Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-05-28
MOODY'S HOLDS CUT
IN WAGES UNLIKELY
Yet Some Additional Down.
ward REIMBURSEMENT May
Be Necessary.
epecial pispateh 70 The star.

Special Dispatch to The Star.
NEW YORK, May 2S.-Asserting that
although some additional downward re-
adjustment of wages will be necessary
before business recovery Is in full swing,
Moody's Investors Service declares that
It is nevertheless a mistake to assume
that wages can be slashed right and
left simply because the tendency seems
to point in that direction"
The survey Is devoted to detailed
study of price changes and wage trends
in four recent major depressionS; those
of 18e3-9T, 1e0T-0S, 1920-21 and 1890
81. Emerging from the analysis Is the
conclusion that in a number of indus
tries where the ratio of wages to gross
profits Is inordinateiy high, further wage
cuts may reasonably be expected. In
the low-wage-ratio industries, on the
contrary, reductions in wages might not
aid earnings appreciably, so long as de-
mand refuses to respond fully to low
cred prices, Moody's states.
The drop in prices of finished goods In
past depressions has been equal to be-
tween about so and 20 per cent of the
decline in raw material prices, accord
ing TO the survey. Since the beginning
Of the current depression raw material
prices have decreased 31.6 per cent and
finished goods prices % per cent, with
the ratio of the decline In finished goods
to that IN raw materials amounting to
go per cent.
unless this depression Is radically
different from most others it therefore
seems that the relative adjustment of
finished goods prices has so far been
quite normal" Moodys adds. However,
this may not be true Of all prices at re-
tail.
at Is reasonable to expect that living
costs viii continue to fall. Since pro-
ductivity Of labor, with the present state
Of factory efficiency, cannot easily ex-
pard as rapidly as 1t did Immediately
after the war, the reduction Of manu-
featuring costs may have to be effected
through some further decreases in wage
rates.
This would be without any real hard
ship to workers so long as the wage re-
auctions are smaller than the decline
In the cost of living
The analysis contains q tabulation of
more than so of the principal industries
in the United States, ranked according
to the amount Of wages paid in relation
to gross profits. This compilation Is
based on findings Of the 1929 Census of
Manufactures. Six industries - ship
building locomotives, motor vehicle
parts and bodies, woolers, cotton goods
and worsted goods-pay out more than
so per cent Of their gross profits In the
form Of wages.
At the other end of the scale are IL
industries where wages represented less
than 20 per cent of the difference be-
tween factory value Of products and cost
Of materials used in their manufacture.
These include -four and grain min prod
ucts (16.95 per cent?, motion pictures
07.32 per cent, food preparations
Q5.6l per cent?, druggists preparations
05.57 per cent?, cigars and cigarettes
(12.06 per cent, medicines $3.50 per
cent? and manufactured tobacco 1888
per cent?.
Moodys remarks that sit is character
tstic that industries grouped toward the
end Of the list happen for the most part
to be among those which have been able
TO maintain their earnings relatively
vel in this depression and In which
threats Of wage cuts or labor troubles
seem to be less serious.
When profit margins shrink In q
given industry, then If 1t is one with a
high wage ratio, its earnings viii be
keenly affected. But in the case Of an
industry which is able to maintain mod
erately good sales in q depression (such
as gas. food and drugs). this is by no
means always due to its ability to lower
prices through wage reductions, but
rather to the fact that these products
are in the nature of everyday necessi-
ties and also that their prices can more
easily be reduced without waiting for
wages to come down.
Briefly. the wage problem must be
solved individually for each industry
and Tor each company, and generaliza-
tons, whether they emanate from the
camp OF labor or Of industry, viii prob
ably do more harm than good"