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CONFIDENTIAL

October 29, 1942
Messrs* Stark and Krost
Kenneth B. William**

Wage Stabilisation and the
Manpower Problem

Wage stabilisation and manpower policy
Wage stabilisation, by institutionalising present -wage differentials,
diminishes the ability of free labor market forces to direct the migration of
workers to those occupations, industries, and areas most essential to the
prosecution of the war* Without the utilization of non-pecuniary measures to
control labor mobility, wage stabilisation is likely to result in large-scale,
purposeless migration of workers from job to job in search of higher pay. Wagerates for the same type of work vary greatly Msong plants in the sasie industry
and area, and among industries and areas* For example, the wage-rate in March
1942 for grade A tool and die makers in airfr&iae plants along the East Coast
ranged from fl*05 to |1*29 perhour* Entrance rates for adult ooMnon building
labor in July Ii41 varied from 31 cents an hour in Memphis to f *98 cents an
hour in Cleveland* Since workers cannot receive higher pay in their present
jobs but can obtain substantial increases by changing employers, the tendency
is for workers to change jobs* The operation of such a tendency will intensify
labor shortages, aagaify training and placement problems, ©reate housing and
eosBBunity facility difficulties, &n& seriously interfere with the attainment
of the required industrial and agricultural production*
stabilisation can only succeed in preventing inflation and in
maintaining full production if wage and iaanpow®r asobilisation policies are in*
tegrated* Both wage and non-pecuniary labor polieies siust be directed toward
the prisary goal of directing workers to those jobs most essential to the
prosecution of the war, and of retaining in war production workers already
employed in suoh jobs*
The War Labor Board is doing an excellent job in handling the problem
froaa the wage stabilization end* It lias properly limited its functions to handling
the fundamental and administratively feasible problems* It is exercising its
functions intelligently on a case by case basis within a framework of essential
principles* A case by ease approach is essential. The market for labor is not
one natiozsal market but is hundreds of markets* In sosie instances an entire
industry is the market (steel)* Is other instances, the market is a snail
geographical area (Southern California). In another instance the market may be
one large plant* Knowledge of the forces operating in each market is required
and application of the general wage policies to each marketroustbe made in the
light of such knowledge*




• 2 *

The War Manpower 0©iasdssion is charged with the sajor responsibility
for labor policies which utilise n0a*peeuniary TO&sures of control* Ifefortunately,
its r@&poasibility is not complete* Selective Service through its authority
over the draft and occupational deferment now lias the vrlm&ry nonr-pecuniary
instruisent of control* The War Manpower Gojeaiasion is urging the passage of a
national service aet ishieh will give the Commission ootsplete compulsory control
of all sten and women inolxtding control of occupational deferment policy* Whether
such compulsory control is yet necessary or desirable is debatable. There is
little doubt but that it will be necessary before the war is won* There is no
doubt but that uuch closer integration of occupational deferment policy, general
laanpower mobilisation, policy, and -war production requirements is imperative*
question of immediate desirability of a national service aet depends in part upon the machinery available to administer ecsnpulsory control and
in part upon public recognition that voluntary methods of control have been
exhausted*
The general public does not yet appear to b© convinced that voluntary
and indirect compulsive measure* have been exhaueted* Organised labor tabes
the position that voluntary measures have not yet been given a full trial* The
machinery available for administering compulsive control is far from adequate*
The only organisation of sufficient siee with enough knowledge of labor supply
and employment problems to begin to handle the job is the United States Employment Service* this agency, however, requires substantial improvement before it
could administer compulsory controls even with rough efficiency*
Military demand for manpower
Two important questions merit serious consideration in connection with
taanpower mobilisation policies* The first is concerned with the proper sia#
of the armed force ©ad the timing of its expansion* fh© War Bepartuent has
announced the official goal is an arcsy of 7*5 million by the end of 1943* An
additional ! £ - 2*0 million will be in the Mavy, Coast Ouard, Marino, and
•>
Merchant Marine by that time* Thus, 9 to S*5 million out of a total of 29 million
isen 18-45 years of age will be in the arssed service by the ©ad of 1943* In
the light of manpower requirements of industry and agriculture, the shipping and
transportation situation, and necessity for supplying materials and equipaent
to our allies, it is highly questionable if our armed forees should be as large
or should increase as rapidly as is now planned* Certainly, any further increase
in rate of inductions or of the total an&ed force required ~by the end of 1043 above
present plans should be permitted only if conclusive proof of its necessity is
offered*
Hours of work
The seoond question concerns hours of work* In Septembert average hours
worked hy all persons employed in non*agrlcultural industries was 43. Average




* S—
•

scheduled hours was about 45* In manufacturing alone, the average in August
was 42.8. Most war industries producing durable goods, except blast furnaces,
steel works and rolling mills, averaged close to 48»
It scheduled hours were increased to 48, a straight arithmetical
calculation suggests that total jsanhours would increase 7 per sent, permitting
the release of about 3 million workers* The distribution of hours worked
around the average indicates that this figure is smeh too high. 4«4 million
persons worked 80 hours or longer, 4«$ million tram SO to S0 hours, 23.8 million
frosm 40 to 49 hours, S*5 million from SO to 39 hours, and 3*1 million worked
29 hours or less. Those now working above 50 hours and a large number of those
in the upper end of the 40 to 49 hour group would not be affected if 48 hours
were made the point at whieh pre^iu® payment begins* Those working less than
30 hours and sany of those in the lower part of the 30 to 39 group would not
work longer hours since they are not now prevented fro® working longer hours by
the requirement that overtime be paid above 40 hours. Many of those working less
than 30 hours a week are part-time workers who would not resiain in the labor
market if they had to work longer hours• The problem narrows down to those
in the upper part of the 30 to 39 group and the lower part of the 40 to 49 group.
If all of those workers were placed on a standard 48-hour week, the number of
workers who arithiaetioally eould be released would be so more than 2 million*
The number actually released by placing the point of premium parent
at 48 would be atxeb ©sailer than Z million* Output per manhour would decline
somewhat and absenteeism would increase* Many women, ©specially married woBien*
would leave the labor sarket rather than work longer hours. In same States,
laws prohibit the employment of women longer hours* The workers released would
not all be in the right areas or have the proper skills to be re-employed.
Labor's attitude Is also important. Labor would not willingly accept a cut in
pay. In seme industries, workers are required to work short hours or idle on
the job because of bad scheduling or lack of raw materials• In some plants,
ssor© sen are employed than ean work efficiently and many of the workers have to
kill time. It would be exceedingly difficult to convince such workers that
longer hours are necessary.
If straight-tine wages are raised to permit the same earnings at
48 straight-time as are now obtained from 40 hours at straight-tisse and 8 hours
of evertijse, wage-rates would have to increase 8 l/s ^&r cent. This would be
Mildly inflationary because not all firms oould offset the added cost of basic
rates by longer hours* In some industries, department*are not sufficiently
balanced to work all persons on a 48-hour basis* For example, a finishing department &ay in 40 hours finish all of the processed goods the department behind
it cam produce in 48 hours* Machinery, equipment, and skilled workers are not
available to balance all departments and industries on a 48-hour basis immediately*
Moreover, higher basic rates xoean higher overtiae rates for those who work sore
than 48 hours (150 per cent of 108 instead of 150 per cent of 100).




- 4 -

More important than any of these eons!derations is timing*
Bventu&lly, average hours must increase* To increase the© now will result in
diminishing the necessity of and incentive for attracting into the labor fore©,
training* and upgrading persons who will be needed in the labor market later
to replace Jten drami into t*a© armed forces* At this stage, it js&y be more
desirable to continue the general pressure for training additional workers and
to mak® adjustments as required in a few tight areas «her« the need for longer
hours is clear. At such a time opposition to longer hours would b© minimised*
On the other hand, in Mew York City sos© 400,000 persons are already unemployed.
It would serve no good purpose to increase hours there and create additional
tmejsployment*
Seas© action is being taken in this field* Eepresent&tive Ramspeek
recently introduced m ess©a.d»@nt to the Fair Labor Standards Aot permitting work
beyond 40 hours a wmk without payment of overtime premiums if agreed to by
representatives of irorksara certified % the fational Labor Eolations Board.
Last July, representatives of eight Govormaent agencies issued a joint statement
recommending th© adoption of the 48-hour week as the best working schedule for
sustained efficiency in most industrial operations* ^hile longer hours say be
necessary in soee instances, every effort should be made to train additional
markers so that hours can be reduced to 48. In peace tiass, a 40*hour wsek is
generally accepted but in war tiase a 48-hour week is isore efficient* The statement was signM by Patterson (War Bepartaent), Bard {Wavy Department) f
Land (Maritime Coisaission), KoKutt (H^G), lolson (W3), fay lor (Commerce},
Draper (Public Health), and Tracy (Labor Department)*
facts
fhe essential manpower f&cts are thati
(1) The unemployed reserve is about gone. Only 1*7 million
(1.0 million Bales, •? million females) were unemployed
in September*
(2) The labor force has already been stretched 1*5 million
above normal*
(3) The deiaands of the ans©d forces and industry are continuing to increase* Sorae 4 million additional men srust be
drawl into the anaed forces by the end of 1243* In addition,
4 million people xaust be brought into war ©isployiseiit*
Essentially these demand® can. be m&t only if 4 million persons,
mostly married wosaen, are brought into the labor force &nd 4 million persons are
shifted out of non-*war industries and agriculture* This means that around 14
zaillion persons must be placed in new jobs, 9 sillion of them trained*
These global figures are too huge to comprehend easily* lhat the
situation is and promises to be in a few areas isay indicate the problem nor®




clearly. In Baltimore, total eiaployiaent increased from 417,OCX) in April 1940
to 534,000 in June 1942, or 117,000* Between July 1942 and July 1943 about
56,000 additional workers will b® needed in war production plants, exclusive
of replacement of military inductees* After replacements of inductees, there
will b@ a net local supply of about 22,000 workers, assuming 10,000 displacements from rton""W&r industries, entrance into the labor imrket of 13,000
without children and 10,000 women with children. At least 34,000 workers
into Baltimore, if war production ftoals are to be achieved.
In the Seattle-Taeoiaa-Breiierton area war ejaployxsent increased from
20,000 in November 1940 to 125,000 in July 1942. The local supply of skilled
ejid seiai-skilled workers is completely exhausted. Even th© supply of unskilled labor is inadequate to js^et the demand* From July 1942 to July 1943,
about 97,000 additional workers will be needed* Even with thorough utilization
of all local labor, including 25 per cent curtailment of non-essential industry,
widespread hiring of women, employment of handicapped workers, and utilisation
of persons available for part-time work, not more than 49,000 persons oan be
lead© available to m&®t tho demand* At least 48,000 and possible 85,000 to
75,000 workers i i s b© obtained through is-siigration.
*ut

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