Evening star., 1944-04-26
Steel Wage Increase
Would Boost Cost Of
War, Backman Says
BY the Associated Press.

By the Associated Press.
Jules Backman, New York Uni
versity economist, told a War
Labor Board panel today that a
general wage increase in 1.-THE
steel industry now, as demanded
by the CIO United Steel Workers,
would have serious repercussions
on the national economy.
MIR. Backman envisoned five major
consequences which he said would
follow approval of the unions de-
mands: A general wage increase in
other industries would result, higher
wages would contribute to a greater
cost of the war, strong tnflationary
forces would be set In motion, a gen.
eral wage increase would create new
distortions in the war economy and
cause distortions in the postwar
economy.
Union Reasoning Called Fallacious.
MIR. Backman said the union S
reasoning that wage increases would
enable workers to improve their
standard of living or keep up with
increasing costs Of living was fall
lacious.
1.-THE size of the goods pie is
f1xed," he asserted, referring to pro-
duction limitations. Placing a
larger number of dollars in the
hands of workers cannot increase
the size of that pie "*. BY giving
wage increases to industrial wage
earners who are already in a favor
able situation because of the past
expansion of their earnings, the
effect inevitably will be increasing
pressure on price ceilings"
AS result, he continued, while a
pseudo-prosperity might be created
temporarily for some workers. an
inevitably further development of
a wage-price spiral would take away
purchasing power from all groups,
eventually depicting even the pres
ent standards of living.
Interpretation Challenged.
Mr.. Backman's testimony came
after the steel industry had chal-
lenged the unions Interpretation of
the Sterilization Act and declared
1t has sought throughout its brief
to mislead the panel"
c. A. McLain of the Bethlehem
Steel Co. told the six-man panel
that the union, which is seeking a
17-cent hourly wage increase, erred
in saying the stabilizatiAn law "or-
dered that the relationship between
prices and wages which prevailed on
September 15.z 1912, had to be con-
tinued and preserved"
THAT law" said Mr.. McLain, 'tdid
no such thing. 1t merely provided
that, except as otherwise therein
provided, the stabilization of prices,
wages and salaries affecting the cost
Of living should so far as practi-
cable be on the basis Of the levels
which existed on September is,
1912"
Denies Mention Of 1941.
Mr.. McLain also contended the
act makes no mention of January
l, 1941, as he said the union implied
in demanding increases consistent
with rises In living costs since that
date. Z
Moreover, Yne said, "theact does
not authorize. and the President has
not interpreted the act to authorize
him to order adjustments in wages
in order to maintain the relation
ship between wages and prices which
existed on January l, 1941. .'s
"The Congress knew that the
board had since the Little Steel case.
refused to grant general wage in
creases to compensate for increases
in the cost of living beyond the
limits Of the Little Steel formula,
which sought to stabilize wages as
Of May /, 1912.
Objective of Act.
"The Congress knew that the
objective sought by the board in
carrying out that policy was to stop
the race between wages and
prices. -
"The legislative history of the act
makes clear that the Congress in
tended to extend that policy and to
authorize and direct the President
generally to prohibit changes in
prices, wages and salaries except to
the extent that he should find it
necessary to aid in the effective
prosecution of the war or to correct
gross inequities, which was precisely
the objective of the Little Steel
forrnI1la