reached; and that the present high rates accordingly are not due to any statutory guarantee of earnings, for there is no such guarantee.
 In analysing the expenses which have largely brought about this sit uation, it becomes evident that by far the largest contributing cause is the labor cost.
 Today the railroads pay out to labor approximately 60c on the dollar they receive for transportation services, whereas in 1916, 4Oc on the dollar went to labor.
 On the first day of January, 1917, when the government took charge of wages through the Adamson Act, the labor cost of the railroads had not exceeded the sum of about $1, ,468,00O,- 600 annually. In 1920, when govern mental authority made the last wage increase, the labor cost of the rail. roads was about $3 100000 annual ly. or, if continued throughout the year instead of for the eight months during which the wage increases were in effect, the labor cost, on an annual basis, would have been largely in ex- cess of $3,9O0,00O, ,000-an increase since the government took charge of wages in the Adamson Act, of Approximately $2,4 45O,00O,O00 an- nually.
 In the light of these figures, it is manifest that the recent reduction of
 
 estimated at from 10 to 12 per cent in no sense meets or solves the prob lem of labor costs and in no way makes 1t possible for the railroads to afford a reduction in their revenues. Thousands of Rates Already Reduced
 Indeed, during the past year there have been between four and five thou sand individual roductiOnS in freipht rates. On some railroads the reduc- cions in rates have amounted to more than the reductions in wages so far made, and on many other railroads the in wages allowed no net re- turn on operations, but merely pro vided against the further accumulation of deficit.
 The point is often made that agri- culture and other industries are also suffering the same immediate difficult tieR aa fha railroads why fhorofOro