Evening star., 1946-01-13
'Ability-to to-Poy' Issue
Remains Confused
GIN Report Considers Question,
But Does Not Dispose of 1t

But Does Not Dispose of 1t
One of the more confused aspects Of
the General Motors controversy con-
Germs the so-called ability-to-pay issue.
Representatives of the United Automo-
bile Workers, at one time, were doing
great deal of talking about it. The
question did not figure prominently,
however, in the hearings conducted by
the Presidents fact-f1nding board, nor
in its report, and it might have been
virtually dead issue by now were 1t
not for the fact that General Motors,
in rejecting the recommendation Of
the board, makes the assertion that
actually the recommendation is based
on the assumed ability of General Mo-
tors to pay this excess wage"
In other words, General Motors says
that there is involved a question of
principle on which it will not yield
namely, that it should not be forced to
pay higher than competitive wages
merely because it is assumed that it
has the financial ability to pay more.
If this is to be the central ground
Of the company's decision, the ground
on which it will seek public support
for its refusal to accept the recon-
mendations of the Presidents board, the
language used by the board in dealing
with the ability-to-pay question will
bear careful examination. In present.
ing the pertinent sections here, they
have been lifted from the context of
the report, but this does not materially
affect the sense of what the board said.
After pointing out that General
Motors had offered an hourly increase
of 1917 cents, 6 cents under the figure
recommended by the board, the report
stated:
"The situation as reported to us may
be summarized by saying that If General
Motors were to make wage adjustment
definitely into the lower group Of en-
ployers who have been granting wage
increases, and that If 1t were to make
an adjustment of 16 cents or more it
would be in the category of the highest
paying employers and in the position Of
leadership of American industry which
1t has occupied in the past. In earning
capacity, and in prospects for profitable
and continuous maximum production, it
is outstanding among American corpora
tions. We stress this fact not as a
ground in and of itself for establishing
a wage increase, but. as a significant
element which may properly be taken
into account in determining the full
weight to be attached to the factors of
cost-of living reduction of weekly hours
and grading and demotions.
"As the board said in its statement
of December %. ls45, there is nothing
new in this practice of considering
ability to pay as one, but only one of
the factors in wage controversy, to be
given as much or as little weight, in
conjunction with other factors, as the
nature OF the case may warrant. This
practice has generally been followed by
arbitrators and wage tribunals, and the
practice has by no means been limited
to public utilities 1t is worthy of note
that at the opening of the General
Motors wage case before panel of the
National War Labor Board on May 81.
1912, the company, in opposing the
unions wage demand, introduced de-
tailed evidence and charts relating to
reduced profits and dividends, not for
the purpose Of pleading inability to pay
but as factors to be taken into account
by the board in weighing the equities"
The board then wound up its report
with these relevant general obser7a-
tons:
"In satisfying ourselves that, in our
Judgment. the company can pay. in the
first II months after the resumption of
production, the recommended wage in
crease without increasing prices. we have
assumed that (a) General Motors will
sell its products at its 1912 schedule of
prices, CD productivity will be no greater
than in ls41, Co aggregate volume Of
production will equal that of 1s4l, I'D
material costs to General Motors have
increased Is per cent since 194l and
may increase more, (e) total payrolls
have increased and will increase pro-
portionately with wage increases and C)
selling, general and administrative costs
will be somewhat higher than in 1941
Our calculations show that, under these
assumptions, the company can earn, in
the first II months following the re-
sumption of production profits in excess
Of those of the base period used by the
Ofice Of Price Administration for pric-
ing purposes. Such result is possible
| principally because (a) prices of Cen
eral Motors 1912 models are slightly
more than IL per cent above 1941 models,
thus yielding a substantial increase in
income on an equal volume of produc-
ton, and (b) General Motors le41
profits were the highest in the history
Of the company. 1t does not follow, of
course, that the company will not apply
| for price increases: nor do we attempt
to forecast what the Offlce of Price
Administration would do should an ap-
| plication be made after such approval
by the National Wage Sterilization
Board as might be required. We have
not felt it proper for us to consult the
once of Price Administration on this
matter. 1t is because of continued Short
ages of materials and other uncertainties
in production, that we have not felt
justified in estimating for the first IL
months following resumption of work a
total production in excess of that
achieved by General Motors in 1941. We
recognize, of course, that General Mo-
tors will gradually achieve higher and