Evening star., 1941-04-18
Entered as second-class matter post ONCE,
Washington. D. c.
Member of the Associated Press.
Wuqes and Prices

Taken by itself, Leon HenderSons
move to freeze steel prices, having
regard for his assurance that adjust
ments will be made quickly If it is
shown that higher costs necessitate
some lifting of prices, may well have
been justified by the necessity of
preventing a potentially disastrous
general price rise. But price fixing
Is not a matter which can be ham
died as though it were unrelated to
other factors in industry.
To a very important extent, prices
in the steel industry are governed
by wages, and the price-freezing
order issued by Mr.. Henderson came
as the direct result of the ten-cents-
an-hour wage increase recently
granted by the steel producers. Thus,
in effect, an administration which
has consistently encouraged labor
demands for higher wages and which
certainly did nothing in this case to
discourage the ten-cent increase, now
steps in and says that the producers
cannot Offset any part OF their
increased wage cost by raising the
price of their product.
For this, Mr.. Henderson Is not to
be blamed. His job is to hold prices
down, and. as he pointed out at
recent press interview, the executive
order creating his price control
agency gave him no authority what
soever over wages. But that does not
alter the fact that the adnlinistra-
ton, If it is going to clamp a ceiling
on prices, must at some stage of the
game assume the responsibility OF
seeing to it that wage demands are
not pushed to point where profits
will be wiped out.
Whether all or part of the steel
industry Is in that position now is a
moot question. Donald M. Nelson,
Office of Production Management
director, has expressed the belief
that the steel industry, with a great
increase in production and conse-
quent reduction of overhead in the
offing, can absorb the higher wage
level without a price boost. Spokes-
men for the industry deny this, and
say that many steel manufacturing
concerns, particularly sthe smaller
ones, will be forced out of business
unless they are permitted to raise
prices. If this latter prediction
proves correct, it may be expected
that Mr.. Henderson will act on his
promise to make prompt adjust
nents, but at best that would be an
unsatisfactory situation.
There are some other aspects of a
policy of holding prices down with
out any corresponding regulation of
wages which are worthy of serious
consideration. One is the inevitable
tendency to strengthen the position
OF large concerns, whose percentage
OF overhead generally is a little
lower, at the expense of the smaller
firms. This Is apt to result in more
and more business going to the big
manufacturers, thereby defeating the
effort to spread" defense work as
widely as possible.
Still another aspect is reflected in
the tax picture. When profitable, the
steel industry is one of the Nations
biggest taxpayers, but the latest wage
increase, In the absence of higher
prices, is going to cut the industry's
profits for tax purposes by about
$120,000 900. All of that money is not
going permanently into the pockets
Of the steel workers, however, for the
Governments revenue needs are
such that it cannot afford to forget
about the tax receipts to be derived
from $120000,00O base. The result,
obviously, is that henceforth taxes
on that sum will be paid by the steel
workers instead of the producers.
These factors, together with the
clear necessity of avoiding policy
which might force steel producers
to operate at loss or 60 out of
business, suggest that the admins
tration, If it is in earnest in it's
effort to guard against inflationary
trends, would do well to forget
political considerations and tackle
the problem from the standpoint of
wages as well as prices. Our eco
nomic setup being what it is, any
excessive effort to force one up while
holding the other down is certain
to have disastrous consequences.