Madison County Democrat. (London, Ohio) 19??-1958, 1950-10-17
The WAGE AND.
PRICE SPIRAL
BY Fred o. kief, Industrial
Economist, Federal Reserve
Bank of Cleveland

sibility had developed that 1850
would be the first postwar year
in which there would be no strong
drive for substantial wage in
creases. The major unions seemed
scontent to bargain for improved
social security benefits instead OF
immediate wage gains.
In looking back at the situation
that prevailed in late spring, it is
not difficult to substantiate the
view of continuing stability in the
wage structure. The cost of living
! at that time was lower than in
1 either 1948 or 1949 so that real
wages from this factor alone had
risen somewhat.
1t must also be recalled that
!. the 100-day Chrysler strike had
finally been settled in the early
part of May. The workers gained
social security benefits but the
wage line was not changed ma
terially. The contract provided for
reconsideration of economic adj
justments July l, 1851
Soon after this important set
tlement, General Motors and the
U.A.W. (CI.O) announced the
peaceful negotiation of new five
year wage contract without any
reopening clause. This agreement
continued the cost of living ar
rangement for adjusting wages
quarterly and provided for an an
nual pay raise of &c an hour re-
gardless of changes in the cost
of living index. Wage stability
thus seemed assured for the year
especially fsiuee the major steel
labor agreements contirpedy un-
til the end Of the year and the
coal contract until 1851.
- Unrest began to develop, how
ever, under the pressure. of events
unfolding after the start of the
Korean war. Between May IS ano
July Is the cost of living index
! rose, about four points as, heavy
consumer buying, much of it an.
ticipatory in nature, pushed prices
up. BY August, it became known
that General Motors employee:
would receive a SC. an hour. wage
boost in September because o.
this gain in the cost of living in
dex to which their wages are tied
With steadily expanding pro
duction and Tightening labor
!. markets, employers. were havinf
difficulty in recruiting additiona
skilled labor. Sporadic wildcat
strikes began to occur in man,
shops. 1t was in this atmosphere
that the Chrysler Corporation
broke all precedents by voluntar
lily discarding its new labor con
tract and initiating on August q
an immediate 10c and hour in
, crease for all hourly workers ant
15c an hour raise for skille,
workers in the tool, die, an,
maintenance departments. a
. This raise became the \ sigma
for higher wage demands upol
nearly all industry and wage in
! creases have been announced al
over the country with startlin,
!. rapidity. Many of these new agree
: ments followed the Chrysler pat
tern and in addition have pro
vided for wages to be adjuste,
with the rise and fall of the cos
!. of living index. More recently
the. increases have tended to b
greater than 1Oc an hour with tn
Aluminium Company of Americ
granting 10 percent.
Most, if not all, of the recen
or current demand for highe
wages has been centered on tn
proposition that workers are bein
squeezed by consumer prices ad
!. vancing more rapidly than wage
with a consequent lowering 0
standards of living. Prominent la
bor leaders have state
this to be the case, and have sug
gested that wages should continu
to rise while prices are frozen s.
as to eliminate hardshipn on work
ers. In view of these statements
it is worth while to examine tb
facts of the situation as proyida'
by official government statistica
sources.
The most commonly use
!; measure of the cost of living
the Consumers Price Index Whie
is computed by the U.. S. Depart
ment of Labor. This is the indie
which is used by many companie
and unions in labor contracts. t
make. wage adjustments. A goo
statistical measure of wages ]
also provided by the u. S. De
partment of Labor in its MONTH
report on earnings Of manufactur
ing production workers. All refer
ences to changes in the cost @
living and wages in the followin
comments are based upon thes
sources.
If the year 1899 is used as tn