Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-05-17
Wage Reductions Regarded
as Only Alternative
for Carriers.
OPERATORS AND WORKERS
FIGHT LOWER PAY SCALE
Weeks Minimum Prices on Ex-
change Drop Below Record
for April.
BY CHARLES F. sPEARE.

BY CHARLES F. SPEARE.
Special Dispatch to The Star.
NEW YORK, May 16.-Last Deem
Der the average price of stocks de-
clined nearly 80 points below the level
of November, 1929. In April this year
stocks broke through the low average
Of 1880, but only little. This week
the minimum prices that had been
established at the end of April have
been violated by a slight margin.
More important than this has been
the decline in the railroad average to
figure less than so per cent of that
In the Spring Of 1880. With industrial
stocks, in which the public has its
largest investment and whose course
determines the speculative trend, under
steady pressure and lower today than
in the last half dozen years.
That investors are upset by the re-
duction in dividends, and by the lack
Of proof that the business situation
will improve to any extent in the
next four to six months, is evident
from the steady liquidation taking
place. The disturbance to prices is
not confined to common stocks. It
has been almost as violent this week
among the junior bonds of railroads
as well as in those of industrial COM
panies and foreign governments. 1t
is safe to say that there Is not holder
of securities who has not experienced
recently a. severe decline in some part
Of his list Not much is said about
the effect of this on the purchasing
power of the country. It figures quite
prominently however, in the absence
of demand in numerous non-essential
industries and is even reflected in
smaller sales at retail Of actual ne
ceSsities.
Commodity Prices Slump.
Commodities and securities have
again been moving sympathetically
While stocks and bonds have been
shrinking, the level of commodities is
steadily being reduced. This week COM
pleteS two-month period of decline
that has brought wholesale prices 81 per
cent below those of a year ago and
within few points of the level pre-
vailing just prior to the outbreak of
the war. Farm products, foodstuffs,
textiles, metals and building materials
have slumped off sharply. The market
for steel scrap has been demoralized,
with quotations this week comparing
with those in 1914. Those for copper
have not been equaled since the last
great depresSion-that of 1893. Iron
and steel production seems to have
reached level where it is being main
taind after dropping from 81 per cent
to AT per cent.
The most acute of the many troubles
surrounding the investment situation
originates with the railroads. Prices Of
railroad bonds held by insurance COM
panies and savings banks, and to no
small extent by commercial banks, have
declined to a point where the deprecia-
ton involved occasions alarm. What
have been regarded for years as the
choicest of the railroad common stocks
are now selling between per cent
and II per cent basis with an aver
age yield Of 81 per cent
It is true that the carriers made a
much better exhibit in net operating in
come In March than in February and
that, in the past six weeks, there have
been evidences Of an improvement in
thir car loadings. The loss in gross
revenues, however is too great to be
compensated for in a reduction in ex-
penses, as the policy of limited main
tenance and release of employees has
been carried as far as 1t can go with
out permanently affecting property
values.
Resistance to Wage Cuts.
Either wages must be reduced or
freight rates must be increased. Resist
snce to the former policy comes from
both the workers and railroad eXecu-
tives. The former declare that the
carriers, among other corporations,
pledged themselves to the Administra-
ton in 1929 to maintain wages. 1t may
be said, however, that there was no
thought then that the depression would
continue for more than year. Within
three months of the Washington con-
ference representatives of the Admin
iStration were proclaiming that "recov-
cry Is in sight" The railroads also
contracted to carry out budget of i'm
provements involving between $780,
100000 and 5000, 900, 900, or more than
they had spent in good years and in
spite Of the fact that they had greater
facilities than were required No one
can argue that they have not done
their part in attempting to keep labor
employed during the severest crisis ex-
now is to maintain the railroad wage
scale and to increase the number of
those participating in it.
The Interstate Commerce Commits
sion Is believed to be sympathetic to
an application for increased freight
rates. Before this could be granted,
however, it would be necessary to es-
tablish proof that 1t was the only
remedy of relief for the carriers. Con-
sequently. it has been suggested that
the commission institute an inquiry
into the entire question of railroad
earnings and make this its main bust
ness until decision Is reached later in
the year.
Effect of Cheap Money.
The fallacy of attempting to correct
this and similar situations through the
medium of lower rediscount rates Is al
ready apparent. A weeks trial has led
to nothing except an imitation in the
prices of Government and municipal
bonds and in limited class of legal
railroad and public utility obligations.
The investment structure which cheap
money was presumed to stiffen has, in
reality, shown less stability than here
tofore. With acceptances at l per cent,
street loans at the same level, six
months money at 134 per cent, COM
mercial paper at 2 per cent and the
Federal Reserve Bank of New York
exhibiting reserve ratio of about 9012
per cent, there is no occasion for ven
turing after still lower rates or a
greater supply of available funds.
Cheap money will not revive any bond
that is whitening under the influence
of poor earnings or suspicion that the
margin of safety of the issue is coming
close to the danger line.
Position Of Employers.
The standard of living in the United
States is enc that should be main
tanned Whether it can be by those
who will not work except at a wage
scale that was established under ens