Labor and Inflation

...One is the obvious interest in stabilizing or decreasing living costs...

...Had labor and business in the giant industries permit-led consumers to participate in increased productivity by helping to reduce living costs just 0.5 per cent, the effect on the real national purchasing power would have been exactly the same as that achieved by the inflationary 3.7-percent rise in living costs...

...unaffiliated consumer financed—through higher prices— both higher wage levels and higher profits...

...This is shown most radically in the drastic decline in home construction reported throughout the nation in the last half-year...

...Beyond all this, a grave social injustice is involved— caused by the inflationary effects on the economy at large of major wage increases in limited sectors...

...The old conflict has largely been superseded by a new clash of interest, the conflict between privileged labor and underprivileged labor, the latter group making up the majority of consumers...

...Still more important, perhaps, was his declaration that neither labor nor management could arbitrarily decide to reduce work time, but that such a reduction must flow from a consideration of the entire national economy...

...During the same period, the cost-of-living index rose by 3.7 per cent and the population increased by about 1.7 per cent...

...the other is in expanding future employment capacity by stabilizing or increasing the financing capacity of savings...

...Not counting wives and widows, 4.8 million retired workers receive Social Security payments...

...Though much of the loss suffered by savers is compensated by a gain on the part of borrowers, the reduction in the real value of their repayments (which amount lo tens of billions of dollars annually) is equivalent to a sharp reduction of the available means for future credit...

...Since construction costs have risen about 10 per cent in the last two years, every repayment on a mortgage granted two years ago now has only 90 per cent of its former financing capacity...

...In other words, inflation can be stopped only if the interest of the huge majority of consumers, living on wages, salaries and pensions, prevails over the supposed interest of labor and business in the giant industries...

...et, even this modest increase in per-capita purchasing power is...

...The second way makes a great deal more sense...

...All the other workers, employed, unemployed or retired, suffer a reduction in purchasing power if their own income fails to rise when living costs increase...

...It seems lo me that enlightened labor leaders must realize that, in recent years, the historic clash of interest between business and labor has faded considerably under the impact of friendly agreements for higher wages and prices concluded by business and labor in the big industries...

...but he has not, I think, fully considered the impact of higher wages on the huge majority of workers outside the UAW...

...Excluding professional and technical workers, farmers, managers, officials and proprietors, our civilian labor force consists of 50.5 million employed and nearly 3 million unemployed workers...

...For the real value of every $300 of individual savings (cash, savings accounts, bonds, insurance policies, pensions, etc...

...Both ways lie at the command of those mighty trade unions, like the UAW, whose members work in the sectors of the economy in which the ruling giant corporations have abolished price competition...

...LABOR AND INFLATION When wages and profits keep rising in big industry, the purchasing power of millions of other workers is reduced and the value of savings slashed By Oscar Schnabel Walter IIeutiier's announcement, at the recent United Automobile Workers convention, that the reduction of working hours will be a major UAW objective is an event of historic significance...

...Thus, we could more economically finance, at lower interest rates, the expansion of our industrial plant and the building of needed homes, schools, roads and hospitals—all of which would have increased employment...

...They could play a major role in fighting inflation on a national basis...

...second, by furthering non-inflationary wage increases wherever possible for underprivileged workers...

...Let them, on the other hand, help the underprivileged sectors of labor increase their purchasing power— first, by enforcing price reductions as a result of the increased productivity of their own industries...

...Yet, only 7 per cent of these enjoy the privilege of an automatic wage increase proportionate to raised living costs...

...December 20...

...decreased by just about the same $11 a rear...

...Reduction of the real value of savings not only deprives the salaried worker of purchasing power when he needs it most (on retirement) ; it also diminishes the means for creating new employment...

...corporations since 1954, a rise of about |4.5 billion, represents just a little more than 1 per cent of our gross national product...

...Surely Reuther is right when lie says that big business, through its price policies, bears a large measure of responsibility for inflation...

...Under the recent pattern, the gains of, for example, auto and steel stockholders and workers have in effect reduced the real income of other large groups of wage-earners...

...The net result of most wage negotiations between big industry and the big unions has been that the Oscah Schnabel, long active in the international econ-omy foreshadowed labor's new demands for shorter hours two years ago in a NEW Leader special section entitled "More Inflation or More Leisure...

...Yet, it is easily seen that this method—a general increase of cash income exceeding the average increase in productivity—would only bring an accelerated inflation and a catastrophic reduction of the real value of national savings...

...In the long run they lead to a reduction in purchasing power all across the board...

...Let the pace-making unions in the big industries be satisfied, for the time being, with the wage gains they have achieved in the last few years...

...Theoretically, there are only two ways to eliminate the social injustice by which the majority of the working class finances the economic advancement of its more privileged fellows...

...in effect, non-existent...

...Now a majority of these underprivileged workers are employed in sectors of the economy which cannot significantly raise productivity...

...Since the price level rose in the same period by 3.7 per cent, more than two-thirds of the rise in living costs has stemmed from causes other than the rise of business profits...

...Wage rises in major industries do not automatically increase national purchasing power, although they do, of course, increase the purchasing power of their immediate beneficiaries...

...The first way would be for these pace-making unions to seek not only wage increases for themselves, but simultaneous and equivalent increases for the less powerful workers in other sectors, and equivalent increases in pensions and unemployment payments...

...Thus, per-capita real income rose by roughly half of 1 per cent, or $11 over the year...

...But the real value of accumulated savings would be slightly increased instead of run-siderably decreased...

...Surely there are trade unions where employment and workers' living standards have been seriously hurt by the continuous inflation...

...Small wonder that the builders of private homes, as well as the municipalities seeking to build schools, find money tightest...

...There can be no doubt that the huge majority of those who suffer from the inflationary price rises caused by higher wages and profits in big industry are employed, unemployed and retired workers...

...Thus, organized labor has a double interest in fighting inflation from every source, including unreasonable wage increases...

...But the 26.5-per-cent increase in the accumulated profits of U.S...

...With regard to shorter hours, he had subordinated the particular interest of the auto workers to the general interest of the national economy...

...The conclusion is inescapable that wage increases in the big industries have gone beyond the rise in national productivity and have thus contributed lo a general rise in living costs...

...But when wage increases surpass the rise in productivity and/or are not matched by a reduction of business profits, they can, at best, lead to a redistribution of purchasing power among various groups of consumers...

...Instead, he is following the old-line reasoning that continuous wage increases are need to absorb the nation's rising production, and that when price rises do occur they are due solely to increased business profits and not at all to higher wages...

...A national Consumers' Anti-Inflation League might well be established, with representatives in Washington to give intelligent guidance to Congress on the effects of unilateral or bilateral policies pursued by sectors of Government, industry and labor...

...The most important result of such organized resistance to inflation would be the protection of the financing power of the nation's savings...

...In our democracy, however, the general interest of consumers has not been given active political form...

...Labor should, as the best safeguard of its present and future interests, take the lead in mobilizing American consumers against inflation...

...Neither of these assumptions can bear serious scrutiny...

...so could the administrators of the nation's savings —life-insurance companies, pension funds, savings banks, and savings associations...

...105-1...

...Real success in curbing inflationary budgetary and monetary trends, and in checking the bilateral wage-price spiral unleashed in the giant industries, is possible only if the huge majority of employed, unemployed and retired workers organize to fight inflation...

...let them, at the same time, reduce their working hours without increasing take-home pay...

...On the other hand, those who do manage to secure higher wages, not absorbed by a reduction in business profits, contribute to the inflationary pressure on the less fortunate...

...Let us look at the record: National income in March 1.957 was 6 per cent higher than in March 1956...

...Thus, more than 80 per cent of Americans—practically all workers—live on wages, salaries, pensions and unemployment payments...

...To be sure cash revenue from Federal and state taxes would have been lower, but cash expenditures for procurement, construction and other Government services would have been lower still...

...Thus, the supposed gain in purchasing power was far more than made up by the loss of future purchasing power in the form of savings...

...therefore, they have little chance to raise their income enough to meet the higher cost of living...

...Unfortunately, however, .Reuther announced at the same time that the UAW would also press for another wage rise—without qualifying this aim in terms of the state of the national economy...