Evening star., 1946-10-08
Lobor's S Wage Policy
Called Shortsighted
Reduction in Price-Level Held
Vital to Balanced Economy
By David Lasorence


By Dapid Laurence
The strategy of labor union leaders in
arguing that wage increases must be
made because of the rise in the cost Of
living may turn out to be shortsighted.
For there is real prospect that next
year living costs will turn. down some
what and logically this should then lead
to reduction in wages.
The theory that wages must go up
when the cost of living rises means that
wages must come down when the curve
goes the other way. But any union
leader who conceded that truism would
find himself out of Office in his union.
Yet this same problem will have to
be faced by many labor leader be-
cause sooner or later in many businesses
there will be no economic justification
for continued increases in wages.
During the war, despite the wage
stabilization policy, and since the war
labor leaders have educated their mem
bers to believe that each year there must
be a tangible increase in wages This
has been one of the main reasons why
contracts have been limited in numerous
cases to one year. There have been in
some instances provisions for reopening
wage scales on 80 days notice
One of the chief reasons for the pres
ent unbalanced economy is the fact that
businessmen cannot look ahead and plan
on any stabilized costs. Hence they can
not make plans for reduction of prices,
because they do not know what their
labor costs will be In any given period
beyond one year. Their costs of ma
terials are subject to constant change.
Signs Being Recognized.
The best way to achieve a distribution
of purchasing power in America would
be through reduction in the price level
without changing money wages. If
money will buy more next year than it
does this year the workers of the coun-
try will be getting the equivalent of a
wage increase If their labor leaders are
wise, they will be content to let the
wage scales rest awhile until business
can adjust itself to new price levels and
an increased output per man.
There are some signs that labor lead
ers here and there recognize the i'm
portance of increasing output per man.
This in itself would bring greater
efficiency and perhaps permit adjust
ments downward in the price level
Unfortunately, however labor leaders
are in too many cases afraid of their
followers. Unless they ask for increases
in wages, they are apprehensive lest
some rival candidate makes that his
platform and turns the incumbent
officers out of power.
Where the officers have good control
OF the situation, on the other hand. and
where they see that the wage increase
cycle has about run its course, there
Will be tendency to urge the establish
ment OF welfare funds. Presumably
| these Improvements will increase the
employers expenses somewhat but prob
ably not to the extent of the wage In
| creases which heretofore have added so
! appreciably to the Nations cost of doing
| business.
| Wage levels in some businesses and
! industries were not affected materially
| during the war and in these cases ad-
justments have been insisted upon in the
| postwar period. For the most part the
nation will have seen the major part
| of its labor bill increases this year, and
next year employers will have to find
way to absorb these costs at their
| present or advanced prices.
Recession" Under Way.
When volume begins to drop OF, the
seller will try the method of reducing
| prices in the hope of increasing volume
| but this does not work out in many
| lines and is better adapted to consumer
businesses. As a consequence the un-
| balanced situation will continue
| To the extent that the imbalance has
already damaged many small businesses
| and has cut the earnings of large busi-
nesses, a readjustment is already under
way. 1t is in fact recession" and
| the reason it isn't called depression"
| is because the consumer lines which
have been trying to satisfy the pent-up
demand have been absorbing many of
| those who might otherwise have been
| unemployed.
The crisis will come when most of
| the GI's now in schools or college or
| in training begin looking for jobs. Or
! dinarily small businesses absorb quite
a large number of new workers. If
| there are not jobs enough for all of
| them, the recession may become de-
preston Plainly there will have to be
| a re-examination by labor leaders of
the whole 1947 economic picture and
new strategy developed, or else the
recession" will rapidly turn into
depression. 1t is because some folks
are betting that the labor leaders will
not see the light till business really
breaks down and the so-called "bust"
! is no longer a prediction but reality
| that the pessimists have had the better
| of it in recent weeks in the stock market.
Reproduction Rights Reserved)
Why Is 1t Scarce?
| From the London Sunday Express.