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F o r m F. R. 5 1 1 TO FROM REMARKS: February 9, 1943. This memo and charts were left with Mr. James F. Biynes by Chairman Eccles (re his radio address tonight). CHAIRMAN'S OFFICE © February 6 # 1943 PSIIDING 1BMAHDS FOR 5&GB INCREASES Demands for wage increases in coal mining$ meat packing* aircraft# w W M f * clothing and on th© railroads, will have to be dealt with within th® next few weeks* tfnles® these and other demands for wage and price increases are denied, the Eeonoisie Stabilisation Program will be seriously threatened* Thereroustbe no retreat fross the "Little Steel* fomula* Recent increases in the cost of lining are not an adequate justification for general increases in wag© rates and the initiation of a new wave of oost^prioe increases. 1* Granting increases will not solve the basic economic problem! it will only intensify it* Higher wages will not gi^e labor the ability to obtain sore goods and services* The war is taking goods off th® shelves and higher wages cannot put thera back. It is econoaai© nonsense to attempt to increase the siae of the pay envelope when the si*e of the market basket is bein^ out down* Larger pay envelopes will intensify the pressure upon the disinishing supply of goods* Larger pay envelopes will lengthen the lift of oomrodities that have to b© rationed and encourage the growth of black isarkets* Higher wages will breed higher costsj higher costs will breed higher prices* To continue a poliey of appeasement to* ward any group in the community will not stop the soraable for ad vantage j It will merely sake the scramble more frensied* All this activity Is futile$ because# in the very nature of this situation* nobody ©an realize any real advantage* Pressure for higher isoney reamaaeration ought to be firmly resisted, from whatever quarter it coses* Labor is no exception* 2* The aeooipfcnying chart shows th© movement of weekly earnings in factories# compared with the oost of living* A glance at the chart is enough to show that workers taken as a whole have realised an Important gain over their pre-war eeonaade position* V?hil© part of this §ain is attributable to the movement of workers into hlgh-wage industries and to longer hours of work* increases in wage-rates are an important factor* We could afford these gains as long as it was possible to increase production of civilian goods* By now it has become evident that the demands of war xaust reduce civilian standards to bed-rock* Wage rates have become adjusted to levels which presupposed a continued abundant flow of consumer goods* How that th© flow has been curtailed, consumers* budgets mart be curtailed as well* But the problem of iOT$obili*ing wag© ineosse on the soale that is now necessary is very difficult* We must call upon workers to redue© their desands upon th© available supply of goods by paying taxes and by saving. The present situation is difficult enough! further wage increases will make it impossible* 3. Surely the answer to den&nds for higher pay is more work* Even in return for aore work, we should not pay out funds that ean be spent ourrently* Every ounce of additional effort ought to be devoted to m r production* W© cannot hope to inereas© civilian supply, but w© ean hope, by increasing the intensity with which we use our lftbor supply, to minimize the inevitable reduction. In return for more work, w« can give deferred claims upon the future supply of goods that Aaerican industry will "be able to produce when the war is over* But these do* ferred claim should be paid only in return for more work* Otherwise employers will be confronted with higher costs • They will be forced to reeovw those costs frero the- Government or f?m the consuming public in higher prices• More work means a longer working -*?eek* Proposals for increasing the length of the working week have been ia@t with the objection that hours of work in aiott war industries are already long and those essential civilian industries which have a short work-week are already working at the limits of capacity imposed by available tsaterials, plant, and equipment. This objection overlooks the fact that a longer work-week in such essential civilian industries would release workers now employed there for use in other areas where labor shortages have be©oa© acute* The most important of these areas is agriculture* There is general agreo&ent that a partial solution to the labor supply problem in agriculture lies in raisinr wage rates in those areas ishere they are inequitably low* But this is only a partial solutioni it will no* slow up ©r reverse the laoiresient fro® th© fields to the factories unless we lengthen hours and enable the factories to get along with a smaller labor supply* Diminishing the industrial tasand for labor is our enly hope of maintaining our agricultural labor supply* 4« In ay opinion these arguments are decisive against the demands for wage increases which will ecm& before you during the next few weeks* If other considerations mdm it necessary to grant &TS? eoncessions at all, they should be made in the form of savings bonds or in soise other fons not available for iass«diat@ expenditure* But it would b© better to tak© a fins stand, for the duration, against any inereas© in rates of pay^est by employers to workers* The Government should guarantee not merely organised labor but all consumers against further increases in th© cost of living, particularly in the eost of food* the link between increased costs to consumers and increased costs to employers should be broken* On© m y of breaking th© link would b© to givs- th© housewife, whenever she buys food# savings stamps in an amount sufficient to eoEip her family for the rise in food prices that has occurred since wages were frozen in September. The value of stamps given with each dollar's worth of purchases would b© increased, if it became impossible to prevent further increases in food prices* The rise in prices that has occurred since September would require th© issuance of a 5f£ stasap for every dollar*s worth of food purchases• Unlike the present savings stas$«* th»#© staisps should not " e rftdftenablo usctil after the w&r# fh@ eost b to the &«werraftent of stioh a proposal, while ooasiderabl®, would »# a relatlvsly s®all prioe to pay for easing the social and political tension that is being created by the competitive demands of agriculture and organised labor upon the consumer* I *a aware of th© administrative difficulties which this proposal involves but I believe that thev could be worked out* F e b r u a r y 8, 1943 CHANGES IN SELECTED PRICES, WA.GES A1TD LIVING COSTS June 1939 January 1941 May 1942 December 1942 3/ Yifholesale prices (1926=100) z/ Farm Other than farm and food 75.6 62.4 80.2 80.8 71.6 84.3 98.8 104.4 95.7 101.0 113.8 95.9 Percent rise to December 1942 l/ from June 1939 January 1941 May 1942 34 82 20 25 59 14 100 23 63 71 22 41 17 3 14 4 9 Farm prices (1909-14=100) s/ Prices received *" ~ Prices paid Ratio of prices received to paid 89* 127 70 104 128 81 152 152 100 178 156 114 Cost of living (1935-39=100) z/ Food Clothing Rent 98*6 93.6 100.3 104.3 100.8 97.8 100.7 105.0 116.0 121.6 126.2 109.9 120.4 132.7 125.9 108.0 22 42 26 4 19 36 25 3 64.2/ | 24.17 37.3 68.9/ § 27.74 39.0 83.1/ 37.46 89.9/ $ 39.78 44.0 40 65 18 31 43 13 Factory Wages Z/ Average hourly earnings Average weekly earnings Average hours worked V November for average hours, hourly and weekly earnings. 2/ Bureau of Labor Statistics. 3/ Bureau of Agricultural Economics. 42 .a - 2 FACTORY EMPLOYMENT AND PAYROLLS BUREAU OF LABOR STATISTICS INDEXES, WITHOUT SEASONAL ADJUSTMENT, 1939 • 100 PER CENT PER CENT MONTHLY 350 350 - 300 - _ 250 1 — - 1 1 - 250 7 - 200 300 - 200 - 150 - PAYROLLS / - _ _ - £2 b-^^EIIPLOYMEl IT 100 100 • 50 —Nr? 50 - 1932 1933 1934 • o n tr ttmnmts tr TM rtMnu. turn srsnm 1935 1936 150 1937 1938 1939 1940 1941 1942 1943 1944 WEEKLY EARNINGS ANO COSTS OF FACTORY WORKERS 1939 • 100 PER CENT PER CENT 180 180 170 "- 170 160 160 150 150 140 WEEKLY EARNINGS 90 80 1939 1940 1941 1942 WHOLESALE PRICES 1926 •100 MONTHLY PER CENT * 180 180 170 i ~7r\ \ (V I 160 160 150 150 • 140 140 — i 130 — _ _ 130 120 120 / I 110 100 i 1 10 100 . 90 90 ' 80 \ v 70 /"""' \K^*+ s^l 80 J 70 ALL COMMOCITIES \J FR AM 60 60 50 40 50 40 w OTHf[R THAN f •ARM PROC)UCTS ANO FOODS 30 30 1936 1938 $OAM0 of 9ovta*o*$ or rue narau *nt*vt tr$rt* 1940 1942 1944
