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Problems and Policies o f Dispute
Settlement and Wage Stabilization
During W orld War II

Bulletin No. 1009
U N IT E D S T A T E S D E P A R T M E N T O F L A B O R




M a u ric e J . T o b in , S ecreta ry

BUREAU OF LABOR STATISTICS
Ewan Clague, Commissioner




Problems and Policies of Dispute
Settlement and Wage Stabilization
During World War II

Bulletin No. 1009
U N IT E D STATES D E P A R T M E N T OF LABOR
Maurice J. Tobin,

Secretary

B U R E A U O F L A B O R S T A T IS T I C S
Ew an Clague, Commissioner

F or sale b y the Superintendent o f D ocu m en ts, U . S. G overnm ent P rinting Office
W ashington 25, D . C . - P rice 75 cents







Letter of Transmittal
U

n it e d

S tates D
B

e p a r t m e n t of

u r e a u of

L

ab o r

L

abor,

S t a t is t ic s ,

, . 67., Decem ber 15 , 1950 .

W ashington D

The S e c r e t a r y o f L a b o r :
This volume was prepared for the National Security Resources
Board as an analysis of the Nation’s experience during W orld W ar
I I in the settlement of labor disputes and the stabilization of wages.
It is published under the sponsorship of the Bureau. The opinions
expressed herein represent those of the editors and authors and do
not necessarily reflect the thinking of any agency of the Federal
Government. The analysis provides a critical and realistic appraisal
of the policies formulated and applied to meet the basic problems of
the W orld W a r I I period. The report also serves to relate the dif­
ferences as well as similarities between that period and the current
emergency.
The editors and authors of the volume are well qualified to make
such a study. They combine an intimate knowledge of wartime ex­
perience, obtained through extensive service in key administrative
positions in the National W ar Labor Board, with an objective and
public-minded attitude. Since the end of W orld W ar I I they have
continued to fill important positions in the labor relations field. They
are:
W . Ellison Chalmers, Director, Institute of Labor and Industrial Relations,
University of Illin ois; formerly Chairman, N W LB W ar Shipping Panel, E x ­
ecutive Head, W ar Production Drive Division of the W ar Production Board,
and Chief of Program Division, U. S. Conciliation Service.
Milton Derber, Coordinator of Research, Institute of Labor and Industrial
Relations, University of Illinois, and Editor, Industrial Relations Research
Association; formerly Economist and Chief of Research Division, National
W ar Labor Board and Editor of termination Report of National Labor Rela­
tions Board.
W illiam H. McPherson, Professor of Economics, Institute of Labor and
Industrial Relations, University of Illinois; and Secretary-Treasurer, Indus­
trial Relations Research Association; formerly Chairman, National W ar
Labor Board Shipbuilding Commission and Principal Labor Analyst, W ar
Manpower Commission.
Benjamin Aaron, Arbitrator and Research Associate, Institute of Indus­
trial Relations, University of California, Los Angeles; formerly Executive
Director, National W ar Labor Board and Chairman of National Air Frame
Panel and Detroit Tool and Die Commission.




m

LETTER OF TRANSMITTAL

IV

Jack G. Day, Attorney; formerly Vice Chairman, N W L B Shipbuilding
Commission, Chairman, Kansas City Regional W a r Labor Board, and Vice
Chairman, National W age Stabilization Board.
H. M. Douty, Chief, Division of Wage Statistics, U. S. Bureau of Labor
Statistics; formerly Chief of Research Division, National W ar Labor Board.
John T. Dunlop, Associate Professor of Economics, Harvard University,
and Impartial Chairman, National Joint Board for the Settlement of Jur­
isdictional Disputes, Construction Industry; formerly Chief of Research Divi­
sion, National W a r Labor Board, Public Member, Boston Regional W a r Labor
Board, and Economic Consultant to Office of Economic Stabilization.
Clark Kerr, Director, Institute of Industrial Relations, University of
California, Berkeley, and Arbitrator; formerly Chairman, National W a r
Labor Board Meat Packing Commission, Vice Chairman, Seattle Regional
W ar Labor Board, and Public Member, W est Coast Air Craft Committee.
Emmett B. M[cNatt, Professor of Economics, University of Illin ois; formerly W age Stabilization Director, Chicago Regional W a r Labor Board.
John B. Parrish, Associate Professor of Economics, University of Illin o is;
formerly W age Stabilization Section Chief and Economic Consultant to
Appeals Committee* N W LB , and Director, Chicago Regional Office of U. S.
Bureau of Labor Statistics.

t

In addition to voluminous documentary material and to their own
experience covering every important aspect of the National War Labor
Board’s work, the authors also drew heavily for advice and criticism
from a large number of experts in the field representing labor, indus­
try, and the general public.
Valuable assistance in the planning and research for the volume was
provided by Morris A. Horowitz, Assistant Professor of Labor and
Industrial Relations, University of Illinois. The authors wish to ex­
press their appreciation to Fred A. Krafft, Samuel E. Hill, and Fred­
erick J. O. Blachly, members of the National Security Resources Board
staff, who made substantial critical and editorial contributions.
E
C a g u e , Commissioner.
Hon. M
J. T ,
Secretary of Labor.
wan

a u r ic e




o b in

l

Contents
Page

Summary and Conclusions— W . Ellison Chalmers , M ilton
Derberf and W illiam H . M c P h e rso n ........................................

1

Chapter

1. Voluntarism and Compulsion in Dispute Settlement—
W. E llison C h alm ers ................................................................
26
2. The Principles of Dispute Settlement—M ilton Berber . . 72
3. The Development of Wage-Price Policies—H . M . D outy . 104
4. An Appraisal of Wage Stabilization Policies—John T.
D u n l o p ....................................................................................
155
5. Relation of Wage Control to Manpower Problems—John
B. P arrish ...........................................................................
187
6. Tripartitism— W illiam H . M c P h e r s o n .......................... 228
7. Jurisdiction—Jack G. D a y .............................................. 267
8. The Distribution of Authority and it's Relation to Policy—
Clark K e r r ..........................................................................
291
9. Problems of Case Processing—Em m ett B . M cN att
322
10. Enforcement—B enjam in A a r o n ...................
350




v




Summary and Conclusions
By W. Ellison Chalmers, Milton Berber, and William H. McPherson

I. P urpose and N ature of S tudy
T
s t u d y attempts to appraise the major policy decisions made by
the Government to meet the threats to production involved in indus­
trial disputes and skyrocketing wage levels from the time that the
Nation began to arm in 1940 until the end of general price and wage
controls in 1947. It appraises each decision in the light of the funda­
mental condition of the time. No attempt is made to conjecture about
what might have followed had any of the basic conditioning factors
been different; and there is only limited speculation as to what the
results might have been if different decisions had been made. For
these reasons the study has certain limitations if considered as the
background for any blueprint projected into the future.
The purpose of this volume lies not in the presentation, but rather
in the analysis of the facts regarding the operation of the three
agencies on which the study focuses—the National Defense Mediation
Board, the National War Labor Board, and the National Wage Sta­
bilization Board. For the reader who is not familiar with the work
of these boards, there are numerous footnote references to the official
reports and other sources of information on each of these agencies.
This summary chapter deals only with what we regard as the basic
problems and the major conclusions. An elaboration of these, to­
gether with a treatment of subsidiary problems and conclusions, will
be found in the chapters that follow.
h is

II. T he S etting

To appraise properly the Nation’s efforts in settling labor disputes
and stabilizing wages during World War II, it must be recognized



l

2

DISPUTE SETTLEMENT AND WAGE STABILIZATION

that certain conditions of the time played a controlling role. Eight
conditions were of primary significance in this respect.
(ia) American involvement in the war came gradually—between
September 1939, and December 1941, This period of transition per­
mitted a reasonably orderly adaptation of industrial life to the needs
of the emergency. Moreover, it allowed the Nation to experiment with
new techniques and procedures, such as the National Defense Media­
tion Board in the field of labor disputes. This experience proved
highly important when we became directly engaged in war.
( b ) The war never touched the American mainland and the basic
patterns of American life were not drastically altered. Even at the
peak of the war effort governmental regimentation of the worker was
slight. Except for inductions of the younger men into the Armed
Forces, freedom of occupational movement was but slightly restricted.
(o) Although the population was badly divided over foreign policy
before Pearl Harbor, it was united to an extraordinary degree in
fighting the war. Despite numerous, and sometimes violent, differ­
ences over domestic policies, the war effort was primary. No strategic
group in the population, openly or secretly, opposed our effort to win
the war. No fifth column presented a threat to production or morale.
Civil liberties were respected to an unusual degree for a war period.
(d ) During the defense period and at the time of our entrance into
the war, the economy was underemployed. Moreover, it had been
underemployed for a dozen years previously. The problem of infla­
tion, which has characterized every major war period, therefore de­
veloped rather gradually. For many months available supplies of
production facilities and manpower resources permitted both largescale output for war and, except for certain consumer durables, ample
supplies pf consumer goods. Neither manpower nor prices had to be
frozen to assure adequate war production and a stable economy during
this period.
(e) Partly because of the previous underemployment of our human
and material resources and partly because the war never hit the
American mainland, no significant section of the civilian population
had to make important sacrifices in living standards and some sec­
tions materially improved their positions. Private debts were greatly
reduced and substantial savings were accumulated. Industrial dis­
putes, therefore, were rarely more than a temporary inconvenience to
the individual citizen, and stabilization measures imposed few real
hardships.
(/) Relations between management and organized labor in many
industries, particularly the mass production industries, were quite
immature. The right of workers to form unions without employer
interference had been recognized by law only a few years before the



SUMMARY AND CONCLUSIONS!

3

outbreak of the war. Many employers regarded unions as a nuisance
to be tolerated at best. Union leaders, in turn, tended to regard
many management representatives with suspicion and to doubt their
motives. Although union strength was developing rapidly, union
status was a major question in many industries at the time of the
Pearl Harbor attack. While many AFL unions had won the closed
or union shop, the key CIO unions which had organized the mass
production industries were still struggling for security. Even griev­
ance machinery in many plants was imperfectly established.
(g )
Neither labor nor management was represented by a single
group. The union movement not only was divided between AFL,
CIO, and independents, but, at the outset of the war, still represented
less than one-third of nonagrieultural workers. Its leaders were di­
vided on many policy questions, including how far to cooperate with
each other. Management was even less well organized from an in­
dustrial relations point of view. Neither the United States Chamber
of Commerce nor the National Association of Manufacturers provided
even formal leadership in the policy decisions of its members.
(A) Notwithstanding the growing strength of the unions and the
support of President Roosevelt and his administration, attempts by
the union movement to play a major part in the direction of the war
program never entirely succeeded. At least in part this was due
to the split in labor’s ranks. Only in agencies concerned directly
with labor relations, such as the National Defense Mediation Board,
the National War Labor Board, and the National Wage Stabilization
Board did union leaders gain a direct voice in policymaking and ad­
ministration. In such important agencies as the War Production
Board (after Hillman’s retirement) and the Office of Price Admin­
istration, labor representatives served largely in an advisory capacity.
III. A P roblem of Balance
Within the conditions set forth above, the Government faced three
major tasks involving labor. The first was to provide machinery to
settle labor disputes with a minimum of interference to production.
A second task was to restrain wage increases as a part of a general
program of economic stabilization. The third was to assure the
best possible distribution and utilization of the Nation’s manpower
in terms of the needs of both the Armed Forces and the domestic econ­
omy. Each of these tasks presented major difficulties. But the most
important, and perhaps least appreciated, difficulty was how to secure
proper balance between the three.




4

DISPUTE; SETTLEMENT AND WAGE STABILIZATION

As the experience of the defense period demonstrated, it was rela­
tively easy to settle disputes over wages in times of expanding pro­
duction and rising profits. Employers were in a good position to pass
on wage increases in the form of higher prices as long as price controls
were not in effect. But when first price ceiling and then wage stabili­
zation rules were introduced, wage disputes became more complex.
The interest of the union did not always coincide with the interest
of the government in a specific situation despite general agreement
on the over-all objective of inflation control.
As available labor supplies became more scarce, a new element
entered the picture. Employers began to compete with each other
for manpower by bidding up wages. Their interests and needs in
specific situations, likewise, did not always coincide with the interest
and needs of the Government regarding manpower distribution. Nor
was the best wage decision from the point of view of manpower dis­
tribution always the best decision for inflation control. Sometimes
also there was a conflict between the objectives of industrial peace
and manpower distribution. Whereas manpower was primarily a
local labor market problem, industrial peace frequently depended
upon industry-wide or regional considerations.
Thus, the threefold task of the Government in the labor field—
settlement of labor disputes, stabilization of wages, and distribution
of manpower—often required compromise decisions. It was theo­
retically, as well as practically, impossible to obtain results that were
ideal for all three purposes. A balance had to be secured not only in
the formulation of general policies but also in specific case decisions.
We therefore conclude:
1. The three objectives of the Government’s program in the labor
field were (a ) the peaceful settlement of disputes, (b ) the limitation
of wages as a part of economic stabilization, and (c) the guidance of
civilian manpower in accordance with production needs.
2. Realization of each objective inevitably meant some conflict
with the achievement of the other two.
3. The basic problem was to achieve a proper balance between the
programs designed to meet the objectives.
4. The problem of balance was not serious while the Nation’s re­
sources were underutilized. It became difficult when the Nation was
attempting to make the best use of all of its resources.
5. The ultimate test of the adequacy of the Government’s program
during the defense and war periods is the degree to which this bal­
ance was achieved.




SUMMARY AND CONCLUSIONS

5

IV. T he S ettlement of I ndustrial D isputes
V olu n tarism .—From the early days of the emergency, as chapter 1
indicates, it was clear that some method had to be found for eliminat­
ing the danger that the production program might be crippled by
serious work stoppages.
Until this time wages and working conditions usually were de(termined by a bargaining process, in which each side was free to
institute a work stoppage. To protect the production program some
restrictions were needed on the existing rights of labor and manage­
ment to engage in strikes and lockouts. The Government had to
make a fundamental choice of the approach it would use to restrict
these rights. The first decision of the Government was to depend
primarily on voluntarism—the self-imposition or acceptance by labor
and management of restrictions on their freedom of action in in­
dustrial relations.
As experience accumulated and as conditions changed, that deci­
sion was modified, but it remained the cornerstone of the Govern­
ment’s industrial relations policy throughout the war.
During the defense period, voluntarism was the basis for the
establishment of a tripartite NDMB and for the limitation of its
powders to mediation and recommendation. For 8 months that Board
was successful in keeping stoppages at a minimum. Despite its
breakdown as a result of the C a ptive M ines case, voluntarism was
continued as the basic approach after our direct involvement in the
war. Labor and management joined in a no-strike, no-lockout agree­
ment because they accepted the urgency of the war program and be­
cause they recognized the need for a peaceful means of resolving
deadlocks. Like the Administration, they preferred a voluntary to
a compulsory method of achieving industrial peace. They agreed,
therefore, to be bound by the arbitrational decisions of a new board.
Throughout the entire war period, this machinery, with few ex­
ceptions, achieved satisfactory results. Most industrial disputes were
settled peacefully and, where work stoppages did occur, they were
of short duration. The industrial machine achieved phenomenal pro­
duction records. When Congress reconsidered the governmental de­
cision in the spring of 1943, even under the pressure of the most
severe dispute crisis of the war—the bituminous coal strikes—it
decided to continue the same voluntary approach in the War Labor
Disputes Act.
When, however, it became apparent that wage stabilization was
also necessary, Congress decided to employ a larger element of com­
pulsion. Both labor and management representatives acknowledged
the necessity for this decision because it affected large numbers of



6

DISPUTE SETTLEMENT AND WAGE STABILIZATION)

unorganized employers and workers. In the development of wage
stabilization principles, in their application to individual cases, and
in the enforcement of the program, labor and management representa­
tives on the NWLB and NWSB participated.
Of course, voluntarism was not completely successful. A consider­
able number of stoppages occurred, many of which were quite im­
portant to the war production program. In some cases, moreover, the
Government decided that it could not tolerate further production
delays and resorted to some degree of compulsion. During the defense
and war periods, the Government, in these few cases, finally achieved
the continuation or resumption of production by seizing the properties.
Such an action was supplementary to, rather than a replacement of,
the voluntary approach. It was required where the group discipline
was not strong enough to hold the recalcitrant party to the pledge
which, through their representatives, the groups had made and to
which they generally were adhering. It appears probable that had
these cases not been so handled, war production would have been
seriously delayed and an increasing number of noncompliance cases
would have arisen.
In spite of the strikes that occurred and the use of the power of
seizure in some cases, voluntarism was largely successful. Although
the Nation needed a high degree of industrial peace, it did not require
perfection. Indeed, in as complex and unsettled a state as then
existed in industrial relations, it would have been quite unrealistic
to assume the possibility of a complete elimination of stoppages.
We therefore conclude:
1. In meeting the labor disputes and wage stabilization problems,
the Government chose to use as little compulsion as possible.
2. The Government was able to depend in large part on labor and
management to join in imposing restrictions on their own actions and
in the administration of such restrictions.
3. During the defense period, these restrictions were almost entirely
voluntary and worked successfully through the NDMB for 8 months.
4. In the war period, the Government necessarily extended its use
of compulsion in the peaceful adjustment of labor disputes, but still
was successful in depending largely on voluntary action.
5. When wage stabilization controls had to be added to the program,
the Government needed to go further in its use of compulsory powers.
Nevertheless, it still was able to depend on the participation of labor
and management representation in formulating and administering the
controls over wages.
6. Voluntarism is more effective than compulsion because it con­
tributes greater realism and flexibility and better cooperation between
labor and management and between these groups and the Government.



SUMM ARY AND CONCLUSIONS

7

7. There are practical limits to the voluntary approach. These
limits vary with different circumstances. A n essential prerequisite is
the willingness o f labor and management to establish and administer
restraints adequate to meet the Government’s needs.
8. Governmental seizure o f the small number o f plants in which
either management or the union refused to accept Board decisions
was essential to protect war production and to prevent an increasing
number o f noncompliance cases.
9. A basic Government problem was to achieve the most effective
combination o f voluntarism and compulsion.
TH partitism .— A s chapter 6 makes clear, the joint participation
o f labor and management with the Government in the establishment
and administration o f the dispute-settling machinery was essential
to the success o f the voluntary approach. This procedure was
strongly favored by both groups. It contributed greatly to the
realism o f the decisions reached, to the fairness with which the boards
operated, and consequently to the general acceptance o f their deci­
sions. In cases where acceptance was not immediately forthcoming,
tripartitism was important in securing compliance with board orders.
When the two groups entered into the no-strike, no-lockout agree­
ment, it was with the understanding that the new board would include
representatives o f both sides. The continuing participation o f these
representatives confirmed their continuing acceptance o f that volun­
tary pledge.
The partisan members contributed to the effectiveness o f each o f
the three boards by (a) realistically interpreting to the public mem­
bers both specific problems and the implications o f proposed general
policies, ( b ) assuring both parties that their case had been adequately
considered, and ( c ) confining the decisions o f the public members
within the range o f acceptability to both parties.
In addition to assuming general leadership o f the boards, the
public members tried to mediate the conflicting views o f the partisan
members on all m ajor issues. They cast the deciding vote in practi­
cally all instances o f policy formulation and in a large m ajority of
case decisions.
There always remained the possibility that one o f the partisan
groups might elect to withdraw. Indeed, the N D M B largely ceased
to function as a result o f the C IO withdrawal. The public members
o f each board, consequently, kept in mind the desirability o f pursuing
such policies as would result in the continued acceptance o f the
machinery by both sides. The alternative o f withdrawal was seldom
even seriously contemplated after its single use. Each group con­
sidered that the Government would have been forced thereby to use
other devices that would be more repressive and would provide less
satisfactory settlements.




8

DISPUTE: SETTLEMENT AND WAGE STABILIZATION"

There were unquestioned disadvantages to tripartitism. It was
time-consuming; there was always the possibility, though rarely the
actuality, that the public members m ight be outvoted on wage stabili­
zation cases; and there was the uncertainty involved in the possibility
o f withdrawal. These disadvantages were more than compensated
fo r by the advantages to the Government as well as to labor and
management.
W e therefore conclude:
1. The voluntary approach depended, for its effectiveness, on the
participation o f labor and management representatives in the dispute­
settling and wage stabilizing processes.
2. The partisan members added realism to the public boards and
gave to the parties whose cases were being processed an assurance
that their problems wT adequately considered.
ere
3. The possibility o f withdrawal gave labor and management a
genuine veto power, but one that could be used only at a considerable
sacrifice.
4. The public members played a crucial role in the dispute-settling
and wage-stabilizing machinery. They cast the deciding vote in
practically all instances o f policy formulation and in most case deci­
sions. Their influence was adequate to protect the Government’s
interests.
5. The position o f the public members exerted considerable influence
upon the partisan members who took the lead in working out policies
w^hich met the needs o f the war program.
6. The greatest benefit o f tripartitism was its contribution to
compliance.
7. Other benefits o f tripartitism included protection against ap­
pointments by political pressure and added assurance that case action
on the part o f staff and public members would not be partial to either
o f the parties.
8. There were disadvantages in tripartitism. It moved slowly.
On a few occasions, the public members were outvoted on wage-stabili­
zation issues. W ithdrawal crippled one o f the boards (the N D M B )
and always remained as an uncertainty.
9. There was less danger o f withdrawal from a tripartite board
than o f withdrawal from an advisory board or o f loss o f effectiveness
on the part o f an all-public board.
10. On balance, tripartitism worked well.
T he need fo r general principles .— A s analyzed in chapter 2, gen­
eral principles were needed fo r the guidance o f the arbitrational ma­
chinery built on the voluntary no-strike, no-lockout agreement. That
machinery was designed to supplement, not to replace, collective bar­
gaining. T o encourage the continuation o f as much collective bar­




SUMMARY AND CONCLUSIONS

9

gaining as possible, there was a need fo r some general guides on
substantive contract issues— particularly the critical issues o f union
security and wages— that the parties could follow in coming to their
own decisions. Although collective bargaining was seriously modified
during the war period, the establishment o f these guides enabled the
parties frequently to reach agreements without coming to the Board.
General principles also proved to be necessary in order that the
N W L B could secure adequate acceptance o f its decisions. As it worked
out, these principles were frequently compromises, reached under the
leadership o f the public members, that satisfied each group o f partisan
members sufficiently so that it was w illing to work with and accept the
Board. These general guides were particularly important in assuring
fairness o f treatment in different cases. When the N W L B was forced
by the size o f its case-load to delegate much o f its decision-making
authority to a number o f regional boards and commissions, guides for
these agencies became essential.
Three important procedural questions arose: W ho should be respon­
sible fo r the formation o f general principles; how should the respon­
sible body go about establishing the principles; and when should the
principles be established ?
The experience o f the N D M B was not helpful in these respects.
That Board deliberately refrained from establishing general principles
on the ground that it was primarily a mediation and not a decision­
making body. W hile it had power to formulate recommendations, it
was able to achieve settlements without using this power in about
two-thirds o f its cases.
Neither Congress nor the Administration was well equipped to
establish the necessary principles at the beginning o f the war because
they had no experience on which to act, Moreover the leaders o f
both branches o f the Government were o f the opinion that wartime
labor principles were far more likely to be realistic and acceptable
if labor and management joined in their development.
General principles might have been worked out by the Labor-Man­
agement Conference that convened just after Pearl Harbor. Clearly
there would have been some advantage in such an early agreement on
the m ajor issues. There then would have been greater assurance of
the continuance o f the N W L B , a framework for the ready processing
o f specific disputes, and the elimination o f uncertainty for the parties.
Actually, it did not happen that way. The Conference arrived at a
no-stoppage and arbitrational agreement, but no agreement could be
reached on the basic issue o f union security. W e cannot be certain
whether it m ight have achieved an agreement on that issue and per­
haps on the almost as urgent issue o f wages if it had continued in ses­
sion fo r a longer time. However, it appears more likely that, given




10

DISPUTE; SETTLEMENT AND WAGE STABILIZATION

the circumstances o f the time, no form ula fo r the settlement o f these
issues developed in advance o f the consideration o f specific cases would
have secured general agreement.
The responsibility fo r form ulating general principles was therefore
left to the new tripartite N W LB . In contrast to the conference pro­
cedure, the B oard developed its principles out o f a series o f case de­
cisions in the manner o f the common law. This method was not easy,
especially since a number o f Board members were fo r some time op ­
posed to the idea o f principles. The m ajor issues—union security
and general wage increases— required months o f earnest debate and
came close to endangering the very existence o f the Board. But the
method had the advantage o f assuring realistic conclusions by work­
ing experimentally toward principles which could achieve the maxi­
mum o f acceptability. W ithin the first 8 months o f its career, the
N W L B was able to develop principles on both o f the basic issues and
on many minor ones, which gained general acquiescence.
Because these first 8 months were a period in which both sides were
particularly restrained under the stimulus o f the immediate national
emergency, that period o f uncertainty had no serious effect on indus­
trial peace. Later, when the Government established general stabili­
zation policies by legislation and Executive order, the Board
successfully developed general standards implementing these policies,
largely by the case-by-case method.
W e therefore conclude:
1. A n y decision-making agency like the N W L B must have certain
general principles as guides fo r the equitable and effective settlement
o f labor disputes.
2. Every dynamic period has a few special problems which are
m ajor impediments to industrial peace. In W orld W ar I I the
m ajor impediments were union security and general wage increases.
3. Acceptable principles dealing with these m ajor impediments must
be formulated as soon as possible after the outbreak o f the emergency
in order to minimize interference with the war effort.
4. Neither the Congress nor the Adm inistration is ordinarily wellequipped to formulate the necessary principles. Agreement by re­
sponsible leaders o f labor and management is essential to the estab­
lishment o f realistic and acceptable principles such as were involved
during W orld W ar II.
5. Under certain circumstances, a labor-management conference,
because o f its composition, is a possible method o f obtaining realism
and acceptability o f general principles. In W orld W ar I I , however,
the conference agreed only on the vital procedural principles o f the no­
strike, no-lockout pledge and the establishment o f a board to settle
disputes. The parties were too fa r apart to formulate principles on




SUMMARY AND CONCLUSIONS

11

the critical dispute issues o f union security and general wage changes.
6. A tripartite board is another feasible method. In W orld W ar I I
this method succeeded, although it required some 8 months o f the most
strenuous deliberation on a case-by-case basis to develop the key prin­
ciples.
7. D uring W orld W ar I I the process o f experimentation did not
seriously impair the war effort because it took place at a time when
concern fo r the Nation’s safety was at a peak and both labor and
management, with very few exceptions, were unwilling to cause a
work stoppage.
8. The case-by-case method was an effective one for establishing
dispute principles under the circumstances o f W orld W ar II. It had
a somewhat lesser role with respect to wage-stabilization principles
because o f the legislative basis o f that program.
Even in the case
o f stabilization, however, specific policies were developed within the
broader framework o f legislation and Executive order, largely through
case decisions.

V. T he S tabilization of W ages
T w o over-all problems faced the Government with respect to wage
stabilization. W as wage stabilization necessary to prevent a runaway
inflation? I f wage controls were needed, when should they be put
into effect? Chapter 3 analyzes the Government’s decisions on these
problems. The decision to control wages was essential to effective
price control when demand fo r a large number o f important goods
and services exceeded the supply. During most o f the early defense
period this condition did not exist. A t the outset o f the defense pro­
gram, the American economy was operating at a level substantially
below capacity. Production for the Arm ed Forces and fo r friendly
nations did not interfere with domestic consumption for many months.
A s certain strategic materials became scarce, the need fo r selective
(but not general) price controls was properly recognized and imple­
mented. W age controls, unprecedented in our modern history, were
not needed under these conditions.
B y the fa ll o f 1941, however, the rising level o f prices and wages,
together with the increasing rate o f defense expenditures, indicated
that the general supply-demand relationship was being reversed. On
purely economic grounds, a strong case could then have been made for
comprehensive control o f both prices and wages.
But economic forces do not operate in a vacuum. The decision to
stabilize prices and wages had to take into account political and psy­
chological factors as well. In the fall o f 1941 the country was not yet
921297—50----- 2




12

DISPUTE: SETTLEMENT AND WAGE STABILIZATION

at war, the wisdom o f participating in the war was being sharply de­
bated, and both unions and employers were opposed to governmental
interference with free collective bargaining. Our economic future
could not be foreseen until our position in the war was crystallized.
W ith Pearl H arbor, the situation changed. The need fo r compre­
hensive price controls was recognized by the enactment o f the Em er­
gency Price Control bill on January 31, 1942, although important
agricultural prices were exempted. The realization that wage stabili­
zation was unavoidable spread rapidly as the country became enmeshed
in the problems o f total war. From the beginning, the N W L B appre­
ciated that it was necessary to lim it wage increases in the labor disputes
which it decided, although the labor members and, to a lesser extent,
the public members opposed the application o f any fixed principles.
F ollow ing the President’s seven-point anti-inflation message o f A p ril
27,1942, and the promulgation o f the General Maximum Price regu­
lation, Board members began to recognize not only the need fo r
some general principles in wage disputes, but also the problems created
by the lack o f control over voluntary wage agreements. The Little
Steel form ula o f July 16, 1942, established a policy on general wage
increases that was to serve as the cornerstone o f the wartime wage
program. The Board then had no authority over voluntary agree­
ments. It received this authority from the President in October 1942,
follow ing the passage by Congress o f legislation directing the stabiliza­
tion o f both wages and farm prices— the two main sources o f income
not previously subject to control.
The failure to impose wage stabilization rules until 10 months after
the start o f the war may possibly be justified on the ground that the
public was not ready until that time to support such a program. A ll
factors considered, however, it would have been desirable to have
achieved wage stabilization as part o f a general economic stabilization
program in January 1942, or at least by the follow ing spring.
Character o f wage stabilization .— In addition to the over-all deci­
sions as to whether and when wage stabilization should take place,
the Government had to make a number o f important decisions as to
the character o f the wage stabilization program. The effectiveness o f
the program, particularly after the President’s hold-the-line order
o f A p r il 8, 1943, suggests that in general the policies were soundly
conceived and adequately administered. Between October 1942, and
August 1945, manufacturing wage rates rose 13.9 percent and con­
sumers’ prices 8.7 percent as compared to figures o f 17 and 18.1 fo r
the much shorter period between January 1941 and October 1942,
when no wage controls and only some price controls were in effect.
The comparison is even more striking fo r the control period from
A p ril 1943, through August 1945. In this period manufacturing wage




SUMMARY AND CONCLUSIONS

13

rates rose only 10.6 percent and consumers’ prices only 4.2 percent.
W hile the statistics fo r the war period suffer from certain technical
limitations, the success o f wage stabilization as a support to price
stabilization appears unquestionable. This does not mean that the
job could not have been done more effectively. But it stands up rea­
sonably well, not only in terms o f the statistics cited, but also on the
basis o f other possible criteria such as comparison with other countries.
A s is pointed out in chapter 4, perhaps the most important decision
affecting the character o f wage stabilization was that a wage freeze
would not be attempted. Even if it had been politically feasible
(which it was n ot), a wage freeze would have had serious effects
upon morale and output because o f the many cases o f injustice which
it would have created. Instead o f a freeze, the program involved the
establishment o f a series o f more or less flexible limits fo r various ele­
ments in the wage-rate structure. Some limits, such as the Little
Steel formula, were held very tightly. Others were extended from
time to time to cope with the inevitable pressures from unions and
employers. B y being flexible on the “ fringe” adjustments, the G ov­
ernment was able to hold the main line on wage rates. A rigid pro­
gram could not have been maintained in the light o f the inequities
which were in existence at the time that stabilization was started or
which were created by the dynamics o f the war situation.
Some o f the policies established by the N W L B proved to be too loose
and had to be tightened up. A n outstanding example is the policy o f
correcting inter-plant inequities, the ineffectiveness o f which precipi­
tated a m ajor crisis in the hold-the-line order o f A p ril 8, 1943. But
a compromise was effected in the policy directive o f M ay 12, under
which it proved possible for the Board to continue to correct inequities
without significantly weakening the control program.
Another important decision affecting the character o f wage sta­
bilization was to separate wage controls from price movements. U n­
like the practice in most other democratic countries, wages were not
adjusted automatically in accordance with changes in the cost o f living.
Nor were wage decisions o f the Board normally influenced by possible
effects on prices. A possible weakness o f this policy o f not relating
wage-rate changes to living costs was that it may have contributed to
the difficulties in the field o f wage and price policies faced by the Nation
in the postwar period. I f the Little Steel formula had been subse­
quently adjusted to the rise in living costs during the war, union pres­
sure fo r postwar wage increases might have been reduced. On the
other hand, the stabilization program was a precarious balance at
best and any further relaxation o f wage controls during the war period
might have resulted in retreat to a much higher level o f prices by virtue
o f the pressure from farmers and the business community.




14

DISPUTE; SETTLEMENT AND WAGE STABILIZATION

A third main decision affecting the character o f wage stabilization
was to stabilize wage rates or average straight-time hourly earnings
and not gross earnings. The latter were, o f course, affected by many
factors other than changes in the wage rate. These factors included
an increase in the hours o f work, a shift in employment toward highwage occupations, plants, and industries, and an increase in output
under piecework systems o f payment. Since these factors were d i­
rectly related to increases in production— one o f the primary objectives
o f the Government— stabilization o f earnings would have inhibited
production.
The effectiveness and weakness o f specific wage principles are ana­
lyzed in chapters 4 and 5. I t is unnecessary to summarize the findings
here. The most significant feature o f these principles was that, with
a few exceptions, they were formulated through the process o f trial
and error in specific cases. This process gave them a quality o f realism
and acceptability which they might not otherwise have achieved.
Another m ajor decision was to link administratively wage stabiliza­
tion with dispute settlement machinery. A t times the objectives o f
industrial peace and wage stabilization conflicted. But administrative
separation o f the tw o responsibilities would not have been practicable.
W age issues are among the most important subjects o f industrial
dispute. I f two different agencies had been involved, constant con­
fusion and friction would have resulted.
On the other hand, administrative responsibility fo r wage stabiliza­
tion and price Stabilization was divided between the N W L B and O P A ,
with the Director o f Econom ic Stabilization as arbiter o f wage cases
involving price increases. The system worked out well. It would not
have been feasible to attain uniform ity in the application o f wage
policy i f the N W L B had permitted its decisions in particular cases to
be influenced by price considerations. Moreover, only a few o f the
N W L B decisions reviewed by the Stabilization Director (about onehalf o f 1 percent) were disapproved.
There was some friction between the N W L B (especially the labor
members) and the D irector o f Econom ic Stabilization because o f the
latter’s intervention in wage-price cases and his actions in prescribing
limits to wage control policy. Outstanding causes o f friction were the
O E S form ulation o f the hold-the-line order (Executive Order 9328) o f
A p ril 8,1943, and the restriction upon “ fringe” adjustments in early
1945. Nevertheless, the role o f the O E S unquestionably strengthened
the stabilization effort.
Immediately follow ing Y J-day a m ajor change in wage policy
occurred, largely in response to strong pressures by unions, employers,
and other segments o f the public against continuance o f Government
controls. One o f the underlying assumptions behind it was the expec­




SUMM ARY AND CONCLUSIONS

15

tation (w hich proved to be erroneous) o f a considerable amount o f
unemployment during the reconversion period. Controls were re­
moved over most wage increases which did not require increases in
prices. Comprehensive control over prices continued.
This splitting o f wage changes into two groups based upon price
considerations was in direct contrast to the wartime policy and proved
to be an unrealistic device. It was not practicable to permit wage
increases fo r one group o f workers and deny them to another because
o f profit-price differences. The result was a break in the wage line in
February 1946. This in turn gave impetus to the attack upon price
control by business groups in the spring o f 1946. In June 1946, the
price control program was broken fo r all practical purposes, although it
was not form ally abandoned until November 1946, and rent controls
continued after that. Thus, the failure to maintain some form o f
comprehensive wage controls after V J-day was one o f several im por­
tant elements in the breakdown o f the price-control program and the
inflation that followed.
W e therefore conclude:
1. In a period o f general excess in demand over supply, such as
W orld W ar II , comprehensive price control, to be effective, must be
supported by comprehensive wage control.
2. From an economic point o f view, comprehensive wage controls
might well have been initiated at the same time as comprehensi ve price
controls, immediately after our entrance into the war.
3. Practically, however, in a democratic society, the effectiveness o f
such controls depends upon general recognition o f the problem and
willingness o f the public to accept such controls. In W orld W ar I I
this general recognition and willingness were not present until some
months after the start o f the war.
4. The wartime experience indicates that wage and price control can
be successfully administered by separate agencies and that it is sounder
to combine wage stabilization with dispute settlement than with price
stabilization.
5. A coordinating and policy-m aking agency, such as the O ES,
appears to be essential to give direction to the entire stabilization effort.
6. The effectiveness o f the wage stabilization program, particularly
after the hold-the-line order o f A p ril 8,1943, appears to be supported
by statistics on wage rates and consumer prices. Comparison with
other democratic countries leads to the same conclusion.
7. Perhaps the most important decision affecting the character o f
wage stabilization was that a wage freeze should not be attempted. A
rigid program could not have been maintained in the light o f the
inequities which were in existence at the time that stabilization was
started or which were created by the dynamics o f the war situation.




16

DISPUTE SETTLEMENT AND WAGE STABILIZATION

8. The decision to break the tie between wage changes and living costs
strengthened stabilization although it probably contributed to postwar
difficulties in the field of wage and price policies.
9. The decision to stabilize wage rates or straight-time average
hourly earnings, and not take-home pay, was wise because stabilization
of the latter would have inhibited production.
10. The specific wage principles formulated by the NWLB had
their weaknesses, but in general they were realistic and acceptable to
the employers and unions of the country. The bracket policy for the
correction of inter-plant inequities was a considerable improvement
over the initial policy and might well have been adopted earlier.
11. The failure to maintain a liberalized form of comprehensive
wage controls after VJ-day was an important factor in the break­
down of the price-control program.
VI. T he P roblem of Manpower
The Nation was faced with a serious manpower problem during
most of the war period. This problem had many facets. During the
emergency it was essential to recruit a large labor force and to
utilize it effectively. Effective utilization involved, among other
things, the placement of workers on the jobs where they were most
needed and the avoidance of unnecessary labor turnover. Seniority
protection for workers transferring to war jobs became an issue.
Wage rates are one of the major factors that influence worker
decisions* Chapter 5 analyzes the way in which NWLB actions re­
garding wage rates and closely related issues inevitably affected the
direction and volume of manpower flow and, to a lesser extent, the
recruitment of additional workers.
The impact of Board decisions on manpower conditions, however,
was not serious during the early months of the war. During that
time voluntary wage increases could be effectuated without Board
action. The lack of impact also stemmed in part from the relative
insignificance of the manpower problem during that period. The
Nation entered the defense period with substantial reserves of avail­
able manpower. The outbreak of war found these reserves greatly
diminished, but still appreciable. It was not until the latter half of
1942 that local labor shortages became sufficiently widespread to
create a general problem.
This was approximately the time when a general program of wage
stabilization was introduced. Indeed, the development of labor short­
ages occasioned extensive wage increases and was one of the major
factors that created the problem of their control,



SUMMARY AND CONCLUSIONS!

17

But by this time the Nation’s wage structure had already become
ill-adapted to effectuating the desired allocation of manpower. A
number of new war plants had adopted wage schedules that were,
in some instances, more than high enough to attract the necessary
labor force. Similar conditions of local imbalance had been created
by company-wide increases for many other enterprises with widely
scattered plants. Some concerns had raised their rates substantially
in anticipation of the growing labor shortage, while others had been
less prompt in foreseeing their future manpower difficulties. Thus,
at the time when the program of wage stabilization was initiated, the
national wage structure was seriously out of balance and, therefore,
highly unstable. This chaotic condition was one of the factors that
conditioned the nature of the Board’s task and the impact of its
decisions on manpower problems. Considerations both of manpower
allocation and of equity required a considerable readjustment of the
wage rates in certain plants, industries or areas as compared to
others.
A second conditioning factor was the nature of manpower controls
as administered by the War Manpower Commission and other agen­
cies with related functions. These controls were remarkably free
from any element of direct compulsion. Practically all of the aspects
of the WMC program that purported to exceed the limits of suasion
were notoriously lacking in any means of effective enforcement. In
one sense, this made the task of the Board more difficult, for if man­
power flow was to be guided largely by inducement, wage rates—as
well as take-home pay and the likelihood of draft deferment—were
sure to be of major significance. On the other hand, the Board might
have faced more difficult problems in this area if manpower controls
had involved a larger element of compulsion. Under a system of di­
rected job-transfer, it would have been necessary to protect the in­
dividual workers against inequitable financial loss. While the adjust­
ment of interplant wage differentials would then be less necessary as
an economic inducement, it would become more necessary to maintain
morale, since maximum efficiency could not be expected from workers
who were suffering financial loss as a result of an obligatory change
of employment. Moreover, under controlled labor allocation the man­
power consequences of the Board’s actions would have become so
patent as to compel more formal recognition of manpower considera­
tions in the formulation of Board policy.
Although it was not given serious consideration at the time, the
noncompulsory character of manpower controls would have required
the introduction of wage stabilization. Even if wage control had
been entirely unnecessary as an aid to price control, it would still have
been essential as one means of attaining a fairly satisfactory distribu­




18

DISPUTE SETTLEMENT AND WAGE STABILIZATION

tion of civilian manpower. After labor scarcity developed, the raising
of wages in essential plants and industries would have been ineffective
in attracting labor if nonessential employers were free to make corre­
sponding increases. This significance of wage control received little
consideration in congressional debates or in Board discussions, though
it was actually a cornerstone of our manpower program.
In facing the manpower implications of its wage-rate decisions, the
Board was confronted with several dilemmas. These dilemmas largely
explain the Board’s reluctance to give formal recognition to manpower
considerations in other than the rare and unusual cases where wage
increases that were clearly necessary for the effective prosecution of
the war could not be justified under any of the other criteria used by
the Board.
In the first place, adjustment of wage rates could not match in
flexibility the constant changes in local manpower needs. Partly
because of changes in procurement priorities, a plant that was in
desperate need of labor at one time, might be of little importance to
the war effort 6 months later. Its wage rates could not be promptly
raised and lowered to meet the Nation’s interest in attracting and
then repelling labor at this site. Although the desperate labor needs
of many plants were temporary, any wage increase approved to meet
those needs was, in effect, permanent. Wage rates could not prac­
ticably be reduced during the war period. Because of labor scarcity
and the rising cost of living, neither the employer nor the union could
be expected to propose such a change. The adjustment of differen­
tials could be achieved only by upward revisions, with consequent
threat to the stabilization program.
A second dilemma arose from the fact that many wage increases
approved or ordered by the Board were inevitably on a companywide or multi-employer basis, in keeping with the past patterns of
collective bargaining. Such adjustments, affecting plants in many
localities, were bound to create disturbing manpower situations in
some areas. Board actions in some instances had to result in disrup­
tion either of local labor-market differentials or of traditional prac­
tices regarding the area of collective bargaining.
A third dilemma was the impossibility of reconciling the need for
prompt actioii by the Board in serious manpower cases with the need
to assure that every alternative means of attracting labor had been
exhausted. Prompt action was necessary because of the urgency of
war production and because it required less of a wage increase to
retain a work force than to replenish one that had been riddled by
quits. Exhaustion of all alternative methods by other Government
agencies was important because numerous nonwage factors could
make the jobs more attractive, and an unstabilizing wage increase




SUMM ARY AND CONCLUSIONS!

19

should be introduced only as a last resort. Had the Board shown
greater readiness to act on manpower grounds, it is possible that other
agencies would not have taken all desirable steps to meet the problem.
A fourth dilemma involved the frequent incompatibility of man­
power considerations and the other criteria used by the Board in
determining the justification for a wage adjustment. These criteria
usually involved, in one way or another, the equity of certain rate dif­
ferentials. The manpower considerations centered, not on equities,
but on expediency. A Board action that removed certain inequities
might nevertheless disrupt a desired flow of manpower. Similarly,
an action taken exclusively on manpower grounds might create, rather
than remove, inequities.
A final dilemma—not wholly unrelated to the others—arose from
the frequent conflict between considerations of guiding manpower flow
and maintaining industrial peace. The avoidance of serious employee
dissatisfaction and possible work stoppage sometimes called for a
wage adjustment inimical to the desired flow of manpower. Thus, a
strong union might win an increase in an adequately manned plant or
industry. In other cases, an increase that appeared necessary for
manpower purposes might create such serious dissatisfaction on the
part of workers in other plants as to be quite impracticable from an
industrial relations standpoint.
Faced with these dilemmas, the Board preferred to give only in­
formal consideration to manpower needs, and its decisions represented
frequently a compromise between conflicting objectives.
Although the Board seldom made a decision formally on manpower
grounds, except in the few rare and unusual cases, it did more often
stretch its other criteria in order to justify a decision that was believed
necessary to meet certain manpower needs. In many cases where no
clear need existed for a change in the flow of manpower, the Board’s
action nevertheless inevitably had that effect. The Board frequently
appeared to give little or no consideration to the manpower conse­
quences of its decisions.
The most serious weakness of wage-manpower policies lay in the
failure of the Government to assign formally to the Board some
responsibility for the manpower program. Such an action would
have required the Board to recognize more definitely than it did the
effect of wage changes on manpower flow. The Board would then
have had to establish a closer working relationship with WMC and
work out a better balance between the functions of wage stabilization,
dispute settlement, and manpower distribution.
We therefore conclude :
1. Wage control is essential to any effective manpower program
because wage decisions inevitably have a significant effect on man­
power allocation.



20

DISPUTE: SETTLEMENT AND WAGE STABILIZATION

2. The earlier introduction of wage control would have aided in
obtaining better manpower allocation.
3. Although coordination between wage and other manpower con­
trols was gradually improved, it never became adequate. Successful
coordination would have required a greater administrative centraliza­
tion of these other manpower controls.
4. The NWLB should have been given specific responsibility to
consider the manpower consequences of wage adjustments in all cases.
5. The extreme reluctance of the NWLB to award or approve rate
increases for manpower reasons was effective in obtaining the applica­
tion by other agencies of nonfinancial measures, but often resulted
in deferring wage adjustment until the time of its greatest effective­
ness had passed.
6. The NWLB should have established a manpower division to
advise its own agencies on manpower considerations and to facilitate
liaison with other governmental agencies having manpower functions.
7. NWLB use of the substandard and cost-of-living criteria in wage
adjustments was warranted regardless of their manpower consequences.
The early use of the inequity criterion permitted a desirable flow of
manpower, but allowed too continuous a raising of rates. The adop­
tion of the bracket policy created fewer new manpower problems,
though it perpetuated some excessive differentials created earlier.
The Board’s handling of internal wage-rationalization problems con­
tributed to efficient labor utilization.
8. Although the NWLB eventually adopted fairly effective controls
over new incentive plans, the earlier introduction of these policies
would have avoided many instances where abnormally high earnings
exerted an undesirable influence on manpower flow.
9. Because of the initial huge manpower reserves of the country,
the unwillingness of the Board to give greater weight to manpower
considerations in its wage decisions did not too seriously jeopardize
the manpower program.
V II.

P roblems of Organization and A dministration

The organizational and administrative problems relating to the
three boards involved principally (1) the scope of their functions
and their responsibilities, and (2) their methods of operation.
The functions of the NDMB were purely mediatory and its opera­
tions were simple. It handled unresolved labor disputes, certified
to it by the Secretary of Labor as endangering national defense. Two
types of cases lay outside of its jurisdiction. It was precluded from



SUMMARY AND CONCLUSIONS

21

dealing with disputes covered by the Railway Labor Act, for which
satisfactory channels already existed. It was required to refer to
the NLRB disputes concerning representation. In addition, it vol­
untarily made similar referral of cases involving unfair labor prac­
tices. Its relations with other Government agencies therefore pre­
sented no special problems. Its operational methods were equally
satisfactory. Its relatively small volume of cases made decentraliza­
tion unnecessary. Although original estimates of the time required
of its members for Board duty proved to be unrealistic, it adjusted
itself quite promptly to a growing workload and settled most of its
cases with reasonable promptness.
The most troublesome of the organizational and administrative
problems regarding dispute settlement and wage stabilization in­
volved the NWLB. As indicated in chapter 7, this Board was pre­
cluded from dealing with issues within the jurisdiction of the NLRB.
This provision was the source of the most difficult jurisdictional prob­
lems faced by the NWLB in dispute cases, as, for example, in the cases
involving foremen. The Board was careful to observe its legal obliga­
tion to comply with the National Labor Relations Act. It referred to
the NLRB cases involving questions of representation or unfair labor
practices, even though the resulting delay often aggravated the situa­
tion. The difficulties, however, were unavoidable, for any alternative
arrangement would have created more problems than it solved. On
the other hand, one limitation placed on the NWLB—the exclusion of
agricultural employees from its jurisdiction—was economically un­
justified and must be regarded as an unwise and inequitable decision.
Many limitations on jurisdiction were voluntarily introduced by the
Board itself, in order to free it from the consideration of cases of
negligible significance.
Although the NWLB had general responsibility for wage stabiliza­
tion, certain areas were excluded from its wage jurisdiction. The as­
signment of salary control for administrative, executive, and pro­
fessional employees to the Commissioner of Internal Revenue worked
fairly satisfactorily. The chief problems were those of demarcating
clearly the jurisdictional boundary between the two agencies and
obtaining similarity of stringency in the two programs. On the other
hand, the decision to give railroad wages separate treatment raised
some serious problems that were never fully resolved. Wage control
in this industry undoubtedly needed separate consideration, but it
appears that this could have been obtained on a more equitable basis
if the persons dealing with this problem had been constituted as an
industry committee within the Board’s framework rather than operat­
ing quite independently of the Board.




22

DISPUTE SETTLEMENT AND WAGE STABILIZATION

The Board itself wisely limited its jurisdiction in order to keep its
heavy case load within manageable proportions. It delegated to
various Government agencies authority to approve wage adjustments
for their own employees. It usually referred back to the parties
minor disputes, such as those involving grievances. Through its gen­
eral orders it permitted minor wage changes to be made without spe­
cific approval and also gave a free hand to most establishments with
eight or less employees. It is likely that more could have been done
in this respect.
Chapter 9 indicates that despite the various efforts to limit its case
load, the NWLB was never entirely successful in processing its cases
as rapidly as was desired. The considerable time consumed in many
cases resulted in some loss of industrial morale and occasional impair­
ment of good relations between employers and unions. A number
of short work stoppages and some violations of the wage stabilization
law occurred.
Part of the problem of delay in case processing arose out of the
Board’s determination to assure full consideration and fair treatment
to the parties. Many of the cases involved complex issues which
required lengthy hearings and careful analysis. Court review was
sometimes urged as an additional safeguard. But, as in the case of
the suggestion that the courts be used to secure compliance with Board
orders, it would have unduly prolonged case decisions and might have
undermined the authority of the Board. While some improvement
in Board procedures was possible, it could have yielded relatively
little saving of time without endangering the fairness of the de­
cisions.
The speed of case processing depended also on the administrative
efficiency of the Board. As the Board gained.experience it made
many improvements in its internal operations. However, it was
never able to overcome the handicaps of its first 2 years when it ac­
cumulated a massive backlog of cases. Some of the difficulty arose
because of the dearth of experienced personnel. The Board was
never adequately staffed for the size of its job. Another major handi­
cap was the lack of adequate wage data. The time required in de­
veloping principles also slowed down case processing.
A major cause of the early backlog was the Board’s reluctance
to decentralize its operation and to delegate authority. It eventually
created a number of industry commissions and panels and 13 regional
boards, but many of them were never able to catch up with their initial
caseload. As chapter 8 suggests, such decentralization was undoubt­
edly desirable and should have been undertaken earlier. A larger
number of regional boards might have improved efficiency and brought
the Board closer to the parties.



SUMM ARY AND CONCLUSIONS

23

The combination of area and industry agencies, however, created
problems. The industry structure proved to be highly useful where a
technical assignment was involved or where the collective bargaining
system was closely integrated. On the other hand, it sometimes created
special wage stabilization problems for the regional boards. Commis­
sions and panels might have been required to consult the regional
boards more frequently to obtain data about local wage and man­
power patterns and a better appreciation of the regional point of
view.
A final major administrative problem involved the enforcement of
wage stabilization regulations. That responsibility might have been
assigned to another agency, such as the Bureau of Internal Revenue.
As chapter 10 concludes, it was wisely left to the Board despite con­
siderable reluctance on the part of the Board to assume a policing
function. The Board was slow to start enforcement activities, thus
aggravating the problem of violations. Even then, it was less suc­
cessful in some industries and areas than in others. However, the
tripartite board proved to be an effective device for enforcement,
because the partisan members greatly contributed to general acceptance
of the stabilization program. On the other hand, there was marked
inconsistency in the penalties assessed for wage violations, resulting
from the absence of any standards and the failure of some partisan
members to adopt a judicial attitude. The results would probably
have been more equitable if the partisan members had been willing
to support the enforcement program without tripartite participation
in each individual case. Nevertheless, an adequate degree of enforce­
ment was achieved with a minimum of harshness and with relatively
slight administrative effort.
Like the NDMB and unlike the NWLB, the NWSB was able to per­
form an adequately expeditious job, and had no serious operational
problems. Its responsibilities were almost entirely limited to wage
stabilization. Even within this area, its activity was limited by
governmental relaxation of wage controls. Because of its limited
authority, this Board did not have a huge caseload. Moreover, it in­
herited from the NWLB a decentralized structure that had finally
been brought up to reasonable standards of efficiency.
We therefore conclude:
1. The exclusion of representation and unfair-labor-practice issues
from the disputes jurisdiction of the NDMB and NWLB was logical
and unavoidable, although it created certain problems during the
life of the latter agency.
2. The decision to combine responsibility for the administration of
wage controls with that of dispute settlement in the NWLB proved
sound.



24

DISPUTE SETTLEMENT AND WAGE STABILIZATION

3. Exclusion of administrative, executive, and professional person­
nel from the wage jurisdiction of the NWLB and NWSB was probably
desirable. The exclusion of agricultural and railroad employees was
probably a mistake.
4. The power of the Board to decline jurisdiction over minor cases
and to grant blanket approval of certain types of wage adjustment
was a definite asset.
5. The average length of time required for case processing was a
serious problem in the case of the NWLB, but not the NDMB or
the NWSB.
6. The number of procedural steps probably could not have been
shortened without impairing the equity of the decisions, the rights
of the parties, or the efficiency of the Board. However, the grounds
for appeal might well have been narrowed.
7. A larger number of public members on the NWLB and its
agencies would have been beneficial.
8. A major source of delay in the processing of NWLB cases was
the reluctance of the Board to decentralize and to delegate to wage
stabilization directors authority to rule on voluntary wage
applications.
9. A closer relationship between the NWLB and its subsidiary
agencies and between the regional boards and the industry commis­
sions would have been helpful.
10. The NWLB and NWSB were the proper agencies for enforce­
ment of the wage stabilization program.
11. The support of the partisan members was essential to the suc­
cess of the enforcement program. It is unfortunate that the partisan
members of the National Board were unwilling to support the program
without requiring tripartite participation in the initial decision of
individual cases.
12. Enforcement was achieved to an adequate extent, but enforce­
ment efforts of the NWLB should have been begun more promptly and
conducted with greater impartiality.
V III. O ver-A ll A ppraisal
In this volume we have attempted (1) to analyze the problems
which inevitably face a democratic government in settling labor dis­
putes and stabilizing wages in time of war, (2) to single out the
major environmental factors which conditioned the way in which
these problems were met during World War II, and (3) to appraise
the major policy decisions, at both the substantive and procedural



SUMMARY AND CONCLUSIONS

25

levels, in terms of achieving the basic objectives o f a wartime program.
In this chapter we have summarized our analysis of the more impor­
tant problems, conditioning factors, and policy decisions.

W e hav6

concluded that, in general, the basic objectives— the minimizing of
work stoppages and the control o f wages as part o f general economic
stabilization— were adequately achieved. W e have also concluded
that the joint participation o f union and management representatives
with the Government in the formulation and administration o f the
wartime labor program contributed greatly to the realism and fairness
o f the decisions reached and to their general acceptance.
gram did not work perfectly.

The pro­

There was a considerable number of

work stoppages, some o f which were the result o f weaknesses in the
administrative machinery.

A small number o f companies or unions

defied Board orders, requiring Government seizure of the establish­
ments involved.

W a ge stabilization controls were adopted somewhat

later than was economically desirable.

Particular wage policies, such

as the initial approach to the correction of interplant inequities, were
too loose.

Tripartite administration o f the enforcement policy tended

in some areas to be lax.

Case processing was often unduly delayed.

Coordination between the labor boards and other branches of the
Government sometimes functioned poorly.
B u t even i f errors had been avoided, the results would have been
considerably less than perfect.

A s we have shown, the objectives o f

labor dispute settlement and wage stabilization sometimes conflicted
and these in turn sometimes conflicted with the equally important
governmental objective of efficient manpower allocation.

Compro­

mises were inevitable. The prime need was to achieve a working bal­
ance between the three sets o f objectives. Under the conditions
prevailing during W o rld W a r I I , we have concluded that the policies
adopted by the Government were reasonably successful in achieving
this balance— with a minimum amount o f compulsion and with a high
degree o f respect for the tenets o f a democratic society.




C H A P TER

Voluntarism and Compulsion in
Dispute Settlement
B y W . Ellison Chalmers

I. I ntroduction

B e t w e e n September 1939 and A ugust 1945, the country’s war needs
precipitated three m ajor crises in industrial relations.

The three

crises, as defined by the Government, were—
1. Critically needed defense production was being delayed by work
stoppages.

The Government determined in M arch 1941, that existing

stoppages in key plants had to be discontinued and the increasing
trend o f stoppages had to be reversed i f defense goals were to be
achieved.
2. W h en , with Pearl H arbor, the Nation was plunged into war, the
Government decided that much larger sections o f the economy had
to be employed in direct or indirect war production. W o r k stoppages
in any part o f this whole area would endanger the war production
program.
3. B y the summer o f 1942, the economic stability o f the country, and
thus the war production program, was threatened by rising prices.
The Government decided that wages as well as other key price trans­
actions had to be stabilized.
I n each case existing procedures for the adjustment o f many types
o f labor-management disputes were proving seriously inadequate as
measured against the N ation’s needs.1

Because the Government was

responsible for meeting the entire war crisis, it had to act in such a
way as to best assure the achievement o f the national goals.

Thus, for

each o f these three situations the basic decisions had to be made by the
1 On the whole, procedures in use on the railways and under the National Labor Rela­
tions Act functioned adequately throughout the defense and war periods.

26




VOLUNTARISM AND COMPULSION IN DISPUTE! SETTLEMENT

Government.

27

There had to be a determination by the Government

that the existing arrangements were so seriously deficient that a change
was essential.

This involved a governmental definition o f the goals

that had to be met.

This first step in the decision-making process

was exclusively governmental. I t was made on behalf o f the entire
Nation, and, o f course, in relation to the consensus o f the public as
well as that o f the administration o f the Government.

The subsequent

steps in this process did not have to be as exclusively governmental.
There had to be a decision on the modifications to be made o f previous
“ rules o f the game.”

This required a governmental decision as to

how much, i f any, o f the responsibility for the establishment o f the
revised rules and their administration should be assumed by the
Government and how much should be assigned to the direct partici­
pants, labor and management.
In the free enterprise economy o f 1939, the essential decisions of
labor-management relations were made by the parties themselves.
Through the enactment and administration o f the National Labor
Eelations A ct, the Government had established the policy o f protect­
ing unionization and encouraging collective bargaining.

B u t the de­

cision to engage in collective bargaining had to be made by the
employees involved, and the results o f the collective bargaining were
the joint decisions o f the managements and unions directly affected.2
In each o f the three wartime crises the Government determined that
private-group decisions failed to meet the needs of the Nation. Some
restriction o f the freedom o f action o f the private groups was necessary.
A possible alternative was the elimination of all discretion by the
parties, but there was no important consideration of the establishment
o f complete governmental direction and compulsion over labor-man­
agement relationships.
Thus, in each o f the three crises, the Government’s problem was to
determine how much was needed in further restrictions on the freedom
o f action o f labor and o f management in their relationship to each
other. A closely related problem was to what degree those restric­
tions should be formulated and enforced by the parties themselves.
W ith in this context, therefore, voluntarism is defined as the self­
imposition or acceptance by labor and management o f restrictions on
their freedom o f action in industrial relations.3

“ Compulsion” is

defined as the imposition by Congress or the President o f restrictions*
8
* The U. S. Conciliation Service and a few parallel State conciliation agencies did useful
work in aiding disputing parties to reach agreements.
8 It should be noted that this definition does not imply the absence of alternatives con­
sidered less desirable by the parties. We shall note that throughout the whole period
under review labor and management decisions were motivated not only by their recognition
of the war needs of the Nation but also by their desire to avoid more compulsory alternatives,
921 297— 50—




3

28

DISPUTE: SETTLEMENT ANiD WAGE STABILIZATION

on the freedom o f action o f labor and management in industrial
relations.
T his chapter w ill evaluate the decisions made by the Government
to meet each o f these crises.

H ow far did the Government need to go

in substituting its own directions for the voluntary actions o f the
parties?
(a)

In such an evaluation, the following steps are necessary:

Definition o f the crisis in terms o f governmental needs, (&) con­

sideration o f the basic conditioning factors that defined the alterna­
tive choices practically available to the Government, ( c ) examination
o f the governmental decision in terms o f how much responsibility for
the accomplishment o f its goals was placed upon the private groups o f
labor and management, and (d ) evaluation o f the consequences o f
these governmental decisions.
A . C ontrasting V alues or “ V oluntarism ” and “ C ompulsion”
A basic governmental problem, in each crisis, was the selection o f the
method by which the further restrictions would be established.
number o f general considerations were involved in each crisis.

A

They

w ill be summarized here, so that they will not have to be repeated in
the analysis o f each case.
1.

Values o f vohm tarism .— The whole orientation of the war pro­

vided a profound psychological appeal for “ democratic” action.

W ith

almost complete unanimity the country defined as a basic war objective
the defeat o f nations which had abandoned democratic principles and
whose aggressive acts were assumed to be the result o f this abandon­
ment. A s a Nation, therefore, we rallied to the defense o f our own
democracy and assumed that our war effort would be successful only
i f we preserved our own democratic institutions.
I t was recognized that a democratic government could sharply re­
strict the individual’s freedom o f choice, i f the government rested on
the political participation o f the citizens and its actions were based on
the consent o f those directed.

B u t the democratic concept included

the belief that insofar as it was possible to permit the direct participa­
tion o f the affected groups in the determination and application o f
restrictions upon their freedom o f action, the response o f the groups
would be more w illing and cooperative.4

Further, it was also widely

4 It is beyond the scope of this study to analyze the restrictions imposed on labor or man­
agement that were outside of the field of industrial relations. There were many such
restrictions on the opportunity to secure Government contracts, materials, machinery, and
labor, on the prices charged for commodities and services, and on the opportunity for
workers to move from job to job. This study makes no attempt to analyze how extensive
was the “democratic participation’’ of the groups in the determination and administration
of such restraints. It may be noted, however, that the extent to which these restraints
existed and the extent to which there was participation in their formulation and admin­
istration had a profound effect on the immediate problems of this study. Major differ­
ences in the extent of, or participation in, such controls might well have substantially
altered the basic elements of the industrial relations history of the war discussed in this
chapter.




VOLUNTARISM AND COMPULSION IN DISPUTE SETTLEMENT

29

believed that the more authoritarian became the government during
the war period, the more danger there would be that the postwar
government would continue authoritarian controls.
'

I t also was generally argued that there would be greater realism of
specific decisions if they were made by those who knew the problem
intimately and who were directly involved in it.

This argument

assumed that the national objectives were both understood and ac­
cepted by the groups directly involved.

The contention of the greater

realism o f voluntary decisions was considered to have particular
validity in the complex field of industrial relations.

In this area, it

was argued not only were the specific relations between unions and
employers a complex o f subtle factors, but also there were enormous
contrasts from case to case that endangered the usefulness of any
generalized rules.
%
Further, it was recognized that the Government goals, o f uninter­
rupted production and, later, o f wage stabilization, were simply ele­
ments o f the larger goals o f maximum and" flexible war production.
The accomplishment of these larger goals, it was widely considered,
depended on the willingness with which decisions were accepted.

For

a large and increasing part of the economy, unions were the repre­
sentatives o f employees in dealings with management.

I f unions

were to be expected to join with employers in efforts for more efficient
production, there needed to be a common acceptance by both that they
could and would work together.
In addition, insofar as the individual parties directly affected had
to be subject to restrictions imposed from above, it was argued that
their acceptance would be more willing i f they considered that they
had been directly represented in the making o f the restrictions. Thus,
the more that group representatives could be involved in decisions
affecting their members, the more likely it was that the decisions
would be w illingly applied. Since the Government was involved in
an unprecedented mobilization of the economy, it was o f great im por­
tance to reduce to a minimum the Government’s problem o f securing
compliance with decisions.
F inally, it was recognized that national decisions had to be made
in quite general terms, particularly within the confused and varied
area o f industrial relations.

On the basis o f this conclusion, it was

argued that the participation o f group representatives would permit a
flexible development and application o f the rules without undermining
the support for the general principles involved.
2.

Values o f compulsion.— There were contrasting values involved

in governmental direction which were equally well recognized.

The

immediate, urgent, and fundamental objective o f the Nation, at least
by the time o f Pearl Harbor, was the winning o f the war.




The Nation,

30

DISPUTE; SETTLEMENT AND WAGE STABILIZATION

with almost complete unanimity, believed that all o f our basic demo­
cratic principles would be seriously threatened if the war were not won.
The people as a whole, and labor and management groups in particular,
were ready to accept for the period o f the war, such governmental
restrictions on their liberties as they considered necessary in the inter­
ests o f the greater immediate objective.
In this period, the decisions o f labor and o f management, in the
fields both o f negotiations and o f wage levels, had an important effect
on the national welfare as well as that o f the groups directly involved.
W here disputes arose that threatened the continuation o f production,
each side tended to agree in the abstract on the importance o f con­
tinuous production, but to consider that concessions to avoid the dead­
lock should be made by the other side.

In the field o f wage stabiliza­

tion not infrequently the*two sides were ready to join in a decision
which m ight well have solved their own immediate problems, but
which would have dam aging consequences for other groups or even
for the economy as a whole.

I t was argued, therefore, that to be

certain that the larger interests o f the Nation as a whole were ade­
quately recognized, the decision had to be made by Congress or the
President rather than by the groups directly affected.

Since the gov­

ernmental machinery had to give adequate recognition to the interests
o f each o f the directly involved groups as well as o f the Nation as a
whole, a governmental decision was not only necessary but could also
be accepted as democratic.
The negotiated solution o f a problem either by the parties directly
involved, or by their group representatives, is generally a long and
cumbersome process. The war needs o f the Nation required not only
a correct but also a quick decision. The entire war production pro­
gram was based on the need fo r the rapid accumulation o f war materiel.
The substitution o f governmental decisions for negotiated agreements,
it was argued, would contribute to the speediest accomplishment of
our war production goals.
F inally it was clear that the decisions avoiding work stoppages and
stabilizing wages were only elements in the much more inclusive m obil­
ization o f the Nation for war.

These particular decisions had to be

made in the light o f other decisions that either had been made or were
in the process o f being made.

I t was, therefore argued that the more

decentralized the decision-making process, and particularly, the more
it remained out o f the hands o f the governmental organization itself,
the more difficult and cumbersome m ight be the administrative task
o f carrying through the total program.




31

VOLUNTARISM AND COMPULSION) IN DISPUTE SETTLEMENT

B. C ombining V oluntarism

and

C ompulsion

In each o f the crises under study, the practical alternatives did not
include either extreme. The practical problem in each case was to
make a decision which gave proper weight to the values o f both
voluntarism and compulsion.
The Government tended to choose the minimum degree o f compul­
sion possible.

This was partly because the crisis arose within the

framework o f a voluntary system.

I t is true that the crisis arose

in terms o f the inadequacy o f the voluntary arrangements, but it is
also true that there was a strong attachment to the prevailing system
and a reluctance to depart from it any further than necessary.

This

tendency to lim it the move into compulsion was strengthened by the
necessity for general acceptance o f whatever changes were decided
upon.
Obviously, a governmental decision that included any degree o f
voluntary acceptance o f responsibility by labor and management de­
pended on both the readiness and the ability of the groups to accept
and successfully execute such responsibility.

A s a result, these deci­

sions were not just governmental decisions; the groups participated
in them.

The Government’s decision was in part shaped by the extent

to which they were prepared, or even anxious, to assume such
responsibility.
The ability o f the groups, as representative o f specific parties, to
participate in decision-making and execution also was affected by
the degree o f their self-discipline.

A n y governmental decision to

place any degree o f responsibility in the private groups o f labor and
of management, therefore, had to be made in the light o f a judgment
that each group could in fact perform in line with its expectations
and intentions.
The readiness of the groups to share in responsibility also depended
on their judgment o f the fairness o f the proposed Government goals.
The war effort was a combined effort o f all elements in the Nation.
I t involved sacrifices of rights as well as o f advantages for every group.
A n essential element o f voluntary group participation in decision­
making and execution, therefore, was the conviction that the Govern­
ment goals were a reasonable approximation o f an equality o f sacri­
fices for all groups.

O f course, this also required the conviction on

the part of each group that the governmental goals were desirable.
Finally, the governmental decision, in each crisis, had to be made
on the basis o f a judgment not only o f the attitudes and abilities o f
each group, but also of their group relationships. In the field o f in­
dustrial relations, the problem before the Government involved both




32

DISPUTE SETTLEMENT AND WAGE STABILIZATION

the type o f responsibility each group was prepared to assume to meet
national objectives, and the extent to which they could and would
agree on decisions capable o f achieving those national purposes.

II.

A ssuring D efense P roduction

A . C haracteristics of the Crisis
The first crisis was limited to a small part o f the economy.

The

defense program began to develop during the early months o f 1940.
I t started slowly with the action o f Congress and the Administration
in making defense appropriations and in awarding defense contracts.
In the last 7 months o f 1940, $10.5 billion o f contracts had been
awarded,5 which although very substantial by peacetime standards
represented only a small fraction o f the total production schedule
o f the Nation.

T he governmental need for uninterrupted production

was even more narrowly focused, because many o f these contracts
were in plants for which alternative production facilities were avail­
able.

A s the program advanced, however, there were more and more

plants on whose rapid and uninterrupted production the development
o f the program was dependent.

This was in part because limited

facilities were available for some materials and no alternative source
o f supply existed. In part it was because some o f the basic materials
on order were essential to the rest o f the program.
N or was this crisis universally recognized. There was still a large
part o f the population that considered it important for the Nation to
avoid involvement in the European war. F or these the defense pro­
gram was reluctantly accepted as a necessary preparation for the
possible contingency, but one which m ight be avoided and certainly
one that was not too immediate. A lthough the Adm inistration was
less sanguine, even it was not prepared to move too rapidly in the war
mobilization o f the Nation.

A s a result, by M arch 1941, no require­

ment had been placed upon industry that it divert civilian production
to the making o f defense materials, and no system o f priorities had
been established to distribute basic materials.
B oth labor and management were prepared to m odify but not to
abandon their own goals in order to achieve continuous production
in defense plants.

F or the labor movement, the improvement in job

opportunities and the economic advances that resulted from the addi­
tion o f Government contracts to civilian production meant an oppor­
tunity to extend organizational efforts.

T he unions were provided

with an opportunity to expand in many areas that were as yet un­
5The United States at War, Bureau of the Budget (1946), p. 29.




VOLUNTARISM AND COMPULSION) IN DISPUTE) SETTLEMENT

organized.

33

W here organization had already been achieved, the de­

fense period provided an opportunity to secure gains that would
strengthen and solidify the union position.

T o the unions this ap­

peared as a natural and desirable drive for further progress toward
their basic goals.
Labor considered such progress all the more desirable because it
believed that many employers, despite the public purpose expressed in
the National Labor Relations A ct, had not fully accepted collective
bargaining. M any employers appeared unwilling to accord to unions
the status that they sought unless compelled to do so by economic
action.

The unions, therefore, feared that any move to impose re­

strictions upon them under the plea of the crisis would have the effect
of lim iting not only their economic advances but also their security
within industry.
W ith in the labor movement there was a significant minority group
that went even further in resisting any acceptance o f the overriding
character o f the national emergency.

This group considered that the

Government’s defense program was, in fact, an instrumentality for
an imperialistic support for reactionary economic interests against
the best interests o f workers, both in Russia and in other parts of the
world.

Strikes initiated by local union leaders who held this opinion

were some o f the most serious at this time.
Management reluctance to accept the overriding character o f the
emergency was as extensive as that o f labor. Management feared
that the crisis would be used by labor as an opportunity to secure
concessions which it considered undesirable and would otherwise be
unwilling to grant. Such concessions, although serious enough in
defense plants, appeared even more serious in their inevitable reper­
cussions upon the much larger area of civilian production. A n d
such concessions appeared equally serious in their continuation into
the future after the crisis had passed.
These fears were not allayed for many managements when they
contemplated the possible role o f the Government in labor relations.
They feared that the Government was far more susceptible to labor
than to management pressure and that governmental action under
the necessities o f the crisis would result in undesirable labor advances.
Even where this did not occur, many managements reasoned, there
would be an unhealthy extension o f governmental controls over labor
relations that would be hard to eliminate in the future and that m ight
at any time be applied contrary to their interests.
Neither side wished to interfere with the defense program.

B ut

each side in a particular deadlock tended to say that if the other would
accept its position there would be no interruption of the program.
Neither side in such deadlocks was prepared to compromise its own




34

DISPUTE SETTLEMENT AND WAGE STABILIZATION

interests beyond what it considered its needs and its power possibilities
in deference to the defense program.
A ll reported work stoppages in United States, January 1940-D ecem ber 1941

Number of Workers Man-days
strikes in
involved
idle
progress (thousands) (thousands)

Number of Workers
Man-days
strikes in
idle
involved
progress (thousands) (thousands)

mo
January.......
February___
March___
April............
May_______
June_______
July_____
August....... .
September...
October____
November...
December...

19^1
222
270
295
336
361
336
390
394
394
419
373
277

41
38
43
53
77
56
83
90
108
108
102
62

247
290
387
442
666
484
586
706
781
915
740
458

January.......
February___
March.........
April....... .
May...........
June........ .
July
August,____
September...
October........
November.. _
December...

345
385
495
588
665
567
627
691
671
633
428
264

110
128
178
566
423
226
222
300
353
343
333
50

663
1,134
1, 558
7,114
2,202
1,504
1,313
1,810
1, 935
1, 912
1,344
434

Source: U. S. Department of Labor, Bureau of Labor Statistics, Monthly Labor Review, vol. 54, No.t
(April 1942), p. 945

A s is indicated in the foregoing table and as was to be expected,
there was a significant increase in the number o f strikes during the
early part o f 1941.6

T his increase resulted, on the one hand, from

the considerable organizing success and enlarging bargaining power
o f labor, and, on the other hand, from the determination o f many
managements to resist any advance in labor’s power and status.
The crisis, therefore, was that o f stoppages in bottleneck defense
plants where either labor or management was unwilling to accept the
terms proposed by the other despite the urgency o f the Government
need.
B . T h e G overnment’ s D ecision
The Government decided to meet the crisis by the establishment, on
M arch 19, 1941, o f a National Defense M ediation Board (hereafter
referred to as N D M B ) . In Executive Order 8716 the President called
upon labor and management in defense plants to settle their disputes
without stoppages and provided a tripartite board to assist them to
reach this goal.

There were five significant elements o f the govern­

mental decision that bear directly upon the general problem being
considered in this chapter.
6 Of course, these strikes developed in relatively few of the defense plants. Many
contracts were negotiated between labor and management without any stoppages, as both
sides sought to reach agreement rather than to resort to economic force. Not infre­
quently deadlocks were successfully mediated by the U. S. Conciliation Service and the
Labor Division of the Office of Production Management whose labor and industry con­
sultants assisted the two sides. But even the few plants where strikes developed were
too many for the defense needs of the Government. In early March 1941 strikes had
stopped production of critically needed airplanes and in the limited facilities for aluminum
manufacture and processing. Others were threatening.




VOLUNTARISM AND COMPULSION IN DISPUTE SETTLEMENT

(a)

35

B y the Executive order, the obligation of the N D M B and the

parties was limited to disputes that “ threaten to burden or obstruct
the production or transportation o f equipment or materials essential
to national defense.”

This represented a relatively small segment o f

the economy. O nly for this narrow area did the Government indicate
that the normal processes of collective bargaining should be modified.
The coverage of the Executive order was necessarily quite vague, and
there was considerable uncertainty in the minds of the parties as to
whether in a specific case production essential to the national defense
was involved. The order specified a process o f certification by the
Secretary o f Labor to the Board that provided to the parties, for the
first time, an unequivocal determination o f defense urgency.
(5 ) The order was based on the concept that the primary approach
to the settlement o f disagreements between management and labor
would continue to be collective bargaining, even in crucial defense
plants.

Thus, the certification process to the Board was to be limited

to those cases in which a deadlock had developed in the collective bar­
gaining that could not be peacefully resolved by the parties.
(c) The Board was to proceed on a case certified to it by seeking
through mediation to secure an agreement between the parties.

Thus

it was to try to find whatever terms would sufficiently satisfy both
parties so that they would agree rather than resort to a stoppage.
( d ) I f by mediation the dispute could not be resolved, the Board
was empowered to issue form al recommendations specifying the terms
which in its judgment would be appropriate as a solution of the dis­
pute.

Even here, the parties were not to be compelled to accept the

recommended solutions. The public announcements o f its recom­
mendations, however, were expected to enlist sufficient public pressures
on both sides to force a settlement.
(e) The President appointed labor, management, and public mem­
bers to the Board. B y this action he expressed a governmental deter­
mination to achieve peaceful solutions. B y the labor and management
appointments he sought to place a direct share in the responsibility for
peaceful dispute settlements on the groups themselves. A s will be
noted later, the role o f the public members involved the mediation o f
disputes with the assistance o f the labor and management members.
The acceptance o f these appointments by labor and management lead­
ers represented their decision to accept responsibility to work out
peaceful solutions.
Thus, in this first crisis, the President decided to depend almost
exclusively on the voluntary actions o f labor and management, through
collective bargaining, the participation o f labor and management rep­
resentatives in mediation and in the m aking o f recommendations and
in the acceptance o f recommendations. There was, however, a minor




36

DISPUTE SETTLEMENT AND WAGE STABILIZATION

element o f compulsion in the President’s decision to establish a board,
the use o f public representatives and the expected public pressure
behind board recommendations.
C. E valuation of the W isdom of the D ecision
1.

E ig h t months o f successful operation.— Im plicit in the decision

summarized above was the determination not to create a set o f rules,
obligations and procedures that would be directly applicable to any
new kind of crisis that m ight develop. The Executive order asserted
the Government need for continuous production and yet did not explain
what would happen if the collective bargaining, mediation, and recom­
mendation processes failed to achieve that result.

The whole program

involved the participation o f labor and management representatives on
the N D M B , but did not indicate what would happen i f either o f them
refused to serve.

There were stoppages in bottleneck defense plants

that occurred during this period.

The Government did not choose to

define them as so seriously interfering with the defense program as to
require an abandonment o f the approach except in three cases where
seizures were necessary. W hen, however, as we shall note below, the
C IO withdrew from the Board in November, the Government had to
consider the abandonment o f its reliance on mediation and recommen­
dations for the accomplishment o f its goal.
T h e first and crucial test o f the wisdom o f the decision o f M arch 19,
1941, was the resulting effect on stoppages. A ll o f the first six cases
referred to the Board involved stoppages which had been in effect for
some time. In each case production was resumed within a few days o f
its certification to the Board. F o r the whole period o f the Board’s
operation, 64 of the cases certified to it involved strikes which were
already in progress at the time o f certification. T hirty-six o f these
were ended before the Board heard the cases, and 12 more were ended
before final disposition by the Board. B y the second month o f its
operation, 98 percent of the workers involved in cases certified to the
Board were at work during the processing o f their case by the Board.
Throughout the B oard’s life this figure never went below 88 percent,
and during its final stages, the figure had reached 100 percent.

These

figures are the more remarkable when it is remembered that cases were
certified to the Board only after the parties had become deadlocked in
their own negotiations and the Conciliation Service and the O P M
consultants had not been able to get the parties beyond that deadlock.
Y e t, the record is by no means perfect. N ot only did the percentage
o f workers on strike during the Board’s handling o f their cases range
up to 12 percent, but in 24 o f the 118 cases certified to the Board a
stoppage originated after the case had been certified to the Board.
In addition, in four o f the cases, the Board found itself unable to




VOLUNTARISM AND COMPULSION IN DISPUTE SETTLEMENT

settle the cases, and had to refer them to the President.

37

In three of

these four cases the President judged the defense needs so urgent
that he used Government force, in the form of a seizure o f the prop­
erties, as a means o f restoring production. A n d in one other case,
the Board returned a certification to the Secretary o f Labor because
it considered it inappropriate to function in a dispute involving two
competing unions o f the Am erican Federation of Labor.
A second and more fundamental test of this largely voluntary
policy is the effect on production.
quately to appraise that effect.

Unfortunately it is impossible ade­
I t has been argued that the N D M B

process had the result of encouraging the development o f more power­
ful unions whose insistence on collective bargaining limited the
freedom and flexibility of management.

W e are not able to appraise

the significance o f the Board in accentuating the development of union­
ism. N or can we assess how significant were the resulting limitations
on managements’ production programs. Assum ing, however, the
inevitability o f the strengthening o f unionism in this period, the
President’s decision appears to have encouraged the development of
more cooperative relationships between management and labor.

The

phenomenal progress made in equipping the country for war would
appear to substantiate D r. George T aylor’s conclusion:
T h e “ m iracle o f production” which the U nited States w rought, convincingly
supports the soundness o f the decision in favor o f voluntarism and the tripartite
board.7

*

There appear to be three basic reasons why this approach worked
so successfully from March to November 1941.
(a) Both labor and management were willing to use the Board
to find a solution to deadlock. E arly in the Board’s history, it began
to use the device o f urging both sides to resume production without
any change in conditions until it could act on the case. In most
cases, since labor was pressing for changes from previously existing
conditions, this had the effect o f urging upon labor that they delay
using strike pressure until the Board had acted. The device was
not used in every case, and in some cases, only after some preliminary
exploration or adjustment seemed to provide a basis for the successful
presentation o f the appeal.

In most cases, however, it was succcessful

in causing a return to work, or a continuation o f work, while the case
was being processed by the Board.
A s the statements of the participants made both at the time and in
the postwar period indicate, this appeal was so largely successful
because the parties preferred not to interfere with the national defense
effort.

The B oard’s positions were based on the Government’s need

7 George W. Taylor, Government Regulation of Industrial Relations (New York;
Prentice Hall, 1948), p. 118,




38

DISPUTE; SETTLEMENT AND WAGE STABILIZATION

for production as demonstrated by the certification o f the case.
Trade-union leaders used the same appeal to their own membership.
B u t it was also based on the belief o f both labor and management
that out o f the Board’s actions would come a settlement which they
could both accept in lieu o f further strike action.

Clearly the appeal,

o f itself, would not have been significantly successful unless it had
been backed by the prospect that a solution o f the dispute would
follow.
( b ) The B oard’s mediation efforts were quite successful.

Despite

the fact that the cases came to the Board only after a deadlock had
developed which conciliation efforts, including those o f the consultants
o f the O P M , had been unable to surmount, the Board secured final
agreements by mediation in 45 o f the 86 cases which it concluded
during its history.8

These mediated settlements involved 70 percent

o f the union security issues that came to the Board and a similar
percentage o f the wage issues in certified cases.9

In part, this media-

tional success was the result o f the prestige attached to a presidentially
appointed Board.

In part, it was the result o f the special skill o f

the mediators selected by the President.

B ut, it would appear, that

more than anything else it resulted from the tripartite character of
the Board.

In each case the parties appeared before a tripartite panel

in which a public representative worked together with one or more
representatives o f each o f the interest groups represented in the case.
The partisan member frequently was able to secure a better under­
standing o f the most urgent issues from the party with which he was
identified.10 A n d each partisan representative on the Board added
to this understanding an acceptance o f a responsibility to secure a
solution o f the dispute. H e therefore participated in working out
a compromise form ula that both sides could accept, and insisted to
his own group that it be accepted.
(c) Recommendations successfully supplemented mediation.

In

41 o f the cases concluded by the Board, it was necessary to proceed
to a form al recommendation.

In 37 o f these 41 cases, the parties

accepted the Board recommendations.1
1

In m aking its recommenda­

tions the Board did not proceed from any fixed principles, other than
to find the basis upon which both sides could agree.

Thus it took

each case on its merits and sought to discover, and then to enunciate,
terms that would meet the essential needs o f each party.

T his ap­

8 U. S. Department of Labor, Bureau of Labor Statistics, Report of the National Defense
Mediation Board, Bull. No. 714 (1942), p. 14.
®Ibid., p. 19. These were the issues most frequently involved in certified cases, and
usually were the issues causing the deadlocks.
1 Ibid., p. 21.
0
1 Ibid., p. 14. The tabulation included nine cases referred to the NLRB and three in
1
which a dissatisfied party finally and reluctantly accepted the recommendations.




VOLUNTARISM AND COMPULSION IN DISPUTE! SETTLEMEiNT

39

proach, as Taylor has noted,12 involved something different from
simply determining what would have been the result had a strike
developed and continued as a test o f relative economic strength.

By

virtue of the defense program each side had developed such economic
strength that its fu ll testing dangerously affected the needs o f the
country. F or each side, therefore, the only possible settlement was
something less than would appear to that aide as the possible result
o f the fu ll use o f its power.

I f either side had insisted on the fu ll

equivalent o f the result o f its economic power, no solution could have
been achieved without a test of that power in every case in which
the same conclusion was not accepted by the other party.

The in­

sistence upon the conclusion o f its economic power by either side
would have resulted, therefore, in the failure of the Board to achieve
a peaceful solution.

A s we shall see, when that insistence was made

by the United Mine W orkers, and concurred in by the entire C IO , it
resulted in the dissolution o f the Board itself.

B ut until that crisis

developed, the Board had been successful in finding and recommending
formulae which settled many cases on terms that the parties were
prepared to accept because they met what they considered essential
needs, although less than they believed that their economic power
m ight have gained for them.
A s with the mediation process, the tripartite character o f the Board
was fundamental to the success o f the Board in the use o f recom­
mendations.

In working out a recommendation, the partisan mem­

bers o f a panel realistically presented the limits o f the area o f possible
acceptance.

The public members worked within these limits to de­

velop, for each case, a form ula that their colleagues, and then the
parties, could be expected* to accept.
A summary analysis o f the recommendations o f the Mediation
Board on the primary issues o f union security and wage increases
will illustrate the Board’s two guiding principles (a) to consider each
case on its own merits, and (&) to find what the parties considered their
needs and would accept in lieu o f strike action.

In the field of union

security the Board recommendations were characterized by consid­
erable variety, ranging from the closed shop to the omission o f any
provision beyond that existing in a previous contract.

In the develop­

ment o f these recommendations the Board came to use most fre­
quently (but not exclusively) a maintenance-of-membership provision.
This provision was not just a compromise between two more extreme
positions taken by the parties.

I t was a device to meet, on the one

hand, what the union considered its need for protection as a substitute
for the strike weapon, and on the other hand, what management con­
1 Op. cit., pp. 107-108.
2




40

DISPUTE SETTLEMENT AND WAGE STABILIZATION

sidered its obligation, not to impose union membership on such of
their workers who had declined to join.
In its recommendations on wages, the Board’s panels recommended
a variety o f different wage increase figures. In general, these were
based on some approximation o f the change in the cost o f living.
Attention was also paid, however, to present and prospective profits
o f the companies, the prospects o f continuous or intermittent em­
ployment, and the comparison with the wage rates and wage increases
enjoyed by comparable groups o f workers.13*
The record o f the Board and the parties did not fu lly meet the G ov­
ernment’s goal o f uninterrupted defense production under a system
o f free collective bargaining in three respects.
(a)

The Board was not able to handle union jurisdictional disputes

successfully.

Indeed, as we have noted, in a dispute between two

affiliates o f the A F L it returned the case to the Secretary o f Labor
and did not function on the case at all.

Its tripartite character did

not appear equal to the task o f settling that internal labor dispute.
(&) Government seizure was necessary in three cases.

T he whole

process o f the M ediation Board set up in M arch 1941, was that o f de­
fining the defense urgency o f specific cases and then providing a threeparty mediational device for their peaceful settlement.

I f mediation

had been completely successful no further governmental action would
have been necessary.

In three cases, however, the refusal o f the par­

ties to accept Board recommendations, the final stage o f the B oard’s
activity, made it necessary for the President to act.
The failure o f the Board in these three cases primarily reflected
the inability o f the group representatives on the Board to secure the
concurrence o f their own local partisans. In two o f the three cases,
the panels o f the Board had developed unanimous recommendations.
T he representatives o f the groups sitting on the Board had come to
agreement on terms which they considered sufficiently fair to the
interests o f each party to provide a basis fo r settlement.

The refusal

o f one o f the parties in each o f these two cases (one o f the recalcitrants
was an employer and one a union) represented an unwillingness o f
the specific parties to accept the conclusion o f their group representa­
tives. The Government had to move in to enforce a group discipline
that was not always strong enough to be effective.
A s D r. T aylor has noted,15 the necessity fo r Government seizure
presented a dilemma to the Government and to the Board.

I f , as a

result o f seizure, the B oard’s recommendations were put into effect,
1 For a more complete analysis of the recommendations of each issue, see the Report
3
of the NDMB, pp. 23-35, 64-67, 74-80.
1 Op. cit., p. 112.
5




VOLUNTARISM AND COMPULSION IN DISPUTE' SETTLEMENT

41

the result would be a close equivalent o f compulsory arbitration.

On

the other hand, if the Board recommendations were not enforced, there
would be no protection afforded to the party that had foregone the
use of its economic power in favor o f follow ing the Mediation Board’s
procedures.

A n d if there was going to be some other solution o f the

issues that caused the dispute, that could be achieved only by adding
some additional and, therefore, superior mechanism to that o f the
Board.

Such a result would have been to displace the Board as a

board o f final action, and transfer all o f the difficult disputes beyond
it.

There was no resolution o f this dilemma during the life o f the

Mediation Board.

The Board its e lf16 wanted the issues decided by

an enforcement o f its recommendations, even though this represented
a departure from mediation.

In the only clear case that arose, how­

ever, the Federal Ship case, the N avy, as the operating agency, avoided
an insistence o f the union to enforce the maintenance-of-membership
recommendation on the basis o f which seizure had been effected.

The

return o f the establishment to private management after Pearl Harbor
was accomplished before the issue had been settled.
I t may be doubted whether such an uncertainty could have continued
indefinitely.

H a d the dissolution o f the Board and the developments

following Pearl Harbor not made the question moot, it would have
been necessary to have resolved the dilemma in one way or another.
Perhaps it would have been resolved, as it later was under the W a r
Labor Board, by the enforcement o f the B oard’s recommendations.
This would have added a good deal o f compulsory power to the
Mediation Board.

So long as enforcement was undertaken only at

the request o f a tripartite board, however, it still would have rested
on the group consent for the actions o f the Board. A n d so long as
there was no certainty during the Board handling o f the case as to
whether the Government later would use compulsion, the Board
could still have operated prim arily on the voluntary acquiescence of
the parties to its action in specific cases.
In any case, the process o f the Board itself recognized the possi­
bility that its recommendations could be refused by either party.
The seizure action o f the Government was in effect a prohibition of a
strike against the Government, not against the individual employer.
( c ) In a few cases the existence o f the Board had the effect o f
reducing the effectiveness of collective bargaining.

Since only a

little over 100 cases were certified to the Board during a period of
over 9 months, it is clear that the vast m ajority o f the adjustments
between management and labor continued to be made by collective
1 See Taylor, op. cit., p. 112.
6




42

DISPUTE: SETTLEMENT AND WAGE STABILIZATION

bargaining.17

Indeed, even in the certified disputes, most issues had

been settled in negotiations. T h is suggests that in most cases the
differences between them were not irreconcilable in the normal proc­
esses o f negotiations, including the threat o f strikes.

H a d a com­

pulsory arbitration alternative been applied, it is reasonable to believe
that a far greater number o f cases would have been referred to the
Board.
I t is still true, as a questionnaire circulated by the N A M suggests,1
8
that there was some tendency for the weaker side in the bargaining
process to decline to conclude an agreement in order to secure the
advantage o f governmental action.

The inclusion o f the public mem­

bers on the Mediation Board meant that there was inevitably added
to the bargaining o f the two sides whatever weight the public members,
backed by their power o f making recommendations, wanted to give
to whatever they considered the equities o f the particular case.

In

addition, there tended to develop a process by which each side m ain­
tained during the bargaining a more extreme position than they were
really prepared to insist upon, in order to aid the further bargaining
process that was certain to develop within the Board operations after
the case was certified.
2.

The practical dissolution o f the B oard,— In its efforts to handle

the Captive M ines case,19 the Board confronted a crisis which it was
unable to surmount.

T he result was the dissolution o f the Board.

The crisis did not have any serious effect upon defense production;
it was finally concluded with only a 2-day stoppage. I t was significant
primarily in demonstrating the limits o f the voluntary approach
within the framework o f the defense situation.
The basic issue in the case was union security. The United M ine
W orkers were demanding that the union shop clause already included
in the Appalachian agreement be accepted by the employers in the
“ captive” mines. The companies refused to go beyond the open-shop
clause in the previous contract, under which an average o f 95 percent
o f the miners were already members o f the union.
unable to bring them into an agreement.

The Board was

B oth sides were preoccupied with their own evaluation o f the wider
implication o f any agreement.

The U M W argued that in order to

protect its future position after the emergency had passed, it needed
the strength that the union shop would provide.

The employers,

1 The BLS estimated that there were at that time some 40,000 contracts in force.
7
During the 8-month period most of them were modified and renewed. Since the Board
only received 106 cases, it is obvious that a very large number of contracts in defense
plants were concluded without the help of the Board.
1 National Association of Manufacturers, Employer Reactions and Opinions Concerning
8
the NDMB (New York, December 12, 1941).
1 The detailed history of the case and all of the basic documents are included in the
9
Report of the NDMB, pp. 108-134, 268-275.




VOLUNTARISM AND COMPULSION IN DISPUTE SETTLEMENT

43

apparently, were concerned not only with the future effect upon the
mines involved, but also with the possible effect upon the steel and
other agreements to which they were a party and in the negotiation
o f which they had successfully resisted a similar demand. Although
the employers finally acceded to a Board recommendation that the
case be submitted to an impartial arbitrator, the union refused even
this recommendation until after the case had passed beyond the M edi­
ation Board.
Apparently each side considered that it had acquired a considerable
increase in bargaining power since the contract had been negotiated
2 years before. The union in particular was unwilling to concede
that the defense emergency made it desirable for them to accept less
than they believed could be won by their enhanced bargaining power.
The record suggests that the Board made every effort to avoid taking
a definite position on the merits o f the issue. It twice acted by making
procedural rather than substantive recommendations. It made formal
recommendations only when the President in the role o f mediator
had returned the case in the hope that a substantive recommendation
could lead to a conclusion o f the controversy. The B oard’s reluctance
is understandable. It found that the group representatives who were
members o f the Board, as well as the parties, considered the issue to
have much wider significance than the individual case and the immedi­
ate settlement. F or the employers the paramount issue was whether
the case would lead to the general extension o f the union shop or the
closed shop in many industries not then covered. This would have
represented an increase o f union power in relation to the employer
and to the individual employee that employers were anxious to avoid.
T o them insistence upon the demand meant an unfair advantage
pressed by the unions because o f the special bargaining position they
had achieved due to the national crisis.2 The union representatives
0
saw in the issue the danger that the employers and the Government
would fa il to recognize the special responsibilities to avoid work
interruptions which the defense crisis imposed upon them. The
union leaders also feared that the crisis would be used to prevent
unions from progressing toward a status in industry which they would
have attained had the emergency not intervened.2
1
Thus, the case was not only a crisis in the sense that it threatened to
erupt into a strike that would very seriously interfere with the defense
program. Even more fundamentally, it was a crisis for the Board
itself. A s we have seen, the success o f the Board had depended on
the acceptance by labor and management, through participation on
20 See the F airless dissent from the final arbitration award of Dr. Steelman, ibid., p. 276.
21 See dissenting opinion of Hugh Lyons, the CIO representative on the NDMB panel th at
handled the case. Ibid., pp. 12 1 - 1 2 2 .
921297-50-




-4

44

DISPUTE, SETTLEMENT AND WAGE STABILIZATION

a tripartite board, o f the necessity fo r a negotiated rather than a
strike solution o f their deadlocks. A considerable number o f cases
involving union security had been successfully handled by the Board.
One solution or another had been found which sufficiently met the
needs o f the two specific parties involved, and which had not com­
mitted the Board to a policy which it endeavored to get all parties
to accept in every case. Despite the efforts o f the public members o f
the Board,2 the group representatives came to think o f any recom­
2
mendation in this case as a conclusion committing the position o f the
Board in future cases. The Board was unable to achieve unanimity on
this basis. The parties were not prepared to accept a formula which
assumed that the fact o f agreement was more important than the
urgent considerations o f principle which each held.2
3
Faced with the necessity o f making a choice as between the positions
o f the groups represented on the Board, the public members voted
against the union-shop demand o f the union in the particular case.
The A F L members joined with the public and employer members in
the final vote. The C IO members announced their resignation, saying
that they no longer could have confidence in the impartiality o f the
Board.2
4
Although the C IO members insisted that they would continue to
avoid strikes i f possible, they were obviously saying by implication
that they would no longer forego strikes in favor o f the tripartite
mediation and recommendation procedure o f the existing Board.
Conceivably, the President might have sought to reconstitute the
Board with a different public membership. But this was not a likely
alternative because it would have appeared as a repudiation o f the
position o f the public members. The President had gone even fu r­
ther than the Board m ajority in his subsequent handling o f the Captive
M ines case by saying that the Government would never order the socalled closed shop. It is also conceivable that the President could have
convened immediately a bipartisan or tripartite conference in an
effort to seek a general procedural agreement or means o f resolving
labor disputes. In view o f the inability o f the groups to find a com­
mon ground on the issue o f union security in the Captive M ines case,
this likewise could not have appeared as a real possibility at that time.
It must be concluded that under the strong influence o f the leader
most directly involved in the specific case, the C IO was choosing to
abandon its previously accepted responsibility to participate in the
22 Note particularly the language of the opinion in the final recommendation w ritten by
Chairman Davis, ibid., pp. 1 2 2 - 1 2 6 .
23 It is clear from the D avis opinion cited in footnote 2 2 that the public members, on the
other hand, were prim arily concerned to achieve a m ediated solution and were prepared
to conclude the case by an agreem ent on either the union or the employer position on the
union-shop issue.
24 D issenting opinion of Murray and Kennedy, NDMB Report, p. 134.




VOLUNTARISM AND COMPULSION IN DISPUTE SETTLEMENT

45

peaceful settlement o f disputes in defense plants under the N D M B,
presumably in the hope that whatever devices were later employed
by the Government would be more favorable to them.2
5
I f the Pearl Harbor attack had not occurred soon after, the N D M B
might have had to be abandoned by the Government. In the subse­
quent 4 weeks there was not enough crystallization o f opinion to
indicate what alternative m ight have been chosen.2 However, it
6
appears doubtful that the Government would have chosen a legal
prohibition o f strikes. Even in the war crisis a year and a half later,
when Congress finally passed the W ar Labor Disputes Act, there was
no strong inclination to adopt such a prohibition.
3.
Sum m ary evaluation o f the decision o f March 19 , 191^1.— The
process o f the tripartite N D M B was essentially voluntary, although
Government compulsion in the form o f seizure had to be used in three
cases. B y placing representatives on the Board, management and
labor accepted the necessity fo r restricting their private actions
toward each other in critical defense plants. When stoppages were
averted or discontinued despite the fact that either side assumed
that greater gains could have been achieved by such action, and when
they accepted the mediation and recommendation functions o f the
Board, the parties to the disputes agreed that they would limit their
efforts in accordance with the needs o f the Nation.
F or 8 months this essentially voluntary approach largely succeeded.
D uring that period the groups demonstrated that, given the appro­
priate machinery, they were prepared to accept less than they might
have won through economic action in order that their conflict might
not interfere with the urgent national effort. During that time they
achieved substantial peace in the defense plants, and established rela­
tionships which they considered most necessary, thus providing the
basis fo r a phenomenal production effort. Clearly the results were
better fo r the Nation than would have been an alternative system o f
compulsory arbitration, because the latter system would have replaced
free collective bargaining by governmentally imposed standards o f
labor relations in defense plants. This approach had to be abandoned
when the Board was unable to reconcile what each side considered
its essential needs. H ad there not occurred shortly thereafter (by the
Japanese action at Pearl H arbor) a fundamental redefinition by the
groups o f the relative importance o f their private needs in the light
o f the national emergency, some new approach would have had to
wait on the development o f a new and more basic agreement between
the Government and the interest groups. W e have concluded that that
could not have been achieved immediately.
25 In tlie Captive Mines case there w as indeed a more favorable solution
Arbitration Award, w hich decided in favor of the union demand, ibid., p.
26 Murray did propose a basis for reviving the NDMB, but th is was never
because the outbreak of war substantially changed the situation. See ch.




in the Steelman
272.
fu lly considered
6.

46

DISPUTE: SETTLEMENT AND WAGE STABILIZATION,

III.

S e t t l in g A

ll

D

is p u t e s

W

it h o u t

S to ppag es

W ith the attack on Pearl H arbor, the Nation had to make a second
crisis decision in industrial relations. Nearly a month earlier, the
C IO resignations had made the Mediation Board practically useless
and simultaneously had demonstrated that peace on the industrial
relations front could not be assured through that mediation machinery
because there was at least one issue on which each side apparently was
ready to deadlock negotiations.
A.

C haracteristics

of the

Crisis

1. Increased 'production needs .— W ith Pearl H arbor the production
needs o f the Nation had to be suddenly and drastically revised upward.
P rior to this time the country had been preparing to defend itself at
some indefinite time in the future, i f it became necessary. Now it had
to beat off a series o f attacks and fight a series o f delaying actions in
which one defeat after another was suffered before there was any hope
o f turning to the attack. One o f the basic determinants o f the severity
and significance o f the defeats, and o f the time and significance o f
later offensive actions was the amount, quality, and timeliness o f m ili­
tary equipment. Already the country had been devoting 15 percent o f
the industrial production to war material.2 W ithin the subsequent 6
7
months 100 billion more were appropriated, and an additional 60 b il­
lion were added within the follow ing 4 months.2 Congress made
8
credit available as rapidly as the economy o f the country could absorb
it in the direct and indirect production o f munitions o f war.
2. Psychological change.— The Pearl H arbor attack also caused a
profound psychological change. A s the Budget Bureau report sum­
marizes :
The attack at Pearl Harbor put an end to the inhibiting doubts that beset our
national policy and action during the preceding year * * * all were ready to
exert every effort and to make sacrifices for eventual victory. There was a single
national program as clear and dominant as can be found in the history of any
people.2
®

3. P rospect o f stoppages .— There were no laws or machinery to as­
sure the country that the enormous production needs would be met
without serious stoppages. The Mediation Board had broken down on
a critical issue. It had been unable to find a form ula that secured
general acceptance. Existing laws, designed prim arily to encourage
collective bargaining, were inadequate to deal with labor dispute prob­
lems in a war economy. The history o f the past year had already
indicated that there was an increasing tendency for negotiations to
27 Bureau of the Budget, The United States a t War (1 9 4 6 ), p. 103.
28 Ibid., p. 112,
Ibid., p. 103.




VOLUNTARISM AND COMPULSION IN DISPUTES SETTLEMENT

47

result in deadlocks as each side considered that the effect o f the m ili­
tary production program was to strengthen its bargaining position.
4.
Alternative approaches possible .— Under such circumstances the
Government had to act. I t was obvious that it had to insist, as a
fundamental o f industrial relations in wartime, that stoppages should
be abandoned. The only question before the Administration was the
method to be selected to reach that goal.
Tw o different alternatives were being suggested in Congress. A bill
by Senator Ball would have prohibited strikes and required the resolu­
tion by compulsory arbitration o f any unsettled issues. A bill by R ep­
resentative Smith had already passed the House, and was being seri­
ously considered by a Senate committee. Although less extreme than
the Ball bill, it would have required, among other things, a compuls6ry
cooling-off period, a m ajority vote o f the workers before a strike was
permitted, the freezing o f existing union security provisions unless
there was an agreement fo r a change, the registration o f unions, and the
submission o f their financial statements. It is important to note that
although the Smith bill would have imposed by law a number o f
restraints on the collective bargaining process, it permitted strikes,
even in urgently needed m ilitary production, i f negotiations and the
cooling-off period were unsuccessful.
A third alternative was also being discussed. It was the proposal,
publicly advanced by both the A F L and the CIO and form ally dis­
cussed within the administration, o f a no-strike, no-lockout agreement
reached by a labor-management conference. This would have been an
effort to revive and carry forw ard the voluntary approach o f the
Mediation Board. Up to December 7, however, this approach had not
been adopted, apparently because o f the fear within the administration
that such a conference could not reach an agreement on methods for
the solution o f disputes without strikes and particularly on a method
or principle fo r the solution o f the difficult union security issue.
Under the different circumstances created by Pearl Harbor, the
administration reappraised the significance o f the experience o f the
Mediation Board. That experience had demonstrated:
(а) There is great value in the most extensive possible dependence
on collective bargaining. Most o f the negotiations in defense plants
had been successfully concluded without reference to the Mediation
Board. Not only were these negotiations concluded peacefully, but
they also may be assumed to have resulted in a realistic agreement on
terms under which both sides were prepared to cooperate.
(б ) There were great values in tripartitism. A t least during a
period when strikes were not prohibited, the labor and industry mem­
bers were o f great value in achieving mediated settlements o f deadlocks.
Where recommendations were necessary, the tripartite Board worked




48

DISPUTE SETTLEMENT AND WAGE STABILIZATION

out a set o f terms that were quite realistic, and, in almost all cases,
succeeded in getting the parties to accept them.
( c ) In most cases, labor and management would accept an alterna­
tive way out o f their deadlock instead o f a stoppage i f they were con­
vinced o f the national necessity fo r such action and had confidence in
the machinery. The experimental development o f the appeal to remain
at work while a case was being handled by the Mediation Board had
demonstrated that in most cases even where neither side would give
in to the other, they were still prepared to accept a patriotic duty to
avoid a strike.
( d) On the other hand, there were limits to the voluntary acceptance
by labor and management o f a peaceful solution o f their deadlocks.
A lthough accepting the urgency o f continued production, each party
to a deadlock tended to insist that further compromising be done by
the other party. Where the Board could not convince both sides o f
the fairness o f a compromise settlement, the parties had to be con­
vinced that the national urgency was greater than their own particular
interest. Tw o issues, wages and union security, gave the Board most
trouble in this connection. Although wages were a frequent cause o f a
deadlock, the Board was able to find an acceptable compromise on
this issue. However, this had been achieved by a constant upward
adjustment in wage rates. On union security, however, the Board
had not been completely successful. The dissolution o f the Board on
this issue indicated that each side was inclined to place the responsi­
bility fo r the deadlock on the other side. The whole approach
depended on the degree o f self-discipline o f the parties. Representa­
tives o f both groups were on the Mediation Board because they recog­
nized the necessity fo r the peaceful adjustment o f certified disputes.
However, they were not always able to secure the agreement o f the
parties involved in the specific case. The strikes that occurred or
continued while the Board had the cases, and the necessity fo r seizure
in three cases, indicated that not all labor nor all management could
be induced to follow the leadership o f their representatives on the
Board.
B. T he G overnment D ecision
1.
Call fo r a conference .— Instead o f the alternatives proposed in
Congress, the Administration chose to try the voluntary approach in
the hope o f securing a more sweeping and more effective elimination
o f strikes. The President acted on December 12 by calling a LaborManagement Conference fo r December 17,1941. H e invited 12 A F L
and C IO leaders whose names had been suggested by the federations
and an equal number o f leading employers whose names had been




VOLUNTARISM AND COMPULSION IN DISPUTE SETTLEMENT

49

selected after informal consultation with business. associations. In
the conference call the President specified the Government need that
there should be no stoppages o f war production. He asked the par­
ticipants to agree to forego strike action and to recommend some
machinery that could settle disputed issues.
Obviously, the Government decision was not irrevocable. Congress
postponed action on any alternative approach only until this voluntary
approach had been attempted. The decision depended upon an agree­
ment by the conference that would be satisfactory to the Government.
2. Conference agreement.— A s the conference began,3 the partic­
0
ipants advanced proposals that indicated considerable differences re­
garding just what the conference should agree upon. Early in the
conference there was a C IO proposal urging the establishment o f in­
dustry-wide tripartite councils whose responsibilities would have been
fa r broader that the settlement o f industrial disputes. It was not
supported by the other groups. Late in the conference, another CIO
proposal suggested the elimination o f profits on war contracts. Pre­
sumably this was not so much a substantive as a tactical proposal
designed to highlight a contrast to the employers’ insistence on a
moratorium on union advance in the area o f union security. The
proposal was form ally supported by the A F L , but defeated, in a tie
vote, by the opposition o f the management representatives.
Both labor and management made proposals for the establishment
o f procedures for the settlement o f disputes. These were based on a
common acceptance o f the President’s position that there should be
no work stoppages during the war. Both a combined A F L -C IO pro­
posal and a resolution o f the management representatives advocated
that differences should be adjusted by collective bargaining, and by
mediation if necessary. They also agreed on a national board on
which both interest groups should be represented. The labor proposal
was fo r a bipartisan board with a public chairman. The manage­
ment proposal was fo r a fully tripartite board. The labor proposal
went no further than the device o f recommendations by this national
board. The management proposal contemplated the appointment o f
arbitrators, but assumed that these would function only when the
parties agreed to abide by their decisions.
The subsequent proposal o f the Associate Moderator, Senator
Thomas, was designed to bring the parties to agreement. It provided
sim ply: (1) There shall be no strikes or lockouts. (2) A ll disputes
shall be settled by peaceful means. (3) The President shall set up a
proper W ar Labor Board to handle these disputes.
30 For the factu al m aterial summarized in this section, see U. S. Departm ent of Labor,
The Termination Report of the National War Labor Board ( 1 9 4 8 ), vol. II, pp. 1 0 3 6 - 1 0 4 2
(hereinafter referred to as The Termination R eport). Also see ch. 2 of this study.




50

DISPUTE

settlem ent

An d

wage

s t a b il iz a t io n s

The labor representatives urged the adoption o f the proposal. The
management representatives countered by m oving the addition o f a
single principle that the Board should not consider any proposal to
m odify existing union security provisions previously agreed to by a
union and employer and that the unions should not attempt to change
any such provision except by voluntary negotiations between the em­
ployer and the labor organization concerned.
The labor motion in favor o f the Thomas proposal was rejected
by a tie vote. The management proposal fo r the Thomas proposal
plus their union security principle was rejected also by a tie vote.
W ith the Conference thus in a deadlock, the Moderators reported to
the President. The President responded by welcoming the agree­
ment on the three points described above and then observing:
Government must act in general. The three points agreed upon cover of
necessity all disputes that may arise between labor and management.

Clearly the President by this device was attempting to achieve an
agreement where none had yet been consummated. His action could
have been rejected by the management representatives. But they
were in a difficult position. They had already accepted the desira­
bility o f the elimination o f stoppages and the settlement o f disputes
by a tripartite board. They had hoped that the President’s previous
statement in the Captive M ines case would lead him to agree with
their position on union security. But instead he had left the matter
to be determined by the new board, on which management would be
represented. A few hours later, therefore, they issued a public state­
ment, sayin g:
The employer members of the conference accept the President’s direction for
the peaceful settlement of disputes and the establishment of a War Labor
Board * * *. We believe that, in determining the procedure of the Board,
consideration should be given to the principle we have consistently main­
tained. * ♦ *

Thus an agreement was reached. The Conference discussion laid
the basis fo r the agreement, but it was only achieved after the Presi­
dent used the prestige o f his position to insist on the terms o f the
agreement, and the employer representatives accepted the position o f
the President. The agreement clearly included the provisions that
stoppages should be eliminated, and that a tripartite board should be
established to settle disputes.
3.
Establishm ent o f National W a r Labor Board*.— Three weeks
later, on January 12, 1942, the President completed the decision,
join tly made by the Government and the interest groups, by Execu­
tive O rder 9017 establishing the National W ar Labor Board.3 The
1
order begins by the President’s declaration that—
a The order is given in fu ll in Term ination Report, vol. II, pp. 49 - 5 0 .




VOLUNTARISM AND COMPULSION IN DISPUTE SETTLEM ENT

51

* * * the national interest demands that there shall be no interruption of
any work which contributes to the effective prosecution of the war * * *.

It bases the new Board on the conference agreement by noting,
* * * as a result of a conference of representatives of labor and indus­
try * * *, it has been agreed that for the duration of the war there shall be
no strikes or lockouts, and that all disputes shall be settled by peaceful means,
and that a National War Labor Board be established for the peaceful adjustment
of such disputes * * *.

The order recognized the readiness o f the representatives o f the
interest groups to participate in the execution o f their agreement by
the appointment o f labor and management as well as public repre­
sentatives on the B o a rd :
There is hereby created * * * a National War Labor Board * * *.
Four of the members shall be representative of the public; four shall be repre­
sentative of employees; and four shall be representative of employers.

The procedures fo r the administration o f the no-strike, no-lockout
agreement were established in the order.
The procedure for adjusting and settling labor disputes * * * shall be as
follows: ( a ) The parties shall first resort to direct negotiations or to the pro­
cedures provided in a collective bargaining agreement. (&) If not settled in
this manner, the Commissioners of Conciliation of the Department of Labor shall
be notified if they have not already intervened in the dispute, (c) If not
promptly settled by conciliation, the Secretary of Labor shall certify the dispute
to the Board. * * * After it takes jurisdiction, the Board shall finally
determine the dispute, and for this purpose shall use mediation, voluntary
arbitration, or arbitration under rules established by the Board.

There were many who were not sure that the decision would work
satisfactorily. They thought that some compulsory alternative would
shortly be necessary3 because o f the deadlock on union security, the
2
breakdown o f the Mediation Board, the much greater urgency for
the avoidance o f stoppages, the probability that the new Board would
have to function as an arbitrator in many cases, and the probably
increasing difficulty o f wage decisions. In addition, it was not certain
how many members o f each group would accept the decisions o f their
representatives.3
3
C. E valuation

of

C onfluence D ecisions

1. Record o f stoppages .— The President, in his call for the confer­
ence and in the subsequent Executive order, had declared continuous
production as the primary Government need. The most significant
single criterion, therefore, in judging the labor, management and8
2
82 See references to Leiserson and Wyzanski speeches in ch. 2.
88 Although the AFL and the CIO had nominated conference participants, these had no
constitutional authority to commit the international and local unions. The authority of
the employer participants w as even more indefinite, since the business associations that
had been consulted had no specific role in collective bargaining.




52

DISPUTE SETTLEMENT AND WAGE STABILIZATION,

Government decision, is the record of continuity of production. As
indicated in the following table,3 the record was by no means perfect.
4
During each of the war years there was a considerable number of
strikes in cases that sooner or later were before the War Labor Board.
The number of these cases rose in 1943 above 1942 levels and rose again
in the following year. The number of workers involved and man-days
idle were also very considerably higher after 1942.
W ork stoppages of concern to N W L B ,1 January 19^% -August 1 9^ 5

Stoppages

Workers Man-days
involved idle (thou­
(thousands)
sands)

______

420
1,439
1,629
869

238
1,288
961^
837

818
11,302
4,867
6, 563

Total__________ ______ _____________________ ________

4,557

3,324

23, 550

1942................
1943..............
1944_.............
____________________________
1945 2

___________

* Stoppages which developed in disputes certified to the NWLB either after the stoppage had been con­
cluded, while it was in progress, or before the stoppage had developed.
2Through August.
Source: The Termination Report, vol. II, pp. 822, 825, and 827.

But the record cannot be evaluated properly until seen in perspec­
tive. Compared to the total number of days devoted to war produc­
tion, only a very small percentage of production days was lost,3 3
5 never
6
rising above 0.17 percent. Furthermore, the record has to be ap­
praised in the light of the existing strains in industrial relations.
This was a period o f unprecedented growth in union organization
and therefore of increasing possibilities of friction between labor
and management. It was a period in which the bargaining power of
individual workers and organized unions expanded enormously. And
it was also a period when rising living costs and other pressures made
labor increasingly restive. Finally, and perhaps most fundamentally,
management in many plants had not accepted the union as either a
desirable or a permanent participant in industrial relations decisions.
Against these considerations we must also note that both labor and
34 I t should be noted th at the table does not include all work stoppages th at occurred
during the war. Of the 1 4 ,8 9 6 stoppages (involving 6.7 m illion w orkers), only 29.2 per­
cent ever came to the attention of th e NW LB (Term ination Report, vol. I, p. 5 3 3 ). Many
of the other stoppages were not considered im portant to the war program. Many others
were of short duration and were settled by the parties them selves or w ith the help of
Federal and S tate conciliation and mediation agencies.
36 It w ill be recognized th a t these figures do not accurately reflect the fu ll significance
of stoppages. Many of the stoppages slowed down the flow of necessary m aterials to other
plants and therefore caused the loss of additional production time. On the other hand,
a number of the stoppages included had very little effect on production schedules because
the m aterial was not immediately needed or because later production more than made up
for lo st time.
I t may also be noted th at W itte con clu d es: “During the war the record [o f strikes]
in th is country was at least as good as in these foreign countries [G reat Britain, Australia,
New Zealand, Canada, S w eden].” E. E. W itte, “Experience W ith Strike Legislation
Abroad,” Annals of the American Academy (November 1 9 4 6 ) , p. 145.




VOLUNTARISM AND COMPULSION, IN DISPUTE SETTLEMENT

53

management were solidly back of the Government’s war program and
were prepared for sacrifices to make their maximum contribution to it.
We cannot be certain just how much disruption of production might
have occurred if the Government had followed any different approach.
But, judging by the period of the First W orld War, we may conclude
that in the absence of the no-strike, no-lockout agreement, includ­
ing the agreement to be bound by the decisions of the Board, there
would have been a great number of stoppages, many of them far more
severe than those that did take place.
It would appear that the strike record was fairly satisfactory from
the standpoint of the Government. In 1943 when Congress debated
and finally passed the War Labor Disputes Act, it demonstrated its
acceptance of this record by supporting and underwriting the Board
and by refraining from imposing a more completely compulsory alter­
native approach. Among the many thousands of collective bargain­
ing negotiations 3 that occurred in war plants during the war, only
6
about 20,000 came to the Board as disputes and only about 20 percent
of these became strikes at any part of the negotiation and arbitration
process.
Some of the more important reasons for the relative success with
which stoppages were avoided during the war are dealt with below.
They will be found in the factors underlying the acceptance of Board
Decisions, the substantive agreement achieved through the Board on
formulae for wage, union security and other issues, the development
o f compliance and seizure procedures, and the continued vitality of
the process o f direct collective bargaining. One particularly im­
portant reason for the relative success of the program was the prac­
tically unanimous acceptance of the Board’s practice not to process
disputes while a stoppage was in effect. This policy had been experi­
mentally developed by the NDMB and was adopted in the early days
of the NWLB and was continued throughout its life.3 It is true that
7
the policy had to be supplemented on occasion by preliminary adjust­
ments between the parties that would provide a reasonable basis for
the continuation or resumption of work pending a settlement of the
basic issues. In addition, it frequently had to be implemented by
a6No available sta tistics permit even a close approximation of the number of negotia­
tions that were concluded during the war and th at m ight have gone to the Board if either
party had caused a deadlock. I f we assume th at there were over 5 0 ,0 0 0 agreem ents in
effect during the war, that m ost of these were in establishm ents and involved workers
that were assumed to be covered by the no-strike agreement, and th at these were re­
negotiated each of the 3 % years from January 1 9 4 2 to August 1945, over 15 0 ,0 0 0 negotia­
tions would be involved. I f we also add internal wage adjustm ents and wage-reopening
clauses w ithin the term of the agreem ents and grievance and other deadlocks (som e of
which are represented in the total Board cases), the total potential deadlocks th at m ight
have been certified to the Board is probably w ell over 250,000.
87 Termination Report, vol. I, pp. 68 - 7 0 . As this report notes, the only significant ex­
ception to th is policy was th at made in the approval of the coal agreem ent reached between
the Secretary of the Interior and the United Mine Workers in 1943.




54

DISPUTE SETTLEMENT AND WAGE STABILIZATION

the techniques of persuasion or insistence on the part of the Board
its interested members, or its staff. But the Board’s refusal to decide
disputed issues while a stoppage existed was a powerful weapon ir
securing the application o f the no-strike, no-lockout agreement.
2. A ccep ta n ce o f B o a r d D ecisio n s .—The record could not have beer
achieved had not the parties generally accepted the obligation to re­
frain from striking and from lockouts and to accept Board decisions.3
*
A public member of the Board reported in January 1943, that no
strikes in war plants had been authorized by international union o f­
ficers and that the Board’s labor members had frequently urged the
avoidance or discontinuance of strikes on their own constituents.*
3
9
Indeed, both labor and management members o f the Board often
urged acceptance of Board orders because of the obligation of the no­
strike, no-lockout pledge. In all but two or three o f the cases of noncompliance with Board orders, the Board unanimously condemned
the recalcitrant party.
Chairman Garrison concluded in his introduction to the Board’s
Termination Report that the tripartite character o f the Board was a
significant factor.4 The participation o f labor and management
0
representatives assured the parties to a deadlock that their case
would be adequately considered by persons conversant with the points
of view and technical problems o f the parties. The determination of
all groups on the Board that the majority decision of the Board should
be accepted reflected their will to make the Board machinery work.
Finally, the public members moved within limits that the partisan
members could accept. These limits were determined in part by the
problems presented and the pressures developed in the individual case.
In part, the limits were determined by the wider implication for each
group of the principle being developed or applied in the individual
case. Within these limits, the public members brought the partisan
members into agreement or at least acquiescence on case decisions and
policies which they considered would safeguard the continued accept­
ance by both groups o f their voluntary no-strike, no-lockout pledge,
and at the same time were consistent with the public interest.
3. A cce p ta n ce o f a form u la on u nion se c u r ity .—But the Board could
have been successful only by finding a way of reconciling the pressures
of the two sides that made the union security and wage issues the dom­
inant and most urgent ones. In the first months of the Board’s opera­
tion, the union security issue was the most difficult. It had resulted in
the dissolution of the Mediation Board and had deadlocked the con88 In the 9 5 percent of the 1 7 ,6 5 0 disputes cases closed “the decision of the Board re­
solved the disputes w ithout further threat to production.” The Termination Report,
vol. I, p. 4 15.
39 Speech o f W ayne Morse, January 17, 1943, The Termination Report, vol. II, p. 506.
40 For a consideration of alternative methods of con stitutin g a board, see ch. 6.




VOLUNTARISM AND COMPULSION IN DISPUTE! SETTLEMENT

55

f erence. Some progress toward a solution had been made by the Medi­
ation Board in the development of the maintenance-of-membership
formula, but that had not been sufficient to prevent either of the crises
referred to above.
In its handling of the union security issue, the Board went through
a number o f steps before arriving at a stable and acceptable solution.
Its first step was the agreement of all members that the Board had the
authority and responsibility of making a decision on the issue. It
then went through a long series of discussions and case decisions ex­
perimenting with various formulae until a standard policy was finally
achieved.4
1
This whole process was significant because:
(a ) The public members earnestly sought to find the basis for a
unanimous agreement. This was temporarily achieved, but industry
representatives later returned to dissenting on the issue. However,
the employer members participated in the unanimous decision that
the issue had to be acted on by the Board.
(h )
The resulting maintenance-of-membership formula protected
the urgent needs of both parties. It permitted the employer to hire
whom he pleased and did not require him to compel any employee to
become a union member. On the other hand, it assured the union
that their strength and status would be protected and it gave them
the disciplinary authority they needed.
( c ) It resolved the crisis so that neither side withdrew from the
Board, and both labor and management representatives continued to
insist that the agreement should be kept and the Board orders accepted.
Thus, by August 1942, when the Board formula had been fully
developed, union security was no longer an issue that threatened to
destroy the Board.
4.
A g r e e m e n t on w a g es .—Because wage rates were a basic factor
in most disputes, agreement on the wage issue was equally necessary
if the voluntary approach was to work. We have seen that the
Mediation Board had handled this issue by obtaining agreements for
substantial increases in wages; indeed, by trading off other issues
through the device of an agreement on a wage increase. W e have
also seen that the Mediation Board had used a variety of standards
for wage adjustments, including profit levels and prospects, and wage
levels that had been reached by agreement.
W ith the war and the establishment of an agency empowered to
make binding awards, settlement of the wage issue became much more
difficult. The Conference had established no principles for the war­
time adjustment of wages,4 and indeed the participants apparently
2
The Termination Report summarized these fcteps, vol. I p. 82.
,
« See ch. 2.




See also ch. 2
.

56

DISPUTE. SETTLEMENT AND WAGE STABILIZATION

assumed that the new Board would proceed on this issue much as had
the Mediation Board. But in making its wage decisions, the Board
could no longer rely on the test of whatever the two sides would
accept. Since it had final authority in dispute cases, it gradually
came to the conclusion that it had to develop standards which could
be applied to future as well as present cases In addition, it had to
give some leadership in the standards that would be applied by the
parties in all wage negotiations.
Not only did the tripartite Board extend the Conference agreement
by the incorporation of a stabilization objective, but, in the subse­
quent months before congressional action establishing a national
policy o f wage stabilization, it developed the basic concepts for the
wage stabilization program by its handling of dispute cases. These
concepts o f maladjustment, inequities and substandards were devel­
oped on the basis of a flexible wage stabilization program which would
help minimize inflationary pressures without seriously interfering
with stable industrial relations and the most effective expansion o f
war production.
Even before the President and Congress were prepared to require
a general stabilization of all prices and before there had been any move
to control voluntary wage changes, it had been demonstrated that
wage disputes could be worked out on a voluntary basis within at least
some stabilization limits.4
3
Although union security and wages were the most frequent, and
usually the most controversial issues, the Board succeeded only be­
cause it worked out with equal success a considerable number o f other
issues. These are briefly summarized in the appendix to chapter 2.
5.
C om p lian ce and the m e o f the p o w e r o f seizu re :4—The record
4
o f nearly continuous production was achieved largely because of the
determination of the parties to abide by the no-strike, no-lockout agree­
ment and their readiness to accept the results of the tripartite adjudi­
cation o f the disputed issues by the Board. Over 95 percent o f the
dispute cases handled by the NWLB were thus resolved without any
further threat to production.4
5
But, in order to protect the whole structure of the agreement, the
Board and the Government found it necessary somehow to achieve
43 There was a great deal of pressure on the Board, including its labor and management
members, to work out such lim its. Some o f these pressures were expressed in the Emer­
gency Price Control Act of January 31, 1942, the President’s stabilization m essage of
April 27, 1 942, and the general maximum price regulation. See ch. 3.
^T h ro u g h o u t this study the words “compliance” and “enforcem ent” are used in the
sense used by the NWLB. The Board’s distinction between “com pliance” and “enforce­
m ent” is significant. The Board referred to its problem of securing acceptance of decisions
in dispute cases as “compliance” because it sought a voluntary acceptance of the obligation
imposed upon the parties by the no-strike, no-lockout agreement. It referred to the “en­
forcem ent” of its wage stabilization actions, because its procedures in the area were based
on the Stabilization Act, Taylor, Op. cit., p. 170. See also ch. 1 0 of this study.
45 The Termination Report, vol. I, p. 415.




VOLUNTARISM AND COMPULSION IN DISPUTE SETTLEMENT

57

substantial compliance in the remaining cases as well.4 The Board’s
6
experience demonstrated that it could successfully handle most noncompliance cases by persuasion. In many of these cases, noncompli­
ance was based on a misunderstanding of the Board order, frequently
because of vagueness or confusion in the wording. Clarification fre­
quently brought compliance. Other noncompliance cases were based
on disappointment and resentment with a Board order. Such emo­
tional reactions were usually tempered, after a short interval, on the
advice o f company or union leaders. In still other cases, although
the aggrieved party never became reconciled to the decision of the
Board, the decision was accepted finally as a patriotic duty in view of
the war emergency. Thus, in most of the noncompliance cases the
judgment of the parties was modified, and acceptance of the Board
order eventually was accomplished.
In order to secure this voluntary compliance, the Board followed
a number o f procedures. Underlying all such procedures was the
unanimous position of the Board that compliance by both parties
should follow its order regardless of the fact that there may have
been a minority dissent in the Board on the terms of the order. One
successful Board procedure was to arrange discussions with the par­
ties. Another was the issuance of appeals by the Board or its staff
members to employers, or to union members, local union leaders and
especially to international union officials. The Board frequently de­
pended also on its owy labor and industry members to urge compliance
n
upon a recalcitrant party. Occasionally, the Board proceeded to
stage a public show-cause hearing. By this latter device it was able
either to secure compliance by focusing public attention on the im­
portance of compliance or by modifying its order.
However, this program alone was not completely successful. A l­
though these voluntary procedures eventually accomplished com­
pliance in most cases, sometimes success was achieved only after con­
siderable delay. More serious was the fact that, for some 200-300
cases, voluntary compliance was never achieved.4 A great many of
7
these were small cases which involved only a few employees and did
not have an urgent effect on the war production program. But a few
cases greatly endangered the war production program. The bulk
of these involved wages or union security.4
8
One proposal for dealing with such cases provided that Board
orders would be enforceable through the courts. During the congres­
46 The Termination Report, vol. I, p. 416. Note, for example, the statem ent of the
industry members.
47 E. E. W itte, “Settlem ent of Wartime Labor D isputes,” Harvard Business Review
(winter, 1 9 4 7 ), p. 169.
48 A sta tistica l analysis of types of issues for a group of cases referred by the Board to
the President or Stabilization Director is given in Termination Report, vol. I, p. 425.




58

DISPUTE SETTLEMENT AN1D WAGE STABILIZATION

sional debates that climaxed in the passage, over the President’s
veto, o f the W ar Labor Disputes Act in 1943, there was considerable
discussion about enforcing Board orders by permitting the Attorney
General to seek a court injunction against a noncomplying party. A n
amendment to this effect was defeated in the Senate, and another
proposal (permitting the use of an interim injunction to maintain the
status quo while the Board was acting) was defeated in the House.
The Board recommended against such procedure both because it
feared the result would be extensive delay in the final application of
its orders and because it preferred to place the emphasis on voluntary
compliance, as well as for other reasons.4
9
In the last months o f the war, noncompliance with Board orders be­
came somewhat more significant. The public members of the Board
even considered a change from their earlier position. They debated
whether it might not be desirable for the Board to have the authority
to apply to a special Emergency Court for the judicial enforcement of
such o f its orders as might be necessary. This proposal was never
acted on by the Board. It probably could not have been applied with­
out a considerable weakening o f the voluntary basis upon which
Board orders were accepted during most o f the war period because
it would have tended to shift the emphasis from voluntary compliance
to legal enforcement. It also would certainly have required changes
and delays in the procedure utilized for processing cases.5
0
Although the device of court enforcement o f Board orders was not
used, there had to be some way to deal with those noncompliance cases
that involved actual or potential interruptions in important war pro­
duction. Several devices were tried. Each o f these involved re­
ferring cases to other executive agencies of the Government. Under
this arrangement, when the voluntary procedures of the Board failed,
compulsory powers of the Government were imposed at the discretion
o f the Director o f Economic Stabilization or the President after the
Board had reported its inability to achieve continuous production.
Only about 100 of the 17,650 cases decided by the Board remained
after all its voluntary efforts had been concluded which were consid­
ered sufficiently serious to be referred by it for additional action.5
1
Many o f these were sent to the Director o f Economic Stabilization in
accordance with Executive Order 9370 o f August 1943. It was hoped
that the application of economic sanctions might secure compliance
in most o f these cases. Under this order it was possible to suspend
favorable provisions ordered by the Board so long as the union and the
workers failed to com ply; to suspend war contracts, material priori-*
1
0
6
49 See
60 See
61 No
Report,

The Termination Report, vol. II, pp. 4 5 2 - 6 2 .
statem ent of Chairman Davis, ibid., pp. 4 6 1 - 4 6 2 .
exact figures are available. This estim ate is made by Garrison, The Termination
vol. I, p. 27.




VOLUNTARISM AND COMPULSION IN DISPUTE SETTLEMENT

59

ties, or manpower referrals from noncomplying employers; to with­
draw draft deferments from noncomplying workers. In the few
cases in which these devices were tried, they did not prove to be very
effective. There was either considerable doubt about their legality,
or they appeared to have little persuasive power, or the Government
hesitated to apply them because of basic production needs.5
2
Only 46 of the remaining most urgent noncompliance cases were sent
to the President for his final consideration. Six of these were settled
by an appeal from him to the noncomplying party. In each o f the
other 40 cases the President ordered the seizure of the property and at
least the token operation of the property by the Government for as
long as noncompliance continued. This device, it will be remem­
bered, had already been used four times in support of actions of the
NDMB. Until 1943 the action was based exclusively on the war
powers of the President and subsequently on the additional authority
o f a provision of the War Labor Disputes Act.
O f the 40 seizure cases that developed during the life of the NWLB,
19 arose from employer noncompliance and 21 from union noncom­
pliance. In practically all of these 40 cases, production was re­
sumed or continued following the seizure. Where seizure had de­
veloped because of an employer refusal to comply with a Board order,
the Government agency operating the plant put the order into effect,
and, if a modification of the Board order later appeared to be desirable,
it applied to the Board for approval. I f the noncomplying party was
the union, strike action was usually dropped when the flag was hoisted
above the seized property. The War Labor Disputes Act did provide
for penalties against the union and its leader for a strike against the
Government, but this was invoked only once and applied only to a few
local leaders.
There were at least four important cases in which seizure was only
partly successful or was considered useless to attempt. The most
significant o f these was the B itu m in ou s Goal case of 1943.5 In that
3
case there w ere three short strikes despite the fact that the properties
T
had been seized and were being operated by the Government. On one
of these occasions the President threatened to induct miners into the
Army. The case was finally settled only after the Government nego­
tiated an agreement with the United Mine Workers and the Board ap­
proved the agreement despite a continuing strike. In the M o n t ­
g o m e r y W a r d case of 1944 the Government was able to apply the Board
decisions only after overcoming the most difficult kind of operating
and legal problems subsequent to seizure of the property. In cases
late in the war period involving the Musicians’ Union and the Typo-6
3
2
The Termination Report, vol. I, p. 424.
63 For a detailed description see The Termination Report, vol. I, pp. 10 7 9 —
1120.

62

921297— 50-------5




60

DISPUTE SETTLEMENT ANlD WAGE STABILIZATION

graphical Union, the Government failed to secure compliance bw
elected, for a variety of reasons, not to apply seizure procedures.5
4
In recapitulation, the parties voluntarily accepted the Board’s
orders without challenge in the vast majority o f the cases. Ever
where there was an original noncompliance, in most cases the per­
suasion o f the Board was successful in securing compliance. Some
other cases were ignored as unimportant. In a small number oi
cases forceful measures were necessary. Although other devices
proved impractical, seizure proved to be largely successful. Even
seizure or its threat failed to win compliance on a few occasions.
The problems of compliance were becoming increasingly serious to­
ward the end of the war, particularly in industries not closely tied in
with the war effort.
In part, the Board’s success was due to its tripartite character, which
contributed to the realism o f the original decisions and the effective­
ness o f appeals for compliance. In part, voluntary compliance re­
sulted from the desire of both sides to retain the Board structure
and to conform to the patriotic attitudes of the community. It is
somewhat unlikely that either the compliance or the production record
would have been as good, had the Board and the Government de­
pended more largely on coercive authority to secure the applica­
tion o f Board decisions.
On the other hand, there is sufficient evidence to suggest that the
voluntary system would not have continued to work effectively if the
few recalcitrants had not been brought into line by the use of the Gov­
ernment’s seizure power. Such power, it should be noted, appeared
much more absolute and final than it really was. When applied
against a recalcitrant employer, it certainly resulted in the applica­
tion o f the Board order. But, as the Montgomery Ward case indi­
cated, the application might be long delayed, and even then fail to
achieve the substantive result intended. This latter conclusion is
also suggested by the fact that of the 19 seizures for employer noncompliance 12 had to be continued until the end of the war because
the employer never did accept the Board order. When seizure was
applied against a recalcitrant union, it depended largely on the
patriotic appeal of the flag. The bituminous coal case highlighted
the fact that even this appeal was not always completely effective,
and had to be used sparingly to be effective at all. I f Government
power had been the main reliance it probably would have been neces54 In the Musicians’ Union ease, the Director of Economic Stabilization decided th at the
dispute was not unduly impeding the war effort. Termination Report, vol. II, p. 714.
In the Typographical Union case, the Board tried to apply pressure by suspending its
processing o f voluntary wage applications, but did not press the m atter further in the
face of a union defiance since VJ-day occurred soon after the Board’s action. Termina­
tion Report, vol. I, p. 419.




VOLUNTARISM AND COMPULSION IN DISPUTE SETTLEMENT

61

sary to experiment extensively with injunctions, with penalties as­
sessed against a union or its members or even with military discipline
exercised over individual workers, just as the President threatened
the coal miners in 1943.
6.
W eakened collective bargaining .— A s indicated earlier, the
labor-management conferees had assumed that, although the Board
would be given final authority to decide disputed issues, there would
be a very large reliance on the process o f collective bargaining during
the war. This assumption conform ed to both the Administration
policy, as stated in the order creating the Board, and the judgment
o f Congress, as expressed as late as 1943 in the discussion o f the W ar
Labor Disputes Act. In fact, there was a significant weakening o f
the bargaining method o f reaching an agreement during the war.
There was a considerable tendency fo r parties in negotiations to hold
back their best offers so as not to prejudice their position before the
Board. In addition, there was some tendency for employers to delay
the conclusion o f a dispute, depending on the no-strike, no-lockout
agreement, and then the later decision o f the Board. More signifi­
cantly there was, as public members o f the Board noted,5 a ten­
5
dency fo r both parties to pass to the B oard the onus o f making a
decision which was less than they, and particularly their people, con­
sider proper. But one o f the most significant factors that operated
to reduce the effectiveness o f collective bargaining lay not in the
Board’s function o f dispute settlement as such but o f wage stabiliza­
tion. Since the upper limits o f wage adjustment were set by the
Board, and since unions tended to be under the necessity o f reaching
these limits, there was considerably less room for the parties in which
to trade. Insofar as there was any uncertainty in the approvability
o f any specific wage change proposal, the parties ran the risk o f losing
that part o f the bargain fo r which they had abandoned other contract
demands.
Despite this tendency, the number o f B oard cases and decisions was
only a small fraction o f the total agreements reached during the war.
Even in these cases, most o f the issues were settled in negotiations. In
part, this continued dependence on collective bargaining was an indi­
cation o f the desire o f both sides to make their own decisions.5 P er­
6
haps o f even greater importance was the fact that as the Board began
to develop general principles, the parties were able to anticipate at
least the general standards that the Board would apply to their case,6
5
65 Speech of Frank Morley, cited in The Termination Report, vol. II, p. 522, and of
Nathan Feinsinger, p. 556.
66 One striking illustration of this desire was that of the W est Coast paper m anufacturers
and unions who submitted only one case to the Board during the war. And even in this
case, they proceeded to modify by m utual agreem ent the decision handed down by the
Board.




62

DISPUTE SETTLEMENT AND WAGE STABILIZATION

i f submitted, and to prefer the speed, realism, and self-decision in­
volved in com ing to an agreement themselves within those genera]
standards.5 The B oard consciously desired to encourage the maxi­
7
mum reliance on collective bargaining and used a number o f devices
to reduce the tendency o f the parties to refer issues to the Board,
including the extension o f existing agreements beyond their termina­
tion dates, with retroactivity while renewal negotiations continued,
the Board delay in assuming jurisdiction i f collective bargaining e f­
forts had not been exhausted, the reference back to the parties o f
numerous issues, and the reference back to the parties fo r the
application o f a general principle.5
8
A s an important element in the appraisal o f the effect o f the B oard’s
approach on collective bargaining, m ajor emphasis needs to be given
to the operation o f the Board itself., In its tripartite deliberations,
there was frequently transferred to its own rooms the process o f
collective bargaining, pictured by public members W itte in the H ar­
vard Business Review and Keezer in the American Economic Review.5
9
Indeed, the most striking indication that the structure and attachment
to the process o f collective bargaining were preserved throughout the
war period was the determination immediately after Y J-day to lift
the governmental restraints on its operation.6
0
IV . U n i v e r s a l W a g e S t a b i l i z a t i o n

The third basic decision considered in this chapter involves the issue
o f wage stabilization. This discussion, however, does not attempt to
analyze the need fo r a general stabilization o f wages in relation to
other prices (considered in ch. 3) nor the general standards that
needed to be applied to aclyLeve stabilization (analyzed in ch. 4 ).
Rather, as part o f the general consideration o f the approach o f v ol­
untarism, this section analyzes the significance o f embracing the
problem o f stabilization within the terms o f the no-strike, no-lockout
agreement.
A . N ature of the C risis

B y the spring o f 1942, it was quite clear that there needed to be a
general stabilization o f prices. Prices were m oving up, the increasing
67 The Term ination Report, vol. I, p. 65.
58 Seven such techniques are summarized in Feinsinger’s speech of March 23, 1945.
The Term ination Report, vol. II, p. 557.
89 Harvard B usiness Review (W inter, 1 9 4 7 ), p. 169, and American Economic Review,
vol. X X X V I: 3 (June 1 9 4 6 ), p. 233.
60 It may w ell be argued that the restraints on collective bargaining were lifted too
soon. That issue is not evaluated here. The im portant point in this analysis is that
neither labor nor management responded to the request of the President for a renewal
of the no-strike pledge. The P resident’s Executive order leading to the dissolution of
the NWLB, as it indicates, w as based on the demonstrated preference of both labor and
management for the resumption of untrammeUed collective bargaining.




VOLUNTARISM AND COMPULSION IN DISPUTE SETTLEMENT

63

governmental purchases and the declining production o f consumer
goods gave promise o f still greater increases in prices unless some
controlling action was taken. This prospect o f advancing prices was
clearly a threat to the Nation’s economic efficiency and morale.
1. N eed to stabilize wages as fa r t o f complete stabilization pro­
gram.— A s an element in the stabilization o f all prices, clearly wages
needed also to be stabilized.6 They were a significant element in
1
the cost o f production and, therefore, advancing wages were bound
to lead to increases in selling prices. In addition, advancing wages
added to inflation by increasing funds in the hands o f consumers
to bid fo r relatively scarce commodities.
But wages were tied to prices in another way. There were many
other aspects o f the economy pressing on inflation besides wages.
Even with no increases in wages, the danger mounted as a larger
and larger quantity o f money was being paid for products which were
not made available to consumers. The advancing level o f farm prices
and o f profits were inflationary pressures also. A n y complete ap­
proach to stabilization o f prices, therefore, involved m oving on a
broader fron t than just wages. Indeed, it appeared impossible to
proceed to wage stabilization unless the pressure fo r wage increases
was significantly reduced by the stabilization o f the cost o f living.
And, in addition, the Government could not expect workers to respond
to a program o f wage stabilization unless they considered that simul­
taneously there was at least an approximately equal concession on the
part o f other groups in the economy. The problem fo r the Govern­
ment, therefore, was to maintain a delicate political balance in estab­
lishing its goals o f wage stabilization within an over-all program o f
price stabilization.
2. N eed to include collective bargaining agreements on wages .—
As far as wages were concerned, it soon became clear that the action o f
the Board in the settlement o f dispute cases could not o f itself achieve
stabilization. In the Little Steel case, the Board based its decision for
a general increase largely on the fact that wages had already moved
up by agreements negotiated without reference to the Board. It
recognized that it would be inequitable to continue to limit only those
wage rates that came before it fo r settlement.
D uring the early months o f its existence, the Board acted on the
assumption that employers would be reluctant to grant wage increases,
and that, therefore, they could be expected not to agree in collective
bargaining negotiations to greater wage increases than the Board
would grant had the matter come before it as a dispute case. Under
61 The program of the NWLB centered on the control of wage rates rather than of
earnings. (See ch. 4, p. 158.) Consequently, throughout the chapters of this study, the
reference to “w ages” refers to wage rates unless otherwise indicated.




64

DISPUTE SETTLEMENT AND WAGE STABILIZATION

such an assumption, the maxima awarded by the Board would set th<
limits that wage levels would be expected to rise because union pres
sure fo r higher wage levels than those previously ordered by th(
B oard would be met by employer refusals and the reference o f the
case to the Board fo r settlement. However, by the summer o f 1942
it became apparent that that assumption was no longer true. U n­
employment had been reduced to a low figure, and many manufacturers
were under the necessity o f attracting large numbers o f new em­
ployees, frequently to new plants and plants in undeveloped areas, in
order to meet their war contracts. Therefore, many employers had
developed a readiness and even an anxiety to lift wage levels in order
to attract the necessary additional labor. Under these circumstances,
negotiated settlements were bound to move the wage levels up ap­
preciably and increasingly. In the General Cable case6 the Board
2
form ally recognized that it would be impossible to stabilize wage rates
i f limitations on wage increases were applied only to the dispute cases
that came to it. The Board concluded that it was necessary to have an
equal limitation applied to the voluntary actions o f employers and
agreements o f unions and employers. Labor and management mem­
bers, by participation in this conclusion,6 voluntarily set the stage
3
fo r the further restriction on their collective bargaining freedom.
B. D ecision

to

S tabilize A ll W ages

I t is conceivable that, given the responsibility, labor and manage­
ment might have follow ed the same general approach used in the
settlement o f disputes and agreed to establish and apply stabilization
limits. It did not happen this way (except in the building industry).
A fte r the Government had determined that stabilization was essen­
tial and that stabilization o f prices required the maintenance o f the
existing level o f wages, the Government ordered the wage stabiliza­
tion controls. This it did in a series o f steps, including the President’s
Seven-Point speech o f A p ril 27,1942, his message to Congress o f Sep­
tember 7, 1942, and the action o f Congress in the Stabilization A ct
o f October 2, 1942. This alternative approach was adopted because
(a) the program had to be a more inclusive one than just wage stabili­
zation, and (b) because, generally speaking, organized labor and
management were not in a position to establish sufficiently pow erful
internal controls to police such an agreement even i f they had entered
into it.
Given the governmental intention to enact a general stabilization
program, representatives o f labor and management groups, on the tri­
62 N ational War Labor Board Transcript, Executive Meeting, August 5, 1942.
63 This conclusion had already been expressed in a May 5, 1942, memorandum signed
by the chairm an of the Board, the Secretary of Labor, the heads of the OPA, and the
Manpower Commission. However, the President w as u nw illing to act until opinion had
crystallized throughout the Nation, and farm-price stabilization also appeared possible.




VOLUNT A RISM AND COMPARISON IN DISPUTE SETTLEMENT

65

partite board, took a decision that involved a considerable assumption
o f responsibility fo r the operation o f the stabilization program. The
Board unanimously recommended that the administration o f the wage
stabilization program should be assigned to it. On July 29,1942, the
unanimous statement o f the Board to the President voiced—
its deep concern of reports that the procedure and authority of stabilizing wages
by the War Labor Board machinery may be drastically modified. Wage de­
cisions of the War Labor Board have been accepted by labor and industry after
careful consideration of their anti-inflationary effects. * * * A denial to
labor and industry of participation in determining wage policy in keeping with
the democratic principle of a tripartite board, set up in accordance with the
labor-industry agreement of last December would seriously injure morale and
effect detrimentally maximum production. * * * We are concerned with
the preservation of government by the consent of the governed.6*
4

The consequence o f this position, assumed by the labor and man­
agement representatives on the Board, and implemented by Executive
Order 9250 on the basis o f congressional action, was to extend the area
o f tripartite functioning in labor relations to the area o f wage agree­
ments as well as dispute settlements. It involved the labor and man­
agement representatives both in the establishment o f specific standards,
and in the administration thereof.
C. A pplication

of the

D ecision

It is important to note that the stabilization standards o f the con­
gressional act and o f the President’s Executive Order 9250 were ex­
tremely general.8 The B oard’s first responsibility was the definition
6
o f more precise standards. It, therefore, began its wage stabilization
administration with a series o f general pronouncements immediately
follow ing the issuance o f the Executive order. The most significant
o f these was the general policy statement o f November 6, 1942, which,
after considerable discussion, was adopted unanimously.
These wage stabilization standards, as drawn up by the Board
on November 6, 1942, and as applied until the follow ing spring, per­
mitted considerable flexibility to meet varying situations. When the
Director o f Economic Stabilization, in A pril 1943, decided that a much
more rigid type o f wage stabilization was necessary, the Board un­
animously objected. Labor and management representatives joined
with the public members o f the Board in insisting upon more flexi­
bility and a wider discretion and responsibility to the Board than was
provided in the o rd e r: (a) because both labor and industry members
as well as public members believed that there could not be the main­
tenance o f industrial peace and morale without the adjustment o f
wage rates that appeared to be out o f line, and (b) because without
64 Quoted in David R. Roberts’, The Developm ent of Wage Stabilization Policy, During
World War II, unpublished manuscript, National Archives, p. 59.
“ Even these general standards were copied from the concepts already developed and
agreed to in the tripartite board. See chs. 2 and 4.




66

DISPUTE SETTLEMENT AND WAGE STABILIZATION

some flexibility it was impossible fo r the tripartite Board to adapt
itself to the pressures from both sides and to provide enough accommo­
dation to keep adherence to its joint operations. The result o f this
unanimous Board ob jection 6 was a reconsideration by the Director
6
o f Econom ic Stabilization and the issuance by him, 5 weeks later,
o f a clarifying, more flexible policy directive. Apparently, in the
judgment o f the labor and industry members o f the Board, consider­
able flexibility was necessary i f they were to continue to be successful
in getting the groups they represented to accept and apply the Govern­
ment principle o f wage stabilization.
Thus, as Board Chairman, T aylor concludes,6 the tripartite Board,
7
in accepting the responsibility fo r wage stabilization, perform ed the
function o f balancing and integrating the need fo r wage stabilization
with the need fo r stable industrial relations. It should be noted,
however, that the A p ril 1943 order (9328) had intervened in the
determination by the tripartite Board o f the wage stabilization policy.
W hat was worked out by the subsequent modification represented a
substantially tighter formulation o f the program, although it re­
tained a significant degree o f the previous flexibility and the group
participation in its form ulation and application.
V.

Su

m m a r y and

C

onclusions

This chapter has focused on one basic principle involved in the gov­
ernmental decisions on labor disputes and wage stabilization during
the defense and war periods. In each o f three crises the Government
correctly decided that the normal working o f the free enterprise
system resulted in some choices being made by labor and management
groups which endangered the Government’s military programs. In
each case, some restrictions on these private decisions were necessary.
The question then to be decided was to what degree the restriction
should be self-imposed or at least accepted and administered by the
groups (called voluntarism in the chapter) and to what degree these
restrictions should be imposed and enforced by the Government
(called com pulsion).
. The Government decisions and the results o f those decisions are
sumarized below,.
A . E valuation

of

B asic D ecisions

1.
In March 1941, the Government decided to call upon labor and
management to share the responsibility fo r achieving the goal o f
66 Labor even seriously considered withdraw al from the Board if the order were not
modified. It appears, therefore, th at a basic reason for the modification by the director
w as his desire to continue the tripartite Board and its responsibility for wage stabiliza­
tion.
$7 y h e Termination Report, vol. I, p. 2J.,




VOLUNTARISM AND COMPULSION IN DISPUTE SETTLEMENT

67

uninterrupted production o f critically needed defense materials* T o
implement this request, the Government established the National D e­
fense Mediation Board and appointed labor and management as well
as public representatives to it. B y the participation of their repre­
sentatives and by their use o f the Board in the adjustment o f specific
cases, labor and management fo r 8 months accepted the governmentally assigned responsibility.
A t that time (or indeed later) the Government did not have, as a
practical alternative, the possibility o f a legal prevention o f strikes.
Although most elements in the community recognized that an emer­
gency existed, no group was prepared to accept the imposition o f such
restraints on the system o f collective bargaining.
F or 8 months there was a great reduction in the number and dura­
tion o f work stoppages in crucial defense plants. W ith the active
participation o f labor and management representatives, the Board, by
mediation and by its recommendations, secured peaceful agreements
in most o f the cases.
The Government goals were substantially but not completely
realized. A number o f stoppages did develop, both before, during
and after the Mediation Board handling o f the cases certified to it.
In three cases Board failure had to be follow ed by Government seizure
in order to get the production which the Government urgently needed.
In November 1941 the machinery broke down, in part from the in­
ability o f the Board to settle the Captive M ines case, but primarily
from the resignation o f the C IO members. These events demonstrated
(a) that a voluntary mediation approach through a tripartite Board
could succeed only to the extent that both sides were prepared to accept
less than their bargaining strength might dictate, and ( b ) that the
issue o f union security was extremely difficult to adjust because it
embodied, among other things, the fear o f the unions that they would
be reduced to impotence without an effective substitute for their
normal strike weapon, and the employer fear that the power o f trade
unions would develop to excessive proportions through the bargaining
position they secured during the defense program and the administra­
tion’s sympathetic concern fo r them.
W ithin a month o f this breakdown, the Pearl Harbor attack basically
changed the characteristics o f the problem. In that interval, no new
approach was worked out by the Government and the parties. One
cannot be sure, therefore, what might have been tried, or how any
alternative approach might have worked, within the framework o f a
continuing defense period. There were suggestions o f a new voluntary
approach through a labor-management conference, but given the
intensity o f the union security issue, it appears unlikely that it would




68

DISPUTE SETTLEMENT AND WAGE STABILIZATION

have been successful. There was some consideration o f a direcl
prohibition o f strikes. It appears very unlikely that there woulc
have been a sufficiently widespread acceptance o f this approach tc
permit its adoption.
2.
In December 1941, the Government decided to try again to plac€
the m ajor responsibility fo r maintaining industrial peace on manage­
ment and labor. The President’s call fo r a labor-management con­
ference resulted in an agreement o f the leaders o f both sides that there
would be no work-stoppages and that a new National W ar Labor
Board would make final determination o f any issues left unsettled in
collective bargaining.
The President thus asked labor and management to work out a
program involving a greater restriction on their own actions than he
was desirous o f imposing. The groups responded in part because they
recognized the national crisis and the national need for uninterrupted
production, in part because they knew that they needed some supple­
ment to their own collective bargaining when deadlocks developed,
and in part because they preferred to avoid compulsory action by the
Government.
On the whole, this decision, participated in by labor and manage­
ment, worked out extremely well during the entire war period. Many
threatened stoppages that would have seriously interfered with the
war effort were avoided. The settlements worked out through the
Board were quite realistic expressions o f the needs o f both parties.
W hen the country reconsidered this decision a year and a half later,
Congress agreed that, on the whole, the results were more satisfactory
than would be those o f a compulsory alternative.
A crucial aspect o f this decision was the participation by labor and
management representatives in the tripartite Board. The basic con­
flicts between the two groups, particularly as regards union security
and wages, were negotiated on the Board. Although the Board discusions were heated and even led to some talk o f the withdrawal o f
one group or the other from the Board, the intensity o f negotiations
at the plant level and the probability o f extensive and bitter work
stoppages were substantially reduced. However, in certain cases
serious friction continued throughout the war, because of the presence
o f attitudes o f individual unions and managements which could not
be reconciled by the Board. Through the guidance o f the tripartite
Board, settlements were achieved which helped inexperienced parties
to improve their relationships with each other. In addition, the joint
participation o f labor and management representatives in the decision­
making process had a profound effect in assuring the acceptance o f
decisions made by the Board.




VOLUNTARISM AND COMPULSION IN DISPUTE SETTLEMENT

69

However, the wartime record was not perfect. Although stoppages
were greatly reduced, they were not eliminated. The self-discipline
o f labor and management was not complete, and in 40 cases the G ov­
ernment had to use its seizure powers to assure continuation or resump­
tion o f work under conditions ordered by the Board. T o strengthen
the hand o f the Board, and to establish unquestionably the Govern­
ment’s seizure powers, the W ar Labor Disputes A ct gave both a legis­
lative base.
The availability and use o f the Board machinery weakened the
effectiveness o f collective bargaining. A vast majority o f agreements
were still developed by collective bargaining. The gradually develop­
ing principles o f the Board were very frequently used as the guide for
these negotiations. But in a great many cases the parties failed to
make a determined effort to reach their own conclusion, and turned
to the Board to make the decision fo r them.
3.
In October 1942, the Congress authorized a wage-stabilization
program. There was now general agreement, including agreement
by most o f the representatives o f labor and o f management, that wage
stabilization must accompany price stabilization. There was also
agreement, expressed in the unanimous action o f the Board, that such
a stabilization program would have to have a legislative base and be
imposed on all groups. However, this action called for including some
element o f voluntarism in its implementation. On the recommenda­
tion, and even insistence, o f the tripartite Board, the responsibility
fo r the formulation and administration o f wage stabilization was
placed in the Board. When the Director o f Economic Stabilization
decided, in the spring o f 1943, that the B oard’s standards were not
sufficiently restrictive, he nonetheless yielded to the insistence o f the
tripartite Board that considerable flexibility be permitted as the price
o f the continued participation o f labor and management in the ad­
ministration and enforcement o f the stabilization rules.
Both labor and management accepted the governmental determina­
tion that wages had to be stabilized and, in very large part, conformed
to the established rules. The participation by labor and management
on the Board resulted in a greater degree o f flexibility in the form u­
lation and application o f wage stabilization rules. I t should be noted
that the effect o f such participation was the gradual advance in wage
levels and in total labor costs through fringe adjustments. But this
moderate weakening o f the stabilization line had the more than com­
pensating virtue o f permitting a realistic adjustment o f labor stand­
ards to the practical problems o f peaceful and cooperative industrial
relations. A nd the participation o f labor and management in its
administration had the result o f a much greater acceptance and volun­
tary application o f the principles than would have been true otherwise,




70

DISPUTE SETTLEMENT AND WAGE STABILIZATION

B. General Conclusions

From the analysis of these three basic governmental decisions five
more general conclusions would appear to emerge:
1. The basic problem in a democratic government in a crisis period
as well as at other times is securing the consent of the great majority
of citizens directly affected. Consent at any particular time and in
relation to any specific program depends on the degree to which the
national patriotism of the groups overrides their specific group in­
terests. Where patriotism is dominant6 and where a governmental
8
need is recognized, the groups can be expected to modify voluntarily
their rights and freedom of action even more extensively than the
Government may be prepared to impose such restrictions.
2. It follows that the governmental decision in a specific crisis
has to be made in the light of the attitudes of the parties as well as
o f its own emergency needs. The three decisions analyzed in this
chapter were different, fundamentally, because o f both considerations.
As the national need became more urgent the restrictions on individ­
ual freedom had to be extended. In the area of disputes, voluntary
decisions of the parties extended the self-imposed restrictions to paral­
lel the national need. In the area of wage stabilization, the Govern­
ment imposed compulsory controls, but even then with a large element
o f voluntary participation in decision-making by the parties. In both
areas, the effectiveness of voluntary restrictions diminished some­
what as the strain of continued self-discipline accumulated.
3. Voluntarism (the self-imposed restriction by labor and manage­
ment on their freedom of decision-making) is modified by the use
o f a tripartite board. The decisions o f the tripartite boards were
based on an agreement, tacit in the case of the NDMB and formally
expressed in the case of the NWLB, which was voluntarily made and
applied. In addition, these decisions were in part made by the
groups themselves through the participation o f their representatives
on the boards, but they were decisions made as a result of the significant
modifications achieved by the public members in their role, in both
boards, of mediating the position of the two groups, and in pressing a
governmental as distinct from a partisan interest. Given a determina­
tion of the Government to restrict but not to eliminate normal free­
dom o f choice, there are great advantages in the voluntarism of labor
and management participation in the imposition and application of
restrictions upon their freedom of action in industrial relations.
68 This is not to say that either group is prepared to yield to the insistence o f the
other on the appeal to its patriotism . Nor is it to say that either side is prepared to
abandon its efforts to secure advantage at the expense o f the other. B ut it does indicate
that patriotism is dominant when each side is prepared to restrict its insistence on an
&#v$.ntage by conform ity to restrictive rules laid down w ith their participation.




VOLUNTARISM AND COMPULSION IN DISPUTE! SETTLEMENT

71

4. These advantages arise partly from the development of a more
realistic and flexible program to accomplish the Government’s objec­
tives. They emerge, even more, out of the subtle psychological stimu­
lus to the parties to cooperate wholeheartedly in order to achieve the
Government’s larger goal of war production. It was a fundamental
principle of the Government to depend on free labor and free manage­
ment to win the production war.
5. Where the approach of voluntarism is used there will be only
an approximate accomplishment of the Government goals. In World
War I I the goals of uninterrupted production and of wage stabiliza­
tion were achieved only within fairly wide tolerances. The nature
of these tolerances depends on a number of factors, including the
degree of support by the parties for the Government’s program, the
degree of self-discipline on the parties, and the variation in the inten­
sity of the clash of interest between the objectives of the Government
and of the parties When the deviation between Government goals
and accomplishment was too wide to be tolerated, Government com­
pulsion had to replace voluntarism even at the cost of more grudging
cooperation. Thus, the Government chose compulsary alternatives in
the addition o f wage stabilization control, the later narrowing of
wage stabilization flexibility, and in the seizure of plants with continu­
ing strikes. This contrast should not be understood to imply that the
immediate Government goals will be completely achieved by com­
pulsion. Even if it is determined that compulsory measures have
to be introduced at the cost of somewhat less cooperation, they too
cannot be expected to be completely successful, and their approximate
success will depend on the general approval and acceptance of the
affected parties.
6. Voluntarism is only as successful as the group cohesion of the
parties permits its implementation. Labor, during the early defense
period, was under considerable strain because of a segment within
the labor movement which did not accept the governmental objectives.
In the war period, both labor and management held quite firmly to
the agreement made by their leaders in December 1941 concerning
labor disputes. This record was all the more remarkable in view of
the dissensions and divisions within the labor movement, and more
particularly in view of the much looser organization of management.




CHAPTER

The Principl es of Dispute Settlement1

2

By Milton Derber

I. T h e P r o b l e m

T h e o u t b r e a k of the war made inevitable the establishment o f a
board to settle labor disputes that could not be settled by existing pro­
cedures. On this point practically all interested groups were agreed.
But the basis on which such a board should operate was a matter on
which opinion was rather sharply divided. Should the precedent of
W orld War I be followed and a set o f principles be adopted for guid­
ance o f the board ? I f so, who should determine the principles—the
Congress, the Chief Executive, a labor-management conference ? And
what issues should be thus settled in advance and in what detail ? Or,
contrariwise, should the board be free to chart its own way ? And if
so, what should its approach be? Should it sit down and hammer out
a code o f principles for its own guidance and the guidance of the Na­
tion’s employers and unions ? Or should it imitate the architects of
the common law and build up a set of precedents case by case, issue
by issue ? Or, still another alternative, should it avoid all principles,
regard each case primarily on its own merits, and decide issues de
novo?
This basic set of dilemmas was perhaps most sharply crystallized
when on February 18, 1942 (little more than 5 weeks after the estab­
lishment o f the B oard), Dr. William M. Leiserson, then member of the
National Labor Relations Board, delivered an urgent warning in a
public address2 that the War Labor Board might meet the fate of its
predecessor, the National Defense Mediation Board, if it also at­
tempted to decide each case on its own merits. Dr. Leiserson stated
1 Ch. 1 has analyzed in detail the problems o f voluntarism in dispute settlement. This
chapter is concerned prim arily with the developm ent o f substantive principles o f dispute
settlement.
2 John H. Finley Memorial Lecture, The College o f the City o f New York, February
18, 1942, reprinted in Labor R elations Reference Manual, vol. IX, p. 922 (T he Bureau
o f N ational Affairs. Inc., W ashington, D. C .).
72




THE! PRINCIPLES OF DISPUTE SETTLEMENT

73

that the success or failure of the new board would be determined by
how it disposed of the closed-shop issue and requests for wage in­
creases. “ It seems rather strange to leave the determination of such
crucial national issues to an arbitration board designed to make awards
in particular cases.” He regretted as a lost opportunity the failure
o f the President’s War Labor Conference to formulate a national war
labor program by mutual agreement of labor and management and
urged its reconvening. In the absence of such agreement, he insisted
that Congress or the President formulate governmental policy on the
fundamental issues.
The Leiserson position was assailed by Philip Murray, president of
the Congress o f Industrial Organizations, whose major steel cases had
just been certified to the Board.3 It drew from Chairman William H.
Davis of the NWLB, leading exponent of the common law approach,
the comment that he found it difficult to share Dr. Leiserson’s lugu­
brious predictions but that personally he would have no reason to
object if the labors of the NWLB were lightened by a formation of
policy by some higher authority.4

II.

P r io r E x p e r ie n c e

In order properly to evaluate the decisions which were made on
these critical questions, a brief survey of the experience then available
to the policy-makers may be helpful.
A.

W a r L abo r B oard of W orld W a r

I

The experience of the War Labor Board of World War I was a lead­
ing guide.5 The need for a unified war-time labor program had be­
come evident by the fall of 1917. Many Government agencies, includ­
ing the President’s Mediation Commission and various production and
procurement departments, had suggested it. Finally in January 1918,
the President appointed the Secretary of Labor as labor administrator
to set up the necessary machinery.
The Secretary, on the advice of a special advisory committee,6
created a 12-man body consisting of 5 representatives o f employers,
5 representatives of wage earners, and 2 public representatives as joint
3 New York Times, March 9, 1942.
4New York Times, February 22, 1942.
5 Most o f the discussion which follow s is based on U. S. Departm ent o f Labor, Bureau
o f Labor Statistics, The National W ar Labor Board, Bulletin No. 237 (December 1921).
6 The advisory comm ittee consisted o f a representative o f the general public as chair­
man, two representatives of employers, tw o representatives o f wage earners, a representa­
tive o f women, and an economist,.




74

DISPUTE: SETTLEMENT AND WAGE STABILIZATION

chairmen7 with the view of reaching agreements on principles and
policies for a national labor program. This War Labor Conference
Board began its meetings on February 25, 1918, and handed in a
unanimous report o f March 29. It recommended the establishment of
a national war labor board composed in the same fashion as the Con­
ference Board; set forth a set of procedures for the processing of
labor disputes; and concluded with a code of substantive principles
and policies to govern relations between workers and employers in war
industries for the duration of the war.
The provisions of the code may be summarized as follow s:
(a) There should be no strikes or lockouts during the war.
( b ) The right of workers to organize in trade-unions and to bargain
collectively, without employer interference, is recognized and affirmed.
(c) The right of employers to organize in associations or groups
and to bargain collectively, without worker interference, is recognized
and affirmed.
( d) The workers, in the exercise of their right to organize, shall
not use coercive measures of any kind.
( e ) Wherever the union shop exists, it shall be continued and union
standards as to wages, hours of labor, and other conditions of employ­
ment shall be maintained.
( / ) The continuance of nonunion shops shall not be deemed a
grievance. However, this shall not deny the right o f workers to
organize, as guaranteed in paragraph & nor prevent the W ar Labor
,
Board from urging, or any umpire from granting, under the ma­
chinery herein provided, improvement of their situation in the mat­
ter of wages, hours, or other conditions.
( g ) Established safeguards and regulations for the protection of
the health and safety of workers shall not be relaxed.
( h ) Women employed in work ordinarily performed by men must
be allowed equal pay for equal work and must not be allotted tasks
disproportionate to their strength.
(i) The basic 8-hour day is recognized as applying in all cases in
which existing law requires it. In all other cases the question of
hours shall be settled with due regard to governmental necessities
and the welfare, health, and comfort of the workers.
( j ) Maximum war production should be maintained and practices
by employers or workers which tend to restrict production or arti­
ficially increase costs should be discouraged.
( k) To mobilize the labor supply with a view to its rapid and
effective distribution, the Department of Labor shall keep on file a per­
7 The em ployer representatives were chosen by the National Industrial Conference
Board, the labor representatives by the American Federation o f Labor. Each o f t£e tyyp
groups selected one public represppt^tiye,




THE! PRINCIPLES OF DISPUTE SETTLEMENT

75

manent list of the number o f skilled and other workers available in
different parts of the Nation.
( l ) In fixing wages, hours, and conditions of labor, regard shall
always be had to the labor standards, wage scales, and other conditions
prevailing in the localities affected.
( m ) The right of all workers, including common laborers, to a
living wage is hereby declared.
( n) In fixing wages, minimum rates of pay shall be established
which will insure the subsistence of the worker and his family in
health and reasonable comfort.
How significant was this code of principles? It is clear from a
study o f the Board’s decisions that the wage and hour principles were
vague generalities which failed to serve as workable guides. A t­
tempts to implement the concept of a living wage were soon aban­
doned and the principles of equal pay and a minimum wage were
never effectively defined.
Oil the other hand, the principles relating to union organization,
activity, and status proved to be of major importance. In 1918 there
was no National Labor Relations Act to safeguard the organizational
activities o f unions. While wartime conditions greatly strengthened
the position of organized labor, recognition of the right to organize
and to bargain collectively and the prohibition against discharges for
membership in trade unions or for legitimate trade-union activities
gave a great, if temporary, impetus to stable unionism and industrial
relations. To a considerable extent, the Board played a role similar
to that of the subsequent National Labor Relations Board.
The basic issue of union status was settled b y the principles freezing
closed and open shops, thereby avoiding the widespread controversy
which was to confront the country in World War II.

B. I nter-W ar E xperience
Although the principles established during World War I were
quickly abandoned after the armistice, a number of those relating to
the right to organize and bargain collectively without employer inter­
ference were revived first in railway labor legislation of 1926 and
1934 and later in New Deal legislation affecting all interstate indus­
try. In contrast to the wartime experience, however, the decisions of
the boards established to administer these laws were subject to review
and enforcement in the courts. The flexibility which characterized
921297— ^0------ §




76

DISPUTE SETTLEMENT AND WAGE STABILIZATION

the voluntarily adopted wartime principles was greatly reduced by
legislative enactment and court interpretation.
The National Labor Board, the first National Labor Relations
Board, and the special industry boards set up during the emergency
NR A period to handle labor disputes arising out o f section 7 (a) o f the
Recovery Act and the labor provisions of the industry codes came
closest to the problems of a war situation. But the emergency atmos­
phere was short-lived and, securing compliance with decisions became
a major problem. Nonetheless, the decisions of the two national
boards had considerable influence on the establishment and administra­
tion o f the National Labor Relations Act of 1935. Throughout this
period primary emphasis was placed upon employer unfair labor
practices and union representation questions.

C. T he N ational D efense M ediation B oard
The experience of the defense period preceding America’s entrance
into W orld W ar II was, of course, most significant for policy decisions
in the war period. This experience has been analyzed in chapter I
and need not be reviewed again here. It need only be noted that
the Board was given no substantive principles or guidance for action.
It was conceived of primarily as a supermediation body whose compo­
sition and prestige, backed by the power of the President, would enable
it to maintain industrial peace in the relatively small number of cases
which it was expected to receive. In the tradition of a mediation
agency, the Board handled the issues of each case on an individual
basis without the creation of binding principles or precedents. As
the authors of the official report of the Board state: “It was the
opinion, at least of the majority of the members, that the Board itself,
being primarily a mediation board, could not consistently adopt a set
policy upon a matter concerning which there was basic disagreement
between employers and employees.” 8

III.

T h e W a r -L a b o r M a n a g e m e n t C o n f e r e n c e a n d E x e c u t i v e O r d e r

9017

From the point of view of the subject matter o f this chapter, four
aspects of the Labor-Management Conference were significant: (a)
The major emphasis was on machinery and procedure and not on sub­
stantive principles for the settlement of labor disputes; (&) only
8 U. S. Departm ent o f Labor, Bureau o f L abor Statistics, R eport on the W ork o f the
N ational Defense M ediation Board, B ulletin No. 714 (1 9 4 2 ), p. 24.




THE PRINCIPLES OF DISPUTE SETTLEMENT

77

one substantive issue, union security, was seriously debated and re­
sulted in a deadlock; (c) the President placed an exceptional premium
on speed of action and resolved the one deadlock by his own decision;
and ( d ) different conceptions of the role of the new board prevailed.
Since the conference has been analyzed in chapter I, only the last of
these aspects requires additional comment.
One prominent view was that the new Board would closely resem­
ble its predecessor in emphasizing collective bargaining and mediation,
although it might have to decide more cases. Since the objective of
mediation is to bring about agreement between the parties, guiding
principles as to the substance of issues in dispute would be unneces­
sary. Consequently, aside from the union security issue which had
caused the downfall of the NDMB, there was no compelling reason
for the consideration of principles. Another important group recog­
nized the decision-making character of the new Board but felt that the
responsibility for the formation of principles should be left to the
new Board. Others felt that the decision-making Board should have
guiding policies fixed for it by Congress or by the President. There
was thus no group in the conference which thought it necessary to
press for substantive principle at that point.
But the question of principles was not entirely forgotten. Fol­
lowing the adjournment of the conference, Government officials set to
work to frame the Executive order establishing the new Board. Two
paramount questions confronted the administration—first, how de­
tailed should the procedure and machinery of the new agency be out­
lined and second, should a set of substantive principles be formulated
to guide the Board. During the nearly 3-week period between the end
of the conference and the issuance of the Executive order both ques­
tions were debated.
In an address9 delivered at Northwestern University on January
12, 1942, Judge Charles Wyzanski, Jr., who was a public member of
the NDMB, gave careful thought to the question whether an arbitra­
tion agency should decide each case on its merits or should be governed
by an announced set of substantive policies. The speech clearly sum­
marizes the differing points of view which prevailed at the time.
Judge Wyzanski listed, in addition to union security and wages, 15
different issues which might be included in a policy statement. They
covered such subjects as overtime pay, paid vacations, women’s rates
for work formerly done by men, procedures to encourage job simplifi­
cation, incentive systems, grievance procedure, delegated agencies, con­
tract reopening, and retroactivity.
He noted that the argument for the declaration of principles came
most forcefully from industrial leaders, the conservative press, and

9Reprinted in Labor Relations Reference




Manual, vol. IX , p. 931.

78

DISPUTE SETTLEMENT AND WAGE STABILIZATION

lawyers. According to Wyzanski, three main points were being made
by these persons: {a) That the mere statement by the Government
o f a policy which it is prepared to support will lessen disputes—many
disputes would never arise once the rules were known; ( b ) that labor
itself has recognized the desirability of clear principles as a method of
achieving labor peace—the collective bargaining contract is a demon­
stration o f this fact; (e) that in the absence of a declaration of rules,
the tendency will be for disputes to be settled on the basis o f the
strength of the parties without regard to either justice or the unsettling
effect o f the decision upon other situations.
Judge Wyzanski went on to note that the majority of union leaders
opposed a declaration of policies because labor is always seeking to
improve rather than to stabilize its position and because these leaders,
by temperament, training, and fields of opportunity, are “ experts in
trading, in dramatic presentation, in ad hominem argument, and in
the subtleties of political adjustment * * *. And they have no
desire to subordinate that great skill to the less colorful art of juggling
words, rules, and precedents.”
Finally, he declared, many disinterested persons specializing in
labor relations also oppose a declaration of detailed rules because
(a) The country was in the adolescent period of labor relations when
war broke out and the announcement now o f a fixed policy not only
would stunt normal growth but in fact could not be carried through
because of lack of sufficient experience with collective bargaining
and with labor relations; (&) neither management nor labor is suffi­
ciently disciplined to implement such a program; and (<?) maximum
war production might be endangered if, without public debate and
overwhelming public support, the country adopted a program strongly
opposed by unions or employers.
Judge Wyzanski did not attempt to evaluate the various positions.
He concluded, however, that in view of the conflict revealed at the
President’s labor-management conference and the unwillingness of
Administration leaders to establish rules without the support of the
representative groups, there was no chance o f a broad declaration of
policy at the time. “ Unless they are otherwise directed by the Presi­
dent or Congress, I, therefore, do not expect to see any announced
set of substantive policies to guide the labor arbitration agencies.”
The Wyzanski speech was delivered on the same day that Executive
Order 9017 was issued. Since it was made by a man who at the
time was close to the inner circles of the policy-makers, it may be
safely concluded that it accurately reflected the thinking which was
then going on.
The advocates of maximum discretion for the Board won out.
Executive Order 9017 simply set up the National War Labor Board




THEi PRINCIPLES OF DISPUTE SETTLEMENT

79

as a tripartite agency with the responsibility o f settling through
mediation, voluntary arbitration, or arbitration labor disputes that
could not be resolved by other existing procedures. The Board was
given virtually complete freedom to carry out its job.

IV .

T h e I n it ia l A p p r o a c h o f t h e B o ard

The new W ar Labor Board resembled its predecessor, the N DM B,
in many respects. H a lf o f the members o f the Board, including the
Chairman, were carry-overs from the NDM B. A ll staff members,
records equipment, and unsettled cases were transferred from the old
board to the new. Much o f the philosophy o f dispute settlement was
also carried over. M ajor emphasis was placed on collective bargain­
ing and the agreement o f the parties. It was hoped to be able to
continue to rely in large measure upon mediation, conciliation, and
voluntary arbitration. The most significant difference, as the Chair­
man put it, was that the Board was probably going to have to make
decisions which are less o f a bargaining decision and more o f an
absolute decision.1
0
It was also recognized that at least with respect to the major issues
o f union security and wages the policy o f the NDM B to handle each
case prim arily on its own merits and to refrain from the establishment
o f precedents or principles probably could not be maintained. The
union security issue, in particular, had become charged with so much
emotion that some sort o f definite and acceptable answer to it seemed
essential i f the Board was to survive. The captive mines case, the
debate in the labor-management conference, the Wyzanski and Leiserson speeches, and innumerable newspaper editorials and articles made
it clear that i f the Board did not arrive at an acceptable policy, either
the President or the Congress would have to deal with the issue. The
situation with respect to general wage increases was a matter o f
conflict not only between labor and management but also between
labor and those in the Government who were responsible for prevent­
ing an inflationary spiral. There were, o f course, many other issues
in dispute that required careful consideration but they were not at
this time critical issues.
The position o f the public members o f the Board was expressed in
a speech by W ayne Morse before the International Juridical Asso­
ciation on March 21,1942. H e said in p a rt:
I am satisfied that, if the Board is permitted to function, in a period of a few
months it will build up a record of sound principles which will guide labor and
10 National W ar Labor Board, Transcript, Executive Meeting, February 6, 1942, p. 44.




DISPUTE. SETTLEMENT AND WAGE STABILIZATION!

80

employers to an orderly and peaceful settlement of their differences during the
war period in accordance with the spirit and intent of the Executive order
creating the Board.
*

*

*

*

*

*

*

There are some critics who seem to believe that the Board should not be let
alone to develop the principles which it is to apply in settling labor disputes
during the war. They question the desirability of such a common-law system
approach to the adjudication of labor disputes. They urge that some authority
higher than the Board, such as the President or Congress, should lay out certain
patterns of labor policy governing such issues as wages, profits, union status,
responsibilities of management, hours of employment, and union organizational
activities. Many columnists, editors, and some public officials are urging that
the Board should work within the framework of a general policy which freezes
wages and union organization as of some past date, such as the date that war
was declared.
*

*

*

*

*

*

*

I do not share such views because I fear that such an inflexible policy would, in
a large measure, defeat its own ends. It may be that the work of the Board
would be lightened by an enunciation of certain broad general policies which
the Government desires to have labor and employers follow during the war.
Possibly the strengthening of the enforcement powers of the Board would assure
its greater effectiveness in executing its functions. However, above all else, it
is important that the Board should be kept in a position so that it can decide
individual cases in accordance with the facts shown by the record of each case as
it is presented to the Board. Ifseem s to me that if the Board is to accomplish its
primary purpose, namely, the peaceful settlement of labor disputes during the
period of the war, to the end of promoting the maximum production of war
goods—it should not be hamstrung by inflexible policies.1
1

The labor members o f the Board favored a continuation o f the
N D M B policy. However, they too recognized, reluctantly, that some
patterns were inevitable. Their approach was indicated by one o f
them in the course o f the discussion over a union security dispute:
* * * My way of approaching this thing on the union side of this question
is the history of the relationship, the question of certification, the question of
production and the war effort and so on and what will produce in the light of
known facts and history the best possible results. I believe that this is a case that
ought to be dealt with on its own merits. I think the union status thing is the
more important thing in view of what appears to be the background and history
of relationships. I don’t believe that we should say we don’t want to do any­
thing about this because there is another case coming up next week or the week
after or at some future time or in the absence of a national policy, i think a
national policy that grows out from a set of experiences and understanding is a
damn sight more healthy thing than a national policy that is the result o f a
bunch of people in the legislative chambers debating something or an executive
order.1
2

The industry representatives, on the other hand, preferred' to
see congressional action on, at least, the union security and wage *
2
3
“ Reprinted in part in Labor Relations Reference Manual, vol. X . p. 1277.
32 N ational W ar Labor Board, T ranscript, Executive Meeting, M arch 11, 1942, p. 76.




THE! PRINCIPLES OF DISPUTE SETTLEMENT

81

issues. This position was strongly emphasized by such prominent
employer organizations as the National Association o f Manufacturers.
A few key industry members o f the Board, however, felt that pend­
ing congressional or Presidential action it was more farsighted for
management to concentrate on working out policies with the other
groups on the Board. Roger Lapham stated:
As an employer representative of this Board, I feel it is this Board’s duty to
go ahead and establish a national wage policy as well as a policy with respect to
the closed shop or any modification thereof. If we are called off by higher au­
thority or if Congress chooses to carry the ball, itself, why, that’s that. But in the
meantime, let us go ahead, saw wood, and do something.1
3

Lapham advised his colleagues on the Board to be realistic about
labor’s strength both economically and politically and, still more im­
portant, to recognize that there must be the closest kind o f coopera­
tion between management and workers if we are to win this war— this
battle for national existence.
It was thus apparent at the outset o f the Board’s life that the Presi­
dent and the Congress were leaving it to the Board to work out a
solution to the two major problems— union security and wages. On
other substantive issues the pressure for policies was much less imme­
diate.

V. P olicy on U nion S ecurity

A s the previous discussion has made abundantly clear, the first
major policy issue was union security. Instead o f sitting down and
considering the issue in an abstract and generalized way, the Board
took up one case after another and attempted to work out a solution
which would be acceptable to the labor and industry groups. The
problem confronting the Board was w ell put by industry member
7
Lapham. “ A s to Union status, this should be a simpler issue than
wages fo r which to find a solution. Yet, the truth is, o f the two, it
is the more troublesome because neither management nor labor seem
able to discuss it without an emotional pounding o f the table.1
4
It took over 6 months o f the most severe debate and experimentation
fo r a working solution to be attained. A nd even the solution that
was reached did not achieve unanimity. It was a majority vote ac­
cepted reluctantly by industry under wartime pressures. The cases
which were decided and the compromises which were proposed have
been described in great detail in the Termination Report o f the
1 Thinking Out Loud or the Present Thoughts o f One Employer, mimeographed, Febru­
3
ary 18, 1942, p. 10.
1 Ibid., p. 11.
4




82

DISPUTE: SETTLEMENT ANiD WAGE STABILIZATION

National W ar Labor Board and it is not necessary to repeat the de­
tails here. However, it is important to review the main steps in the
evolution because no policy was more sharply crystallized than union
security.
I t should be noted first that the Board started out with a backlog o f
experience accumulated by its predecessor, the NDM B, as well as the
debate in the President’s labor-management conference and the pub­
lic press. The unions, as a rule, wanted either the closed or union shop
to give them a maximum o f bargaining strength and to maintain in­
ternal discipline. They argued that the no-strike pledge removed
their m ajor weapon and some strong form o f union security was re­
quired to replace it. On the other side stood those employers who
insisted that the law required merely that unions representing a
m ajority o f their employees should be recognized only as exclusive
bargaining agents. They contended that unions should not be per­
mitted to improve their status because o f the war emergency. They
gave wide currency to President Roosevelt’s statement during the cap­
tive mines dispute o f 1941 that the Government would never order
an employer to compel employees to become union members.
The public members o f the N W L B were thus faced with a most
difficult task. B y siding with either the unions or employers, they
might cause the other to quit the Board. The alternative was to de­
velop some compromise which m ight bring agreement, or at least, i f
it did not satisfy either side entirely, would be sufficient to prevent a
break. The compromise which appeared to be most suitable, mainte­
nance o f membership, had been used a number o f times by the N D M B,
follow ing a pattern that had been in effect in the Pacific Northwest
paper industry. This clause simply provided that those who were
or became union members must maintain their membership fo r the
duration o f the agreement or subject themselves to discharge. It did
not require any worker to become a member o f the union. But even
maintenance o f membership contained compulsory features which
many employers on and off the Board considered objectionable.
The result was a succession o f experiments in an effort to develop
a workable clause. In the first case involving the union security
issue the public and labor members, with industry dissenting, directed
a maintenance-of-membership clause that required each employee to
sign a card inform ing the company o f his membership in the union
and his willingness to remain a member in good standing for the dura­
tion o f the agreement. In a succeeding case, the maintenance-ofmembership provision was applied to all persons who were members
o f the union as o f a given date; no card signatures were required.
In another early case a special election was ordered to determine
whether a m ajority o f the employees desired the granting o f the main­




THE- PRINCIPLES OF DISPUTE SETTLEMENT

83

tenance-of-membership clause. In several cases the request for main­
tenance of membership was denied entirely and the voluntary check-off
alone was granted.
In the course of the bargaining process, some of the industry mem­
bers indicated that a maintenance-of-membership clause might be
acceptable if union members were given an opportunity to withdraw
from the union before the provision took effect. The labor representa­
tives regarded the idea with some misgivings but decided to go along.
As a result, a maintenance-of-membership provision with a 15-day
escape clause was formulated. In June 1942 this provision was ap­
proved by a number of the industry members of the Board and in one
case a unanimous vote was obtained.
But the unanimity was short-lived. The employer members who
had been most insistent upon the establishment of a formula now
argued that it be applied with considerable flexibility. For example,
they contended that the provision should not be awarded to compara­
tively new unions or to unions which had achieved good relations with
their employers. They also insisted that the unions should submit
to a variety of tests such as the issuance of public financial statements
as a mark of their democratic character.
The refusal of the industry members to agree to maintenance-ofmembership with the escape period as a general principle led to a
recognition by the public members that further attempts to secure
unanimity were futile. During the later discussions of the major
steel cases in June 1942, its award was virtually taken for granted by
all sides, including the dissenting industry members. Finally in
the Norma Hoffman decision15of August 24,1942, the Board majority
formulated the precise language of what subsequently became known
as the standard maintenance-of-membership clause. Thereafter, it
was awarded in union status cases with considerable regularity, the
main exception being cases where the union had shown evidence of
irresponsibility by violating the no-strike pledge. In a small number
of additional cases, other forms of union security were ordered because
maintenance-of-membership was not applicable to the particular
industry (e. g., maritime).
The evolution of the maintenance-of-membership policy illustrated
the manner in which the Board carved out through case decisions
a body of substantive principles or patterns. It was the old common
law approach depending upon the experience and trial and error.
There was one important difference. Because of its tripartite struc­
ture, the Board also functioned as a collective bargaining agency and
its principles reflected directly the interests of the groups involved.
One of the major objectives of the public members of the Board
15Norma Hoffman Bearings Corp., Case No, 120,



84

DISPUTE SETTLEMENT AND WAGE STABILIZATION

was to achieve agreement between labor and management. Although
such agreement was not achieved with respect to either maintenanceof-membership or the Little Steel formula, restricting general wage
increases, the Board principles were sufficient compromises to gain
acquiescence.
The approach led to few striking innovations. As public member
Lloyd K. Garrison once stated:
♦ * * the fact is that, apart from the Board's pioneering work in the
presumably temporary field o f wage stabilization, the Board has turned out
relatively little that is new. On the contrary, it has relied upon industrial
experience as the primary source of its rulings, and has turned to the best
practices of employers and unions, developed through years o f collective bargain­
ing and trial and error, as guides for the solution o f present-day controversies.
In this selective process, aided greatly by the first-hand knowledge of the
industry and labor members of the Board, as well as by the contentions and
agreements o f the employers and unions who have appeared before us, certain
precedents set by collective bargaining have been particularly relied upon,
certain methods o f settlement tested by experience have been particularly
singled out for use, and certain trends in collective relationships have been
given a particular impetus and a more specific form.1
®

Thus, while the Board turned out relatively little that was new, it
did extend what it regarded as the best existing practices to industrial
areas hitherto untouched by such concepts.
VI. T h e N a t u r e of P r in c ip l e s U sed i n D is p u t e C ases 17
The principles thus established by the Board to apply to the settle­
ment of other types of dispute cases were not all as clear-cut as main­
tenance-of-membership. Many of them varied considerably in pre­
cision of statement as well as in regularity and consistency of
application. There were numerous reasons for this variation. Some
issues were too complex to lend themselves to simple statement. Others
varied so much from industry to industry and from case to case that
a single pattern was inadequate. Still others involved problems on
which the Board could not agree to apply a consistent pattern. In
not a few cases, the Board deviated from past precedent simply be­
cause under the pressure of time and case-load, it did not have readily
at hand a clear description of previous actions. And sometimes ex­
ceptions to general rules were deliberately made as the only way out
of difficult situations.
Because of the variety of cases that came before it, the Board rarely
felt obligated to adhere to a principle under every condition. Its main
T h e T e rm in a tio n R ep o rt, v o l. I , p . 6 5 .
M T h is section is
tre a te d in sec. V I I I .




concerned .m a in ly w ith

nonw age issu es.

W age

d isp u te issu e s a r e

THE PRINCIPLES OP DISPUTE SETTLEMENT

85

obligation to the Nation, as its members saw it, was to safeguard war
production by reducing industrial conflict. If more industrial pro­
duction could be achieved by deviating from general rules or by finding
a way around a rule, the Board often adopted the exception to the rule.
Wage stabilization principles, based on congressional and Executive
dictates, represented a special problem to be discussed later.
For purposes of analysis, Board actions on dispute issues may be
divided into three main categories:
(a) Actions based upon principles which were consistently fol­
lowed.
(5) Actions based upon principles which were applied in different
ways.
( c) Actions following no principles.
A. P r in c ip l e s C o n s is t e n t l y F ollowed
A few rules were practically invariable. During the captive mines
case, the President had stated that the Government would never order
the closed shop. The Board followed this dictum throughout its
existence without an exception. As a counterbalance, however, the
Board adopted the equally firm principle that it would not deprive a
union of the closed or union shop once it had been voluntarily agreed
to by the employer.
Almost as uniformly applied was the rule establishing arbitration
as the last step in grievance procedure. Among the flood of dispute
issues which threatened to swamp it, the Board found many grievances
arising under existing contracts. Instead of settling these grievances
themselves, many unions and employers had developed the habit of
referring them to the Board. This practice was not only contrary
to sound collective bargaining; it also seriously delayed the Board
in the settlement of more important cases. One means of coping
with this problem was the ordering of arbitration as the final stage
of grievance procedure and the refusal to accept grievance cases which
had not gone through all of the stages. On this issue, the Board went
beyond its customary decision-making approach. It prepared a num­
ber of general declarations unrelated to any case in which it enunci­
ated this policy and urged all employers and unions to follow it. In
disputes over the details of grievance and arbitration machinery, on
the other hand, the Board’s action varied considerably.
The principle of the check-off of union dues and initiation fees
went through a long and gradual evolution before it reached stable
form. In the early months of the Board, the check-off was viewed
principally as a mild form of union security, a substitute for maintenance-of-membership. W ith the Little Steel decision in July 1942




86

DISPUTE SETTLEMENT AND WAGE STABILIZATION

the Board began to use the check-off as a supplement to, rather than
a substitute for, maintenance-of-membership. It was granted where
the union could prove a special need for having the company collect
dues. Finally, the Board began to award the check-off together with
maintenance-of-membership as a regular matter except where there
was a substantial reason, such as a violation of the no-strike pledge,
for not giving it. The individually authorized form of check-off
was most commonly ordered although in several of the mass produc­
tion industries where plants were sprawling and dues collection ex­
ceptionally difficult, the automatic check-off was awarded.
B. P r in c ip l e s A pplie d i n D if f e r e n t W a y s
On perhaps a majority of the important dispute issues the Board
evolved a clear general principle but, for various reasons, did not
consistently apply it. A few examples may illustrate the practice.
For instance, the principle of equal pay for equal work was enunciated
at an early stage with respect to sex. It was applied without ex­
ception whenever the issue involved the same occupations in a given
establishment. But this was generally relatively easy to do; the
only problem was to determine whether, in fact, the women on the job
were performing the same work as the men. Far more complex was
the problem of correcting alleged discrepancies between the rates of
jobs employing women exclusively and the rates of other jobs employ­
ing men. In these cases Board actions varied considerably although
for the most part, one of three positions was taken. These are sum­
marized in The Termination Report of the NWLB in the following
language:
(1) It (the Board) presumed that rates for jobs traditionally performed
by women were correctly rated in relation to the general wage schedule o f the
plant, especially if such rates were established through collective bargaining;
(2) it remanded the issue to the parties for further negotiations as to the jobs
which were historically performed by women and appropriate rates for such
classifications; (3 ) it suggested or ordered the institution o f a job evaluation
to establish the worth of a job on the basis o f content irrespective o f the sex
of any incumbent.1
8

Similarly, the Board adopted the general rule that union security
would not be awarded to unions which were irresponsible, but the
problem of determining irresponsibility defied consistent treatment.
The Board limited the concept to violations of the no-strike pledge.
But often a union violated the pledge because of some employer pro­
vocation. And many strikes took place without official union approval.
How to allocate the blame and how to assess penalties? The Board
treated each case individually and where penalties were assessed, they
varied considerably.
» P . 294.




THEI PRINCIPLES OF DISPUTE SETTLEMENT

87

Disputes over discharges were generally referred back to the parties
for settlement Under the grievance and arbitration procedure of the
agreement or, if no suitable procedure were available, the parties were
ordered to select a special arbitrator to decide the dispute. Where
the discharge was related to a strike, the Board’s policy was first to
order the strike terminated and all employees reinstated to their jobs.
After reinstatement, the employer could discharge employees for
cause, subject to the grievance procedure. In practice, however, the
policy was marked by a number of exceptions. In a few cases, for
example, the Board itself decided the merits of the discharge directly.
But while there was some variation and inconsistency, a general policy
emerged and was ultimately enunciated in a general declaration.
The policy on retroactivity of wage payments provides another
leading example of varying application. After numerous, often con­
flicting, case decisions, the Board attempted to standardize its practice
in a general statement of policy. This statement, as subsequently
revised, provided that the Board would use the date agreed upon by
the parties or fixed by their contract or, where an existing contract
contained a wage reopening clause, the date when the wage issue was
actually reopened; or in the absence of such agreement, the date of
expiration of a previous agreement governing the same bargaining
unit. If there was no agreement of any type, then the date of
certification by the United States Conciliation Service or assumption
of jurisdiction by the War Labor Board was to be used. However,
if the Board agency acting on the dispute deemed some other date
appropriate, due to special circumstances, the previous rules could
be disregarded. This was obviously a loose policy and frequent ex­
ceptions to the general rule were inevitable.
C. A ct io n s F o l l o w in g N o P r in c ip l e s

On a number of issues, like seniority and most aspects of grievance
procedure other than the establishment of arbitration as the final step,
the Board found it most expedient to refrain from establishing prin­
ciples and to treat each case individually. It was not uncommon for
the Board to use some of the cases as precedents for others but no
serious attempt was made to establish a consistent pattern. The rea­
sons for this method of dealing with these issues were numerous.
Some of the issues came to the Board in such small numbers as not
to warrant a general principle. The Board did not develop prin­
ciples, as a rule, unless the pressure of cases impelled such action.
Usually the facts varied so much from establishment to establishment
that attempting to enforce a WLB general rule would have seriously
affected the equities of the individual situation. In the case of issues
which involved breaking new ground in the field of industrial rela-




DISPUTE. SETTLEMENT AND WAGE STABILIZATION

88

tions, the Board was reluctant to move more rapidly than the parties
in a given industry or locality.

V II.

A .

T

h e

P

W

a g e

r e s t a b il iz a t io n

P

D

is p u t e

P

r in c ip l e s

19

e r io d

In its first few months the Board dealt with wage issues in much the
same fashion as it handled other dispute issues—case by case. There
was, however, a strong awareness o f the overhanging problem o f in­
flation control. On February 6,1942, Leon Henderson, Price Stabili­
zation Director, appeared before the Board and urged the need for
stabilizing wages as part o f the over-all stabilization program. He
noted that as far back as the summer o f 1941 suggestions had been
made in Congress to give his agency authority to freeze wages but
that he had opposed such action. More recently he had urged the
President to leave the control over wages to the NW LB rather than
to the Price Administration. The Leiserson address o f February 18,
1942, was another important call for a national wage policy.
The industry members o f the Board likewise took the position that
a wage control policy was essential. Some o f them insisted on the
need fo r congressional or Executive guidance on the matter; others
urged that the Board itself should immediately formulate a policy.
One industry member proposed that further general increases in wages
should be permitted only to correct fo r wages below the prevailing
average fo r comparable jobs in a community or to avoid hardship.
The labor representatives on the Board were strongly opposed to
any attempt to regulate wages. They wished to continue the NDM B
approach—each case on its own merits, with the primary emphasis
on collective bargaining. The public members were sympathetic to
the emphasis on collective bargaining but were constrained to recog­
nize that some set o f flexible principles regarding wages was unavoid­
able. A s one o f the public members stated in a general Board
discussion follow ing the certification o f the basic steel industry cases
in February 1942, “No doubt the decision that we make in steel w ill be
a precedent, damn near a policy .” 20
The reluctance o f the public members at this stage to commit them­
selves to any firm wage control program was illustrated by the
m ajority opinion in the first m ajor wage case, International Harvester
Co. case No. NDMB 4, 4-a, and 89 (A p ril 15, 1942). This opinion
set forth a number o f basic principles which should be considered
19 A s described in cb . 4 , th e B o a rd discussed w a g e s ta b iliz a tio n in te rm s o f w a g e ra te s,
n o t tak e-h om e p ay .
*° N a tio n a l W a r L a b o r B o a rd , T ra n sc rip t, E x e c u tiv e M eetin g , F e b ru a ry




6,

1942,

p.

44.

THEi PRINCIPLES OF DISPUTE SETTLEMENT

89

minimum guarantees in any wage issues considered by the National
W ar Labor Board. The principles were briefly as follow s:
(a) Wages should be sufficiently high to maintain a decent stand­
ard o f living.
(&) Every effort should be made to protect real wage levels
although labor could not expect in time o f war to have wages tied to
the cost o f living.
(c) Substandard wages should be raised to the standard level when­
ever possible.
(d) W age adjustments to offset rises in the cost o f living should
be made to the extent that they could be done without inflationary
effects.
These principles, it may be noted, were similar to the principles
set forth by the W ar Labor Board o f W orld W ar I and which
proved to be ineffectual because o f their vagueness and generality.
Nevertheless, they represented a first step in the formulation o f a wage
policy.
Less than 2 weeks after the Harvester decision, the President on
A pril 27, 1942, issued his Seven-Point anti-inflation program which,
among other things, directed the NW LB to stabilize wages with
due consideration to inequalities and the elimination o f substandards
o f living.2 The Presidential statement stimulated further discussion
1
in the Board about wage policy. Perhaps its major effect was to push
the public members in the direction o f firmer wage principles. To the
industry members, the statement simply meant a reinforcement o f
their original position. As one industry member stated:
I should th ink as a result of it (the Presidential statement) we have got to try
to develop some form ula that we are going to fit these things into reasonably.
You ju s t can’t pick this and th a t and the other thing out of the air. * * * 22
2
3

To the labor members it meant a withdrawal from the position o f no
policies to a recognition that—
th is Board in deciding wage disputes which come to it as p art of its job shaU
be guided by the national policy laid down by the President. * * * 2
8

But they continued to insist upon a broad interpretation o f the Presi­
dent’s words and placed primary emphasis upon collective bargaining
and the particular circumstances o f each case.
The public members agreed that collective bargaining was to retain
its primary role. As the chairman stated:
* * * There was a great pressure on the President not to leave this thing
to collective bargaining, to have Leon Henderson or somebody say th a t wages are
21 See ch. 3 fo r a fu lle r d iscussion o f th is p rogram .
23 N a tio n a l W a r L ab or B o ard , T ra n sc rip t, E x e c u tiv e M eetin g , M a y 5 , 1 9 4 2 , p . 2 7 .
23 Ib id ., M a y 5, 1 9 4 2 , p . 2 1 .




90

DISPUTE SETTLEMENT AND WAGE STABILIZATION

frozen where they are, th a t there won’t be any increase in wages. That was
what Congress wanted to do * * * (my advice) was not to freeze the wages
but to make them dependent on collective bargaining. That was the same advice
you fellows (the labor members) were giving him, and th a t is the advice he
followed * * ♦ The actual situation is * * * th a t the President has
said to the country th a t this Board is going to do th a t job. Now, I understand
th a t to mean * * * th a t it is to do it by deciding cases.8
4

The Seven-Point program had one other important effect. It made
the Board conscious o f the problem o f controlling, in addition to wage
disputes, voluntary wage rate increases. A number o f the Government
procurement agencies, for example, called upon the Board fo r advice
or action on suggested wage increases. The Office o f Price Adm inis­
tration was particularly insistent upon the establishment o f a policy.
A t a Board meeting early in June 1942, one o f the industry members
proposed the adoption o f a wage stabilization declaration to the effect
that employers shall not voluntarily make general increases in salaries
or wages without first clearing through the proper governmental
agencies and any general increases in salaries or wages shall be granted
only after an examination o f the circumstances and approval by the
W ar Labor Board.2
5
The labor representatives vigorously attacked the proposal. One
charged it would lead to socialism and complete regimentation.
Another suggested that the voluntary wage problem be left to other
agencies. The labor position was best summed up, however, in the
follow ing statement:
* * * I th in k it wipes out coUective bargaining and it invites every nego­
tia tio n in this country to break off and make a dispute before this Board and
reaUy sets th is Board up as the controller of wages in this country. I don’t th in k
the Executive order provided fo r that. W ith one clean sweep you wipe out
collective bargaining. You bring every dispute to th is Board. You destroy, in
my judgment, the no-strike agreement.8
*

The public representatives urged a postponement o f any decision on
the resolution until the big steel and auto wage disputes had been dis­
posed of. They pointed out that Board decisions had already laid
down patterns in the case o f substandard and inequality adjustments
and that further decisions would set additional patterns fo r the unions
and employers o f the country to follow .
On July 16,1942, in the Little Steel cases, the public members, sup­
ported by the industry members, issued the formula which was to
serve as the definitive answer for the remainder o f the war period to
the basic problem o f the relation between wage increases and the cost
o f living. It was a precise formula, just as the maintenance-of-mem­
bership policy was precise, and it contrasted strikingly with the*
2
6
24 Ib id ., M a y 5 , 1 9 4 2 , p. 6.
26 Ib id ., Ju n e 1 6 , 1 9 4 2 , p . 2 0 .
M Ib id ., June 1 6 , 1 9 4 2 , p. 2 0 .




THE! PRINCIPLES OF DISPUTE SETTLEMENT

91

general wage principles o f W orld W ar I. Labor opposed it, partly
because it was a formula, partly because it did not yield as high a
return as the unions had wanted. A t a press conference announcing
the Little Steel formula, the vice chairman o f the Board stressed that
“this is no mathematical formula that you push a button and an answer
comes out. I mean, these are guiding principles to be followed, but it
takes a good bit o f discussion and meeting o f minds as to the applica­
tion o f these figures to a situation * *
One o f the labor mem­
bers replied that it “ stymies collective bargaining.”
Thus, on a case-by-case basis, a set o f general principles o f wage
adjustment was developed by the Board. Particularly under the in­
fluence o f the President’s anti-inflation statement, they had a stabiliz­
ing purpose. They were quite precise on the relation o f wages to the
cost o f living and less precise in other respects.
As pointed out in chapter 3, it was not feasible to stabilize wages
solely through disputes. On September 7,1942, the President pledged
to stabilize all wages if Congress would agree to stabilize the prices o f
farm commodities. A t the same time he asked Congress to enact
legislation enabling him to stabilize both farm prices and wages. On
October 2 such legislation was enacted and on the follow ing day
Executive Order 9250 was issued making the NW LB responsible for
the administration o f wage controls.
B.

E

f f e c t

of

S

t a b il iz a t io n

L

e g is l a t io n

The enactment o f a national wage stabilization program had two
important effects upon the Board’s approach to the settlement o f wage
disputes. For one thing, the policy o f developing principles exclu­
sively through the process o f case decisions was no longer practicable.
As one o f the union members put i t :
I was one of those th at fought tooth and n ail against this Board adopting any
wage policy, but rather to deal w ith each case on its own m erits. I am not
kidding myself any longer about th a t * * * w ith thousands of cases piling
in here it is ju s t a physical im possibility to do so.”

Another stated:
I t is true th a t we talked about the L ittle Steel form ula, but none of us, up
u n til the present tim e, were w illin g to say th at the Board had a definite wage
policy. * * * *8
2

The pressure for the quick establishment o f general principles to
implement the very vague legislative and executive stabilization lan­
guage came from both inside and outside the Board. The Board itself
realized that a policy statement was necessary to guide the members
o f its rapidly expanding staff in the newly formed regional offices as
2 Ib id ., O ctober 2 7 , 1 9 4 2 , p. 1 1 7 .
T
28 Ib id ., O ctober 2 8 , 1 9 4 2 , p. 2 4 5 .
9 2 1 2 9 7 — 5 0 -------- 7




92

DISPUTE: SETTLEMENT AND WAGE STABILIZATION

well as fo r the inform ation o f the country at large. Otherwise it
would have been impossible to achieve equality o f treatment fo r parties
similarly situated. The D irector o f Economic Stabilization also re­
quested a declaration o f policies for his guidance in wage cases which
involved price relief.
On November 6, 1942, the Board therefore issued a policy state­
ment,2 which was to serve as the basis o f wage stabilization for the
9
duration o f the war. It is important to note, however, that the main
principles set forth in this statement came not from abstract discus­
sion but from prior case experience. Thus the first major principle
enunciated and the foundation stone o f the stabilization program was
the Little Steel formula. W ith respect to wages which were sub­
standard, the statement noted that—
The N ational W ar Labor Board has dealt w ith but a very few cases in which the
substandard issue has been a factor. Therefore, the Board is not in a position
a t th is tim e to enunciate a general policy * * *.

The provision relating to inequalities and gross inequities was much
broader than the Little Steel form ula but likewise expressed much o f
the thinking o f decisions in previous disputes. The Board specifically
declared that it would not approve wage increases fo r the purpose o f
influencing or directing the flow o f manpower but also provided that
it m ight make special adjustments3 in the interest o f the more effective
0
prosecution o f the war.
The second main impact o f the stabilization program on dispute
principles came from the emergence o f the Economic Stabilization
D irector as the chief spokesman o f the Administration with respect
to inflation control. A ll wage decisions o f the Board which necessi­
tated increases in prices or involved increased costs to the Government
became subject to review by the Stabilization Director. Although the
number o f dispute cases falling in this category was comparatively
small, many o f them were important in terms o f number o f employees
affected and some o f them involved significant policy changes. Any
important liberalization o f wage policies thus required the approval
o f the Stabilization Director. This lim itation on the Board’s au­
tonomy and the failure o f the Government to work out a satisfactory
procedure for price relief cases were among the most criticized fea­
tures o f the stabilization program—particularly on the part o f
organized labor.*1
8
0
The elaboration o f wage principles and their application to wage
disputes as well as the relations between the Board and the Stabiliza­
tion Director are described in detail in chapters 3, 4, and 5 and in the
29 T h e T e rm in a tio n R ep ort, v o l. I , p . 1 8 7 .
80 See ch. 5 fo r a n a ly s is o f th is p olicy.
81 See chs. 3 an d 4 f o r reason s fo r criticism .




THE.' PRINCIPLES OF DISPUTE SETTLEMENT

93

Termination Report o f the N W LB. The details need not be repeated
here. It is sufficient to observe that while the Board continued to place
the main emphasis on case decisions in policy formation (e. g., the
substandard p o licy ), it was also obliged to temper the settlement o f
wage disputes by policies arrived at more or less independently o f
cases. The so-called brackets policy for the correction o f interplant
inequities is a leading illustration o f the latter. Even this policy was
applied with considerable flexibility in individual cases.
The wage principles, like the nonwage policies, were not applied
rigidly to disputes. Such a course would have run counter to the
underlying concept o f collective bargaining and the traditional ap­
proach o f the members o f the Board respecting industrial relations
problems. The main objective o f the Board in a dispute was to ar­
rive at a decision which, within the limits o f the stabilization program,
had a maximum o f acceptability to the parties involved—if possible,
complete agreement. The Board never approached its problems in the
role o f a court applying a fixed set o f principles to a particular set o f
facts, with the knowledge that regardless o f the reactions o f the par­
ties, the decision would be enforced by the power o f the state. As is
pointed out in chapter 1, the Board relied prim arily upon voluntary
acceptance by the parties o f its decision and only in a few extreme sit­
uations upon Presidential enforcement o f its orders against the wishes
o f the affected parties. Thus, each dispute was studied with great
care in terms o f its particular circumstances and the principles were
applied with considerable flexibility. Sometimes the principles were
ignored for the purpose o f a specific case; sometimes, if the case was
sufficiently important, and the prospect o f acceptability o f a decision
based on existing principles was tenuous, the case was used as a spring­
board fo r the modification o f the principle.
C. F r i n g e I s s u e s
O f all the wage issues, the so-called fringe issues were the most flexi­
bly treated. As other chapters note in greater degree, the wage sta­
bilization program was essentially a delaying action against the in­
exorable inflationary pressure generated by the war. W age stabiliza­
tion was only one o f seven anti-inflation forces included in the Presi­
dent’s A pril 27, 1942, program. The line was not held equally well
on all these points and the labor organizations constantly pushed for
greater elasticity in wage policy. In the face o f substantial pressure,
the Board was able to hold its main line—the Little Steel formula.
But the unavoidable price was greater flexibility on secondary lines.
The fringe issues—job evaluation and reclassification, paid vacations,
shift differentials, paid holidays, paid lunch periods, severance pay, in­




94

DISPUTE SETTLEMENT AND WAGE STABILIZATION

surance plans, and many others—were therefore the issues which un­
derwent the most continual change, until on March 8 and A pril 24,
1945, the Director o f Economic Stabilization established stabilized
lim its fo r the more important o f them.3
2
The policies on the m ajor fringe issues were developed in the cus­
tomary Board manner—through dispute case decisions. As in the
case o f most other issues, the Board would begin without a general
policy. The issue would be treated on an individual case basis.
Gradually, however, with experience, certain precedents would emerge
and general principles would be established. But the evolution was
by no means always consistent, the precedents were not always adhered
to, and even after a fairly definite principle had emerged, exceptions
were not uncommon.
The above pattern was most clearly discernible in the case o f paid
vacations and shift differentials. Both o f these payments had been
well developed through collective bargaining prior to the war and
the Board simply furthered the trend. On most other fringe issues
fo r which there was some industrial precedent, the Board generally
follow ed industry or area practice although no clear-cut definition
o f industry or area practice was established and the decisions there­
fore varied considerably. On fringe issues which had generally
been outside o f the collective bargaining area prior to the war (e. g.
insurance plans or severance pay) the Board acted most conserva­
tively. It broke little new ground. In most o f such cases, it refused
to order the adoption o f the union demand. In the few cases where an
order giving effect to the union demand seemed warranted, the Board
was careful to specify that no general policy had been set.3
3

VIII.

S

u m m a r y an d

C

o n c l u s io n

A s the preceding discussion indicates, the NW LB was given a rela­
tively free hand in the settlement o f wartime labor disputes referred
to it. Its predecessor, the National Defense Mediation Board, had
consciously refrained from the establishment o f substantive principles
and had approached each case on its merits. The labor-management
conference called by the President to develop a wartime labor pro­
gram had agreed to the establishment o f a board to settle labor dis­
putes without strikes and lockouts but had deadlocked on the only
substantive issue, union status, which was seriously considered. The
framers o f the Executive order establishing the Board had debated
the question o f principles to guide the new Board but had decided to *
“ See ch . 3 fo r d etails.
* See T h e T erm in a tio n R e p o rt, v o l. I , pp. 3 8 3 , 3 9 0 , an d 3 9 2 .




THE! PRINCIPLES OP BISPTJTE SETTLEMENT

95

leave the Board free to make its own decisions. The Executive order
merely set up the machinery.
The Board was urged by its employer members as well as by indi­
viduals on the outside immediately to formulate principles at least on
the two m ajor issues of the time—union status and wages. But instead
o f creating principles out o f general discussion, it carved out a set
o f principles in the manner o f the common law—through case deci­
sions. W hile the enactment o f wage stabilization legislation imposed
some limitations on this approach, the bulk o f the wage stabilization
j>rinciples (there were a few m ajor exceptions) were developed, as the
nonwage issues, through the process o f settling dispute cases.
It is now relevant to return to the questions which were posed at
the start o f this chapter. Was the course follow ed a wise one?
W ould the Board have been able to do a more effective job o f settling
wartime labor disputes if guiding principles had been set up in
advance, either by Congress, or the President, or the Labor-Manage­
ment Conference, or the Board itself?
A .

I

n e v it a b il it y

o f

P

r in c ip l e s

As the Board quickly discovered, the NDMB policy o f no policies
could not be maintained by an agency whose principal function was
to make decisions, not to mediate. Inevitably, the accumulation o f
cases and decisions led to the making o f comparisons, the citing o f
examples, and the establishment o f precedents. Principles served a
number o f important uses. They informed the employers and unions
o f the country what action they could reasonably expect from the
Board on a given issue and thus served as guides to collective bargain­
ing. The Board, o f course, received many cases which probably would
have been settled by the parties themselves if there had been no Board.
The development o f principles helped to reduce this flow. They thus
contributed to the more effective and expeditious settlement o f dis­
putes. They also added an element o f certainty to the industrial
relations picture which was a stabilizing factor. When the parties
were in doubt about the outcome o f a case, as in certain wage cases,
there was always the problem o f persuading them to accept unpopular
decisions. Some o f the most critical situations which confronted the
Board arose in cases where, for one reason or another, the workers
had been led to believe that they would receive a more favorable
decision than actually materialized.
Principles also were very useful from the point o f view o f internal
board operations after the establishment o f the regional boards and
commissions. They served as guides to the board agencies on critical
issues and insured a closer equality o f treatment throughout the
country than would otherwise have occurred. They were essential to




96

DISPUTE; SETTLEMENT AND WAGE STABILIZATION

the appeals system which the Board established to afford every em­
ployer and union just treatment.
B.

N

e e d fo r

G

e n e r a l

A

c c e p t a b il it y

T o be useful, principles must be generally acceptable. I f principles
are to be acceptable, employers and unions must feel that their interests
have been justly considered, that they are not being asked to sacrifice
more than their opponents or competitors, and that they can apply the
principles in a realistic manner to their particular establishment or
industry. As chapter 1 has made clear, high worker morale and high
production depend in the last analysis upon consent—the willingness
o f the workers and employers to produce under the conditions which
prevail. I f the conditions are too unsatisfactory to either side, the
results are a poor labor-management relationship, friction, impaired
morale, and lowered production.
It is true that a number o f the most serious noncompliance cases
o f the Board arose out o f the unwillingness o f either a union or an
employer to accept one or more o f the basic principles. The fact,
however, that only relatively few such cases emerged testifies to the
widespread recognition that the Board’s principles were about as sat­
isfactory as could be expected under the circumstances. As indicated
above, principles must be realistic if they are to win consent and to be
effective. In the industrial relations field, that means that they must
usually be flexible. American industry is so varied and so complex
that it is rarely possible to apply a single rigid standard or rule with­
out creating many inequities. Even the maintenance-of-membership
principle, which is simple in concept and relatively easy to administer,
was found to be inapplicable to certain industries such as the maritime.
The Little Steel formula likewise required a variety o f special adapta­
tions to be generally applicable. The substandard wage principle
also required a different type o f application in the laundry industry
than it did in the textile industry.
C.

T

im in g

o p

P

r in c ip l e s

The evidence clearly indicates that a war labor board needs princi­
ples for deciding labor disputes. A much more difficult question to
answer is whether such dispute settlement principles should be set up
in advance to guide the Board, as was attempted in W orld W ar I, or
should be established by the Board itself, as was done in W orld W ar
II. By “ advance” is meant immediately before the establishment o f
the emergency board, not a considerable period before. No one has
seriously proposed the form ulation o f principles prior to the rise o f
the emergency. The chief argument in favor o f establishing prin­
ciples “ in advance” is that if they are effective principles, they w ill




THEi PRINCIPLES OF DISPUTE' SETTLEMENT

97

eliminate serious controversies which might otherwise arise during a
period of policy formation. Few advocates of this course propose
the prior establishment of a large number of highly detailed rigid
rules which would tie the hands of the Board. The industrial rela­
tions world is too complex for this procedure to be successful.
Every dynamic period, however, has a few special problems which
are major impediments to industrial peace and industrial production.
In World War I the major problem was recognition by the mass pro­
duction industries of the right of unions to organize and bargain col­
lectively without employer interference. By World War II this right
had been embodied in the law of the land. The critical problems of
World War II were union security and general wage increases. If
it had been possible to establish acceptable principles on these issues
before the Board’s establishment, it probably would have been sound
procedure. Whether it was possible, in the light of the bitter labormanagement differences of opinion at the time is impossible to answer.
No serious effort was made to do so.
The opponents of the establishment of principles in advance argue
that if the principles are general and vague, they serve no useful
purpose; they are merely window-dressing. If, on the other hand,
the principles are sufficiently specific to serve as workable guides, they
are likely to be too restrictive on a board which must apply them to a
bewildering variety of situations. Particularly in time of war, con­
ditions may change radically almost overnight and it is essential for
the machinery to adjust its policies accordingly. Furthermore, it is
argued, the Board itself is much more likely to be able to work out
acceptable and realistic principles when confronted by concrete cases
than is Congress or the President or a labor-management conference
acting in abstract terms. It is also pointed out that it is not always
possible to know in advance what the real issues of the emergency w ill
be and that these can be adequately recognized only after concrete
incidents have occurred. Moreover, it is argued, that since the major
issues in dispute are usually tinged with considerable emotion, lasting
agreement could best be achieved through the mechanics of case by
case discussion.
These arguments, of course, do not apply to the question of general
wage stabilization. Since the decision to institute a national wage
stabilization program is intimately linked with a general economic
stabilization program and since it affects workers and employers gen­
erally, congressional and Presidential action are clearly called for.34*
8
8 British experience provides a contrary answer under conditions significantly different
*
from the American conditions of World War II— namely, a unified, strongly self-disciplined
labor movement, widespread union organization throughout the economy, well established
employer organizations, a considerable history of stable collective bargaining, and im­
portant governmental responsibilities exercised by the unions in the fields of manpower,
labor disputes, production, and elsewhere.




98

DISPUTE; SETTLEMENT AND WAGE STABILIZATION

Even then the governmentally established principle may well be
phrased in general terms.
The decision to leave the establishment of substantive principles
governing wage and nonwage issues to the War Labor Board in
World War II without any guidance proved to be highly successful
in fact. The Board was able, within a comparatively short time, to
find workable solutions to the critical issues dividing labor and man­
agement without any serious disruption of the war effort. The cir­
cumstances of the time played an important part.
In pursuing its pragmatic common law approach, the Board re­
quired somewhat less than 8 months to spell out the main principles
on which it functioned throughout the war. During this period
principles were established (or a firm foundation for their subsequent
establishment wds laid) for critical issues of union status and the rela­
tion of general wage increases to the cost of living as well as for such
issues as grievance procedure, equal pay for equal work, and juris­
dictional disputes. The main exceptions, such as the principles relat­
ing to intra- and inter-plant inequities, grew out of the wage stabili­
zation program, which depended upon factors beyond the control of
the Board. Even some of these were developed experimentally and
were modified later through case handling.
The Board’s approach during this period created a vast amount
of debate in the newspapers and in Congress. But in the industrial
area, it was a period of substantial peace. In the months JanuaryAugust 1942 only about 0.06 percent of available working time was
lost as a result of strikes.35 This outstanding record was, of course,
primarily the result of the Nation’s response to the shock of Pearl
Harbor and the military disasters in the Far East. The entire coun­
try reacted with all its energies to the needs of the war. Private
interests were subordinated to the national interest more intensely
than at any subsequent time during the war. Thus during the pri­
mary period of trial and error the Board accomplished much with a
minimum of economic dislocation. One of the main risks of the
common law approach, the time required for experience and testing,
was thereby minimized.
It should be noted that in general the Board did not attempt to
pioneer new forms of labor-management relations but rather to extend
and consolidate the most acceptable forms then in existence. Under
prevailing conditions it was a successful policy because it was most
likely to win the consent of the parties. The only dispute case
“crisis” in the Board’s life came from the refusal of a few employers
to accept the maintenance-of-membership principle and the violation 5
8
8 U. S. Department of Labor, Bureau of Labor Statistics, Monthly Labor Review, May
5
1943, p. 962. The percentage of time lost was the lowest since 1930.




99

THE. PRINCIPLES OF DISPUTE SETTLEMENT

of the no-strike pledge by a small number of unions over the appli­
cation of wage stabilization principles.
D.

If P
D

rinciples

e t e r m i n e

T

re

T

h e m

A

?

o

B

e

E

stablished i n

A

d v a n c e

W

h o

S

h o u l d

The final question to be answered, assuming that it is wise to have
certain critical substantive principles established for the guidance
of the War Labor Board, is who should determine the principles—
Congress, the President, or a special conference of representatives of
labor and industry.
In the particular set of conditions existing at the time of the Pearl
Harbor attack, it is clear that neither the Congress nor the President
was an adequate instrument for the establishment of meaningful in­
dustrial relations principles to guide a war labor board in the settle­
ment of labor disputes. On the two major issues, union status and
wages, as well as on a number of the less important issues, the accumu­
lated experience essential to meet the basic conditions of consent and
realistic flexibility was lacking. Had Congress acted on the Smith
bill or similar legislation pending at the time of Pearl Harbor, it
would have clearly failed to meet the existing needs. A t best Con­
gress or the President could have enunciated general rules which
would not have had an unduly restrictive effect upon the operations
of the new Board. The labor-management conference composed of
the major interest groups, thoroughly experienced in the problems
of industrial relations, was a far more suitable device for the estab­
lishment of principles.36 However, such a conference, to be success­
ful in the advance establishment of principles, needs a clear-cut
directive from the President as to its function and sufficient time to
reach a unanimous agreement. The achievement of agreement is its
main purpose for being convened. Such agreement can be achieved
with respect to controversial issues only after a prolonged period of
hard bargaining and compromise.
E.

C

o n c l u s i o n

The experience under review, therefore, is suggestive but does not
provide a conclusive answer to the problems of the chapter. On the
whole, it appears that general principles are necessary and that these
can be developed better by a tripartite machinery than by the Govern­
ment acting alone without the participation of labor and manage­
ment representatives. What actually happened in World War II is
that the needed principles were largely developed out of case handling.
This worked well for the settlement of dispute issues. When the9
3
3 This would not have been true if wage-price stabilization had been involved since none
9
of the representatives at the conference represented the general public interest.



100

DISPUTE; SETTLEMENT AND WAGE STABILIZATION

Government found it necessary to establish compulsory wage stabi­
lization, it formulated the broad principles in advance of case
handling, in part by legislation and in part by administrative action.
Even then, however, specific policies were largely developed through
case decisions. The experience also suggests that the sooner principles
were developed, the more useful they were, provided that they were
(a) generally accepted, (b) sufficiently realistic, and ( c) sufficiently
flexible. There is considerable question whether the Labor-Manage­
ment Conference could have achieved the first two of these standards
had it tried to formulate general principles in December 1941. In
any case, it would certainly have been necessary for the tripartite
board to have had authority to modify or change such principles as
conditions changed.
A p p e n d ix to C h a p t e r 2

A CODE OF NWLB PRINCIPLES USED IN DISPUTE CASES
The Termination Report of the National War Labor Board analyzes
the substantive principles of dispute settlement developed by the
Board. They are summarized here in their final form. It should be
remembered that some of these rules were applied earlier and more
rigorously than others.
I. Union Status
A. Except in cases of union irresponsibility (i. e., violation of the no-strike
pledge) unions will be awarded a maintenance-of-membership provision with a
15-day escape clause.
1. When the maintenance-of-membership provision is renewed, a new 15-day
escape period will be provided.
2. In cases of union irresponsibility maintenance of membership may be
awarded after a reasonable period of good behavior on the part of the union.
B. Neither the closed nor the union shop nor any combination of clauses which
are the practical equivalent of the closed or union shop will be ordered by the
Board where such provisions have not previously been in effect. However, where
the closed or union shop has been in effect as a result of collective bargaining, the
Board will not deprive the union of this status except in cases of union
irresponsibility.
0.
The checkoff of union dues and initiation fees will be ordered together with
maintenance of membership when requested by the union. Except in certain
mass production industries where the checkoff will be made compulsory upon all
union members, the voluntary, individual authorization form of checkoff will
be ordered.
II. Grievance Procedure
A.
Grievances can best be settled by the prompt initial attention of those in the
plant who have intimate knowledge of the dispute. The exact procedure for such
attention to grievances must be adapted to the needs of the plant and can best be
worked out by the parties themselves.




THE.

p r in c ip l e s

of

d is p u t e

settlem en t

101

B.
Grievance procedures should provide for the final and binding settlement o f
all grievances not otherwise resolved. For this purpose, provision should be
made for the settlement of grievances by an arbitrator under terms and condi­
tions agreed to by the parties. I f the Board finds it necessary to order an arbi­
tration clause, it prefers the permanent arbitrator setup, but it will order this
type of arbitration only where the employer has expressed no serious opposition
or where exceptional circumstances warrant a permanent arbitrator despite
management opposition.
0. I f the parties cannot agree upon an arbitrator within a specified period o f
time (usually 10 or 15 days) the Board will appoint one.
D. Even in the absence o f established grievance procedures, the Board will
expect all parties to settle grievances through direct negotiation and, if necessary,
voluntary arbitration. Where the company or union seeks to have a case in­
volving a grievance certified to. the Board, the Board will consider the grievance,
if at all, primarily from the point o f view o f the establishment of effective griev­
ance machinery within the plant. As a rule, the Board will refer such unsettled
grievances to an arbitrator.
E. The creation of a grievance procedure for a minority union w ill not be
ordered save in the most exceptional circumstances.
F. Such grievance procedure problems as time limits, written versus oral
presentation o f grievances, the number o f union grievance men, and payment for
time spent in handling grievance will be determined on an individual case basis.
III. Discharge
A. A disciplinary suspension or discharge alleged to be without just cause
should be taken up as a grievance and finally determined under the grievance
procedure as speedily as possible. I f an existing multistep grievance procedure
has been found to be not adapted to the speedy processing o f such grievances, a
special shortened procedure should be established for this purpose.
1. Grievances which cannot be settled by negotiations should be promptly sub­
mitted to an arbitrator or umpire for final and binding decision, with power to
order reinstatement and back pay in appropriate cases.
2. Management has the right, in the absence o f agreement to the contrary,
to direct a discharged or suspended employee to remain away from work until
the grievance has been finally determined. A reasonable opportunity should
be provided for the employee, before leaving the premises, to report the details
o f his grievance to the union official authorized to present it.
B. With respect to discharges occurring during a strike, the Board will, as a
general rule, order reinstatement o f the discharged employees. I f disciplinary
action should subsequently be taken by management, which does not constitute
a circumvention of the order o f reinstatement, a dispute concerning such
action may be taken up as a grievance, and, if necessary, submitted to arbi­
tration.
IV. Seniority
A. In deciding disputes over questions o f seniority rules to be applied in case
of layoffs, transfers, or promotions, the Board will attempt in each case to order
a clause which most nearly meets the desires of the disputing parties and
most completely fills the particular needs o f the industrial organization.
V. Contracts.
A. Contracts must be adhered to.
unexpired contract.




The Board will not modify the terms of an

102

DISPUTE; SETTLEMENT ANTD WAGE STABILIZATION

B. The Board normally will provide that the terms of its order remain ir
effect for a period o f 1 year from the date of the order. However, it may ordei
a contract for more or less than a year because of industry patterns, past prac­
tices, or other reasons.
C. In recognition of the fact that the National Wage Policy may change
at any time, the Board may direct wage reopening clauses with date prior to
the regular expiration date of the contract.
D. The Board will order the terms of an old contract to be continued during
negotiations for a new contract.
E. If upon the expiration of a contract, the employer challenges the majority
status of the union, the Board will continue to recognize the already established
status of the union as the bargaining agency in the absence of a clear showing
o f a compelling change in circumstances.
VI. Retroactivity
A . The Board will recognize the principle of retroactive payment of wage
adjustments.
B. The appropriate date of retroactivity will b e :
1. The date agreed upon by the parties or fixed by their contract, or where
an existing contract contains a wage reopening clause, the date when the wage
issue was actually reopened;
2. In the absence of such agreement, the date of expiration of a previous
agreement governing the same bargaining unit;
3. In the absence of any agreement, then the date o f certification of the dis­
pute by the United States Conciliation Service or the date of assumption of
jurisdiction by the War Labor B oard;
4. Some other date if required by special circumstances.
C. Any employee who has either left or been discharged between the retroactive
date established by a directive order of the Board and the date of the order will
receive the amount of the increase for his classification up to the date on which
his employment with the company terminated.

VII. Discrimination
A . The Board will require equal pay for equal quality and quantity of work
without regard to race, sex, color, or national origin.
B. The Board will encourage equal opportunity for employment and advance­
ment o f all workers without regard to race,'sex, color, or national origin.

V III. Wage Increases*
A. I f a group of employees has received increases amounting to 15 percent
in their average straight-time rates over the level prevailing on January 1, 1941,
the Board will not grant further increases as a correction for maladjustments
resulting from the rise in the cost o f living (the Little Steel formula).
B. The ability or inability of employers to give wage increases will not be
considered a factor in determining wage increases during the war.
C. The Board will adjust wages to correct for substandards of living. (The
minimum finally reached by the Board was 55 cents per hour.)
D. In connection with the granting of wage increases to eliminate substand­
ards of living or to give effect to the Little Steel formula the Board will grant
wage adjustments for workers in immediately interrelated job classifications
to the extent required to keep the minimum differentials between immediately
♦No attempt is made to summarize all the detailed wage stabilization principles,




THE: PRINCIPLES OP DISPUTE SETTLEMENT

103

interrelated job classifications necessary for the maintenance of productive
efficiency.
E. Interplant wage differentials which are established and stabilized are nor­
mal to American industry and will not be disturbed. Where interplant inequities
exist, the Board will order increases up to the minimum of the sound and tested
going wage rates for the job classifications in the labor market.
F. The Board will order wage rate adjustments to correct intraplant in­
equities through re-evaluating particular jobs found to be out of line with other
jobs.
G. The Board will not order wage increases for the purpose of influencing
or directing the flow of manpower except in rare and unusual cases involving
the critical needs of war production.
IX.

“ Fringe” Issues

A. The Board will decide disputes over hours and overtime in terms o f the
circumstances of each case and the relation to industry and area practice,
subject to the limitations o f the Fair Labor Standards Act and Executive Order
9240.
B. The Board will not order the adoption o f wage incentive plans.
0. The Board will normally order a vacation plan providing for 1 week’s
paid vacation after 1 year’s service and 2 weeks’ paid vacation after 5 years’
service.
D. The Board will order premium payments for second and third shift work
provided that such compensation is not already included in the basic wage rate.
(The stabilized limits for shift differentials in noncontinuous industries were
set by the Stabilization Director at 4 cents an hour for the second shift and
8 cents an hour for the third shift. In continuous operations, whether rotating
or nonrotating shifts, the limits were 4 cents for the second shift and 6 cents:
for the third shift.)
E. The Board will order payment for holidays not worked on the basis o f
industry and area practice. (Executive Order 9240 required the payment o f
time and one-half for work on six holidays—New Year’s Day, Independence Day,
Labor Day, Thanksgiving Day, Christmas, and either Memorial Day or a similar
holiday o f greater local importance. It forbade premium payment for any other
holidays worked and also prohibited the payment o f more than time and a
half.)
F. The Board will not order the payment of a nonproduction bonus unless it
has been the invariable practice of the company concerned, i. e., an integral
part o f the wage structure.
G. Except in unusual circumstances, the Board will not order a sick leave
or insurance plan or the payment of a severance bonus.
H. Paid meal periods will be ordered only on the basis o f industry or area
practice.
1. Paid rest periods will be considered on an individual case basis. They
will sometimes be ordered when the shifts are excessively long or the work
burdensome or on the grounds o f industry or area practice. They will be denied,
where the character o f the work does not appear to warrant it or where there,
is a critical need for uninterrupted war production.
J. In disputes involving payments for time not worked, other than holidays;,
lunch periods and rest periods, the Board will base its decision on the facts;
of each case and the criterion of “ reasonableness.”
I. The Board will normally order from 2 to 4 hours’ pay for reporting to>
work as scheduled when no work is available.




CHAPTER

3

The Development of Wage-Price Policies
By H. M. Douty
I. S o

m e

G

en e r a l

Factors

in

W

age

-P r i c e C

o n t r o l

A. I
When the European conflict began in September 1939, the general
economic requirements of modem warfare were widely understood.
This was a reflection, in part, of experience in World War I. It re­
flected, also, additional insight gained in the two decades before the
war into the nature of the economy and its operation, together with
improvement in the tools for measuring economic changes and
economic performance.
A t the same time, the concrete measures designed to gear the econ­
omy for war could not, in the nature of the case, be clearly foreseen.
Measures taken in any emergency are, in part at least, improvisations.
Their precise nature and their timing depend upon a complex of cir­
cumstances, and the economic measures to meet a war emergency are
no exception.
In the case of the United States, the question of our actual involve­
ment in the conflict, and hence the extent of our military and economic
commitment, was not irrevocably determined until December 7,1941.
During the preceding 18 months, however, we had been engaged in
a defense program of substantial magnitude. As the rate of expendi­
ture under this program mounted, its impact on the structure and
stability of the economy became progressively heavier. In conse­
quence, the need for central direction and control became increasingly
apparent. But how much planning and control? And by what
measures?
The purpose of the present chapter is to inquire into the relation
between wage and price control during the defense and war periods
and in the immediate postwar era. Although supported by many
other measures, these were the major direct controls aimed at securing
economic stabilization in the war emergency. The principles of war­
time wage stabilization are elucidated elsewhere in this volume.1 The
n t r o d u c t i o n

1 Ch. 4 .

104




DEVELOPMENT OF WAGE-PRICE POLICIES

105

specific techniques of price control w ill be discussed only to the extent
necessary to clarify the course of price control development.2 Em­
phasis w ill be placed, instead, upon the timing of controls and their
interrelationship.
Extensive preparation for war gives rise to predictable economic
consequences. The precise impact of war preparations upon the
economy, however, depends not only upon the relative magnitude of
the defense or war effort, but also upon the nature and structure
of the economy and its level of operation when war preparations
are inaugurated. For example, the immediate economic effects of
expanding defense or war expenditures w ill be markedly different
under (a) an existing condition of full employment, or (&) substantial
unemployment and unused plant capacity. The size and timing of
the defense program are plainly important both in themselves and in
relation to the underlying economic situation at the time the program
is initiated. Clearly these and related factors need to be taken into
account in any evaluation of past experiences.
B. W E
I
In 1939, the United States possessed relatively large volumes of
unused resources. Substantial unemployment had constituted a major
problem for almost a decade.3 In the critical steel industry, ingot
production in 1939 amounted to 52.8 million tons as compared with
existing capacity of approximately 80 million tons.4 In the cotton
textile industry, to use another example, 92.5 billion spindle hours
were utilized in 1939 as compared with 133.4 billion in 1942 although
the number of spindles in place was greater in the earlier year.5 In
substance, the output of the economy in 1939 lent itself to sharp ex­
pansion through the addition of unemployed or underemployed
workers to existing plant and facilities.6
The existence of unused manufacturing capacity and the avail­
ability of raw materials meant that a relatively large defense program
could be inaugurated without curtailment of the production of con­
sumer goods. In the spring of 1941, at the end of the first year of the
defense program, we were using about one-eighth of our productive
effort to produce war materials. Production for civilian purposes,
however, had not diminished. Indeed, the output of consumer goods
a r

xpenditu res

a n d

n f l a t i o n

2 The most convenient source of reference on price control is found in the series of
monographs on the Office of Price Administration published as part of the Government’s
Historical Reports on War Administration.
8 The Bureau of Labor Statistics estimates average unemployment in 1939 at almost
9.5 million workers. See Stanley Lebergott, “Labor Force, Employment and Unemploy­
ment, 1929-39: Estimating Methods”, Monthly Labor Review, July 1948, pp. 50-53.
4Iron Age, January 2, 1941.
5The Cotton-Textile Institute, Inc., What Is The Truth About The Cotton Textile
Situation? (undated), p. 6.
6 George Terborgh, “The Problem of Manufacturing Capacity.” Federal Reserve Bulle­
tin, July 1940.




106

DISPUTE S E T T L E M E N T A N D W A G E STABILIZATION

had measurably increased. This simultaneous expansion in the pro­
duction o f consumer goods and war goods plainly could not continue
past the point o f full employment. In fact, the output o f some types
o f consumer goods (e. g., aluminum products) virtually ceased long
before this point was reached. Beginning roughly in late 1941 or early
1942, additional output o f war materials could be obtained only by
the sacrifice o f civilian goods production.
The fu ll impact on consumer goods output o f the production re­
quirements for W orld W ar I I may be summarized as follow s:
The composition of the national output at the peak of the war effort was different
from what it was before the war. * * * Although the dollar volume o f con­
sumer expeditures held above prewar levels, there was virtually no production o f
the most important types o f consumers’ durable goods, while some nondurable
goods became unavailable. Other kinds o f consumer goods had deteriorated in
quality. At the same time, consumers’ services were limited in amount and
changed in character.7

F or example, between 1941 and 1945 expenditures for consumers’
durable goods declined from 9.75 billion dollars to 7.98 billion dollars
although gross national product rose from 125.3 billion dollars to
213.2 billion dollars.8
The expansion o f physical output under the defense program in­
duced expansion in national money income. Table 1 indicates the
extraordinary increase that occurred in Federal expenditures. This
T a b le

1.— Total

Federal expenditures and expenditures fo r goods and services

19 89-46

,

[Millions of dollars]

Year

1939__
1940...........................................................................
1941...........................................................................
1942____
1943...........................................................................
1944_______________
1945___________ ,

Total ex­
penditures
8,955
10,094
20,545
56,150
85,979
95,559
84,929

Goods and services
Total»
1,157
6,170
16,923
52,027
81,223
89,006
74,796

War
1,258
2,223
13,794
49,567
80,384
88,615
75,923

Nonwar
3,908
3,956
3,173
2,664
1,480
1,552
1,031

1Federal expenditures for goods and services less the value of Federal sales of goods. Since the total
figure is net, the sum of the war and nonwar components exceeds the total by amounts ranging from 9 million
dollars in 1940to 2,158 million in 1945.
Source: T S. Department of Commerce, Office of Business Economics.
J.

enormous increase in expenditures fo r defense and later fo r war was
financed to a substantial extent by debt creation through the banking
system.9 The new purchasing power thus created flowed through the
7J. Frederic Dewhurst and Associates, America’s Needs and Resources (New Y ork:
Twentieth Century Fund, 1947), p. 11.
®U. S. Department of Commerce, National Incom e: Supplement to Survey of Current
Business, July 1947, p. 19.
9 Charles O. Hardy and others, Prices, Wages and Employment. (W ashington: Board o f
Governors, Federal Reserve System, 1946), pp. 8-11..




107

D E V E L O P M E N T OF WAGE-PRICE POLICIES*

economy and, to the extent that it was not siphoned off by taxation,
represented claims on present or future goods and services.
As long as money income and physical output o f goods available
for civilian consumption increase at about the same rate, the higher
level o f money income cannot exert significant general upward pressure
on the price structure. In the absence o f controls inflation results
when purchasing power expands at a more rapid rate than output.
Under these conditions, the demand for goods and services at existing
prices cannot be satisfied, and prices are bid up. The incidence o f in­
flation affects various sectors o f the economy unequally, as evidenced
by unequal movements o f prices, wages, and salaries, and entreprenurial and property income.1
0
In table 2, selected measures o f income are set forth fo r the period
1939-45. In many ways, the most significant measure fo r our present
purpose is disposable personal income. In 1939, individuals retained
T able 2.— National income, employee compensation, personal income, and
disposable personal income, 1989-45

[Millions of dollars]
Year
1939..........................................................................
1940...........................................................................
1941..........................................................................
1942...........................................................................
1943...........................................................................
1944..........................................................................
1945...........................................................................

National
income

Employee
compensa­
tion1

72,532
81,347
103,834
136,486
168,262
182,260
182,808

47,820
51,786
64,280
84,689
109,102
121,184
122,872

Personal
income
72,607
78,347
95,308
122.156
149,432
164,915
171,590

Disposable
personal
income3
70,167
75,743
92,015
116,197
131,617
146,011
150,712

1Including supplements to wages and salaries.
*Personal income after Federal, State, and local taxes.
Source: U. S. Department of Commerce, Office of Business Economics.

after taxes about 70,167 m illion dollars for expenditure on personal
consumption or for saving. By 1941, disposable income had in­
creased by 31 percent. The use o f yearly totals conceals the rapid
rate o f increase during 1941. In 1942, disposable personal income
stood at 66 percent above the 1939 level. Thereafter, the rate o f
increase declined sharply.
As the defense program developed, the increase in income available
for consumption could not be matched, as we have already seen, by
an equivalent increase in civilian goods. In the absence o f counter­
acting forces, therefore, inflationary price rises could be anticipated.
As a useful conceptual device, estimates were made for some perio|i j
in the future o f expected consumer expenditures and o f the v^lue,v
at then existing prices, o f the expected volume o f goocjs and ’services '
1 Frederick C. Mills, The Structure of Postwar Prices J New ..York,: National Bureau of
0
Economic Research, 1948), especially pp. 1-16.
921297— 50------ 8




108

DISPUTE. S E T T L E M E N T A N D W A G E STABILIZATION

that would be available fo r sale. The difference between these
aggregates, in the discussions o f the early 1940’s, was called the infla­
tionary gap.1 The concept played a role in the hearings on the
1
Emergency Price Control bill. Leon Henderson, wartime price chief,
estimated that the supply o f civilian goods in June 1942 would be
worth 77.2 billion dollars in terms o f September 1941 prices, but that
civilian demand would amount to 83 billion dollars.1
2
On the surface, the most direct way to eliminate inflationary pres­
sures would appear to be fo r the Government to take excessive pur­
chasing power in the form o f taxes. Sharp increases in personal and
corporate income taxes during the war years did, in fact, reduce the
money income available for private expenditures. F or a variety o f
reasons, it seems unlikely that in a m ajor war, inflationary pressures
can be eliminated through taxation.1 Some o f these reasons are
3
technical—time is required, for example, to impose and collect new
or higher taxes. O f even greater importance, however, is the fact
that tax rates would have to be so high as probably to reduce the
incentive to work and produce.
The pressure o f excess purchasing power can also be lessened if
individuals can be persuaded to increase their rate o f saving. Saving
did increase remarkably during the war period. Thus the ratio o f
individual saving to the disposable income o f individuals rose from
less than 9 percent in 1938-39 to more than 23 percent in 1944. The
m ajor portion o f these savings went into Government bonds, with the
remainder held in the form o f unspent bank balances or currency.
It is o f crucial importance to notice that price control and saving
(and, o f course, taxation) reenforce and complement each other.
There would be little saving if consumers expected constantly increas­
ing prices. I f reasonable price stability through price control (sup­
ported by rationing to assure an equitable distribution o f the available
supplies o f essential goods) can be achieved, then the incentive to save
is immeasurably strengthened. A n increase in the rate o f saving or
taxation, in turn, greatly eases the administrative task o f making price
control effective.
The preceding discussion indicates in general the case for price con­
trol in an emergency situation with a high inflationary potential.
Price control is flexible and direct. It can be used to prevent unwar­
1 See the two papers on The Inflationary Gap by Walter Salan and Milton Friedman,
1
American Economic Review, X X X II: 2 (June 1942), pp. 308-320. The controversy that
developed on the nature and significance of the concept, and its measurement, need not
detain us.
P Emergency Price Control Act, Senate Hearings, 1941, p. 28. The exactness of this
or similar estimates is not important for present purposes; the concept is useful in the
process of visualizing the nature of the pressures on the general price level as the defense
program developed.
1 Committee on Public Pebt Policy, Opr National Pebt After Great Wars (1946),
3




D E V E L O P M E N T OF WAGE-PRICE POLICIES!

109

ranted price increases in selected commodities that are critical in the
emergency situation, and it can contribute powerfully to the main­
tenance o f general price stability.1 Price control must be supported
4
by appropriate fiscal measures, by intensive efforts to induce indi­
viduals to save, by rationing, and by proper consideration o f civilian
needs in production planning for the duration o f the emergency.
Experience seems to indicate that price control, to be effective, must be
supported also by some form o f wage and salary stabilization.
C . W ages , L abor C osts , a n d P rices

From the standpoint o f the economy, wages and salaries represent
the largest single cost in carrying on productive activity. They also
represent, o f course, the m ajor component o f national income. In
1939, wages and salaries, including supplementary payments, consti­
tuted 65.9 percent o f national incom e; this proportion had increased,
for a variety o f reasons, to 67.2 percent by 1945.
Labor costs are determined prim arily by wages per hour in relation
to the number o f man-hours per unit o f product. I f wages advance
more rapidly than labor output per man-hour, unit labor costs w ill
increase. Increasing labor costs may be offset, in terms o f total unit
costs, by reductions in other cost factors. In the first year o f the
defense program, increased utilization o f plant and equipment served
generally to reduce unit overhead costs, notably in those plants and
industries that did not experience m ajor changes in product. Hence,
up to a point, wage increases beyond the level indicated by changing
labor productivity can be absorbed, in a period o f expanding produc­
tion, out o f current or anticipated profits without direct price effects.1
5
Whether they w ill be so absorbed depends on such factors as firm or
industry pricing policy, market conditions, and the existence or absence
o f price control.
In any case, price control can scarcely prove effective in a period o f
excessive demand if wage rate changes are not brought within the gen­
eral framework o f stabilization.1 In a period o f general labor short­
6
age, the bargaining position o f labor is extraordinarily great. This
strength is possessed not only by organized workers; it is shared also
by unorganized workers through the competitive bidding o f employers
for the available labor supply. Thus wage rates tend to be bid up,
unit labor costs tend to increase, and these increases tend to be re­
MFrom an economic point of view, the initial extent of price control action will depend
largely on the condition of the economy at the time of the emergency. Experience in
World War II is described in some detail at a later point in this chapter.
1 The relation of wage changes, labor costs, and prices is complicated. For data on
5
selected individual firms, see Temporary National Economic Committee, monograph No.
5, Industrial Wage Rates, Labor Costs, and Price Policies (1940).
1 It should be noted that emphasis is upon the control of wage rates and not of
6
earnings.




110

DISPUTE: SETHJEfMENT A N D W A G E STABILIZATION

fleeted in prices. This inflation o f the cost structure, in turn, generates
purchasing power that supports prices from the demand side.
Wage and salary stabilization, therefore, permits control o f a m ajor
element o f industrial cost. In conjunction with the stabilization o f
farm prices at a reasonable level, wage stabilization makes industrial
price stabilization possible. Stabilization, o f course, implies in all
instances such measure o f administrative flexibility as may be required
to remove well-defined inequities in either wages or prices or to serve
the ends o f economic policy in the emergency period.
D . W age - P r ic e C o n tr o l a n d R esource A l l o c a t io n

Another aspect o f the relation between price and wage controls and
the mobilization o f resources fo r war requires brief consideration.
The defense and war efforts required enormous expansion in some
branches o f production, with no expansion or even curtailment in
others. Great changes were required in the allocation o f resources as
between, broadly, civilian and m ilitary production. These changes
could be effected, up to a point, through the normal operation o f the
price (including the wage) system. Prim ary reliance, indeed, was
placed upon “ market incentives” during the defense period. This was
possible because o f the tempo o f the defense program in relation to
the underlying economic situation during 1939-41. But in the United
States, as in all o f the belligerent countries, the fu ll mobilization and
specific allocation o f resources for war required elaborate schemes o f
priority controls, direct allocations o f materials, manpower control—
in a word, production planning by Government on a comprehensive
and national basis.1
7
The basic reasons for the establishment o f direct controls over the
use o f resources in wartime are succinctly stated by Galbraith:
Market incentives are incapable of producing the comprehensive transfers in
resource employment that any considerable mobilization requires. An effort by
the Government to monopolize steel supply must necessarily be defeated by the
inelasticity o f demand for steel by some private buyers. So with other resources.
Needless to add, the response to market incentives is uncertain and sellers in
imperfect markets who take a comprehensive view o f their position do not seek
to maximize profits at any given point of time. For this reason, they will not
willingly accept a Government order, even though it is immediately more profit­
able than any alternative, if it promises to impair their long-run position in the
market. The automobile industry, in late 1941 and early 1942, was displaying
1
7 The objective of this planning has been admirably defined by Galbraith as being
designed “ to attain maximum resource employment at maximum efficiency, to get the psycho­
logically optimal allocation of resources between military and civilian use and to dis­
tribute the former between different kinds of production, present and future, in accordance
with a given but not static plan.” J. K. Galbraith, The Disequilibrium System, American
Economic Review, X X X V II: 3 (June 1947), p. 288.




D E V E L O P M E N T OF WAGE-PRICE POLICIES

H I

normal market behavior in preferring manufacture o f automobiles to tanks or
aircraft even assuming the latter netted higher returns.1
8

Direct controls became imperative when the point o f full utilization
o f all resources was approached. Up to this point, market and income
incentives worked reasonably well to effect the resource allocations
needed fo r the defense program. The difficulties tended to be specific
rather than general and amenable to selective action. Similarly, the
price effects were manageable on a selective basis. W ith full re­
source utilization, price and wage controls provided powerful sup­
port to the direct controls over the use o f resources.
II. W a g e -P r ic e C o n t r o l : F ir st P h a se , 1940-41

A . P r ic e a n d W a g e M o v e m e n t s , 1939-41
Table 3 shows indexes prepared by the Bureau o f Labor Statistics
o f wholesale and consumers’ prices from August 1939 to the end
o f the defense period in December 1941.1
9
Until the inauguration o f our defense program in the summer o f
1940, the war abroad had comparatively little effect on the level o f
wholesale prices. As table 3 indicates, there was an advance o f about
6 percent, largely speculative in character, in the fall o f 1939. W hole­
sale prices turned downward early in 1940 and by August were only
3.2 percent above the level o f a year earlier. During the period
August 1939-August 1940, the largest advance, 7.5 percent, was reg­
istered by the farm products component o f the wholesale price index;
the average wholesale prices o f fuel and lighting materials actually
declined during this period. The Bureau o f Labor Statistics index
o f consumers’ prices rose about 2 percent during the first year of
the European war.
On May 16, 1940, the President reviewed military developments
in Europe before a joint session o f Congress and called for an imme­
diate appropriation to strengthen the defenses o f the United States.
Initial funds were made available by the Congress in June. By May
1941,1 year after the inauguration o f the program, defense appropri­
ation and contract authorizations amounted to 37.3 billion d ollars;2
0
actual expenditures, on a monthly basis, had increased from 177 m illion
dollars in July 1940 to 836 m illion dollars in May 1941. Defense,
including lend-lease, expenditures had reached a monthly rate o f
almost 2 billion dollars by the time o f our entrance into the war.
1 Ibid., p. 288.
8
1 BLS indexes of wholesale prices reflect, for the most part, prices in primary markets,
9
such as prices charged by manufacturers or producers or established on organized com­
modity exchanges. The BLS consumers’ price index measures changes in the prices of
cost-of-living essentials, including rent, of moderate-income families.
8 Office for Emergency Management, Defense: 1 Year, p. 9.
0




112

DISPUTE; S E T T L E M E N T ANI> W A G E STABILIZATION

,

T able 3.— In d exes o f wholesale and consum ers’ prices A u gu st 1 989-D ecem ber 1941
[August 1830*100]
Year and month
19S9

August______
September___
October.,........
November......
December...... .
1940

January......... .
February....... .
March.............
April...............
May.............. .
June.............. .
July...............
August............
September.......
October...........

Wholesale Consumers*
prices
prices
100.0
105.5
105.9
105.6
105.6
105.9
104.9
104.5
104.8
104.5
103.3
103.6
103.2
104.0
104.9

100.0
102.0
101.0

101.2
101.9
101.8
101.6

Year and month

Wholesale Consumers*
prices
prices

10 0
4 —Continued
November, . _ _ _
December____________
1941

January
February_____________
March_______________
April..............................
May________________
June.............. ................
July__............. ..............
August______________
September.......... ...........
October.........................
November____________
December . _ _ _ _ _
_

106.1
106.7
107.7
107.5
108.7
110.9
113.2
116.1
118.4
120.4
122.4
123.2
123.3
124.8

101.5

102.1

102.2

102.2
102.6

103.7
104.4
106.1
106.8
107.7
109.6
110.9

111.8
112,1

Source: U. S. Department of Labor, Bureau of Labor Statistics.

The impact o f the defense program was reflected in changes in
the price structure. Initially, price increases at wholesale were con­
fined largely to commodity markets affected directly by rearmament
needs, such as scrap metals and lumber, and to some manufactured
products, notably cotton and wool cloth. Beginning about February
1941, the price movement broadened and sharpened. In December
1941 the general level o f wholesale prices stood 26 percent above the
August 1939 level. Farm products had advanced by 55 percent, foods
and textiles by about 35 percent; on the other hand, the average whole­
sale prices o f fuel and lighting materials had increased by only 8
percent and o f metals and metal products by 11 percent.
Increases o f these magnitudes in primary market prices could not
fail to be reflected in the prices o f goods at retail. Retail prices began
to rise markedly early in 1941 to synchronize with the broadening
advance in wholesale prices. B y December 1941, the consumers’ price
index o f the Bureau o f Labor Statistics was 12 percent above the
August 1939 level and almost 10 percent above the level for January
1941. The food component o f the index increased 21 percent over
the whole defense period; o f the 54 foods then included in the index,
the retail prices o f 9 increased more than 40 percent.2 Clothing ad­
1
vanced by 15 percent and housefumishings by 16 percent; rent, how­
ever, rose by less than 4 percent, and the remaining components by
less than the average fo r all items.
In general, the level o f both wage rates and earnings in American
industry remained stable between 1939 and the spring o f 1941. There
were some wage rate increases during this period, but nothing in the
nature o f a broad wage movement. Average earnings as yet were
* Unpublished BLS manuscript.




113

D E V E L O P M E N T OF WAGE-PRICE POLICIES

not greatly affected by longer hours, shifts o f employment to high
wage industries, and other factors that were to exert a powerful
influence on the level o f earnings as the defense program gained
momentum.2
2
T able 4.— Indexes of average hourly earnings and estimated wage rates1, factory
production workers, August 1939-December 1941

[August
Year and month
1959

August
_ ________
September
___
October..........................
November......................
December.
............
1940

January
_______
February
________
March . __________
April
____
May
__
June ____________ __
July
________
August_________ . . . . . _

September

________

Gross aver­ Estimated
age hourly wage rates1
earnings
100.0
100.6
101.8
102.9
104.6

100.0
99.8
99.7
101.0
101.9

105.0
104.8
105.3
105.1
105.8
106.1
105.4
105.8
106.3

102.8
102.9
102.9
102.9
103.2
103.4
103.4
103.2
102.9

1939=100]

Year and month
October.........................
November.......... ...........
December... ........ .........
1941

January_ ___ _______
_
February.......................
March...........................
April......... ...................
May________________
June__ ____ _________
July...............................
August_____ _________
September____________
October......................
November____________

December

Gross aver­ Estimated
age hourly wage rates 1
earnings
106.6
107.5
108.3

102.3
103.4
103.4

109.5
109.8
110.4
112.5
115.5
117.3
117.8
117.9
119.9
122.0
123.9
125.5

104.9
104.7
104.9
106.6
108.6
109.9
111.5
111.5
112.9
114.2
115.9
116.8

i Average hourly earnings adjusted to exclude premium pay for overtime at the rate of time and one-half
after 40 hours per week and weighted by man-hours of employment in January 1939. This is a rough meas­
ure of wage rates, but adequate for the purpose.

Source: U . S. Department of Labor, Bureau of Labor Statistics.

The trend o f wages can be established most precisely for factory
workers. Table 4 shows indexes for the period 1939-41 o f two meas­
ures o f wages (1) average hourly earnings, including premium pay for
overtime, and (2) average hourly earnings adjusted to exclude the
influence o f overtime premium payments and the shift o f workers
(during this period) from low- to high-wage industries. This latter
series has been designated as “ estimated wage rates” ; it provides the
closest approximation that can be made o f changes in the level o f wage
rates in manufacturing industry.2
3
In the 19 months from August 1939 to March 1941, factory wage
rates increased, on the average, by less than 6 percent. This increase
reflects the influence o f scattered wage advances. The spring o f 1941,
however, witnessed the beginning o f a wage movement that was to lift
the level o f rates by about 10 percent by the end o f the year. The
bituminous coal miners received an increase o f a dollar a day in A p ril;
a general increase o f 10 cents an hour occurred at about the same time*
2
8
2 For an analysis of the movement of wage rates and earnings during the defense and
2
early war periods, see H. M. Douty, Trends in Factory Wages, 1939-43, Monthly Labor
Review, October 1943, pp. 869-884.
2 For the period beginning January 1941 a more precise measure is available in the
8
form of the urban wage rate index compiled by the Bureau of Labor Statistics.




114

DISPUTE S E T T L E M E N T AN!D W A G E STABILIZATION

in steel and automobiles. W age advances spread throughout indus­
try. Although no casual relationship is implied,2 this wage move­
4
ment coincided with the upsurge o f wholesale and retail prices. (See
table 3.) By the summer and fall o f 1941 the wage-price situation
was clearly dynamic under the powerful pressure o f the expanding
defense program.
Even in the absence o f wage rate increases, the level o f earnings
(hourly and weekly) would have increased significantly as the defense
program developed. As early as the fall o f 1940 the level o f earnings
began to be affected by longer hours o f work, more work at premium
overtime rates, and by the shift o f workers to the relatively high-wage
war industries. These factors, and others o f lesser importance, con­
tinued to influence the level o f earnings well into the war period.
Even by December 1941 the level o f hourly earnings in manufacturing
was about 6 cents higher than wage rate changes alone would account
for. Because o f expanding employment total payrolls increased much
more sharply than other earnings.
This brief analysis o f the movement o f wages and prices during the
defense period indicates clearly that the general problem o f stabiliza­
tion did not emerge until the spring or summer o f 1941. In terms o f
the relation between consumer purchasing power and civilian goods
output, Leon Henderson, early in 1942, divided the 1939-41 period
into three phases: (1) Up to February 1941 “ the increase o f buying
power, generated by exports and our own defense program, was
matched by an increase o f output and prices remained practically un­
changed” ; (2) beginning about February 1941 many industries ap­
proached capacity operations, and prices began to rise sharply as in­
creased output only partially offset increased demand; (3) by the fall
o f 1941 the production o f consumer goods and services began to de­
cline although total output and purchasing power continued to ad­
vance.2
5
Rising costs do not appear to have been a highly significant factor
in price increases in the initial phases o f the defense program, although
toward the end o f 1941 this situation began to change. Food prices
responded to higher levels o f consumer income and were affected by
Government requirements fo r the expanding Armed Forces and for
lend-lease. The farm price support program was a contributing fac­
tor.2 Increased prices o f farm products other than foods likewise
6
were affected more by demand than by cost factors during this period.
In the processing industries, expanding output tended to lower unit
overhead costs and to counteract raw material and other cost increases.
2 See discussion below.
4
2 National War Labor Board, Transcript, Executive Meeting, February 6, 1942, pp. 4-5.
5
2 Food prices at the beginning of the war were relatively low, prices in August 1939
8
being about 6.5 percent below the 1935-39 average.




DEVELOPMENT OF W AGE-PRICE POLICIES

115

A general summary o f the cost-price situation during the defense
period is given below :
Increases in cost as such did not play any very important part in the general
price rise during the early stages o f the war. It is true that direct costs rose
substantially in many industries, principally because of higher prices for raw
materials. Costs o f farm products and imported materials rose most sharply,
the latter reflecting increases not only in prices abroad but also in shipping and
insurance rates. Labor costs per unit of output also advanced somewhat in a
number of industries, especially toward the end of the Defense period when
spreading increases in wage rates could no longer be matched by greater labor
efficiency. In general, however, these higher direct costs were more than offset
by the sharp reduction in unit overhead which accompanied the expansion of
productive activity. Of course, this situation could not last indefinitely, and, by
the time of Pearl Harbor, costs in a growing range o f industry had begun to
move upward as capacity output was approached or reached. Nevertheless,
viewing the period as a whole, little if any of the increase in prices of most manu­
factured products can be traced to higher costs.2
7

W ith respect specifically to wages as a cost factor, the situation
appears to be reasonably clear. Thus, in February 1942 Henderson
stated:
Through spring o f 1941 the increase of wage rates was more than matched by
the increase of productivity and rising wages did not force up labor costs. Since
that time, however, the increase o f average hourly earnings has been greater
than the increase of productivity and labor costs per unit have been rising.2
8

Henderson’s view apparently was that the round o f wage increases
in the spring o f 1941 could, in general, have been absorbed without
price effects. This is consistent with the action o f the Office o f Price
Administration and Civilian Supply, immediately follow ing the
A pril 1941 wage increase in steel, in freezing steel prices as o f the
first quarter o f the year, pending a thorough study o f cost-price
relationships in the industry.2 This general view o f the relation o f
9
wage increases to prices through the spring o f 1941 was shared by
Isador Lubin, then Commissioner o f Labor Statistics, in testifying
in October 1941 on the Emergency Price Control A ct.3
0
B y the fall o f 1941 there was widespread concern over wages as
a cost factor in price. It was felt that, for the duration o f the war,
the prospects for gains in man-hour output above the 1941 level were
2 U. S. Department of Labor, Bureau of Labor Statistics, Bulletin No. 749, Wartime
7
Prices. Part 1— August 1939 to Pearl Harbor (1944), p. 2.
2 National War Labor Board, Transcript, Executive Meeting, February 6, 1942, p. 3.
8
2 Minutes of Price Administration Committee, April 14, 1941; William Jerome Wilson
0
and others, The Beginnings of OPA (Washington, Government Printing Office), pp. 165—
168, 207.
8 House Hearings, 1941, pp. 1834-44. Lubin concluded by stating that
0
* * it
is quite apparent from all of the evidence that such important price increases as have
already occurred have in virtually all instances preceded rises in wages. In other words,
increases in wages have not been responsible for most of the price increases that have
occurred.” Ibid., p. 1848.




116

DISPUTES SETTLEMENT AND WAGE STABILIZATION

decidedly poor.3 Lubin pointed out in testifying on the Emergency
1
Price Control A ct that—
* * * as more and more people have been taken on, as yon have had to resori
to the employment o f less and less skilled people, there has been a tendencj
fo r the output o f the workers to drop. There has been a very slight drop, bul
the tendency Is already under way * *

Although inform ation on man-hour output during the war period
is not abundant, the available data indicate that, for a variety of
reasons, the general level o f productivity did not increase during the
war in industries manufacturing civilian goods. In 32 nonmuni­
tions industries, output per man-hour generally increased from 1939 to
1941, turned downward from 1941 to 1943, leveled off in 1944, and
increased in 1945.3 Dilution o f the labor force and o f managerial
8
talent, coupled with the difficulty o f making normal improvements in
technique or even in adequately maintaining existing equipment, con­
tributed largely to arrest gains in man-hour output in civilian goods
industries during the war.
B. T h e G r o w th of S ele c tiv e P r ic e C on trol
On May 28, 1940, prior to the initial defense appropriation, the
President established the National Defense Advisory Commission.3
4
Tw o o f its seven divisions, price stabilization and consumer protection,
had to do particularly with prices.3
*
Thus, at the very beginning o f the defense effort, and approximately
a year in advance o f the clear emergence o f the problem o f price
stability in generalized form , systematic attention began to be given
to the impact o f the defense program on the price structure. Hen­
derson states that—
My instructions at the time were to watch prices, to advise the President, to talk
with the leaders o f American Industry, to get their individual consent, so fa r
as possible, to a restraint on prices."

During the early months o f the National Defense Advisory Com­
mission Price Stabilization Division, Henderson and his small staff
were occupied by a number o f matters that were related only indirectly
to price. These matters included Government procurement policy,8
1
2
*
5
81 Henderson expressed this belief to the members of the National War Labor Board.
See Transcript, Executive Meeting, February 6, 1942, pp. 3-4.
8 House hearings, 1941, p. 1846.
2
8 Celia Star Gody and Allan D. Searle, “Productivity Changes Since 1939.” Monthly
8
Labor Review, December 1946, p. 899. In the production of war equipment, there were
tremendous gains in productivity as mass production volume was achieved. In some of
the nonmanufacturing industries, such as railroad transportation, electric light and
power, and agriculture, sharp gains in man-hour output occurred during the war period.
The prewar rate of increase was generally maintained in the mining industries. The
article cited contains an excellent summary and analyses of the available information on
man-hour output during the war period.
* See Bureau of the Budget, The United States At War (June 1946), pp. 21-25.
8 Wilson and others, op. cit., pp. 25,177.
5
8 Emergency Price Control Bill, House hearings, 1941, p. 10.
8




DEVELOPMENT OF W AGE-PKICE POLICIES

117

financing defense plant expansion, and various production and supply
problems.3 By the fall o f 1940, however, price problems began to
7
appear in scattered areas o f the economy. These included pulp and
paper, lumber, machine tools, copper, secondary aluminum and alu­
minum scrap, and steel and steel scrap. Every effort was made to
handle these early situations on an informal basis, at least in part,
because the authority o f the Price Stabilization Division to enforce
maximum price orders was questionable. On February 17, 1941,
however, the first form al*price schedule, relating to second-hand
machine tools was issued. The second price schedule, for secondary
aluminum and aluminum scrap, was issued on March 21.
The development o f price control policy was tentative and experi­
mental throughout the whole defense period. Continuity o f devel­
opment was achieved, however, through continuity o f top personnel,
despite several organizational changes3 prior to the creation, on
8
January 30,1942, o f a price control agency with statutory authority.
The policy that emerged is generally characterized as “ selective price
control” and this policy carried over into the early war period.
This policy had its roots in the conditions under which the price
control program was inaugurated and in which it functioned during
the defense period The establishment o f the NDAC Price Control
Division in May 1940 was a highly perceptive action. A t that time
there was no price problem. A s the problem did begin to make its
appearance, it was in the form o f special or selected situations that
required action. It obviously made sense to meet these particular
problems as they arose. Even when prices began generally to move
upward in the spring o f 1941, the belief that reasonable stability
could be achieved through the control o f key or strategic prices was
probably unexceptionable. Certainly public opinion was not pre­
pared for comprehensive price control. The political situation was
volatile. W e were not at war, and the full magnitude o f our arma­
ment effort could not be predicted. Moreover, Congress had to be
persuaded that the price control agency should be given statutory
powers. The power to control prices is a very great power. Espe­
cially in view o f the fact that we were not at war until 4 months
after hearings on the Emergency Price Control bill began, selective
control undoubtedly appeared more defensible. The hearings on this
bill, particularly in the House, were thorough arid illuminating.
w Wilson and others, op. cit., pp. 140-150.
8 The Price Stabilization Division of the National Defense Advisory Commission was
8
superseded by the Office of Price Administration and Civilian Supply on April 11, 1941
(Executive Order 8734) ; on August 28, 1941, the civilian allocations function was trans­
ferred to the Office of Production Management and the prestatutory Office of Price Admin­
istration was created (Executive Order 8875).




118

DISPUTE; SETTLEM ENT AND WAGE STABILIZATION

In purely economic terms, a case fo r comprehensive control could
have been made as early as the fa ll o f 1941.3 Prices were rising
9
generally and the known extent o f the defense program made great
additional pressure inevitable. In fact, these circumstances were re­
flected in the actions o f the price control agency. A s already pointed
out, the agency took no form al price action fo r almost a year. Beliance was placed upon inform al methods: persuasion, agreement,
warnings, threats. These inform al methods were useful and they con­
tinued to play an important role all during the prestatutory period.
But the lim it o f their effectiveness is clearly stated in the follow ing
passage:
When upward price pressures became appreciable, inform al control usually
showed signs o f breaking down. For those industries most closely dominated
by a very small number o f firms, inform al methods proved more generally effective
than in more competitive areas. But even under the most favorable circum ­
stances, success was typically temporary and uncertain. The government could
secure voluntary compliance with its requests only within narrow lim its. As
soon as its requests failed o f general acceptance either because they were thought
unreasonable under changing cost conditions or because less responsible elements
in the industry could not withstand the temptation to secure greater profits, then
inform al controls proved inadequate and mandatory controls became necessary.4
0

A s 1941 wore on, and price pressures multiplied, the tempo o f for­
mal price control actions increased. As previously noted, the first
form al price schedule was issued on February 17, 1941. During the
next 5 months, up to July 10, 1941, only 13 additional schedules were
promulgated, including a temporary schedule relating to bituminous
coal.4 During the succeeding 5 months, July 10, 1941, to December
1
7, 1941 (Pearl H arbor), 33 form al price schedules were issued. In
the period o f less than 2 months from Pearl Harbor to the passage o f
the Price Control A ct on January 30,1942, 58 schedules were issued.4
2
Thus the price pressures that became manifest by the spring o f 1941
forced ever wider action in the sphere o f form al controls. The nature
o f the situation was clearly recognized by the price control agency.
For example, a memorandum prepared by the Office o f Price Adm in­
istration and Civilian Supply and introduced on August 8,1941, into
the House hearing on the Emergency Price Control bill concludes:
The task o f avoiding serious price disruption and inflation during the period
immediately ahead is exceedingly complex and becomes more difficult each day.
8 The case was made, in fact, by isolated individuals, the most distinguished of whom
0
was Bernard Baruch.
4 Wilson and others, op. cit., pp. 204-205.
0
4 See memorandum on “The Activities of the Price Stabilization Division and the Office
1
of Price Administration and CivUian Supply,” Emergency Price Control biU, House
hearings, 1941, tables 14 and 17, pp. 280-281, 283. There is a discrepancy between the
totals shown in these two tabulations. Table 14 apparently omits reference to the price
schedule for second-hand machinery.
4 See Office of Price Administration, Federal Price Control July 1, 1940-February 10,
2
1942, for a digest of the prestatutory period.




DEVELOPMENT OP W AGE-PRICE POLICIES

119

The first waves o f a potential inflation are already surging through the channels
o f manufacture and pounding against retail counters. Every week it becomes
im perative that an increasing number o f industries and commodities be brought
within range o f effective price control if disastrous consequences are to be
avoided. The problems are intensified because the industries which must in­
creasingly be brought under control are those with numerous sellers and un­
standardized goods which do not lend themselves easily to control.
One m ajor tool o f effective price control is woefully lacking: adequate power
to secure compliance with ceiling schedules. W ithout such power the price
situation w ill soon be dangerously out o f hand. Time is of the essence. Price
increases must be prevented before they occur. Any widespread scaling down o f
prices once they have risen is impossible.4
8
C . W ages a n d t h e N a t io n a l D efen se M e d ia t io n B oard

During this whole period (1940-41), except in the case o f shipbuild­
ing, there was no semblance o f formal wage stabilization or control.*4
4
In the National Defense Advisory Commission, general responsi­
bility fo r labor supply problems rested with Sidney Hillman, and
Hillman’s staff subsequently became the Labor Division o f the Office
o f Production Management.4 Aside from technical problems on labor
5
supply, attention with respect to labor tended to be focused during this
period on the prevention o f industrial disputes that would interfere
with the defense effort. On March 19, 1941, the National Defense
Mediation Board was formed.4 The Executive order establishing
6
this agency did not mention wages or any principles o f wage
settlement.
W illiam H. Davis, chairman during the latter part o f the Board’s
existence, clearly summarizes the problem o f the Board with respect
to wages: “ You see, they [N DM B] were mediating individual cases,
as has already been remarked, without any policy, not having any
power, really, to make a national policy on wages.” 4 The official
7
report on the work o f the Board contains the follow ing analysis o f
procedure in wage cases:
Roughly speaking, it may be stated that the recommendations, with a few ex­
ceptions, proceeded along lines made fam iliar by arbitration practice. The
4 House hearings, 1941, p. 301.
8
4 On November 27, 1940, the National Defense Advisory Commission created a Ship4
building Stabilization Committee, composed of representatives of labor, management, and
the procurement agencies of the Government. The principal object of the Committee was
to stabilize shipyard employment. During 1941 the Committee worked out a series of
Zone Standards Agreements providing for substantiaUy uniform wage rates and other
basic conditions of employment within each of four broad geographic areas. The agree­
ments provided for wage escalation based on changes in the cost of living. The escalator
clauses were deleted in May 1942 at the insistence of the Government as being incom­
patible with economic stabilization. Wage increases (lesser in amount than the cost-ofliving criterion would have permitted) were granted at this time, and annual wage reviews
were provided for. Several other approaches on an industry basis to voluntary wage
stabilization were made prior to the imposition of formal wage controls in October 1942.
4 OPM was created by Executive Order 8629, January 7, 1941.
5
4 Executive Order 8716. The work of this Board in various aspects of dispute settle­
6
ment is discussed elsewhere in this volume.
4 National War Labor Board, Transcript, Executive meeting, February 6, 1942, p. 45.
7




120

DISPUTE SETTLEMENT ANID WAGE STABILIZATION

Board was reluctant to recommend rates o f pay. Such recommendations ordi­
narily would require a detailed examination o f facts. As indicated above, the
Board’s regular procedure o f developing facts was a loose one, w ell fitted to
mediation but often insufficient for the needs o f arbitration. It thus had to
appoint special investigators where the m ediatory process did not succeed, but
more than this the Board understood that there were no firm principles to give
a measure fo r a decision with respect to wage demands and so preferred that
the parties find a solution by agreem ent4
8

D. W

ages a n d

P r ic e C on trol — T h e 1941 D e b ate

Although there was no wage control effort during the defense
period to parallel the price control program, the relation between
price and wage control was given wide consideration. This is revealed
notably in the House hearings on the Emergency Price Control bill in
the summer and fa ll o f 1941. The bill was introduced on August 1,
and hearings began on August 5. The bill as introduced contained
no reference to wages; it provided authority fo r the establishment o f
commodity price ceilings and for stabilizing rents in defense areas.
The language o f the bill was sufficiently broad to provide for either
“ selective” or “ general” price control.4 It was explained and de­
9
fended largely in terms o f selective control, partly on administrative
grounds, partly in view o f the climate o f public opinion, and partly
in the belief that general price stability could be achieved if the prices
o f critical commodities could be effectively controlled. Henderson
at various points stressed the relationship between prices and wages,
but seemed at this time to place primary reliance on voluntary restraint
as fa r as wages were concerned. Lubin was the principal witness on
the wage aspects o f the control problem.
W ith respect to wage control, Lubin argued, in short, that col­
lective bargaining could continue to operate within a price control
framework. “ I f you fix prices,” he testified, “ you are automatically
fixing a certain part o f your wage structure.” 8 Labor, he believed,
0
would take price ceilings into account in form ulating wage strategy.
“ I f labor knows that the price is fixed and that the employer cannot
pay it out o f profits, that there are not any more profits to pay it out
o f, and he cannot raise his prices, I think you w ill find in all o f these*
4
0
48 U. S. Department of Labor, Bureau of Labor Statistics, Bulletin No. 714, Report on
tbe Work of the National Defense Mediation Board, March 19, 1941-January 12, 1942,
p. 29. This volume contains a summary of the cases handled by the Board. Among the
leading wage cases were Marlin Rockwell (No. 39), Bituminous Coal Operators, Appa­
lachian Mines (No. 20), Bituminous Coal Operators, Alabama Mines (No. 20C), General
Motors (No. 21), Central States Employers' Negotiating Committee (No. 105).
40 At one point, Henderson testified that “ the power to establish an over-all ceiling
as far as commodity prices are concerned is present in this act.” Emergency Price Control
bill, House hearings, 1941, p. 863. See also p. 102.
8 Ibid., p. 1849.
0




DEVELOPMENT OF W AGE-PRICE POLICIES'

121

collective bargaining agreements that those factors are always taken
into consideration.” 5
1
Contrary testimony was presented by Bernard M. Baruch, who
argued that an over-all price freeze (w ith provision, o f course, for
individual adjustments) was necessary, and Representative Albert
Gore, whose substitute bill embodied Baruch’s general ideas. Baruch’s
position stemmed from his experience as Chairman o f the W ar Indus­
tries Board in the First W orld War. He stated categorically: “ I
do not believe in piecemeal price fixing. I think you have first to put
a ceiling over the whole price structure, including wages, rents, and
farm prices up to the parity level—and no higher— and then to adjust
separate price schedules upward or downward, if necessary, where
justice or governmental policy so requires.” 5 He felt that whether
2
prices and wages were controlled by the same or separate agencies
was an administrative detail.5
3
Representative Gore’s b ill5 provided for a base-date freeze o f
4
prices, rents, wages, and salaries. Gore stated his position vigorously
before the House Committee.
The House hearings on the bill were concluded on October 23,1941;
the bill passed the House on November 28. Hearings began before the
Senate Committee on Banking and Currency on December 9, 2 days
after Pearl Harbor. The sense o f urgency was very great; the hear­
ings were comparatively brief; and the bill was enacted into law on
January 3 0 ,1942.5
5
The Senate hearings developed little that was new with respect to
the relation o f wage stabilization to price control. Henderson gave
an excellent summary o f his position as developed before the House
committee. He was very clear in his position that “ * * * there
is as much danger from inflationary wages as there is from inflationary
prices,” 5 that wage stabilization should not be tied administratively8
6
1
8 Ibid., pp. 1849-1850. Lubin raised other problems in relation to wage control: ( a )
1
wage increases do not necessarily increase labor costs (p. 1858) ; (b) wage ceilings may
affect labor output adversely (pp. 1858-1859) ; (c) wage ceilings would impede the shift
of labor into defense industry, at least in the absence of manpower direction (pp. 18591860) ; ( d ) wage ceilings would require the fixing of profit ceilings (pp. 1860-1861) ; (e)
collective bargaining contracts stabilize wage rates for the duration of the contract (pp.
1861-1862) ; (/) in view of the complexity of the American wage structure, the adminis­
trative task of establishing ceilings would be extraordinarily formidable (pp. 1862-1865).
Most of these points were amplified in the course of the extensive interrogation that fol­
lowed (pp. 1866-1960, 1983-2016). Of particular interest is Lubin’s memorandum on
Representative Gore’s substitute for the Administration bill (pp. 2035-2042) ; and
Representative Gore’s rejoinder (pp. 2043-2049).
“ Ibid., p. 990. In part, Baruch’s testimony on wage control was confusing. At
various points he seemed to feel that wage ceilings were compatible with full collective
bargaining. See especially ibid., pp. 1004, 1018.
“ Ibid., p. 997.
“ H. R. 6086, 77th Cong., 1st sess.
“ Public Law 421, 77th Cong., 2d sess.
“ Senate Hearings, 1941, p. 161.




122

DISPUTE. SETTLEM ENT AND WAGE STABILIZATION

to price control, and that, in general, the problem o f wage contro
should be approached, at least initially, on a voluntary basis and a
part o f a comprehensive wartime labor policy. * Obviously, Hender
son in the follow ing passage foreshadows the labor-management con
ference which convened on December 17, 1941, at the request o f th<
President:
You may recall that during the last war the employers’ organizations and tin
labor organizations came together and worked out a war labor policy. It seemi
to me that that is something which needs to be explored now. I have higl
hopes, from what the President has said recently, that this w ill be the case. I d<
not believe we have gone far enough in exploring what is possible by means oj
the general agreements that can come between labor and industry for emergency
purposes. I think also that we would be better off if we handled all these ques­
tions o f jurisdictional strikes, closed shop, open shop, and inflationary wages
together. Any attempt on the part o f a price adm inistrator to handle a wage
increase would lead directly into collective bargaining, conciliation, mediation
prospective stoppages or strikes, and the possibility o f reference to arbitration.1
”

III.
A.

W

age

-P r i c e C

C r e a t io n

of

o n t r o l

: Se

c o n d

N a t io n a l W

ar

L

P

h a s e

abor

, Ja

B

n u a r y

1942- O

cto ber

1942

oard

The situation with respect to wage control at the time o f the pas­
sage o f the Emergency Price Control bill on January 31,1942, may
be summarized briefly.
A s finally passed by Congress, the Price Control A ct contained
a general statement o f policy for the guidance o f Government agen­
cies dealing with wages. The statement, which was inserted by the
Senate, read as follow s:
It shall be the policy o f those departments and agencies o f the Government
dealing with wages (including the Department o f Labor and its various bureaus,
the W ar Department, the Navy Department, the W ar Production Board, the
National Mediation Board, the National W ar Labor Board, and others hereto­
fore or hereafter created), within the lim its o f Jtheir authority and jurisdiction,
to work toward a stabilization o f prices, fa ir and equitable wages, and cost o f
production.*8

This statement, as was brought out clearly in the Senate debate,
should be viewed solely as a general injunction to other Government
agencies to work “ within the limits o f their authority and jurisdic­
tion” toward the stabilization o f the economy. The act specifically
states that it—
* * * shall not be construed to authorize the regulation o f (1 ) com pensation
paid by an em ployer to any o f his em ployees. * * *1
9

“ Ibid., pp. 161- 162.
“ Emergency Price Control Act, sec. 1 (a).
“ Sec. 302 (c).




123

DEVELOPMENT OF W AGE-PRICE POLICIES

In the meantime, the President’s Labor-Management Conference in
December had arrived at a no-strike, no-lockout agreement for the
duration o f the war. T o implement this agreement, the President, on
January 12, 1942, created the National W ar Labor Board.6 The
0
Executive order establishing the Board contained no reference to
wages or wage stabilization, although clearly the Board was given
authority over wage issues in those disputes over which it assumed
jurisdiction. A s in the case o f the Mediation Board, there was no
formulation o f wage policy to guide the decisions o f the new agency.
The hammering out o f a basic wage stabilization policy with respect
to general wage increases was to prove one o f the greatest contributions
o f the Board to the war effort.6
1
B.

P

rice

and

W

age M o v e m e n t s , D e c e m b e r

1941- O

cto ber

1942

Our entrance into the war in December 1941 resulted in rapid ac­
celeration o f the war production program and o f all phases o f war
activity. Government expenditures for war climbed from a monthly
rate o f 2 billion dollars in January 1942 to 3 billion in March. The
output o f civilian goods, which had reached its peak in the summer o f
1941, was affected markedly by the imperative needs o f war production.
The Government issued curtailment orders for many durable goods.
By March 1942, civilian consumption had been reduced by an estimated
8 percent from the August 1941 level.6 Further reduction clearly
2
could be anticipated.
Table 5 shows the average monthly percentage increases in the
general level o f wholesale prices, consumer’s prices, and estimated
wage rates from December 1941 to October 1942. The latter month
was marked by the adoption o f comprehensive wage control and the
grant o f increased authority over farm prices to the Office o f Price
Administration.
Over the whole 10-month period from December 1941 to October
1942, the wholesale price level advanced, on the average, 0.7 percent
per m onth; consumers’ prices by a monthly average o f 0.8 percent;
and wage rates by about the latter percent. I f the adoption o f the
General Maximum Price Regulation in A pril 1942 is used as a line
to divide the period, striking differences in average rates o f increase
appear. Thus, wholesale prices advanced at an average monthly
rate o f 1.4 percent between December 1941 and A pril 1942, and at a
8 Executive Order No. 9017.
0
6 Dr. George W. Taylor, vice chairman and later Chairman of the Board, has stated:
1
“ I will always consider that the formulation of the national wage stabilization policy was
the Board's greatest achievement, not only because of the difficulty of the problem, but
because the welfare of the Nation was so dependent upon this action." The Termination
Report of the National War Labor Board (Washington: Government Printing Office),
vol. I, p. xix.
8 Office of Price Administration, First Quarterly Report, p. 27.
8
921297— 50------ 9




124

DISPUTE: S E T T L E M E N T A N © W A G E STABILIZATION

monthly rate o f 0.2 percent between A p ril 1942 and October 1942
F or the same two periods, the average monthly increases in consumers
prices were 1.1 and 0.6 percent, respectively. On the other hand
wage rates advanced, on the average, 0.6 percent per month in the firs!
period and 1 percent in the second. The more rapid rate o f increase in
wage rates in the second period is undoubtedly related in part tc
contract reopenings in the spring o f 1942.
T able 5.— Average monthly percentage increase in wholesale prices, consumers
prices, and estimated manufacturing wage rates, December 19\l-O ctober 1942

Average monthly percentage increase in—
Period

Estimated
Wholesale Consumers* manufactur­
ing wage
prices
prices
rates *

DftftAmbfir 1041-April 1942 _ _ . _ __ .... _
......
April 1942-Ootoher 1942_______________________________
DAfiAmher 1941-Oritnhftr 1942 . .. _ __ ... ____

1.4
.2
.7

1.1
.6
.8

0.(
l.(
A

» Average hourly earnings adjusted by overtime premium pay and weighted by January 1941 man-hours
of employment by industry group.
Source U. S. Department of Labor, Bureau of Labor Statistics.
It was in this general setting that the O PA froze prices under the
General Maximum Price Regulation, the National W ar Labor Board
developed the Little Steel formula for general wage increases in dis­
pute cases, and Congress gave the President authority to control vir­
tually all wage and salary rates.
C.

G. M. P. R.— T he Change in P rice P olicy

During its prestatutory period, O PA brought approximately 30
percent o f the value o f the commodities in the Bureau o f Labor Statis­
tics’ wholesale price index under either form al or inform al control.6
3
Its initial effort after the enactment o f the Emergency Price Control
B ill on January 30, 1942, was to extend selective controls. In the
first 3 months o f its statutory existence, the agency reissued 105 price
schedules and issued 50 additional schedules. The new actions, to­
gether with those validated under statutory authority, brought about
one-third o f the BLS wholsale price index under form al control. Re­
tail prices, up to this time, were completely uncontrolled.
During this period, as we have seen, prices were advancing very
rapidly and inflationary pressures were mounting. Selective action
could not effectively stem the tide.6 The O PA was, in effect, virtually
4
administering an inflation in early 1942.6 Under the impact o f actual*
5
6
8
6 Office of Price Administration, First Quarterly Report, p. 24.
8
The staffing and administrative difficulties encountered by any rapidly expanding
agency undoubtedly slowed down the extension of control during this period.
6 W. W. Rostow, “ Some Aspects of Price Control and Rationing/* American Economic
8
Review, X X X II: 3, p. 487.




D E V E L O P M E N T OF WAGE-PRICE POLICIES

125

war and its economic consequences, the logic o f selective control
vanished.
On A pril 28,1942, O PA issued the General Maximum Price Regu­
lation.6 W ith the exceptions indicated below, this was a general price
6
freeze order. The ceiling for each seller was established at the highest
price charged in March 1942 to the same class o f consumer. The
regulation became effective on May 11, 1942, for manufacturers and
wholesalers; May 18,1942, for retailers; and July 1,1942, for services.
Commodities covered by separate regulations were not included within
its terms.
The exceptions to the regulation were
exclusions written into
the Price Control A ct itself, such as books, magazines, and newspapers,
(6 ) some primary raw materials whose prices were indirectly con­
trolled by ceilings at later stages of production,
certain commodiities with no organized markets, and ( ) farm and food products that
had not attained the level above parity specified in section 3 (a ) o f the
act. This latter exclusion was by all odds the most important.
Throughout the war period, agricultural prices had a persistently
unstabilizing influence,6 even when they were brought within the
7
general framework o f control.
The shift in control policy represented by the General Maximum
Price Regulation was decisive. The shift has been explained in
these term s:

(a)

d

(c)

In view o f the overwhelming opinion in favor o f selective price control at the
tim e o f its adoption, an explanation o f the sh ift to a general ceiling is called
for. The answer is that Pearl Harbor completely changed the m agnitudes. A
defense program was converted into a war program. Given sufficiently flexible
fiscal powers, selective price control rem ains the logical solution to bottleneck
inflation. But there is no real Ukelihood o f the severe use of the fiscal weapon
that is required to prosecute a modern war. In fact, if the m orale factor is
taken into account, it is open to question whether or not the over-all prosecu­
tion o f the war would benefit from the unlim ited use o f the fiscal powers.
Subsidiary factors affecting the decision were (1 ) the necessity for moving
into the control o f retail prices which is fa r more difficult to handle on a piece­
meal basis than is control at the m anufacturing le v e l; (2 ) the fa ct that a more

6 For an appraisal of this regulation, see Doris P. Rothwell, The General Maximum f*rice
6
Regulation, U. S. Department of Labor, Bureau of Labor Statistics, Bulletin No. 879
(1946).
6 “Agricultural prices continuously exercised an upward pressure on prices. Neither
7
the October 1942 amendment to the Price Control Act, which reduced the 110 percent of
parity rule to 100 percent, nor the President’s interpretation of parity as parity less
benefit payments, eliminated this pressure, because parity, the ratio of prices received
by farmers to prices paid by farmers, is itself affected by this rise. Since a large part of
prices paid by farmers is for farm products, any increase in prices received by farmers
causes automatically a smaller rise in prices paid by farmers and a consequent increase
in the parity ratio. Even if all industrial price were controlled rigidly, the parity ratio
would rise with farm prices. Moreover, the 100 percent rule applied to individual prod­
ucts, not to the general ratio. Thus, a rise to parity in the price of one commodity might
necessitate an increase in the price of a second related commodity in order to maintain
the proper ratio, even though the price of the latter item was already well above parity.”
Rothwell, op. cit., pp. 39-40.




126

DISPUTE S E T T L E M E N T A N D W A G E STABILIZATION

adequate staff was availab le; (3 ) a frank recognition o f the tendency for pricei
to edge upward through personal pressures involved in the wide dispersion o:
adm inistrative authority.*8

The General Maximum Price Regulation was an emergency measure
It was, in a real sense, an heroic measure to arrest an inflationary
movement that was threatening to get out o f bounds. Its economic
effects in slowing the rate o f increase in prices and living costs were
significant.6 The extent to which control was exercised over prices
8
6
9
was unprecedented.7 A fter the issuance o f the regulation, O P A was
0
involved in ironing out inequities, dealing with “hardship” cases,
replacing for particular industries or commodities coverage under
GM PR by coverage under individual regulations better designed to
meet special industry problems, the extension o f control to additional
commodities (especially after the amendment o f the Emergency Price
Control A ct in October 1942), and the host o f problems incident to
rationing and subsidies. It is unnecessary to examine the details o f
this rich experience in the methods and problems o f general price
control.7
1
D. G eneral P rice Control and W ages

The adoption o f a general price control policy in the spring o f 1942
meant inevitably that the question o f wage control would become o f
critical importance. However, aside from the general injunction
with respect to wages in the Emergency Price Control A ct,7 the
2
NW LB had no specific authority to stabilize wages in the early months
o f its existence. Its basic function was the settlement o f labor dis­
putes. The agency could deal with wages only to the extent that
wages were at issue in the dispute cases that came before it, and it
had no stabilization criteria for guidance in such cases. Nevertheless,
the shadow o f the steel case was on the Board from the beginning.7
3
An early formulation o f wage policy occurred in the
case, decided A pril 15, 1942.7 This case involved
4
several CIO and A F L unions and had been inherited from the National

Harvester Co.

International

6 Don D. Humphrey: “ Price Control in Outline,’* American Economic Review, X X X II: 4,
8
December 1942, p. 745.
6 For some of the evidence, see Rothwell, op. cit., pp. 46-49.
0
7 About 76 percent of the commodities and services in the BLS wholesale price index,
0
and about 48 percent in the consumers’ price index were under OPA control by mid-May
1942; these percentages were 83 and 71, respectively, by mid-October 1942; and 94 and
82, respectively, by the end of the war. In addition, the prices of certain items in the
consumers’ price index not under OPA control were controlled by other Federal or State
agencies. See Doris P. Rothwell, “ Price Control Since the General Maximum Price Regu­
lation” Monthly Labor Review, October 1945, p. 684.
7 See the group of report (Washington: Government Printing Office) dealing with OPA
1
issued as part of the Historical Reports on War Administration, particularly Problems in
Price Control: Pricing Techniques; Problems in Price Control: Changing Production Pat­
terns ; Problems in Price Control: Pricing Standards.
7 See above, sec. I l l : A.
2
7 National War Labor Board, Transcript, Executive Meeting, February 6, 1942, p. 1.
8
7 War Labor Reports, vol. I, pp. 112-130.
4




D E V E L O P M E N T OF WAGE-PRICE POLICIES

Defense M ediation Board.
declared—

127

In its opinion in the case, the Board

♦ * * that for the duration of the w ar the follow ing basic principles should
be considered minimum guaranties in any wage issues considered by the N ational
W a r Labor Board * * *.
F irst, a ll workmen shall receive wages sufficiently high to enable them to
m aintain a standard o f living compatible with health and decency.
Second, the real wage levels which have been previously arrived at through
the channels o f collective bargaining and which do not impede maximum pro­
duction o f war m aterials shall be reasonably protected. This does not mean
that labor can expect to receive throughout the war upward changes in its wage
structure which w ill enable it to keep pace with upward changes in the cost o f
living. On the other hand, every attem pt should be made to protect the real
wages o f labor to the point that they do not drop below a standard o f living
sufficient to m aintain health and decency. W ithout doubt wages in substandard
brackets should not only be increased to meet changes in cost o f living, but,
whenever possible, they should be raised to the standard level.
Third, to the extent that it can be done without inflationary effects, labor
should be encouraged to negotiate through the processes o f collective bargain­
ing for fa ir and reasonable upward wage adjustm ents as an offset against in­
creases in the cost o f living * * *.w

This statement contains many germs o f later wage stabilization
policy and is o f great interest as representing a stage in the thinking
o f the Board. The opinion embodies, in essence, a series o f concepts
that had been expressed in memoranda to the President during the
preceding several weeks. For example, on March 30, 1942, Chair­
man W illiam H. Davis submitted, at the President’s request, a
memorandum o f wage policy.7 He divided wage earners into two
5
7
6
groups:
Those who had attained “ fair and equitable5 wages
’
through collective bargaining or otherwise, and
those whose
wages were substandard. The real wages o f the first group should
be maintained although the—

(a)

(i)

* * * diversion o f production to win the war m ay have to be carried to a
point where it is im possible to m aintain the level of real wages for the standard
wage earners.

The real wages o f the second group, the substandard workers,
should in any case be maintained and increased. Davis proposed
that the Board determine “ in each wage dispute” whether existing
rates were fair and equitable. It should be the aim o f the Board to
stabilize the purchasing power o f “ standard” rates (i. e., grant cost
o f living adjustments if warranted). “ Substandard” rates would be
corrected insofar as possible.
7 Ibid., p. 120. The majority opinion was written by Wayne L. Morse, public member,
5
and concurred in by the remaining three public members; labor members concurred in the
directive order in the case but not in the language of the majority opinion; employer
members prepared a dissenting opinion on the union security issue.
7 Davis submitted the memorandum as his own and not as a policy formulation of the
6
Board.




128

DISPUTE; S E T T L E M E N T A N D W A G E STABILIZATION

On A pril 13,1942, the Secretary o f Labor submitted a memoranduu
on wage policy to the President; on the follow ing day a memoranduu
broadly similar in content to his statement o f March 30 was submitte<
by Chairman Davis. Neither suggested control over voluntary wagadjustments. Chairman Davis went somewhat farther than th<
Secretary in suggesting that July 1, 1941, be fixed as a stabilizatioi
date, with “ standard” wages established before that date subject t<
a cost o f living adjustment to compensate fo r increased prices up t<
that time. It is not clear whether subsequent cost o f living adjust
ments were contemplated. In each memorandum “ standard wages’
were defined as wages established by collective bargaining, w it!
certain exceptions. These memoranda were obviously intended foi
use by the President in preparing his forthcom ing message tc
Congress.7
7
Less than 2 weeks after the decision in the H a rvester case, the
President addressed a message to the Congress on the economic situ­
ation. This message, on A pril 27, 1942, preceded by one day the
issuance o f the General Maximum Price Regulation. The President
pointed out that—
the rise in the cost o f living during this war has begun to parallel the last. The
tim e has definitely come to stop the spiral. And we can face the fa ct th at there
m ust be a drastic reduction in our standard o f living.

The President outlined a Seven-Point program to stabilize the cost
o f living. The third point in this program called for the stabilization
o f—
*

*

*

the remuneration received by individuals fo r their work.

W ith respect to this item, the President stated that—
* * * legislation is not required under present circum stances. I believe
that stabilizing the cost o f living w ill mean that wages in general can and should
be kept at existing scales * * * a ll stabilization or adjustm ent of wages
w ill be settled by the W a r Labor Board machinery which has been generally
accepted by industry and labor for the settlem ent o f a ll disputes.

The Board w ill—
* * ♦ continue to give due consideration to inequalities and the elim ination
o f substandards o f living.

The President’s message did not, o f course, confer added authority
on the Board.7 It did serve, however, to sharpen its responsibilities
8
in dealing with wage issues in dispute cases. This was clearly under­
stood by the Board members. Apparently some o f the President’s
77 The text of these memoranda is given by David E. Roberts, The Development of Wage
Stabilization Policy During World War II, unpublished manuscript, National Archives, pp.
16-23.
™
7 National War Labor Board, Transcript, Executive Meeting, May 5, 1942, p. 23.
8




D E V E L O P M E N T OF WAGE-PRICE POLICIES!

129

advisors, if not the President himself, believed that labor and industry,
follow ing the message o f A pril 27, should voluntarily agree—
*

*

*

that a ll wages are frozen as is

*

*

*7
9

The conclusion o f the Board, as expressed by Chairman Davis, was
that—*
*

*

*

0ur job iS to effect that stabilization [called for in the President’s

m essage] by deciding cases that come before ns.8 *
0

E . T he Problem of V oluntary W age I ncreases

But the acuteness o f the wage problem in general, and not only in
relation to dispute cases, persistently forced itself upon the attention
o f the Board. The problem o f voluntary wage increases, which under
the circumstances could not be directly affected by Board action,
threatened to erase any stabilization line that the Board might draw.
Thus, Chairman Davis stated that—
* * * It is a fact that this voluntary wage increase business is going to kick
the bottom out of the bucket. There is no doubt about that.”

Shortly after the delivery o f the President’s message, an interagency
committee met to discuss its implementation with respect to wages.8
2
This committee8 met at various times over a period o f several months,
3
and discussed various methods o f achieving the stabilization o f wages
called for in the President’s message. Am ong the expedients con­
sidered were
voluntary stabilization agreements industry-by­
industry through labor-management conferences, (&) the refusal o f
O PA to take post-April 28 wage increases into account as a basis for
price increases,
the disallowance by the procurement agencies o f
post-April 28 wage increases in settlements under cost-plus contracts,
( ) the withholding by W PB and W M C o f materials and labor from
firms which did not stabilize their wage rates, ( ) the extension o f
authority to the MWLB or the W ar Manpower Commission to control
voluntary wage increases.8 On June 15,1942, a memorandum from
4
the NW LB to the participating agencies summarized the functions
o f the committee and the status o f the discussions. W ith respect to
voluntary wage adjustments, the “ committee was merely to choose
the best way o f stabilizing wages by collective bargaining processes
with Government participation * *
8 It seems clear that this
5
high-level committee made comparatively little positive progress

(a)

(c)

d

e

T Ibid., p. 13.
O
8 Ibid., p. 23.
0
« Ibid., June 4, 1942, p. 246.
8 The meeting was called by Chairman Davis of the NWLB, an action that was violently
2
objected to by one of the labor members of the Board. Ibid., May 5, 1942, pp. 13 If.
8 The committee included the heads of the War Labor Board, War Production Board,
8
War Manpower Commission, Labor Department, War Department, and Navy Department.
8 See Roberts, op. cit., pp. 59-51.
4
8 Ibid., p. 53.
5




130

DISPUTE S E T T L E M E N T A N D W A G E STABILIZATION

toward a national wartime wage policy, although unquestionably it*
consideration o f various alternatives was valuable in terms o f eventual
clarity in this difficult field.
On the follow ing day, the question o f control o f voluntary increases
came up fo r discussion within the Board. One o f the employe]
members presented a resolution on June 16 that called upon the
Board, in effect, to propose the establishment o f comprehensive wage
controls. The resolution stated, in part, that—
* * ♦ wage increases voluntarily agreed upon m ay defeat the objective
set forth by the President o f keeping the cost of living down.

It urged that—
* ♦ * this Board call the President’s attention to the situation created by
uncontrolled and voluntary wage increases m ade without reference to the
W ar Labor Board * * ♦
%

and that the Board request the President—
♦ ♦ * to amend Executive Order No. 9017 to perm it the N ational W a r Labor
Board to review and pass upon aU questions o f general increases in salaries
and wages regardless o f whether an actual labor dispute is in progress.8
8

This resolution was discussed extensively with the Board but did
not come to a vote. Vice Chairman Taylor explained that he did not
want to vote on the resolution in view o f the pending decisions in
the steel and automobile cases, where a stabilization pattern might
be set. There was a general feeling to the effect that the Board
gradually was evolving a wage policy, and there was some sentiment
for a new labor-management conference on wage stabilization.
The Board was, in fact, developing a wage policy to govern the
settlement o f disputes which came before it, and in the L it t le S te e l
case*7the cornerstone o f wartime wage stabilization was laid. In this
8
case, decided on July 16,1942, a lim it was set to general increases in
wage rates, and an answer was provided to the question o f—
♦ * * whether or not there would be another round, or an unUmited suc­
cession o f rounds, o f wage increases in a vain effort to keep up w ith a steadily
increasing cost o f living.8
8

The form ula provided that establishments which had not had an
increase o f 15 percent in average straight-time hourly earnings since
January 1941 (equivalent to the rise in living costs between January
1941 and May 1942) should be permitted to increase wages to this
“ National War Labor Board, Transcript, Executive Meeting, June 16, 1942, pp. 9-10.
8 War Labor Reports, vol. I, pp. 325-398.
7
“ Opinion by Dr. George W. Taylor. War Labor Reports, vol. I, p. 336. A number
of leading cases decided between July 16, 1942, and October 2, 1942, clarify the Board’s
application of the Little Steel formula. See particularly the R e m in g to n R a n d C o. case
(War Labor Reports, vol. II , pp. 137-142) ; G e n era l C a b le C o. case (War Labor Reports,
vol. II , pp. 228-236) ; A lu m in u m a n d M a g n esiu m C oe . cases (War Labor Reports, vol. II ,
pp. 311-345).




D E V E L O P M E N T OF WAGE-PRICE POLICIES

131

amount. In the months after the President’s A pril 27 message,
the Board also felt its way toward definitions o f the terms “ inequali­
ties” and “substandards,” mentioned in the President’s message as
basis for wage adjustments.8
9
On July 29, 1942, Chairman Davis o f the W ar Labor Board in a
letter to the President stated that the interagency approach to the
problem o f voluntary increases had been ineffective. Davis stated:
The pressure of a com petitive labor m arket m ight lead to voluntary wage
increase o f an amount and scope sufficient to break all effective wage stabiliza­
tion. The W ar Labor Board has no control o f these voluntary increases. The
powers o f the various Government agencies concerned with wages have not been
effectively used for lack of agreement among them, and in the absence of
Executive direction. This should be corrected by an Executive order.

In the same letter, Davis, in behalf o f the entire Board, requested the
President not to depart—
*

*

*

from the democratic principle of a tripartite board set up in accordance

with the labor-industry agreement o f last December.9
0

Although the letter is not entirely clear, the Board appears to be ask­
ing the President to extend its authority to voluntary wage adjust­
ments.9 And this, o f course, was an event o f first-rate significance.
1
It meant relinquishment fo r the war period o f the tenaciously held
belief in free bargaining in the labor market, and fu ll recognition o f
the intimate relation between wage and price control under conditions
o f excess demand. It reflected, as the Chairman’s letter indicates, the
failure o f the several agencies to agree on a national wage policy and
the means for its implementation, and the genuine need fo r executive
direction. Very importantly, as the reference to the maintenance o f
tripartitism shows, the pressure for comprehensive wage control had
given rise to serious consideration o f the establishment o f a wage con­
trol agency outside o f the Board. In a second letter to the President
on July 29, the Board expressed—
* * * its deep concern over reports that the procedure and authority of
stabilizing wages by the W ar Labor Board machinery m ay be drastically
modified.9
2

Also on the same day Dr. Frank P. Graham, public member o f the
Board, wrote to Vice President W allace to the same effect.9
3
In a letter dated August 10,1942, to Judge Samuel J. Rosenman at
the W hite House, Chairman Davis stated:
W e are more and more impressed with the urgent necessity for prompt action to
stabilize wages. W e feel that if the discussion continues much longer increases8

8 Roberts, op. cit., pp. 29-41.
8
8 Cited by Roberts, op. cit., p. 58.
0
8 This is Roberts’ interpretation, and appears to be justified by additional correspondence
1
to Judge Samuel Rosenman, one of the President’s advisers, a few days later.
8 The text of this letter is given in Roberts, op. cit., pp. 59-60.
2
8 Ibid., p. 59.
8




132

DISPUTE S E T T L E M E N T A N D W A G E STABILIZATION

w ill have been made which w ill make it im possible to stabilize wages within th
lim its o f the anti-inflation program.

Attached to the letter was a draft o f an Executive order enlarging th
authority o f the W ar Labor Board to include voluntary wage increases
This draft differs considerably from the wage provisions o f the Execu
tive order issued on October 3,1942, after the passage o f the Stabilize
tion Act, although some o f its provisions are similar. It was, in fact
only one o f a number o f efforts that were made at about this time, b j
other agencies as well as the Board, to draft an acceptable Executive
order in the uncharted field o f comprehensive wage control. The
final product reflected the work o f many minds.
Undoubtedly there was widespread dissatisfaction by this time with
the lack o f a stabilization policy applicable to all wage adjustments.
Even the Board’s wage policy as expressed in the Little Steel case was
under attack.9 The functions o f OP A , in particular, were affected
4
by the steady rise in the level o f wage rates that continued after the
President’s A pril 27 message and the issuance o f the General Maximum
Price Regulation.
In fact, the role o f O PA on the question o f wage stabilization in
this critical period was by no means passive. The lack o f effective
wage stabilization constituted one o f the two m ajor threats to the
price program. The agency reported that wage increases were pro­
ducing “ * * * powerful pressure on price ceilings,” 9 comparable
5
with the pressure exerted by uncontrolled farm prices. Despite the
stabilization effort o f the NW LB in dispute cases, and the efforts in a
few industries, including construction,969at voluntary stabilization—
7
* * * wage increases continued to be granted in a ll industries and in a ll parts
o f the country.”

A s early as February 5,1942,5 days after the passage o f the Emer­
gency Price Control bill, Henderson addressed a letter to the President
on “ W hy Wages Must Be Stabilized.” The letter dealt with the eco­
nomic case for stabilization and did not suggest legislation; it was
prompted by indications o f the development o f a round o f wage in­
creases similar to the round that had occurred in the spring o f 1941.
A t an executive meeting o f the N W LB in June 1942, the effort o f
O P A to take a strong line on the adjustment o f prices on the basis
« Ibid., pp. 58, 60-61.
9 Office of.Price Administration, Second Quarterly Report, p. 17.
5
9 In May 1942, an agreement was entered into between the Government agencies charged
4
with defense construction and the Building Trades Department of the American Federation
of Labor. The agreement provided that wage rates paid under collective bargaining agree­
ments as of July 1, 1942, were to remain in effect on all Government construction for at
least 1 year or until modified by a wage adjustment board to be created under the terms
of the agreement. Another effort at voluntary stabilization occurred in the tool and die
industry in the Detroit area early in 1942. This particular effort failed, but effective
stabilization was later achieved under War Labor Board auspices.
9 Office of Price Administration, Second Quarterly Report, p. 21.
7




133

D E V E L O P M E N T OP WAGE-PRICE POLICIES

o f voluntary wage increases was reported.9 Early in July 1942,
8
O P A intervened forcefully in the conference on wages in the west
coast aircraft industry.9 There was a measure o f drama in this
9
situation that undoubtedly helped to bring the wage problem to a
head. On July 18, Henderson sent the President a rough draft o f
a joint resolution designed to give the President broad power to
control salaries and wages as well as farm prices. Four days later,
in another memorandum to the President, Henderson suggested that
the Federal agencies dealing with wages be notified to suspend action
while the next move in wage policy was being considered. On August
5, the general counsel o f O PA addressed a memorandum to Judge
Rosenman expressing the position o f the agency with respect to some
details o f wage policy. It is clear, in summary, that O PA exercised
a very appreciable influence in the formulation o f Government eco­
nomic stabilization policy that culminated in the President’s message
to Congress o f September 7, calling for, among other things, the power
to stabilize all wages and salaries.
F.

T

he

S t a b il iz a t io n A

ct of

O

c to b e r

2,1942

On September 7, 1942, the President again addressed a message to
the Congress. The President, in part, stated:
Our experience during the last 4 months has proved that general control of
prices is possible— but only if that control is a ll inclusive. I f, however, the
costs o f production, including labor, are le ft free to rise indiscrim inately, or if
other m ajor elem ents in the costs o f living are left unregulated, price control
becomes impossible. I f m arkets are flooded with purchasing power in excess
of available goods, without taking adequate measures to siphon off the excess
purchasing power, price control becomes likewise impossible.
*

*

*

*

*

*

*

It is im possible fo r the cost o f living to be stabilized while farm prices
continue to rise. You cannot expect the laborer to m aintain a fixed wage level
if everything he wears and eats begins to go up drastically in price. On the
other hand, it is im possible to keep any prices stable— farm prices or other
prices— if wage rates, one of the m ost important elements in the cost of produc­
tion, continue to increase.
*

*

*

*

*

*

*

Therefore, I ask the Congress to pass legislation under which the President
would be specificaUy authorized to stabilize the cost o f living, including the
price o f all farm commodities. The purpose should be to hold farm prices at
parity, or at levels o f a recent date, whichever is higher.
*

*

*

*

*

*

*

A t the same tim e that farm prices are stabilized, wages can and w ill be
stabilized also. This I w ill do.

9 National War Labor Board, Transcript, Executive Meeting, June 16, 1942, pp. 14-15.
8
9 See War Labor Reports, X, pp. 581 ff., and Richard Feise, “Aircraft—A Mass Production
9
Industry,” in Colston E. Warne (editor), Yearbook of American Labor (New York: Philo­
sophical Library, 1945), pp. 251 ff.




134

DISPUTE S E T T L E M E N T A N D W A G E STABILIZATION

On October 2,1942, less than 1 month after the President’s message
Congress passed the Stabilization A ct o f 1942,1 0*in the form o f a
0
amendment to the Emergency Price Control A ct. This act authorizes
and directed the President “on or before November 1, 1942, to issu
a general order stabilizing prices, wages, and salaries, affecting tb
cost o f livin g; and, except as otherwise provided in this act, sucl
stabilization shall so far as practicable be on the basis o f the level
which existed on September 15, 1942.” Scope was provided fo r tin
adjustment o f prices, wages, and salaries “ * * * to aid in tin
effective prosecution o f the war or to correct gross inequities.” Th(
measure provided fo r the regulation o f farm prices on a basis that
would make effective control possible. Thus, 3 years after the be­
ginning o f the war in Europe, more than 2 years after the beginning
o f our defense program, and almost 10 months after our entry intc
the war, a firm statutory base was created fo r the stabilization ol
the price and wage structure.
On October 3, 1942, the President issued Executive Order 9250
giving to the NW LB control over all changes in wage rates. The
Executive order provided that:
No increases in wage rates granted as a result o f voluntary agreem ent, col­
lective bargaining, conciliation, arbitration, or otherwise and no decreases in
wage rates, shall be authorized unless notice o f such increases or decreases
shaU have been filed w ith the N ational W ar Labor Board, and unless the N a­
tional W ar Labor Board has approved such increases or decreases.

The Executive order also provided that the Board should not
approve—
* * * any increase in the wage rates prevailing on September 1 5 ,1 9 4 2 , unless
such increase is necessary to correct m aladjustm ents or inequalities, to elim i­
nate substandards o f living, to correct gross inequities, or to aid in the effective
prosecution o f the w ar.

This same Executive order created an Office o f Economic Stabiliza­
tion with authority, subject to approval by the President, to—
* * * form ulate and develop a comprehensive national economic policy
relating to the control o f civilian purchasing power, prices, rents, wages, salaries,
profits, rationing, subsidies, and a ll related m atters— a ll for the purpose o f
preventing avoidable increases in the cost o f living, cooperating in m inim izing
the unnecessary m igration o f labor from one business, industry, or region to
another, and facilitatin g the prosecution o f the w ar. To give effect to this
comprehensive national economic policy the D irector [o f Economic Stabilization]
shaU have power to issue directives on policy to the Federal departments and
agencies concerned.1 1
®

The organizational structure fo r economic stabilization that was
to endure, with relatively minor changes, fo r 3 years o f war con­
1 0Public Law No. 729, 77th Cong., 2d sess.
0
1 1 See chs. 2 and 4 for indications of the reaction of industry and labor to wage policies
9
developed by the Board and the Office o f Economic Stabilization.




D E V E L O P M E N T OF WAGE-PRICE POLICIES*

135

sisted basically, therefore, o f the Office o f Price Administration, the
National W ar Labor Board, and the Office o f Economic Stabiliza­
tion, with the latter agency designed to coordinate price and wage
policy and to integrate the activities o f other Government agencies
whose functions affected the stability o f the economy,
IV.

W

a g e -Pr i c e

C o n t r o l :Th i r d P h a s e , O

ctober

1942- A u g u s t 1945

A . C o m p r e h e n s iv e C o n t r o l a n d W a g e - P r ic e S t a b il it y
W ith the passage o f the Stabilization A ct o f October 1942, the
period o f comprehensive control o f wages and prices began. The
NW LB until the end o f the war in August 1945 had jurisdiction over
most wage adjustments in the American industrial economy except
agriculture and railroads.1 2 During this period, decisions affecting
0
wages were made on the basis o f hundreds o f thousands o f applica­
tions for approval o f voluntary adjustments and in thousands o f
dispute cases. The case load o f the Board, and the decisions in these
cases, are no real measure o f its contribution because many requests
for wage adjustments were not even made by the parties because they
were recognized as being outside the limits o f stabilization policy.
O PA, during the same period, had control o f the prices o f most o f
the commodities and services purchased by American consumers.
Both agencies had difficult problems o f staffing and administration,
both had problems o f enforcement, and both had to give concrete
meaning to the general directives under which they functioned. Both
had to face up to the stabilization crisis in the spring o f 1943 that
called forth the hold-the-line order.1 8 Both experienced a wide vari­
0
ety o f pressures that were inevitable in the nature o f the situation.
It is sufficient for the purposes o f this chapter to emphasize the
fact that both wage and price controls were flexible rather than rigid.
The Stabilization A ct directed that wages and prices be stabilized,
so far as practicable, at the levels prevailing on September 15, 1942.
This language recognized the fact that various types o f inequities
existed within the structures o f wages and prices that should not be
frozen—and in many instances could not be frozen without harm to
the production effort—for the duration o f the war. Hence, the wage
stabilization that was sought, for example, provided tolerances fo r
the correction o f defined inequities. A n analysis o f the nature o f
these inequities, the limits that were established for their correction,
and the way in which these limits were administered falls largely
outside the scope o f the present discussion.1
0
3
*
1 3A precise accounting of the wage jurisdiction of the Board is given in ch. 7.
0
Executive Order 9328, April 8, 1943.




136

DISPUTE S E T T L E M E N T A N D W A G E STABILIZATION

A brief analysis o f the circumstances o f the “hold-the-line” orde
is necessary, however. Many factors contributed to the crisis in tb
stabilization effort that led to the issuance o f this order.1 4 I t is suffi
0
cent to note here that wages and prices continued to increase signifi
cantly in the months follow ing the Stabilization A ct o f October i
1942. In the 6-month period between October 1942 and A pril 194*
the level o f wage rates in manufacturing increased by 3 percent
during the same period, the level o f consumers’ prices advanced mor
than 4 percent.
Executive Order 9328 directed the Price Adm inistrator and th
Food Administrator “ * * * to place ceilings on all commoditie;
affecting the cost o f living * * * to reduce prices which weri
excessivly high, unfair, or inequitable * *
and, in the future
to grant price increases only to the “ * * * minimum extent re
quired by law.”
W ith respect to the NW LB (and the Commissioner o f Interna!
Revenue), the order provided that no further increases in wages anc
salaries were to be authorized except those clearly necessary to correci
substandards o f living or to compensate for the rise in the cost oi
living between January 1, 1941, and May 1, 1942 (the Little Steel
form ula). The exact significance o f this order, as it related to the
W ar Labor Board, requires brief explanation.
It has already been pointed out that the Board, in the period pre­
ceding the Stabilization A ct, and particularly after the President’s
message o f A pril 27,1942, made considerable progress in defining the
conditions under which wage adjustments could be made within a
stabilization framework. The Little Steel form ula is the outstanding
example, but progress had also been made in the definition o f other
types o f wage inequities. When jurisdiction over the vast m ajority
o f wage adjustments in the American economy was given to the Board
after the passage o f the Stabilization A ct, a more precise form ulation
o f the conditions under which wage adjustments would be approved
or ordered had to be made.1 5 On November 6,1942, the Board issued
0
a policy statement which incorporated the Little Steel form ula and
specified other general criteria for deciding dispute and voluntary
wage cases. Dr. George W . Taylor does not exaggerate in contending
that this policy statement was a singular achievement o f the tri­
partite board.1 0
0
Up to this point—indeed, up to the hold-the-line order—the Board
controlled stabilization policy. The Board had made the rules (within *
1
0
8
1 4F op a brief but excellent analysis of the situation that gave rise to Executive Order
0
9S28, see Bureau of the Budget, The United States at War, pp. 386-389.
See ch. 2 for a fuller discussion of this point.
1 8The Termination Report, vol. I, pp. X X -X X I; for text of policy statement see ibid., II,
0
appendix. J-27.




D E V E L O P M E N T OP WAGE-PRICE POLICIES

137

the general framework o f the Stabilization A ct and Executive Order
9250), and the Board could m odify the rules. Under Executive
Order 9328 the Board lost its authority to m odify the criteria under
which wage adjustments could be approved.
The new order provided that the Board could authorize wage in­
creases only in accordance with the Little Steel formula as theretofore
defined by the Board or to correct substandards o f living. By this
time, adjustments allowable under the Little Steel formula had, for
the most part, been exhausted. The order meant in effect, therefore,
that the Board could authorize no further wage adjustments except
to correct substandards o f living. In the months preceding the holdthe-line order, the great bulk o f the Board’s cases had been decided
on the basis o f inequalities in rates as between the subject establish­
ment and other establishments in the industry or labor market. In
its practical application, the inequalities doctrine, which was not in
any case very clearly defined, permitted wage adjustments that threat­
ened to defeat the objectives o f stabilization policy. It was to this
situation, insofar as wages were concerned, that the hold-the-line order
was prim arily directed.
The hold-the-line order produced an internal crisis within the
Board. Aside from the change effected by the order in the authority
o f the Board over the stabilization program, the order was unrealistic
in denying the Board authority to approve any wage adjustments
on interplant inequity or inequality grounds. The Board and the
Director o f Economic Stabilization jointly devised a new approach
to the problem o f interplant inequalities, which avoided the unsta­
bilizing effects o f the former approach. The new policy was embodied
in a clarifying directive from the D irector o f Economic Stabilization
dated May 12,1943.
It is now pertinent to look briefly at the extent to which stability
was achieved during the period o f comprehensive wage and price
control, and particularly after A pril 1943. Table 6 presents a few
basic figures for the 34-month period from October 1942 to August
1945 and, fo r purposes o f contrast, for the 21-month period from
January 1941 to October 1942.
The contrast is striking. Between January 1941 and October 1942,
wage rates in manufacturing and the general level o f consumers’
prices increased by 17 and 18 percent, respectively, or at rates ap­
proaching 1 percent per month. The level o f wholesale prices ad­
vanced almost 24 percent, or at the rate o f 1.1 percent a month.
During the 34-month period from October 1942 to August 1945, the
increases in wage rates and consumers’ prices were approximately
14 and 9 percent, respectively, with monthly rates o f less than 0.5 per­
cent. Wholesale prices advanced about 5.7 percent, or at the rate o f
less than 0.2 percent per month.




138

DISPUTE S E T T L E M E N T ANID W A G E STABILIZATION

T a ble 6.— Percentage changes in wholesale prices, consumers9 prices, and manu­

facturing wage rates, selected periods January 1941-August 1945
Period

Whole­
sale prices

Consumers'
prices

Manufac­
turing wage
rates *

Percentage increase
January 1941-October 1942...................................................
October 1942-August 1945.....................................................
October 1942-April 1943........................................................
April 1943-August 1945.........................................................

23.8
5.7
3.7
1.9

18.1
8.7
4.3
4.2

17.i
13.'
3
.<
10.i

Average increase per month
January 1941-October 1942....................................................
October 1942-August 1945.....................................................
October 1942-April 1943........................................................
April 1943-August 1945.........................................................

1.1
.17
.62
.06

0.86
.26
.72
.15

0.8
.4:
.5(
.3*

l BLS urban wage rate index for manufacturing. For nature of index, see Robert J. Myers and others
“ Wartime Wage Movements and Urban Wage-Rate Changes,” Monthly Labor Review, October 1944,
pp. 684-704; for movement of index within stabilization period see Frances Jones Clerc and Eleanor K,
Buschman, “ Trends in Urban Wage Rates, September 1947,” Monthly Labor Review, January 1948,
pp. 45-60.
Source: U. S. Department of Labor, Bureau of Labor Statistics.

The statistical picture is even more impressive if measurement is
made from A pril 1943, the date o f the hold-the-line order. Thus, the
level o f consumers’ prices increased only 4.2 percent in the 28-month
period from A pril 1943 until the end o f the war, an average rate per
month o f less than 0.2 percent.1 7 The stabilization o f wholesale prices
0
was even more successful. The rate o f increase in wages declined
slightly.1 8
0
In view o f the magnitude o f the defense and war efforts, the extent
to which wages and prices were stabilized represents a significant
achievement o f direct controls supplemented by fiscal measures. It
is possible to argue, at least with the advantage o f hindsight, that an
even better job could have been done. The tim ing o f controls might
have been better, and their administration might have been more
effective. The fact remains, however, that we came to the end o f the
war with price and wage structures that had been affected, but not
seriously distorted, by inflation. Moreover, an enormously successful
production effort was made within the framework o f price and wage
controls. It appears reasonable to conclude that the success o f the
production effort was related to the maintenance o f reasonable
stability.
1 7For a complete account of the wartime controversy over the BLS consumers' price
0
index, see Office of Economic Stabilization, Report of the President's Committee on the
Cost of Living (Government Printing Office, 1945).
1 8 See ch. 4 for a more extensive evaluation of wage stabilization program. See also
0
National War Labor Board, Wage Report to the President (February 22, 1945), and
Termination Report, I, ch. 46.




D E V E L O P M E N T O F WAGE-PRICE POLICIES

B.

T

he

R

e l a t io n s h ip o f

O PA

and

139

NW LB

The nexus between NW LB and O PA was the Office o f Economic
Stabilization. Executive Order 9250 provided that:
* ♦ * where the N ational W ar Labor Board or the Price Adm inistrator shall
have reason to believe that a proposed wage increase w ill require a change in
the price ceiling o f the commodity or service involved, such proposed increase, if
approved by the N ational W ar Labor Board, shall become effective only if also
approved by the D irector [o f Economic Stabilization],

This provision o f the Executive order required some form o f sys­
tematic collaboration between the NW LB and the O PA. The me­
chanics o f the procedures that were devised need not be explored.1 9
0
In substance, the NLW B decided cases on the basis o f wage stabiliza­
tion criteria, without regard to the price consequences o f the decisions.
However, in both voluntary and dispute cases, employers were re­
quired to indicate whether Board approval or order o f a wage adjust­
ment would result in application for price relief; where affirmative
answers were given, employers were also required to file an appropriate
application, with supporting data, with the O PA within a specific
time in relation to the initiation o f the wage action. Upon receipt o f
this application, the O PA determined whether price relief was war­
ranted in terms o f price stabilization criteria. I f price relief was
not warranted, the Board was so notified, and an approved wage in­
crease could bejnade effective. I f O PA determined that price relief
was required, the wage increase could not become effective until ap­
proved by the D irector o f Economic Stabilization.
It seems perfectly clear that the Board itself could not be expected
to take price aspects form ally into account in making its wage de­
cisions. It does not appear to have been the intent o f Executive Order
9250 that the Board should do this, and the Board itself would have
been most reluctant to have had its decisions in particular cases in­
fluenced by price considerations.1 0 U niform ity in the application o f
1
wage policy would not have been feasible in such circumstances. Some
inquiry should be directed, indeed, to the question o f whether the re­
quirement fo r approval by the Director o f Economic Stabilization
o f wage decisions in price relief cases served a useful purpose.
The facts in the situation can be summarized briefly. Only about
one-half o f 1 percent o f all cases in which the Board approved or
ordered wage adjustments were reviewed by the Director o f Economic
1 9See National War Labor Board, Manual of Operations, various revisions, and Research
0
and Statistics Report No. 21 (April 27, 1944) for procedure in handling price relief cases;
also Office of Price Administration, Administrative Supplementary Order No. 28, November
18, 1942 (revised May 28, 1943), and Operating Order No. 7, January 11, 1943.
There was extensive discussion of the problem in the early stabilization period. See
National War Labor Board, Transcript, Executive Session, October 30, 1942, p. 628 ff.
921297— 50------ 10




140

DISPUTE S E T T L E M E N T A N D W A G E STABILIZATION

Stabilization. O f the 1,457 such cases1 1 between October 2, 1942,
1
and August 18,1945, the D irector approved the wage actions in almost
99 percent.1 2 In addition, the Director gave advance approval to
1*
specified types o f wage adjustments in some categories o f cases, even
i f price relief was involved.1 8 Advance approval was given in Sep­
1
tember 1943 fo r wage increases granted in accordance with the Little
Steel formula, or to correct substandards o f living or interplant in­
equities, even though increased costs to government procurement
agencies were involved.1 4
1
Virtually no wage adjustments, in short, were denied on price
grounds, and the volume o f price or production cost cases was small
in relation to the total number o f cases. D id the review function
o f the Office o f Economic Stabilization have any significance? The
answer is emphatically “ yes.” In several ways the review function
served to strengthen the stabilization program. First, the review o f
cases gave the OES insight into Board application o f wage increase
criteria and into O P A application o f pricing standards. Second, the
review requirement undoubtedly made fo r more careful application
o f wage policy by the Board in price relief cases and, hence, tended
to raise the general level o f wage administration. Third, some o f the
individual cases that required OES approval were o f industry-wide
or area-wide significance, and these cases merited and received thor­
ough review in terms not only o f wage-price relationships, but also,
in some instances, o f manpower and production problems associated
with wage and price structures. In short, the review function, by
providing the Director o f Economic Stabilization with veto power
over wage actions immediately affecting price, enabled him to exercise
a more direct influence on policy application than might otherwise
have been the case. This influence is difficult to appraise, but it was
real.
In considering the relation o f approved wage adjustments to price
increases, the number or nature o f the cases in which price relief was
granted as an immediate consequence o f wage increases does not reveal
the fu ll impact o f NW LB wage actions on prices. W age adjust­
ments not accompanied by applications fo r price relief could be re­
flected in increased prices if an industry or firm, at some later time
1 1 Including a small number of production cost and airframe reclassification cases. See
1
footnote 114 below.
The Termination Report, I, p. 563. During the wartime stabilization period, em­
ployers Indicated that they would file for price relief in more than 8,000 cases. It is
estimated that in about 70 percent of these cases, the employers either failed to file appli­
cations with OPA or OPA found that wage adjustments did not require price increases.
Ibid., II, appendix C.
1 4Ibid. In his policy directive of May 12, 1943, the Director of Economic Stabilization
1
extended his review of NWLB wage adjustments to those cases involving increased cost to
government procurement agencies. On July 26,1943, reclassification cases in the airframe
industry were brought under review.




D E V E L O P M E N T OF WAGE-PRICE POLICIES

141

applied fo r and could qualify fo r price relief under O P A pricing
standards. Thus, “ the fact that an employer has not filed such an
application or petition [fo r price relief or amendment o f price regu­
lation] w ill not preclude recognition by the Office o f Price Adm in­
istration o f the increased cost resulting from the wage or salary
increase in considering any later application for adjustment or peti­
tion for amendment based on subsequent changes in circumstances.”1 5
1
I t is impossible to appraise statistically the extent to which approved
wage increases were subsequently reflected in price increases during
the war period.1 6
11
7
The relations between the two m ajor control agencies were not in­
timate in an operating sense. Nor does this appear to have been
necessary. The work o f each agency conditioned the work o f the
other. A t the same time, the spheres o f activity, and the special
criteria, problems, and pressures were reasonably distinct. I f the
Board perform ed its stabilization task effectively, powerful support
was provided fo r effective price stabilization. Effective price stabil­
ization, in turn, served to reduce the pressure for general wage rate
revision. But it was not necessary for the price control agency to
become involved in the day-to-day administration o f wage control,
or for the wage control agency to be concerned with the routine con­
duct o f the price control function.
0 . T

h e

B

ole of t h e

O

ffice o f

E

c o n o m i c

S

tabilization

It w ill be recalled that Executive Order 9250 gave to the Director
o f Econom ic Stabilization the function o f form ulating and developing
“ a comprehensive national economic policy” fo r the prevention o f
inflation and the more effective prosecution o f the war. He was given
also certain specific functions, such as the review o f wage cases involv­
ing price relief, as described above.U
T
The existence o f an agency such as the Office o f Economic Stabiliza­
tion was essential to the effectiveness o f the stabilization program.
This is true despite the fact that wartime economic policy was reason­
ably well formulated by the time the Office o f Economic Stabilization
was established. It was not so much policy form ation as coordina­
tion, direction, and general supervision o f the economic control agen­
cies that gave OES its importance. Moreover, as a practical matter
the existence o f OES served to direct some o f the pressures the fu ll
1 5 Office of Price Administration, Administrative Supplementary Order No. 28 (November
1
18, 1942).
3 6The basic steel industry, where both price and wage control were highly effective,
1
provides nevertheless an interesting study in the relation of wages, labor costs, and prices
during the war. Addison T. Cutler, ‘‘Price Control in Steel” in Studies in Industrial
Price Control (Washington: Government Printing Office, 1947^, pp. 37-85.
1 7 On April 8, 1943, the President in Executive Order 9328 delegated to the Office of
1
Economic Stabilization all of the authority given to him by the Stabilization Act.




142

DISPUTE: SETTLEMENT AND WAGE STABILIZATION

force o f which would otherwise have been experienced by the direct
control agencies.
Judge F red M. Vinson, who succeeded Justice Byrnes as Stabiliza­
tion Director in M ay 1943, in describing the functions o f the Office o f
Econom ic Stabilization, pointed out that—
* * * differences in emphasis among the various agencies [concerned with
stabilization] sometimes lead to differences of opinion and even on occasion to
differences in policy. There was need for team play. W e must have basic poli­
cies which take into account aU the relevant factors, and an agency authorized
to formulate these basic policies and to settle such differences of opinion as may
arise in connection with their application.1 8
1

W illiam H . Davis, who succeeded Judge Vinson as Stabilization
D irector, stated—
* * * the functions of that Office [Office of Economic Stabilization] are of
two kin ds: administrative functions, which consist really in settling the conflicts
or disputes that arise between the procurement agencies of the Govern­
ment * * * and the price control agencies * * * and then these diffi­
culties that arise between the W a r Labor Board and OPA , conflict of decision
and so on [and] * * * to formulate the rules which are to be followed by
these agencies to make effective the purpose of the Stabilization Act of October

2 , 1942.1 9
1

The Office o f Econom ic Stabilization did play an important and
positive role in the direction o f stabilization policy. The outstanding
action o f the D irector o f Econom ic Stabilization affecting both the
N W L B and O P A undoubtedly was the formulation o f the “ hold-theline” order (Executive Order 9328) which was issued on A p ril 8,1943.
The “ hold-the-line” order, which marked the assumption by the
Office o f Econom ic Stabilization o f a positive role in policy direction
and determination, unquestionably strengthened the stabilization e f­
fort. I t made fo r a more effective wage control program.1 0 The order
2
also resulted in a greatly improved price control program which, with
the introduction o f subsidies and price roll-backs, held basic living
costs stable fo r the remainder o f the war period. Recognition o f the
relation between the price and wage portions o f the order are essential
in its interpretation.
The role o f the Office o f Econom ic Stabilization in controlling and
prescribing limits to wartime wage control policy is illustrated also
with respect to “ fringe” adjustments— vacations, shift differentials,
u8 E xtension of Emergency Price Control bill, H ouse hearings, 1944, p. 2330.
1 9 Stabilization Extension Act, H ouse hearings, 1945, pp. 1 0 6 4 - 1 0 6 5 .
1
1 0The intervention of the Office of Economic Stabilization w as not welcomed by the
2
tripartite Board. This is reflected in the analysis of the period by Dr. George W. Taylor,
Government R egulation of Industrial Relations (N ew York: Prentice-Hall, Inc., 1 9 4 8 ) , pp.
1 7 1 - 1 9 6 . For example, Dr. Taylor w rites that “Under the new [hold-the-line] order,
wage disputes could no longer be arbitrated.” I t is difficult to understand, however, how
an effective wage stabilization program and the latitude required for arbitration can be
reconciled, a t lea st in the kind of period now under review.




DEVELOPMENT OF WAGE-PRICE POLICIES

143

and the like. The liberalization of such adjustments operated as a
safety valve to reduce the pressure for general wage rate increases.
Liberalization m ight have gotten out of hand, however, in the absence
o f an agency such as O E S to establish general limitations on the extent
to which the process could go. A t the same time, the existence o f O E S
removed from the N W L B some o f the pressure for policy liberaliza­
tion. In general, the price control agency was aided and strengthened
in similar fashion. The significance of the O E S authority to review
price relief cases has already been described.
F inally, the Office o f Economic Stabilization did serve as a sort of
court o f appeals in the conflicts and problems o f policy coordination
that inevitably arose from time to time among agencies that were
administering related programs. W hen a relatively rounded pro­
gram was finally achieved, considerable skill was required to get the
parts to mesh and to function with relative smoothness. O E S con­
tributed greatly to this end.

V. P rice-W age Control : F ourth P hase, A ugust 1945-N ovember 1946
A . S o m e D e t e r m in a n t s

of

R

e c o n v e r s io n

S t a b il iz a t io n P

o l ic y

The fourth and final phase in the relation between wage and price
controls came with the end o f the war. The peak o f the production
effort for war came in 1944. A fter the victory over Germany in May
1945, industrial reconversion began on a limited scale. The level o f
war output remained high, however, for the date o f the Japanese
capitulation obviously could not be predicted.
Attention had been given to many facets o f reconversion economic
policy prior to V E -day. A t the request o f the Office o f W ar Mobiliza­
tion, a unit under the direction o f Bernard M . Baruch was formed to
study reconversion problems. The Baruch-Hancock report, dealing
mainly with the financial aspects o f reconversion, was issued early in
1944 m j n October 1944 the Office o f W ar M obilization and Recon­
version was established by Congress and was given responsibility
for many phases o f reconversion.1 2 B y this time, a number o f the war
2
agencies had formulated plans looking toward the end o f the war in
Europe.1 8
2*
1
3
^Bernard M. Baruch and John M. Hancock, Report on War and Postwar Adjustment
Policy (S. Doc. No. 154, 78th Cong., 2d sess.).
133 The functions of the Office of War Mobilization, created by Executive Order No. 9347
on May 27,1943, were transferred to the new agency.
summary of such plans, together with material relating specifically to wage prob­
lems after VE-day, was prepared for the National War Labor Board by its Research and
Statistics Branch. Memorandum to the Board from Carroll R. Daugherty, Post-EuropeanWar Reconversion Problems, October 6, 1944.




144

DISPUTE: SETTLEMENT AND WAGE STABILIZATION

O P A , on M ay 11, 1945, announced its policy on the pricing of
products that had been out of production during the war period.
Briefly, prices on reconversion products were established at 1941-42
levels, with adjustments for legitimate increases in cost since that
time. Cost adjustments were to be calculated on an industry-wide
basis or, in some situations, on an individual firm basis.1 4
2
A t the same time, the N W L B announced a wage policy applicable
to plants converting from war to civilian goods production.1 5 The
2
Board made clear the fact that the—
* * * present statement is not to be construed
change in the stabilization program.

*

*

*

as a substantive

In short, the policy provided that wage structures in converted plants
(negotiated through collective bargaining or, in the absence o f union­
ization, established by the employer) could be put into effect without
advance approval by the Board provided that the new wage struc­
tures did not furnish the basis for a request for an increase in the
prices set by O P A under its reconversion pricing policy. Post­
review by the Board was provided for.
A fter V E -day, much attention was also devoted to the larger prob­
lem o f reconversion stabilization policy, basically the question o f the
controls that would be required for a smooth economic transition from
war to peace. There was fairly general agreement, at least in govern­
mental circles, that O P A should carry on into the postwar period
essentially unchanged, with gradual decontrol beginning with items
o f minor significance in the cost o f living. In his Budget message in
January 1945 the President had pointed out that—
* * * many businesses and individuals have ample funds for a buying
spree * * *

and that—
the balance between incomes, savings, and expenditures will still be precarious
during the reconversion period.

The attitude toward wage control was by no means as forthright.
There was a general disposition to believe that wartime wage controls
could, at the very least, be modified substantially at the end o f the
war. Very early in the post V E -day period, the N W L B discussed
a proposed reconversion wage stabilization policy that provided for
the removal o f controls on voluntary wage increases where price relief
was not involved. This and some other elements of the proposed
1 4 Office of Price Administration, Fourteenth Quarterly Report, pp. 2 -4 ; Fifteenth Quar­
2
terly Report, pp. 2-5.
1 5 National War Labor Board, Statement in Regard to the Determination of Appropriate
2
Wage Rate Structures for Plants Converting From War Production to the Production of
Civilian Goods, May 10, 1945.




DEVELOPMENT OF WAGE-PRICE POLICIES

145

policy found their way into the policy actually adopted immediately
after V J-day.1 6
2
There were several inter-agency meetings of great interest on the
general subject of reconversion wage policy in the summer of 1945,
attended by members of the N W L B and ranking representatives of
O P A , O E S, the Office of W ar Mobilization and Reconversion, the
Federal Reserve Board, and other agencies. A t these meetings, O P A
representatives argued strongly for a firm wage control policy in the
reconversion period, on the ground that any other policy would under­
mine price control.1 7 Representatives o f the other agencies were
2
inclined to the opinion that postwar economic conditions would be
such that wage controls could be modified considerably. This opinion
was shared by the public members of the N W L B .
A number o f factors contributed to the belief that wage controls
could be substantially relaxed in the immediate postwar period.
In the first place, it was clear before the end of the war that the
major labor organizations would press for appreciable wage advances
at the conclusion o f hostilities. Organized labor had never accepted
the barrier to general wage rate increases embodied in the Little Steel
formula. The labor members o f the Board sought to obtain modifi­
cation of the formula within the framework of the Board and of
wage policy during the war period.1 8 These efforts failed. I t was
2
plain that a new situation would exist at the close of hostilities when
the no-strike, no-lockout policy would expire. Undoubtedly an effort,
and possibly a successful effort, could have been made to prepare the
way for the maintenance of a comprehensive wage control policy,
with some modification of wartime criteria, into the reconversion
period. The effort, however, was not made.
Second, business on the whole favored the speedy removal o f all
wartime controls. Whereas organized labor favored the maintenance
of price controls for as long a period as might be needed, management
was decidedly restive under O P A regulation. This attitude extended
to wage controls as well as to other forms of wartime planning.
A general factor of very great importance, in the third place, was
the assumption (which subsequently proved erroneous) o f large-scale
unemployment in the immediate post war period.1 9 W ith particular
2
reference to wage policy, the assumption was that a “ loose” labor
1 6 These policy proposals were discussed within the Board and with the Regional Board
2
chairmen. See Transcript, National War Labor Board, Conference of Regional War Labor
Board Chairman, June 1-2, 1945.
m Based upon recollection of the writer.
1 8 See National War Labor Board, Wage Report to the President (February 22, 1945).
2
The case for modification of the formula as presented by the AFL members may be found
on pp. 97-107; the CIO case on pp. 109-129.
1 9 See W. S. Woytinsky, “What Was Wrong in Forecasts of Postwar Depression?”
2
Journal of Political Economy, April 1947.




146

DISPUTE: SETTLEMENT AND WAGE STABILIZATION

market would provide protection against inflationary wage increases.
These assumptions were not universal; they were dominant, and they
were influential in policy determination. A t the same time, postwar
inflationary factors were also recognized, particularly the shortages of
many types o f durable consumers’ goods and the large accumulation
o f liquid assets during the war period. Hence, the general outlook ap­
peared to be for a mixture o f conflicting tendencies; the problem o f
policy was to assure conditions that would make for as smooth a
transition as possible.
Fourth, only 8 months intervened between victory over Germany
and the Japanese surrender. A considerably longer period— some­
thing in the neighborhood o f a year— had been generally assumed in
policy planning. This longer period, had it materialized, would have
permitted a more gradual reconversion accompanied by gradual re­
laxation o f controls. Instead, basic decisions had to be made virtually
overnight.
B.

I

n it ia l

R

e c o n v e r s io n

S t a b il iz a t io n P

o l ic y

Between Tuesday evening, August 14, 1945, wben the surrender o f Japan
was announced and Friday morning, August 17, when the country returned to
work after a double holiday, a transition stabilization program was formulated
and announced.” 0

T his program reflected the influence o f the factors cited above. I t
had been formulated, actually, in the innumerable policy discussions
that had taken place after, and to some extent even before, V E -d ay.
I t undoubtedly reflected the consensus o f those responsible for stabili­
zation policy, although it is equally clear that this opinion was by no
means unanimous.
The new wage-price policy was expressed in Executive Order 9599
issued on August 18,1945. This order was amended on October 30,
1945, by Executive Order 9691, Comprehensive regulations for the
guidance o f the stabilization agencies were issued on December
6 , 1945.m
The new policy sought to maintain price stability through con­
tinuation o f comprehensive control The Price Adm inistrator and
the Secretary o f Agriculture (in the exercise o f his price responsi­
bilities under the Stabilization A ct) were directed to—
* * * take all necessary steps to assure that the cost o f living and the
general level of prices shall not rise.1
0
8

1 0John T. Dunlop, “ The Decontrol of Wages and Prices” in Colston E. Warne (editor),
8
Labor in Postwar America (New York: Remson Press, 1949). This chapter contains
an excellent account of the transition in wage-price policy.
m See U. S. Department of Labor, The National Wage Stabilization Board (Washington:
Government Printing Office, 1948), ch. 4.




DEVELOPMENT OF WAGE-PRICE POLICIES

147

Moreover, the order provided that the Price Administrator and the
Secretary o f Agriculture should—
* * * improve or tighten price controls in those fields which are important
in relation to production costs or the costs of living in which in their judgment
the controls have heretofore been insufficiently effective.” 1 2
8

In contrast to policy on price control, Executive Order 9599 per­
mitted employers to make wage increases of any magnitude without
governmental approval, provided such increases were not used as the
basis for an increase in price ceilings or to increase the cost of goods
or services furnished the United States under procurement agency
contracts.1 3 In short, freedom o f action was restored to employers
3
and workers with respect to those upward wage adjustments that
could be made within the existing framework of prices and costs to
the Government.1 4 Subsequently, by Executive Order 9651, the Price
3
Adm inistrator was authorized to take unapproved wage or salary
increases into account for price purposes, after such increases had been
in effect normally for at least 6 months.
Under Executive Orders 9599 and 9651, proposed wage increases
that would provide immediate bases for applications for price relief
remained subject to governmental approval. Approval of wage in­
creases in price relief cases could be granted (a) if increases in
straight-time average hourly earnings since January 1941 in the ap­
propriate unit had failed to equal the increase in living costs between
January 1941 and September 1945, (h) if inequities in wage or salary
rates existed among plants in the same industry or locality, ( c ) if
wages were inadequate for the recruitment o f needed manpower in
industries designated as essential to reconversion, ( d ) if the proposed
increases satisfied standards in effect prior to August 18, 1945.
The basic assumption in the new wage policy was that many em­
ployers were in a position to grant increases in basic rates of pay
within existing price ceilings and that, in general, the magnitude o f the
increases could be determined through collective bargaining without
work stoppages.1 5 Many such increases were, in fact, granted. In
3
important instances, however, no agreement was reached between em­
ployers and unions on the magnitude o f the wage increases that could
be made under the wage-price policy. No agency for the final deter-*
3
1
1 3Decontrol on a modest scale began after VJ-day. Thus, between August 15 and August
3
31, 1945, 184 decontrol actions were taken, removing from control a variety of items
unimportant in the cost of living or in business cost.
m Except in the construction industry, where all voluntary wage adjustments remained
subject to the approval of the Wage Adjustment Board. Adjustments of intra-plant wagerate inequities in basic steel industry also continued to be subject to approval of the
Board’s Steel Commission.
1 4All wage reductions remained subject to control by the terms of the Emergency Price
8
Control Act, as amended by Public Debt Act of April 10, 1943.
3 5An additional assumption was that such increases would not be inflationary from
8
the demand side.




148

DISPUTE SETTLEMENT AND WAGE STABILIZATION"

mination o f these disputes existed in the absence o f a renewal o f the
no-strike, no-lockout pledge after YJ-day. The National W age Sta­
bilization Board had control, as previously indicated, only over certain
categories o f voluntary cases.1 ® W hen collective bargaining broke
3
down and the parties could not agree to submit the issues to arbitra­
tion, recourse to economic power was to be expected. In the fa ll and
early winter o f 1945-46, important wage disputes occurred in petro­
leum refining, automobiles, steel, meatpacking, farm machinery, and
other industries. The wave o f labor disputes that began in the fa ll of
1945 reached a peak in February 1946, when a direct loss o f approxi­
mately 23,000,000 man days o f work was recorded.
C.

T h e P o stw a r W ag e M o ve m e n t a n d R e v is io n op S t a b il iz a t io n
P o l ic y

These disputes and their settlement broke the stabilization policy
embodied in Executive Orders 9599 and 9651.
A brief summary o f the impact o f those disputes on wage policy is
necessary.1 7 In the more important o f the stoppages, the Government
3
appointed boards to determine the facts in each dispute and to make
recommendations for settlement within wage-price policy. The first
two boards to report (petroleum and General M otors) each recom­
mended wage increases that, in their opinions, could be paid without
price relief. The recommended rate increase in oil was 18 percent;
in General Motors 19.5 cents (about 17.5 percent). In steel, the Presi­
dent1 8 him self recommended a settlement o f 18.5 cents (about 17.5
3
percent). The United States Steel Corporation refused to agree to
the recommended wage settlement until price relief had been assured.
This case was complicated by the fact that some price adjustment was
rquired in steel even in the absence o f a wage increase. The price
increase finally negotiated between the corporation and the Govern­
ment was in excess o f that recommended by O P A .1 9 Even on the
3
view that the steel settlement was made within the framework o f wageprice policy, which is questionable, it is clear that this settlement con­
tributed to a change in wage policy. The similarity o f the wage award
to those made in the petroleum and General Motors cases suggested a
pattern approach to wage change.
" I n a statement on August 16, 1945, the President announced that the NWLB would
be terminated as soon as practicable after the conclusion of a forthcoming Labor-Manage­
ment Conference on Industrial Relations. The Board was actually terminated on December
81,1945 (Executive Order 9672), at which time the National Wage Stabilization Board was
established. The Labor-Management Conference, which adjourned on November 80, 1945,
failed to agree on machinery to effect the settlement of labor disputes where collective
bargaining and conciliation had been unable to produce agreement.
1 7 See H. M. Douty, Wage Policy and the Role of Fact-Finding Boards, Monthly Labor
8
Review, April 1948, pp. 537-549.
1 8In the steel case, the fact-finding board as such made no recommendations.
8
1 8For details, see Addison T. Cutler, “ Price Control in Steer* in Studies in Industrial
8
Price Control (Washington: Government Printing Office, 1947), pp. 60-76.




DEVELOPMENT OP WAGE-PRICE POLICIES

149

The outcome o f the meat-packing dispute was decisive. Price
relief was clearly involved in this case. The fact-finding board de­
cided that a wage increase of 16 cents per hour was fair and equitable.
It found that 11 cents of this increase was approvable under existing
Executive orders and regulations of the Stabilization Director and
was therefore the basis for price relief. It also determined that the
companies had the capacity to absorb the remaining increase of 5 cents.
This recommendation helped to confirm a pattern of wage adjustments
that the General Motors board had described as characteristic of the
higher wage-paying group of employers voluntarily granting wage
increases since YJ-day.
The impact o f these and related developments was reflected in
Executive Order 9697 issued on February 14, 1946. This order
directed the National W age Stabilization Board to—
* * * approve any wage or salary increase, or part thereof, which it finds is
consistent with the general pattern of wage or salary adjustments which has been
established in the industry or local labor market area between August 18, 1945,
and the effective date of this order. * * *

Several other criteria for the approval o f wage increases where price
relief was indicated were set forth in the order. The general effect of
the new order was to establish a framework within which more
nearly uniform wage increases within industries, between related in­
dustries, and within local labor-market areas could be approved for
price-relief purposes. It was hoped that a new stabilization line would
be established on the basis of the adjustments thus made.
A t the same time, the provision in Executive Order 9651, by which
the Price Adm inistrator was authorized to take unapproved wage in­
creases into account for price purposes after such increases had been
in effect for a trial period (normally 6 months) was removed in E x­
ecutive Order 9697, apparently in the hope of strengthening the po­
sition of the Board. Beginning with the effective date o f this order,
the making of an unapproved wage adjustment was deemed to—
* * * constitute a waiver of any right of the employer to use such increase,
at any time during continuation o f the stabilization laws, as a basis for seeking
an increase in price or rent ceilings or, in the case of products or services being
furnished under contract with a Federal procurement agency, as a basis for
increasing costs to the United States.

D. T h e E nd

op

C on tr ol

W ithin 6 months after the issuance of Executive Order 9697, wage
and price control, for practical purposes, ceased to exist. On June
29, 1946, the President vetoed the bill passed by Congress amending
and extending the stabilization acts. The effect of the amendments,
for the most part, undoubtedly would have been seriously to dilute




150

DISPUTE SETTLEMENT AND WAGE STABILIZATION

the ability o f O P A to control prices. For more than 3 weeks there
was no legal restraint on price or wage movements. A great up­
surge occurred in the level o f both wholesale and consumers’ prices
during this period, with the upward rise continuing after the reim­
position o f controls. On July 25, 1946, the President signed an ex­
tension act from which some o f the more objectionable features o f
the previous bill had been removed. B y this time, however, the end
was clearly in sight. In the following months, the process o f decon­
trol was accelerated, and on November 9, 1946, the President an­
nounced the removal o f virtually all price ceilings except on rents,
and o f all wage and salary controls.
There is no single factor that explains the stabilization debacle.
The break-through in wages in February was undoubtedly a contrib­
uting factor o f great importance, and this break-through, in turn,
was unquestionably linked closely with the failure after V J-day
to retain comprehensive control over wages coupled with the absence
o f machinery for the adjudication o f wage disputes within a policy
framework. I t is clear in perspective that the policy o f differentiated
wage changes im plicit in Executive Order 9599 was not calculated to
provide the measure o f wage stability needed for the effective adminis­
tration o f a comprehensive price-control program.
The break-through in February conceivably could have been con­
tained on the basis o f a comparatively modest advance in the level
o f prices. But the February policy changes, and the events that
produced those changes, gave great impetus to the furious attack
upon price control by business groups in the spring o f 1946. Organ­
ized labor, which was still in the process o f carrying a major wage
movement to completion, was not strategically in a strong position to
mobilize public opinion for a tight price control program. Moreover,
there was no assurance that the wage line based upon pattern adjust­
ments could be held.
Even in the absence o f these factors, a determined effort probably
would have been made to secure substantial relaxation or abandon­
ment o f price control when the legislation came up for renewal in
the spring o f 1946. Business was impatient o f controls in a boom
market, the war was beginning to recede into the background, and
there undoubtedly were technical problems in the application o f price
control in the reconversion period that were difficult o f solution.
B ut certainly the chances o f holding the inflation barrier would
have been better if comprehensive wage control, even with some liber­
alization o f wartime criteria, had been extended into the postwar era.
E . P rice

and

W age M ovem ent , A u g u st 1945-N ovember 1946

The period o f postwar wage and price control, as we have seen,
may be broken down conveniently into three parts: (a ) August




151

D E V E L O P M E N T OP WAGE-PRICE POLICIES

1945-February 1946, during which wage-price policy as formulated
in Executive Order 9599 (as amended by Executive Order 9651) was
applicable; (b) February-June 1946, marked by the revision o f policy
embodied in Executive Order 9697; (c) June-November 1946, during
which stabilization policy was emasculated and then abandoned.
Table 7 summarizes the broad price and wage movements during
these periods.
In the first period, covering the 6 months from August 1945 to
February 1946, the level o f wholesale prices edged upward by almost
2 percent; the level o f consumers’ prices (including rent) remained
practically stable; wage rates in manufacturing advanced approxi­
mately 6 percent.
In the 4 months from February to June 1946, after the reformulation
o f wage-price policy, wholesale prices, on the average, increased by
almost 5 percent, consumers’ prices by about 3 percent, and manu­
facturing wage rates by almost 8 percent. In each o f these periods,
or in the tw o periods considered as a whole, the increase in manufac­
turing wage rates was considerably greater than the advance in either
wholesale or consumers’ prices.
The third period was strikingly different. From June 1946 the last
month before the temporary lapse o f price and wage controls to
November 1946, when controls, except fo r rent, were finally abandoned,
the level o f wholesale prices jumped by almost 24 percent while con­
sumers’ prices, on the average, rose 14 percent. The tail end o f the
first postwar round o f wage increases lifted the level o f wage rates
in manufacturing by 3.5 percent.
Over the whole period, August 1945 to November 1946, the increase
in wage rates barely exceeded the increase in consumers’ prices. The
level o f prices at wholesale increased much more sharply than either
wage rates or consumers’ prices.
T able 7.— Percentage changes in wholesale prices, consumers9 price and manufac­
turing wage rates, specified periods, August 1 9 4 5 -November 1945
Percentage change in—
Period
Wholesale
prices
August. 1MS-Ffthmary 194fi
Fp.hrnary-.TimA 1Q4B ____
JnnA-NnvAmbftr 104fi
___
August 1045-NovATnhp.r 1946._ _

_ _

..........
_________ ______

* Partly estimated.
Source: U . S. Department of Labor, Bureau of Labor Statistics.




1.9
4.8
23.7
32.1

Consumers’
prices

0.2
2.9
14.2
17.7

Manufactur
ing wage
rates*
6.1
7.9
3.5
18.5

152

DISPUTE: S E T T L E M E N T A N D W A G E STABILIZATION

VI.

Sum m ary

an d

C o n c lu sio n s

This chapter has sought to describe and analyze the general devel­
opment o f wage and price controls in the defense, war, and recon­
version periods. Except incidentally, no attention has been given to
the techniques o f control, to the problems that arose in their applica­
tion, to questions o f alternative control standards, or to questions o f
equity. Administrative and operating problems have been almost
wholly ignored. Only general statistics have been utilized to describe
the general characteristics o f wage and price behavior within the
period from 1939 to 1946 with which we are concerned.
The chapter may be summarized briefly as follow s:
1. When expenditures under the defense program began in the
summer o f 1940, the economic system in the United States was operat­
ing at a level substantially below capacity. Because o f the nature o f
the underlying economic situation, a relatively large defense output
was achieved without curtailment o f the production o f consumer
goods. In fact, the output o f civilian goods measurably increased
during the first year o f the defense program. Thereafter, additional
output o f war goods could be obtained only by the sacrifice o f civilian
goods production.
2. Economic controls in the W orld W ar I I emergency had, in a
sense, an organic growth. This was due partly to our lack o f experi­
ence with comprehensive economic controls, partly to the fact that
we had preparatory time and an initial economic situation that per­
mitted a substantial defense program to get under way without imme­
diate curtailment o f civilian production and partly to the lack o f
public readiness to accept controls. In the early defense period, the
problem o f price control was selective rather than general in character.
Genuine foresight was exhibited by the Government in making pro­
vision for systematic attention to price problems at the very beginning
o f the defense period (M ay 1940).
3. The general level o f prices and wages began to rise in the spring
o f 1941, and on economic grounds a case could have been made fo r
comprehensive control o f both prices and wages by the fa ll o f that
year, particularly in view o f the known rate at which defense ex­
penditures were increasing. However, the country was not at war,
public opinion was divided, and the fu ll extent o f our economic com­
mitment could not be foreseen. On a selective basis, and without
firm legal authority, the price control agency perform ed an energetic
and creative job during this period. The introduction o f the Emer­
gency Price Control bill in Congress (August 1, 1941) reflected in­
creasing concern with the price situation.




D E V E L O P M E N T OF WAGE-PRICE POLICIES

153

4. The testimony on the Emergency Price Control bill, even after
Pearl Harbor, was predominantly in terms o f selective rather than
general control. W age control was not part o f the proposed legisla­
tion. There was wide recognition in the testimony that price control
would have to be supported by reasonable wage stability. Aside from
an admirable reluctance to interfere with free collective bargaining,
the belief was expressed that price control would yield indirect wage
control. It was also believed that voluntary wage stabilization agree­
ments might be developed on a broad scale as an alternative to control.
The lack o f any clear principles o f wage control probably was im­
portant. The fact that price and wage controls required different
skills, and could not be administered jointly, was frequently cited in
the testimony on the Emergency Price Control bill.
5. The Price Control bill was enacted into law on January 31,1942,
almost 2 months after we entered the war. A fter labor and manage­
ment had given a no-strike, no-lockout pledge fo r the duration o f
the conflict, the NW LB was established (January 12,1942), as a suc­
cessor agency to the NDMB. The new Board had no authority over
wages except in those dispute cases involving wages that came before it.
6. Inflationary pressures increased after we entered the conflict.
Selective price control was clearly no longer sufficient. The O PA
issued its General Maximum Price Regulation on A pril 28,1942. On
the preceding day, the President had outlined a seven-point stabiliza­
tion program, the third point o f which called for the stabilization
o f “ * * * the remuneration received by individuals for their
work.” No legislation was proposed. The NW LB in the Little Steel
case (decided July 16, 1942) established a policy on general wage
increases that was to serve as the cornerstone o f wartime wage control
policy. But the Board had no control over voluntary wage adjust­
ments, and such adjustments, in conjunction with the farm price situ­
ation, threatened to destroy the price-control program.
7. B y the summer o f 1942, there was wide realization o f the need
fo r legal control over all wage and salary changes in the interest o f
general economic stabilization. This was reflected in the ch a n g in g
attitude o f the NW LB toward the question o f general wage control.
O P A played an active role in the policy debate.
8. A fter the President’s message o f September 7, 1942, Congress
passed the Stabilization A ct o f October 2,1942, providing among other
things, fo r comprehensive wage control. This function was delegated
to the NW LB. Hence, fo r the first time provision was made for the
comprehensive control over both prices and wages.
9. Especially after the stabilization crisis in the spring o f 1943,
prices and wages were stabilized with reasonable effectiveness fo r the




154

DISPUTE S E T T L E M E N T A N D W A G E STABILIZATION

duration o f the war. In view o f the inflationary pressures, indeed,
the success o f this effort was remarkable.
10.
In the immediate postwar period, comprehensive control oi
wages was abandoned, and no agency existed fo r the adjudication oi
wage disputes within a policy framework. These developments con­
tributed significantly to the collapse o f the whole stabilization effort in
the reconversion period.
A few conclusions may be ventured on the basis o f the analysis in
this chapter o f the development o f price and wage control in the
W orld W ar I I period.
1. Excessive purchasing power (in terms o f the available supply
o f civilian goods and services at the current level o f prices) tends to
be generated by extensive preparations fo r war or by war itself. This
is the basic condition fo r inflation. F or a variety o f reasons, only a
part o f this excess o f purchasing power can be siphoned off by taxa-:
tion. Hence, the need for direct and comprehensive price control and
rationing, supplemented by high taxation and a high level o f savings.
2. In a period o f general excess in demand, comprehensive price
control, to be effective, must be supported by comprehensive wage
control Rationing is required to assume the equitable distribution
o f essential consumer goods in short supply. Such controls tend to
reduce inflationary pressures from both the cost and demand sides.
3. From an economic point o f view, comprehensive wage-price con­
trols might well have been initiated immediately after our entrance
into the war, and perhaps even earlier. Practically, however, in a
democratic society, the effectiveness o f such controls depends upon
general recognition o f the problem and willingness o f the public to
accept such controls.
4. Economic stabilization provides a desirable underpinning to the
use o f direct controls (materials allocation and the like) to secure an
optimum allocation o f resources as between war and civilian uses. It
also permits direct controls to be supplemented, to a limited extent,
by financial (wage and profit) incentives.
5. Strong considerations made separate administration o f wage and
price controls desirable. The wartime experience indicates, more­
over, that wage and price control can be successfully administered by
separate agencies. A coordinating and policy-m aking agency, such as
the wartime Office o f Economic Stabilization, appears to be essential,
however, to give direction to the entire stabilization effort (including
the contributions o f agencies, such as the Treasury, that are not
prim arily engaged in direct control functions).




C H A P TE R

An Appraisal o f Wage Stabilization Policies
By John T. Dunlop

A s s h o w n in chapter 3 the wage stabilization program, and indeed
the entire wartime system o f controls, was not the result o f elaborate
blueprints. It did not spring full-blown. It was improvised as
problems became acute. It had no single architect. It was adapted
to the shifting phases o f the wartime economy—a defense program,
the tooling-up stage in war production, a full-scale war economy, de­
mobilization and reconversion. The program did not, on the other
hand, “ just grow ” like Topsy. It was molded by persistent convic­
tions and constituted in retrospect an integrated structure.

I. B a sic F e a tu r e s

of th e

W ag e S t a b il iz a t io n P ro gram

A ny account o f the development o f wartime wage stabilization tends
inevitably to hide its basic features. This section is concerned with
the fundamental policy decisions which were responsible for the main
contours o f the program. The standards governing the program are
outlined in chapter 3 and are described in detail in the termination
reports o f the NW LB and the NW SB.
A.

G o vern m en tal R

e g u l a t io n

The wage stabilization program involved the direct limitation on
wage changes through a governmental administrative agency, albeit
tripartite. It may be contended that the point is trivial and that wage
921297— 50------ 11




155

156

M S P U T B S E T T L E M E N T A N D W A G E STABILIZATION

stabilization necessarily must involve governmental regulation. Yel
England carried through an effective wartime stabilization program:
which did not include a governmental system o f wage regulation
Voluntary restraint through collective bargaining in the face o f the
national crisis was thought to be preferable to a system o f form al pub­
lic regulations.
The English situation was quite different from our own, yet the ex­
perience indicates that it was possible to operate a wage stabilization
program on a basis diametrically opposed to ours. Among the condi­
tions which facilitated the English program were the follow in g: the
high degree o f organization o f both employers and workingmen, in­
dustry-wide institutions o f collective bargaining, the centralization
o f authority to speak fo r all significant trade-unions, the absence o f
dualism within the labor movement, the strong tradition o f voluntary
acceptance o f responsibility and labor participation in the Govern­
ment.
In both countries the labor movements acquiesced to wage stabiliza­
tion as a wartime necessity. In England the labor movement accepted
the responsibility through collective bargaining to prevent serious in­
flationary pressures arising from wage changes. In the United States
the labor movement generally joined in the administration o f a gov­
ernmental program o f wage stabilization while protesting all the while
(at least after A pril 1943) the equity o f the wage standards. The de­
cision fo r explicit governmental regulations, as opposed to voluntary
administration under collective bargaining, was a basic feature o f our
wage stabilization program.
B. S e p a r a t io n o f W a g e a n d P r ic e C o n t r o l s
The wage stabilization program prior to V J-day involved the vir­
tually complete separation o f wage and price controls. This princi­
ple had two distinct facets, (a) The stabilization o f the general level
o f wages was made independent o f the stabilization o f the level o f
prices; wages were not adjusted automatically in accordance with
changes in the cost o f living as in the wage stabilization programs o f
most countries. T o use the language o f the act o f October 2, 1942,
the Board’s task was to stabilize the level o f wage rates “ * * * so
fa r as practicable * * * on the basis o f the levels which existed on
September 15, 1942.” (6 ) A wage change appropriate under wage
stabilization standards was not in fact denied on account o f probable
consequences to price ceilings.
It is significant that the N W LB, and the other stabilization agen­
cies, at the outset o f the war confidently expected a decline in real
wages during the war. Such a decline had taken place in some pre­
vious wars and was thought to be necessary to bear the real costs o f




APPRAISAL OF W A G E STABILIZATION POLICIES

157

the larger conflict. This view that wages could not be expected to
keep pace with prices was partially responsible for the doctrine that
wage and price controls had to be separated.1
In the early formulation o f the stabilization program, the only ex­
ception to this doctrine o f austerity was made for workers receiving
substandard wages who suffered doubly because of low wage rates
and the fact that the rise in agricultural prices was more serious for
low income groups among whom food constitutes a larger proportion
o f total expenditures. As early as February 6, 1942, at a policy dis­
cussion o f the NW LB Leon Henderson, the Price Administrator,
argued that it would be physically impossible to maintain the level
o f real hourly wages during wartime. W hile recognizing that the
cost o f living might be made the basis o f wage policy fo r substandard
income levels, Henderson pointed out to the Board that these sub­
standard groups would be most fearfully prejudiced by any program
in which the entire wage scale was tied to prices while taxes and
compulsory savings were used to close the inflationary gap.2
In the International Harvester and Little Steel cases the Board
concluded that the automatic adjustment o f wage rates to living costs
would only feed the inflationary spiral. The Little Steel formula did
not tie wage rates to the cost o f living. It was intended to accom­
plish quite the opposite. The Board had observed that wage levels
had been fairly steady during 1939 and 1940. The impact o f the
defense boom during 1941 and early 1942 had not increased wage rates
in all plants and industries to the same extent. The Little Steel
formula was intended to permit to employees in laggard plants an
increase in wage rates equal to the rise in the cost o f living between
January 1941 and May 1942, an increase which had been received by
a m ajority o f industrial wage earners at the time the Little Steel
formula was enunciated in July 1942.
The attempt to create a complete separation between wage and
price controls, as w ill be discussed later in this chapter, was a unique
feature o f the American stabilization program. In most countries
the wage level was explicitly tied to the cost o f living. The separa­
tion in the American program had several consequences which may
be noted briefly. In the first place, as the cost o f living continued
to rise, with the Little Steel formula unchanged, wage earners and
union leaders felt that they were suffering an injustice. It mattered
not that gross average hourly earnings or weekly earnings for all
employees as a group increased as rapidly as living costs. The un­
changed formula became a symbol o f a grievance which grew in irri-*
1 It must be observed in passing that these expectations of a decline in the real wage rate
were not realized for the wartime period.
* National War Labor Board, Transcript, Executive Meeting, February 6,1942, pp. 50 If.




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DISPUTE S E T T L E M E N T A N D W A G E STABILIZATION

tation. Moreover, by the time wage standards were relaxed aftei
V J-day there were groups o f employees, although a small minority
who had received increases o f hourly earnings o f only 15 percent whih
the cost o f living had increased at least 30 percent over January 1941
The Little Steel form ula, which severed the tie between wages anc
consumer prices in the wage stabilization program, no doubt con­
tributed to the severity o f the problem o f reconciling the various in­
terest groups after VJ-day. In the second place, the decision tc
separate wage and price controls withdrew, or certainly weakened
one o f the strongest supports fo r price stabilization to judge by the
experience o f other countries. W here wages are tied to the cost oi
living, the farm and business interests are more keenly aware o f the
consequences o f price increases.
Under title I I o f Executive Order 9250 and the policy directive oi
the D irector o f Economic Stabilization dated May 12,1943, the Board
was instructed that no wage adjustment requiring a change in price
ceiling could become effective without the approval o f the Director
o f Economic Stabilization. The D irector o f Economic Stabilization
in fact approved all but a few insignificant cases. W age changes
within the existing wage stabilization standards were virtually never
disapproved on account o f possible price consequences. The Office of
Economic Stabilization developed the principle o f advance approval
o f certain groups o f cases clearly within the wage stabilization stand­
ards even though they involved possible price ceiling adjustments.
Thus wage stabilization was administratively separated from price
controls during the period o f hostilities.
A fter V J-day the principle o f the separation o f wage and price
controls encountered difficulties. W age stabilization then remained
only fo r cases o f wage increases to be used as a basis fo r seeking
revision in price ceilings. The reduced profit margins o f the later
war years and the uncertainties o f reconversion meant that a larger
proportion o f wage cases would involve price relief. The wage in­
creases required to settle industrial disputes could not be approved
within the existing wage stabilization standards and companies would
rather take a strike than absorb the increase. The failure to maintain
the separation o f wage and price stabilization, or to establish a single
agency capable o f handling both simultaneously, resulted in the stabi­
lization impasse o f January and February 1946.*
C . S t a b il iz a t io n

op

W

age

R

ates

N ot E

a r n in g s

The wage stabilization program did not set as its objective the
stabilization o f gross hourly or weekly earnings. The total earnings
o f all wage earners considered as a whole did increase, quite apart•
• See ch. 3, for elaboration of this point.




APPRAISAL OF W A G E STABILIZATION POLICIES

159

from any change in the wage rate structure, as a result o f many
factors—an expansion in the number o f workers employed, an in­
crease in the hours o f work, a shift in employment toward high wage
occupations, plants, and industries, and an increase in output under
piece-work systems o f payment. The stabilization agencies concluded
that increases in money incomes from these sources were directly the
consequence o f increased production. T o stabilize earnings would be
to inhibit wartime output.
A limitation on earnings with an increase in output would have re­
quired a reduction in wage rates, a highly impracticable policy.
Moreover, the additional income created by the factors noted above
was only a small part o f the larger problem o f imbalance between
available goods for civilian consumption and disposable income. The
stabilization program hence concentrated on setting limitations to in­
creases in labor income arising from a change in the price o f labor
services.
D.

E

s t a b l is h m e n t o f a

S e r ie s

of

L im it s

The wage stabilization program involved the establishment o f a
series o f limits for various elements in the wage rate structure. Sta­
bilization consisted in fixing definite limits fo r each dimension o f
the wage rate. W age increases in themselves were not conceived by
the Board as unstabilizing provided they involved bringing particu­
lar minority groups o f employees up to specified stabilized limits.
The Little Steel form ula provided the lim it to general or acrossthe-board wage rate increases. The substandard wage, determined
by the Board to be initially 40 cents per hour in 1943 and finally 55
cents in February 1945, provided the lim it to increases on the special
equity o f substandards o f living. The bracket system provided a
lim itation to increases based upon interplant wage comparisons.
Even in rare and unusual cases involving critical needs o f war pro­
duction, the Board prescribed detailed procedures to assure that the
wage change was part o f a comprehensive governmental attack on
the bottleneck. Finally, the principle o f stabilizing limits was ex­
tended to fringe wage adjustments such as shift premiums, vacations
with pay, merit increase and progression plans, and job evaluation
plans or other methods o f ordering the internal wage structure o f
a plant.
The first lim it established was that for general wage rate increases
on account o f increases in the cost o f living (m aladjustment). The
last set o f stabilized limits concerned “ fringe adjustments.” This
progression has been varyingly interpreted. In many quarters each
successive lim it was depicted as a “ loophole” or evasion o f the Little
Steel formula. In other circles the development o f these different




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DISPUTE SETTLEMENT AND WAGE STABILIZATION

standards is portrayed as an example o f the flexibility o f the wag<
stabilization program. A rigid program involving a virtual freezt
on wages would have been too brittle.
The succession o f stabilized limits prim arily reflected the fact thal
employers and unions shifted the focus o f their applications and de­
mands as other avenues for wage adjustment were exhausted. By the
end o f 1943 cost-of-living adjustments under the Little Steel formula
had been substantially exhausted. The ratio between applications de­
cided by the Board involving claims o f gross inequities (wage bracket
standard) and those involving the Little Steel form ula had reached
almost five to one.4 The inflationary pressures which had been sealed
at one point tended to take other forms. In a democratic and in­
genious community, administrative agencies can count on new forms
o f requests fo r wage increases. Thus, the wage stabilization program
involved the study and formulation o f a new lim it as the focus o f the
inflationary pressures shifted. It would have been difficult, if not
impossible, in advance to formulate a comprehensive system o f sta­
bilized limits.
A complete wage freeze throughout the varying phases o f the war
economy would have been impossible viewed solely from the per­
spective o f the most effective prosecution o f the war. In the first place,
the war economy required different wage differentials among job clas­
sifications, plants, localities and industries than those inherited from
the prewar economy with substantial unemployment. In the second
place, it would have been impossible to anticipate all o f the various
form s o f wage adjustments created by the resourceful parties to col­
lective bargaining. The gradual development in turn o f the Little
Steel formula, wage brackets and fringe limits really constituted an
adaptation to the shifting inflationary pressures. The wage stabiliza­
tion process involved the construction o f successive stabilizing limits.
Moreover, a complete wage freeze would have created such obvious
cases o f injustice as to be seriously damaging to morale and output.
A complete freeze would have been politically impossible.
E. U se

of

D elay

The wage stabilization program involved the skillful use o f delay in
making changes in policy. Since a program o f absolute wage freeze
was impracticable, i f not impossible, the difference between wage sta­
bilization and wage inflation is simply the rate o f wage change. One
o f the principal objectives o f stabilization is to slow down the rate
o f change. This involved the skillful use o f delay. A distinction
•must be made between delay in the processing o f cases under an es­
tablished policy and delay in the change in any policy. The Board
4Memorandum from George W. Taylor to Hon. Fred M. Vinson, March 13,1944.




APPRAISAL OF WAGE STABILIZATION POLICIES

161

sought to speed up the action in cases under an existing policy.
Changes in policy were handled with great caution.
Delay in the handling o f cases may involve heavy risks. Industrial
relations may be kept stable if the parties are satisfied that their cases
are being processed and that they w ill not suffer by delay. The ret­
roactive policy o f the Board assumed that the interests o f the parties
would not suffer by resort to orderly processes. Y et any conscious
stalling would have been explosive in its consequences. Disputes
which are allowed to remain fo r prolonged periods may fester and
create great unrest.
The use o f delay as a stabilization technique is a subtle process re­
quiring the most skillful administrator. The series o f steps by which
decision on the request to change the Little Steel formula was pro­
longed played a significant role in the wartime wage stabilization pro­
gram. The Congress o f Industrial Organizations pressed a series o f
dispute cases in 1943 and 1944 containing wage demands which could
be granted only under a liberalized wage stabilization program. The
American Federation o f Labor petitioned on February 9,1944, fo r re­
laxation o f the Little Steel formula. Both organizations conducted
persistent campaigns charging the inadequacy o f the Bureau o f Labor
Statistics cost-of-living index on which the Little Steel form ula was
based. The final step was not taken by the Board in this matter until
its report to the President in February 1945. Throughout the period
a succession o f procedural steps were taken; yet the basic decision was
delayed.
It is exceedingly difficult to determine how large a part o f the delay
was a conscious policy and how much the result o f inertia and admin­
istrative complexities. In the hands o f a skillful executive the dis­
tinction may not be important. A good deal o f stabilization was
delay, or more accurately, simply slow motion.
F . S t a b il iz a t io n

and

D is p u t e S e t tl e m e n t

The wage stabilization program was an integral part o f machinery
to decide wartime labor disputes. The wage stabilization program
was significantly shaped by its being administered by the same agency
charged with primary responsibility fo r maintaining industrial peace.
The NW LB always had in mind the double objectives o f industrial
peace and wage stabilization. A t times these objectives were con­
flicting and wage stabilization interfered with dispute settlement.
On other occasions the requirements o f industrial peace resulted in
some sacrifice o f the stabilization objectives.
An administrative separation o f these two responsibilities would
not have been practicable. W age issues constitute one o f the most




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DISPUTE SETTLEMENT AN© WAGE STABILIZATION

important subjects o f industrial dispute. Constant confusion and
friction would undoubtedly have resulted if the settlements o f one
Government agency, charged with responsibility to maintain indus­
trial peace, were disapproved by another agency, charged with wage
stabilization responsibilities. The effective settlement o f disputes
would soon have gravitated to the agency with the real authority to
approve the wage adjustment. The combination o f dispute settle­
ment and wage stabilization authority placed in one organization the
delicate problems o f balance between these objectives.
The railroad wage dispute o f 1943 offers a striking example o f the
difficulties inherent in divided administrative responsibility. The
railroad industry was one o f the few m ajor areas not under the juris­
diction o f the N W LB. It had its own dispute settlement and wage
stabilization machinery. W age changes in the industry, however,
were required to conform to stabilization rules as formulated by the
Director o f Economic Stabilization and the NW LB. In 1943, a m ajor
crisis developed when the Stabilization Director disapproved a wage
settlement for the railroad industry resulting from a recommendation
o f an Emergency Board. The disapproval was based upon the ground
that the settlement exceeded the amount allowable under the Little
Steel formula which had been evolved by the NW LB. The Stabiliza­
tion D irector’s decision was follow ed by protests from the railroad
unions, a threatened railroad strike, Government seizure o f the rail­
roads, a vote by the United States Senate favoring the position o f
the unions, the appointment o f two additional Emergency Boards,
and direct intervention by the President as mediator and arbitrator.
In the end, after months o f confusion and danger to the war program,
the dispute was resolved by a settlement which exceeded the award
originally disapproved by the Stabilization Director.®
The N W LB, as a matter o f policy, refrained from consulting with
the D irector o f Economic Stabilization regarding particular cases
prior to the decision o f the Board. The Board as a tripartite body
did discuss several cases with the Director (the Southern California
Aircraft and the Big Four Meatpacking cases) in early 1943. The
experience proved mutually unsatisfactory and was not utilized there­
after. Such conferences on particular cases tended to destroy confi­
dence in the Board as a dispute-settling agency o f the last resort and
to shift responsibility to the Stabilization Director. The public mem­
bers o f the Board did, however, thereafter continue to consult with
the D irector on issues o f stabilization policy.
•For a detailed discussion of the railroad dispute, see Colston E. Warne (editor), Year­
book of American Labor (New York; Philosophical Library, 1945), ch. XVII. The larger
figure of the final decision included an amount regarded as compensation for the unions
agreement to forego premium overtime pay for the duration of the war.




APPRAISAL OF WAGE STABILIZATION POLICIES
II. A

dministrative

T echniques

of the

163

Stabilization P r o g r a m

It was observed above that the wage stabilization program defined
limits fo r each o f the principal elements in the wage structure. The
effectiveness o f the program depended in considerable degree upon
the main techniques used to establish and administer this series o f
limits.
A. T h e L it t l e S te e l F o r m u la
The Little Steel formula was intended to set a lim it to the increase
in the general level o f wages arising from across-the-board increases
applicable to all employees in a bargaining unit, plant, industry, or
other customary area o f wage setting. The Little Steel form ula
permitted an increase in straight-time hourly earnings o f 15 percent
over the January 1941 levels. It was intended to permit laggard
groups o f employees to receive increases already obtained by the
m ajority o f workers. In postwar language, it was intended to com­
plete a round o f wage increases.
The 15 percent figure in the Little Steel formula was derived from
the percentage increase in the cost o f living despite the fact that the
wage stabilization program fundamentally involved a separation o f
wage and price controls, with the announced intention o f stabilizing
both at, or as near as practicable, their September 1942 levels. Since
wage and price controls were to be separated, it might have been more
convincing if the allowable increase under such a formula had not
been related to cost-of-living changes. It might have been possible,
for example, to adopt a figure (in cents per hour) based upon the
average increase in the wage rate o f employees who had received
increases between January 1941 and May 1942.
The attempt to separate wage and price controls is itself open to
question, as had been noted. The device o f tying wages to prices
explicitly, at least within some limits, has the advantage o f intensify­
ing the interest o f other economic groups in the community, such as
industrial management and agriculture, in the stabilization o f the
cost o f living.
The use o f a percentage figure in the Little Steel formula had the
effect o f providing larger cents per hour increases fo r employees in
higher-paid establishments than for lower-paid groups. In a period
when the economic forces at work in the labor market were operating
to narrow wage rate differentials, it was unfortunate that the Little
Steel form ula should have operated to have increased the cents per
hour differentials among different groups o f workers. I f the formula




164

DISPUTE: SETTLEMENT ANiD WAGE STABILIZATION

had been expressed in cents per hour this lim itation might have beer
avoided.
The adoption o f any limitation on across-the-board increases
inevitably tended to create the notion o f a right to such increases.
Stabilization essentially involved holding the higher wage rates and
narrowing the differentials among lower-paid employees starting
from a period in which differentials reflected labor markets with sub­
stantial unemployment. The Little Steel form ula tended to create
in the minds o f the highest paid employees a right to an increase,
thus making more difficult the task o f holding the top rates.
B . B r a c k e t P o l ic y fo r I n t e r p l a n t I n e q u it ie s

The initial policy o f the Board with respect to correcting interplant
inequities had been loose6 and the President’s “ hold-the-line” order
o f A pril 8,1943, provided for removal o f authority to make such wage
adjustments. The device o f wage brackets was developed between
A pril 8, 1943, and May 12,1943, after the NW LB convinced the D i­
rector o f Economic Stabilization that it was economically and polit­
ically undesirable to freeze all interplant wage relationships. As
described in chapter 5, the conduct o f the war under conditions o f a
tight labor market required the narrowing o f some o f these differen­
tials. The wage bracket idea was derived from the notion that wage
stabilization under wartime conditions had to give greater weight in
wage setting to the locality or community factors than to the indus­
try influences. A sound and tested minimum rate was thus estab­
lished fo r each principal occupation in an industry in a locality.
The experience o f the bracket program clearly demonstrated that
there were large areas o f the wage structure which had to be handled
upon an industry rather than a locality basis. Industry influences
predominate in many sectors o f the economy, such as coal, railroads,
and basic steel. The locality approach to wage stabilization can in
fact be applied only to a portion o f all wage rates.7
The bracket approach also had to recognize eventually that in many
localities there were only a few firms in particular industries; many
firms did not readily fa ll into any industrial classification. In these
circumstances the appropriate bracket was virtually impossible to es­
tablish. Consider, for example, a macaroni factory in a small textile
town, or a plant making glass tubing for penicillin in any com­
munity. The experience under the bracket program emphasized
the difficulty o f determining the appropriate sound and tested rates
in many small communities and fo r many relatively unique plants.*
* See U. S. Department of Labor, The Termination Report of the National War Labor
Board (1948), vol. I, ch. 20.
* See ch. 5 for detailed discussion of the conflicting pulls of industry and area factors.




APPRAISAL OF WAGE STABILIZATION POLICIES

165

The bracket program also encountered a problem in the community
in which virtually all plants operated under union conditions with
standard rates. Under such circumstances it became increasingly d if­
ficult to refuse to bring a few laggard plants up to the standard union
rates, despite the fact that the bracket minimum ordinarily was sup­
posed to be set at a point below the “ prevailing rate.”
Nevertheless, there can be little doubt that the bracket approach
was an effective technique o f wage stabilization for local industries
in communities in which a number o f plants were found in an indus­
try. As conditions varied from these circumstances under which
the bracket program was conceived, the task o f determining inter­
plant wage rate differentials became more difficult, and more fre­
quently the new rates were the product o f judgment and bargaining
among Board members.
C. S u bstan dard s
The policy o f providing for the approval o f wage-rate increases
on the ground o f substandard o f living encountered two groups o f
problems. In the first place, the determination o f the level, in cents
per hour, up to which wage increases could be approved naturally
evoked controversy between labor and management representatives.
The relation between figures used by the NW LB (55 cents finally) and
the 40 cents per hour in the Fair Labor Standards A ct raised ques­
tions in Congress. The determination o f substandard levels was never
related to minimum budget costs for wage-earner families. The use o f
the term “ substandards o f living” consequently created some am­
biguity. The levels selected by the NW LB were always a judgment
based upon the structure o f wage rates.
In the second place, the adjustment o f wage rates above the mini­
mum follow ing an increase in substandard wage rates proved to be a
perplexing problem. In general, increases at the lower end o f the
wage scale in a plant could not be used as a basis for equal wage in­
creases all the way up the line to the top. The wage-stabilization
policy insisted upon “ tapered increases” under which successively
smaller increases were applied, and finally no increase at all, proceed­
ing up the wage rate scale. This policy resulted in the dislocation o f
normal wage-rate relationships between job classifications. In some
cases, such as the cotton textile and railroad industries, these changes
proved so impracticable that subsequent increases had to be granted
to higher-paid employees to restore the differentials between job
classifications.
From the beginning o f the stabilization period it was generally
agreed that special consideration should be given to the lowest wage
groups. Despite the problems mentioned above, the substandard
policy o f the Board was never seriously challenged.




166

DISPUTE SETTLEMENT AND WAGE STABILIZATION

D. P ro m o tio n s

and

R e c l a ss if ic a t io n s

Perhaps the most difficult task o f the wage-stabilization program
was to set standards fo r increases which took the form o f promotions
reclassifications, and merit increases. Every wage rate in the country
m ight be frozen but substantial increases in labor income and laboi
costs could occur i f employees were frequently promoted and reclassi­
fied without regard to the actual work which they perform ed. The
task o f setting limits in this area was difficult not only because it
involved the detailed supervision o f the handling o f m illions o f indi­
vidual employees but also because it was difficult to distinguish be­
tween promotions and reclassifications and merit increases which
reflected increased skill and those changes which were intended as
evasions o f the wage-stabilization program. The war effort required
considerable dilution in the labor force. Still many promotions were
no doubt a form o f evasion.
It is easy to criticize this phase o f the work o f the National W ar
Labor Board as represented by General Order No. 31. It is difficult,
however, to provide a ready alternative. Any wage-stabilization pro­
gram must attempt to deal with these problems o f individual prom o­
tions and reclassifications, or the whole program can readily be
undermined. It is a problem which has its counterpart in price stabi­
lization, the low end item.
The setting o f limits in the area o f promotions and reclassifications
might have been simplified if the establishment o f new rate ranges had
been discouraged and if the rules in this area had been established at
an early date in the wage-stabilization program. The problems became
acute as other form s o f wage increases were exhausted, and the rules
in this area had to be imposed after the situation had substantially
deteriorated. A more vigorous and independent program o f enforce­
ment also might have improved the record o f stabilization in this
regard.
E. F r in g e I ssu es
The inflationary pressures under the wage-stabilization program
shifted during 1944 and 1945 toward “ fringe” items as other form s o f
wage increases were exhausted under the stabilized limits. Stand­
ards were developed fo r vacations with pay, shift premiums,
and other form s o f benefits. As in the case o f any stabilizing lim it,
these fringe standards came to create in the minds o f labor leaders
and workers the notion that they were entitled to such benefits as a
matter o f right. It became increasingly difficult to deny such in­
creases to any group o f employees.
The establishment o f separate standards fo r each form o f fringe
benefit made it difficult to consider the group or “ package” o f such




APPRAISAL OF WAGE STABILIZATION POLICIES

167

benefits as a whole. In the normal collective-bargaining process one
type o f benefit may be traded for another. The parties for separate
reasons may prefer one form o f benefit to another. Y et the wagestabilization program did not recognize these bargains over a total
‘•package.” It appraised each fringe issue on its independent and
isolated merits. Thus the parties might prefer 3 weeks’ vacation and
no shift premium. The standards established in the wage-stabiliza­
tion program, however, might compel them to adopt 2 weeks’ vaca­
tion and a shift premium. The standards on these fringe benefits
established in the wage-stabilization program substantially distorted
the bargaining process which would have considered the package o f
benefits as a whole.
F. A d m in is t r a t iv e R e spo n sib ilit ie s
In addition to the above comments on the main administrative tech­
niques utilized in the wage stabilization program some brief atten­
tion must be directed to the administrative division o f responsibility
for the total program. As is described in chapter 7 on jurisdiction,
the Bureau o f Internal Revenue had the responsibility for stabilizing
most o f the higher salaries; the Department o f Agriculture concerned
itself with agricultural wages; the National Railway Labor Panel
had the responsibility for employees under the Railway Labor A ct;
the Arm y and Navy were delegated responsibility for wage stabiliza­
tion among the civilian employees. Other Government departments
were delegated similar authority over their employees. They were
supposed to conform to Board criteria and their actions were subject
to Board review. There was little attempt on the part o f the Office
o f Economic Stabilization to coordinate the activities o f these various
stabilizing agencies. As a result there were serious differences in the
ways in which wage stabilization standards were applied.
The relative inactivity in the stabilization o f agricultural wages
perhaps had some justification because these wage rates started from
exceedingly low levels which were a consequence o f the large excess
o f labor supply on farms at the outset o f the war period. The d if­
ferential between farm and industrial wage rates was narrowed
throughout the period o f hostilities. More vigorous and active wage
stabilization in agriculture would have been required were it not for
the high level o f industrial wages. The separation in administration
might have been more serious under circumstances o f a tight labor
market from the start.
The division in administrative responsibility arose prim arily from
political considerations.. The salaries o f executives could not ap­
propriately be limited by an agency tripartite in character. More­




168

DISPUTE SETTLEMENT ANiD WAGE STABILIZATION

over, the special problems o f executive compensation were fam ilial
to the Bureau o f Internal Revenue. W hile wage setting in the rail­
roads is in part isolated from the rest o f the industrial community,
it is doubtful i f an entirely separate administrative agency was re­
quired. There is little doubt that the railroad industry had a special
legislative position, as was evidenced by the action o f Congress calling
for an approval o f the 8-cents-an-hour increase disallowed by the
Director o f Economic Stabilization in 1943.
G . S elf -A d m in ister ed R u les

The NW LB provided that in certain respects the wage stabilization
program should be self-administered. Firms with eight or fewer
employees were, with some exceptions, excluded from the program
fo r purposes o f administrative convenience. Approval o f individual
wage increases in conformance with an established plan o f merit
rating or progression was provided by general order. W age in­
creases up to specified minimum levels were also approved in advance
by general order. In general, however, the W ar Labor Board made
relatively little use o f such self-administering rules. It is likely that
more could have been done in this respect. Such a step would have
lightened the Board’s load.
H . C o lle ctin g W

age

D ata

The wage stabilization program required comprehensive occupa­
tional wage rate data on a local labor market and industry basis.
These data became particularly important after the May 12, 1943,
P olicy Directive required the establishment o f “ brackets,” occupation
by occupation, fo r the correction o f interplant wage inequities.
There were two principal sources o f wage information—those data
provided by the parties, and wage information compiled by the Bureau
o f Labor Statistics. A distinction must always be drawn between the
collection and compilation o f wage data, and the use o f wage statistics
as standards in a stabilization program. The labor and industry
members o f the W ar Labor Board came to have a real interest in
the process o f securing wage information. The selection o f labor
market areas, the definition o f job classifications and the grouping
o f firms into industries were certain to influence the wage data ap­
plicable to a particular case.. The National W ar Labor Board con­
tracted to the Bureau o f Labor Statistics the collection and presenta­
tion o f wage data. The details o f the program o f collecting wage
information, however, were worked out in conference with repre­
sentatives o f the NW LB. The arrangement was a sound one. Un­
fortunately the sudden development o f the brackets policy imposed




APPRAISAL OP W A G E STABILIZATION POLICIES

169

a Herculean burden upon the Bureau which could not be dealt with
as speedily as was desired.

III.

St a n d a r d s

for

A

ppraisal o f

W

age

Stabilization

A n appraisal o f the wage stabilization program must commence
with the standards against which the performance o f the stabilization
program is to be compared or tested. A tight system o f wage control
may facilitate price stabilization but may make industrial peace and
the movement o f wage earners to war production plants more difficult.
Is wage stabilization to be appraised by its effects on wage rates, on
industrial peace, or on war production ? Similarly, a normal adminis­
trative agency might produce more stable and consistent application
o f wage stabilization criteria, but the institutions o f collective bargain­
ing would tend to be more seriously impaired fo r postwar industrial
relations than under a tripartite system. Is wartime wage stabiliza­
tion to be judged in terms o f its postwar consequences?
Clearly there are a variety o f standards which may be utilized to
evaluate wartime stabilization. This section is intended to identify
some o f the more significant o f the possible tests and to appraise the
program in terms o f these norms. A ny final judgment o f the war­
time wage stabilization program must designate the relative im por­
tance o f the various objectives o f the program.

A.

Controls

versus

No C ontrols

W age stabilization may be appraised by comparison to what would
have happened in the absence o f a program o f controls. This standard
need not receive much attention here since it is generally conceded that
in wartime, in the absence o f a comprehensive system o f price, wage,
and production controls, resources may readily be diverted to nonwar
purposes and that cumulative inflation may seriously reduce and
disrupt the national effort.
A comparison o f w age8 and price movements in previous war pe­
riods with the experience during W orld W ar I I provides some basis
fo r judgment on what would have happened in the absence o f con­
trols. In the Civil W ar and W orld W ar I the cost o f living increased
by a much larger percentage than during the recent hostilities. The
percentage increases in hourly earnings and the cost o f living for these
three war periods are as follow s: 9
8 Since wage rate data are not available, average hourly earnings are used.
9 Alvin H. Hansen, “ Factors Affecting the Trend of Real Wages.” American Economic
Review, vol. XV, March 1925, pp. 27-42; and Bureau of Labor Statistics.




170

DISPUTE: S E T T L E M E N T A N D W A G E STABILIZATION
Average
hourly
earnings

Civil War (1861-65)
First World War:
1914-20_______
1917-20_______
Second World War:
1939-47_______
1941-45_______

Cost o f
living

54. 4

149. 2

142.0
72. 9

100.0
48. 4

67. 5
40. 2

52.0
22. 5

The recent record of stabilization is the more outstanding when account
is taken of the fact that production for war purposes constituted so
much larger a share of total output during the recent conflict. The
proportion of the national output diverted to war at the peak of the
effort in World War II was at least twice that at the peak of World
War I.
The absence of price and wage controls would not only have meant a
much greater increase in the cost o f living but most probably also
a greater relative rise in prices and consequently a fall in real hourly
earnings, as occurred in the Civil War period. It is true that much of
the rise in the real hourly earnings had to take the form of savings—
since goods were not available—which were expended in the post­
war period, 1946-48, when prices had increased. Nonetheless, no
wage or price controls would have meant a rapid deterioration in the
real wage rate or serious labor difficulties.
B. T ransfer of L abor
Wage stabilization may be appraised in terms of its contribution
to the transfer of labor to war purposes. The central task of a war
economy is to transfer resources of all types from unemployment or
from peacetime uses to war purposes. In the case of labor services,
manpower may also be recruited from those normally outside the labor
force. When dispensable peacetime goods and services have been
reduced to a minimum, the task becomes the transfer o f resources from
less to more critical needs o f the war economy. The reallocation of
the civilian labor force is a vital aspect of the maximization of the
war potential o f the community. The wage structure may assist,
be neutral in, or hinder the transfer of the labor force.
There has been some tendency to underestimate the role which
changes in the wage structure had during the war period to facilitate
the reallocation of the labor force. This underemphasis arises in
part from the fact that the most significant changes in wage structure
for these purposes took place before the formal wage stabilization
program went into effect in October 1942. Furthermore, many




APPRAISAL OF WAGE STABILIZATION POLICIES

171

changes in wage structure which were approved on a variety of
grounds other than manpower actually facilitated the distribution of
the work force required by the war. Yet the stabilization agencies
were naturally reticent to place the grounds for approval explicitly on
the important needs of the war effort. Such exceptions were reserved
for genuinely critical cases.
During 1941 and the first half of 1942 workers in the shipbuilding
and the aircraft industries received very substantial wage increases
relative to other industries. These favorable wage structures, during
the period o f most rapid expansion of the two industries, provided a
pull attracting manpower. Other factors such as the longer hours
o f work at overtime pay, the draft, and the opportunity for patriotic
service all played a part. Yet these wage differentials were conducive
to, and no doubt facilitated, the manpower flows required by a rapid
expansion in these two basic wartime industries.
The coal industry received much larger than average increases in
the industrial wage rate structure during the war period. The indus­
try moved up relatively to a position near the top of the wage rate
structure at the end of the war era. The status of these increases under
the stabilization program was subject to some uncertainty and sus­
picion. Relative increases were continued into the postwar period,
1946-48, so that wages in coal mining came to rank virtually at the
top of the wage rate structure. The change in the position o f coal
mining fundamentally reflected the world-wide shortage o f coal
and the fact that the prewar wage was the product of 20 years
of depressed conditions in the industry. This relative change in wage
structure was instrumental in holding men in the industry during the
war and securing requisite replacements.
The cotton textile industry received very substantial increases,
measured in percentage terms, on the ground of the substandard wage
criteria. These increases were vital to man an industry whose internal
wage structure and relative level reflected depressed conditions and
large stagnant pools of labor in mill towns adjacent to rural areas, par­
ticularly in the South. Wages in the industry, relative to others,
had to rise in order to secure and retain the requisite manpower for
civilian and military production.

The textile industry case is illustrative of the general proposition
that all wage differentials will be narrower under conditions of high
level employment. The prewar wage structure of the country, includ­
ing the differentials among firms by area, job classification, and indus­
try, had developed during a period of considerable unemployment.
The wage structure appropriate to high level employment, quite apart
921297— 50------ 12




172

DISPUTE: SETTLEMENT AND WAGE STABILIZATION

from war conditions, must be different from the wage structure
developed in the normal times as we have known them over the
past century. The war period saw such a narrowing of wage differ­
entials, at least when measured in percentage terms.
Chapter 5 o f this report evaluates the manpower consequences o f the
work o f the Board and the specific standard in the wage stabilization
program which provided for exceptional increases in rare and unusual
cases involving the critical needs of war production. The significant
point here is that wage changes made before the Stabilization Act of
October 1942 and the application of wage standards other than the
rare and unusual case produced a wage structure for the country which
facilitated war production. In the main, other wage standards were
so administered as to eliminate differentials which were peculiarly
the product o f a depressed economy and to produce a wage structure
more appropriate to a period of high level employment.

The above analysis should not be construed to imply that wage rate
differentials in themselves are normally, or even under war condi­
tions, a highly effective device to secure rapid movements and adjust­
ments in the labor force among areas, localities, industries, and occu­
pations. There is a considerable body of evidence10to show that wage
differentials are normally, in short periods, not an effective stimulant
to movement of workers between jobs.
It is true, however, that the role o f wage differentials in inducing
movement is greater in tight labor markets than in areas of substan­
tial unemployment. The structure of wage differentials may facili­
tate or retard movements in the labor force. There is considerable
basis for the judgment, some of it outlined above, that the changes in
wage structure prior to October 1942 and to a lesser extent during the
wage stabilization program, facilitated the transfer of wage earners
required by the war effort. The point is not that wage changes were
used extensively to transfer workers. Rather, wage structures which
were serious impediments to desired movement were modified to
permit other factors inducing movement to operate. Obsolete wage
structure, such as cited in the case of coal and textiles, would have
seriously impeded war production. The wage adjustments created a
more favorable environment for active factors to direct the flow of
manpower from other uses, from unemployment and from outside the
labor force.

1 W. Rupert MacLaurin and Charles A. Myers, Wages and the Movement of Factory
0
Labor, Quarterly Journal of Economics, XLII (February 1943), pp. 241-264; Gladys L.
Palmer, Research Planning Memorandum on Labor Mobility (New York: Social Science
Research Council, 1947) ; Lloyd G. Reynolds in A Survey of Contemporary Economics,
edited by Howard S. Ellis (Philadelphia: The Blakiston Co., 1948), pp. 255-287.




APPRAISAL OF WAGE STABILIZATION POLICIES

173

C. E ffect U pon W age Structure1
1
The wage stabilization program may be appraised in terms of its
effects upon the level and structure of wage rates and earnings. Any
analysis of the wartime movement of wage rates and earnings must
commence with an examination of the various possible measures of
wages and earnings. Chart I indicates the movement o f urban wage
rates, gross average hourly earnings and average weekly earnings in
the period 1941-47.

Urban wage rates reflect general changes in hourly or piece rates,
changes in the rates for individual job classifications and the effect
o f output changes under piece rate methods of wage payment.
Straight-time hourly earnings (adjusted) further reflect changes in
the composition of the labor force as among high and low paying
occupations, firms and localities and the effect of shift premiums.
Gross hourly earnings include, in addition to these factors, the impact
of changes in the amount of overtime premium work. Gross weekly
earnings further include the effect of changes in the weekly hours of
work.
Between January 1941 and July 1945 basic wage rates increased
24 percent; urban wage rates increased 32.4 percent; and estimated
straight-time hourly earnings (adjusted) increased 70.6 percent. The
rise in the cost of living, corrected as recommended by the President’s
1 The Termination Report, vol. I, pp. 547-559.
1




174

DISPUTE: SETTLEMENT AND WAGE STABILIZATION

committee on the cost o f living, increased 33.3 percent in this same
period.
The wage stabilization program, as has been noted, was directed
toward controlling the structure of wage rates rather than o f weekly
earnings. The weekly earnings of manufacturing employees increased
from $26.64 in January 1941 to $45.45 in July 1945. The following
table indicates the relative importance of the various components
which produced this increase in earnings.
P ercent of
total
increase

A m ount

Weekly earnings, January 1941____________________________
Increase due to—
Changes in basic wage rates 1_________________
$6. 22
Liberal administration of merit increases, piecerate adjustments, etc., and changes in output of
________________________
2. 17
piece-rate workers 1
Changes in distribution of workers as between
regions, occupations, and shifts; and changes in
provisions for premium pay for overtime work
and for work on extra shifts 1
_______________
2. 10
Changes in distribution of workers as between
industries1________________________________
1.40
Extension of workweek 2______________________
4. 85
Additional premium payment for overtime work2. 07

$26. 64
33

12

11
7
26
11

Total increase______________________________________

18. 81

Weekly earnings, July 1945_________________

100

45. 45

1 At January 1941 hours.
* At July 1945 straight-time rates.
Source of data: The Termination Report, vol. 1, p. 553.

The level o f weekly earnings of wage earners was substantially
increased during the war period as indicated in the table above.
Probably two-thirds o f the increase, however, was associated with
expansion in war production. Only a third of the increase in weekly
earnings represented a rise in basic wage rates. Some part of even
these adjustments was required to adapt wage structures to the war
economy for manpower reasons. Had basic wage rates been permitted
to increase significantly more than they did, unit labor costs would
have increased still more, thereby greatly increasing the pressure on
prices.
D. E ffect on D istribution of I ncome

The wage stabilization program may be appraised in terms of the
equity o f its effects on various groups in the community. The stabili­
zation program as a whole decisively affected the allocation of the
real costs o f the war. The wage stabilization program may be evalu­




APPRAISAL OF WAGE STABILIZATION POLICIES

175

ated (a) in terms of its effects on the relative position of major eco­
nomic groups in the country and ( i ) by its impact upon the relative
status o f various groups of wage earners.
(a) There are a variety o f ways in which the relative economic
status o f wage earners during the war period can be tested. The
share o f the compensation of employees in national income rose from
63.7 percent in 1940 and 61.9 percent in 1941 to 67.6 percent in 1945
and then declined to 65.4 in 1946, 63.0 in 1947, and to 62.0 percent
in 1948.1 The small drop at the outset of the war and the larger
2
wartime bulge in the share of national income going in the form of
the compensation of employees is typical of developments in other
countries. The wartime increase can probably be attributed pri­
marily to the relatively greater expansion of industries, such as the
metal manufacturing area, in which the ratio of labor’s participation
in income is relatively higher than in other industries.
The comparison of the movements of wage rates and corporate
profits during the war period has been the subject of extensive con­
troversy.1 The choice of a base period and the use of profits before
3
or after taxes have figured prominently in the differences between
spokesmen for industry and labor unions. The Nathan report,1 for
4
example, emphasized that corporate income before taxes rose by
approximately 275 percent between 1939 and 1944 while wages and
salaries from private employment rose by only 138 percent. The
choice of a 1941 base, the Machinery and Allied Products Institute
emphasized,1 will show that wages rose by a greater percentage than
5
profits. Spokesmen for industry suggest that profits be measured as
a percentage o f national income while labor representatives stress the
ratio of profits to net worth. The conclusion is inescapable that there
is no generally accepted base from which to appraise the relative
movements o f wages and profits in wartime. Moreover, it is highly
doubtful if wages and profits ought to be tied together in any short
period or that either side would really consistently prefer such a
policy.
There is little doubt that during the war period agricultural income
rose by a greater percentage than the income o f other sectors. A gri­
cultural prices rose more sharply than others. It has been contended,
however, that at the outbreak of the war the relative position o f agri­
culture was less favorable than other major economic groups in the
1 Midyear Economic Report of the President, July 1948, p. 79.
2
3 For a summary and evaluation, see “ Symposium : Wage Policy” in Review of Economic
3
Statistics, XXXIX (August 1947), pp. 137-160.
1 Robert R. Nathan and Oscar Gass, A National Wage Policy for 1947 (Washington,
4
December 1946).
1 Machinery and Allied Products Institute, Bulletin No. 1965, An Analysis of the Nathan
5
Report Entitled, “ A National Wage Policy for 1947,” December 1946.




176

DISPUTE; SETTLEMENT AND WAGE STABILIZATION

community. Agriculture had been relatively depressed during the
1920’s and 1930’s.
( b)
The wage stabilization program had effects upon the relative
economic status o f different groups of wage earners. The lowest
paid groups received substantially larger percentage increases of
wages under the substandard criterion. The general narrowing of
wage differentials among areas and among firms in the same industry
tended to produce the same result. Differentials were not always
narrowed in dollar terms, particularly when considering the differ­
entials among industries. The war period provided a greater relative
increase in income to those sectors of the working force in which there
had been considerable unemployment during the late 1930’s or which
had the lowest rates.
E.

C o m p a r is o n W

it h

O t h e r C o u n t r ie s

Wage stabilization in the United States may be appraised by com­
parison with the results o f wage stabilization programs in other
countries. Any such standard for evaluation must commence by
recognizing that there are always fundamental differences in insti­
tutions and, incidentally, statistics, among various countries. Yet
these nations were confronted with many o f the same, or at least
similar, problems o f wartime stabilization. Chart I I indicates the
comparative movements of average weekly earnings, the cost o f liv­
ing, and real average weekly earnings for the United States, Britain,
Sweden, Canada, and Australia.1 In all these countries wage stabili­
6
zation was part of a wider program o f inflation control. In each,
to a greater extent than in the United States, wage stabilization was
made to depend upon price stabilization. Stability in the cost o f liv­
ing was conceived to be the primary objective; wage stabilization
could not be reasonably expected if the cost o f living was allowed to
rise.
In three of the countries—England, Sweden, and Australia—wage
stabilization was made effective through collective bargaining or gov­
ernmental machinery o f long standing. The collective bargaining
mechanisms were the sole formal machinery in England and Sweden.
The labor court was utilized in Australia. These institutions were
so well established and so comprehensive as to be readily adaptable
by informal means, as in Sweden and England, or by Government
order, as in Australia, to the wartime task of wage stabilization.
In three o f the countries—Sweden, Australia, and Canada—the
wage level was formally tied to the cost o f living for at least part of
the period. In Canada and Sweden the connection was broken as the
1 Some of the more important characteristics of wage stabilization in these countries
8
are described in Appendix A of this chapter.




APPRAISAL OF WAGE STABILIZATION POLICIES

177

stabilization task became more acute. In both cases price stabilization
was made increasingly effective with the separation.
In none of the four countries was there any attempt to gear closely
together wage stabilization and the function of manpower allocation.
In fact, there is little evidence of any systematic attempt to use wage
changes to influence the flow of manpower even to such limited ex­
tent as exemplified by rare and unusual cases under the NWLB in
the United States. In all countries, however, there is evidence of a
narrowing o f prewar wage rate differentials of all types as labor
markets became tighter.
In all of the four countries the wartime system of controls, includ­
ing wage stabilization, was continued for a longer period than in the
United States with the result that the cost of living did not increase
so rapidly after the war. In all of the countries, however, there were
substantial rises in wages and prices with the problems of adjustment
to a postwar world.
F. P ostwar E ffects
Wage stabilization during wartime may be appraised in terms of
its contribution to postwar industrial relations and wage structures.
Whatever its effects upon wartime conditions, the wage stabilization
program had longer run consequences. These more distant implica­
tions of a wartime program were frequently among the most difficult
problems confronting wartime policy making.
The wage stabilization program contributed to more satisfactory
postwar relations in a variety o f ways. A large number o f top labor
and industry representatives came to know each other, to trust each
other personally, and to work well together. A large number of
younger men received invaluable experience and have since served
in public capacities as arbitrators, mediators, and fact-finders. The
personnel o f the field was very significantly enriched. A great deal
of wage information was collected for the first time and methods
of collection and analysis were developed which have made a perma­
nent contribution to our understanding of wage issues.
The wage stabilization program provided the postwar world with
a lower wage rate level than would otherwise have existed. It is no
doubt a close and debatable question whether postwar industrial rela­
tions would have been improved by an earlier relaxation in the stand­
ards for the general wage level. On the one hand, it can be held
that the Little Steel formula became a symbol which had to be de­
stroyed by the unions; it created a sense of injustice and contributed
to the postwar period of industrial strife. On the other hand, it
may be held that the stabilization program was a precarious balance
at best and any further relaxation of wage controls during the war




178

DISPUTE SETTLEMENT AND WAGE STABILIZATION

period would have resulted in retreat to a much higher level o f prices
by virtue o f the pressure from farm ers and the business community.
T he wage stabilization program made a permanent contribution
to the development o f m ore orderly internal wage structures.

W h ile

a good deal o f the interest in internal rate alinements was derived
from a desire to secure increases made im possible by other wage con­
trols, the intraplant wage structure was im portant in itself fo r pro­
m otions, grievances, and job analysis.

T he careful program s initiated

under the guidance o f the Board fo r changes in wage structures on
an industry scale in basic steel, m eat packing, and cotton textiles con­
stituted significant constructive steps toward im proved relations and
management.

A t the same tim e there were, no doubt, m any job

evaluation plans introduced which served no purpose other than
granting a wage increase.
T he wage stabilization program gave great im petus, ho doubt un­
intentionally, to the grow th o f frin ge benefits. I t has been noted
earlier that when the inflationary pressures were checked on the wage
level and occupational rates, they created demands fo r frin ge bene­
fits which were w idely adopted.

T he wage stabilization program

provided a significant stim ulus fo r the rapid extension o f m any o f
these form s o f benefits— vacations, sh ift prem ium s, sick leave, h oli­
days w ith pay, group insurance, pensions, etc. Som e o f these pro­
visions, such as sh ift prem ium s in continuous operations, m igh t other­
wise never have become widespread. In m ost cases the wage stabili­
zation program sim ply speeded up their development and extension.

IV .

S trategic F actors in the W age S tabilization P rogram

A s noted at the outset o f this chapter, the wage stabilization pro­
gram did not spring fu ll-blow n from a blueprint. The preceding
pages have indicated that it was m olded and shaped to meet the
evolving problem s o f an economy m oving from defense to w ar to
reconversion.

I t was fashioned in the lig h t o f a particular w artim e

environm ent.

A different environm ent would no doubt have pro­

duced a different wage stabilization program .

T h is concluding sec­

tion calls attention to the features o f the wartim e com m unity which
were particularly decisive in producing the wage stabilization policies
appraised in this chapter.
A . C o n d it io n

of t h e

E

conomy

The war effort commenced in an economy w ith substantial unem ploy­
ment.

In the early phases o f the war, production was increased by

placing unem ployed manpower to work.




L ater, new accessions to the

179

APPRAISAL OF WAGE STABILIZATION POLICIES

labor force were im portant in m eeting civilian requirements.

O nly

tow ard the end o f the war was it necessary to depend in large measure
upon transfers from less essential to more essential work to meet m an­
power requirements. W h ile some transfers did take place from the
outset, the particular manpower situations at the outset o f the war
were decisive in shaping the wage stabilization program .
F rom June 1940 to June 1944 unemployment fe ll 7.4 m illions.
Seventy percent o f this decrease took place w ithin 6 months o f the
outbreak o f war (by June 1942) and nearly 95 percent took place
w ithin 18 m onths (by July 1 94 3).

The exhaustion o f this reservoir

was to an extent m itigated by the large increase in the labor force.
The total labor force, including the A rm ed Forces, rose 10.3 m illions
between June 1940 and June 1944.

F orty percent o f this increase

had occurred by June 1942 and 85 percent by June 1943.
The essential point is that the economy entered the war period w ith
substantial slack in the labor m arket.

The upward pressure on wage

rates was m itigated, or was less severe, by virtue of this fact.

In the

period prior to m id-1943 the wage stabilization program facilitated
the manpower movements out o f unemploym ent and into the labor
force.

W hen labor markets quite generally became tigh t and transfers

o f wage earners became the prim ary means o f increasing m ost essential
output, the wage stabilization program became much tighter follow ing
the hold-the-line order in A p ril 1943. T he wage stabilization pro­
gram , in fact the whole program o f wartime controls, was shaped by
the early slack in the system.

B. N ature

of

C ollective B argaining R elations

The degree o f m aturity o f collective bargaining relationships influ­
enced the form o f the wage stabilization program . I t has been noted
that w ell-established collective bargaining, and more particularly
effective N ation-w ide m achinery on both sides, was used to achieve
wage stabilization in Sweden and E ngland. Form al governm ental
agencies were not created fo r wage stabilization purposes as in the
U nited States. The fact that in this country collective bargaining was
not more widespread, that the labor movement was divided, and that
there was not available effective national machinery w ith discipline
and internal control on both sides precluded a policy o f utilizing col­
lective bargaining institutions alone fo r wage stabilization.

O rgani­

zation had not proceeded fa r enough on both sides to bear the heavy
strain o f wage stabilization.

A governm ental agency was the only

practicable form o f adm inistering wage stabilization.

C. L oyalties

of

P arties

There was no question o f the complete loyalty o f all parties in col­
lective bargaining to the cause o f the country. T he labor movement




180

DISPUTE; SETTLEMENT AND WAGE STABILIZATION

and organized managem ent were united in this respect.

There was

little possibility o f one faction seeking to gain an advantage by criti­
cizing leaders who were devoted to the war effort. B y and large, how ­
ever, organized labor and management accepted or tolerated the wage
stabilization program and actually assisted in its development, adm in­
istration, and enforcem ent.
T he absence o f division w ithin the labor movement over the ideology
behind the hostilities and the tacit acceptance o f wage stabilization
perm itted a tripartite agency to function effectively. A no-strike,
no-lockout pledge provided the basis for the peaceful settlem ent o f
labor disputes.

Serious division w ithin the labor movement over the

hostilities and the war aims o f the country would no doubt have made
the no-strike, no-lockout agreement im possible o f achievement and
would have precluded thereby any effective tripartite agency fo r dis­
pute settlem ent or wage stabilization.

A bility T

D.

o

M ain tain L iving S tandards

T he requirements o f war production, the industrial capacity o f the
country, and the expansion in the labor force resulted in a situation
in which probably no actual sacrifice o f livin g standards was required
fo r wage earners on the average or fo r any other m ajor economic
group.

I t cannot be denied that particular groups, such as those de­

pendent upon fixed incomes, did suffer a loss o f real income.

I t can­

not be denied either that particular goods were unavailable. B u t on
the whole there was probably no real decline, a result contrary to
pronounced expectations at the outset o f the war. T he m ajor eco­
nom ic groups m ay be said to have made subjective sacrifices in the
sense o f foregoing the conjectural greater gains that m ight have been
achieved in an unrestricted arena o f economic struggle. T hey m ay
have had to acquire liquid assets instead o f current consum ption.
I t is w ell to remember that the stabilization program was never
put to the test o f operating under conditions o f a general reduction in
liv in g standards fo r all groups or fo r a large and influential group
w ithin the com m unity.
these greater strains.

T he stabilization program never had to face
Such strains could not have been avoided if tw o-

thirds or three-quarters, instead o f one-half o f aggregate output had
been devoted to war production.

I t is im possible to determine whether

the stabilization program would have been adequate in such circum ­
stances.
E.

L evel

P rofits

oe

T he expansion in output associated w ith the war created profit levels
which absorbed much o f the gradual rise in wage structures during the
war period.

O n the whole, profit m argins were fa irly satisfactory in




181

APPRAISAL OF W A G E STABILIZATION POLICIES
1940 and 1941.

T he great expansion in industrial output from these

levels very substantially increased profits.

F rom 1943 until the end

o f the period o f hostilities, higher wages and other costs gradually
began to eat into these profit levels. T he very rapid rise in profit levels
in the defense and early war years perm itted some absorption o f higher
wage costs without political com plications. T he separation o f wage
from price stabilization was made possible by these profit m argins in
the early days o f the war. I f profit m argins had been narrower or had
been relatively constant fo r some period, such absorption would have
been more difficult.
F. P

o l it ic a l

E

q u il ib r iu m

T he stabilization program constituted a delicate political balance
am ong labor, industry and farm groups. T he central strategy o f
stabilization became that o f establishing a political equilibrium or basic
compromise am ong com peting economic groups which would perm it
and be com patible w ith the stabilization o f economic forces in the
economy.17

T he process o f form ulatin g the stabilization program in

the period 1 940-42 involved the delicate balancing o f the political
forces reflecting the interests o f labor, industry and agriculture.

The

capstone o f the stabilization program , the hold-the-line order, which
achieved stability in the cost o f livin g fo r the rem aining 2 % years o f
hostilities, constituted a brilliant political compromise. T he failure
to achieve such a compromise at a m oderately higher level o f wages
and prices after V J -d a y was responsible fo r considerable inflation.
P olitical accommodation

o f the m ajor economic groups o f the

com m unity is requisite to economic stabilization.
A

p p e n d ix

A

W A G E S T A B IL IZ A T IO N IN F O U R F O R E IG N C O U N T R IE S
A . B r it a in
T he B ritish white paper on price stabilization and industrial policy
issued in Ju ly 1941 stated that a hadl and fa st policy o f cost-of-livin g
controls was intended to remove the pressure fo r wage demands.

A

strict control over prices and comprehensive rationing o f the lim ited
supply o f the principal item s in the budget o f the household were
instituted in lieu o f any form al interference w ith norm al channels o f
collective bargaining.

The white paper admonished that both wage

earners and employers should bear in m ind, particularly when dealing
w ith general wage applications, that the policy o f price stabilization 1
11 Philip H. Coombs, “ Central Problems of Political-Economic Management in the Stabili­
zation Program,” lecture delivered at the Industrial College of the Armed Forces, Wash­
ington, June 17, 1947.




182

DISPUTES S E T T L E M E N T A N D W A G E STABILIZATION

w ill be m ade im possible and increases o f w age rates w ill defeat theii
own object, unless such increases are regulated in a manner th at makes
it possible to keep prices and inflationary tendencies under control.
In J u ly 1940, the N ational A rbitration T ribu nal was set up to
decide wage disputes which could not be settled under existing
m achinery and which were referred to it by the M inister o f Labour
and N ational Service.

B u t there were never any criteria issued fo r

determ ining w age adjustm ents com parable to Executive O rders 9250
and 9328.
basis.

W a g e decisions were m ade on an individual case-by-case

In addition, voluntary w age increases, granted by unilateral

action o f the em ployer or as the result o f collective bargaining agree­
m ents, did not require any governm ent approval.

T h e m ovem ent o f

w ages in this system was le ft to be determ ined b y the relative strength
o f the parties to collective bargaining, the degree to which they heeded
the w arnings o f the stabilization white paper, and the pressure o f
w artim e m anpower needs.
A verage w eekly earnings in B ritain rose 82 percent from October
1938 to J u ly 1944, at which tim e the index declined, risin g again at
the end o f 1945 to a h igh point o f 90 percent over the base period. T he
average workweek increased by 3 y 2 hours, from 46.5 in October 1938
to 50 in Ju ly 1943, after which it gradu ally declined to a level below
the prew ar average in January 1946.

A bou t h a lf o f the increase in

w eekly earnings can be assigned to increased w age rates; the index
o f w age rates reached 142 in 1944 (O ctober 1 9 3 8 = 1 0 0 ) and continued
to rise much m ore rapid ly than did our controlled basic rates. Com ­
parison o f the weekly earnings’ trends fo r the U nited States and the
U n ited K in gdom shows a marked sim ilarity, the result o f B ritain ’s
sm aller increase in hours and the larger increase in average hourly
earnings and wage rates. T h e E n glish co st-o f-liv in g index rose
sligh tly higher than ours in the early w ar years, to 128 in 1941 and to
130 in 1944, but from then on it did not fluctuate by m ore than 1 point
u n til M ay o f 1946, when it went up to 132.

In real term s, A m erican

workers experienced a greater increase in real w eekly earnings, but a
m uch sm aller increase in real wage rates by the end o f the w ar.

(These

series have serious lim itations on account o f rationing, distribution
and supply problem s, and differences in the areas o f price control in
the tw o co u n tries.)1
Since the end o f the w ar the real w eekly earnings o f the B ritish
worker have im proved w hile there has been a decline in this country.
T h e difference does not lie in the movements o f m oney wages but
rather as a consequence o f the greater success in the U nited K in gdom
‘ Wages (o) General Report, Report VI, International Labour Conference, Thirty-first
Session, 1948; “ Wartime Hours and Earnings in the United States and Great Britain,”
Monthly Labor Review, July 1944, p. 153; “ Great Britain: Wage Trends and Policies,
1938-47,” Monthly Labor Review. September 1947, p. 285.




183

APPRAISAL OF WAGE STABILIZATION POLICIES

in stem m ing the tide o f postwar price inflation. T h is success probably
can be directly related to the slower rate o f abandonment o f wartim e
controls and anti-inflationary measures.

B. C anada
Canadian wage controls paralleled the Am erican W a g e stabiliza­
tion program in im portant respects and yielded sim ilar results.

At

the end o f 1941 wage rates were stabilized at the level o f Novem ber
24, 1941, w ith cost-of-livin g bonuses to be ordered as determined by
the Canadian W a r Labor B oard.

A t the end o f 1943 the W artim e

W age Control O rder incorporated previous cost-o f-liv in g bonuses into
the basic wage rate and lim ited future adjustm ents to changes neces­
sary to rectify a gross inequality or gross injustice. T h e Canadian
price control program began in the fa ll o f 1941 and included a wide­
spread subsidies program .
The movement o f wages in wartime Canada resembled that in this
country.

T he average weekly earnings index (1 9 3 9 = 1 0 0 ) reached a

high point o f 153.8 in 1944, when real weekly earnings had risen by
31.4 percent over 1939.

A s in the case o f both Great B ritain and the

U nited States, there were changes in the wage structure.

D ifferen­

tials were narrowed between the average hourly earnings fo r men
and women, among industries, and among different Provinces.
C. S weden
Com parison w ith neutral Sweden is somewhat questionable since
the production and manpower requirements o f a belligerent nation
were not present. The basic labor agreements (recommendations to
member organizations) between the Sw edish Em ployers’ Confedera­
tion and the Confederation o f Sw edish T rade U nions were the m ajor
instrum ent o f wage stabilization through the war. In 1939 these
organizations agreed upon, and renewed each year through 1946, a
plan fo r adjustm ent o f wage rates according to changes in the official
cost-o f-liv in g index. A s a safeguard against an uncontrolled wageprice spiral, however, wage adjustm ents were not to be kept on a
parity w ith increases in the price index. In 1940 wages rose by an
amount representing 75 percent o f the rise in livin g costs; in 1941,
50 percent; in 1942, 60 to 70 percent.

A t the beginning o f 1943, the

confederations agreed to hold off any further wage increases Until the
cost-of-livin g index should reach 249 (J u ly 1 9 1 4 = 1 0 0 , January 1 9 4 3 =
2 3 9 ).

Shortly before this level was reached the governm ent an­

nounced a general price freeze which continued until the last quarter
o f 1946.
The success o f this program and the degree to which the basic
agreements were observed is evidenced by the fact that average weekly




184

DISPUTE! SETTLEMENT AND WAGE STABILIZATION

earnings rose by 45.7 percent from 1939 to 1945, w hile the cost-o flivin g index rose 43 percent in the same period. (T axes are included
in the cost o f liv in g .) There was virtu ally no change in the average
length o f the workweek and no movement into higher paying war
industries as in the other countries.
after 1939.

R eal earnings fe ll tem porarily

T he low point came at 89.2 in 1941, after which it rose

to 98.6 fo r 1945 and 105.9 in 1946.2
Sweden like E ngland concentrated upon direct governm ent con­
trols over prices and com m odity rationing.

W a g e demands were

m ost likely to result from unstabilized prices and an inequitable dis­
tribution o f short supplies. T he striking stability o f real wages
under an essentially voluntary system o f basic wage agreements m ust
be related to the prewar history o f effective negotiation o f national
basic agreements by the employers’ and workers’ confederations.
D. A

u s t r a l ia

A u stralia entered the war w ith a high ly developed and centralized
system o f basic wage determ ination m achinery in operation.
Com monwealth A rbitration Court fixed basic rates (m inim a)

T he
fo r

unskilled workers and differentials fo r skills and other special condi­
tions.

T h is m achinery was carried over, w ith little m odification, into

the w artim e stabilization system .

In 1940, the award rates fo r certain

skilled categories were made m axim um as well as m inim um rates,
and in February 1942, the same principle was extended to all em­
ployees. These m axim um rates were pegged at the February 1 0 ,1 9 4 2 ,
levels. A ustralian wage controls m ay seem roughly parallel to the
Am erican measures. B u t the basic A ustralian wage was tied directly
to the cost o f livin g by automatic adjustm ents o f the base rate each
quarter as these prices changed. T h e Price Com m issioner recognized
increases in award wages as justifiable grounds fo r price increases.
In J u ly 1943, the governm ent began reimbursement by subsidies to
em ployers who granted wage increases on account o f living-cost
changes.
In spite o f the difficulties experienced by the Com monwealth G ov­
ernment in stabilizing prices, the program as a whole was quite success­
fu l in m aintaining real wages and preventing an uncontrolled spiral.
F rom 1939 to 1945 the index o f hourly wage rates rose from 109 to
137 (1 9 3 7 = 1 0 0 ) fo r m ale workers.

T h is increase was only 4 percent

more than the rise in the cost o f livin g in the same period.

A s a re­

sult o f increased overtim e and steady em ploym ent during the w ar,
average weekly earnings o f all m ale workers rose 18 percent in the
years 1941-44.

A s in other countries, the structure o f wage differ­

entials was changed as women’s wage rates rose relatively.*
* “ Sweden: Wage Trends and Wage Policies, 1939-47,” Monthly Labor Review, October
1947, p. 431.




185

APPRAISAL OF W A G E STABILIZATION POLICIES

WARTIME TRENDS IN WAGE
EARNINGS AND COST OF LIVING
Five Countries
INDEX

INDEX

150

r -

A U S T R A L IA ,
June

140

(y e a r

6

S t a t e s , Adult Male

b e g in n in g

160

J u ly )

A v e r a g e W e e k ly

130

—t

1 9 3 9 = 1 0 0

W age R a te

i_L

\

1 ______ !
_
r

i
\
\

»C o s t j
o f L iv in g

S \
R e a l A v e ra g e '

120

W e e k ly W a g e R a t e \

100

|

90
80
190
180
170

120

NO

100

90
1939*40 *41 *42 *43 *44 *45 '46 *47 '39 *40 *41 '42 *43 *44 *45 '46 1947
UNITED ST AT ES DEPARTMENT OF LABOR
BUREAU OF LABOR STATISTICS




186

DISPUTE SETTLEMENT AND WAGE STABILIZATION

WARTIME TRENDS IN WAGE EARNINGS AND COST OP LIVING—PIYI
COUNTRIES
Australia:
1. Average weekly wage rate index, six states, adult males, annual averages fo]
12 months beginning July of each year; average of 3 years ended June 1939=100
Source: Monthly Review of Business Statistics, Canberra, March 1948, p. 22.
2. Cost-of-living index (retail price index), six capital cities; average 3 yean
ended June 1939=100. Source: As above.
3. Real average weekly wage rate index, six states, adult males; series (1]
divided by series (2). Source: As above.
Canada:
1. Average weekly earnings index; 1939=100; data not available for 1940 anc
1941. Source: Monthly Labor Review, October 1947, p. 427.
2. Cost-of-living index; 1939=100. Source: As above.
3. Real average weekly earnings index; 1939=100; data not available for 194(
and 1941. Source: As above.
Sweden:
1. Average weekly earnings index; 1939=100. Source: Monthly Labor Re­
view, October 1947, p. 433, from Sweden, Royal Social Board.
2. Cost-of-living index (excluding direct taxes paid) ; 1939=100. Source:
As above.
3. Real average weekly earnings index; series (1) divided by series (2).
United Kingdom:
1. Weekly earnings index; the figures for July of each year are taken as repre­
sentative of the year; October 1938=100. Source: Monthly Labor Review, Sep­
tember 1947, p. 286, from Ministry of Labor and National Service, Central Statis­
tical Office.
2. Cost-of-living index; October 1938=100. Source: As above.
3. Real weekly earnings index; series (1) divided by series (2) ; the figures
for July of each year are taken as representative of the year.
United States:
1. Average gross weekly earnings index; index of annual averages, 1941=100.
Source: Bureau of Labor Statistics.
2. Cost-of-living index, annual averages; 1935-39 average=100. Source:
Bureau of Labor Statistics.
3. Real average gross weekly earnings index; index of annual averages, series
(1) divided by series (2).




CHAPTER J)

Relation o f Wage Control to Manpower
Problems
By John B. Parrish

I. I n tr o d u c tio n

T h i s c h a p t e r is concerned w ith the relationship o f wartim e wage
controls to the flow o f m anpower. T h is relationship m ay in some

cases be very direct and easily recognized and in other cases be very
indirect and difficult to determine.

W a ge adjustm ents1 under some

conditions m ay be a prim ary factor in the flow o f m anpow er; under
other conditions, very secondary. A t tim es, such adjustm ents m ay
have im m ediate effects on labor m obility, yet at other tim es they
m ay not be fe lt fo r relatively long periods o f tim e. Further, it is
often difficult to isolate the wage factor from the m any other factors
which m ay cause workers to accept or reject job offers. Nonwage
factors, such as home ties, clim ate, job security, length o f workweek,
community facilities, and transportation are always im portant in
influencing the flow o f labor. T he confusion and overwhelm ing pres­
sures o f m ilitary m obilization add additional pushes and pulls to the
labor m arket. T he effect o f these nonwage factors is not analyzed in
this chapter, since they were beyond the control o f the N W L B .
A n alysis o f the effect o f frin ge adjustm ents is also excluded, because
they are believed to be o f relatively m inor im portance w ith respect
to the flow o f manpower.
1 By “ wage adjustments” is meant wage rate adjustments, including incentive rates. The
term does not include adjustments in the so-called fringe issues.
9 2 1 2 9 7 — 5 0 ----- 13




187

188

D IS P U TE! S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

Wage adjustments may affect manpower flow in at least four im­
portant respects. In the first place, they may influence the move­
ment of workers from plant to plant within the local labor market,
Other things being equal, labor will flow from low- to high-wage
plants in a period of expanding employment. A second type o f mo­
bility may take place between labor markets; i. e., from low-wage areas
o f limited opportunity to high-wage areas of greater opportunity.
This type o f mobility is generally referred to as migration.
A third type o f wage-manpower relationships concerns intraplant
mobility. Normally workers advance with experience and training
from low-wage to high-wage jobs in accordance with aptitudes. They
may not do so if narrow job differentials provide no incentive. They
may be dissatisfied to remain where they are if rate differences do not
reflect differences in job content. This dissatisfaction takes the form
o f rising quit rates and restricted output.
A fourth type concerns the effect of wage levels on the proportion
o f the community’s population in the labor force. Some persons not
ordinarily in the labor market may be induced to enter if wages are
sufficiently attractive (although low family incomes drive others to
seek employment).I
.

II.

E a r l y M a n p o w e r T rends

Although the central interest of this chapter is NWLB wage policy
as related to manpower, it is important to note briefly wage differen­
tial and labor supply problems as they existed during the early stages
of the defense and war program.
Between 1940 and 1943, some 7,000,000 unemployed were absorbed.
A t least 8,000,000 new workers entered the labor market in response
to high wages and a great variety of opportunities.
Several million workers transferred from less to more essential
wartime jobs under pressure of Selective Service. Millions migrated
voluntarily from regions of labor adequacy to war-production centers.
One out of every four families changed address at least once. The
workweek was lengthened by 15 to 20 percent on the average, adding
the equivalent of several million workers to the labor force.
With this tremendous and unprecedented voluntary activity going
on, those who opposed compulsory direction of labor had the whip
hand in Washington. National service legislation was proposed but
never got much support either in Congress or the White House.
Labor mobilization during this early period was accomplished by
thousands o f individual employers using their own devices for hiring,




189

R E L A T IO N O F W AG E) C O N TR O L T O M A N P O W E R P R O B LEM S

train ing, ^upgrading and dism issal and draw ing from the same labor
supplies as civilian Government agencies and the m ilitary services.
Labor flowed voluntarily into w artim e industries because wage rates
were generally higher, more overtime was offered, opportunities for
advancement were greater and there was greater likelihood o f avoiding
the d raft.
The W a r and N avy D epartm ent procurement branches system ati­
cally established wages in Government-owned plants (whether oper­
ated privately or by the Governm ent) at rates well above prevailing
local m arket levels.

H ad the N ation entered the war w ith fu ll em ploy­

m ent this procedure would have raised im mediate problem s.

B ut

so slack was the labor market in 1941 that essential private industry
could still recruit successfully in spite o f wage increases elsewhere.

I II. D e v e l o p m e n t

of

M a n po w er C ontrols

The development o f a manpower program came m ore slow ly than
the form ulation o f wage stabilization policies.

W h en N W L B was

created in January 1942, aggregate labor supply was considered ade­
quate.

A bout this tim e a great m any different Federal agencies

acquired or assumed an interest in manpower as a result o f other
responsibilities.

The U nited States Em ploym ent Service, w ith its

48 affiliated State services, recruited labor fo r both defense and non­
defense em ployers. Selective Service drafted men fo r the armed
services. The W a r and N avy Departm ents recruited men fo r m ilitary
service, hired civilians fo r directly operated plants and aided contract
employers in hiring civilian labor. S ix agencies were active in train­
in g program s o f one kind or another. Numerous others were con­
cerned w ith specialized types o f recruitment. A ll were supposed to
be under the general direction o f the N ational D efense A dvisory
Com m ission and subsequently the Labor D ivision o f the Office o f
Production M anagem ent. T h is over-all control was more in name
than fact. Coordination w ith the m ilitary services and Selective
Service was negligible.

Thus, from the very beginning, manpower

adm inistration was disconnected and dispersed am ong m any w ell-en­
trenched agencies, each w ith its own special responsibilities and
political support.

T he confusion and overlapping was compounded

by top-heavy adm inistrative structures in some o f the agencies.

Such

a development was perm itted because labor supply was not critical
in the defense period and few could see that it would become so.
T he W a r M anpow er Com mission was created in A p r il 1942, on the
assum ption that an over-all manpower program m ight be needed.

It

was superimposed on the U nited States E m ploym ent Service but had




190

D IS P U TE S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

no operational authority at this tim e.

I t was essentially a p olicj

forum . F in d in g itse lf w ithout real authority, W M C did little except
make public pronouncements and consider its own internal staff prob­
lem s.

In December 1942, W M C was given operational authoritj

through Executive O rder 9279. U nder this authority it could regulate
hirin g o f workers in critical areas and request other agencies to take
specific com plem entary action.

Selective Service was transferred ad­

m inistratively to W M C , though it actually rem ained independent.2
In A p r il 1943, an attem pt was made by W M C through General O r­
der 4 to control the causes o f N ation-w ide turn-over.

W orkers in 3S

essential industries were required to obtain certificates o f availability
before leaving their jobs to seek em ploym ent elsewhere. T h e objective
was to reduce the transfer o f workers from essential industries.

In ­

ability to obtain adequate enforcem ent o f General O rder 4 and failure
to coordinate its objective w ith N W L B wage policy doomed the order
to lim ited effectiveness from the start.

U nilateral action in this field

could not possibly be fu lly effective.
M eanw hile W M C had experimented (in late 1942 and early 1943)
w ith local em ploym ent stabilization plans involving carefu lly super­
vised controlled h iring and priority placem ent.
not very effective.
plants.

The local plans were

W orkers continued to m ove into higher-w age

O n ly the fact that the high -p riority plants tended to have

the highest wages saved these efforts from com plete breakdown.
W h en W M C attem pted to direct workers to low -w age plants it found
itse lf helpless.
There were other weaknesses in W M C ’s local efforts. W h o was to
say w hat local products were m ost urgently needed in the over-all war
effort? C ertainly not W M C . T h is decision could be m ade only by
W P B in cooperation w ith the armed services. W M C and W P B de­
bated this issue m onth after m onth. M eanw hile the unregulated labor
m arket went on its w ay, w ith both favorable and unfavorable results.
In June 1943, a coordinated W M C -W P B priorities plan was begun
in B uffalo.
basis.

H irin g was controlled and referrals were on a p riority

In Novem ber more elaborate jo in t agency controls were ap­

plied in five west coast cities through local W P B Production U rgency
and W M C M anpow er P riorities Com mittees.

P rincipal features in­

clu d ed : (a) W P B determ ination o f production priorities paralleled
by W M C referrals on the same p riority basis, ( b ) W P B review o f all
new contracts to determine feasibility and adjustm ent o f existing con­
tracts when necessary to balance labor supplies, ( c ) em ploym ent ceil­
ings set by W M C and W P B , ( d ) control o f h iring by W M C and ( e )
Selective Service deferm ent o f workers in h igh -p riority plants.
2 Selective

Service was removed from WMC in December 1943.




R E L A T IO N O F W AGE! C O N TR O L T O M A N P O W E R P R O B LEM S

191

The west coast plan did not result in reducing existing contracts but
did prevent additional over-letting.

I t aided recruitm ent in h igh -

priority plants and brought about more realistic appraisal o f future
labor needs.

(Som e shortages turned out to be statistical deficits.)

Turn-over was not significantly reduced although it was better d i­
rected. N othing was done to curtail or reduce low -p riority contracts.
The basic principles o f the west coast program , i. e., priorities, em­
ploym ent ceilings and controlled referrals, were extended in part or in
whole to 10 other areas by the m iddle o f 1944.

T h is action ju st about

completed the development o f manpower controls.

I t should be noted

that the various local employm ent stabilization plans were totally un­
related to wage policies except where special inter-agency program ­
ing was effected, as in Seattle.

T h is fact lim ited the effectiveness of

both manpower and wage policies.

W M C was forced tim e and again

to appeal to N W L B fo r assistance.

N W L B was forced tim e and again

to recognize manpower aspects in particular cases and industries and
eventually in general.

T h is w ill be discussed further in the next

section.
In sum m ary, W M C ’s stabilization program s were lim ited to a few
areas and varied greatly in effectiveness.

H a d the w ar worsened,

they would have provided the fram ew ork fo r more effective regula­
tion.

A s it was, centralized m anpower controls were never achieved

out o f the “ pu ll and tug o f the tw enty-som e Governm ent agencies in
the labor supply field * *
3

IV . N W LB A p p r o a c h

to

M an po w er P roblem s

In the m onths im m ediately follow ing the P earl H arbor attack,
labor supplies tightened somewhat but the belief was still current
that labor supply was the least threatening o f all factors lim iting
production. A s a generalization, this was probably correct. Scores
o f areas still had surplus labor. W orkers were flow ing into war
industries at an accelerating rate. C itin g this fa ct, both m anage­
m ent and labor stood firm against rigid m anpower controls.
Y e t the satisfaction w ith the flow o f m anpower was somewhat
illusory.

Underem ploym ent had largely disappeared, and unem ploy­

m ent had declined sharply.

Labor shortages had developed in m any

areas, w hile large surpluses remained in others.
chinery fo r seeking out secondary workers.

There was no m a­

Turn-over was rising

w ith dangerous rapidity.
8U. S. Bureau of Budget, The United States at War, Historical Report No. 1 (1946),
p. 183.




192

D IS P U TE; S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

T he voluntary quit rate fo r m anufacturing industries (p er IOC
employees) as measured by the U nited States Bureau o f Labor Statis­
tics was less than 1 percent per m onth throughout m ost o f 1939.
T he quit rate rose rapidly to around 2 percent in 1941, then to 3
percent in 1942, and reached the excessively high range o f 4 to (
S
percent per m onth during m ost o f 1943-44.

In general term s this

m eant that in 1943, o f 100 employees at the beginning o f the year,
only about 40 w ould be le ft at the year’s end i f no accessions were
m ade.

Fortunately much o f the turn-over involved the same in ­

dividuals constantly shopping the m arket.

Even assum ing, however,

that m any plants retained a reasonably stable hard core o f employees
(b y no means alw ays the case) the high turn-over was w asteful and
a serious drag on the rate o f production.

There were numerous

reports o f labor hoarding and underutilization.
Bottlenecks o f production gradually began to be paralleled by
bottlenecks o f m anpower.

B y the fa ll o f 1942, m anpower problem s

began to be im portant enough to be given consideration in N W L B
discussions, but not critical enough to be integrated into B oard
p olicy. In fa ct, manpower problem s probably could not have been
incorporated into N W L B policy at this tim e.
Governm ent had no over-all manpower policy.
no effective over-all manpower agency.

In the first place, the
Secondly, there was

B ather there were tw enty-

odd agencies in the m anpower field, whose energies were largely taken
up by efforts to cla rify jurisdictional authority.
Since the B oard had no official authority to deal w ith m anpower
problem s (except indirectly through its power to approve wage
changes necessary to prom ote the effective prosecution o f the w ar) it
was technically correct in saying it would not use wage adjustm ents
to influence m anpower flow.
M ore im portant, the B oard did not
believe it was desirable to m obilize m anpower through wage m anipu­
lation. Further, the B oard did not believe it would be necessary
to have strong m anpower controls at a ll.

T he approach to wage con­

trols, therefore, was one o f securing as much equity as possible w ithin
a stabilization program .

B oth the labor and industry members

wanted the N W L B to stay as fa r away as possible from m anpower
problem s.

T hey wanted their constituents to be free to criticize and,

i f possible, prevent governm ental direction o f labor.

T he labor m em ­

bers repeatedly said they w ould never support either national service
legislation or wage controls based on m anpower flow unless the emer­
gency was much greater than anything visualized in 1941 and 1942.
In d u stry members were ju st as emphatic in saying they were un­
w averingly opposed to Governm ent interference w ith private h irin g
and discharge.
In this connection it should be remembered th at the background o f
a ll three sides o f the N W L B table was collective bargaining either as




R E L A T IO N O F W AGE! C O N TR O L T O M A N P O W E R P R O B LEM S

193

participants or as m ediators and arbitrators. None o f the B oard
members had had experience with general recruitm ent, training, and
placem ent o f labor supplies.

None wanted this experience.

A b le as the B oard members were, they could not foresee the length
o f the w ar, the eventual size o f the armed services and the degree o f
labor stringency in some areas. B oard discussion at this tim e still
included the threat o f a postw ar labor surplus and suggested th at
the less scram bling o f labor during the war, the less unscram bling at
the end.
B ig h tly or w rongly, the B oard wanted to avoid manpower con­
siderations wherever possible.

H a d the w ar not intensified, this ap­

proach would have succeeded.

Since this was not to be the case, the

Board erred in its assumption that it could avoid dealing at least
indirectly w ith manpower problems except in unusual cases.
T h is conclusion is based on a general observation o f labor market
characteristics.

A s long as labor supplies are adequate, extrem ely

wide interindustry and interplant wage differentials in a given m arket
are o f secondary im portance in determ ining the adequacy o f labor
supplies fo r individual plants.

A s labor becomes m ore scarce, wage

differentials become more and more im portant as determinants o f
manpower flow.

A s the m arket becomes increasingly tigh t the low -

wage plants are subjected to greater pressures to narrow differentials
w ith the higher plants. T his assumes o f course that nonwage factors
are approxim ately equal. Obviously a high-w age plan t in an in ­
accessible location m ay be at a disadvantage w ith lower-wage plants
ideally located to transportation, housing, service industries, etc.
Likew ise w orking conditions, amount o f w orking tim e offered, pro­
m otional opportunities, stability o f employm ent and m any other
factors m ay affect the flow o f labor. A large number o f labor markets
did become so stringent by 1943 that wage differentials directly a f­
fected the ability o f some plants to recruit and retain workers.
W ith this background in m ind we shall turn directly to the appli­
cation o f the B oard’s fou r m ain policy criteria, starting w ith the
m ost im portant o f all from the manpower standpoint, the inequity
doctrine.

V . T h e I n e q u it y D o c tr in e

as

R e la t e d

to

M anpow er

In adopting a policy that it would grant wage increases to correct
wage inequities, the B oard recognized two ty p es: {a) interplant and
( b) intraplant. T he second o f these w ill be considered later in a
more detailed discussion o f internal w age-rationalization policy.




194

D IS P U T E S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

T he phrase “interplant inequity’7 was defined in very general term s.
I t was described as an unusual or unreasonable difference in w age rates
so discrim inatory as to constitute a m anifest injustice.4 T h e vague­
ness o f the language called fo r the exercise o f judgm ent in each case—
an approach which the B oard thought necessary at that tim e.

Labor

wanted to avoid the rigidities th at w ould have follow ed from setting
down specific and standardized criteria. T he industry members
wanted to hold wages in general, but to make exceptions where neces­
sary.

T he public members wanted a flexible policy in which to turn

around. T h ey could give here and hold there w hile still m aintaining,
in general, a stabilization program .
Between January 1942 and A p r il 1943 the B oard was free to apply
the doctrine pretty much as it pleased.

A plan t w ith wages below the

average in a given labor m arket (or industry) could be raised to the
average.

P lants w ith wages above prevailing com m unity practice

could often receive wage increases on the ground that the low er-w age
plants were noncom parable.

In practice this m eant that the B oard

granted inequity adjustm ents fo r plants w ith nearly all levels o f wages
except the very highest in each com m unity.

A s the low -w age plants

m oved up, a new prevailing average was created which served as the
basis fo r still additional inequity claim s. I t was creeping wage escala­
tion w ith no term inal point.
H a d employers opposed wage increases to counterbalance the pres­
sures o f unions, the policy m ight have worked fa irly w ell. T h is did
not occur. Instead, the B oard was swamped w ith voluntary ap p li­
cations fo r increases from em ployers w ith and without unions. W h y
the sudden sh ift o f managem ent out o f its traditional role in wage
negotiations ?
B efore the war A m erican management operated under considerable
price com petition in m ost industries. I t kept its eye alw ays on the
product m arket where profits were made or lost on the volum e o f
sales.

W ages reflected in part the ability to pay o f individual indus­

tries and plants.

T h e effects o f depressed product m arkets in the

1930’s resulted in w idely varying rates between and w ithin plants
fo r comparable jobs.

L abor m oved w ith difficulty from low - to high -

wage plants in a tim e o f labor surplus.

M anagem ent was, therefore,

under no urgent com pulsion to correct wide differentials on com­
parable jobs.
A fte r 1941, costs were no longer the lim itin g factor to production.
M any Governm ent orders were placed on a cost-plus or fixed-fee basis.
L abor could now m ove readily to high-w age jobs. P lants w ith low
or even average wage levels found themselves unable to hire or retain
4 Wage Stabilization Policy of the National War Labor Board, November 6,1942, The Ter­
mination-Report, vol. II, p. 681.




R E L A T IO N O F W AG E) C O N TR O L T O M A N P O W E R P R O B LEM S
workers at a tim e when labor was the key to production.

195

In this

environm ent, norm al prewar differentials suddenly became serious in ­
equities to both management and labor.
W h a t effect did the liberal inequity policy have on the distribution
o f m anpower? In some relatively loose labor m arkets in which there
were only a few large war plants, the effects were probably favorable,
since they tended to give higher wage levels to war plants than to less
essential industries.

In other loose labor m arkets w ith m any types

o f industries, it created slow ly rising inflationary pressures, but
created only m inor manpower problems.
T o the extent that m any inequitable interplant rate differentials
were corrected, the results were favorable.

O n numerous occasions

however, increases were granted to alter differentials which were not
actually inequitable from a job-content view point.

Such action gen­

erated slow inflationary pressures and encouraged labor and m anage­
ment to seek more and more adjustm ents to no real end as fa r as w ar
production was concerned. T he announcement in the local press o f a
substantial wage increase fo r P lan t A , already high , was high ly dis­
turbing regardless o f a sk illfu lly worded rationale.

T h e manpower

problems o f low -w age plants were made correspondingly more diffi­
cult.

T he basic weakness o f the inequity policy was that it had no

end and le ft both labor and m anagement in a state o f confusion and
expectancy.
In stringent labor markets the effects o f the inequity doctrine were
least favorable from the standpoint o f manpower m obilization. Som e
insight into the im pact o f inequity policy in such labor m arkets m ay
be obtained by review ing the operation o f this policy in the South
Bend area, which was the subject o f detailed study by the B oard’s
research division late in 1942 and early in 1943.5
In the spring o f 1943 there were approxim ately 180 m anufacturers
in South B end. A bout 30 em ployed over 100 workers each. N ine
em ployed over 1,000 each. P ractically all were engaged on war
contracts or on other w ork essential to the w ar effort.
T w o companies dom inated the area by sheer size, Studebaker w ith
12,000 employees and B endix A v ia tio n w ith 10,000. These two com­
panies em ployed about one out o f every six workers in the com m unity.
F o r m any years, wage negotiations in other South B end plants (w ith
a few exceptions such as apparel and rubber) were conducted w ith
reference to

Studebaker and B endix.

D ifferentials between the

leaders and the other plants were narrow in some cases, very wide
in others.

A s long as adequate supplies o f labor were available these

different plant wage levels could exist side by side.

T h ey caused

5 National War Labor Board, Wage Stabilization Division, Research and Statistics Report
No. 7 (July 30, 1943).




196

DISPUTE SETTLEM ENT AND W AGE STABILIZATION

constant difficulties in negotiations, but as one m anager said, “ we
could live w ith the situation.”
B y the fa ll o f 1942 the labor m arket had become very tig h t.
em ployer was tryin g to hire.

Every

Com m unity facilities were strained by

the influx o f 10,000 workers.

In December the B oard received a

request from Studebaker Co. and its U A W -C I O local fo r a 4-cent
increase.
rates.”

T he application gave as a reason: “ inequality w ith D etroit
I t was claim ed that it had become custom ary after 1935 fo r

Studebaker to grant adjustm ents agreed to by G eneral M otors and
the U A W in D etroit.

T he record casts considerable doubt as to the

valid ity o f th is claim .

T he parties stated th at they were entitled to

4 cents because the B oard had granted this am ount to G M . I f to G M ,
w hy not to Studebaker? I t w ould aid m anagem ent to recruit labor
and m aintain m orale.

I t w ould increase the prestige o f local union

leadership and bring its accomplishm ents in lin e w ith those o f the
D etroit negotiators.
T he Board unanim ously granted the increase.

T h e B oard’s tran­

script reveals little consideration o f the effects on m anpower flow or
the creation o f new inequities.

F rom the standpoint o f com m unity

w age levels, the 4-cent increase was not considered to be inflationary
or unstabilizing.
T h e actual effects o f the decision in relation to m anpower were fa r reaching. T h ey were fa r greater than anyone foresaw at the tim e.
T h e union at B endix im m ediately claim ed an inequality w ith Stude­
baker. Then began an ever-increasing stream o f inequity cases from
South Bend. Investigation revealed th at nearly a ll were pure and
sim ple m anpower cases, which were aggravated b y the B oard’s grant
to the highest-w age p lan t in the area. W ith in 5 m onths, five m otor
car or parts com panies asked fo r increases, claim ing loss o f skilled
mechanics to Studebaker. A low -w age steel range com pany m aking
A rm y field equipment applied fo r a 4-cent increase.
were em bittered by a denial in M arch o f 1943.

Its workers

A s one worker sa id :

I have been working at the plant for 10 years and I am now m aking 87 %
cents per hour on day work w ith no chance to participate in an incentive system .
M y daughter-in-law started a t Studebaker a few m onths ago, and she is now
working as an inspector and is m aking $1.15 an hour.

A sam ple study o f hires at Studebaker revealed th at one-third o f
the workers came from com panies w ith critical w ar contracts.

Serious loss of workers was experienced by the peripheral towns
within the South Bend labor-market area. Traditionally, wages had
been somewhat lower in nearby communities such as Elkhart, Goshen,
and Mishawaka, so that normally a flow of manpower into Stude­
baker and Bendix would have taken place under conditions of full
employment. The Studebaker inequality decision, however, adver­




RELATION OF W AG© CONTROL TO MANPOWER PROBLEMS

197

tised and thereby accelerated the movement out o f the low -w age
communities, m any o f which had war contracts as essential as Studebaker’s.

In fa ct, the latter was held up on bomber production one

fu ll evening because o f production failure due to labor shortage in a
nearby plant claim ing loss o f workers to Studebaker.
Loss o f manpower encouraged low -w age plants to increase earnings
o f workers by the use o f methods beyond or outside the control o f the
N W L B . M anagem ent resorted to over-classification, excessive up­
grading and prom otion, and loose tim ing o f incentive jobs. W a g e
stabilization violations undoubtedly occurred.6
A nother undesirable effect o f the Studebaker action was reported
by the W a r M anpower Com m ission in its effort to bring secondary
workers into the labor m arket.

W h en asked i f they w ould help out in

the w ar effort, these workers replied, “ Y es, but we’ll w ait ’til we can
get work at Studebaker or B endix.

W h y take a job in a low -w age

p lan t?” H ad the W M C shut off hires at the high-w age plants until
the low -w age plants were adequately staffed, many o f these workers
would never have come into the labor m arket at all.
A lth ough only a single instance, the experience in the South Bend
labor m arket suggests a number o f conclusions:
(a) In a stringent local labor m arket, inter plant wage differentials
affect manpower flow rather directly, i f other factors are approxi­

m ately equal.

Therefore more consideration should have been given

to manpower effects o f wage increases in such areas.
( b ) I t was not practical to increase prewar differentials where these

were extreme.

T o do so w ithout strong manpower control was to

create im possible manpower problem s in low -w age plants. T o have
done so w ith strong manpower controls would have been intolerably
inequitable and unworkable.
(<?) Industry-w ide or com pany-w ide wage adjustm ents should not
be attem pted without careful consideration o f their effects in given
labor m arkets, fo r such action can be h igh ly disturbing w ith re f­
erence to local manpower problems.
(d)

Successful wage stabilization m ust be severely applied to high -

wage plants.

Otherwise there is no end to inequity claim s and neither

wage nor manpower stabilization can be readily effected.
Should N W L B be held responsible fo r all the manpower conse­
quences o f the Studebaker decision and others like it in the period
prior to A p ril 1943 ?

T he B oard said it was not responsible fo r the

flow o f manpower. B u t it was not operating in a vacuum. A decision
to grant or w ithhold a wage increase could determine the ability
o f a plant to recruit or retain labor.
•See ch. 10 for further discussion.




T he Board should have •

198

DISPUTE SETTLEM ENT AND W AGE STABILIZATION

probed deeper into the manpower consequences o f some o f its inequitj
decisions.
The M ay 12th policy directive set fo rth a new inequity bracked
policy which greatly tightened the granting o f adjustm ents. In ­
stead o f increases to the prevailing m arket average, low -rate jobs
could be raised only to the first substantial cluster o f going and tested
rates, except in rare and unusual cases.
In so fa r as the bracket policy greatly restricted wage increases,
particularly in the high-w age plants, it reduced the constant disturb­
ance to local wage structures that occurred under the previous p ol­
icy.

M any m anpower problems that w ould have been created for

essential low -w age plants were thus avoided.

P lants which had

gotten under the wire and obtained increases before the hold-the-line
order were com paratively w ell off. Som e o f those which did not,
found themselves in difficulty.

H ad local wage differentials actually

been w ell adjusted at the tim e o f the order, the results w ould have
been alm ost entirely favorable.

A s it w as, m any areas had badly

distorted interplant wage relationships due in part to N W L B ’s own
actions.

H a d the bracket policy been adopted earlier, some o f these

distortions w ould have been avoided.
T he bracket policy succeeded in part because the N ation started
w ith tremendous reserves o f labor and the job o f h iring had been
done in m any areas before the M ay 12th policy directive, and in part
because o f the great flexibility exercised by sk illfu l national and re­
gional B oard members in app lyin g the policy. T h is flexibility ex­
tended to the point o f recognizing m anpower pressures w ithout offi­
cially doing so.

V I. T h e E f f e c t iv e P r o se c u tio n
A . J anuary

to

of th e

W a r P o l ic y

O c t o b e r 1942

In the foregoing discussion we have indicated that manpower prob­
lem s played a large part in the B oard’s inequity decisions.

W h a t then

were the cases labeled manpower during the pre-stabilization period,
January-O ctober 1942?
Som e o f the m anpower cases arose in labor markets in which the
inequity doctrine based on interplant or interindustry differentials
could not be applied.

P lants w ith unique operations or large plants

located in areas w ith no com parable plants or industries gave rise
to th is type o f case.

O ther m anpower cases were those in which the

applicants pleaded manpower shortage as the sole issue.

S till others

were cases which other Governm ent agencies had identified as m an­
power and specifically asked the B oard to provide a solution on that




RELATION OP W AG© CONTROL TO MANPOWER PROBLEMS

199

ground. T he difference between so-called manpower cases and many
others was one o f degree rather than kind. T h is is not to say, o f
course, that there were m any inequity cases which did not involve
manpower consideration.
Faced w ith specific manpower cases, what was N W L B policy?

No

official policy statement was issued. Each case was considered on its
own m erits. D urin g this 9-m onth period, the B oard decided nine
cases specifically called m anpower.
out o f the nine.

Increases were granted in eight

In the ninth, the new ly created W M C indicated that

there was no real shortage, to give the B oard a score o f 100 percent ap­
proval where labor shortage was demonstrated.
W h a t kinds o f m anpower problem s were involved?

In one case a

union claim ed discrim ination because rates were low and its members
frozen by an anti-p irating agreement.7 T he B oard agreed that if
workers’ freedom to change jobs was restricted, such workers were in
equity entitled to the going wage fo r com parable work in the area.
A ctu ally at this early date the public members did not regard such
cases as im portant or precedent-setting.

T he labor members, how ­

ever, were quick to see the opportunity fo r spiraling wage increases on
the basis o f ju st such decisions.
In a second and much more im portant case the B oard was con­
fronted w ith the m igration o f workers from the isolated properties
o f a large nonferrous m ining com pany.8 N o doubt unfavorable wage
differentials were a prim ary factor in the exodus. T h e B oard recog­
nized that there was no solution to the problem except to grant a wage
increase, since no labor reserves were available in western m ining
towns.
I t must be remembered th at at this tim e (June 1942) the N ation
relied solely on the voluntary flow o f labor to m an the industries
vital to w ar production. Observers noting the mass m igration from
m arginal farm s in Arkansas and O klahom a to W est Coast airfram e
and shipbuilding companies were high ly pleased w ith this voluntary
flow. B u t little attention was paid to the fact that the same forces
were also pu llin g workers out o f the copper mines. The conse­
quences o f prewar interindustry differentials under conditions o f labor
shortage were to prove a continuing problem throughout the war.
In tw o other cases the flow o f workers was out o f low -w age New
E ngland textile com panies9 and Pacific N orthw est foundries.1 The
0
B oard granted increases. In the Pacific N o r th w e s t F o u n d ries case
the B oard fran kly noted the relationship o f wages to m anpower. I t
sa id :
7 R a n g er A ir c r a ft E n g in e D iv isio n , case No. 24 (June 12,1942).
* P h e lp s D o d g e C orp ., case Nos. 5 and 114 (June 24, 1942).
* N ew E n g la n d T e x t ile O p e ra to rs, case No. 147 (July 7,1942).
1 P a cific N o r th w e s t F o u n d ry I n d u s tr y , case No. 2415-CS-D (August 28,1942).
0




200

DISPUTE SETTLEM ENT ANiB W AGE STABILIZATION

W hatever scheme is eventually contrived by other branches o f Government to
enable w ar industries to obtain and retain workers w ill come too late if it comes
at a ll to provide for the requirements of this day, fo r this industry, in this area.
The experience o f these foundries * * * shows * * * qualified men are
constantly being taken into better paid jobs * * * labor turn-over has been
appalling

♦ *

♦

The acute general shortages o f later m onths had already arrived by
m id-1942 in certain localities and certain industries. The B oard did
not adopt officially a special critical area policy, yet used one in the
above case.

T he rem aining m anpower cases were sim ilar and do not

need review.
Sum m arizing this early period, the B oard had few manpower cases.
These were all granted wage increases.

There was no special policy,

but neither was there much need.
B . O c to b e r 1942

to

A

p r il

1943

U nder Executive O rder 9250 in October 1942 the Board was given
authority to grant increases necessary to prom ote the effective prosecu­
tion o f the war. T he effective prosecution o f the war criterion was
intended to enable the B oard to grant wage increases fo r m anpower
and production purposes where the other criteria were inapplicable.
In only 14 cases out o f thousands com ing to the B oard between O cto­
ber 1942 and A p r il 1943 was m anpower recognized as the key issue.
T he number was sm all only because o f the large element o f m anpower
significance in m any o f the straight inequity cases.
O f the 14 m anpower cases, 2 involving thousands o f workers w arrant
b rief review.
O ne o f these was the N o n fe r r o u s case.1 In the spring o f 1942 work­
1
ers started leaving the nonferrous m ining areas o f U tah , N evada, and
A rizon a fo r higher-w age w ar jobs under better w orking conditions.
T he m igration was especially heavy to C aliforn ia and Oregon. B y
summer the loss was serious.

In A u gu st an Interdepartm ental N on-

ferrous M etals Com m ittee was established at the insistence o f the W P B
Copper B ranch. The nonferrous industry was fa llin g behind sched­
ule.

In Septem ber and October action was taken by six m ajor agen­

cies as a result o f prodding by the com m ittee.

O n ly tw o o f these

actions were very effective. T he W a r D epartm ent furloughed 4,500
soldiers w ith m ining experience. N W L B granted a substantial wage
increase solely on m anpower grounds.
fu l.

These tw o actions were help­

W M C began an intensified interstate recruitm ent cam paign w ith

very little success. W h o would want to accept arduous work in the
copper mines under great pressure and at high temperature in isolated
communities w ith poor facilities fo r $1.20 an hour, i f he could get the
same rate w orking in Oregon shipyards?
u N o n fe r r o u s

M e ta ls




W M C then took a m ore

case No. 185 et al. (October 23.1942).

RELATION OF WAGE CONTROL TO M ANPOWER PROBLEMS

201

drastic step by declaring the nonferrous m ining areas as critical.
W orkers were required to obtain certificates o f availability before
leaving to accept other em ploym ent. M any workers, anticipating the
freeze, le ft in advance. Others le ft afterw ard, fo r the order could
not be strictly enforced. W P B closed the gold mines to release miners
fo r nonferrous work. The action was not too h elpfu l. M any miners
could not or would not move.

Selective Service instructed local boards

to grant deferm ents to all miners.
not.

Som e local boards d id ; some did

Interagency action was completed when a joint O P A -W P B

committee agreed to adjust copper quotas and prices whenever costs
rose because o f wage increases.
The N o n fe r r o u s case illustrated m any things about our early war
program .

I t pointed to the inseparability o f wage and manpower

problem s under certain labor-m arket conditions.

I t emphasized the

inadequacy o f coordination between Federal agencies w ith an interest
in manpower.

I t called attention to the dangers in general policies

based on an adequate total labor supply w ithout due regard fo r acute
shortage problem s in lim ited areas. U nder existing labor controls,
the program s o f other Federal agencies were sometimes ineffective in
coping w ith the manpower problem w ithout the support o f N W L B
action.

T h is applied particularly in areas w ith no m ale reserves fo r

jobs ill adapted to the use o f women workers.
W h a t evaluation should be placed on the N W L B action in this case ?
I t came late.

W h en it did come, the B oard’s decision was technically

competent and realistic.

I t narrowed the unfavorable or “ inequitable”

differential between nonferrous m ining and other industries.

The

B oard’s industry members opposed approval, fearing it would create
an “ outbreak o f unstabilizing manpower wage dem ands.” The facts
were that the B oard already had a considerable load o f ju st such cases,
albeit not quite so critical, under the guise o f “ inequities.”
T he other m ajor “ m anpower” case between October 1942 and A p r il
1943 involved the Pacific N orthw est fir and pine companies.12 The
circumstances were sim ilar to the N o n fe r r o u s M eta ls case. W orkers
were leaving the lum ber camps for higher-w age areas. The number
o f loggers was reported by private industry to have decreased from
16,000

in 1940 to 11,000 in 1942.

There were no effective manpower

controls to stop the exodus (although W M C “ froze” the loggers in
Septem ber).

There were no reserves o f labor that could be effectively

tapped.
A g a in the problem was tackled by an interagency committee (W P B ,
W M C , N W L B , and Selective Service). A g a in each agency did what
it could.

A n d again all efforts were o f lim ited help until the N W L B

1 T h e F ir cases Nos. 285 et al. (December 17, 1942) and
2
(January 4, 1943).




T h e P in e

cases Nos. 321 et al.

202

DISPUTE SETTLEM ENT AND W AGE STABILIZATION

W e st Coast Lum ber Com m ission acted. T he only practical solution
was to narrow the differentials between lum bering and shipbuilding.
The differential in entrance rates was reduced from 20 to 5 cents by
increasing the low er lum ber rates. The rationale o f the decision was
realistic.

W orkers would continue to m igrate unless the unfavorable

wage differential was narrowed.

I f workers obeyed the W M C order

to stay in lum ber, thus giving up traditional liberty, they were entitled
to higher pay.
T h e other “ m anpower” cases during this period do not require spe­
cial review.

T he B oard proceeded to narrow interplant and inter­

industry differentials in order to prevent m anpower flow.

In 5 o f

the 14 cases the B oard denied adjustm ents on the grounds that inter­
p lan t or interindustry differentials were not sufficiently serious. In
the denials, interestingly enough, the B oard reiterated its desire not
to use wage m anipulation fo r m anpower purposes unless other G overn­
m ent agencies showed it to be o f “ controlling im portance.”
was clearly in accordance w ith executive authority.

T h is

Y e t every day

the B oard , w ith and w ithout the aid o f other agencies, influenced the
flow o f manpower through the inequity doctrine.

In one denial the

m ajority B oard opinion s a id :
A fter a ll, the supply o f the N ation’s manpower is lim ited, and it is not fo r the
W a r Labor Board to say whether workmen should remain at a plant processing
soybeans or should go to a magnesium plant * *

T h e opinion went on to say that i f workers are expected by m anpower
authorities to rem ain in a low -w age p lan t, rather than take jobs in
a nearby high-w age plan t, then N W L B would have to consider raising
the low -w age em ployees on grounds o f inequity or effective prosecution
o f the war. B u t it w ould do so only i f other agencies demonstrated
the need fo r such action. Since W M C and W P B were ineffective at
the local level in establishing priorities, this m eant in practice that
N W L B w ould do the deciding, either by approving or denying an in ­
crease.

A n essential plant losing m anpower because o f low wages

usually had to ju stify a wage request on other than manpower grounds.
T h is seemed confusing to both managem ent and workers in such a
plan t.

One Federal agency asked more production.

A nother ad­

m itted production was slow because the plant could not keep workers
w ith its low wages.

A th ird, N W L B , said it would ignore the m an­

pow er consideration.

T h e lack o f more general interagency coordina­

tion was a serious weakness.
C.

M

a t

12,1943,t o A

u g u s t

1 9 ,1 9 4 5

A s previously stated, the M ay 12th policy directive and the bracket
p olicy therein approved greatly restricted interplant and interindus-8
1
1 S ta le y
8

M a n u fa ctu r in g C o.




case No. WA-12 (November 3,1942).

RELATION OF WAGE; CONTROL TO M ANPOWER PROBLEMS

try inequity adjustm ents.

203

The phrase “ effective prosecution o f the

war” was dropped at this point.

A lm ost all m anufacturing had be­

come essential to the war effort or civilian needs.

Instead the criterion

o f “ rare and unusual” was adopted in the M ay 12th policy directive
fo r those manpower cases which could not be handled under other
policies.
Because o f their strategic im portance several o f the “ rare and un­
usual” decisions deserve brief review.

The T h irty Northern M ichigan

and W isconsin Lum ber Cos. decision was one o f these.14 The indus­
try suffered from out-m igration o f workers. Its wage rates were 25 to
30 cents an hour low er than in other industries in the region. A con­
ference o f interested agencies (N W L B , W P B , W M C , A rm y , N avy)
recommended a wage increase as the principal solution to the industry’s
problem .

T he Board granted an increase on grounds o f raising lum ­

ber rates to the “ sound and tested” levels in the region as determined
by other industries.

Stabilization D irector Yinson rejected this ad­

justm ent, pointing out that the bracket system was an intraindustry,
labor-m arket area concept designed specifically to stop “ levelling-u p”
between industries.

The B oard subsequently approved the increase

under the “ rare and unusual” concept.

In his opinion, public member

George T aylor called the lum ber industry’s wage structure “ obsolete.”
W h ile this was quite true it was not different from m any other wage
structures which lagged in recovering from the distortions o f 1930’s
depressed labor m arket. H ad a period o f fu ll em ploym ent preceded
our entry into war, this type o f wage structure probably w ould not
have been present.
T he m ost publicized decision o f all “ rare and unusual” cases in­
volved the B oeing A irc ra ft Co. in Seattle.1 In A u gu st 1943, the
5
company was badly behind schedule in the production o f the F ly in g
Fortress. Its wage structure was high fo r the airfram e industry.
B u t the plant was located in Seattle, called by W M C “ about the tigh t­
est labor m arket in the country,” due chiefly to the overwhelm ing ex­
pansion o f shipbuilding. Labor turn-over at B oeing was described
as “ app allin g.” Since Pearl H arbor, the com pany had hired 250,000
workers but in A u gu st had ju st 35,000 on the payroll. W L B granted
B oeing a 7-cent an hour average increase and raised some high ly skilled
job rates to the highest level in the Seattle area.

T he results o f the

N W L B action, coupled w ith the program o f several other agencies,
was successful.
on in.

B oeing’s labor supply problem s im proved from there

I t should be noted that the wage increase fo r Boeing was

accompanied by cutbacks in shipyard contracts.
1 Case Nos. 11-31-C et al. (July 8,1943).
4
“ Case No. 2685-D (September 4, 1943).
921297— 50------ 14




B oeing got the m a­

204

DISPUTE SETTLEM ENT AND W AGE STABILIZATION

jo rity o f the released workers but some were perm itted to go to other
essential plants. T hus the position o f the other plants did not deteri­
orate but rather rem ained about the same or in a few instances sligh tly
im proved after the interagency program raised B oeing’s draw ing
power and reduced that o f the shipyards.
Several aspects o f this case deserve special comment.

T h e prin ­

cipal cause o f B oeing’s trouble was the level o f its wage structure.
B u t there were other nonwage factors that accounted fo r m uch o f
the turn-over and which justified the B oard’s contention th at w ages
alone cannot solve manpower problem s.

In B oeing’s case these other

factors included (a ) poor personnel policies, (b ) bad plant location
necessitating much inconvenient travel tim e, ( c ) inadequate commu­
n ity facilities including housing, eating and laundry services, and ( d )
the placement o f too m any war contracts in the Seattle area. T he case
provided an illustration o f how nonwage factors m ust first be corrected
in order to make wage rates effective in regulating the flow o f m an­
power.
T h e B o e in g case illustrates once m ore the lack o f coordination betweeen Federal agencies at the local level.

A fte r much delay a jo in t

program , w orking through the W P B Production U rgency and the
W M C Labor Su pp ly P riority Com m ittees, was finally effected.

It

in clu d ed : (a) a controlled hiring plan fo r Seattle w ith B oeing placed
in class I , (&) release o f workers fo r B oeing from other plants through
cutbacks ordered by W P B , A rm y and M aritim e Com m ission, and (c )
im provem ent in com m unity facilities through efforts o f the local cham­
ber o f commerce. A ction in the B oeing case should have been taken
m uch m ore quickly. T h e N W L B decision was 6 months in process.
W P B action took even longer.
central agency should have had
w ar contracts and to develop a
authority m ight not necessarily

T he B o e in g case suggests th at some
authority to prevent the pile-up o f
unified program o f action. T h is
have ordered a particularly type o f

action but it should have been able to secure action by each specialized
agency o f the Government.
T h e B o e in g case also revealed a basic weakness in our wartim e ad­
m inistration in not coordinating plant location and production
schedules w ith labor supply.

T op procurement officials were warned

early in 1943 about placing additional contracts in Seattle which
already was struggling under the m istake o f both airfram e and ship­
bu ilding locations in the same m arket area.
fo r this poor planning.

They paid a high price

A th ird case which warrants review under the “ rare and unusual”
doctrine is the L o s A n g e le s R a ilw a y case.16

T h e com pany provided

transportation services fo r 150,000 workers in the L os A ngeles area.8
1
1 L os
8

A n g e le s R a ilw a y O orp.




ease No. 10-5417 (October 24,1943).

RELATION OF WAGE! CONTROL TO MANPOWER PROBLEMS

205

The services were gradually reduced during the summer and fa ll o f
1948 because o f inability to hire and retain workers. T he com pany’s
wage structure was relatively low compared w ith some war plants
but higher than others.
high.

In its industry the com pany was fa irly

H ours were long— 53 hours a week w ith no overtim e.

The

cost o f uniform s and equipment was considerable and sp lit sh ifts o f 14
hours were unattractive.

A s an inequity case alone, there was no

basis fo r granting an increase.

T he B oard, in a decision on July 19,

1943, denied a union-m anagem ent request fo r an upward adjustm ent.
Thereupon a strike o f 1 day occurred, tyin g up all w ar production in
the area.

T h e B oard agreed to reconsider the case and advised

other Governm ent agencies to substantiate the need fo r a wage in­
crease i f they desired. W P B , W M C , A rm y , and N avy officials sup­
ported the claim fo r an increase at special hearings. O n October
24, 1943, the B oard reversed itself and granted an increase on the
ground o f manpower under the “ rare and unusual” doctrine.
T he case illustrates a number o f problem s.

I t showed once more,

o f course, the need fo r coordination at the local or regional level be­
tween interested agencies.

T h is lack perm itted the workers to force

the Governm ent’s hand by a 1-day strike.

Y e t had the Government

used the powers o f national service, it is not at all certain it could
have prevented the strike.

Because o f delays at the regional and then

the national levels, tempers rose high and distrust was widespread.
W hether the workers in this case actually suffered a “ m anifest in ­
justice” is beside the point.

T heir position was probably not d if­

ferent from workers in other areas.

B u t the relationships between

the workers and the war agencies had deteriorated to the point where
a wage increase was the only way out. T he B oard’s final approval
was sign o f weakness.

I t detracted from the B oard’s stature.

It

encouraged workers to engage in quickie strikes in order to get action.
The case called attention to the fact that the differentials between
war and nonwar employments were favorable in the beginning to
prom ote the movement o f workers into tem porary war jobs. B u t
once labor became short, the differentials became unfavorable, fo r
there was no w ay o f stopping the process.
The case illustrates also the lim itations o f the bracket system based
on interplant relationships. There was only one streetcar and bus
system in L os A ngeles. There could be no area bracket. Later the
B oard did work out a separate treatm ent fo r local transit companies,
but this did not overcome the weakness inherent in the application o f
stabilization policy to other unique establishments in acute labor
m arkets.
I f the B oard had not tried to play hide-and-seek w ith manpower it
m ight not have gone through such an embarrassing and face-saving




206

DISPUTE. SETTLEMENT ANiD WAGE STABILIZATION

decision as Los Angeles Railway. Clearly the key to the situation
was whether the decline in transportation was serious enough to war­
rant a wage adjustment. On wage inequity grounds, it was not. On
the decline in service because of turn-over, it apparently was. Some
authority should have assumed responsibility in critical areas for
determining priority o f production and services as guides for all
agencies dealing with the labor market.
T he B oard faced much the same problem in the case o f the A sso ­
ciated Laundries o f P ortland, O reg.17 These 12 laundries paid low
w ages, worked a 60-hour week and offered relatively poor w orking
conditions.

In labor-short Seattle they could not hire or retain labor.

W a s it essential to the war effort to keep labor in these laundries?
Such a question in 1941 w ould have seemed ridiculous.

B u t when

in the summer o f 1943 workers did not show up at w ar plants because
their laundry was not available, the m atter was not so easily dism issed.
Laundries became an essential service.

In its decision the B oard at­

tem pted to shadow -box w ith the problem by avoiding all discussion
o f “ m anpower.” Its approval o f a large increase cited substandards
and interindustry inequities.

The Stabilization D irector joined the

shadow -boxing by asking the B oard to approve the wage adjustm ent
on intraindustry bracket principles.
creases on this basis.

T he B oard approved the in­

I t was a sim ple case o f narrow ing an inter­

industry differential fo r a low -w age industry that had become essential
in a stringent labor m arket. T h e issue was m anpower, pure and
sim ple.
One other case deserves m ention. In the fa ll o f 1943 the B oard had
to establish rates fo r a new plant o f the W rig h t Aeronautical Corp.
located in the labor-shortage area o f New Jersey.18 The location o f
this plant in such an area indicated poor planning in the first place.
T h e B oard had to step into a bad spot. A ssum ing W M C held labor
in existing essential plants, where was the labor fo r the W rig h t plant
to come from ?

In setting the new rates the B oard established them

not at the m inim um o f the bracket but somewhat above the m iddle so
as to draw manpower from “ nonessential industries and * * *
the hom e.”

T h is was one o f the few decisions in which the B oard

gave recognition to the fa ct that in shortage areas rates m ust be set
relatively high to attract new secondary workers.
realistic.

T he decision was

The foregoing discussion considers some of the leading cases in
which the manpower element was clearly identified even though some­
times not outwardly recognized in the Board’s decision. I t should be
noted, however, that the manpower element was important in thou­
1 Case No. 12-329 (June 5 1943).
7
,
1 Wright Aeronautical Corp. case No. 111-1375-D (October 3, 1943).
8




RELATION OF WAGEI CONTROL TO MANPOWER PROBLEMS

sands o f inequity cases processed during the stabilization period.

207
Its

im portance varied from very sligh t to very substantial but there is no
way o f determ ining its relative w eight, for the applicants themselves
sought grounds other than m anpower as a basis fo r proposed
adjustm ents.

V II. C o s t -o f -Li v i n g A

djustments and

M

a npower

O rdin arily the application o f the L ittle Steel form ula did not affect
manpower flow one way or the other since it was “ given all the way
around.”

B u t in some labor m arkets even this type o f wage adjust­

ment had its effects on m anpower flow.

T he M uncie, In d ., labor

m arket w ill serve as illustration.
In the summer o f 1942 there were 16 plants w ith over 300 employees
each in the M uncie area.

A lm ost all were engaged in war work and

the rem ainder in work essential to the war effort.

A s the labor m ar­

ket tightened, the manpower problem s became increasingly difficult
in plants at the low er end o f the wage structure, especially in those
whose jobs were not easily adaptable to the use o f women workers.
The tw o General M otors plants had traditionally been the wage
leaders in the com m unity.

A s in South B end, no serious problems

resulted from the interplant disparity as long as labor supplies were
adequate.
In October 1942 the N ational B oard granted a wage increase o f 4
cents an hour to the 300,000 workers in 70 plants o f General M otors.
T w o o f the plants were in M uncie. T h e grant o f 4 cents was based
on the L ittle Steel form ula. I t was som ething that was “ com ing to
everybody.” The entrance rate at G M was already 1 0 -2 0 cents an
hour above other companies before the grant. N ow the gap was fu r­
ther widened by 4 cents. M anagem ent and labor in the other estab­
lishm ents found it difficult to understand an N W L B act granting an
increase to the G M plants which already had the highest rates. Sev­
eral workers wrote to the B oard, “ T h a t’s one hell o f a way to stabilize.”
M anagem ent in the low wage plants found it more difficult to recruit.
T h is decision raised m anpower problem s sim ilar to those created in
South Bend by the Studebaker decision discussed above.
T he N ational B oard based its decision on the cost-o f-liv in g criterion.
B u t that did not ease the difficulties it created in such a labor market
as M uncie.

T h e fact that m any o f the other plants had already

exhausted their cost-o f-liv in g increases made the problem
difficult.




more

208

DISPUTE! SETTLEMENT AND W AGE STABILIZATION

In another type o f case19 involving Lever B ros. C o., the B oard
refused a cost-o f-liv in g increase on grounds th at it would unstabilize
area rates. T h e fact that there was no union involved in Lever B ros,
gave rise to criticism o f the B oard fo r unstabilizing in union towns
like M uncie w hile holding down a nonunion plan t under sim ilar cir­
cumstances.

T h e B oard should, o f course, have been consistent.

The

conflict between equity in term s o f cost o f liv in g and stabilization o f
local wage structure is probably irresoluble.

In applyin g the L ittle

Steel form ula generally, there was disturbance o f some labor m arkets
w hich intensified the race fo r inequity adjustm ents.

VIII.

T

h e

Substandard P

olicy a n d

M

a n p o w e r

T he correction o f substandard wages was an integral part o f w ar­
tim e wage controls throughout the B oard’s history.

In the first

m onths o f its use the substandard policy was described as an “ excursion
into social reform .”

I t was based on the conviction that in w artim e

as w ell as in peace, workers “ ought not in justice” to be asked to w ork
at wages which w ould not perm it “ health and decency” standards o f
livin g.

A s such, it was not directly related to manpower.

Y e t in

practice it soon became, like m ost other B oard policies, directly or
indirectly related to manpower.
T he term “ substandard” was never defined. I t was not used in the
Stabilization A c t o f October 2, 1942, but was used in the P resident’s
anti-inflation speech o f A p r il 2 7 ,1 9 4 2 , in subsequent Executive orders
and in the B oard policy statement o f Novem ber 6 ,1 9 4 2 , w ithout clari­
fication. T h e B oard never defined it. In fa ct, the B oard on several
occasions said it w ould not “measure substandards o f liv in g by any
fixed wage rate * * *. Cases w ill be considered on their individ­
ual m erit.” 20

In a general order early in 1943 the B oard set 40 cents

an hour as a level to which employers could raise wages w ithout in d i­
vidual approval.

T h is was raised to 50 cents in 1944.

In individual

cases the national B oard later granted up to 55 cents, and regional
boards were perm itted to do the same.
H ow was the substandard policy related to m anpower?

I t pro­

vided another means by which the B oard m ight grant w age adjust­
ments fo r m anpower needs.
industry.

Illu strative were cases in the textile

O n February 20, 1945, the B oard issued an order affecting 54
leading cotton and rayon textile com panies in the South, M iddle
1 Case Nos. 2276 and 2303-CS-D (September 2,1942).
9
2 N W L B , Wage Stabilization Policy, March 6,1942.
0




REIfATTON OF WAGE' CONTROL TO MANPOWER PROBLEMS

209

A tla n tic, and New E ngland States.2 The basic provision was a 551
cent hourly m inim um rate to correct substandards, supplemented by
a 5-cent hourly increase in all rates above the 50-cent level to “m ain­
tain the m inim um differential between im m ediately interrelated job
classifications.”

One o f the basic considerations o f the B oard’s de­

cision was the m anpower problem .

In its decision the B oard sa id :

Various m a n p o w e r devices have been tried in cotton textiles including the use
of soldiers * * * but they have been insufficient to turn the tide of con­
tinually declining output * * *
. Other Government agencies m a k e it very
clear that output * * * has been falling far short of the amount needed
for w a r purposes and for essential civilian uses.
Undoubtedly the m a n p o w e r difficulties cannot be eradicated by w a g e ad­
justments. There is neither rhyme nor reason, however, to m a k e the crucial
m a n p o w e r and production problems virtu a lly im possible o f solution by continuing
a $0.50 m i n i m u m wag e and by limping along under grossly unbalanced rate
structures. [Italics added.]

T he loss o f workers from the textile industry had occurred since
the beginning o f the w ar.

E ven w ith the above substantial grants,

wage levels remained unattractive.

T he basis o f m anagem ent’s re­

quests, however, fo r substandard increases was not so much social ju s­
tice as labor shortage.

T he B oard’s use o f the concept was not infla­

tionary and alleviated to some extent the problems o f a low -w age
industry. H a d there been no substandard policy the pressure on the
other criteria w ould have been ju st so much greater.
The textile cases illustrate a basic issue.

Suppose the m ilitary serv­

ices had been granted control over national service regulations.
Suppose they had adopted a hard-boiled attitude tow ard labor turn­
over in critical industries and forced workers to rem ain at their jobs.
E m ployers would probably have urged m anpower authorities to freeze
the workers in the textile towns. Then there would have been no need
to press fo r wage increases in order to secure or hold manpower.
U nder these conditions the textile worker, as one union leader said,
would have been “ stuck real good.” They would have had no oppor­
tunity to move into high-w age w ar production centers. M orale would
have sunk to a very low level. A n y democratic governm ent would
have had to grant substantial increases on “ equity” grounds as compen­
sation fo r workers’ loss o f freedom to seek the best jobs in the best
places.

Thus national service legislation might not haye changed many
o f the basic problems of interindustry differentials in wartime. It
would have meant that unions would have had to carry more o f the
2128 S o u th ern C o tto n T e x t ile C om p a nies case Nos. 111-5110-D, et a . 25 N ew E n gla n d
l,
C o tto n & R a y o n C om p a n ies case Nos. I l l —
7739-D et al., 6 N ew Y o r k and P en n sy lv a n ia
R a y o n C om p a n ies case Nos. 111-7107-D et al., decision of February 20, 1945, released on

March 9, 1945.




210

DISPUTE: SETTLEMENT 1 ANiD WAGE STABILIZATION

burden fo r correction o f inequitable situations instead o f having the
strong support o f managem ent in low -w age industries.
N ational service legislation w ould have m ade the task o f a wage
control agency even tougher.

F o r the decisions would have involved

greater amounts o f judgm ent unsupported by such concrete evidence
as out-m igration o f labor.

I t was easy to convince managem ent o f an

“ inequity” when labor was leaving the industry.

I t w ould not be so

easy i f the workers could not leave w ithout perm ission.

A pprehen­

sion over ju st this problem was one reason w hy labor fough t national
service legislation to the bitter end.
In contrast to the textile cases, the B oard went out o f its w ay in
some instances to avoid official recognition o f manpower aspects o f sub­
standard cases.

T h e A sso c ia te d L a u n d ries case discussed earlier in

the chapter is an instance in point.

IX . In t r a -Pl a n t W

age

P

olicy a n d

M

a n p o w e r

Problems

T h e extent to which large segments o f Am erican industry had failed
to develop system atic and rational internal wage structures became
apparent to the B oard at a very early date.

In trap lan t inequity

claim s, some bona fide, some not, poured into the B oard at an as­
tounding rate.
T h e correction o f intraplant inequities was not ju st a m atter o f
justice. I t was also a m atter o f proper manpower utilization. In ­
equitable rate differentials between workers doing the same or sim ilar
work obviously created dissatisfaction which in turn led to slowdowns,
tim e-consum ing grievances, work stoppages, and quits. Inequitable
w age structures made it difficult fo r some plants to recruit when it
was known that “there’s alw ays trouble there.”
There were various other types o f intraplant inequities.

I f the

differential between the low er and higher skilled jobs was too wide the
form er became difficult to fill.

I f differentials between the unskilled

and the skilled were too narrow workers refused prom otion.

“W h y

take on tw ice as much responsibility fo r an extra nickel an hour ?”

If

there were too m any job titles workers were confused and suspected
arbitrary managem ent discrim ination in prom otions.

I f there were

only a few classifications each covering a w ide range o f job duties,
workers fe lt they were gettin g “ equal pay fo r unequal w ork.”

W h en

earnings o f incentive workers rose m ore rapidly than those on non­
incentive jobs, dissatisfaction was created.

F o r exam ple, when house­

wives w ithout previous experience were placed on loosely tim ed incen­
tive jobs and acquired earnings in excess o f old experienced journey­




RELATION OF WAGE! CONTROL TO MANPOWER PROBLEMS

211

men who set up the machines “there was hell to pay in the plan t and
in the hom e.”
B oard policy in dealing w ith these internal inequities was as varied
as the problem s themselves. I t was developed through individual
decisions and in General O rders 16 and 81. The Board tended to
establish general guides and leave technical details up to the app li­
cants, fo r, as one B oard member said, no Government agency should
attem pt to work out intraplant details.22

The B oard’s insistence on

equal pay fo r equal work and rate differentials based on differences in
job content was fundam ental to any good industrial relations program .
In general, the B oard required the applicant to describe both existing
and proposed wage structures.

In the descriptive process itself, in­

equities became apparent and their proper adjustm ent indicated.

In

plants w ithout form al classification and grading o f jobs, the Board
required such action in aw arding increases.

B y exacting som ething

in the way o f internal improvements in return fo r moderate increases,
the B oard displayed great ingenuity.

Such grants seldom jeopardized

stabilization, yet the parties “ got som ething to work w ith” while im ­
proving rate relationships.
I t is not possible to illustrate here m any o f the B oard’s decisions,
but a few m ay be cited to reveal the types o f problem s. A well-known
case was the W e st Coast A irfram e Cos. decision.2
3
tion in this vital industry was appallin gly bad.
in g back production.

M anpower utiliza­

Turn-over was hold­

B ate structures were described as “ chaotic.”

New workers were sometimes paid higher than experienced personnel.
New jobs were sometimes assigned rates unrelated to other job rates.
The B oard ordered a job evaluation plan adopted by all plants to
bring about standardization and sim plification. Job titles were re­
duced from over 1,000 to less than 300. Labor grades were reduced
to 10.
In cases involving the wage schedules o f A tlan tic coast shipyards fo r
1 943-44,2 the Shipbuilding Com m ission follow ed a pattern that re­
4
sulted in substantial standardization o f rates fo r sim ilar classifications
in all o f the m ajor shipyards o f the region.
Sex differentials on com parable jobs were consistently elim inated
or greatly reduced.2
5

I f , when women were assigned jobs norm ally

perform ed by m en, some job dilution was actually necessary; the B oard
approved some sex differential.2
6

A n internal problem o f great com­

2 George W. Taylor, address before American Economic Association and tbe American
2
Political Science Association, Washington, D. C., January 22, 1944.
2 West C oa st A ir fr a m e C os. case No. 174, et al. (March 3, 1943).
3
2 E. g., N ew Y o r k S h ip b u ild in g C orp. case No. 111-2277-D (April 8, 1944).
4
2 For example, B r o w n & S h a rp e M a n u fa ctu r in g Co. case No. 101 (September 25, 1942).
5
2 G e n era l E le c tr ic Co. case No. 111-17208-D and W e s tin g h o u s e E le c tr ic & M a n u fa ctu r in g
6
Co. case No. 111-17809-D (December 12, 1945).




212

DISPUTE; SETTLEMENT AND WAGE STABILIZATION

p lexity, arising directly from wartim e changes, occurred when the
earnings o f incentive workers arose much m ore rap id ly than those o f
hourly paid workers. I f the disparity became excessive, the B oard
generally granted an adjustm ent to narrow the gap.27

I f the dis­

parity was m oderate, the Board generally refused an adjustm ent on
the ground th at there norm ally exists a differential in favor o f
incentive workers.28
In this connection the Board approved m any incentive plans de­
signed to perm it the indirect workers to share in the gains o f produc­
tion workers.29

H ig h technical competence characterized the B oard’s

handling o f these com plicated issues.

E specially notew orthy was

action designed to regularize and rationalize incentive earnings.30
F o r exam ple in the J a m estow n S te e l P a rtitio n C o . case the B oard
ordered specific guaranteed m inim a to protect workers against w idely
fluctuating piecework earnings.

In the J . / . C ase C o. case the B oard

established guaranteed earnings fo r incentive workers not in a posi­
tion to secure adequate incentive earnings due to downtim e, set-up
tim e, experim ental w ork, m aterial shortage or tem porary transfer.
In other cases the B oard directed that incentive systems m ust provide
a reasonable bonus, often specified as between 20 to 25 percent.
G eneral O rder 16 perm itted any em ployer to elim inate sex d if­
ferentials on the same or sim ilar work w ithout B oard approval.
General O rder 31 prescribed a m odel plan fo r w age-rate increases to
individual employees which m ight be adopted w ithout specific B oard
approval. The objective was to get intraplant jobs properly classified
and provide orderly and system atic upgrading w ithin the classified
structure. L im itations were im posed on the rate o f progression
w ithin rate ranges.
T he effect o f General O rder 31 on Am erican industry was tremen­
dously constructive. I t served as a guide fo r the correction o f thou­
sands o f haphazard and illogical rate structures, the establishm ent o f
orderly wage adm inistration and efficient internal manpower m anage­
m ent.

A s one executive sa id :

* * * some of the things that Order 31 sets u p for us to do are things that
any well-managed company should have done a long time ago of its o w n volition.
If w e retain only that part that is good * * ♦ w e will have derived some
benefit from this indirect attempt on the part of the Government, while aiming
at stabilization * * * to bring some order out of chaos in the rate structures
of companies in this country.8
1

2 S p ic e r M a n u fa ctu r in g Oo. case No. 2669-D (July 17, 1943).
7
2 E le c t r ic A u to -L ite case No. 111-568-D (August 1, 1944).
8
2 G ru m m a n A ir c r a ft E n g in eerin g C orp . case No. 13-285 (September 14, 1943).
9
8 J a m esto w n S te e l P a r titio n C o. and D a h lstro m D o n C o. case Nos. 2558-D and 2559-D
0
(January 19,1943), J . I . C ase Co. case No. 2257-D (December 23, 1942), and M a rlin R o c k ­
w e ll C orp . case No. 2881-D (April 2, 1943).
8 National Industrial Conference Board, S tu d ies in P e r s o n n e l P o lic y , No. 62, April 1944.
1




RELATION OF WAGE! CONTROL TO MANPOWER PROBLEMS

213

W h ile the confines o f this chapter do not perm it further discussion,
it should be noted that the B oard’s internal rationalization policies
occasionally conflicted to some extent w ith its stabilization program .
F or exam ple, the Board had authority to correct substandard rates
and to taper the interrelated jobs rates above the substandard level.
In plants w ith very wide rate structures, the tapering procedure (de­
signed to protect stabilization) distorted the higher classifications
and created internal dissension.
The application o f the L ittle Steel form ula also affected internal
manpower adm inistration adversely in some situations. T he L ittle
Steel form ula perm itted increases up to 15 percent in the average
straight tim e hourly wage rate in individual establishments. Its ap­
plication to any particular establishm ent was calculated by determin­
ing the straight tim e average hourly wage (w eighted arithm etic aver­
age rate) o f workers to be covered by an award, taking 15 percent o f
this amount and applying the amount so computed in cents per hour
to each wage rate established in the plant. T h is procedure therefore
gave the largest percentage increase to the lowest hourly wage rate
classification and tended to narrow wage rate differentials in any given
wage schedule.

Exceptions were occasionally made to the procedure

indicated above, but not in a sufficient number o f cases to constitute
a significant departure from the general principle. D issatisfaction
was created in plants where various groups o f skilled workers wanted
to be treated separately rather than included in plant-w ide increases.
The applications o f the bracket policy also clashed at tim es w ith the
needs o f internal alinement. R egional boards, after some experience,
abandoned the device o f granting an increase to each occupation up
to its appropriate area bracket yardstick because o f the internal plant
difficulties created. Instead they frequently granted lum p-sum , plant­
wide increases based on averaging o f adjustm ents due under bracket
policy. T he B oard cannot be criticized fo r these difficulties. The
conflict between stabilization and rationalization required compro­
mises. In trap lan t correctives were rarely responsible fo r increases in
prices.
In general, N W L B ’s policy o f correcting intraplant inequities was
a first-rate perform ance.

The B oard made a real contribution to in­

ternal wage and manpower adm inistration in this country. W h ile no
data are available fo r prewar years, N ation-w ide studies in 1946-47 in
selected m etalw orking industries,3 revealed that as high as 80 percent
2
o f all plants had form alized wage structures and system atic adm in­
istration. Probably h a lf o f them acquired their wage plans during
W o rld W a r I I . 8
2
8 Unpublished data, U. S. Bureau of Labor Statistics.
2




214
X.

DISPUTE. SETTLEM ENT AND W AGE STABILIZATION

I n t e r a g e n c y R e l a t io n s

in

D e a l in g W

it h

“ M anpo w er” P roblem s

T h e B oard’s relations w ith other agencies interested in manpower
took fou r different form s. One was the participation o f other agencies
in individual N W L B decisions.
try procedures.

A second was through special indus­

A third was through general interagency procedures

fo r coordinating action on given manpower problem s.

A fou rth was

the inform al exchange o f inform ation and view s between key per­
sonnel.

T h is latter was im portant, but difficult to evaluate because

it was so sporadic and w ill not be discussed.
A . I ndividual D ecisions
T h e participation o f other agencies in individual N W L B decisions
has already been discussed in a general w ay in preceding paragraphs.
I t m ay be sum m arized in term s o f the follow in g nine leading de­
cisions :
Prestabilization period, January-O ctober 1 9 4 2 :
Phelps D odge C orp., June 2 ,1 9 4 2 (W P B ).
Pacific N orthw est Foundries, A ugu st 28 (W P B , N avy, M a ri­
tim e C om m ission).
J . H . W illia m s C o., Septem ber 18 (W M C ).
Stabilization period, first phase, October 1 9 4 2 -A p ril 1 9 4 3 :
N onferrous M etals, October 23, 1942 (unofficial interdepart­
m ent com m ittee, W P B , W M C , O P A , Bureau o f M ines, S S ,
A rm y , N avy, M aritim e C om m ission).
Pacific N orthw est Lum ber, December 17, 1942, and January
4 ,1 9 4 3 (unofficial interagency com m ittee, W P B , W M C ).
C aliforn ia Processors and Growers, February 8 ,1 9 4 3 (unoffi­
cial interagency com m ittee, U S D A , O P A , W M C ).
Stabilization period, second phase, M ay 1 2 ,1943-A u gu st 1 9 ,1 9 4 5 :
T h irty M ichigan and Northern W isconsin Lum ber C os., Ju ly
8, 1943 (unofficial interagency conference, O P A , W M C ,
W P B , A rm y , N a v y ).
B oeing A irc ra ft, Septem ber 4 ,1 9 4 3 (official W P B -W M C In ­
teragency Production U rgency and L abor Su pp ly Com ­
m ittees, W P B , W M C , Selective Service, A rm y , N avy,
M artim e C om m ission).
L os A ngeles R ailw ay, Ju ly 19, October 24, and Novem ber 17,
1943 (W M C , A rm y , N a v y ).
W h a t m ay be said o f the effectiveness o f this type o f coordination?
I t was obviously lim ited to a relatively few cases.

I t was largely a

h it or m iss affair w ith no single person or persons assigned sole respon­
sibility.

D elays were inevitable.




There were no official procedures.

RELATION OF WAGE! CONTROL TO MANPOWER PROBLEMS

215

A lm ost all actions taken in these cases were dependent on N W L B
w illingness to grant wage increases. Y e t the B oard was not able to
insist upon minim um nonwage actions. In those cases in w hich w ellrounded program s were worked out and applied, the results were
usually good, albeit always late. A s in the case o f nonferrous m etals,
lum ber, fluorspar and others, action came after a crisis had developed.
M issing was preventive program m ing between agencies.
T he solutions were case-by-case im provisations. The nine cases
illustrated w hat could be done. Less recognized is w hat was not done
in m any areas, w ith the result that local situations deteriorated
needlessly because they failed to get to the attention o f top personnel
in tim e.

The need o f centralized responsibility fo r spotting and

program m ing difficult local m arket problems is a lesson to be learned
from these cases.
B . Special I ndustry P rocedures
T he second type o f interagency relations, i. e., special industry pro­
cedures, were lim ited to a few industries including foundries, laun­
dries, flourspar, work gloves, canneries. The procedures fo r the
foundry industry w ill illustrate the problem , the m ethods and the
results.
In late 1943 and early 1944 production and procurement officials
reported that one o f the principal bottlenecks to production was la g ­
ging output from foundries and forge shops.
m aterials but m anpower shortage.

The problem was not

E fforts by W P B , W M C , and the

armed services to stop the steady decrease in foundry workers and
to secure new recruits fe ll fa r short o f needs.
In February 1943,
W M C and W P B representatives talked w ith B oard members about
the grow ing crisis in this bottleneck industry.
N W L B pointed out that it was processing dozens o f foundry cases
every week under its usual procedures. I f foundries were in trouble,
let them apply fo r adjustm ents. B u t foundry labor supplies con­
tinued downward. In the follow in g m onths the pressures o f W P B
and W M C increased to the point where an interagency agreement was
reached on A p ril 18, 1944. I t provided sim ply that N W L B would
{a)

give preferential treatm ent to foundry applications, (6 )

ask

regional boards to issue interim orders on the m ost acute aspects o f
complex cases, and ( c ) ask regional boards to establish brackets im ­
m ediately wherever they had not already done so.

T he agreement

was supplemented on Ju ly 19, 1944, as fo llo w s: (a) A public mem­
ber would w ork w ith W M C and W P B to secure prom pt action under
the “ rare and unusual” doctrine and (&) em ployers and unions in­
terested in adopting “ sound” incentive plans to speed up production
would be advised to consult w ith W P B .




216

DISPUTE. SETTLEM ENT AND WAGE STABILIZATION

B y the summer o f 1944 the B oard announced it had disposed oi
alm ost 90 percent o f 2,000 foundry cases filed in the previous 10
m onths. I t had approved 8 out o f 10 requests. T he rem aining 200
cases, however, included m any o f the country’s m ost im portant
foundries in key production areas. W P B and W M C joined by the
A rm y and N avy pressed fo r greater speed.
On November 20, 1944, under some urging by the Director of

Economic Stabilization, the Board adopted a streamlined procedural
system form ally and officially incorporating joint action with W P B
and W M C and designed to complete action on all remaining critical
foundry cases. The procedures included several steps, (a) W P B
and W M C would determine “critical foundries.” W P B was to
determine which foundries were o f greatest importance to the war
effort and were short on manpower in relation to production schedules.
W M C was to certify that all nonwage W M C efforts had failed, that
a wage increase was needed, and that if workers transferred to
foundries because o f N W L B action, such transfer would be approved
by W M C as in the interest of the war effort. (6 ) Critical foundries
cited by W P B and W M C would be placed by N W L B on a special
blanket certification list, (c) A ll cases on this “ blue ribbon” list would
be approved by N W L B up to 10 cents an hour as “ rare and unusual”
cases. W ithin 60 days after adoption of this procedure, most of the
critical foundries had been so certified and wage adjustments approved.
This helped relieve the manpower problem.
W hat was the reason for the manpower problems o f the foundry
industry? The lowest-classified jobs were generally rated as common
labor, although actually considerable skill was involved. N ot only
were the rates low, but in many plants the processes were inefficient
and incentive earnings were low. The work was heavy, disagreeable,
and hazardous. It offered little chance for promotion. W hen work­
ers left foundries for easier higher-wage jobs, it was impossible to re­
cruit from the normal civilian labor force. (Some Central Americans
were brought in by W M C with considerable success.) W omen were
not adapted to foundry work. The low level o f rates reflected a carry­
over from depression days when labor was plentiful and interplant
competition drove profit margins down. Under such conditions the
conflict between wage stabilization and the desired flow of manpower
was inevitable. One or the other had to give way.
W hat can be said o f the Board’s policy in this situation? W hile it
was slightly inflationary, it was probably the only realistic policy that
could be followed. In some labor markets it was necessary to pay
premium rates above other jobs normally considered comparable in
order to compensate for the undesirable working conditions. I t took




RELATION OP WAGE! CONTROL TO M ANPOWER PROBLEMS

217

higher wages to recruit new workers than to hold old workers.

The

bracket principle had to be set aside in recognition o f m anpower needs.
T h is was the price Government agencies had to pay fo r not tackling
the problem sooner.
W h a t can be said o f interagency procedures that were developed
to meet the problem ? N W L B displayed a characteristic reluctance
to have either W P B or W M C , especially at the local level participate
in w age-adjustm ent decisions.
the beginning and too slow.

The procedures were cumbersome in

I f the B oard was justified in its m isgiv­

ings about the possible actions o f local W M C personnel— it was afraid
they would rely solely on wages to influence manpower— it should
have taken more positive steps to work out safeguards w ith top W M C
officials.

I f N W L B was to agree w ith the principle o f no com pulsion

in the labor m arket and at the same tim e hold to a policy o f “ no wage
increases fo r m anpower purposes,” it should have taken m ore positive
steps to determine the effects o f its own decisions at the local level.
C . S e v e r a l P r o ced u r es
The third form o f interagency relationship came through general
procedures established by N W L B fo r w orking w ith W M C and other
agencies.
1.

P e r io d o f n o proced u res , O ctober 191 $ to June 191$ . — Through­

out 1942, despite developing spot shortages, there were no N W L B W M C procedures.

In February 1943 N W L B , under pressure from

topside policy m akers, fe lt it desirable to issue instructions regarding
field relations w ith W M C .

T h is was not easy.

W M C had little

authority. I t had only a sm all field staff. The N ational B oard is­
sued instructions to its regional boards pointing out that “ there exist
no procedures” fo r join t handling o f manpower cases. T he regional
boards were instructed to act as fo llo w s:
Until such (manpower) principles and procedures have been worked out, the
regional office * * * will have to refrain from deciding cases on solely
manpower grounds.
Occasionally, however, manpower cases may be processed as such and recom­
mendations made to the National Board, when in the judgment of the regional
office, the manpower issue is of predominant importance and must be squarely
faced.3
8

W h en m anpower cases were received, regional boards were advised to
obtain inform ation from local W M C offices on (a ) the relationship
o f the applicant’s business to the war effort and (6 ) the efforts made
by the applicant to solve his manpower problem s by certain nonwage
methods such as “ recruiting new workers from reserves o f women and 3
8
8 NWLB, Wage Stabilization Division, Manual of Analysis, February 1943, p. 26.
3
(Mimeographed for staff use.)




218

DISPUTE: SETTLEM ENT AND WAGE STABILIZATION

m inority groups, dilu ting and upgrading labor, increasing produc
tiv ity and resorting to overtim e.”
In practice, the regional boards at th is tim e seldom obtained thi:
type o f inform ation from W M C because (a ) it was tim e-consum ing
(6 ) the boards handled alm ost all cases under the inequity doctrine
2.
C on su lta tion procedu res, J u n e 1 9 1 $ -A p r i l 191$. — O n A p r il 17
1943, W M C instituted N ation-w ide control o f turn-over in 35 essentia
industries. In M ay, N W L B began operations under its new bracke
policy in which m anpower cases were to be handled as rare and un
usual cases.

A t the behest o f the D irector o f Econom ic Stabilization

N W L B on June 1, 1943, issued interagency procedures intended t<
facilitate collaboration, prim arily w ith W M C , but also w ith sucl
agencies as W P B , the W a r Departm ent and the N avy.

T h e instruc

tio n s34 provided fo r (a ) processing m anpower cases under the rar<
and unusual doctrine and (&) defining rare and unusual cases a s :
Those

*

*

*

cases

*

*

*

where, in the judgment of the regional

board, approval of * * * [a wage] adjustment is highly essential to th<
success of the war effort or for the correction of grossly inequitable conditions

E ssentiality o f a plant was described a s :
The establishment should be engaged primarily in an activity included in th<
W a r Manpower Commission’s List of Essential Activities [35] or covered by th<
W M C ’s designation of locally needed activities.
The establishment must have been in compliance with all the W ar Manpower’s
regulations and policies with respect to recruitment, training, and utilizatioi
of labor and with respect to operation on a minimum wartime workweek (as
defined in sec. 4 of W M C Regulation No. 3 ) .
There should be proper statements or certification from appropriate Govern
ment agencies with respect to the above matters.

These procedures provided not so much fo r join t study o f difficull
m anpow er problems as fo r official presentation o f evidence to N W L E
from other agencies on m anpower needs. A n exam ple was the
handling o f the radio industry by the Chicago R egional Board.
W M C , the A rm y , and the N avy recommended a wage increase fo i
this relatively low -w age industry.

T he low wages resulted, it was

claim ed, in inability to recruit labor and in excessive turnover.
nonwage steps had been taken.

A

A l]

substantial w age increase was

granted on rare and unusual grounds.

Y e t the evidence was con­

flicting, as N W L B public members warned it often w ould be.

Some

o f the low est-w age plants had less turn-over than some o f the highwage plants.

Factors other than wages were involved.

A wage in ­

crease w ould not correct them.8
4
8 NWLB, Memorandum of Instructions to Regional Boards entitled <
4
‘Processing of ‘Rare
and Unusual* Cases,” under the Supplementary Directive of May 12, 1943. June 1, 1943.




RELATION OF WAGEf CONTROL TO MANPOWER PROBLEMS

219

W h a t in general can be said o f these early procedures fo r rare and
unusual cases?

They were obviously better than none.

late in acute shortage areas or industries.

T hey came

T hey were vague as to

ju st w hat kind o f wage adjustm ents were called fo r and what kind
o f evidence should be supplied by other agencies. Some o f the in­
creases granted were in excess o f the amounts required and caused
considerable dissatisfaction in other industries.
Testim ony by other agencies in manpower cases was easily given.
I t saved them from the pain ful process o f doing som ething about the
nonwage factors, which is precisely w hat the N ational B oard feared
m ight happen.

W h a t was needed, o f course, was a clear understand­

ing between top staff officials o f the W ashington agencies as to just
what types o f nonwage action an em ployer would have to take before
the local representatives o f the interested war agencies w ould support
a request fo r a wage increase on manpower grounds.
3.

Certification and exp ed itin g p roced u res , A p r i l %9, 1 9 ^ 4 .— A s a

result o f continued pressure from W M C , W P B and the D irector o f
Econom ic Stabilization, interagency discussions were held in the
spring o f 1944.

These discussions culm inated in the first form al rec­

ognition o f other agencies in supporting wage action in manpower
cases.

T he agreement covered two types o f action: (a ) expedition

o f urgent cases and (b ) certification o f cases as rare and unusual.3
5
The expedition o f cases was to be handled at the regional level through
form al requests o f interested agencies to the Board— such requests to
include detailed justification fo r special treatm ent.
T he certification procedure was a roundabout, four-step , paperheavy affair. A local W M C office could m ake a request through its
W ashington office, which w ould presum ably evaluate the m erits o f
the claim and forw ard it to the N ational B oard.

B efore doing so,

however, W M C w ould n o tify other interested agencies, which could
join the certification, take no action, or file objections. T h e N ational
B oard would then evaluate the m erits o f the proposal and forw ard to a
regional board. T he latter would evaluate the proposal and act on its
own judgm ent, w ith or w ithout special hearings.

I f the proposal was

deemed sound, the regional board was free to approve it on rare and
unusual grounds, which m eant th at it could fix wages above the lim its
applicable in other cases, i. e., above the m inim um o f the bracket.
W M C certification had to include evidence to demonstrate th at (a )
the need was urgent and (b ) all nonwage actions had been taken.
T he procedures spelled out the evidence required from W M C , W P B ,
and the procurement agencies in great detail.

F rom W M C this in for­

m ation included (a ) length o f workweek, (6 ) recruitm ent and assign­
8 NWLB, Release B-1482, April 29, 1944.
5
921297— 50------ 15




220

DISPUTE; SETTLEM ENT AND WAGE STABILIZATION

m ent practices, (o ) training and upgrading program s, (d ) extent ol
job dilution, ( e ) w orking conditions, ( / ) measures to reduce turn­
over and absenteeism, (g ) collective bargaining relations, ( h ) use o1
women, N egroes, part-tim e and handicapped workers, ( i ) adequacy
o f housing, transportation, schools, and m edical care as these affected
m anpower, and ( j )

from what sources additional labor w ould be

draw n i f a w age increase were approved.
W h y were the procedures so laborious ?

T h e Stabilization D irectoi

and N W L B feared W M C and other agencies w ould rely too m uch or
the easy expedient o f wage increases rather than the harder task oi
im proving manpower utilization through nonwage techniques.

By

placing obstacles in the path o f certification, all but the m ost urgent
cases would be elim inated.
T he N W L B agreed to cooperate w ith other agencies fo r a number
o f reasons.

One reason was the clear inapplicability o f the bracket

principle in the case o f low -w age plants whose products were urgently
needed but which were faced w ith the problem o f hiring labor in acute
shortage areas.

Secondly, the issue o f national service legislation had

been practically settled by this date.

There would be none.

The

labor members looked w ith m ore favor on W M C ’s requests, since they
.would result in wage increases not otherwise allowable under bracket
policy.

T he procedure tied in fo r the first tim e W M C , W P B , and

the armed services in determ ining the all-im portant question: “ Is this
plan t’s output the m ost urgent in the area at this tim e?” W ith o u t
such determ ination there could be no intelligent wage-m anpower
policy. B efore this date it was claim ed that other agencies were not
in a position to provide the necessary inform ation. T h is was prob­
ably true. Centralized planning was not conspicuous in W o rld
W ar II.
T he procedures as finally effected were tortuous. They were called
“ denial o f m anpower increases by delay.” They did, however, con­
structively set down the m inim um nonwage requirements which
should be met before resort to wage increases.

They did officially

coordinate, albeit late in the w ar, the efforts o f wage and m anpower
regulation. T hey did provide a way to side-step the bracket policy
where urgently needed.
N o record is available o f the number o f cases handled under the
certification procedures, but it was com paratively sm all.

T h e job o f

allocating manpower was done, except fo r a few critical areas, by the
tim e the interagency agreement was consummated.
earlier, it would have been h elpfu l.

H a d it come

Previous discussion has indi­

cated that the special industry procedures fo r foundries were devel­
oped still later, i. e., in November 1944, and provided alm ost automatic
approval o f m anpower wage adjustm ents on a greatly speeded-up




REFLATION OF WAGE' CONTROL TO M ANPOW ER PROBLEMS

procedural basis.

221

H ad this been done early in W o rld W a r I I the

deterioration in such industries as nonferrous m ining would never
have occurred.

X I. N W LB -W M C R e l a t io n s

and t h e

G eneral Control

of

Interplant

T r a n sf e r

T he control o f turn-over was basic to W M C ’s local em ploym ent
stabilization program s. W h en W M C ’s first antipirating program was
instituted in the summer o f 1942, W M C regulations perm itted trans­
fers out o f jobs w ith rates below prevailing levels.

T he lack o f

adequate wage data meant th at transfers were allow ed except from
the very high w age plants. W M C labor controls received their first
real strength from Executive O rder 9328, issued on A p r il 8, 1943.
T h is order greatly restricted transfer out o f low -w age industries ex­
cept when approved by W M C .

W orkers could not transfer to get

higher wages unless in the interests o f the war effort. Labor pro­
tested strongly and pointed to the inconsistency w ith the B oard’s
bracket policy. In A ugu st, W M C issued new regulations tyin g in w ith
N W L B ’s bracket policy.

These perm itted workers to m ove out o f

jobs whose rates were below the bracket minim um or the substandard
level, whichever was higher. I t was difficult, i f not im possible, to
enforce even this restriction.
around the regulations.
plants.

W orkers had too m any w ays o f getting

They continued to move into high-w age

W a g e levels and manpower regulation m ust be synchronized

to make manpower controls fu lly effective. T his is extremely difficult
because o f the changing nature o f the criteria o f essentiality.
U n til Executive O rder 9328, W M C ordered preferential referral
treatm ent to essential war industries, i. e., m unitions, aircraft, ship­
building and other types o f direct w ar production. The transfer out
o f nonwar industries was not only approved, but encouraged. B y the
spring o f 1943, such industries as restaurants, laundries, hotels, food
and fu el distribution, and local transportation, in war production
centers had been seriously drained o f manpower.

Authorities realized

that m inim um com m unity services had to be m aintained or direct
war production would decline.

The nonessential became essential.

W M C on M ay 2 5 ,1 9 4 3 , issued regulations providing fo r the designa­
tion o f “ locally needed activities” in critical areas.

Cafeteria and

laundry workers became as im portant as riveters in a bomber plant.
N W L B did not officially adopt a special policy fo r critical areas as
did W M C .

In effect, some regional boards did so through the flexi­

b ility o f the bracket principle.

A special policy m ight have been

developed which would have proved more effective.
such a policy is discussed later in this chapter.




The nature o f

222

DISPUTE; SETTLEM ENT ANiD WAGE STABILIZATION

X II. T h e W P B P r o d u c t io n D r iv e T h r o u g h W a g e I n c e n t iv e s
Som e critical labor m arkets experienced declines in total laboi
supply in m id-1943 at a tim e when demand from the m ilitary was
still rising.
w ay out.

W P B turned to greater productivity per worker as one

T he W P B management Consultant D ivision undertook a

N ation-w ide cam paign to prom ote adoption o f wage incentive systems,
T he drive was indirectly aided by the tightening o f the w age-stabiliza­
tion program , which m ade it more difficult to get approval o f w age-rate
increases.

Labor and m anagem ent both saw incentives as a possible

w ay to “ give the workers som ething” w ithin the stabilization program .
A t first, N W L B was slow either to advocate or discourage W P B
efforts to popularize incentive plans. The labor members stressed
labor’s traditional opposition to incentive system s o f wage paym ent.
T h eir hostility gradually softened, however, when the public members
agreed to m inim um safeguards.
A fte r several exploratory decisions, in which the B oard tested out
the feasibility o f approving incentive systems w hile still protecting
the stabilization line, it announced certain principles as guides fo r
parties proposing new incentive systems.
(a ) T he plan m ust not substantially increase production costs.
(b ) I t must be carefully outlined in detail.
(c ) R esponsibility fo r technical details m ust be assumed by the
applicant.
(d ) T he plan m ust be approvable under the stabilization policy, i. e.,

m ust not provide increased earnings unrelated to worker effort.
( e ) I t m ust be concurred in by unions in organized plants.
( / ) Protection m ust be provided against the usual hazards o f in ­
centives, such as changes in specifications or processes.
I t is not possible to examine leading B oard decisions on incentive
plans in detail.

T he B oard’s handling o f these com plex cases was

o f a very high order.

T he Board denied crude or poorly developed

incentive plans and schemes based on factors other than worker effort.
H ow were N W L B actions related to those o f W P B in this incentive
cam paign?

T he latter organization placed management consultants

in each regional office and urged m anagement to utilize their services.
W P B reported it handled over 1,000 inquiries in 1943. E m ployers
were assisted in technical m atters and in the preparation o f applica­
tions to N W L B . In several regions, join t N W L B -W P B review o f
proposed plans was adopted.

The interagency cooperation on incen­

tives at the regional level, while inform al, was in general good.
I t is difficult to estim ate how m uch m anpower was saved by the
adoption o f incentive plans because sufficient data are not available.




RELATION OE WAGE! CONTROL TO MANPOWER PROBLEMS

223

NW LB reported it had 800 incentive applications between April and
September 1943, o f which about half were approved. Several spot
checks on results were reported by J. W. Nickerson, Director of the
W P B Management Consultant Division.3 He reviewed 50 plans
6
approved in the New York region and reported that the increase in
output per worker over past performance ranged from 10 to 100 per­
cent with the average around 25 percent. He reported later on 86
plans approved by the Chicago regional board in which average pro­
ductivity had risen 46 percent. In terms of production it is possible
that the equivalent of at least 100,000 workers was added to critical
industries in late 1943 and early 1944 by this method.3 More might
7
have been done if efforts had been concentrated in a few critical in­
dustries rather than scattered through many industries, some o f which
were already meeting production schedules.

X I I I. S u m m a r y

and

C o n clu sion s

The relatively successful mobilization o f manpower and the stabili­
zation o f wages in World W ar I I was the result more o f favorable
labor market conditions than of good planning.
The nearly 12 million civilian replacements for workers drawn into
the armed services came from the Nation’s tremendous labor reserves
accumulated in a period o f widespread unemployment and under­
employment. The flow of these reserves into war production was
achieved under conditions of a relatively free labor market through
favorable wage differentials, overtime and promotional opportunities
in new and converted production facilities. Specific Government
direction o f individual workers was fortunately not required except
in a few areas. The manpower job was largely done by the voluntary
action o f individual employers, workers, and unions.
The foregoing serves to explain the most striking feature of W orld
War I I wage and manpower controls, namely, the almost complete
lack o f coordination between them until the closing months o f the war.
Wage controls were comprehensive and were developed early under
the general threat o f inflation. Manpower controls were limited in
scope and were developed much later when labor was still adequate in
general but short in particular.
Wage controls were centralized in the NWLB. Manpower con­
trols were never centralized. In fact, an over-all manpower policy
8 War Production Board, Management Consultant Division, Wage Incentive Plans and
6
Labor-Management Relationships, October 1944.
8 Estimate of author based on WPB data. (See footnote 36.)
7




224

DISPUTE SETTLEM ENT AND WAGE STABILIZATION

was never achieved. Manpower authority was dispersed through
many agencies.
The NW LB was one of the agencies whose responsibilities with
respect to manpower was implicit rather than explicit. It inevitably
came as a responsibility to the Board because o f two fundamental
facts: ( a ) A large part of the pressure for wage increases (particularly
from employers) came from the desire to improve the relative draw­
ing power o f the particular plant in the labor market, and ( b ) the
effect of any wage increase was to improve the relative drawing powei
o f that plant as compared to others in the same labor market.
But important though this consideration was, it was not the directly
assigned obligation o f the Board. Bather, the Board was assigned
to settle industrial disputes, and to stabilize wages against inflation.
As we have noted, the application of these objectives caused manpower
problems wherever the achievement o f either or both objectives ran
counter to the needs for the guidance of manpower flow.
Most important o f the Board’s standard wage criteria from the
manpower standpoint was the “ inequity” policy. The first phase of
this policy (October 1942-April 1943) represented an industrial re­
lations approach to wage adjustments based on achieving equity
through give-and-take within a flexible program o f stabilization.
The inequity policy in its first phase had a favorable effect on man­
power flow in loose labor markets. Kising wage levels in war plants
combined with other influences to attract workers from less essential
jobs and from nonworker status. In stringent labor markets the
policy was often highly disturbing. The “ prevailing” level was con­
stantly raised. This encouraged “job shopping.” Increases were oc­
casionally granted to the highest-wage plants, which widened hiring
differentials with low-wage plants o f equal essentiality. The man­
power problems o f the latter were unnecessarily intensified. The
Board should have considered the effects o f its decisions on manpower
in such labor markets.
The second phase o f inequity policy, that o f area-wide occupational
brackets, created fewer new manpower problems. However, it tended
to perpetuate some o f the unfavorably wide differentials made, or at
least not corrected, in the previous phase. Had the bracket policy,
or something like it, been adopted much earlier, it would have retarded
the rush up the “ inequity” ladder, and the correction o f inequitable
rate differentials could have been done once instead of many times.
Two maxims o f the inequity policy—“ no wage increases to influence
manpower” and “no disturbance o f normal differentials”—were useful
devices in the hands o f skillful public members in protecting the sta­
bilization line., But they were not always practical under wartime
market conditions, and were occasionally disregarded in key decisions.




RELATION OF WAGE! CONTROL TO MANPOWER PROBLEMS

225

The so-called normal prewar differentials represented in part the
laggard distortions o f depression that would inevitably have narrowed
under conditions o f full employment. Part o f the difficulties with
the inequity doctrine stemmed from these distortions in wage struc­
tures carried over from years of depressed labor and product markets.
Serious manpower problems were certain to arise in low-wage In­
dustries and plants as the Nation moved toward full employment.
Part o f the manpower difficulties also came from the timing o f
wage controls. Wage rates in some industries had moved up con­
siderably by October 1942, while in others the advance had been slight.
These differences in timing caused increasing strain in some centers
as labor became stringent. Had wage controls been instituted earlier,
some manpower problems could have been avoided.
The lack o f N W LB control over incentive earnings caused some
difficulties. Day-work plants often were unable to hire effectively
in competition with plants which operated very loose incentive systems.
Some effort should hJtve been made to control the extreme cases which
upset local labor-market structures.
The Board’s cost-of-living and substandard criteria were generally
well applied. Their occasional disturbance o f manpower could not
well have been avoided. N W LB’s handling o f internal wage rational­
ization problems was an outstanding performance which greatly aided
the efficient utilization o f labor.
The most serious weakness o f wage-manpower policies lay outside
the authority o f both NWLB and WMC. It consisted of topside
failure to provide centralized direction for the agencies involved and
to assign formally to the Board some responsibility for the manpower
program. Such an action would have required the Board to recog­
nize more definitely than it did the effect of wage changes on man­
power flow. The Board would then have had to work out a better
balance between the three functions o f wage stabilization, dispute
settlement, and the guidance of manpower flow.3
7
With respect to manpower flow, four primary considerations would
have been involved: (a) The determination of a current priority
rating for each production facility; (&) certification of the extent to
which each facility had met manpower needs by utilization o f non­
wage techniques (such as the longer workweek, modernized recruit­
ment, selection, training and upgrading programs, the degree of job
dilution, the employment of women, minority groups and handicapped
workers, the provision o f eating and laundry services, e tc.); ( c ) in­
troduction o f wage adjustments required to retain or recruit needed
8 It should be noted that the complex factors affecting the movement of labor still require
7
considerable study and that many generalizations about manpower flow must be of a tenta­
tive character.




226

DISPUTE; SETTLEM ENT AND WAGE STABILIZATION

labor; and ( d ) consideration of the effects o f any proposed wage ad­
justments on the production schedule o f other local plants.
The integration o f these considerations with the Board’s functions
would have posed some extremely difficult problems for the Board
as well as for the other cooperating agencies such as WMC, W PB, and
the armed services. As our study has shown, the Board frequently
found that a decision which helped to accomplish one o f the three
functions adversely affected another. Each time, for example, that
the Board made a “rare and unusual” decision, it promoted manpower
flow at the expense of wage stabilization. Each time that the Board
ordered an industry-wide wage change, it promoted industrial relations
at the expense o f possible local manpower considerations. The basic
problem was one o f securing a balance.
One o f the main questions arising from the manpower considera­
tions listed above would have been how to relate wage adjustments
to current priority ratings for production facilities which fluctuated
considerably throughout the war. Such ratings V ere made by W P B
and the armed services but not very effectively. A literal application
o f this approach would have required frequent increases and decreases
o f wages in many plants often in close proximity to each other.
From an industrial relations point o f view this would have had seri­
ous effects upon morale and production. While the higher priority
plant might have gained additional employees, the plants with lower
priority ratings but whose products were also important to the war
effort would have been faced with insuperable morale problems. In
addition, if the high priorty plant was later reduced in priority stand­
ing and had to suffer a reduction in wages, it too would have en­
countered critical industrial problems. Nothing in the experience of
W orld W ar I I suggests that this type o f approach would have been
feasible. If, on the other hand, the priority rating approach involved
only upward wage adjustments and did not require wage reduction
with a reduction in rating, it would have had serious inflationary
effects because o f the large number of changes in priorities required
by the war production program.
Another important problem would have been how to assess the
need for wage adjustments as compared to nonwage techniques to
meet manpower needs. Both WM C and W P B had made efforts to
utilize various nonwage techniques but these were poorly coordi­
nated and not extensively applied on a systematic basis. In gen­
eral, it would have been better to utilize systematically all possible
nonwage techniques before attempting wage adjustments so as to mini­
mize inflationary effects. Where such measures Were inadequate,
then the Board would have been called upon to grant wage adjust­




REFLATION OF WAGE CONTROL TO MANPOWER PROBLEM S

227

ments. Indeed, as earlier noted, this was a procedure encouraged by
the Board. It must be recognized, however, that it was not always
feasible to utilize many nonwage techniques in a given situation in
the time required. This again posed a problem o f balance, in this case
between the wage program o f the Board and the nonwage programs
o f other governmental agencies. Careful coordination o f the various
agencies would have been required.
The practical effects o f the form al assignment o f responsibility to
the Board to help guide manpower flow by the adjustment o f wages
would have been tw ofold :
(а) more frequent and better coordinated use o f the rare and un­
usual principle, and
(б ) greater recognition in the application o f the inequity and other
wage policies o f their impact upon manpower flow.
It would have been helpful if the Board had established a manpower
division. Its purpose could have been threefold. In the first place,
it could have advised other agencies on minimum standards o f non­
wage action required as a prerequisite to considering wage applica­
tions with manpower significance. Secondly, it would have kept the
Board inform ed o f the deterioration o f wage-manpower situations in
critical manpower areas so that speedier action could have been taken
where needed. Thirdly, it could have served as a focal point for all
the numerous agencies in Washington with an interest in manpower
cases.




CHAPTER

Tripartitism
By William H. McPherson*
.
I

I n establishing the NDMB, the NW LB, and the NWSB, one o f the
major questions involved the composition o f the agency. In each
o f these three cases it was decided that the Board should be organized
on a tripartite basis, i. e., that some o f the membership should be
selected to represent labor, an equal number selected to represent
management and others selected as neutral persons. The first two
groups may be referred to as the “ interest” or “ partisan” members,
while the last group is usually referred to as the “ public” members.
The experience o f these three agencies constitutes the outstanding
example o f tripartite organization in the history of American gov­
ernment. It is, therefore, the purpose of this chapter to analyze
that experience in order to evaluate tripartitism as a method for the
settlement o f labor disputes and the administration o f wage stabiliza­
tion, and to determine whether, if the method was to be employed
at all, the scope of tripartite action in these agencies should have been
broader or narrower.

I. E a r l ie r E x p e r ie n c e

Contrary to widespread impression, these three agencies were not
the first to be established as tripartite organizations in the govern­
mental regulation of labor relations. Three earlier experiences o f­
fered to the persons responsible for the creation o f the NDMB some
basis for a limited judgment on the effectiveness o f the tripartite
principle.
The most recent instance of tripartitism at that time was to be
found in the composition o f the minimum wage boards, which con228




TRIPARTITISM

229

stituted the central procedural step in determining specific minimum
rates for certain individual industries under the laws of many States
and under the Federal Fair Labor Standards Act. The experience
with these tripartite boards, dating back over a period o f several
years, had been quite satisfactory. No appreciable amount o f dis­
cussion had been evoked regarding the appropriateness of tripartite
membership for this purpose, and the continued use o f this machinery
had never been a significant issue.
This experience, however, was o f little value in deciding the com­
position o f the NDMB, for the problems in the two cases were sig­
nificantly different. In the first place the decisions o f the minimum
wage boards constituted only a recommendation that was offered for
acceptance or rejection by a regular Government official. Secondly,
each o f the wage boards was convened on a temporary basis and usu­
ally completed its task and disbanded within a few days, whereas the
NDMB members were expected to work together as an effective team
for an indefinite period. Thirdly, the interests of the labor and in­
dustry members were less divergent on the wage boards than on the
NDMB. Although it might at first be supposed that the industry
representatives on the wage boards would oppose any increase in the
minimum wage, most of the firms in an industry stood to benefit by
the setting o f a minimum wage that would bring the labor costs o f the
remaining firms more nearly up to a level with their own. Fourthly,
the wage boards had little to do with policy formulation. The policy
with reference to minimum wage determination was embodied in the
controlling legislation and the standards of the administering agen­
cies. The NDMB, on the other hand, was expected to determine for
itself nearly all policies relating to its operation and recommenda­
tions. For these various reasons the experience with tripartitism
under minimum-wage administration was o f little assistance to those
who determined the organization of the NDMB.
A second and more relevant experience with various forms of tri­
partitism was the organization of the several labor boards under the
National Recovery Administration. The National Labor Board was
composed o f three representatives each of labor and industry and an
impartial chairman.1 It was appointed by the President upon the
joint recommendation o f the Industrial and Labor Advisory Boards,
and its partisan members were separately nominated by those two
boards.1
1 Such a form of organization has not usually been considered as tripartitism, yet it is
fundamentally a tripartite structure. The influence and vote of the public members is
equally decisive whether there are one or more. Numerical equality between the public
members and each of the other two groups is surely not essential to tripartitism, for this
did not exist in the NDMB. Nor can the presence of more than one public member be a
distinguishing characteristic, for it would be unrealistic to conclude that the National Labor
Board became tripartite only at the later date when two additional representatives from
each of three groups were added to its membership.




230

DISPUTE; SETTLEM ENT AND WAGE STABILIZATION

This Board had a stormy existence during its 10-month life. Its
assumed and eventually assigned function was to settle labor disputes
involving interpretation o f the President’s Reemployment Agreement
or o f industry codes. Its principal cases involved questions o f intro­
ducing employee representation in plants that had been unorganized.
It operated quite successfully for a short time, but was soon wrecked,
prim arily by serious cases o f employer defiance.2
The composition o f the special labor boards established for several
individual industries varied widely. The Steel and Petroleum Labor
Boards had an all-public membership, while there were various form s
o f tripartite membership on the boards in automobiles, cotton textiles,
and bituminous coal. Unfortunately, no comparative study is avail­
able o f the relative effectiveness o f these different types o f organization
in meeting the somewhat similar problems faced by these boards.
Certainly the N RA experience with tripartitism could give no real
support to those who urged that this composition be adopted for the
NDMB or the NW LB. The lack o f success o f the National Labor
Board, however, was largely due to factors other than the nature o f
its membership. It faced special difficulties in that ( a) its legal
foundation was insecure, (b) the principle o f collective bargaining
which it sought to enforce was widely and vigorously challenged at
that time, and ( c) there was no danger o f international warfare to
mitigate internal conflicts.
The Railroad Labor Board, established by the Transportation Act
o f 1920, offered another experience with tripartitism in the settlement
o f labor disputes. It consisted of three representatives each o f the
industry, the employees, and the public. Its experience was not a
happy one. Its decisions were frequently disregarded. As a result
o f the combined efforts o f labor and management in the industry, its
life was finally terminated by the Railway Labor Act o f 1926. The
experience o f this Board was far from conclusive with reference to
the merits o f tripartitism. The following analysis of the reasons
for its failure implies that its tripartite structure was not one o f the
major factors:
* * * in spite o f the prodigious volume o f work o f good quality performed
by the Board it had come to be regarded as a failure long before 1925, and there
was an insistent demand for its abolition, especially by organized labor. The
dissatisfaction was due in part to some unfortunate appointments made to the
Board, in part also to pronouncements made by one o f its chairmen and to a de­
mand for more power to be vested in it. Another factor * * * [was that a ]
large number o f the disputes should never have come to the Board at aU. * * *
Again, the Board and its decisions were imposed upon the parties immediately
interested; they sought and found ways of avoiding rulings, or frequently ignored
2 Louis L. Lorwin and Arthur Wubnig, Labor Relations Boards (Washington: the Brook­
ings Institution, 1935), ch. 4.




TRIPARTITISM

231

them. * * * In times of deflation arbitration machinery is likely to be
wrecked.
* * * Peace was maintained until 1922, when the shopmen struck against
a decision rendered. From that time on, and partly because of incidents in the
behavior of some o f its members, the Board was sadly undermined.3

Although the experience of this Board was inconclusive regarding
tripartitism, it may suggest that this form of organization is unlikely to
succeed when based on statute rather than agreement o f labor and
industry.
A fourth experience with tripartitism was to be found still earlier in
the history of the National War Labor Board of W orld War I. This
Board has sometimes been described as having had a two-party (labor
and industry) organization, but in reality it was tripartite in character,
as were the temporary groups whose recommendations led to its ap­
pointment. The initial organizational step leading to the establish­
ment o f the first War Labor Board was the appointment of a special
tripartite Advisory Council to the Secretary of Labor, consisting of
two labor and two industry representatives and three others. The
council’s function was to suggest means for effectuating the coordina­
tion o f labor administration that had been ordered by President
Wilson.4 Among other things, it recommended the naming of a tri­
partite board to agree on policies for improving labor-management
relations and preventing work stoppages.5
In creating this War Labor Conference Board, the Secretary of
Labor requested the American Federation o f Labor and the National
Industrial Conference Board to name five members representing labor
and industry respectively. In his letters to these organizations, he
stated that the five representatives named by each “ will be asked to
name a sixth who will represent the general public.” 6 The labor rep­
resentatives selected Frank P. Walsh and the industry representatives
named William Howard Taft. Thus the W ar Labor Conference
Board was composed of two public members plus five representatives
each of industry and labor.
This Board recommended that the task of mediation and voluntary
arbitration o f labor disputes be the function of a national war labor
board having the same number o f members as the War Labor Confer­
ence Board, and with those members appointed in the same manner.
President Wilson thereupon decided to appoint the same individuals
to the new National W ar Labor Board. In his proclamation o f April
8 H. A. Millis and R. E. Montgomery, Organized Labor (vol. I ll of The Economics of
Labor) (New York : McGraw-Hill Book Co., 1945), pp. 736-737.
4 Gordon S. Watkins, “ Labor Problems and Labor Administration in the United States
during the World War,” University of Illinois Studies in the Social Sciences, V III: 3 and 4
(September and December 1919), p. 18.
5U. S. Department of Labor, Bureau of Labor Statistics, The National War Labor Board,
Bull. No. 287 (1921), p. 30 and Watkins, op. cit., pp. 162-163.
6 U. S. Department of Labor, op. cit., p. 31.




232

DISPUTE; SETTLEMENT AND WAGE STABILIZATION

8, 1918, establishing the new Board, he appointed Mr. T aft and Mr.
Walsh as “ representatives o f the general public o f the United States.” 7
The two public members served as alternating chairmen o f the Board.
The question may well be raised as to whether the chairmen could
properly be regarded as public representatives— and the Board prop­
erly regarded as tripartite in view o f their separate selection by the
labor and industry members. However, both the prominence o f these
two men as public servants and their conduct as members o f the Board
indicate that they did serve, in fact as well as in name, as true public
members. This conclusion is supported by the fact that in only three
instances during the Board’s 16 months o f existence was a decision pre­
cluded by disagreement beween the two chairmen.8
Although the Board was tripartite in organization, its individual
actions were frequently not tripartite, due to the procedures that it
follow ed. In describing these procedures, a distinction must be drawn
between cases that were handled by mediation and those that were han­
dled by voluntary arbitration. When a complaint was received from
one party, the other party was asked to join in the case and agree in ad­
vance to accept the Board’s decision. Whenever voluntary arbitra­
tion was thus accepted, the Board’s decision was reached only by
unanimous vote. I f the members could not reach agreement, the
Board then named an umpire, whose decision was final. Thus the
public members did not have the decisive votes, but were rather re­
quired to serve as mediators within the Board. When an umpire
was appointed there was no final tripartite action, since his decision
was not subject to Board review.
In 85 percent o f all cases acceptance o f voluntary arbitration was
not obtained. In these instances the Board acted by m ajority vote,
but its action constituted a recommendation rather than an award.
Most o f these cases were handled by a two-man section, consisting o f
one labor and one industry representative or—particularly in publicutility disputes—the two public members. In a very few cases a
four-man section was used consisting o f two public members and one
from each o f the other groups. Only in these last instances was the
action o f the section tripartite in character. The recommendation
o f the section was usually reviewed by the fu ll Board, but the Board’s
consideration was generally perfunctory where the action o f the
section was unanimous. The public members had the decisive vote
only in action by four-man sections or by the fu ll Board on mediation
cases.
The experience o f the first National W ar Labor Board was one o f
considerable success.9 Although vast changes had taken place be­
7Ibid., p. 34.
8 Ibid., p. 17.
9Watkins, op. cit., pp. 168-172.




233

TRIPARTTTISM

tween W orld W ars I and I I in the prevalence o f collective bargaining
and the nature o f the principal dispute issues, there was little reason
to suppose that tripartitism would operate any less successfully in
1941 than it had in 1918. The most significant difference in the situ­
ations was that 1941 was a “ defense period” rather than wartime, so
that there was less assurance that industry and labor would submerge
their disagreements in the interest o f national security.

II. T r i p a r t i t i s m

on the

NDMB

During the defense period o f 1940-41, the work o f the Conciliation
Service in the settlement o f labor disputes was initially supplemented
by labor and management representatives serving as mediators on
the staff o f Sidney Hillman, head o f the Labor Division o f the A d­
visory Commission to the Council o f National Defense (later known
as the Labor Division o f the Office for Production Management).
The W ar and Navy Departments and the Maritime Commission also
sought to mediate disputes in plants operating under Government
contract. As the problem o f work stoppages grew increasingly seri­
ous and the mediators attached to the various Government agencies
appeared unable to cope adequately with the situation, thought was
given to the establishment o f a national board. Harry A. M illis,
W illiam Leiserson, and W illiam H. Davis were among the most
prominent advocates o f a board, although they differed consider­
ably in their views as to the functions and organization o f such a body.
In this instance, unlike the procedure followed in connection with
both the first and second National W ar Labor Boards, the establish­
ment o f the board was preceded by no form al consultation with labor
or industry. Some clearing was done inform ally by Frances Perkins,
Sidney Hillman, and W illiam Knudson, all o f whom supported, for
various reasons, the proposal for a tripartite mediation board. The
President accepted the suggestion that the new board should be tri­
partite. Executive Order No. 8716 establishing the NDMB provided
for participation by four representatives each o f labor and industry
and three representatives o f the public.
The decision regarding the Board’s composition was based largely
upon the insistence o f certain prominent union officials. More funda­
mentally, it was consistent with the scope o f the Board’s functions. In
addition to serving as a mediator, the Board could issue recommenda­
tions which might be enforced, in effect, by other agencies o f the Gov­
ernment. George W . Taylor suggests that tripartite organization
was adopted to provide some safeguards to labor and industry in view
o f the fact that the Board’s operations would constitute a considerable




234

DISPUTE: SETTLEMENT AND WAGE STABILIZATION

interference with free collective bargaining.1 A further reason for
0
adopting a tripartite structure perhaps lay in the limited authority
o f the Board. Its lack o f any real power made it especially dependent
on the acquiescence o f labor and industry. Presumably a final con­
sideration was the lack o f any form al advance approval from labor
or industry. Failure to consult openly with these two groups in ad­
vance made it especially important to give them each a voice on the
Board.
Under tripartitism the Board acted successfully for 6 or 7 months.
In all but three cases final action was taken by a tripartite panel o f
three members, without referral to the fu ll Board. Panel action was
unanimous on all but four cases.1
1
In November 1941, however, the CIO members resigned in protest
over the Board’s recommendation in the “ captive mines” case. This
instance is an excellent illustration o f some o f the strengths and weak­
nesses o f tripartitism. A ll CIO cases were withdrawn from Board
consideration by the unions involved. The Board considered that it
still retained jurisdiction over these cases, but it took no further action
on them. Its effectiveness was sharply reduced during the 2 months
between its loss o f the CIO members and its replacement by the NW LB,
although some new cases were certified to it and it continued to act
where no CIO union was involved. On the other hand, the CIO unions
found themselves in a difficult position, having no access to emergency
mediation facilities at a time when the national peril made labor re­
luctant to resort to strike action in order to enforce demands. CIO
officials found that they had undermined the Board, but only at con­
siderable cost to their unions.
Under these circumstances it was but natural that inform al nego­
tiations were soon begun with a view toward achieving the resumption
o f CIO participation in the work o f the Board. These negotiations
were spurred by congressional consideration o f antistrike legislation.
Just prior to the Pearl Harbor attack, Philip Murray wrote to Presi­
dent Koosevelt that the CIO would return to the Board provided the
Board would reaffirm its policy that previous decisions would not be
considered as precedents and provided neither the A F L nor the CIO
members would participate in the voting on each other’s cases.1 W ith
2
the outbreak o f war, however, it was decided to discontinue these nego­
tiations and approach the problem anew through the convening o f a
national labor-management conference.
The CIO withdrawal proved that tripartitism does give to the
partisan members a genuine veto power on Board actions. Under
1 Government Regulation of Industrial Relations (New York: Prentice-Hall, 1948), p. 98.
0
11U. S. Department of Labor, Bureau of Labor Statistics, Bull. No. 714, Report on the
Work of the National Defense Mediation Board (1942), p. 7.
MNational Defense Mediation Board, Transcript, Executive Meeting, December 11, 1941,
pp. 3-4.




235

TRIPARTITISM

tripartite organization either labor or industry can halt the whole
procedure by withdrawal. The public members w ill, o f course, seek
to avoid any danger o f withdrawal by serving in a mediatory capacity.
Thus labor and industry can be assured that the positions o f the public
members on all major issues w ill not be arbitrary, but rather w ill be
carefully considered in an effort to find a solution that w ill be at least
acceptable to both sides.
On the other hand, the experience o f the NDMB made it equally
clear that the veto power would not be exercised in any similar new
agency with regard to any issue that was not o f absolutely fundamental
importance. In the first place, withdrawal by either management or
labor at a time o f national emergency would be regarded as an un­
patriotic act and would tend to alienate public opinion. Secondly, at
a time when, because o f patriotism or the fear o f incurring public
disapproval, free use could not be made o f the strike weapon, the
existence o f a special dispute-settlement agency would be particularly
important to the unions. Thirdly, the veto by withdrawal probably
could not be used more than once, since a second use would be possible
only if there should be a return to participation in the interim. It
would not be exercised unless dissatisfaction with the agency’s action
were so keen and basic as to make more attractive the probable alter­
native to the agency’s continuation. Only if legislative action should
appear preferable to labor or to management, could either afford to
disrupt the agency. Most important o f all is the consideration that
the withdrawal o f industry or labor at a time o f national emergency
would probably result in the establishment o f a board with similar
or stronger powers and one that would not include representatives o f
industry or labor.1
3

III. E s t a b l ish m e n t

of th e

NWLB

The foundations for the NW LB were laid during the discussions o f
the Labor-Management Conference o f December 1941. The establish­
ment o f some such board was a necessary concomitant o f the no-strike,
no-lockout agreement.1 The recommendations o f this conference re­
4
garding the number and selection o f the NW LB members were much
less specific than the recommendations made by the W ar Labor Con­
ference Board o f 1918. The 1941 conference recommended only that
a “ proper” board be established. There is, however, no doubt but that
1 Since the basic nature of tripartitism was much the same in both the NDMB and the
3
NWLB, further evaluation of it will be deferred to later sections of this chapter.
1 For discussion of this agreement and its relation to tripartitism, see ch. 1.
4

921297—50------16




236

DISPUTE: SETTLEMENT AND WAGE STABILIZATION

the conference members considered a tripartite organization to be
desirable. Both o f the proposals separately submitted by the labor
and industry members provided for tripartite composition. One rea­
son why the final wording was vague was that the labor proposal called
fo r a single public member while the management proposal called
fo r three. The President and his advisors apparently decided that
future withdrawals from a tripartite agency were unlikely in view o f
the conference agreement, the Pearl Harbor attack, the difficulty o f
the CIO unions in settling their disputes satisfactorily after their
withdrawal from the NDMB, and the resulting interest that the CIO
had shown in returning to that Board. Whatever their reasoning
may have been, they determined to constitute the NW LB on exactly
the same basis as the NDMB with the single exception o f adding a
fourth public member, so that each party should have an equal number
o f representatives on a 12-man board.

IV . F u n ctio n s

of

P a r t is a n M em bers

on t h e

N W LB

A first step toward evaluating the experience o f the NW LB with
tripartitism must be a survey o f the numerous aspects o f the activities
o f the labor and industry members. In reviewing the various types
o f activities o f the partisan members, it should be kept in mind that
their principal function from their own point o f view was to represent
with maximum effectiveness the interests o f their constituents and to
obtain fo r their principals as favorable a decision as possible, insofar
as this did not run counter to the interest o f their constituents as a
whole. This partisanship was tempered to a greater or lesser extent
by the individual labor and industry members, depending upon the
sincerity with which each one viewed his position as a Government
official.1 It was also tempered, especially on the National Board, by
5
the interest and responsibility that each member had in assuring fu ll
observance o f the no-strike, no-lockout agreement.
A. I

n

D

is p u t e

C ases

Nearly all dispute cases were decided in the first instance by the re­
gional boards or industry commissions, but the National Board took
initial jurisdiction in cases covering more than one region (providing
no appropriate commission existed) and in a few other cases o f major
significance.
The first step in the substantive consideration o f a dispute case was
the conduct o f a hearing o f the parties (except in the very few cases
MFor further discussion of this point, see p. 251 of this chapter.




TRIPARTITISM

237

where the parties waived a hearing). Partisan members nearly al­
ways participated in the conduct o f these hearings. Most o f the
cases assigned to the regional boards were heard by ad hoc tripartite
panels, whose function it was to recommend to the Board the terms
o f a decision (unless they settled the case by mediation). The com­
missions generally held their own hearings, and made infrequent use
o f panels. The National Board used standing panels in a few indus­
tries and ad hoc panels in other cases.

The only deviation from the tripartite conduct of a hearing came
in those instances where the parties agreed to present their case to
a hearing officer, who would then make recommendations to the
National Board or its appropriate agency.

In the hearings it was the function o f the partisan members o f
the panels or commissions to assure that their party presented its case
as effectively as possible. When a partisan member saw any oppor­
tunity for strengthening a case, he would question the parties to elicit
the information that he sought. The ingenuity o f some partisan mem­
bers in the phrasing o f leading questions was truly remarkable.
The second major step in the processing o f a typical dispute case
was its discussion in executive session o f the panel and determination
o f the recommendations to be presented. The follow ing step was con­
sideration and decision o f the case in executive session by the National
Board or a regional board on the basis o f the recommendations o f its
panel or hearing officer, or by a commission on the basis o f the hearing
that it had held.
The functions o f the partisan members were much the same,
whether the discussion was that o f a panel (step 2) or o f the National
Board or one o f its permanent agencies (step 3). Their chief purpose
in both instances was to obtain a decision as favorable as possible to
their party. The partisan members on each side therefore sought
to persuade those on the other side and especially the public members
o f the logic o f their own position. Where the partisan members were
uncompromising there was little prospect o f their reaching agreement
with those on the other side o f the table in order to achieve a unani­
mous decision. In such cases they therefore centered their attention
on the persuasion o f the public members in an effort to obtain a favor­
able m ajority vote. Those who were more objective usually took a
more moderate position and directed their efforts also toward per­
suasion o f the other partisan members.
The partisan members who argued their case on a factual and
analytical basis were the most effective and performed a real service.
Those who habitually resorted to shouting and table-thumping were
generally ineffective and merely wasted the time o f all concerned.
Many o f these latter soon realized the futility o f their methods and




238

DISPUTE SETTLEMENT AN© WAGE STABILIZATION

became valuable participants in the discussion, but a few seemed
satisfied to pride themselves on their nuisance value.
D uring case discussions the partisan members were often o f real
assistance to the public members in supplying technical inform ation
regarding the industry. This service was especially important be­
cause o f the compromise character o f the decisions in most o f the
dispute cases. A ny im practicability in the position o f either party
was usually brought out by the other party during the hearing; but,
since the positions o f the parties on most disputed issues were at oppo­
site extremes and the appropriate settlement appeared to lie some­
where between, the public members had to suggest, in executive session,
various possible solutions that had not been argued at the hearing
and could not readily be checked fo r practicability except on the basis
o f the knowledge o f the partisan members. The technical inform a­
tion o f these members was therefore valuable as a check on whether
a proposed decision was feasible and would meet the problem. This
service was o f greatest significance in the discussions o f the industry
commissions, since in these instances the partisan members were
specialists in the operations that were under discussion; but even on
the regional boards the public members concluded that this was one o f
the greatest benefits o f tripartitism.1
6
The partisan members themselves sometimes suggested realistic
compromise solutions. They seldom advanced such proposals in exe­
cutive session, partly from fear o f weakening their “ bargaining posi­
tion.” They occasionally perform ed this function in private discus­
sions with the public members. In such inform al conferences a parti­
san member could state more candidly the realities o f the dispute and
discuss more frankly the possible bases fo r a satisfactory solution.
This method was especially useful when the management or labor
representative wished to propose a settlement that he regarded as
fair, but one that he was not w illing to support publicly with his vote.
The partisan members perform ed another valuable function in indi­
cating to the public members, by the intensity o f their argument and
the degree o f their emotionalism, the relative significance o f various
issues to the parties concerned. The members who were equally
temotional on all issues were o f no service in this respect, but the
many who demonstrated a clear ability to distinguish between the
important and unimportant were very useful to their public colleagues
and their constituents. W hen they showed great concern over a par­
ticular issue, it was clear that that the proposed decision was ex­
tremely distasteful to their constituents, either because o f its im­
practicability or because some basic principle was at stake.
1 U. S. Department of Labor, The Termination Report (1948), vol. I, p. 581.
6




TRIPARTTHSM

239

The degree o f contact between a partisan member and his con­
stituent in any particular case was an important determinant o f his
ability to supply useful information or to reflect the attitudes o f the
party. In many cases the partisan members kept in fairly close touch
with the parties involved and often checked confidentially on the
acceptability o f a proposed decision. It was not unusual fo r further
discussion o f a particular case to be deferred until the follow ing
meeting in order to give the partisan members an opportunity to
obtain from the parties certain desired additional information.
A further function o f the partisan members in dispute cases was
participation in the balloting on proposed decisions. Frequently all
the members were in fairly close agreement regarding the appropriate­
ness o f a proposed decision. In some o f these instances decision was
by unanimous vote. In the others, the members o f one o f the partisan
groups were reluctant to vote in favor o f the proposal and preferred
to register a dissent in order to protect their relations with their con­
stituents. On most issues, one group or the other was particularly
dissatisfied, so that the dissents were generally vigorous rather than
pro forma. In some cases both o f the partisan groups, because o f the
irreconcilability o f the position o f the two parties, were very dissatis­
fied with the disposition proposed by the public members. The public
members thus sometimes had difficulty in obtaining a m ajority vote.
Such instances, however, seldom created a serious problem. When
the public members were convinced o f the desirability o f a particular
decision but could get no initial support, they usually first decided
which o f the partisan groups could most reasonably be expected to
concur in the decision, and then proceeded to force such concurrence
by threatening to vote for a less favorable decision unless concurrence
was forthcom ing. However, in a few instances where there was sharp
disagreement on issues o f outstanding importance, there was great
difficulty in obtaining support from either side for a solution that
was acceptable to the public members. The possibility that the public
members might be outvoted by the partisan members seldom arose in
dispute cases.1
7
The comments in the preceding paragraphs regarding the partici­
pation o f the partisan members in the decision o f dispute cases by
panels, commissions, and the boards apply equally to the handling
o f appeals by the Appeals Committee and the National Board.
In a small proportion o f dispute cases, the Board had to face the
further problem o f obtaining compliance o f the parties with a decision.
Since this problem is discussed in detail in chapter 1, it w ill suffice to
emphasize here that tripartitism contributed in three ways toward
obtaining compliance. In the first place, the participation o f the
1 This problem is discussed on p. 258 of this chapter.
7




240

DISPUTE SETTLEMENT AN© WAGE STABILIZATION

partisan members in the original determination o f the case decreased
the possibility that the decision might be so distasteful as to be totally
unacceptable to either o f the parties.
Secondly, the partisan members, in their contacts with their con­
stituents, often prepared them fo r announcement o f the decision.
Merely the receipt o f advance indication as to the probable nature
o f a decision helped to preclude any revolt by union or management
officials. More important was the usual practice o f accompanying
such information With an explanation o f the reasons for the decision.
This information gave the parties assurance both that their case
had been given thorough consideration and that there were strong
reasons why a more favorable decision could not be obtained. The
contacts o f the partisan members with their constituents were not
close (enough to permit advance information in more than a fraction
o f all dispute cases, but it is certain that these included nearly all
o f the instances in which there was any danger o f noncompliance.
In some instances, because o f inaccuracy or misunderstanding, ad­
vance notification proved to be a liability rather than an asset. It
was also unfortunate if only one party received advance notification,
since the other party then obtained initial inform ation about the
Board’s action from a source other than the Board.
Thirdly, the partisan members were o f service to the Board in
obtaining compliance in some instances where it was not imme­
diately forthcom ing. They were in a much stronger position than
the public members to use effective persuasion, because they could
speak as prominent members o f the group (labor or management)
to which the recalcitrant person belonged and could discuss the ques­
tion more convincingly in terms o f his ultimate interest. They used
their influence in nearly all instances where they foresaw any pos­
sibility o f success. These efforts were exerted not only during strike
hearings or compliance hearings, but often in direct private discussion
with the recalcitrant party. A s is necessary to the success o f a tri­
partite organization, the members o f the Board almost invariably
took the position that a m ajority decision was the responsibility o f
them all. Even those members who had dissented from a particular
decision practically always cooperated in every effort to obtain com­
pliance.
B. I n J u r is d ic t io n a l D isp u t e s
I t was early decided that tripartite action was inappropriate in
the case o f disputes as to which union had jurisdiction over a particu­
lar type o f work, since these were disputes between unions rather
than between a union and an employer. Because such disputes were
essentially interunion quarrels the industry members were well satis-




241

T R IP A R T IT IS M

fied to abstain from participation in their decision. The first step
in processing these cases was to refer them to the labor members o f
the N ational B oard, who attem pted to work out a solution w ith the
top officers o f the unions involved.

These efforts were not always

successful.
W illia m Green and P h ilip M urray reached an agreement w ith
the B oard that unresolved cases would be referred fo r decision by
persons whom they w ould appoint in each instance.

Several efforts

to follow this procedure resulted in an inability o f the appointees
to settle the dispute.

The B oard then adopted the general policy

o f referring unresolved jurisdictional disputes to an um pire fo r final
decision that was not subject to review by the B oard. Thus the only
elements o f tripartitism in the B oard’s handling o f jurisdictional
disputes lay in the unanimous agreement on a procedure and in the
fact that the um pire named to settle such a dispute, like the umpires
appointed in all other cases by the B oard, had been previously ap­
proved by both the labor and industry members.
C. I n W

age

S t a b il iz a t io n

The prim ary function o f the B oard during its first 9 m onths was
the settlem ent o f labor disputes, although, like certain other agencies,
it was vested by the Em ergency Price Control A c t w ith general respon­
sibility to prom ote stabilization o f prices and production costs. A s
has been indicated in chapter 2, no set o f principles had been pre­
scribed in advance, so that the Board was free to develop its own
policies. Its action in the individual dispute cases constituted the
process o f policy form ation. F or exam ple, the L ittle Steel form ula,
discussed in chapter 4, was the product o f such tripartite action.
W ith the advent o f a form al Governm ent wage stabilization pro­
gram in October 1942, greater lim itations were placed on the freedom
o f Board action on w age-adjustm ent issues. In spite o f these lim ita­
tions there still remained a considerable scope fo r determ ination o f
the B oard’s wage policies, since the lim itations were o f a general
character and required interpretation. Thus the B oard’s partisan
members acquired a new function in their influence upon wage stabili­
zation policy in the adm inistration o f the new program .

T hey had,

fo r exam ple, fu ll participation in the adoption o f the general orders,
which set forth the various types o f wage adjustm ents that could be
made w ithout individual B oard approval.

T heir action on individual

cases helped to shape Board policy on the form ulation and applica­
tion o f such criteria as inequities, substandards, and rare and unusual.
M oreover, in the execution o f the m inim um -of-the-bracket policy, the
determ ination o f specific bracket rates was made by tripartite com­
mittees o f the regional boards and in some instances was the subject
o f tripartite review by the N ational B oard.




242

D IS P U TE . S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

In addition to their influence on the B oard’s stabilization policy,
the partisan members also had an appreciable influence on the various
aspects o f the over-all Governm ent program .

W henever the public

members were called into consultation by F ederal executive officers
or congressional com m ittees, th eir advice was inevitably affected by
their intim ate know ledge o f the attitudes o f the industry and labor
representatives.

Probably the m ost striking instance o f the influence

o f the partisan members upon the Governm ent program is to be found
in the clarification (o r m oderation) o f the hold-the-line order b y the
D irector o f Econom ic Stabilization on M ay 1 2 ,1 9 4 3 .

P artisan m em ­

bers sometimes participated in the conferences w ith other Government
officials, but this was often not the case.

W h en not invited to partici­

pate, they vehem ently objected to having only an indirect influence
on the over-all Governm ent program .
T h e adoption o f an official stabilization program brought the intro­
duction o f the F orm 10 application fo r approval o f a voluntary (undis­
puted) wage adjustm ent.

T h e N ational B oard and its agencies took

tripartite action on a number o f these applications during the early
m onths o f the stabilization program .

A s soon as the regional boards

got into operation, nearly a ll applications were handled b y them and
the com m issions, and reached the N ational B oard only on appeal.
A fte r the B oard’s stabilization policies began to crystallize, the
grow ing flood o f F orm 10 applications forced the regional boards and
com m issions to delegate to a staff member (th e head o f the wage
stabilization or case analysis un it) authority to act on m ost o f these
applications. Once the partisan members had participated in the
form ulation o f policies th at narrowed the scope fo r individual ju d g ­
m ent in tiie processing o f w age applications, they generally took little
interest in participating personally in the individual decisions on these
voluntary cases. O n ly in some o f the industry com m issions, where
the partisan members were w ell inform ed on the conditions in the
various establishm ents, did they show any reluctance to delegate this
authority.

E ven in these few instances the authority was eventually

delegated, though an inform al review o f staff decisions was some­
tim es m ade b y individual partisan members, prim arily to check the
staff action.
T he B oard agencies placed different types o f lim itations on th is
delegation o f authority and m odified their lim itations from tim e to
tim e to increase the proportion o f cases th at w ould be disposed o f by
the staff.

T he lim itation was usually stated in term s o f the number

o f em ployees involved.

T he nature o f the industry and the basis

fo r approval were also occasionally used as criteria to define the scope
o f the authorization.

In some instances the responsible staff member

was given com plete discretion and instructed to bring to the B oard only
cases regarding w hich he was in doubt.
f„



243

T R IP A R T IT IS M

A lth ou gh nearly all o f the F orm 10 cases were decided by authorized
staff members,18 the N ational B oard and its agencies took action on
them in case o f appeal. The in itial appeal was from the staff action
to the B oard agency, w ith final appeal to the N ational Board. T ri­
partite action on Form 10 appeals brought increasing clarification to
the B oard’s w age-stabilization policies and resolved borderline cases.
T h e experience o f the Board and its agencies in passing on F orm 10
applications seems to indicate that there is little need fo r or interest
in tripartite action in dealing w ith individual cases where the decision
is largely predeterm ined by adopted or prescribed policies.
Participation in enforcem ent procedures was another function o f
the partisan members in relation to the w age stabilization program .
T h is chapter w ill include only a brief reference to the tripartite aspects
o f the enforcem ent program , since a detailed analysis o f enforcement
policies— including tripartite participation— is presented in chapter
10.

Each o f the regional boards had a tripartite enforcement division,

whose duty it was to review instances o f violation o f w age-stabiliza­
tion regulations in order to determine how much o f a penalty, if any,
should be assessed against the violator.

T h is was probably the m ost

unwelcome o f any o f the functions assumed by the partisan members.
The labor members throughout the B oard had little interest in penal­
izing employers fo r granting unauthorized wage increases, except to
reduce dissatisfaction on the part o f employees whose rates were held
w ithin the lim itations o f the stabilization program .

T he industry

members, although they were strongly opposed to the granting o f
unauthorized increases by individual em ployers, were loathe to p ar­
ticipate in the penalization o f a fellow em ployer except in instances
o f deliberate and flagrant violation. T he T w elfth R egional Board
voted unanim ously that its enforcem ent division should consist only
o f public members.19 T h is decision, however, was countermanded by
the N ational B oard.
I t was surely appropriate that the N ational B oard should establish
enforcem ent policies and consider enforcem ent appeals on a tripartite
basis. O n the other hand, the practice o f tripartite participation in
the in itial decisions on enforcem ent cases had disadvantages that
perhaps outweighed its advantages.
There were tw o principal alternatives to the use o f tripartite en­
forcem ent divisions.

One was the possibility o f in itial decisions by

staff members, subject to appeal to the regional board and the N ational
Board.

Such a procedure w ould correspond to the usual staff action

on Form 10 cases.

The im possibility o f developing clear standards

1 Of some 200,000 applications for voluntary wage or salary adjustments determined by
8
tbe regional boards from July 1, 1944, to August 17, 1945, nearly 96 percent were decided
by the Wage Stabilization Directors (The Termination Report, vol. I, p. 818).
» Ibid., p. 765.




244

D IS P U TE S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

governing the extent o f the penalty and the consequent wide range
fo r individual judgm ent made delegation o f such authority to staff
members inadvisable.
A m ore feasible alternative was the use o f all-public enforcem ent
divisions.

T h e relative m erits o f these various alternatives are dis­

cussed briefly in the paragraphs that follow .
I t has been generally reported that the partisan members o f the
enforcem ent divisions perform ed their tasks conscientiously and th at
division actions were unanimous in the vast m ajority o f cases.20

It

seems clear, however, that there is less justification fo r tripartitism
in the consideration o f individual enforcem ent cases than in the per­
form ance o f the rest o f the B oard’s functions.

T he opinions o f

B oard and staff members who had experience w ith the enforcem ent
program differ sharply on the question o f whether, nevertheless, the
assets still outweighed the liabilities on this point.
P robably a m ajority o f these persons believe that tripartite action
on individual enforcem ent cases was desirable.

T hey point out (a)

that the severity o f the m axim um penalties required great m odera­
tion in their app lication; (b ) that tripartitism lessened the danger o f
the corruption o f members o f the enforcem ent sta ff; (o) that it served
to w in public approval o f the enforcem ent program and to obtain ac­
ceptance o f the penalties by the parties, which was especially im ­
portant when a rollback o f wage rates was in volved ; and ( d) that the
wide area inevitably le ft fo r discretion in determ ining the am ount o f
the penalty made tripartite consideration desirable.
T h e w riter, however, believes th at the T w elfth R egional B oard
acted w isely in proposing that its enforcem ent division consist en­
tirely o f public members. M oderation o f the assessment o f penalties
was certainly desirable, but could surely have been obtained without
tripartite divisions, especially since general enforcem ent policies and
action on appeals were in any case subject to tripartite determ ination.
W h ile the danger o f corruption m ight have been greater if the au­
th ority had been delegated to a staff member, this would not have
been the case i f the decisions had been placed in the hands o f an a ll­
public division.

I t seems probable th at public approval o f the en­

forcem ent program was little influenced by the procedure o f individual
tripartite decision. I t is at least possible that the acceptance o f the
penalties by the parties would still have been satisfactory so long as
the enforcem ent program had the general support o f the tripartite
B oard.

T he w ide area le ft to discretion would have made it more

difficult to delegate the task to a staff member, but did not make an
all-public division less appropriate than a tripartite one fo r this task.
The very nature o f the enforcem ent problem made it inappropriate
3 Ibid., pp. 583-584.
0




245

T R IP A R T IT IS M
fo r detailed tripartite operation.

T ripartitism made its chief con­

tribution in the development o f reasonable policies and the application
o f technical inform ation to the practical solution o f a complex problem
o f labor-m anagem ent relations.

F or these purposes a close relation­

ship to the parties was useful.

T ripartitism , however, was unsuited

to a jud icial procedure, where a complete detachment from the parties
was desirable. T he partisan members were placed in the difficult,
i f not im proper, position o f serving both as advocate and as judge.
I t must be recognized, however, that general support o f the partisan
members was essential to the success o f the enforcem ent program .

If

that support could be obtained only on condition o f tripartite partici­
pation in the decision o f each case, then there was no better alternative
than the enforcem ent procedures actually follow ed by the B oard.

It

is here suggested that the partisan members o f the T w elfth R egional
Board showed statesm anship in their w illingness to support the pro­
gram without complete tripartite participation.

I t is further sug­

gested that it was unfortunate that some o f the partisan members o f
the N ational B oard refused to concur in the decision o f their colleagues
in the tw elfth region.

H ow ever, no criticism o f the public members

o f the N ational B oard is here im plied, fo r, given the nonconcurrence
o f some o f the partisan members, they had no alternative other than
to assure the continuance o f partisan support by voting to veto the de­
cision o f the regional board.
The conclusion here reached is that the tripartite enforcem ent pro­
cedure had but sligh t, i f any, advantage over an all-public division.
I t had, on the other hand, the serious disadvantage o f inconsistency
in the severity o f the penalties im posed. T h is inconsistency arose
from the difficulty o f ju d gin g the deliberateness o f the violation and
the consequent difficulty o f disregarding considerations that were
irrelevant to the case. The partisan members were clearly more sub­
ject to undue influence by the parties than were the public members.
I t seems probable that detailed tripartite adm inistration o f the en­
forcem ent program was not in the best interest o f labor or m anageagement, that it placed on certain partisan members an unpleasant
obligation that they should not have been asked to shoulder, and that
the handling o f individual enforcem ent cases should have been placed
in the hands o f all-public divisions appointed by the national and
regional boards.

T h at the enforcem ent program was as successful as

it actually was is indeed a high tribute to the integrity and courage
o f the partisan members.
D.

In

the

A

d m in i s t r a t i v e

P

r ocess

One o f the m ost significant o f the adm inistrative functions per­
form ed by the partisan members o f the N ational B oard was their ap­
proval o f the appointm ents o f all public members to the B oard’s va­




246

D IS P U TE : S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

rious agencies.

N o public member was appointed to any o f the agen­

cies w ithout unanimous approval by the N ational B oard. T h is pro­
cedure assured that every nonpartisan member who had a vote in the
decision o f cases anywhere w ithin the B oard’s organization had, in i­
tia lly at least, the confidence o f the partisan members o f the N ational
B oard.
T h is authority could have been abused, but it was exercised w ith
restraint and in good faith .

Instances o f the rejection o f apparently

w ell qualified persons by the partisan members o f the N ational B oard
were surprisingly rare.

T h is procedure was particularly desirable be­

cause it increased the effectiveness o f the public members o f the B oard
agencies in their relations w ith their partisan colleagues and protected
them from careless charges o f partiality.
The partisan members o f the regional boards had a sim ilar function
o f approving appointm ents to the list o f public panel members.

T h is

procedure had corresponding advantages fo r the appointees.

It

operated, however, less satisfactorily than on the N ational B oard.
T h e public members o f a few regional boards thought that m any w ell
qualified nominees were rejected by one or more partisan members fo r
m inor reasons o f personal prejudice.
F in a l tripartite action in the appointm ent o f staff members was prac­
ticed to varying degrees on the N ational B oard and its agencies.

T he

extent o f this practice on the N ational Board varied from tim e to tim e.
D u rin g the B oard’s early days, it voted to authorize the top staff m em ­
ber to make staff appointm ents at the low er professional levels and to
authorize one o f its public members to act on all staff appointm ents
at the higher levels. T h is policy, however, did not rem ain lon g in
operation. F or some tim e, final action on appointm ents to staff posi­
tions carrying a salary in excess o f $3,800 was taken by the fu ll Board.
A lth ou gh there was no serious disadvantage to this practice, since the
recommendations o f the public members were seldom rejected and
since only an insignificant part o f the B oard’s tim e was devoted to con­
sideration o f appointm ents, it w ould have been more appropriate i f
tripartite clearance had been applied only to division chiefs and not to
any o f their subordinates.

In fa ct, as tim e went on the N ational

B oard did increasingly confine its review to appointm ents to the m ajor
positions.
One real advantage in the procedure o f tripartite approval o f the
appointm ents o f public members and staff members was the protec­
tion th at it afforded against external pressures o f politicians seeking
to influence appointm ents. The partisan members fe lt entirely free
from such pressure, and did not hesitate to rebuff the efforts th at
were occasionally m ade to obtain the appointm ent o f persons whose
qualifications fo r a position appeared questionable.




T he know ledge

247

T R IP A R T T T IS M

that tripartite approval was requisite discouraged any serious attem pt o f politicians to dictate staff appointm ents. I t also precluded
any effort by labor or management to initiate appointm ents.
O n the regional boards and industry agencies fu ll adm inistrative
authority was typ ically vested in the chairm an by acquiescence or
common consent. In a few instances, however, the partisan m em­
bers insisted on review o f all proposed m ajor staff appointm ents,
including prom otions.

T h is practice gave rise to much more difficulty

in these particular regional boards than it did on the N ational B oard.
T he public members in a few o f these agencies fe lt that much valuable
tim e was wasted in discussion o f personnel problem s and th at some
partisan members acted quite unreasonably in rejecting m erited ap­
pointm ents or prom otions.
A nother function o f an adm inistrative character perform ed by the
partisan members was their consultation w ith parties who wished to
inquire about the status o f their cases or to present personally argu­
ments supporting their position, particularly in instances where no
hearing was held.

The public members received m any such visitors,

but their tim e would have been very largely occupied by these con­
ferences had not the partisan members shouldered the m ajor part o f
this load.

Such conferences frequently gave the partisan members a

clearer understanding o f the details o f a particular case and as a
result were o f real value to the entire board.
A staff member was appointed to assist each group o f partisan
members o f the national and regional boards in m aintaining their
contacts w ith their constituents and in preparing their cases fo r argu­
ment in executive session. In some agencies the A F L and C IO
members each had an assistant; sometimes they shared one.
case the assistant was selected by the persons he would aid.

In each
The par­

tisan members frequently chose someone from the staff o f the agency
who had had experience in analyzing cases. These assistants were o f
great value. They enabled the partisan members to fu lfill their func­
tions much better than would otherwise have been possible.
A lth ou gh adm inistrative problem s were often discussed in meetings
o f the N ational B oard, m any im portant types o f adm inistrative ques­
tions were delegated to sm all committees that included a few o f the
partisan members.

T he final revisions o f general orders and stabili­

zation instructions were am ong the problem s handled in this w ay.
Som e other types o f decisions were delegated by the N ational Board
to tripartite committees that had their own regular partisan and
public members named by the B oard.

T h is structure was used, fo r

exam ple, on the N ew Case Com m ittee, which decided whether each
new dispute case had been properly referred to the Board and which
o f the B oard agencies should deal w ith it.




T h is form o f organization

248

D IS P U TE ; S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

was also used on the Postdirective Com m ittee, whose function it was
to reply to inquiries regarding the interpretation or intent o f Board
decisions. A nother illustration was the A pp eals Com m ittee, which
took prelim inary action by form ulation o f recommendations on each
appeal before it was referred to the N ational B oard fo r final deter­
m ination. A further instance was the Review Com m ittee, whose re­
sponsibility it was to review reports o f panels, hearing officers, and
arbitrators on cases before the N ational B oard and to recommend to
that B oard appropriate action on these nonappeal cases.
These illustrations w ill serve to demonstrate how com pletely the
policy o f tripartitism was follow ed in all decision-m aking activities
o f the Board.

V . T h e F u n c t io n s

of

P a r t is a n M e m b e r s

on t h e

NW SB

T h e functions o f the partisan members on the N W S B were the same
as they had been on the N W L B w ith the vital exception that the func­
tions o f the B oard were lim ited to the adm inistration o f the w agestabilization program and did not include settlem ent o f labor disputes.
I t has been indicated earlier in this chapter and w ill be developed m ore
fu lly in the subsequent sections that the benefits o f tripartitism were
m uch greater in dispute settlement than in w age-stabilization adm in­
istration. Consequently the appropriateness o f tripartitism is less
certain in the case o f the N W S B than in the case o f the N W L B . Its
success in the N W S B was probably due largely to the thorough ex­
perience w ith tripartitism that the members o f this B oard had had as
members o f the earlier agency.2
1

V I. S e l e c t io n

of

P a r t is a n M em ber s

T he selection o f the industry and labor members involved several
problem s, some o f which continued to be subjects o f considerable con­
troversy throughout the life o f the three boards.
A.

A

bsen ce of

G o v e r n m e n t C on trol O ver A

p p o in t m e n t s

H a lf o f the original labor members o f the N W L B were nam ed by
the President on the recommendation o f top officials o f the A F L and
h a lf on corresponding recommendations from the C IO . The industry
appointm ents were based on the recommendations o f prom inent in ­
“ For further analysis see U. S. Department of Labor, The National Wage Stabilization
Board (1948), pp. 302-306.




249

T R IP A R T T T IS M

dustrialists affiliated with the U nited States Chamber o f Commerce
or the N ational Association o f M anufacturers.

T he industry group

and each o f the tw o labor groups had in effect fu ll authority to select
the persons to fill any vacancies arising in their respective ranks.2
2
They also separately named their counterparts on all o f the B oard
agencies. T he industry, the C IO , and the A F L members o f the re­
gional boards in turn selected their own counterparts on all regional
panels.
The review o f public-m em ber appointm ents to B oard agencies by
the partisan members o f the N ational Board (discussed on pp. 2 4 5 -6
o f this chapter) was not matched by any corresponding review o f
partisan appointm ents by the public members.
sound procedure.

T h is was probably a

T he effectiveness o f the partisan members in the

perform ance o f their functions was largely dependent on the extent
to which they had the confidence o f their constituents. A n y veto over
such appointm ents by the public members m ight have given employers
or employees the im pression that only their less forcefu l representa­
tives were being accepted.

There m ight also have been a tendency

fo r the partisan members to protect themselves from such charges by
adopting a more m ilitant and less useful attitude in board meetings.
A second reason why a public check on partisan appointm ents would
have been undesirable was the im possibility o f accurate advance ju d g­
ment o f the ability o f any particular individual to perform his func­
tions effectively. B oth the nature o f the job and its general setting
were quite new to a great m any o f the partisan appointees.2
3
B.

D

e t e r m in a t io n of t h e

S e l e c t in g O r g a n i z a t i o n s

A lth ough the partisan members o f the regional boards and indus­
try agencies were named by the corresponding members o f the N a­
tional B oard, the selections were in fact largely made by their respec­
tive organizations, i. e., the C IO , the A F L , the N A M , and the Chamber
o f Commerce. Thus the selection o f the partisan members o f a par­
ticular regional board was made by the representatives o f the labor
federations and councils o f the States w ithin the jurisdiction o f
that Board and by the sim ilarly located branches o f the em ployer’s
organizations.
T he partisan members o f the N ational B oard had a final check on
these selections, and the form al appointm ents were made by the fu ll
Board.
2 Since these vacancies were filled on appointment by the President, there was at least
2
the possibility of the rejection of a recommendation.
2 It was, of course, equally difficult to judge the abilities of the public members at the
8
time of their initial appointment. The review of proposed public members by the partisan
members was chiefly a check on impartiality. There was no reason for a similar check on
proposed partisan members.




250

DISPUTE: SETTLEM ENT AND WAGE STABILIZATION

A s a general rule, the labor members on the commissions and re
gional boards were drawn only from A F L and C IO unions and wer
equally divided between the tw o. T h is was invariably the case on th
regional boards, but there were several exceptions to it on the com
m issions.

T h e labor membership o f each com m ission was tailor-m ad

to fit the conditions in the particular industry.

F o r exam ple, on th

Telephone Com m ission both o f the regular members and fou r o f th
five alternate members belonged to independent unions.

O n the M ea

P acking Com mission there was one labor member from each o f th
three national unions in that industry, one o f which was an independ
ent.24 O n the T ruckin g Com m ission all the labor members were draw]
from the A F L .
V arious independent unions made repeated attem pts to obtain rep
resentation am ong the regular labor members o f the boards. T h i
dem and was consistently rejected by the N ational B oard because (a
the addition o f independent union representatives w ould greatly com
plicate the B oard’s structure, (6 ) there was no central organizatioi
th at could speak fo r all or m ost o f the independents, ( c ) there woul<
be no place to draw the line in deciding which o f the independent
should have representation, ( d ) the A F L and C IO were very insist
ent upon retaining the exclusive righ t to select the labor member
o f the B oard’s decision-m aking agencies, and ( e ) the B oard wa
convinced that the independent unions were receiving fa ir treatm en
in B oard decisions.
T h e N ational B oard early decided that the disadvantages o f in
dependent union representation did not app ly to the panels nam ed fo
its agencies to hold hearings on a particular case and present recom
m endations regarding its settlem ent. Since panels were organized t<
act on a single case, their membership could be planned to fit any spe
cial situation. M oreover, there was little danger in using person
closely related to the parties, because the panel had no authority t<
take definitive action.

T he Board therefore gave m any independen

unions assurance th at any panel established to deal w ith a case t<
which the independent was a party w ould contain as its labor membe:
a person satisfactory to the independent. T h is did not m ean tha
the labor member would necessarily be drawn from the membershi]
o f the independent, although this was usually the case in actua
practice.
C . R e p r e s e n t a t iv e n e s s

op

P

a r t is a n

M

em bers

T h e partisan members were, in general, representative o f the or
ganizations th at influenced their selection, but this was som ewhat lesi4
8
8 This commission also differed from the others in that it contained an unequal numbe
4
of labor, industry, and public members. There were two public members and five regula
industry members— one from each of the major companies. For voting procedure, see Th
Termination Report, vol. I, p. 1051.




251

TRIPARTTHSM

true o f the industry than o f the labor members.

T h e industry mem­

bers generally considered themselves as representing the interests o f
management in general and only incidentally the policies o f the Cham ­
ber o f Commerce and the N A M .

A close relationship was m aintained

however, between the industry members o f the N ational B oard and
the top officials o f those two organizations. A fte r the early m onths,
a senior member o f the staff o f both organizations usually attended
the m eetings held weekly by the industry members o f the N ational
Board to discuss issues and policies.

A t these meetings an effort was

made to reach unanim ity, but the individual members were not com­
m itted to the judgm ent o f the m ajority when persuasion did not result
in agreement.
Some industry members found that they were subjected to rather
strong pressure from their organizations, their business associates,
or their fellow -m em bers on the B oard whenever their votes differed
sharply from the general policies o f organized m anagement.

They

differed in their susceptibility to such pressure, depending upon their
individual prominence and prestige, the nature o f their business posi­
tion, and the circumstances surrounding their appointm ent.

In spite

o f group m eetings and occasional pressures, the industry representa­
tives did not alw ays vote in unison.
S p lit votes were probably more rare am ong the labor than the in­
dustry members.

T he other labor members were usually inclined to

follow the lead o f the one who was m ost closely related to the union
involved in the case.

A division o f the labor vote usually occurred

only when the issue involved a clash o f interest between A F L and
C IO unions.
The labor members o f the N ational Board and its agencies fre­
quently asserted that it was their responsibility not to represent
m erely the A F L and C IO but to represent all workers. M ost o f them
represented quite conscientiously the workers belonging to inde­
pendent unions. F ew , however, could m uster any enthusiasm in the
F orm 10 cases involving unorganized employees. A rgum ent by the
labor members in these cases probably resulted chiefly from the
realization th at each case m ight w ell set some precedent fo r later
cases.

V II. P o s i t i o n

of

P artisan M

embers

The appointm ent o f partisan members to a Governm ent agency in
other than a purely advisory capacity has been rare, in spite o f the
precedents cited early in this chapter. T herefore, an analysis o f the
nature o f their position is o f special interest.
921297—50------17




252
A. T

DISPUTE SETTLEM ENT AN*D WAGE STABILIZATION
heir

D

u a l

R

ole

T o some extent the partisan members were subject to conflicting
loyalties. A s Governm ent employees they had some obligation t
keep in m ind the public interest; and as partisan members they wer
certainly expected to present the point o f view o f their constituents
These interests m ight w ell be inconsistent in some instances.

It i

probable that m any o f the partisan members were seldom consciou
o f any such conflict.

Som e members o f each group undoubtedly be

lieved that, in representing the interests and policies o f their organiza
tions, they were prom oting rather than endangering the public inter
est.

There were, on the other hand, m any who recognized th at th i

was not necessarily the case and who sometimes had great difficult;
in deciding what position they should take on particular issues.
A sharp conflict o f loyalties would frequently have arisen i f th<
industry members had fe lt a responsibility to support in fu ll th
position o f the individual em ployer in each particular case or i f th<
labor members had fe lt a sim ilar responsibility tow ard the demand
o f each individual local union. The partisan members, however, con
sidered themselves as representatives prim arily o f their respectiv<
groups rather than the parties.

In addition, their m embership 01

the B oard was a sym bol o f the acceptance by their respective groups
o f a responsibility to achieve the m axim um o f industrial peace an(
prevent serious inflation. Because o f these general group interests
the likelihood o f sharp conflict between the partisan and public inter
est was considerably reduced.
T h e m ost striking illustration o f the difference between the genera
and individual interest o f m anagement or o f labor is seen in the posi
tion o f the industry members w ith reference to requests from indi
vidual em ployers fo r approval o f wage increases. T he desire o f many
em ployers to effectuate a large wage increase was regarded as contrary
to the general interest o f m anagement in strict wage stabilization
In du stry members were, therefore, usually more reluctant than public
members to approve wage increases.25

In du stry members undoubt

edly fe lt that they were voting equally in the interest o f managemem
and o f the public in their efforts to prevent an increase in the genera
level o f wage rates.
T he position o f the labor members on the question o f wage stabiliza
tion is not quite so clear. In general, they accepted the necessity o"
a w age-stabilization program . A lth ou gh they argued vigorously
against some o f the policies adopted by the B oard to lim it the extent o:
w age adjustm ents— in particular, the L ittle Steel form ula— they sel
dom advocated the com plete discontinuance o f wage stabilization
2 Some notable exceptions to this generalization created a problem discussed on pp. 2585
259 of this chapter.




253

TRIPARTTTISM

O n the other hand, they usually tried to obtain higher rates in de­
cisions on individual cases.

There were, however, m any instances in

dispute cases where the labor members did not support all o f the
demands made by the local union. M ost o f these instances m ust have
been ones in which it was fe lt that the union demand was inconsistent
w ith the public interest.
A lth ou gh it m ay well be recognized th at there were cases o f in ­
com patibility between the partisan and the public interest and that
in such cases the public interest was not always kept upperm ost in
m ind, this fa ct probably had little influence upon the B oard’s deci­
sions.

W ith the exception o f rare instances to be noted on pages

258-259 o f this chapter, the public members invariably cast the deciding
votes.

In general, the votes o f the partisan members were not de­

cisive, so that the presence o f such members on the Board— even when
they occasionally seemed to disregard their responsibility tow ard the
general public— seldom constituted any threat to the public interest, at
least so fa r as the substance o f the decisions was concerned.
B. D

is q u a l if ic a t io n of

P a r t is a n M

embers

T he foregoing discussion has indicated that the industry and labor
members showed varying degrees o f objectivity and th at their help­
fulness was greatest when they exercised some restraint.

These con­

siderations led the B oard to attem pt to avoid instances in which a
partisan member who was participating in the decision o f a case had
more than a general interest in one o f the parties involved.
The policy was reaffirmed in detail follow in g the passage o f the
W a r Labor D isputes A c t, which contained the provision that—
no member o f the Board shall be perm itted to participate in any decision in
which such member has a direct interest as an officer, employee, or representa­
tive of either party to the dispute.

In interpreting this provision the B oard’s general counsel concluded
that a labor member was disqualified from participation in the deci­
sion o f a dispute i f he was a member or employee o f a local union
involved, or was an officer or em ployee o f a national or international
union that was directly involved, or had participated in the negotia­
tions preceding the certification o f the case.2® In du stry members were
disqualified under corresponding circumstances.
There was one apparent deviation from the usual practice.

On

the M eat Packing Com m ission, fo r exam ple, both the labor member
and the industry member who acted on a particular case were custom­
arily directly representative o f the union and the com pany that were
parties to the case.

T h is was regarded as a suitable procedure because

that Com m ission was established to supervise the application o f a
sweeping decision that had been made by the N ational Board.
MThe Termination Report, vol. II, pp. 422-426 (appendix H -2).




254

DISPUTE; SETTLEMENT AND WAGE STABILIZATION

N o objection was raised to a close relation to the parties in the case
o f panel m em bership, since the action o f panels constituted a recom­
m endation to a board agency rather than final action upon the case.
Thus the panel procedure was used in some instances where direct
relationship was considered unavoidable or at least desirable.

For

example, it was im possible to obtain w ell qualified industry repre­
sentatives in the m aritim e industry who were unaffiliated w ith a com ­
pany that was party to the dispute.

F or this reason, am ong others,

this industry was placed under the jurisdiction o f the W a r Shipping
Panel rather than a commission.
C. R

elease op

C o n f id e n t ia l I n f o r m a t io n

A lth ou gh the partiality o f the labor and industry members seldom
created any problem s regarding the substance o f decisions, their spe­
cial interests sometimes created problem s regarding the release o f
inform ation.

A s indicated on page 240 o f this chapter, unofficial

advance notification to the parties regarding B oard action was often
desirable.

Instances occasionally arose, however, where the members

o f the N ational B oard or one o f its agencies agreed that decision should
rem ain confidential until officially released.

In a number o f these

cases the P artisan interests o f some members unfortunately were so
strong as to result in breach o f the agreement.
E qu ally embarrassing to the Board was the occasional unofficial
release by a single member o f news regarding the nature o f the dis­
cussions on unresolved m ajor problem s, including predictions as to
what decision w ould eventually be reached. W h ile it was generally
supposed that certain o f the partisan members were especially sus­
ceptible to the wiles o f the journalists, it should in fairness be said
that they were not the only ones and that sim ilar disclosures occur in
nontripartite governm ental agencies.
A th ird type o f disclosure involved the contents o f confidential in ­
ternal records o f the B oard and its agencies. T h is happened m ost
frequently in connection w ith the analyses o f individual cases pre­
pared by the staff fo r the inform ation o f the B oard members.

Som e­

tim es an analysis reached one o f the parties even before it was pre­
sented to the Board.

I f such instances had occurred more frequently,

it m igh t have become necessary to send all analyses to both parties
fo r comment before the case was considered by the B oard.

Such a

procedure would have aggravated the problem o f delay in B oard
decisions.

V III. E f f e c t i v e n e s s

of

P artisan M

embers

T he functions o f the partisan members were discussed earlier in
this chapter.




I t was seen that several o f these functions were vital

255

TRIPARTTTISM

to the successful operation o f the B oard and could not be perform ed
adequately by the members o f an all-p ublic agency.

Som e indications

were given regarding variations in the adequacy w ith which certain
o f these functions were actually perform ed but it remains to analyze
m ore thoroughly the effectiveness o f the labor and industry members.
A ., E f f e c t

on

P

u b l i c -M e m b e r

D

e c is io n s

So fa r as can be determined from a study o f The Term ination R e­
port, there is agreement am ong the public members o f the B oard
that the nature o f B oard policies and the substance o f case decisions
were considerably influenced by the participation o f the partisan mem­
bers.

I t is further agreed by nearly all that the influence was a

favorable one.

A s a result o f it, decisions were more realistic, more

practicable, and more acceptable to the parties than could otherwise
have been the case.

There was a stronger tendency to adjust the

decision to fit the needs o f each particular case.
T he public interest required that labor disputes be settled without
detriment to production and w ithout significant im petus to inflation­
ary forces.

O n the other hand, the maintenance o f high employee

m orale and productive efficiency necessitated some gradual im prove­
ment rather than a freezing o f the term s o f em ploym ent.

T he tri­

partite structure was well suited to the achievement o f these objectives.
P artisan participation gave the public members a clearer picture than
they could otherwise have obtained as to which o f the alternative
possible decisions would best settle a controversy and as to when and
where some m odest m odification o f policy was essential to the m ainte­
nance o f m orale.
T he influence o f the partisan members on policy form ation and case
decisions was exerted in several ways. Som etim es their contribution
took the form o f supplying pertinent inform ation about technical
operations, industry practices, or the attitudes o f the parties. Such
contributions were o f great value to the public members.
M ore often the partisan participation took the form o f argum ent
and discussion. T he argum ent usually helped to protect the public
members from m isinterpretation o f the facts. In some instances, on
the other hand, it probably involved an effort to distort the facts.
The discussion assured that attention was given to a ll the relevant
considerations.
im pertinent.

U sually it was pertinent.

O ccasionally it became

A s in negotiations directly between tw o parties, the

discussion occasionally degenerated into vituperation and loose talk .2
7
A ctu a lly , the form o f collective bargaining was being transplanted to
w ithin a Government agency where the public members could listen
2 For a lively, if somewhat exaggerated, account of this aspect of Board activity, see
7
Dexter M. Keezer, “ Observations on the Operations of the National War Labor Board,”
American Economic Review, XXXVI, 3 (June 1946), pp. 233-257.




256

DISPUTE SETTLEM EKT AND WAGE STABILIZATION

in and participate as conciliators or arbitrators.

T h e essential d if­

ference between this procedure and collective bargaining was that th(
outcome rested on the judgm ent o f the public members, w ith little
regard to the relative economic force o f the parties. I t is generally
agreed that the result o f collective bargaining usually gives the best
solution to a labor dispute.

T rip artite case decision approaches that

result, w ith the difference th at the decision is certain to be based more
upon the relative m erits o f the issues and less on the relative power of
the parties.
O n very rare occasions the efforts to influence the decisions o f the
public members took the form o f threats by one group or the other
to w ithdraw from N ational B oard m em bership.

Som etim es it seemed

clear that these threats were n ot made seriously, but on three occasions
during the 4 years o f the B oard’s life the public members were
concerned about the possibility o f w ithdraw al.

O ne instance occurred

during the first weeks after establishm ent o f the B oard and involved
the opposition o f the industry members tow ard aw arding union se­
curity.

T he second, a few m onths later, concerned the h ostility o f the

labor members tow ard the adoption o f the L ittle Steel form ula.

The

th ird occurred about a year later as a protest o f the labor members
against the issuance o f the “ hold-the-line” order, and was thus d i­
rected at the new national wage policy rather than at any proposed
action o f the B oard.
I t now seems probable th at w ithdraw al was not really considered on
at least the first tw o o f these occasions. Subsequent to the conclusion
o f the B oard’s activity, prom inent labor and industry members have
stated that at no tim e did their respective groups seriously contem plate
w ithdraw al as a result o f B oard decisions. Nevertheless, w ithdraw al
fro m the N D M B had actually occurred, and was alw ays present in
the m inds o f the N ational B oard’s public members as a possibility that
should be avoided as lon g as this could be done w ithout sacrifice o f
the public interest.

T he presence o f this eventuality served to assure

th at the B oard’s policies and decisions w ould be kept w ithin the lim its
o f partisan acquiescence.
A second instance o f actual w ithdraw al did occur during the life o f
the N W S B .

T h e tw o industry members subm itted their resignations

on J u ly 18, 1946, but acquiesced in the request o f President Trum an
th at they prolong their service.
resignations.

O n O ctober 9 they renewed their

T h is action, however, was not taken in protest against

any action o f the N W S B .

They attributed their decision to their

beliefs th at continuation o f wage controls was n ot feasible and th at
tripartite adm inistration was inappropriate in tim e o f peace.28

A l­

though on one occasion they indicated th at the latter reason was the
2 This latter aspect of the incident is considered later in sec. IX of this chapter.
8




257

TRIPARTITISM

dom inant one, their other statements and inform ation from other
sources give reason to believe that they were m otivated chiefly by a
desire to expedite the term ination o f price and wage controls. In ­
dustry members from seven o f the regional boards jo in tly urged the
President to appoint new industry members and offered to recommend
persons fo r appointm ent. T he President appointed those whom they
suggested, and the Board continued to function on a tripartite basis.2
9
The im portant point to note fo r the purpose o f the present discussion
is not so much the failure o f these resignations to achieve their pur­
pose as the fa ct that they were aimed at influencing general G overn­
m ent policy rather than the decisions o f the B oard’s public members
and were not accompanied by heated argum ent in B oard m eetings.
A few public members o f the regional boards, though adm itting the
benefits o f tripartitism , believed that the disadvantages o f lengthy
w rangling in executive sessions outweighed these benefits.

In spite

o f these few dissenting voices, nearly all o f the public members reached
the conclusion that the guidance obtained from the partisan members
was more than worth the waste o f tim e and nervous energy involved
in the process.

M any o f them had grave doubts o f the net value o f

tripartitism at the outset o f their services on the B oard or its agencies,
but these doubts were alm ost invariably dispelled by experience.

An

all-public membership could certainly have settled cases m ore expedi­
tiously, but the decisions would frequently have been less practicable.
I t seems clear that those who had “ lived” w ith tripartite procedures
are alm ost unanimous in concluding that the extra tim e fo r fu ll dis­
cussion was w ell spent in order to assure the realism and acceptability
o f the B oard’s actions. In their m inds the danger o f disruption o f the
Board by the w ithdraw al o f a partisan group was much less serious
than the danger that an all-public board would lose its effectiveness
because o f some serious errors o f judgm ent o f Government officials
forced to make their decisions without the tedious and tryin g process
o f obtaining intim ate insight into the issues through partisan partici­
pation.
A nother criticism that was made o f partisan participation in policy
and case determ ination was the danger that the vote o f the public
members m ight be unduly influenced by pressure from one side or the
other.

There w as, indeed, some possibility that an inexperienced

member m ight m isinterpret the occasional vehemence o f a partisan
member.
cern.

T he danger, however, was too slight to warrant serious con­

F or one reason, any special pressure em anating from one side

was prom ptly balanced by corresponding pressure from across the
table.

Secondly, i f a public member had been unduly influenced by

pressure, that fact would soon have become clear to his colleagues.

The

» For the official correspondence regarding this incident see the NWSB report, pp. 52-55.




258

DISPUTE: SETTLEM ENT AN1D WAGE STABILIZATION

inevitable results w ould have been a loss o f his effectiveness and prompi
com plaints from one or both groups o f partisan members to the N a
tional B oard , follow ed probably by eventual tran sfer to a less influen
tia l position. The appeals procedure was a further safeguard against
such a m istake.
B. T

he

P

o s s ib i l i t y o f

O u t v o t in g

the

P

u b l ic

M

em bers

T ripartite action inevitably presented some danger that the im par­
tia l members, who were especially responsible fo r representing the
public interest, m igh t occasionally find them selves in the dissenting
m inority.

There w as, o f course, the possibility o f poor judgm ent on

the part o f the public members, so that each instance o f outvoting can­
not be considered prim a facie as a reverse fo r the public interest.
There were few instances o f outvoting in the processing o f dispute
cases.

H ere the interests o f the parties were diverse, and there was no

likelihood th at the partisan members could find a common ground that
w ould be unsatisfactory to the public members.

F o r a tim e on one of

the B oard agencies the partisan members often conferred on cases in
advance o f the discussion in executive session. B y a process o f bar­
gaining they reached agreement regarding their decision on m any o f
the issues. T he public members in this situation had only the choice
o f concurrence or dissent.

In m ost instances they readily concurred.

W h en they thought the agreement ran counter to the stabilization pro­
gram and could not persuade the partisan members to reconsider their
prelim inary decision, their remedy was to request the public members
o f the N ational B oard to call the case up fo r review.
The real danger that the public members m ight be overridden la y in
the voting on voluntary applications fo r approval o f w age increases.
E ven this possibility seldom became an actuality. A s mentioned ear­
lier in this chapter (p . 2 5 2 ), the industry members on the N ational
B oard and m ost o f its agencies quite consistently opposed any w age
increase that w ould be inconsistent w ith the B oard’s stabilization p oli­
cies.

T h e reports o f the chairmen o f the B oard agencies, published in

volum e I , part I I o f the Term ination R eport, indicate th at in m ost o f
these agencies the public members were not outvoted m ore than a h a lfdozen tim es in approxim ately 3 years.

One o f the chairm en reports,

however, th at th is happened on a few early key cases that set an u n for­
tunate precedent fo r later actions.80
W h en outvoted, the public members o f regional boards usually
let the m atter rest, i f they thought that the issue was o f little con­
sequence or that there was enough room fo r individual judgm ent
so th at the decision was not clearly in error. T o take care o f the other
instances, the N ational B oard provided that cases could be forw arded,
80 The Termination Report, voL I, p. 601 .




TRIPARTITISM

259

at the request o f the dissenting public members, to the National Board
for review before the release o f the decision. This practice was fo l­
lowed frequently in one o f the regions.8 This procedure was likely
1
to correct any serious error, for the partisan members o f the National
Board were persons o f exceptional standing who took their public
responsibility seriously. So far as can be determined, there were not
more than three or four instances in which the public members o f
the National Board were outvoted. I f this had been a real problem,
it might have become necessary fo r the President to transfer else­
where the function o f administering wage stabilization.
Outvoting o f the public members was a somewhat more frequent
occurrence on the regional boards o f the NW SB, especially in connec­
tion with cases involving a wage increase based on a collective bargain­
ing agreement. However, the referral o f cases to the National W age
Stabilization Board fo r preview resulted in sustaining the judgment
o f the public members in all m ajor cases.8
2
C . E ff e c t o n S t a f f A c tio n s

The general effect o f tripartitism on the activities o f the Board’s
personnel was to make the staff members especially careful to avoid
any partiality. A ny evidence o f partiality was certain to cause prompt
complaint.
There were occasional instances in which a partisan member at­
tempted to influence a staff member. These usually involved an effort
to obtain special priority in the processing o f a particular case or to
obtain favorable action by a W age Stabilization Director in a Form
10 case. In general the policies o f the public members and the selfrestraint o f the partisan members gave the staff adequate protection
from subjection to influence, though there were some instances where
the promotion o f a staff member was blocked by a partisan member,
whose displeasure he had incurred.
D. F actors I n f l u e n c in g E ffec tiv en e ss
The extent to which the effectiveness o f each partisan member was
influenced by his methods and temperament has already been dis­
cussed. The importance o f his having fu ll knowledge o f industry
practices has also been emphasized. The desirability o f his having
had considerable experience in collective bargaining is too obvious
to need elaboration. Labor members were certain to have such ex­
perience, but many prominent employers who might have been con­
sidered for appointment had had little or no such experience, either
because their plants were unorganized or because they personally
specialized in other aspects o f managerial operations.
3 Ibid., p. 741.
1
8 The NWSB Report, pp. 304-305.
2




260

DISPUTE SETTLEMENT AND WAGE STABILIZATION

One o f the most important determinants o f effectiveness and the or
that was most difficult to provide was regularity o f participatioi
Regular attendance was desirable for several reasons. In the fin
place, experience showed that considerable experience as a member o
a board or commission was a prerequisite fo r constructive particips
tion. The necessary length o f time varied with the individual, bv
fu ll effectiveness could not be achieved in less than several week
This much time was necessary to become fam iliar with Board prc
cedures and policies and with the precedents established by earlie
cases. Secondly, any interruption o f service soon left a member ou
o f date, since policies and procedures were in a state o f constant flu
and development. Thirdly, many dispute cases had to be discusse
in a number o f meetings, often stretching over a considerable period o
time, before final decision on all the issues could be reached. I f th
partisan members who attended the hearing or had made a specia
study o f the case were not in attendance when the case was ready fo
the docket, it was necessary either to defer consideration or to us
members who were less fam iliar with the details o f the case. Whe:
the issues were complicated, such unfam iliarity was a very seriou
handicap. Fourthly, irregular attendance weakened a member’s con
tacts with his colleagues and with his constituents. Lastly, interrup
tions in service made it impossible to determine which member shoul<
be consulted fo r prior discussion o f a particular case. The partisa:
members o f some Board agencies frequently gave some o f their coun
terparts on the National Board fu ll inform ation regarding an im
portant case that was coming up on appeal, only to learn later tha
these members had not been in attendance when the case was decided
Although the partisan members all recognized its importance t
themselves and their constituents, regular attendance was never widel;
achieved. Only a modest improvement in this respect was obtaine<
as time went on. Just when prominent management and union offi
cials were wanted fo r service with the Board or its agencies, thes
people found that their regular positions and other wartime activitie
were making unusual demands on their time. The unions increasing!
assigned some o f their officials to full-tim e work with the Board, bu
management made little progress in this respect.

IX .

I n t e r e st

of

L abo r

and

I n d u str y

in

P a r t ic ip a t io n

Since the most important determinant o f the success o f any gov
emmental machinery fo r the settlement o f labor disputes is the ac
ceptance o f that machinery by the parties, the merits o f tripartitisn
cannot be adequately assessed without consideration o f the attitude o:
labor and industry toward this form o f organization.




TRIPARTITISM

261

On this point there is no room for doubt. Tripartitism was strongly
preferred to any alternative organization not only by the top offi­
cials o f unions and, to a lesser extent, o f employers’ associations, but
also by local unions and individual employers. This conclusion is
supported by the experience o f all the Board agencies in their efforts
to encourage parties to hold their hearings before a hearing officer
rather than a tripartite panel. Hearing officers were used only with
the consent o f the parties. As an inducement to such consent, it was
widely known that decision o f a case could usually be obtained some­
what faster if a hearing officer were accepted. Also, the hearing
officer would conduct the session at the site o f the dispute, thus saving
the parties the expense o f travel to the agency office. Nevertheless,
every agency found that in a vast m ajority o f the cases the parties
refused to accept a hearing officer, although they knew that in either
case the final decision o f the issues would be made by the tripartite
agency. In other words, most o f the parties wanted tripartitism
not only at the final stage, but at every stage o f the procedure.
Another indication o f this preference is to be seen in the history
o f the W est Coast Lumber Commission. Its original partisan mem­
bers were persons not directly connected with the industry. This
practice was subsequently discontinued.3
3
The conviction o f industrial leaders as to the desirability o f tri­
partitism was well attested by the fact that all eight o f the industry
members o f the National Board joined in a letter to the editor o f the
New York Times to refute an editorial attack on partisan participa­
tion in administration o f the wage-stabilization program. They de­
fended tripartitism as the only means o f obtaining the fu ll cooperation
o f labor and industry that is essential to maximum production. The
letter continued:
B ut above all, and why we plead for the tripartite principle in a w ar labor
board such as ours is th is : It brings to one table representatives o f management
and labor. It gives to every member the right to speak his piece and to find
out why the other fellow disagrees. No one can serve on any tripartite labor
board without learning plenty, including tolerance. Discussion across the table
develops truth, exposes fallacies. It is democracy working in the raw .
W ith all due respect to the public members o f the national and regional boards,
they, too, need the education which management and labor can give them and
which they would not get if they sat alone without the voting check o f manage­
ment and labor.8
8
3
4

As indicated in the preceding section, this unanimity o f industry
support for the tripartite principle did not continue throughout the
postwar readjustment period. In submitting their original resigna­
tions, the two industry members o f the NW SB said that one o f their
8 The Termination Report, vol. I, pp. 1064-1065, 1067.
3
8 New York Times, March 28, 1943, sec. 4, p. 8.
4




262

DISPUTE SETTLEMENT AND WAGE STABILIZATION

reasons was “ * * * because in our considered judgment, the con
tinuance o f the so-called tripartite arrangement o f this and similai
boards is inadvisable.” 8 8 In their letters agreeing to prolong then
5
6
7
services, each said:
* * * M y letter o f July 18 w as m otivated principally by a feeling th at t
tripartite system o f law adm inistration had outlived its usefulness and * * '
should be term inated. I believe that this system , however justified in w artim e
is inconsistent w ith the norm al precepts o f the adm inistration o f Government it
peacetim e."

I t developed, however, that these views were shared by few o f tht
industry members o f the regional boards. The industry members oi
the Second Regional Board released a statement that read, in part, as
follow s:
W e believe th at industry generally throughout the country is in agreement
th at a ll price and wage controls should be term inated forthw ith. However,
w hile OPA continues, reasonable wage controls m ust also continue. A wagecontrol board in our opinion is strengthened and the public interest is better
served with Am erican industry actively represented on that b oard ."

Industry members from 7 o f the 11 regions—some o f the members
o f the more distant boards were unable to attend the meeting and a few
refused to—declared that the statement just quoted “ * * * repre­
sents the considered judgment o f employers and employer associations
in their regions.” 8 Thus nearly all o f the industry members pre­
8
ferred to continue tripartitism even in peacetime as long as wage
controls remained in effect. This difference o f opinion in industry
circles regarding the desirability o f tripartitism has continued to the
present time.
Some experts in arbitration have suggested that public membership
on a Government agency is an absurd redundancy and that the N W LB
structure was inconsistent with established practices in labor arbitra­
tion. On the contrary, a similar composition is often used in private
arbitration. The use o f arbitration boards is far from novel. Some
arbitrators prefer to serve on them; some prefer to serve alone. It
is especially significant that the parties frequently prefer to use such
a board in spite o f its additional cost. A t least, there is no absurdity
in transplanting this structure from private to governmental arbitra­
tion. Its importance in the latter case is much greater, fo r it is there
the requisite to obtaining at least some considerable degree o f
voluntarism.
In still another respect management and labor had a mutual in­
terest in tripartitism. Many o f the partisan members believed that
8 The NWSB Report, p. 52.
8
8 Ibid., p. 53.
6
8 Ibid., p. 54.
7
8 Ibid., p. 55.
8




TRIPARTITISM

‘ 263

their experience on the Board and their close association with the
members o f the other side o f the table would give all o f them a better
understanding o f the problems o f labor-management relations and
would contribute toward a more constructive relationship in the post­
war era. W ith reference to this particular consideration, the rotation
and turnover, among the partisan membership was a blessing rather
than a misfortune,.

X.

A l t e r n a t iv e s

to

T r ip a r t it is m

The most obvious alternative to tripartitism is an all-public board.
The relative advantages and disadvantages o f this alternative have
been discussed at several places earlier in this chapter. There seems
little doubt about the preferability o f tripartitism in dispute settle­
ment, but somewhat more doubt regarding its use in wage control.3
9
A second alternative is an all-public board with a bipartisan ad­
visory council, as used in the W ar Manpower Commission. It seems
very doubtful that such a form o f organization would have been suc­
cessful in the work o f the NW LB. An advisory council, meeting
occasionally, could not provide the technical information and guidance
that contributed to the practicability o f Board decisions in individual
cases. It could offer counsel regarding m ajor policy decisions, but
such advice would surely be less valuable than if offered by the same
persons when they were participating fully in the work o f the Board.
It is almost impossible at occasional meetings for an advisory group
to gain a complete understanding o f the problems confronting an
agency.
Moreover, serious problems are likely to arise if the advice offered
by such a group is not follow ed closely. It seems clear that com­
pliance and enforcement would have deteriorated seriously in such
a situation. Thus the members o f an advisory council might become
virtual dictators o f policy without having any real public responsi­
bility. A New Y ork Times editorial o f March 28, 1943, advocating
administration o f wage control by an all-public board with bipartisan
advisors said: “ * * * public powers o f compulsion should be
placed in the last analysis in representatives o f the public alone.”
It is, however, possible that the public members had in effect more
8 In fact, the administration of salary control was on an all-public basis under the Com­
9
missioner of Internal Revenue. Adjustment of salaries of $5,000 or more per year and of
lower salaries paid to unorganized executive, administrative, or professional personnel were
under the control of that official. This experience, however, cannot be compared usefully
with that of the NWLB. There is nothing to be gained by the use of tripartitism for wage
control of unorganized employees unless their compensation is directly related to that of
other employees who are subject to tripartite control.




264

DISPUTE SETTLEMENT AND WAGE STABILIZATION

authority under tripartitism than they would have had under tin
advisory-council form o f organization.
The use o f advisory councils representing groups intimately affectec
by Government orders seems better suited to Government program!
that can be readily enforced than to agencies that have a delicah
problem o f compliance and enforcement. Such organization woulc
also be more feasible in an agency with a definitely prescribed progran
than in one that must formulate most o f its own policies, for in th<
form er case the scope o f the advice would be more definitely delimited
Thus an advisory council might have been a more acceptable alterna
tive to tripartitism on the NW LB, if the Board had been given al
the outset a detailed list o f principles, instead o f having to work oul
all its policies on a case-by-case basis; but, as was indicated in chaptei
2, this approach would have been impractical.
A third possibility is to use partisan representatives as continu
ously as under tripartitism, but to deprive them o f the vote and restrici
them to advisory functions. This alternative would have the advan
tage o f providing the desired guidance in the consideration o f indi­
vidual cases as well as in the determination o f major policies. H ow­
ever, it would not reduce the wrangling in Board meetings or shorter
them. It would help but little in obtaining acceptance o f the genera!
program by management and labor or acceptance o f individual deci­
sions by the parties. It might well result in less constructive par­
ticipation by the partisan members, for an advisory group is sure
to feel less responsibility than a voting group.
It is even doubtful whether such a structure could long be kept
intact. It would be difficult, and perhaps impossible, to persuade
labor and industry leaders to accept advisory positions that would
require so much o f their time. In addition, the problem o f protest
resignation would be more serious because there would be less to lose
by withdrawal. Individual resignations might well occur from frus­
tration. It has been indicated that partisan members in a tripartite
structure, in spite o f their considerable accomplishments, face con­
siderable frustration from being frequently outvoted by the public
members. This reaction would surely be much stronger if there were
no safety valve o f at least casting an official vote and occasionally
w riting a dissenting opinion. W ithout this possibility, the dissents
would then be voiced unofficially and in different language.

XI.

C o n d it io n s F a v o r a b l e

to

T r ip a r t it is m

The success o f the Board’s experience with tripartitism was un­
doubtedly due in part to several favorable background conditions.




TRIPAKTTTISM

265

In the first place, labor relations were on a somewhat more stable
level than they had been during most o f the preceding decade. The
general nature o f these relations had been undergoing rapid change
since 1933, but by 1942 the pattern was taking shape. The task o f
mediation and arbitration is especially difficult when relations are
in the midst o f a m ajor transition, because o f the absence o f definite
criteria on which to base decisions. The basic change occurring in
labor relations in the early thirties was one o f the factors that made
the tasks o f the N BA labor boards too difficult fo r satisfactory
accomplishment.
Secondly, the existence o f a grave national emergency made the
partisan members more w illing to work smoothly together for a
common purpose. The experience o f the NDMB and the NW SB gives
some indication that tripartite agencies may have more difficulty in
maintaining unity in times o f peace.
Thirdly, all o f the members o f the Board and its agencies were in
complete support o f the objectives o f the war effort, in which the
Board was playing a vital role. The presence o f any disloyal mem­
bers, o f course, would have been intolerable.
Fourthly, moderate inflation is probably the business condition
most conducive to successful tripartite settlement o f labor disputes.
An environment o f deflation might give rise to bitter conflict among
the members over wage reductions. Under rapid inflation, the opera­
tions o f any arbitration agency are likely to be disrupted by the
constant shifting o f wage rates and other terms o f employment, lead­
ing to instability in the criteria used in case decisions. During a
period o f slight inflation, workers can be awarded occasional improve­
ment in their terms o f employment without serious opposition from
management and without harm to the public interest. The NW LB
operated under favorable circumstances in this respect so long as the
price-control program was fairly effective and the wage-stabilization
program not too rigid.
In one respect, the NW LB suffered a serious handicap. The avail­
ability o f an adequate supply o f impartial persons experienced in
mediation and arbitration to serve as skillful public members is a
factor favorable to successful tripartite action. The NW LB did not
have this advantage. Many public members on Board agencies and
panels had to be trained on the job. Nearly all o f the Board agencies
contained more than one public member, so that there was usually a
master craftsman present to train the apprentice. The partisan mem­
bers also were o f great assistance in this respect. In fact, many o f
them contributed so much to the education and training o f new public
members that this service should be listed as one o f their m ajor func­
tions. The overcoming o f the handicap o f inexperienced personnel
by the NW LB shows more clearly the strength o f tripartitism.




266

DISPUTE SETTLEMENT AND WAGE STABILIZATION

XII.

C o n c l u sio n s

The m ajor conclusions that have been reached in the course o f th<
preceding discussion may be summarized as follow s:
a. Voluntary acceptance o f, or acquiescence in, a dispute-settlemem
or wage-stabilization program by management and labor is essentia
to its success.
&
.
Such acceptance can be obtained most fu lly under tripartite
operation.c. Tripartitism gave labor and management a genuine veto power
but one that could be used only at a considerable sacrifice.
d. The greatest benefit o f tripartitism was its contribution t<
compliance.
e. A benefit o f nearly equal importance, though one not obtainec
in all Board agencies, was its contribution to a complete understand­
ing o f each case by the public members and the consequent assurance
o f practicable decisions. This result o f course also contributed tt
compliance.

/. Other benefits included protection against appointments by politi­
cal pressure and added assurance that case action on the part oi
staff and public members would not be partial to either of the parties

g. The scope o f tripartite action properly included policy deter
mination, the decision o f dispute cases and Form 10 appeals, and th(
approval o f appointments to public membership. It properly ex­
cluded action on routine voluntary wage applications after enough
had been processed to establish clearly the standards fo r decision.
It should not have included staff personnel administration. It alsc
is concluded here that it should not have included the preliminary
consideration o f enforcement cases.
h. The disadvantages and dangers inherent in tripartitism were ap­
preciable, but were far outweighed by the advantages. The dangers
included outvoting o f the public members, undue influence on the stall
or on the public members, disclosure o f confidential information, and
withdrawal from participation. There was less danger o f withdrawal
from a tripartite board than o f withdrawal from an advisory board
or o f loss o f effectiveness on the part o f an all-public board.
i. The most serious disadvantages o f tripartitism were its timeconsuming character and the difficulty o f obtaining regular partisan
attendance.

j. During the period covered by this study labor and management
strongly preferred tripartitism to any of its alternatives.




CHAPTER

Jurisdiction
By Jack G. Day

I. I n t r o d u c t io n

J u r is d ic t io n in the sense o f this chapter is simply authority to act.

This is to be distinguished from policy or power to act in a particular
way. Because o f the delegated character o f Federal powers and be­
cause the authority o f Federal agencies is under consideration, a
jurisdictional analysis should logically encompass the constitutional
basis fo r authority. However, since it is reasonably clear that the
war powers would have sustained the Government’s labor program
had a direct constitutional test arisen,1 this chapter deals only with the
delegation and limitation o f power by Executive order and statute and
the administration o f jurisdiction by the agencies themselves in the
exercise o f the inherent authority and duty to determine the scope o f
granted powers. It is important to recognize that in practice, the
application o f the inherent power may involve either an affirmation
o f jurisdiction or declination to accept decisional obligations in a
particular case or type o f cases. Such rejection would arise, not from
lack o f power to act, but rather as a matter o f self-restraint motivated
by policy considerations, such as a desire to avoid possible complica­
tions with agencies having an impinging jurisdiction or the wish to
avoid cases o f relatively little importance to main objectives even
though clearly authorized.
1 Billings v. Truesdale, 321 U. S. 524 (1944) ; Falbo v. United States, 320 U. S. 549
(1944) ; Estep v. United States, 327 U. S. 114 (1946) ; Hirabayashi v. United States, 320
U. S. 81 (1943) ;Korematsu v. United States, 323 U. S. 214 (1944) ; Tabus v. United States,
321 U. S. 414 (1944) ; Bowles v. Willingham, 321 U. S. 503 (1944) ; Woods v. The Cloyd
Miller Co, et al,, 333 U. S. 138 (1948) ; Prize cases, 2 Black 635 ; Duncan v. Kahanamoku.
327 U. S. 304 (1946).
921297— 5(




-18

267

268

D IS P U TE; S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

Critical approaches to the jurisdictional problem, as distinguished
from the merely descriptive, soon become involved with issues beyond
the questions of how much and what authority. For the critic the
main question will be what the scope of jurisdiction ought to be.
Although the quick and apparent generalization in response to this
question lies in the purpose of the agency and an estimate of the
power requirements for that purpose, realism will insist that political
feasibility must be a constant qualifier in any decision respecting
jurisdiction, just as it is in any other policy decision in Government.
II.

T

h e

Ju r i s d i c t i o n

of the

NDMB

Executive Order No. 8716, establishing the NDMB, contained no
complicated jurisdictional factors. Paragraph 2, the heart of the
order, recited only two jurisdictional qualifications, both procedural.
The controversy had to be certified by the Secretary of Labor and
incapable of adjustment by the conciliation commissioners in the
Department of Labor. On the substantive side, the order granted
authority over a dispute or controversy “which threatens to burden or
obstruct the production or transportation of equipment or materials
essential to national defense,” but limited the power by excluding
disputes within the Railway Labor Act. A further restriction was
implicit in paragraph 2 (e), providing that disputes over “the appro­
priate unit or appropriate representatives to be designated for pur­
poses of collective bargaining” were to be handled by way of request
to the National Labor Relations Board to expedite the necessary
determinations. The Board was empowered to refer to the Depart­
ment of Labor uncertified disputes which might come to its notice,
but it had no power to take such cases on its own
.
The Board ordinarily treated certification by the Secretary of Labor
as conclusive of jurisdiction. The one exception arose when a dispute .
primarily between rival unions at Busch-Sulzer Bros. Diesel Engine
Co. was closed for want of jurisdiction. According to the report on
the work of the Board, the ground for refusal was that the dispute
was not between an employer and employees.2 This reasoning fits in
with the description of jurisdiction in paragraph 2 of Executive Order
8716. But both the rationalization of the action in the Busch-Sulzer
B ros . case and the language of the order are difficult to reconcile with*
m o tio n

*U. S. Department of Labor, Bureau of Labor Statistics, Report on the Work of the
National Defense Mediation Board, Bulletin No. 714 (1942), p. 5 (hereinafter referred to
as The NDMB Report). There is no intention to suggest here that the question whether
a 'labor dispute” existed in the technical legal sense was a material consideration in the
Board’s decision.




JU R IS D IC T IO N

269

a later willingness to act in the Consolidated Edison Co . case.3 That
case, like the earlier one, involved a work-jurisdiction dispute. Both
disputes were characterized by a lack of employer-employee relation­
ship. One difference of importance to the Board was the intrafedera­
tion character of the dispute in the Busch-Sulzer Bros, case, in con­
trast to the affiliated union versus independent union aspects of the
Consolidated Edison case.4 For this distinction one may admit a
certain realism and political expediency without attempting a logical
reconciliation between the Consolidated Edison case and the language
of the Executive order. In any event, the Board did accept extra­
mural jurisdictional controversies. Usually these involved represen­
tation questions and were handled by persuading the workers to resume
production in exchange for an attempt by the Board to expedite NLRB
proceedings.5*
NDMB jurisdiction to accept and act in a dispute was not limited
because the issues concerned were within the bailiwick of the NLRB.
What Executive Order 8716 did limit, at least by implication, was
the disposition to be made in a case involving appropriate unit or
representation questions. No similar qualification, expressed or im­
plied, was made for unfair labor practice problems in disputes which
might be certified to the NDMB.8
Generally, however, the Board conducted with restraint those of its
affairs touching questions under the NLRA. Apparently the Execu­
tive order contemplated the handling of representation questions by
the NLRB. This contemplation was consistently honored by the
reference of representation questions to that Board, and a comparable
deference was also exhibited in affairs involving unfair labor prac­
tices. In addition, close cooperative relationships were maintained
even on the interpretive level. The NDMB made a practice of check­
ing with NLRB sources, both formally and informally, on matters
before it which could involve NLRA policy questions. There were
instances of accommodation by each agency to the requirements of
8 Ibid., p. 209.
4 The case histories attached to The NDMB Report at pp. 147 and 209-210 suggest a
possible additional distinction. The Mediation Board may have regarded the Busch-Sulzer
Bros, dispute as primarily between unions, and the Consolidated Edison Co. controversy
as primarily between employer and employee. However, the report in the latter case
reveals local 3 of the International Brotherhood of Electrical Workers as the active
union disputant. The members of local 3 were not employees of the company and were
disputing a work-jurisdictional point affecting two unions and paralleling the BuschSulzer Bros, dispute so closely as to sap the distinction of much difference.
5On at least one occasion the Board did not respect an NLRB order directing a company
not to bargain with a union. This was distinguished by two exceptional factors— cessa­
tion of production and the absence of a competing union. Cornell-Dubliner Electric
Corp., The NDMB Report, p. 95, The case history does not discuss the exceptional fac­
tors, but see ibid., pp. 34-35 for general discussion of Board handling of questions in­
volving the National Labor Relations Act.
•Sec. 2 (e). However, there may be some room for doubt whether, even in time of
emergency, the President could place authority in an agency of his creation when that
same authority had been vested elsewhere by the Congress.




270

D IS P U T E S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

the other. The relationship has been characterized as “altogether
harmonious.” 7 The importance of this type of relationship between
governmental authorities with contiguous powers can hardly be
overstated.8*
In three respects of jurisdictional significance, the authority of the
NDMB differed from that of the NWLB. The NDMB had no power
to take a case on its own motion for any purpose. However, once in
charge of a controversy, it could mediate broadly with relatively in­
significant limitations. On the other hand, it had no authority to
decide an issue, but could only recommend.*
III.

A.

T

h e

Ju r i s d i c t i o n

of t h e

NWLB

J
F
E
O
9017 E
9599
The jurisdictional propositions in Executive Order 9017 establish­
ing the NWLB, were stated in very general terms. The conferring
sections provided techniques for settling labor disputes “which might
interrupt work which contributes to the effective prosecution of the
war,”10 but excepted all labor disputes subject to existing alternative
procedures for adjustment or settlement until those procedures had
been exhausted. On the strength of the “whereas” clauses it is possible
to interpret the authority over disputes broadly, limited only by its
effect on the prosecution of the war. These clauses recited the na­
tional interest in no interruption in any kind of work contributing to
the effective prosecution of the war. They also referred to the agree­
ments of the labor-management conference covering the elimination
of strikes and lockouts, the settlement of all labor disputes by peaceful
means, and the creation of a national board for the peaceful adjust­
ment of disputes.
Procedural prerequisites to certification of a dispute to the Board
by the Secretary of Labor included collective bargaining and the
intervention of the Conciliation Service. But the Board was given
D

isp u t e s

u r is d ic t io n

rom

x e c u t iv e

rder

to

x e c u t iv e

O rder

1 The NDMB Report, p. 85.
8 See also the Duquesne Light Co., The NDMB Report, p. 166, where similar restraint
was demonstrated in relation to a State agency with jurisdiction of representation questions.
8 However, even in the mediation phase of emergency labor relations handling, the Army
and Navy were just offstage, as evidenced by four seizures during the life of the NDMB.
Cf., ibid., p. 2 and pt. V.
1 Subsequently, Executive Order 9599 (post VJ-day) provided that officials administer­
0
ing labor-dispute settlements in accordance with Executive Order 9017 and sec. 7 of the
War Labor Disputes Act consider “ that labor disputes which would interrupt work
contributing to the production of military supplies or interfere with effective transition
to a peacetime economy are disputes which interrupt work contributing to the effective
prosecution of the war.” This enlargement evidently was aimed at forestalling con­
troversy over the Board’s jurisdiction after the shooting war had ended.




JU R IS D IC T IO N

271

discretionary authority to take cases on its own motion after consul­
tation with the Secretary. After the vesting of jurisdiction, the
widest latitude was allowed the Board in determining the dispute.
Mediation, voluntary arbitration, or arbitration under its own rules
were permissible modes of settlement. A conforming clause provided
that nothing in the order should be construed as superseding or in
conflict with existing labor laws.11
Thus was the- framework for the disputes function of the Board
established. Ultimately it was to be extended by Executive Order
9250 to cover “all industries and all employees”12 in disputes concern­
ing wage adjustments.
The Board’s jurisdiction was further extended by the War Labor
Disputes Act, which added a specialized disputes function for seizure
cases.
The NWLB delineated its own jurisdiction under the Executive
Orders and Statutes.1* In determining its jurisdiction the Board took
the broad view.
Determinations respecting jurisdiction were probably influenced fa­
vorably to a broad interpretation by the Board’s concept that its or­
ders were mere “declarations of the equities” in labor disputes and
were therefore not subject to judicial review or restraint. Fully
aware that this condition drew after it the impossibility of judicial
recourse for the enforcement of its orders, the Board nevertheless
regarded this lack of enforcement power as a point of strength. What­
ever paradox this seems to raise can be resolved in the light of the
Board’s firm belief in keeping labor relations on a voluntary basis and
out of court. This conviction went deeply enough for the Board to
work actively to persuade Congress to omit from the War Labor
Disputes Act any provision for judicial enforcement or review.14*
Working solutions, not legal niceties, provided the cutting edge in
Board operations.
n The statutes specified were the Railway Labor Act of 1926, as amended, the National
Labor Relations Act of 1935, the Fair Labor Standards Act of 1938, the Public Contracts
Act, approved June 30, 1936, and the act amending the act of March 3, 1931, relating to
the rate of wages for laborers and mechanics approved August 30, 1935 (Davis-Bacon
Act). For a decision turning on the conformance clause, see A llis-C h a lm ers M a n u fa ctu r­
in g C o, case No. 111-3511-D (October 12, 1943). In effect, matters vested in other
governmental agencies under statutes mentioned in the conforming clause were interpreted
by the NWLB as exclusively within the cognizance of those agencies and therefore beyond
the authority of the Board. Cf. P o tla tc h F o r e s ts , I n c ., cases No. 412 and 2540-CS-D
(March 14. 1945).
1 Title III, sec. 1. The Board’s view of this section was that it extended jurisdiction,
2
at least in wage dispute matters, to “all industries and all employees * * * whatever
the relation of the companies’ business to the prosecution of the war may be.” S e c u r ity
T itle and G u a ra n ty C o., case No. 646 (November 13,1942).
2 For a holding that the parties could not by agreement affect the Board’s jurisdiction,
2
see P u r e O il C o., case No. 5-D-737 (August 25,1944).

1 See NWLB General Counsel’s Memorandum Legislative History of Provisions for
4
Judicial Review of War Labor Board Orders, especially Chairman William H. Davis* letter
at the end. The Termination Report, vol. II, pp. 452-462.




272

M S P tTTE . S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

In deciding what disputes affected the prosecution of the war, con­
siderable weight was given to civilian morale, the location of a dispute
in a large industrial area, and the contagious effect of strikes.15 In
the face of a company contention that a dispute had no substantial
effect on the war effort, the Board asserted its jurisdiction with seeming
assurance in a case involving the relatively unimportant work of classi­
fied advertising solicitors for telephone directories. Both wages and
union security were in controversy. In taking jurisdiction the Board
spoke strongly of the importance of controlling all wages in the effort
to combat inflation but in equally positive terms stated its views on
jurisdiction of the nonwage issues:
It is the position of the W a r Labor Board that the war powers of the President
are sufficiently broad to empower him to provide for the final determination
of all wartime labor disputes by the National W a r Labor Board as he has done
in Executive Order No. 9017. Therefore, it is the intention of the Board to
take jurisdiction of all labor disputes not settled by other peaceful procedures
and finally determine them on their merits.1
®

The W ar Labor Disputes A ct, passed over the President’s veto on
June 15,1943, gave the legislative imprimatur to the powers granted
by Executive Order 9250, including the extension o f Board functions
to “ all industries and all employees.” It is therefore not surprising
that the Board continued to interpret its authority without material
inhibition from the act.1 That there were other inhibiting considera­
7
tions affecting jurisdiction w ill be apparent.

1. The N L R A .—Conforming clauses in the documentary sources
of NWLB authority clearly called for conformance with the National
Labor Relations Act. That act and determinations by the National
Labor Relations Board pursuant to it covered two types of issues—
those involving representation questions and unfair labor practices.
An important segment of any representation issue was the determinatio of the appropriate unit for bargaining.
a. Bargaining v/rvit.—As a general rule the War Labor Board would
not interfere in any way with an NLRB appropriate unit determina­
tion. It ordinarily refused to establish, split18or augment19the unit,
and tended to follow NLRB policy on bargaining-unit matters even
where no official designation of units had been made.20 But the Na­
tional Board, in a case denying a consolidation of bargaining units, did
1 See M o n tg o m e r y W a r d & C o., case No. 192 (June 29, 1942).
8
19R u e b e n H . D o n n e lle y C o r y ., case No. 4207-D (March 29, 1943).
1 See E le c tr ic a l T r a n scrip tio n M a n u fa ctu r ers, case No. 111-2499-D (July 20, 1943) ;
7
M o n tg o m ery W a rd & C o., case No. 3930-CS-D (August 20,1943).
1 P h e lp s -D o d g e C orp ., case No. 111-1529-D (September 4, 1943) ; C u rtis s-W rig h t C o rp .,
8
case No. 111-3715-D (January 13, 1944) ; F a ll R iv e r T e x t i l e M in s , case No. 111-5334-D
(February 24, 1944).
19 F lo rid a P h o s p h a te M in in g C os., case No. 111-1380-D (January 24, 1944).
2 Supervisors were excluded from an agreed bargaining unit in C uda hy P a c k in g C o .,
0
case No. 111-209-C (June 30, 1944). See also B r e w s te r A e r o n a u tic a l C o rp ., case No. 1113372-D (September 24, 1943), providing that parties negotiate a separate collective*
bargaining agreement for militarized guards.




JU R IS D IC T IO N

273

authorize a subordinate agency to order uniform contracts for several
bargaining units if the agency should determine that stabilization and
labor relations in the industry justified uniformity.21
6. The determination of m ajority representation .—The boldest safe
generality regarding the Board’s reaction to disputes over majority
representation is that it would “normally decline to act,” on the ground
that the matter was properly one for the NLRB.22 In a few cases the
Board ordered grievance procedures for the members of minority
unions, but indicated that this practice would be reserved for excep­
tional circumstances.23 In another case,24 wage changes were ordered,
with the opinion indicating that during the war “any group of em­
ployees” which had exhausted all other procedures for achieving wage
increases could come to the Board. This statement was very positively
made, though probably unnecessary to a decision in the case in view
of the Board’s findings that the union represented a majority of the
employees for whom it made its demand. Board practice also allowed
the handling of supervisors’ disputes except for representation and
unfair-labor-practice issues.256 There was, of course, some element of
2
recognition of representative status derived even from the handling
of nonrepresentation disputes for unrecognized employee groups.
NLRB determinations of representative status were presumed to
continue until supplanted by another determination either by that
Board or the courts.20 The presumption applied also to voluntary
recognitions.27 But whether certified or voluntarily recognized, a
clear showing of loss of majority, at least in cases involving contract
2 O hio C o n tra c t C a rriers A s sn , e t al. , case No. 4648-D (November 9, 1943).
1
2 V irg in ia E le c tr ic and P o w e r C o. case No. 41 (March 11, 1942) ; E a s y W a sh in g M a ch in e
2
C orp. case No. 703 (January 9, 1943). See NWLB-NLRB agreement on cases involving
Wagner Act questions, January 4, 1944, the Termination Report, vol. II, pp. 584-586. The
statement accompanying the agreement indicated that the principles of the agreement
applied both to employers engaged in interstate commerce and subject to the National
Labor Relations Act, and to employers engaged intrastate but subject to a State labor
relations act comparable to the NLRA.
2 NWLB-NLRB agreement, loc. cit., sec. V.
8
2 A n a c o r te s V e n e e r , I n c . case No. 111-368-C (December 22, 1943).
4
2 Resolution of May 18, 1944, War Labor Reports, vol. XV, p. xxxix.
6
2 C hicago T ra n s fo r m e r C orp . case No. 111-4581-D (March 1, 1944). A special prob­
6
lem in representation matters was raised by riders to the National Labor Relations Board
appropriation acts. The riders prevented the use of NLRB funds to process complaints
arising out of contracts between management and labor where the contracts had been
in existence for 3 months or more without complaint being filed. Because the statutory
language referred only to complaints, the NLRB felt itself uninhibited in representation
matters. The NWLB was confronted with the consequence of this situation in B a sic
M a g n esiu m I n c. case No. 111-2980-D (February 9, 1944). The NLRB had certified a CIO
union after representation proceedings, but had refused to issue an order to bargain be­
cause of the interference of such an order with the company’s older than 90 days contract
with the predecessor AFL union. The NWLB refused jurisdiction of the dispute over
refusal to bargain and later processed a voluntary application for a wage adjustment
filed by the company and the AFL union, in spite of the usual NWLB rule that voluntary
applications were to be only with the consent of the bargaining representative. See
NWLB General Counsel’s opinion on a comparable problem, War Labor Reports, vol XXI,
p. xcii.
2 H o o k s M o t o r L in e s case No. 111-4734-D (September 9, 1944) ; S te ffe n s I c e and I c e
7
C ream Co. case No. 111-1568-D (February 11, 1944).




274

D IS P U T E S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

renewals, would result in the Board eliminating issues, such as union
security, bearing on the representation question.28
Intrastate representation disputes did not involve conflicts with
NLRB jurisdiction. On the contrary, disputes of this variety seemed
to be a logical place for the NWLB to operate in the absence of a State
labor relations board. The Board held a few representation elections
involving intrastate employers. This practice was soon stopped, no
doubt because of the burden the cases threatened to become. In gen­
eral, the Board limited itself in intrastate disputes to the fixing of
terms and conditions of employment without reference to representa­
tion or exclusive recognition.29 However, the union had to demon­
strate that it represented a substantial number of employees; and it
was accepted as representative only for its own members,80 unless vol­
untary exclusive recognition had been extended, in which case it was
presumed the status continued.
o. U nfair labor 'practices.—Again because of conformance obliga­
tions, the Board veered away from matters involving unfair labor
practices under the Wagner Act. Thus the Board refused to enforce
collective bargaining between an employer and a certified union, and
instead recommended bargaining81or occasionally issued orders recog­
nizing the status which the NLRB had certified.82* NWLB orders
placed on top of orders issued by the NLRB posed a different question.
These had apparent consistency with the conformity requirements,
but raised an issue respecting the exclusive enforcement jurisdiction
of the courts under the Wagner Act.88 The NWLB might have re­
fused enforcement efforts altogether, consistently with that section.
A concession to the problem was the Board’s unwillingness to go for­
ward with compliance proceedings while an NLRB order was in liti­
gation for review or enforcement.84*
Unfair-labor-practice issues, in general, were complicated by the
fact that labor had voluntarily renounced the right to strike in war­
time. Board action was the alternative and, when the use of the alter­
28 M is s o u r i F a r m e r s A s s n . R efin in g C o. case No. 111-4996-D (August
g o m e r y W a r d & C o., I n c ., case No. 111-5353-HO (January 13,1944).

1, 1944) ;

M o n t­

* Resolution of the National War Labor Board of July 12, 1944, War Labor Reports, vol.
XVII, p. liii, II (a). Case development on this point preceded the resolution.
8 W e b e r M ilk C o. case No. 111-1012-D (June 23, 1944); B r o o k ly n C en tr a l Y M C A case
8
No. 111-1286-D (June 16, 1944). Some regional boards had gone much further on the
recognition question prior to the Board’s resolution of July 12,1944.
8 Cf., e. g., U ta h C o p p e r C o. and K e n n e c o t t C o p p e r C orp . cases Nos. 111-4944-D and
1
111—
4945— (February 5, 1944).
D
8 See C h ica g o T r a n s fo r m e r C o rp ., footnote 26, supra.
2
* Cf. S p e r r y G y r o s c o p e C o. case No. 70 (April 28,1942).
8 Conditions attached to NWLB compliance orders provided for the eventuality of a
4
court test. See W in c h e s t e r R ep ea lin g A r m s C o. case No. 443 (February 5, 1943); B a l ti ­
m o r e T r a n s it C o. case No. 522 (April 27, 1943).




JU R IS D IC T IO N

275

native raised jurisdictional conflicts between agencies of the Govern­
ment, some variety of interim action became a virtual necessity pend­
ing the final determination of jurisdiction.
Discriminatory discharges, for example, raised special problems
handled in a variety of ways in the early experience of the Board.
Ultimately the policy in such cases was precipitated in a policy state­
ment worked out after consultation with the NLRB.35 That policy
in substance renounced all jurisdiction of discharge cases not involving
numbers of men large enough to interfere with the war effort. Where
the numbers were sufficient to justify NWLB action, it was proposed to
act only after consultation with the NLRB and without prejudice to
any proceedings by the latter.
Actually the policy represented an attempt to avoid the welter of
discharge cases which would have come to the NWLB if the pivot of
jurisdiction had become the absence of antiunion motivation in the
dismissal. In practice, however, the Board continued to handle indi­
vidual discharge cases so long as the union discrimination factor was
not apparent.36
2. Intrastate disputes .—Regarding certification of disputes by the
Secretary of Labor as virtually conclusive evidence of the existence
of a dispute that may lead to a substantial interference with the war
effort, the Board regularly ordered dispute settlements for enterprises
engaged in intrastate commerce. In a series of cases followed by a
policy declaration on July 12, 1944, jurisdiction of such matters was
put squarely on a war-powers basis.37 Careful hedging protected
against trivial cases, against the requirement of exclusive bargaining
with a minority union, and against interference with exclusive bar­
gaining rights where voluntarily extended.
In the implementation of this policy, the Board regularly handled
a broad group of issues in addition to wages. As a general rule,
however, exclusive representation, union security, and related issues
were avoided. But voluntary recognition resolved objections to Board
action on those issues.
3. Parties and jurisdictional issues.—a. Em ployers .—In a few in­
stances the parties to a dispute affected the problem of jurisdiction.
A good example was that of nonprofit and charitable enterprises,
which were excluded from NLRB jurisdiction but not from that of
the NWLB. This problem was related to the issue of jurisdiction in
intrastate disputes. The NWLB determined at first that it had juris-7
8
*
5
8 May 4,1943, War Labor Reports, vol. XI, p. 579.
5
A r m o u r a n d C o. case No. 111-644-D (August 1, 1944)
Co. case No. 111-4840-D (January 25, 1944).
8 See footnote 29, supra.
7




; P e n n s y lv a n ia P o w e r & L ig h t

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D IS P U T E S E T T L E M E N T ANiD W A G E

STABILIZATION

diction of such enterprises.38 Later considerations motivated a policy
denying jurisdiction of representation issues in intrastate disputes
generally39 and eventually the whole jurisdiction of nonprofit and
charitable institutions was relinquished.40 This represented a vol­
untary abandonment of jurisdiction, to which the Board made an
exception in deciding a dispute between nonprofit hospitals and
their union, which had been certified to the Board about 1 year
before the policy on such disputes crystallized.41 The Board also
voluntarily declined jurisdiction of disputes involving local govments. The decision not to take jurisdiction of disputes between
municipalities and their employees may have turned ultimately on
political rather than purely legal considerations, but in any event
the tone and development of the opinion written by public member
Morse 42left little doubt that an affirmation of jurisdiction could have
been supported if the Board had thought it necessary to the war effort
to do so.
6. Em ployees .—Jurisdiction over representation questions for agri­
cultural workers was denied on policy grounds. The Board thought
Congress deliberately excluded them from the NLRA and thus ex­
pressed an intent to keep the Federal Government out of represen­
tation questions affecting them.43 With the passage of the War Labor
Disputes Act, the Board lost jurisdiction over agricultural workers
on all dispute questions.
Supervisory employees also posed a problem. It was contended
that they were not employees within the meaning of the War Labor
Disputes Act and that therefore controversies over their terms and
conditions of employment were not labor disputes within the mean­
ing of that act. The Board rejected these contentions and proceeded
8 B r o o k ly n C en tra l Y o u n g M en ’ s C h ristia n A s s o c ia tio n case No. 111-1286-D (August
8
11, 1943). The YMCA’s antijurisdiction contentions were: (1) the YMCA was not within
the jurisdiction of the NLRA since it engaged in intrastate commerce only, (2) the
New York State Labor Relations Act specifically exempted charitable institutions from
collective bargaining and (3) charitable institutions should not be required to bargain
collectively. The Board rejected the arguments pointing out that it had previously
taken jurisdiction of intrastate disputes, that the New York Constitution recognized the
right of all employees to bargain collectively, thus overriding any provision of the New
York Labor Relations Act to the contrary, and that charitable organizations are required
to conform to wage stabilization policies. Issues other than wages were involved in the
case. The Board later declined jurisdiction of the representation issues. See War Labor
Reports, vol. XVII, p. 249.
8 See S im on J. M u rp h y C o. case No. 111-1228-D (February 4, 1944).
9
4 NWLB General Order No. 26, January 22, 1943, permitted charitable and nonprofit
0
institutions to make wage adjustments without approval. This order, coupled with the
Simon J. Murphy decision, severely limited jurisdiction in the Institutional cases. At
last the Board adopted a resolution providing for the return of disputes involving charit­
able or nonprofit organizations to the Conciliation Service. See the Termination Report,
vol. I, p. 34.
4 B e th I s r a e l e t a l., case No. 111-2827-D (July 27, 1945).
1
4 M u n icip a l G o v ern m en t, C ity o f N ew a r k , e t a l., case Nos. 47 and 726 (December 24,
2
1942).
4 C a lifo r n ia P a c k in g C o rp o ra tio n case No. 111-549-D (February 4, 1944).
8




JU R IS D IC T IO N

277

to process the cases, excepting only those issues within the jurisdiction
of the NLRB and related matters such as union security.44 At this
time the NLRB decision in the M aryland D ry dock Go. case, denying
bargaining rights to supervisory employees, represented the majority
view of that Board. When this decision was reversed in the Pack­
ard M otor Car Go . case, the NWLB began to consider union security
issues along with other terms and conditions in supervisory employ­
ees’ disputes.
4. Nature of issues as affecting jurisdiction.—As has been stated,
issues within the jurisdiction of the NLRB represented a required
exception to NWLB jurisdiction. Other types of issues were volun­
tarily renounced. For example, the Board refused to concern itself
with the internal affairs of a union,45 and declined to order contract
clauses affecting postwar issues.46 In both situations the decision was
based on lack of jurisdiction. The Board also declined to act on hypo­
thetical issues; whether from reasons of policy or as a matter of juris­
diction does not appear.47
An early decision regarded a dispute over contract reopening for
wage purposes as a jurisdictional question.48 Later decisions in com­
parable situations supported the view that such matters were not jur­
isdictional in nature. Rather, said the Board, jurisdiction is clear,
the relevant argument goes to the question of appropriate disposition
of the issue.49
5. Conflicts w ith State law.—In a number of States, statutes and
constitutional provisions affected terms and conditions of employ­
ment. Where they did not conflict with Board policy, the State laws
were given effect.50 Conflicts arose when Board orders went counter
to the State expression on the subject. The Board early affirmed the
supremacy of its orders in these circumstances, basing its decision
squarely on the supremacy of Federal war powers. In a leading case
on the question,51the Board stated in part:
The war powers o f the President and Congress, under which the Board
derives its authority to order the * * * company and its employees to abide
by the maintenance-of-membership clause o f the Board’s directive order, are

4 See M u rra y C orp . o f A m er ica e t a l., case No. 111-2882-D, also the Resolutions of May
4
18, 1944, and September 8, 1944, discussed in the Termination Report, vol. I, pp. 34-35.
4 W e b e r S h ow C a se d F ix tu r e Co. case No. 2749-D (July 30 and November 9, 1943) ;
5
see also S . A . W o o d s C om p a n y case No. 160 (August 1, 1942).
4 G len n L . M a r tin C o. ease No. 111-7696-D (October 21, 1944). Cf. W e s te r n A s s o c ia ­
6
tio n o f W h o le s a le O p ticia n s case No. 111-6648-D (September 7, 1944) for a different view
of the problem of the post-war issue.
4 O zan L u m b er Co. case No. 111-5830-D (February 26, 1945).
7
" M a jo r N ew Y o r k F ilm E x h ib ito r s case No. 111-60-C (May 17, 1943).
4 A m er ica n S te e l F o u n d ries e t a l., cases Nos. 111-4190-HO, 111-5862-D, 111-6071-D
9
(May 29, 1945).
6 S er v el, I n c . case No. 111-6878-D (May 10, 1945). (State law required employers to
0
pay employees weekly if the employees requested it.)
61J . C reen eb a u m T a n n in g Co. case No. 879 (August 28,1943).




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D IS P U T E S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

superior to and supplant any legislation o f the State * * * which woul<
place restrictions or conditions upon the m aintenance-of-m em bership provisioi
which the B oard has seen fit to apply. The Board has arrived a t this con
elusion upon the prem ise that the absolute necessity for peaceful and prompi
settlem ent o f wartim e labor disputes calls fo r fu ll use o f those broad and ex
tensive powers o f the President and Congress heretofore designated as the wai
powers.

WJien the issue arose again in interpreting the requirement of the
War Labor Disputes Act that NWLB decisions conform to certair
specified laws and all other applicable provisions of law, the Board
concluded that the language of the statute had reference to Federal
laws only. The point of supremacy became well established.62 At
least one State supreme court was in accord.53
Wartime disposition of labor problems demanded the extensive
jurisdiction placed in the NWLB. The breadth of the jurisdiction
inevitably brought the activities of the Board to points that impinged
upon the jurisdiction of other agencies such as the National Labor
Relations Board and the Treasury’s Salary Stabilization Unit. The
many jurisdictional exceptions and conforming clauses were designed
to fit the parts together or to serve a special interest, sometimes
purely political. Such efforts could not obviate all jurisdictional
controversy and sometimes were sources of it. Day-by day operations
brought up problems affecting jurisdictional authority that no general
propositions could fully anticipate.
War enforces such enormous demands in the labor field that an
argument for a complete integration of all jurisdiction in matters
affecting labor has some apparent sense. But the actual implement­
ing of such a decision would no doubt evoke problems not foreseeable.
However, integration was not attempted on anything like a com­
plete scale during World War II. In fact, it may be true that more
integration should have taken place than did. For example, salary
stabilization jurisdiction, reserved to the Treasury Department, might
have been put in the NWLB. Such a move probably would have
developed more uniformity in treatment for all salaried employees and
certainly would have helped resolve some suspicion of discrimination
which inevitably arose when the responsible agencies acted differently
or seemed to diverge on matters of policy. Also strike control might
have been simpler had the NWLB had more authority. Representa­
tion and unfair labor practice issues were outside the NWLB juris­
diction. Strikes over such controversies were not. Therefore, ability8
6
*
8 See U n ited S ta te s V a n a dium
3
P r o d u c ts C o . case No. 111-7502-D

case No. I l l —
1021— (January 21, 1944\ ; U n iv ersa l
D
(June 21, 1944). The principle applied to conflicting
State constitutional provisions as well as statutes. See R a d io S ta tio n W F T L case No.
Ill—
9032— (July 5, 1945).
D
6 I n te r n a tio n a l B r o th e r h o o d o f P a p e r M a h ers, A . F . o f L . v. W isc o n sin E m p lo y m e n t
8
R e la tio n s B oa rd , October 10, 1944, Wisconsin Supreme Court, War Labor Reports, vol.
XIX, p. 249.




JU R IS D IC T IO N

279

to condition progress on the merits of the dispute with the resumption
of full production, the usual procedure, was not completely within the
NWLB authority.
Regardless of speculative possible improvements in the jurisdic­
tional powers of the NWLB, it is apparent that, tested by pragmatic
standards, jurisdiction was sufficient to the demands put upon the
Board. Few major disputes were outside its authority, and the pow­
ers of the Board were sufficient to meet all but relatively few of those
within its jurisdiction. On the latter score, the ingenuity of the
public members of the Board, backed by the partisan representation,
is certainly more to be credited than any mere jurisdictional arrange­
ment. However, the authority had to be sufficient to allow for the
imaginative operation which Board personnel brought to wartime
labor problems.
2. D isputes jurisdiction from Executive Order 9599 to Executive
Order 9672 .—After August 18, 1945, the main forces of the Board’s
energies were directed to the liquidation of the disputes program.
Disputes which threatened the transition to a peacetime economy were
to be handled,54 but the main emphasis by far fell upon collective
bargaining. Every effort was made, and with considerable success,
to get the parties in pending cases to settle their differences by negotia­
tion. The wage leeway in the new Executive Order (9599) was used
to encourage fresh bargaining on deadlocked wage issues.
Failure to negotiate settlements would bring an importuning to
submit to arbitration. Failing that, the parties were to be urged to
submit the matter to the NWLB for final and binding settlement.
Further momentum was given the winding-up process by provision
for ending the issuance of directive orders in all cases except pend­
ing appeal cases and cases in which the Board was by agreement to
issue a binding order. All other disputes were to be decided by
recommendation only. This step obviated the necessity for permit­
ting appeal and at the same time provided a process thought to be
more in keeping with the functions of a liquidating agency.
Immediately upon the issuance of Executive Order 9651, clarifying
and expanding the wage policy of Executive Order 9599, the Board
seized the occasion to refer disputes back to the parties for negotia­
tion if issues affected by the new order were involved. This policy
applied to all cases, whether or not the parties had agreed in advance
to be bound by the Board’s decision.4
6
6 See President Truman’s statement on August 16, 1945, reproduced in part in U. S.
4
Department of Labor, The National Wage Stabilization Board (1948), pp. 25-26 (herein­
after referred to as The NWSB Report). Executive Order 9599 expanded the definition
of labor disputes that interrupt work contributing to the effective prosecution of the war to
include disputes “ which would * * * interfere with effective transition to a peace­
time economy.”




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D IS P U TE S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

Following its policy of divesting itself of responsibility for direct
participation in dispute settlement—in a sense a renunciation of
jurisdiction—the Board moved rapidly toward its termination.
On the whole, the atmosphere created by the approach to disputes
matters after VJ-day was not conducive to industrial peace. The
emphasis was such that the parties could not count on Government
decision in disputes which did not respond to collective bargaining.
In spite of the fact that NWLB “orders” had not been mandatory in
a legal sense, they carried more weight than post YJ-day decisions
frankly designated “recommendations.” The NWLB attitude was
characterized by a desire to get out of existence and had concrete
demonstration in its relaxation of jurisdiction. While this approach
certainly coincided with much of the postwar reaction to Government
interference in labor relations, the policy was a mistake. Agreement
to continue the activity of the Board for the purpose of voluntary
arbitration was unobtainable, but it would have been desirable if labor
and management could have been persuaded, on the basis of a modifi­
cation of stabilization policies, to continue the disputes function of
the Board during the postwar transition period on a recommendatory
basis at least.55
3. W age-stabilization jurisdiction from the Stabilization A c t o f
191$ to Executive Order 9599 .—The responsibilities of the NWLB for
wage stabilization stemmed principally from the Stabilization Act of
1942, supplemented by Executive Order 9250 and regulations of the
Economic Stabilization Director. All wage-rate and certain salary
increases and decreases required the filing of notice with, and approval
of, the Board.56 Salaries and wages were broadly defined in Executive
Order 9250.
a. Exceptions and exemptions .—Many jurisdictional enclaves
marred the broad primary grant. Some of these were established by
the Board itself under authority conferred by the Executive order
and the regulations of the Economic Stabilization Director. Others
were established directly in the regulations.
(1) E xem pted employees.—Two groups of employees were placed
outside the Board’s jurisdiction. Agricultural labor57 was not sub-6
8
*
5 More will be said about the jurisdiction over wages and salaries in connection with
5
the discussion of the stabilization sections which follow.
8 Jurisdiction of the Board originaUy extended to the United States and its territories
6
and possessions. Under authority of OES Regulations, sec. 4001.14 (War Labor Reports,
vol. IV, p. XVII), the Board, in its General Order 8, issued October 31, 1942, contracted
jurisdiction to include only1the United States and Alaska. In June 1944 the Territorial
War Labor Board for Hawaii Was organized. See General Order 36. (Board wage deter­
minations were not to be subject to court review in civU proceedings. OES Regulations,
sec. 4001.2.)
w Defined in OES Regulations, sec. 4001.1 (2). “ The term ‘agricultural labor’ shall
mean persons working on farms and engaged in producing agricultural commodities
whose salary or wage payments are not in excess of $2,400.00 per annum. * * ♦” On
July 17, 1945, a rider to the War Agencies Appropriation Act of 1946 prohibited any of




JU R IS D IC T IO N

281

jecfc to wage and salary regulation unless and until the Secretary of
Agriculture should determine that approval for future increases
should be required. Also excepted from the Board’s jurisdiction—
and placed under the jurisdiction of the Commissioner of Internal
Revenue—were salaried employees paid above $5,000 per year and
nonunionized executive, administrative, and professional employees
paid not more than $5,000 per year.
(2) D ivided jurisdiction .—A divided or shared jurisdictional situ­
ation arose whenever the Board or the Price Administrator had reason
to believe that a wage increase would require a price-ceiling change.
In this circumstance simple Board approval was not enough. The
proposed increase could become effective only if also approved by the
Economic Stabilization Director.
Executive Order 9299 provided for another and different variety of
jurisdiction sharing. That order stipulated that the general orders
of the Board and regulations of the Commissioner of Internal Revenue
allowing changes in wage and salary rates without specific approval
should apply to all employees subject to the Railway Labor Act. Thus
changes within the general orders could be made for such employees
without approval. On the other hand, any proposed change for such
employees which, in the opinion of the chairman of the Railway
Labor Panel, did not conform to the standards of the stabilization
program was subject to special procedures outside those provided by
the Board.58
Most of the discussion in connection with disputes jurisdiction in
the war era is pertinent to wage stabilization jurisdiction during the
same period. Considerations that argue for integration of disputes
authority apply equally to wage and salary controls. For one thing,
wage and salary issues were a most prolific source of disputes. It
would have been incredibly bad policy to put jurisdiction of disputed
wage changes in one agency and agreed changes in another simply on
the ground that one adjustment was in controversy and the other not.
That would have created a major division of jurisdiction, and co­
ordination of wage and salary jurisdiction would have been even more
difficult than it was. Enough problems were created by multiple ex­
ceptions, exemptions, and minor divisions of jurisdictional authority.
Moreover, if the test is effectiveness, apparently the jurisdiction was
the appropriation for the fiscal year ending July 1, 1946, to be used in connection with
“ investigations, hearings, directives or orders concerning bargaining units composed
in whole or in part of agricultural laborers as that term is defined in the Social Security
Act.” The effect of this rider was to remove NWLB jurisdiction over adjustments for some
processors and packers not previously excluded. See The Termination Report, vol. I, p. 43.
m The Chairman of the Railway Labor Panel was empowered to appoint a three-man
emergency board (selected from the panel) to investigate the proposed change and report
to the President. Executive Order 9581 amended Executive Order 9299 to give the
Hawaii War Labor Board jurisdiction of voluntary wage and salary adjustments for
territorial workers subject to the Railway Labor Act.




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D IS P U TE . S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

at least adequate. Postwar experience makes this clear. Contrasts
between wartime stabilization and that following VJ-day speak elo­
quently for the merit of the wartime effort.
4. 'Wage-stabilization jurisdiction from Executive Order 9599 to
the succession of the N W SB . —At the end of hostilities Executive
Order 9599, followed by 9651, set the stage for loosened controls and
broadened policy where controls remained. The Government, in re­
sponse to widespread clamor, moved swiftly toward decontrol and
attempted to return to a peacetime basis almost in a single leap.
In this climate it is not surprising that the Board and its agencies
resembled a ship after orders to abandon. The crew worked hard
at pitching all movable cases over the side, and prepared to follow
them in haste.
The weakening of controls accompanying the wind-up of affairs
was largely reflected in contracted jurisdiction. Thus jurisdiction in
wage stabilization matters affecting increases turned on one primary
consideration after August 18, 1945. Executive Order 9599 author­
ized 59the Board (and such other agencies as the Director of Economic
Stabilization might designate, with the approval of the Director of
War Mobilization) to permit the instituting of wage or salary in­
creases without approval, provided such unapproved increases were
not to be used in whole or in part to justify increases in price ceilings
or to increase the cost of products or services furnished the United
States. The Board immediately implemented its new “authority” by
General Order 40, authorizing wage or salary increases without Board
approval, subject to the conditions imposed by the order. Within 2
days employers and employees in the building industry and subject to
the jurisdiction of the NWLB Wage Adjustment Board were excepted
from the General Order 40, thus continuing controls in the industry.60
The jurisdiction of the Steel Commission was also retained intact.61
Earlier general orders were modified or repealed to conform to new
requirements.
There was no change in jurisdiction over wage and salary de­
creases. In this era of surging wages and prices this was of minor
consequence.
Reconversion problems, especially lay-offs, reduction of take-home
pay and labor strife,62 evoked Executive Order 9651. In this order
jurisdictional modifications were secondary to policy changes. Never­
theless it had two significant jurisdictional effects. The new order
8 “ Authorized” in the context of the time was tantamount to “ directed.” See the Presi­
9
dent’s statement of August 16,1945, The NWSB Report, pp. 25-26.
6 Special circumstances, particularly short supply in housing, account for this.
0
0 General Order 42. The Steel Commission had been set up to administer changes in
1
wage rate inequities within the limits of a directive order of the Board.
8 See address broadcast by President Truman from the White House, October 30, 1945,
2
The NWSB Report, p. 335.




283

JU R IS D IC T IO N

reaffirmed the principle in Executive Order 9599 that the institution
of a wage or salary increase without prior Board approval was no bar
to an application for approval thereafter to be used in seeking price
relief, resisting reduction in ceilings or increasing cost to the United
States. Furthermore, the failure to secure approval would not bar
consideration of an unapproved wage or salary increase by the Price
Administrator in determining whether an upward adjustment of
price ceilings was required. The only limit was a provision requiring
that the unapproved increase be given a reasonable test period before
being taken into account in determining whether to increase price
ceilings.68 Thus the already relaxed approval “requirements” were
transformed. Jurisdiction in the NWLB became merely a conditional
“power to act” should the employer or the employer and the employee
representative will it, with no necessary consequences trailing a denial
of Board approval.
IV. T h e J u risdiction

of

the

NWSB

Transition from the NWLB to the NWSB was greatly facilitated
by the creation within the NWLB of an embryo stabilization board,
known as the Stabilization Division. This tripartite divison formed
the framework for the successor agency. One of the division’s most
important jobs was to assist in developing regulations which were to
govern the early operations of the new Board. The personnel of the
division became the members of the NWSB by Presidential appoint­
ment. When Executive Order 9672 replaced the NWLB with the
NWSB, the latter was immediately ready to operate.
Apart from a severely limited disputes jurisdiction,* the order con­
64
tinued in the Stabilization Board an authority equivalent to that of
its predecessor.65 A subsequent order, 9697, dated on Valentine’s Day,
1946, wiped out all stabilization effort for a whole period by approv­
ing, in effect, all increases66made between August 18,1945, and Febru­
ary 14, 1946.67 The Stabilization Administrator, with the issuance of
« The order specified that 6 months would be a “ reasonable period/* saving exceptional
cases.
6 This jurisdiction covered only minor mopping-up responsibilities— to continue the
4
Steel, Textile, and Meatpacking Commissions* operations under the old NWLB orders,
appoint arbitrators, set terms and conditions of employment in the rare instances required
by sec. 5 of the War Labor Disputes Act and accept strike notices.
6 The NWSB Report, p. 8, marks some possible areas of jurisdiction never entered by
5
the NWSB.
«« Excepting only increases in industries, such as the building and construction industry,
which remained under wartime restrictions.
67Executive Order 9697, sec. 3 (d). “ * * ♦ any wage or salary increase heretofore
lawfully made, or made in accordance with a governmental recommendation in a wage
controversy announced prior to the effective date of this order, shall be deemed to have
been approved within the meaning of this order. * * ***
921297— 50------ 19




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D IS P U TE . S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

General Order 1, added to the sweeping approvals contained in the
Executive order itself.
In direct approval matters, executive supervention raised serious
questions, some of them bearing on jurisdiction. In the AFL mari­
time cases, for example, the NWSB’s partial denial of the desired
wage increases evoked strike action. After reaffirmation of the orig­
inal decision on reconsideration by the Board, the Stabilization
Director intervened and, in effect, took away the Board’s jurisdiction
retroactively by amending the supplementary wage and salary regu­
lations to make Board approval unnecessary in certain circumstances
involving increased costs to the Government.68
The inadequacies of post VJ-day stabilization jurisdiction were ap­
parent. Actually there was insufficient authority to stabilize. Wage
and salary increases made without regard to price relief put pressure
upon price-needy employers to grant comparable increases. And
when it is considered that nothing would prevent future considera­
tion of such increases for prjce relief purposes, the pressure was
virtually irresistible. Moreover, the postwar era rapidly became a
period of booming markets and full employment. This condition
put still more pressure behind inflationary demand. The market
was lively and it was no time to argue. Workers on the other hand,
caught in the high price whirl, pressed for more to keep up, and
inflation became inevitable.
All this might have been avoided had wage policy been modified
somewhat and a jurisdictional authority equivalent to that prior to
VJ-day continued. With some wage margin to work on, a continu­
ation of NWLB processes might have bridged the crucial year or
two after VJ-day by the familiar process of case-by-case adjustment.
It is clear now, and was clear to some people even then, that the throw­
ing off of controls was an error. Beyond all this, such weakened
authority as remained assumed aspects of utter futility when on
Valentine’s Day, 1946, all postwar stabilization to that date was wiped
out by Executive order. In retrospect, the stabilization effort seems an
attempt to control without controls. What relaxed jurisdiction and
ill-conceived policy did not unstabilize, executive intervention did.
V.

P

rocedural

R

e q u ir e m e n t s for

J u r is d ic t io n

Procedural requisites during the prewar mediation period were
quite simple. Certification by the Secretary of Labor was the ex­
clusive method for getting a matter before the NDMB, and the fact
of certification was considered a conclusive jurisdictional determi­
6 The NWSB Report, p. 50.
8




JU R IS D IC T IO N

285

nation. The NDMB, unlike the NWLB, could not take a case on its
own motion. Instead it might refer an uncertified dispute to the
attention of the Department of Labor. Wage stabilization was not
yet in the picture and therefore presented no problem.
The NWLB could acquire disputes jurisdiction either by certifica­
tion or on its own motion, but might turn back cases acquired either
way if convinced that the parties had not exhausted the possibilities
of settlement without Board intervention or that, for some other
reason, the matter was not properly within its bailiwick.
The New Case Committee of the NWLB had an important func­
tion in this area. This tripartite committee operated as a clearing
house for new dispute cases, all of which were referred directly to
the National Board. Its prime operation was to sift certifications
and determine whether the cases were appropriate for the Board,
taking such investigational steps as might be necessary for each deter­
mination. Assuming the clear propriety of a certification, the com­
mittee was authorized to refer it to that agent of the Board which
in its judgment should process the case. Bejected cases were returned
to the Secretary of Labor. Precertification discussions between the
staff of the National Board and the Conciliation Service were used
to forestall receipt of doubtful cases.
Jurisdictional problems in voluntary wage increase cases during
the NWLB and the NWSB eras were substantially alike. Principally,
this involved inquiry at local offices of the Wage and Hour and Public
Contracts Division of the Department of Labor to determine whether
the proposed increase required approval. Affirmative conclusions
made necessary the completion of an application form signed by the
employer or the employer and the union, where the employees were
represented.69 The local Wage and Hour Office normally transmitted
the application to the NWLB or one of its agents according to
established rules determining the allocation of applications. In
the interest of protection of collective bargaining processes, col­
lective bargaining agents were given an opportunity to state objec­
tions to applications to which they were not parties. Objections
would convert the matter into a dispute case. Some adaptations of
this process were instituted by the NWSB. Perhaps the most sig­
nificant was a provision in October of 1946 to speed processing. Ap­
plications were processed immediately without notice to or signature
of the collective bargaining representative of the employees involved,
if based on a wage agreement and accompanied by a copy of the
agreement.
6 Private arbitration awards involving wage or salary increases were treated as applica­
9
tions for voluntary adjustments.




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DISPUTE SETTLEM ENT AND WAGE STABILIZATION

Both the NW LB and the NW SB had a special disputes responsibil­
ity under section 5 o f the W ar Labor Disputes A ct o f 1943. That
section was applicable only to facilities being operated by the Govern­
ment after seizure under section 9 o f the Selective Training and
Service A ct o f 1940. Jurisdiction attached whenever the operating
agency or a m ajority o f the employees in the seized facility or their
representatives applied fo r a change in “ wages or other terms or con­
ditions o f employment.” Thus the procedural necessities o f juris­
diction required only application by an appropriate party.

VI.

Ju r isd ic tio n

of

S t r ik e s

and

L o ck outs

The NDMB had an obvious interest in strikes and lockouts, but it
was logical that the NW LB should particularly concern itself with
these problems, since its procedures were the alternative to economic
action by the parties to the industrial relationship. O rdinarily the
Board did not take action in strikes until the Conciliation Service had
exhausted its resources. However, thq strike section in the disputes
division o f the N W LB often acted in advance o f form al certification
in strike situations. In urgent instances the certification was “ tele­
phonic,” to be follow ed by form al papers.
In some instances strike settlements would be follow ed by a resolu­
tion o f differences through the parties’ agreement or through Board
processes. In others the issues m ight be outside the Board’s juris­
diction,1 and therefore no further action would be taken.7 Progress
0
0
7
1
on the merits o f a certified matter was supposed to stop when strike
action began, but procedural matters were handled including pro­
cedural prerequisites to Board jurisdiction and, it must be conceded,
handled faster at times as a consequence o f a strike.

VII.

C o m p l ia n c e Ju r isd ic tio n

The NDMB affected settlements o f disputes through mediation and,
i f necessary, through the publicity given to recommendations. A u­
thority fo r the procedure rested on the clear mandate o f Executive
Order 8716. As indicated in chapter 1, ultimate failure to secure
compliance might result in seizure.
Compliance matters raised a good many problems fo r the N W LB.
They were generally worked out, a few exceptions apart, by varied
7 For example, a representation issue.
0
7 See sec. I ll above.
1




JURISDICTION

287

techniques o f persuasion. This was in fact the only weapon the Board
itself had.7 Sufficient basis fo r the exercise o f compliance jurisdic­
2
tion could be argued from the theory o f inherent power o f a judicial
or quasijudicial tribunal to “ enforce” its orders. Compliance is a
weaker concept than enforcement and it was appropriate that “orders,”
which were in legal contemplation only suggestions, should be accom­
panied by methods o f securing observance which were short o f com­
pulsion. Restating the jurisdictional theory in compliance matters
to fit the status o f the Board’s powers, one might say that a quasi­
judicial tribunal with power to suggest, coupled with the authority to
“ finally determine the dispute,” has the inherent power to attempt to
secure acceptance o f its suggestions. From this viewpoint the com­
pliance jurisdiction had a breadth equivalent to that o f the general
disputes jurisdiction.7
3
SUMMAKT AND CONCLUSION

The jurisdiction o f the wartime labor agencies was conditioned by
political necessities and administrative practicality as well as the pro­
gram objectives. Except fo r the post V J-day period the reconciliation
o f these varied considerations was sufficient to win the necessary sup­
port fo r the program. Such occasional issues as were raised over the
constitutional authority o f the agencies were met by reference to the
war powers.
During the defense period, efforts at industrial peace met with rela­
tively little jurisdictional complication even though, or perhaps be­
cause, the NDMB had broad authority to attempt mediation and
persuasion. However, some attention was paid to political and ad­
ministrative factors affecting jurisdiction, as evidenced by the exclu­
sions and exceptions in the Executive order establishing the Board
and by some o f its jurisdictional decisions.
When the demands o f the active war period caused the creation o f
the NW LB, the jurisdiction remained broad. However, the no-strike
objectives o f the Government were more critical and labor’s pledge
against stoppages during the crisis called for more positive techniques
than mere persuasion in handling disputes. The Board as established
was a decision-making tribunal which issued “ orders” and assumed
7 Executive Order 9370, August 16, 1943, put drastic powers for the effecting of com­
2
pliance with Board orders in the hands of the Director of Economic Stabilization. The
possibility of seizure was always in the background also. However, the latter was a tech­
nique that depended more on psychological effect than is generally comprehended. A
broad use of it would have drastically limited its usefulness. The doctrine of responsibility
as a prerequisite to Board-ordered union security was used as a strike deterrent. But,
regardless of the Board’s use of the verbiage of force, its main strength was effective
persuasion. “ Orders” were, in legal contemplation, only suggestions or recommenda­
tions, and “ show cause” hearings after orders only a variation of the process of
persuasion.
7 Jurisdiction over enforcement of wage-stabilization regulations is discussed in ch. 10.
3




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DISPUTE. SETTLEM ENT AND WAGE STABILIZATION

inherent jurisdiction to secure compliance with them. Jurisdiction
was extended further after the wage freeze and the vesting in the
Board o f wage-stabilization functions. The passage o f the W ar Labor
Disputes A ct o f 1943 added more authority, putting in the Board the
power to determine disputes in seized plants and facilities. T he Board
tended toward a liberal interpretation o f its jurisdiction, a policy
justified by the importance o f Board functions to the war effort. Nev­
ertheless, considerations o f expediency such as case load and relation­
ships with other agencies o f Government played some role in temper­
ing the Board’s decisions regarding the extent o f its jurisdiction. In
other instances statutory exceptions confined the authority o f the
NW LB. On the whole, however, its jurisdictional authority ade­
quately combined duties that needed to be centralized either because
o f their subject matter or because o f the practical necessity for
coordinated handling. One undesirable effect o f jurisdictional divi­
sion was a difference in handling some issues such as wage and salary
adjustments.
A fter the Japanese surrender, a loosening o f procedures and con­
trols contributed materially to the encouragement o f agreed settle­
ments o f many disputes. On the other hand, the elimination o f the
NW LB procedures disposed o f the one alternative to strike action
during the postwar period, with serious consequences for industrial
peace.
The NWSB was concerned principally with that part o f the post­
war anti-inflation campaign related to wages. Dispute functions
were reduced to the handling o f controversies arising in seized fa cili­
ties under section 5 o f the W ar Labor Disputes Act.
A ll stabilization jurisdiction in the NW SB, a few exceptions apart,
was related to price relief. And even where wage increases were in­
stituted without approval on the theory that prices would need no
adjustments, they could be used nevertheless to justify price relief
under certain easily attained conditions. Also, executive intervention
wiped out the stabilization efforts in at least one instance for a period
o f several months before and after the NW SB began functioning.
Under these conditions, stabilization jurisdiction after YJ-day was
grossly insufficient for the program objectives.
Procedural requisites to jurisdiction were mainly significant in the
defense and war periods and in connection with disputes problems.
The Secretary o f Labor had the power to certify disputes to both
the NDMB and the NW LB. The latter could also take jurisdiction
on its own motion.
Strikes and lockouts were the m ajor concern o f the defense period.
Obviously their importance was accentuated by war. Initial juris­
diction o f such matters by the NW LB was taken fo r the lim ited pur­
pose o f securing fu ll production. Even though the Board had




JURISDICTION

289

jurisdiction o f the merits o f the dispute, hearing and decision on the
merits would be withheld until full production was restored. How­
ever, the NW LB also acted in strikes or lockouts when the basic dis­
pute was not within its jurisdiction. This sometimes complicated
sw ift handling on the merits after the stoppages ended.
Compliance jurisdiction for the National Defense Mediation Board
was simply a matter of using persuasion and publicity to secure ac­
ceptance o f proposed settlements. W ith the advent o f the NW LB,
compliance became a matter o f greater concern. Parties which volun­
tarily surrendered rights to use economic pressure in exchange for
NW LB handling came to expect acceptance o f its decision. How­
ever, in the total o f decisions only a very few were met with adamant
refusal to comply after compliance processing. Compliance juris­
diction in the NW SB was a relatively insignificant matter. However,
in one important instance, a strike aimed at a decision o f the Board
under section 5 o f the W ar Labor Disputes Act evoked executive
intervention to m odify the decision—a process not calculated to
enhance the effectiveness o f the Board.
The problems inherent in devising and administering a jurisdiction
sufficient to the requirements o f the war period, as contrasted with
the defense era before Pearl Harbor when jurisdictional problems
were negligible, were met by integrating extensive powers in the
NW LB in a series o f broad jurisdictional sweeps and adding some
minor powers from time to time. Tailored exclusions and exceptions
met practical or political considerations and in turn raised new
problems. In general, the NW LB functioned in a fashion adequate
for its responsibilities up to and including YJ-day.
A fter Y J-day, wage and salary controls were relaxed and disputes
functions virtually abolished in spite o f the Government’s anti­
inflation program, which included fu ll production, and its preoccupa­
tion with a peaceful transition to peacetime production.
In the final analysis, the adequacy o f jurisdiction in the respective
periods is to be judged by whether the jurisdiction provided was
sufficient for the objectives o f the program. On this basis the follow ­
ing conclusions are draw n:
1. Political and administrative considerations were reconciled with
program objectives during the defense and war periods without impos­
ing serious limitations on the effectiveness o f the program.
2. The defense period raised no critical jurisdictional problems.
3. During the war period the broad jurisdiction o f the NW LB,
coupled with its efforts to secure compliance with directives and to
enforce wage stabilization, probably intensified efforts to secure excep­
tions or exemptions to jurisdiction. Furthermore, the catholicity o f
controls affecting labor and the variety o f agencies sharing some




290

DISPUTE: SETTLEM ENT ANID W AGE STABILIZATION

responsibility fo r them created a necessity for conform ing clauses and
exceptions. The principal effect o f the resultant jurisdictional divi­
sion was some lack o f uniform ity in handling comparable issues.
4. The degree to which integration o f jurisdiction o f wage issues,
nonwagQ issues, strikes, and compliance took place in one agency, the
N W LB, provided the instrument for the coordination essential tc
speedy and effective handling o f disputes during the war period.
5. Jurisdiction in dispute cases was relaxed too fast and too much
after VJ-day. The elimination o f alternatives to economic force vir­
tually insured work stoppages in the postwar period.
6. A fter the elimination o f alternatives to strike action, the m ajoi
jurisdictional mistake o f the postwar period was the tying o f juris­
diction o f wage changes to the effect o f such changes on the necessitj
fo r price relief.
7. Executive intervention in stabilization affairs to affect decisions
already made by the NW SB impaired the usefulness o f the whole sta­
bilization process during the postwar era.
8. Procedural jurisdictional problems were adequately met through­
out the defense, war, and postwar periods.
9. The screening o f cases at a staff level on a jurisdictional basis was
a useful device helping in expediting cases and eliminating unneces­
sary work.
10. Taking jurisdiction o f strikes for the limited purpose o f restor­
ing production and conditioning consideration o f the issues upon such
restoration was a useful technique in shortening the period o f stoppage
However, the technique could have been more useful had the breadth oi
jurisdiction o f issues been as broad as the strike jurisdiction.
11. Compliance jurisdiction was an essential part o f jurisdiction tc
settle disputes. A n alternative to the use o f economic force presup­
posed that that alternative could be made effective.*
12. During the defense and war periods, the jurisdiction o f the war­
time labor agencies was generally sufficient to meet the problems oi
those periods. Neither dispute nor stabilization authority was suffi­
cient in the postwar period.




C H A P TE R

8

The Distribution o f Authority and Its
Relation to Policy
By Clark Kerr

A n y national policy-making and administrative agency o f size and
importance must diffuse some o f the responsibility granted it. The
NW LB, as one o f the basic emergency arms o f the Government, had an
immensely delicate, complex, and detailed task to perform . It was
confronted with the necessity o f decentralizing its operations, and the
organizational forms it chose to develop were closely intertwined with
its policy-m aking and administering functions. P olicy making and
policy enforcing are interrelated, and both are affected by and in turn
affect organizational structure and operations.
The Board dealt with powerful external pressure groups operating
in a highly controversial field, and was itself tripartite in composition.
A t the same time, it was imperative that the Board serve public
rather than partisan interests. The central theme o f this chapter is
that a chief aim o f strategy had to be the neutralization, equalization,
containment, and channeling o f pressures, and that administrative
organization was an important tactical weapon for these purposes.

I. T h e L ocation of A uthority
A . T h e E s s e n t ia l C h oices

The NW LB was faced with three primary problems in managing
the authority granted it in Executive Orders 9017 and 9250:
(a) Should all authority be retained in the hands o f the National
Board itself, viewed as an operating entity o f twelve men and their
alternates; or should some o f this authority be parcelled out to sub­
sidiary groups with a degree o f independence ?




291

292

DISPUTE SETTLEM ENT AND W AGE STABILIZATION

(6 ) I f the authority was to be dispersed, should it be delegated to
the staff, to local panels, to regional boards, or to industry agencies?
(c)
I f authority was to be granted to others, should it be power
to make policy or to administer policy?
The National Board arrived at decisions on all o f these questions,
although more as. a result o f operating pressures than deliberate and
planned choice. These decisions had important effects on the opera­
tion o f the Board. It should be understood, however, that the Board
was not prim arily an administrative agency. Its administrative as­
pects were far outweighed by the importance o f its policy-m aking
functions.
B.

T h e B a s ic T ests

The effectiveness o f an administrative agency can be tested in a
number o f ways. Two important tests are smoothness o f functioning
and quality o f results.
Smoothness o f functioning in the case o f the NW LB meant primar­
ily the rapidity with which cases were processed and the minimization
o f friction between different levels o f the organization and between
groups at the same level. The first o f these considerations did not
mean, ideally, instantaneous disposal o f either wage stabilization or
dispute cases. As indicated in chapter 9, some delay, on occasion, was
desirable, as well as inevitable. Delay, however, could give rise to
irritation and aggravate the natural resistance to a regime o f controls.
It was important, therefore, that delay stop short o f that degree which
would produce exasperation in industry and labor.
The second consideration—minimization o f friction—had several
aspects. Standards governing the allocation o f cases among the sub­
sidiary agencies needed to be clear so that cases would not be shunted
around unnecessarily and tempers not be frayed by internal jurisdic­
tional disputes. The channels o f communication needed to be suffi­
ciently clear-cut so that the subsidiary agencies could perceive the
directions they were to pursue. Status needed to be conferred com­
mensurate with the assigned responsibilities and the reasonable
expectations o f the personnel.
The desired quality o f results is not easily discerned nor completely
noncontroversial. Three somewhat inconsistent results, at least, were
desirable.

First, it was necessary to achieve a satisfactory degree of wage
stabilization. This did not mean freezing wages. Nor did it mean
doing in a cumbersome way what would have happened anyway. It
meant slowing the advance of wage rates and holding down the ulti­
mate levels. Administrative arrangements, as will be noted below,
affected considerably the degree of stabilization.




DISTRIBUTION OF AUTHORITY AND ITS RELATION TO POLICY

293

Second, a sense o f equality o f treatment was needed, in lieu o f com­
plete equality itself. In many cases complete equality o f handling
was unwise, difficult, or impossible, however ethically desirable such
uniform ity would have been. Nevertheless, the concept o f “ equal
treatment under the law” was sufficiently ingrained so that decisions,
as far as possible, needed to appear substantially uniform. The vari­
ation in basic circumstances and the im perfect transmission o f knowl­
edge made it possible to establish some distinctions which did not
actually distinguish and to rely on varying degrees o f ignorance about
what was being done in other regions or industries. An approxima­
tion to fairness o f treatment had to be preserved.
Third, the decisions, fo r the most part, had to be voluntarily ac­
cepted. This requirement overshadowed all the others. W ithout a
large measure o f voluntary acceptance the Board could not have op­
erated at all. W hile the other results o f Board operations were de­
sirable, this one was imperative. The willingness or ability to accept
wage stabilization, fo r example, was not spread uniform ly throughout
American industrial society; nor was the capacity o f the Board to
secure acceptance equally distributed. Economic and political power
varied greatly from industry to industry and union to union. Some
recognition, on occasion, had to be given to this unequal distribution
o f power—whether m orally justified or not—when the groups with
power were unwilling to have this power go unrecognized and un­
rewarded even in a period o f national emergency. Some lions de­
manded a lion’s share.
A n inherent conflict existed between the requirements o f wage
stabilization and uniform ity o f treatment, on the one hand, and o f
uncoerced acceptance on the other.
The decisions o f the Board on the location o f authority w ill be
tested, prim arily, by reference to the five criteria discussed above—
the extent to which the decentralization program o f the Board achieved
smoothness o f functioning, as shown by (a) a reasonably rapid process­
ing o f cases and (&) a minimization o f internal friction ; and the
quality o f results, as indicated by (a) the achievement o f a satisfactory
degree o f wage stabilization, (&) the impression o f nondiscriminatory
determination and application o f policy, and ( c ) the attainment o f
voluntary acceptance under conditions where merit and power did
not always parallel each other.
The Board fashioned administrative arrangements which met each
o f these criteria to an adequate degree; but the definition o f “ ade­
quacy” fo r a period o f great change and immense confusion must o f
necessity be minimal. The task o f the Board would have been
simpler, were the tests more consistent internally. Despite the diffi­
culties, in retrospect—which is certainly the easiest if not the only




294

DISPUTE SETTLEM ENT AN® W AGE STABILIZATION

process by which corrective measures can be fearlessly prescribed—
certain improved arrangements appear to have been possible.
C.

T h e N eed to D ecentralize

The only function o f the NW LB from January to October 1942,
was to decide dispute cases. A sufficiently small number o f these
came along, so that the Board, with the aid o f a small staff and a
limited number o f ad hoc panels, could decide all cases itself and keep
reasonably current. Even then it fell progressively, but not dis­
astrously, behind its agenda.
Executive Order 9250 changed this by giving the Board extensive
wage stabilization responsibilities. An immense number o f voluntary
cases poured in. Nor was the effect only this direct one. Dispute
cases were affected too. Their number increased appreciably be­
cause free collective bargaining and wage stabilization were not
entirely compatible. A labor member o f the National Board stated
the im plication o f Executive Order 9250 was that there would be
“ little or no old-tim e collective bargaining” 1 and there was no point
talking about resurrecting it. “ Take wages out o f collective bar­
gaining and what the hell do you have left? * * * The best we
can do is retain a tripartite system.” * A public member observed that
mediation was made more difficult, since the parties had to secure
“ authoritative approval” o f wage increases, “ so the whole collective
bargaining business bogs down.” *
Several substantial reasons caused this check upon collective bar­
gaining and the consequent upsurge o f dispute cases. In the first
place, the parties had less latitude fo r bargaining. W ages are nor­
m ally the most important issue in disputes. The unions could not
accept less than Board policy allowed, or they would be subject to
criticism ; nor could they get more. Beyond that, fringe issues were
controlled also. The ability o f the parties to accommodate to each
other’s requirements was greatly lessened by the control o f all those
contractual provisions which had a monetary dimension.
Secondly, when the parties tried to bargain freely, their decisions
were subject to reversal. A union might, for example, trade some non­
wage provision for a higher wage increase, and upon disapproval of
the increase by the Board have neither the provision nor the wage.
In a dispute case, on the other hand>, the Government might yield more
than the employer. In any event, the maximum obtainable was-what
the Government would allow, so why take a chance on settling for
less? - - - '
0
1 National War Labor Board, Transcript, Executive Meeting, January 5, 1943, p. 27.
* Ibid., p. 28.
* Ibid., p. 19.




D IS T R IB U T IO N O F A U T H O R IT Y A N D IT S R E L A T IO N T O P O L IC Y

295

Moreover, responsibility could be shifted to the Government. Rep­
resentatives o f both sides could avoid, and on some occasions wished
to avoid, taking responsibility for decisions by referring cases to the
Government. Any criticism was then directed at the governmental
agency rather than the representatives o f the parties. In a period
o f considerable stress, this had great advantage to some individuals.
The sense o f responsibility was weakened further by the knowledge
that if the parties decided a wage or fringe issue once, the Govern­
ment would have to decide it again fo r them anyway.4
On January 5,1943, when the Board gave its most extended consider­
ation to decentralization, the impossibility o f continued centralization
o f function was clearly apparent. During all o f 1942, the Board had
closed 429 dispute cases. Over 350 new disputes had been received in
the previous month. In the previous week the Board had disposed o f
59 cases o f all types. During that same week, 550 new voluntary
cases had been received, and the backlog was 3,500.5
The National Board was literally engulfed by work. Decentraliza­
tion grew out o f this realization, rather than emerging from desire.
Case-load statistics were not the only evidence o f this engulfment.
Board members reported on the rising irritations with delays. A n
industry member said: “ The criticism against the Board, I think, is
largely centered on the fact that they can’t get quick decisions.” 6 A
labor member reported: “ The union tells me, ‘Give us a decision; just
give us a decision.’ ” 7 A public member stated: “ I am o f the opinion
that this Board cannot last beyond another 30 days and should not
last beyond another 30 days if it does not meet this problem o f disposing o f problems out in the field in a much more efficient and expeditious
manner than we have.” 8 Decentralization o f some sort had become
imperative.
D.

R

e l u c t a n c e to

D

e c e n t r a l iz e

The National Board did not decentralize its activities readily. A d­
ministrative inertia in part explains this. The Board had been going
along in a moderately satisfactory fashion, without substantial decen­
tralization, until Executive Order 9250 was issued. It had no in­
clination to change its method o f operation unless compelled to do so.
Administrative inertia was especially great because o f the nature of
4A further but minor factor, as the war continued, was the fact that both parties felt
they could get higher wage increases by having a dispute over them to be settled by the
Board, than by submitting a voluntary case to be passed upon by a staff member. These
collusive disputes were not a basic cause of the increase in dispute cases, but they had
a cumulative effect.
5 Transcript, Executive Meeting, January 5, 1943, pp. 38-48.
e Ibid., p. 30.
7 Ibid., p. 43.
8 Ibid., p. 46.




296

D IS P U TE S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

the organization. Twelve men, drawn from industry, labor, and the
public, made policy. On organizational matters a high degree o f
unanimity was desirable. It took longer to arouse this Board to the
necessity o f making a decision than would have been the case with an
organization having a single person at the head; and the process o f
establishing policy was more complex and time-consuming. Further,
there may have been some natural resistance to the release o f power,
although this does not appear to have been an important factor.
Seven explicit arguments against decentralization—particularly
the setting up o f regional boards—were set forth in the discussions
o f the Board.
{a) It was feared that conflicts over policy would arise among the
subsidiary agencies, and between these agencies and the Board. This
would reduce the effectiveness o f the Board and lower its prestige.
(6 ) It was anticipated that great confusion might result. F or
example, it would be difficult for the public to distinguish among the
several subsidiary agencies. The Board might dissolve in “ froth.”
(c) The danger was foreseen o f building up a vast bureaucracy.
This bureaucracy would develop a vested interest in controlling in­
dustrial relations and strangle free collective bargaining.
(d) The establishment o f too many administrative levels would
cause great delay. Anyone who was turned down on a case would
keep appealing it to higher and higher levels hoping to gain a favor­
able decision. There would be nothing to lose by appealing, and
something might be gained. This would unnecessarily prolong the
settlement o f cases. It would be better to start at the top. The
cases would reach the top anyway; and they might better get there
sooner than later.
(e) The selection and training o f competent personnel—particu­
larly the public members—in the subsidiary agencies would be very
difficult. It was better to rely on an already seasoned National Board
than to undergo the costs and risks involved in setting up a number
o f “ little war labor boards.”
( / ) It would be difficult, if hot impossible, to control the operations
o f subsidiary agencies. Lack o f uniform ity o f decisions could place
the entire process in disrepute. The only way to secure uniform ity
o f action was by having action taken by a single board in Washington,
D. C. Blunders once made by a subsidiary agency would be hard to
correct.
(g) Subsidiary agencies, being closer to the parties, would be sub­
ject to more pressures, and the actions o f these agencies would reflect
these pressures. The National Board had the stature and the insula­
tion—by its geographical location—to avoid succumbing to these pres­
sures. Decentralization would invite pressure tactics.




D IS T R IB U T IO N O F A U T H O R IT Y A N D IT S R E L A T IO N T O P O L IC Y

297

Despite hesitations, the Board did decide to decentralize. The most
important decisions were made in December 1942 and January 1943.9
The most compelling reasons fo r these decisions were expressed as
follow s by one o f the public members:
We had two main objectives for decentralizing. One was to set up machinery
that would give the people out in the field a method whereby they could get quick
disposition of their disputes, where we could get rid of the criticism that the
Board is bogging down because of delay, give them machinery where, instead of
waiting 2 months for a decision, they’d get it in 2 weeks; and, second, we were
trying to bring the local communities into play, make them a part o f the War
Labor Board program.1
0

E. T h e M a j o r A lt e r n a t iv e s
Three major alternative proposals were considered by the Board:
{a) Greater delegation o f function to staff personnel, (&) increased
use o f ad hoc or permanent advisory panels, and (c) the creation of
regional boards and industry agencies, which could make decisions
subject to appeal.
1. Staff 'personnel.—Immediately after the issuance o f Executive
Order 9250, the Board relied prim arily on the greater use o f staff
members to assist in handling cases.1 * A t the national level, staff
1
1
3
employees were used to a much greater extent for analyzing and
screening cases on behalf o f the Board. A t the regional level, regional
directors were appointed to process voluntary cases. These regional
directors were permitted to make decisions on cases o f minor im por­
tance, but even then the decisions were not final. Advisory com­
mittees, consisting o f labor and management representatives, were
appointed, with whom the regional directors could consult. Sub­
sequently these committees, which were the forerunners o f the regional
boards, were permitted to hear appeals. This temporary solution
kept centralized control in the hands o f the National Board.
2. Panels} 2
—The National Board made extensive use o f ad hoc
panels in handling dispute cases prior to Executive Order 9250. It
was suggested that more o f these panels be established. As an alter­
9 The National Board did not, however, decentralize suddenly. Four commissions, pri*
marily to handle dispute cases, were set up prior to Executive Order 9250; and three
more shortly after the issuance of this order. The advent of the wage-stabilization pro­
gram led to the establishment of the regional boards. Discussions of regionalization began
in October 1942, subsequent to the announcement of Executive Order 9250.
1 Transcript, Executive Meeting, January 5,1943, p. 16.
0
1 The rising level of dispute cases, prior to Executive Order 9250, had already led
1
to an augmentation of staff personnel.
1 The term “ panel” was used in three different senses, ( a ) There were ad hoc panels,
3
appointed initially by the National Board and later by the regional boards, to hear indi­
vidual dispute cases and make recommendations for settlement. (&) A proposal was
made for the creation of standing panels located in major metropolitan centers, (c) Sub­
sequently industry panels were authorized to hear cases arising from one industry or a
segment of an industry, and to make recommendations to the National Board. These
Industry panels had relatively permanent status.




298

D IS P U TE ; S E TTLO E M E N T ANID W A G E S TA B IL IZ A TIO N '

native, the creation o f 30 to 100 standing panels was proposed. These
panels would be more experienced than the ad hoc panels, and thus
better able to base their recommendations on the policies o f the
National Board. The original proposal fo r widespread decentraliza­
tion, made by one o f the public members on December 18,1942, called
fo r setting up 30 such panels. It was suggested that each panel would
handle cases arising in its area, regardless o f industry.
The utilization o f panels, again, would result in basic decisions being
made .by the National Board on the basis o f the recommendations
received.
3.
Regional boards and industry agencies.— The third m ajor pro­
posal was for the creation o f regional boards and the greater use o f
industry agencies. These agencies would have the power to make
decisions rather than recommendations only. This would greatly
relieve the overburdened National Board. Other arguments were also
advanced. It would be easier to train 10 boards than 100 panels;
and, if uniform ity was not achieved, it was better to have “ 10 national
policies than 100.”
The boards would have a continuing existence, as against the ad hoc
panels, and thus would be able to make better decisions. The tri­
partite arrangements at the national level could be imitated at the
local level. This was more in keeping with the spirit o f the Board
than reliance on administrators. Collective bargaining could better
be preserved at the local level under tripartite auspices.
Finally, regional boards could work closely with the local repre­
sentatives o f the Conciliation Service. The Board, prior to Executive
Order 9250, had relied heavily upon mediation. It was hoped that
mediation could be continued. Begional boards could advise con­
ciliators on the lim its within which cases could be settled. This would
aid voluntary settlement and reduce the case load fo r the Board.
Further, the conciliators could pass on inform ation to the regional
boards, which would reduce the necessity fo r separate hearings and
speed up the decision-making process.
F. T h e D ec isio n
The key decision was to create regional boards out o f the advisory
committees, with power to make decisions. This does not mean that
the regional boards and industry agencies were relied upon exclusively.
The ultimate administrative arrangements drew heavily on all three o f
the alternatives. The National Board came to rely more heavily on
its staff in Washington, and the regional directors became chairmen
o f the regional boards with a greater degree o f independence. Panels
continued to be used by the National Board and were widely employed
by the regional boards. Most o f these panels were established on an
ad hoc basis, although some were permanent.




D IS T R IB U T IO N O F A U T H O R IT Y A N D IT S R E L A T IO N T O P O L IC Y

299

• The grant o f authority to the regional boards was essentially (a)
to decide dispute cases confined to the individual regions based upon
the policy o f the National Board and subject to appeal to the National
Board and (5 ) to pass upon voluntary cases arising within each region
based upon the wage-stabilization policy o f the National Board and
subject to review by the National Board.
The Board’s Executive D irector set forth the functions o f the
National Board as follow s: 1
8
(a) To exercise ultimate reviewing authority, and a general super­
intendence over the regional machinery;
(5 ) T o hear appeals from regional board orders in cases where
petitions fo r review were granted by the National B oard;
(c) T o issue general policy directives;
(d) T o take jurisdiction o f cases o f national importance whenever
it seemed in the public interest to do so ; and
(e) T o support the regional boards in maintaining the national no­
strike, no-lockout agreement and in obtaining compliance with their
directive orders.
The basic factor in maintaining “ a general superintendence over the
regional machinery” was the selection and supervision o f the chair­
men o f the regional boards, and to a much lesser extent o f the wagestabilization directors. The chairmen were selected as much because
o f the confidence the members o f the National Board had in them as
because o f their fam iliarity with their regions. The chairmen were
called into Washington on a number o f occasions to confer with the
National Board and were held responsible to that Board.
The National Board continued to be prim arily a disputes board.
It spent most o f its time deciding dispute cases on the basis o f the
recommendations o f its panels and handling appeals from the decisions
o f its agencies. Much o f its wage-stabilization policy was made in
dispute cases.*4 The regional boards were at least as much, if not
1
prim arily, wage-stabilization boards. They were much more con­
cerned with passing on voluntary cases or reviewing staff decisions in
voluntary cases than was the National Board.1 1
5
6
The National Board always kept jurisdiction over dispute cases.
A ll disputes were sent by the Conciliation Service first to the National
Board. The latter then sent them out to its agencies, except when it
1 Transcript, Executive Meeting, January 5,1943, pp. 59-60.
8
1 The National Board handled 16 percent of the dispute cases and disposed of appeals
4
on about another 33 percent, but took action in any form on only 1 percent of the
voluntary cases. (U. S. Department of Labor, The Termination Report of the National
War Labor Board (1948), vol. I, pp. 480 and 508—hereinafter referred to as The
Termination Report.)
1 Regional boards and commissions and their staffs handled about 15,000 dispute cases
6
as against 400,000 voluntary cases (ibid., pp. 480 and 503).
921297— 50------ 20




300

D IS P U TE . S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

wished to handle the case itself. This “ putting-out” system contrasted
completely with the handling o f voluntary cases. Voluntary cases
were sent by the original receivers—the local offices o f the W age and
Hour Division—directly to the Board agencies, which processed and
decided them. A very few went to the National Board on appeal,
although others were sent to the staff o f the National Board fo r de­
layed and rather perfunctory and ineffective review.
This solution was aimed at three results: (a) T o make decisions
more quickly, (&) to give local people an opportunity to participate
in handling local problems, and (c) to develop a coordinated program
through the power retained by the National Board to determine policy,
review decisions, and control key personnel.
In making this decision, the National Board transferred basic re­
liance for assistance from its ad hoc panels to the regional boards,
which in turn used panels o f their own to hold hearings and make rec­
ommendations on dispute cases. The regional boards seldom at­
tempted mediation, but left that function to their panels.1 Nor did
6
the conciliators work closely with the regional boards as some had
suggested they might. Really close relations nowhere developed,
The boards devoted themselves to deciding dispute cases with the aid
o f their own ad hoc panels, and to ruling on the legitimacy o f volun­
tary applications.
G.

T h e V alu e s of D e c e n t r a l iz a t io n

The basic merit o f decentralization was that the Board could not
have survived without it. Seven general advantages flowed from the
delegation o f authority to the regional boards and industry agencies.
1. Volume and speed.—The National Board ruled on about 3,00C
dispute cases and reviewed about 5,000 appeals from decisions b j
regional boards or industry agencies. This totaled a little less thar
half o f all dispute cases. It received petitions to review rulings o f its
agencies in about 2,500 voluntary cases out o f over 400,000 requests
fo r rulings submitted to those agencies. It could not possibly have
decided all these cases itself.
2. Acceptance of the program by labor and industry.—The Board
both by choice and necessity, relied prim arily upon the consent oi
industry and labor to secure compliance. Consent was easier to obtair
if local boards or specialized commissions were employed. Decentral­
ization appealed to the “ grass roots” psychology o f the Am erica!
public. It permitted action by local people on a face-to-face basil
as against decisions by “ bureaucrats” in the national capital. As on<
labor member expressed it, it took the Board out into the “ highway!
MThe advent of wage stabilization bad, however, considerably reduced the possibility
for mediation,




D IS T R IB U TIO N O F A U T H O R IT Y A N D IT S R E L A T IO N T O P O L IC Y

301

and byways o f the country.” 1 Decentralization also permitted issu­
7
ance o f “ trial balloons.” Awards by regional boards or industry
agencies tested the range o f decisions acceptable to the parties. De­
cisions which fell outside the limits o f the range could be handled
differently by the National Board on appeal. It was often more
difficult, however, to get the final decision back within these limits
than it would have been for the National Board to discover the limits
itself, by other means, and make the original decision.
3. Appeal procedure.—When original decisions were made by the
regional boards or industry agencies, an appeal procedure was pos­
sible. This helped to create a sense o f “ due process o f law.” The
original decision, if upheld, helped to prepare the losing party psy­
chologically fo r the ultimate result. The final decision, if it fo l­
lowed the original decision, buttressed the seeming justice o f both
awards. A greater “ chance to be heard” was also created.
4. Proximity.—The boards and commissions were closer to the
parties. This made it easier to obtain the essential facts about the
cases. It also facilitated an understanding o f the feelings o f the
parties about the cases. Dissemination o f information about Board
policies was greatly aided.
5. Diffusion of responsibility.—Decentralization spreads the fact­
gathering and decision-making tasks over several organizational levels
and over a substantial number o f individuals. This reduced the
pressures on any single governmental representative, and aided action
in the public interest. Regional boards could share criticism with
the National Board for policy making; the National Board could
divide blame with the regional boards for their improper handling
o f cases or fact finding.
6. Safety-valve.— The large number o f regional boards and indus­
try agencies, with power to make decisions, provided more oppor­
tunities for oral hearings before one’s “ peers.” This served as an
exhaust valve, and aided compliance.
7. Differentiation in treatment.—The National Board, on occasion,
felt it necessary to accord separate treatment to certain regions or
to certain groups. It would have been difficult for the same men to
act in such a diverse manner. The demand for “justice” would have
been too compelling. By creating separate agencies, within each of
which relative uniform ity was achieved, it became possible to isolate
somewhat the parties in one jurisdiction from those in another. They
could then be treated variously with fewer protests. The jurisdic­
tional lines between and among regions and commissions served as a
partial insulation.
1 Transcript, Executive Meeting, January 5,1943, p. 160.
7




302

D IS P U TE! S E T IT ^ JM E N T A N D W A G E S T A B IL IZ A T IO N

As a longer-run byproduct, decentralization, by leading to partici­
pation by many industry, labor, and public representatives throughout
the Nation, had important educational advantages.
Advantageous though the decentralization program was in its total
results, it created definite problems. In retrospect, it appears that
some o f these difficulties could have been avoided or minimized without
sacrificing the benefits.
II. G

eographic

V

ersus

In d u s t r i a l O

rganization

The Board never resolved a basic conflict in its administrative struc­
ture. It rejected basic policy-m aking by staff personnel on the ground
that it was too authoritarian. It rejected prim ary reliance on panels
because they were too ephemeral and hard to control. It accepted
regional boards and industry agencies because they were permanent
and tripartite, and were thus considered best able—next to the Na­
tional Board—to arrive at proper decisions. But as between regional
boards and industry agencies, the National Board never made a
final decision. It used both, but was not fu lly satisfied with the
arrangement.
A . T h e K e g i o n a l B oa r d s
Originally 10 regional boards were set up and subsequently 3 more
were added to make 13. They were located as follow s: Boston, New
York, Philadelphia, Atlanta, Cleveland, Detroit, Chicago, Kansas
City, Dallas, Denver, San Francisco, Seattle, and Honolulu.
The determination o f the number and the definition o f regions was,
apparently, basically the work o f the Budget Bureau.1 The original
8
10 boards were located in cities where the Office for Emergency Man­
agement had established headquarters. This facilitated the handling
o f payrolls and other administrative aspects o f the program. The
National Board had originally contemplated a somewhat larger num­
ber o f such boards—15 or 16.1 Cities which were variously mentioned
9
as possible locations for boards were: H artford, Baltimore, Pitts­
burgh, Buffalo, Birmingham, New Orleans, Cincinnati, St. Louis,
Minneapolis, and Los Angeles.
1. The logic of greater decentralization.—Some o f the arguments
fo r a larger number o f boards were the same as those used to support
the decentralization program. The more regional boards there were,
the faster cases would be processed and the easier it would be to secure
factual data and assay the attitudes o f the parties. Greater consent
would be forthcom ing, since the closer board members were to local
industry and labor leaders, the greater the acceptance would be. The
1 Ibid., pp. 1—
8
2.
» Ibid., p. 65.




D IS T R IB U T IO N O F A U T H O R IT Y A N D IT S R E L A T IO N T O P O L IC Y

303

more regions there were, the easier it would be to adopt different poli­
cies from region to region to fit local circumstances. The Hawaiian
Territorial Board, fo r example, under unusual collective bargaining
circumstances, developed its own version o f union security, substituting
the checkoff fo r maintenance o f membership.
The case volume was quite unequally distributed among the regions;
and, in general, the larger the case load, the more difficult it was to
keep current. Chicago, New York, and Cleveland together had about
40 percent o f the dispute cases handled by all the regions; Denver,
Seattle, and Dallas together had less than 10 percent. The propor­
tions were about the same fo r voluntary cases.
Three other factors also argued fo r a larger number o f regional
boards. In the first place, intercity rivalries are intense in some parts
o f the country. In California, as one o f several examples, San Fran­
cisco and Los Angeles are traditional competitors. Location o f the
regional board in one city caused dissatisfaction in the other. Los
Angeles was almost as unhappy about operating under administration
from San Francisco as it would have been under administration from
Washington, D. C.
Secondly, homogeneity o f the region was a considerable asset to
some boards; heterogeneity a cause o f difficulty to others. In develop­
ing wage stabilization policy in the Cleveland region, as an illustra­
tion, it was found that living standards were much lower in Kentucky
than in northern Ohio. The degree o f unionization varied substan­
tially. The outlook o f the employers was not the same. The basic
industries were quite different. Local practice on fringe benefits
varied considerably. Similar variations within other regions made
it difficult to develop suitable policy and reconcile different points o f
view within each board.
Thirdly, consistency o f board membership was much greater in
regions with one recognized metropolitan center. Where there were
two or more rival centers, the industry and labor membership o f
the board fluctuated constantly. In the Chicago region, fo r example,
Minneapolis labor and industry members preferred to sit on their own
cases, rather than have the Chicago members do so. In California,
there were virtually two boards—one in San Francisco and one in
Los Angeles. One group o f labor and industry members sat on
northern California cases, another on southern California cases. H igh
board morale, good personal feelings, and consistency o f policy were
all hard to achieve under such circumstances.
2. The logic of restricted numbers.—Several o f the basic reasons
fo r lim iting the number o f regional boards correspond to those ad­
vanced fo r having none at all. The selection and training o f suitable
board members, particularly public members, and staff personnel




304

D IS P U TE . S E T T L E M E N T ANlD W A G E S T A B IL IZ A T IO N

would be increasingly difficult as more boards were added. The avail­
able number of skilled persons, in w h o m the National Board had con­
fidence for regional chairmanships, was strictly limited. The
preservation of uniformity in action would become harder and harder
as agency after agency was added. A larger total staff would be re­
quired as the number of regional boards grew. This would create an
even larger bureaucracy.
Additionally, other arguments favored restricting the number of
regional boards. The cost was increased with each new board. N e w
board members had to be compensated, and additional staff had to be
hired. This was important particularly to the Bureau of the Budget.
Coordination with the work of other agencies would be hampered.
The Office for Emergency Management could best service boards in
cities where i had regional o f c s The cities originally selected by
t
fie.
the Board were generally ones in which other war agencies had their
regional headquarters. If more regional boards had been established,
liaison between them and these other agencies would have been made
more d f i u t or these agencies might have found i necessary to
ifcl,
t
establish additional o f c s also. Demarcation disputes potentially
fie
would have been increased by an addition to the number of boards.
More and more cases would have fallen partly within two or more
regions.
The decisions which were made on the appropriate number of re­
gional boards needed to reflect consideration of these factors, among
others. In actual practice, however, everything else remaining equal,
the regional boards with relatively homogeneous areas had the least
d f i u t e , and those with diverse areas and rival cities had the most.
ifclis
This suggests that creation of additional regions might have reduced
some of the tensions.
B. I n d u s t r y A g en c ies
The National Board established 17 commissions, panels, “sections,”
and “committees.” Each of these was in varying degrees competitive
with the regional boards. Commissions had an independent life like
a regional board. They could make decisions and issue orders on
their own account. Panels could hear cases and make recommenda­
tions, but could not issue their own orders. Several agencies which
started as panels subsequently became commissions. A section—
and there was only one: the Automotive Section— was in reality a
panel with Nation-wide jurisdiction, attached to a regional board
(Detroit). A committee— and there were only two, the entirely sepa­
rate divisions of the West Coast Aircraft Committee— was a panel,
confined to a single region, reporting to a regional board, but estab­
lished by the National Board.




D IS T R IB U T IO N O F A U T H O R IT Y A N D IT S R E L A T IO N T O P O L IC Y 305

1
.
Establishment of industry agencies. Four industry agencies (or
—
their predecessors) were in operation before decentralization was
widely discussed:
N e w York Metropolitan Milk Distributors Commission.
Shipbuilding Commission.
West Coast Lumber Commission.
Wage Adjustment Board (building construction).
Three more were established during the period when the regional
boards were being developed:
Nonferrous Metals Commission.
Detroit Tool and Die Commission.
Trucking Commission.2
0
The remaining 10 commissions, panels, sections, and committees were
set up after the regional boards were in operation:
Newspaper Printing and Publishing Commission.
West Coast Aircraft Committee (in reality two committees—
one in Los Angeles and one in Seattle).
Automotive Section.
W a r Shipping Panel.
National Airframe Panel.
Meatpacking Commission.
Steel Commission.
Northern Textile Commission.
Southern Textile Commission.
Telephone Commission.
Most, but not a l of these special agencies covered more than one
l,
region. Several of them had jurisdiction over enterprises in every
region (except Hawaii). A few, such as the two West Coast Air­
craft Committees, were confined to a single region. Some of the spe­
cial agencies were limited to a single industry, like shipbuilding.
Others were confined to a portion of an industry, like the Meatpacking
Commission, which was concerned primarily with plants of the “Big
Four” companies. Still others covered more than a single industry,
like the Trucking Commission, which followed, in large part, the
jurisdiction of the Teamsters’Union.
The subject matter encompassed varied greatly. Some of these
agencies handled all types of disputes and voluntary cases arising
within their jurisdictions; others considered only restricted types
of cases, such as intraplant inequities, as in the case of the two textile
^Regional trucking panels were subsequently established. They were responsible to
the regional boards administratively, but jointly to the regional boards and the Trucking
Commission on matters of policy.
;




306

DISPUTE SETTLEMENT AND WAGE STABILIZATION

commissions. Thus the special agencies varied greatly in their geo­
graphic, industrial, and subject coverage. They were distinguished
by diversity rather than similarity.
2
.
Sources of the special agencies.— These special agencies were
developed for a variety of basic reasons. In each case, for some
reason or reasons, the National Board did not wish to handle the
problems itself and did not think it wise or possible to delegate them
to the regional boards. Six essential factors variously led to the
establishment of these agencies.
a. H istorical considerations.— The Wag e Adjustment Board was
f r t created, with only labor and Government representation, in 1942
is
by the Secretary of Labor to administer a wage stabilization agree­
ment for Government construction. It was reconstituted as a tripar­
tite body by the National Board to process wage cases in the construc­
tion industry. The Shipbuilding Commission was set up, in part, be­
cause of the existence of the Shipbuilding Stabilization Committee,
which was established in 1940 by the National Defense Advisory C o m ­
mission. The W a r Shipping Panel took over review of wage increases
from the W a r Shipping Administration.
5
.
Manpower pressures.— Several agencies developed out of severe
manpower d f i u t e . Manpower stringencies put pressure on wage
ifclis
rates. In order to reduce turn-over and maintain or increase the
labor supply of an industry, wages needed to be standardized, and in
some cases raised to new levels. These manpower pressures were quite
evident early in the war in the tool and die, nonferrous metals, and
northwest lumber industries, among others.
c. Government purchasing.— In some industries, the Government
was the sole or largest purchaser of the products. It was concerned
with wages in these industries not only because of their relation to
wage stabilization but also because they directly affected the cost of
financing the war effort. This was true of the aircraft, shipbuilding,
construction, and shipping industries, among others.
d. Technical complexities.— The National Board became involved
in several major cases where i did not have the time to work out all
t
the technical d f i u t e . These problems usually related to the de­
ifclis
velopment of intricate wage relationships among individual job rates,
or the working out of complex clauses on bonuses, penalty rates, m a n ­
ning scales, e c , or the handling of a myriad of grievances. The Air­
t.
frame Panel, West Coast Aircraft Committees, W a r Shipping Panel,
Textile Commissions, N e w York Metropolitan Milk Distributors C o m ­
mission, Meatpacking Commission, Steel Commission, and West Coast
Lumber Commission were partly or wholly established to handle such
complicated problems.
e. Possession of power. Some industries and some unions had suf­
—
ficient economic or political power to insist on separate treatment, if




D IS T R IB U T IO N O F A U T H O R IT Y A N D IT S R E L A T IO N T O P O L IC Y 307

they desired i . Sometimes this separate treatment could be secured
t
best from the National Board i s l . O n other occasions, a special
tef
commission was preferred. Such a commission might give higher
wages or lower wages or a different wage structure than the regional
boards following standard policy, and adopt similar variations on
other issues. In some industries, both parties wanted to be separated
from the confines of general policy; in others, i was a strong union,
t
alone or a strong employer alone seeking the differentiations.
/ Difficult industrial relations. In some industries, because of
.
—
rival unionism or employer-union controversies, collective bargaining
was conducted unusually aggressively and unpleasantly. The National
Board found i helpful, on occasion, to relegate such situations to the
t
attention of a special commission. This was a primary factor in the
creation of several of the special agencies.
The establishment of few of the special agencies can be explained
solely on a single ground. Nearly all of these six factors were con­
tributing considerations in the creation of two or three of the agencies.
C. T

he

I m pact

of

S p e c ia l A

g e n c ie s o n

W

age

S t a b il iz a t io n

The special agencies generally, but not universally, administered
the wage-stabilization policy more liberally than the regional boards.
The explanations for this will be examined subsequently. In partic­
ular, industry agencies created because of manpower shortage, d fficult
i
industrial relations or the application of economic or political power
were likely to order or allow wage increases beyond those normally
permitted by the regional boards.
This liberality of treatment frequently had an upsetting effect on
wage stabilization in the regions for several reasons. In the f r t
is
place, the definitions of commission and regional jurisdictions were not
always clear or mutually exclusive.2 Under such circumstances com­
1
mission decisions sometimes applied to individuals w h o m the regional
boards thought were within their own jurisdiction. In other instances,
the commissions applied their higher wage decisions, if not to the
same individuals, at least to people in the same or similar occupations.
The regional boards were then put under pressure by labor, and some­
times industry, to extend commission wage rates to the other people
in like circumstances. This was particularly true when union a f l a
fii­
tion was the only basis for distinction between those covered by higher
commission rates and lower regional rates. Whether or not the people
involved were similar, industries or enterprises with commission rates
attracted workers from those with regional rates. This led to re­
quests for increases to competitive levels.
2 The industry agencies were usually the more persuasive in jurisdictional disputes.
1
They usuaUy had more powerful proponents than the regional boards.




308

D IS P U TE . S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

Moreover, workers or employers who had, to various degrees, his­
torically compared the rates they received or paid with those in
industries covered by commissions demanded that the historical re­
lationships be restored. Other workers, unions, or employers, who
had not made such historical comparisons, learned of the more favor­
able handling by the commissions and demanded that they be accorded
the same treatment.
If the regional boards granted increases on any of these grounds,
then a new chain of reactions was set into e f c . The wage structure
fet
of the Nation i a mass of interrelationships. Few wage rates are en­
s
tirely unrelated to any other rates. Particularly in a period of full
employment, the interrelationships are tightly knit.
These interrelationships are the result both of mental comparisons
based upon concepts of what i just, proper, or possible, and of man­
s
power pressures. Thus, commission decisions spread out and their
repercussions were felt in many different places. At the same time
that the regional boards were subjected to new pressures, their will­
ingness to hold the line was decreased by their observance of the
actions of the commissions.
The Chairman of the Tenth Regional W a r Labor Board illustrated
this process as follows:
For instance, the Board felt as a matter of equity it had to order the same
rates for the pulp and paper industry as those approved in cases under jurisdic­
tion of the W est Coast Lumber Commission, because of the historical relationship
between the industry and lumber. Rates ordered in the Los Angeles area ship
yards by the Shipbuilding Commission led to demands for similar wages by the
steel fabricating and metal trades unions. Actions of the National Trucking
Commission were used as bases for requests by unions in cases before the regional
board.2
2

The twelfth region was perhaps most drastically affected by the
work of the commissions. The commissions, particularly the West
Coast Lumber Commission, the Wa g e Adjustment Board, the Ship­
building Commission, and the Trucking Commission, covered almost
as many employees as the regional board— 400,000 as against 500,000.2
i
The Chairman of the Board reported:
These commissions generaUy made wage adjustments without consultatioi
with the regional board and frequently with resulting dislocations in rates fo]
comparable jobs under the jurisdiction of the W a r Labor Board. For example
the Shipbuilding Commission allowed cooks $1.30 and $1,375 per hour, while th<
W a r Labor Board was endeavoring to stabilize such rates at $1. Waitresses
were awarded $0.84% , when the W a r Labor Board bracket was $0.60. The Wag<
Adjustment Board allowed common labor rates of $1.13 per hour, when th<
comparable common labor rates under W a r Labor Board jurisdiction was $0.85.2
*

2 The Termination Report, vol. I, pp. 748-749.
2
2 Termination Report of Twelfth Regional War Labor Board (mimeographed), p. 7.
8
* Ibid., pp. 7-8.




D IS T R IB U TIO N O F A U T H O R IT Y A N D IT S R E L A T IO N TO P O L IC Y 309
D.

T

he

M

R

e g io n a l

B

oards —

E

c o n o m ic

P ressures

in

L

ocal

L

abor

arkets

The adherence of the regional boards to strict wage stabilization
standards varied from region to region. It was the industry agencies,
however, which upset regional stabilization, rather than the regions
upsetting the industry agencies. A public member of the National
Board commented:
When you give attention to the problems of a particular industry, the tendency
is naturally to meet the problems of that industry. * * * W e find, more than
the regional boards, a tendency of the commissions to meet the problems of that
industry irrespective of the wage stabilizing program. * * * A commis­
sion obviously must become industry-minded instead of wage-stabilizationminded. * * * 2
5

This greater attachment of the regional boards to the principles
of economic stabilization was due to at least four causes. In the
f r t place, the regional boards had more extensive knowledge of
is
local wage structures. They were familiar with the existing patterns
of interrelationships. They could anticipate, and were more concerned
with, the effects of one wage increase on surrounding rates. This
acquaintance with the over-all effects of a single wage increase damp­
ened the enthusiasm for making increases. They could visualize the
reactions of other employers and union leaders to an increase in one
industry or plant which would upset the local pattern.
Secondly, the regional boards had a greater sense of responsibility
for over-all stabilization. They covered many industries and seg­
ments of industries and knew they were accountable for what hap­
pened in the area.
Thirdly, board members were in the center of diverse pressures. A
single industry— both the employer and the union— might desire a
wage increase, but other employers might fight i because of it effects
t
s
on them. Employer members of the regional boards were conscious
of the general desire of the employer community that approval not
be granted for wage increases that would embarrass employers in other
industries. Even labor members did not always press effectively for
certain wage increases. Unusual increases given to one union incon­
venienced other unions whose contracts were not open or whose leaders
knew they could not secure similar advances. The public members,
subject to both upward and downward pressures from the community
and from within their own board, were better able to follow the dic­
tates of policy. They were quite conscious of the importance of prece­
dents and subject to arguments based on the creation of precedents.,
Fourthly, the National Board, apparently, kept a closer check on
the regional boards than on the industry agencies, to see that they*
* Transcript, Executive Meeting, June 24,1943, p. 648.




310

DISPUTE SETTLEMENT AND WAGE STABILIZATION

did not violate wage stabilization policy in either voluntary or dispute
cases. The Wag e Stabilization Director of the National Board had
more influence over the regional wage stabilization directors than
over their counterparts on the special agencies. The regional wage
stabilization directors in turn usually had greater influence within
their organizations, than was the case on the industry agencies.
The tripartite system required special strategy to assure effective
stabilization, since more than the public interest was represented in
policy formulation and application. Thus i was essential to develop
t
an opposition of interests which would approximate the same results
as if only the public interest had been represented. The regional
boards, in particular, supplied an administrative device where selfinterests offset each other and supplied a system of checks and balances.
As compared with the industry agencies, they afforded a political
situation within which the public interest could better be served. The
essentialstrategy was the equalizing of pressures.
E . T h e I n d u s t r y A g en c ies — P o l it ic a l P ressures i n

C o lle ctive

B a r g a in in g

The commissions, generally, were in a situation less conducive to
concentration on problems of wage stabilization. There were several
reasons for this.
The industry agencies were more conscious of other considerations,
in addition to wage stabilization. They were familiar with the ma n ­
power problems of the particular industry they covered and any
procurement problems of Government agencies purchasing from i .
t
Their over-all knowledge of the industry led to greater sympathy with
itsproblems.
Man y of the industry agencies were more concerned with standardi­
zation than with stabilization. Several were set up for the purpose
of equalizing wage rates within the industry over a large area. Others
were subject to severe union demands to standardize on an inter­
regional basis. This usually meant raising rates to the highest levels
which prevailed in any single locality regardless of local labor market
wage levels.
The public members of the industry agencies were particularly con­
scious of the necessity of their getting along well with the representa­
tives of the particular union and industry with which they dealt.
This led to more of a mediation approach, as in the case of the earlier
ad hoc panels, than to strict enforcement of a wage stablization pro­
gram. Some of the industry agencies were designed to help keep the
peace in certain industries. Public members of these were particu­
larly bound to discover what was mutually acceptable, as well as what
was good stabilization practice. The price of peace was sometimes
a cost to the stabilization program.



D IS T R IB U T IO N O F A U T H O R IT Y A N D IT S R E L A T IO N T O P O L IC Y 311

The political context within which some of the industry agencies
operated was unfavorable to stabilization. Sometimes both the in­
dustry and labor members of an industry agency preferred substan­
tial wage increases. Difficulties in recruiting adequate personnel,
combined with the ability to pass on higher costs to the Government
or to private consumers or to take them out of excess profits, served
to obliterate the classic conflict of interest over wages. Under such
circumstances, the pressures on the public members were in the up­
ward direction only and no counter-vailing pressure exerted i s l .
tef
W h e n one or both of the parties were powerful enough to get an in­
dustry agency set up, they were powerful enough to assure that the
agency served the purpose for which i was intended.
t
The industry agencies also had less information about the potential
results of their decisions in local labor markets, had less responsibility
for the over-all consequences, and were less subject to careful wage
stabilization review.
The situation of the industry agencies was not entirely unlike that
of the National Board in wage stabilization. The National Board
also had less information about the local repercussions of its wage de­
cisions than did the regional boards. The National Board, perforce,
viewed problems from a national point of view, which tended to pass
over subtle local distinctions. Moreover, in any single case involving
wages, as in the Boeing case, the National Board was conscious of the
needs of the parties immediately before i and not of the attitudes of
t
other unions and employers in the same area. Thus, in i s day-to-day
t
operations, i was primarily concerned with the acceptable settlement
t
of disputes rather than with local wage stabilization.
Consequently, the regional boards were in the best position to sta­
bilize effectively. They had the most complete information and were
subjected to the most nearly equalized pressures. The industry agen­
cies were most likely to feel only one-sided pressures;and the National
Board to act in a rarified atmosphere where the local situation was
only dimly seen.
The industry agencies, as the war neared an end, began to act more
like the regional boards. Labor-market pressures were reduced; and
the employers, as they began to look ahead to the postwar period, be­
came again more concerned with competitive costs in the product
market.
F.

T

he

I m pact

of

D

e c e n t r a l iz a t io n o n

A

d m in is t r a t io n

The coexistence of 13 regional boards and 17 special agencies created
certain administrative d f i u t e .
ifclis
It was impossible to draw clear-cut jurisdictional lines for most of
the industry agencies. The boundaries of the Trucking Commission,
in particular, never were satisfactorily defined. Even in what would




312

D IS P U TE S E T T L E M E N T ANflD W A G E S T A B IL IZ A T IO N

appear to be the relatively simple case of the Meatpacking Commis­
sion, clear lines of demarcation were hard to distinguish. It was
necessary in that instance to define the jurisdiction in six dimensions.
Some unions, some companies, some plants, some types of operations,
some employees, and some issues were covered by the commission;and
the others by the regional boards.
The shadowy nature of many of the dividing lines confused staff
members in the industry agencies and regional boards alike, caused
unnecessary shunting of some cases back and forth, and irritated staff
personnel and industry and labor representatives.
The juxtaposition of regional boards and industry agencies caused
some internal conflicts within the administrative machinery. A cer­
tain amount of mutual resentment was aroused. The Chairman of the
Twelfth Eegional Board stated:
The Twelfth Regional W a r Labor Board, from time to time, raised its voice in
vigorous protest against the extension of the jurisdiction of the commissions,
and even argued in favor of reducing them, or at least requiring more effective
cooperation between the commissions and the regional board and for better
coordination o f policy. A ll of these protests fell on deaf ears and the commis­
sions continued to flourish and expand.2
6

The chairman of the First Eegional Board advised:
Avoid special areas of “wage stabilization,, such as the Trucking Commission,
Shipbuilding Commission, etc.2
7

The chairman of the Second Eegional Board protested against—
defining as an industry the businesses which happen to have been organized by a
particular union.2
8

The chairman of the Third Eegional Board said the commissions and
regions should be better coordinated.2 * The chairman of the Fourth
9
Eegional Board stated that national commissions were not readily ac­
cepted in the South and mentioned in particular the unstabilizing ef­
fects of three commissions.8 The chairman of the Seventh Eegional
0
Board pointed out that: “The unsettling implications of such an ar­
rangement are obvious.” 3 The chairman of the Eighth Eegional
1
Board said commissions “should be discouraged.” 3
2
These statements reflect the fairly widespread distrust of industrj
agencies in the regions. This resentment was based partly on the
feeling that i was not equitable for some groups, usually in the more
t
advantageous positions already, to obtain unusually favorable treat*•Termination Report of the Twelfth Regional War Labor Board, op. cit., p. 9.
2 The Termination Report, vol. I, p. 612.
7
8 Ibid., p. 625.
8
39 Ibid., p. 645.
» Ibid., p. 658.
8 Ibid., p. 761.
1
* Ibid., p. 715.




DISTRIBUTION OF AUTHORITY AND ITS RELATION TO POLICY

313

ment. It was also caused by the effect commission decisions had in
making the difficult stabilization task o f the regional boards addi­
tionally onerous.
G.

T h e R e c o n c i l i a t i o n o f R e g i o n a l a n d In d u s t r y A p p r o a c h e s

Administration by regions and by industry are two philosophically
opposed principles. The former presupposes equality o f economic citi­
zenship ; the latter differentiation in status. The form er emphasizes
adaptation o f policy to suit the needs o f a varied clientele; the latter a
tailoring o f policy to satisfy the requirements o f a restricted element
or elements. The difference is, in part, the difference between essen­
tially public and essentially private courts. Administratively, also,
the two principles, if simultaneously follow ed, o f necessity lead to some
overlapping.
But the regional form and the industry form o f organization each
had merits from the point o f view o f the National Board. The re­
gional boards were generally better at wage stabilization and thus most
useful in those areas o f economic life where stabilization was most de­
sired or at least most easily achieved. They were better at adminis­
tration o f enforcement and as liaison with the Wage and Hour offices
and other Federal field offices. Jurisdictional problems seldom arose
among the regional boards. Regional lines were precisely drawn
and, for the most part, the National Board handled the interregional
cases.
The industry agencies had specialized functional areas, also, in
which they excelled. I f, for some reason, strict stabilization was un­
desirable, as in cases o f essential industries experiencing severe man­
power shortages, or impracticable, as in the case o f powerful groups
unwilling to submit to it, the industry agencies were better at unstabi­
lizing than the regional boards. By their nature they were more
likely to raise wages, and the separatism o f jurisdiction served to ob­
scure the variations in policy. Similar action by the National Board
or the regional boards would have appeared more crude. The effec­
tive prosecution o f the war could not always wait on moral consid­
erations. The redistribution o f manpower and the maintenance o f
full production were often o f an equal or greater order o f importance
than distributive justice.
The industry agencies were adept at highly technical problems such
as developing more consistent internal wage structures or standardiz­
ing wage or “ fringe” policies on an industry-wide basis. They were
closer to the parties; more concerned with acceptance o f decisions; and
better able to achieve compliance in industries with troublesome rela­
tions. By disposing o f some o f the more difficult problems, they re­
duced the pressures which the regional boards had to meet and thus
facilitated their functioning. A s the end o f the war approached, they




314

DISPUTE SETTLEM ENT AND WAGE STABILIZATION

were able to assist in the adaptation o f industrial relations to the re­
quirements o f the transition period. They usually acted more ex­
peditiously in processing cases than the regional boards, and were more
effective in handling dispute cases because o f their greater knowledge
o f each industry and their more constant contact with the parties.
Regional boards and industry agencies were simultaneously useful
and inconsistent modes o f administrative organization. The two
form s were most nearly compatible when one or more o f six circum­
stances were present:
(a) The industry agency had as its sole task the detailed applica­
tion o f general orders o f the National Board. It operated at a tech­
nical level within restricted limits. The opportunities fo r it to upset
local relationships were strictly confined.
(&) The collective bargaining system over which the industry
agency had jurisdiction, by the nature o f the industry or the history
o f its relationships, was clearly defined and relatively isolated from
the main flow o f manpower and o f industrial relations developments.
Overlapping o f jurisdiction and the transmission o f separatist policies
were both minimized. This was, in part, the situation o f the W ar
Shipping Panel, the Newspaper Commission, the T ool and D ie Com­
mission, and the Nonferrous Metals Commission,3 for example.
3
(<?) The industry agency follow ed the policy o f checking with the
regional boards when its acceptance o f cases or the content o f its de­
cisions might affect regional operations, as did the T ool and Die Com­
m ission; or it was geared into the regional boards, as were the two
W est Coast A ircraft Committees.
(d) The special agency was a panel, rather than a commission.
Panel recommendations were subject to review by the National Board
with its greater capacity fo r taking an over-all view.
(e) The industry agency follow ed the same wage stabilization policy
as the regional boards, and did not establish separate policies such as
the “in lieu o f” principle which was used by the Trucking Commission,
follow ing the precedent established in the railroad industry.
( / ) The special agency follow ed conservative wage policies. Oc­
casionally the industry agencies were more conservative than the re­
gional boards. It was not difficult fo r the boards to resist downward
pressures in wartime; the problem o f maintaining their standards
arose when they were subjected to upward pressures as a result o f
agency actions. Industry agencies with elements o f conservatism
were the Telephone Commission and the Airfram e Panel.
Conversely, the greatest difficulties arose in the case o f industry
agencies that acted on general wage increases and fringe benefits; that
“ It was particularly true for the mining operations covered; much less true for the
refining segment of the industry.




DISTRIBUTION OF AUTHORITY AND ITS RELATION TO POLICY

315

dealt with groups that were intertwined with other groups; that did
not check with the regional boards; that had the power to make origi­
nal decisions; that developed their own distinct policies; or that ad­
ministered wage-stabilization rules liberally because o f manpower
needs, the demands o f influential parties, or the urging o f procure­
ment agencies.
Some o f the difficulties between the regional boards and the Truck­
ing Commission, Automotive Section, Shipbuilding Commission, West
Coast Lumber Commission, and W age Adjustment Board stemmed
from one or more o f these factors.

III.

T h e D e t e r m in a t io n

and

A d m in istr atio n

of

P o l ic y

Once having decentralized, the National Board needed to determine
how much policy it should make and how much should be made by its
agencies; and which cases it should handle and which should be
referred to its subsidiaries.
The essential policy was stated by a public member as follow s: “ The
Board always reserved fo r itself the final judgment upon all m ajor
questions.” 3 It made all m ajor policy, established the procedural
4
rules, set up uniform administrative regulations, handled appeals, and
made all m ajor appointments. It reserved the right, on its own
motion, to take jurisdiction at any time over any case. It kept dispute
cases which had interregional aspects and could not be referred ap­
propriately to one o f its industry agencies. It also kept cases which
involved the making o f basic policy. The National Board delegated
case handling, but not policy form ulation; it follow ed the practice o f
centralizing policy and decentralizing administration.
The Board agencies had less and less to do with policy determination
on m ajor issues. They could exercise free judgment only on issues
regarding which the National Board had not prescribed policy.
During the early life o f the Board, this gave the agencies considerable
lattitude. In fact, many policies were developed by National Board
approval, on appeal, o f policies originated by an agency. As time
passed, the National Board formulated policies on more and more
issues, so that the agencies needed to follow increasingly specific
National Board principles.
A.

C o n t r o l v .Ini ti ati ve

Generally the system worked satisfactorily. Central domination
over policy-m aking kept a large degree o f uniform ity in the decisions
8 The Termination Report, vol. I p. x
4
,

921297—50------21




x iii.

316

DISPUTE; SETTLEM ENT AND WAGE STABILIZATION

o f a complex agency. The regional boards and industry agencies were
less subject to being pushed and pulled around since they could not
make, but only interpret, basic policy. The work o f the public mem­
bers, in particular, was eased. Both the Board agencies and the Na­
tional Board were reasonably satisfied with the arrangement.
T o the extent that there was any discontent it arose from a feeling
in the regions that too much authority was concentrated in the Na­
tional Board. The chairman o f the First Regional Board stated:
“ The regional boards should be made to realize that their actions are
subject to check only in extreme cases and that regional discretion w ill
be respected within these extreme lim its.” 3 The chairman o f the
5
Third Regional Board fe lt: “ The regions should be given the greatest
possible degree o f independence from W ashington control.” 3 The
6
chairman o f the Tw elfth Regional Board expressed the opinion that:
“ Every attempt should be made to leave with the regions a fa ir degree
o f initiative and also a considerable degree o f finality in their
awards.” 3 It was generally argued that greater delegation o f au­
7
thority would reduce the congestion in the National Board and lead
to greater initiative and responsibility in the regions.
Four complaints, in particular, were advanced by regional per­
sonnel. In the first place, some o f the regional boards would have
welcomed more consultation by the National Board prior to the is­
suance o f policy directives and the deciding o f important inter­
regional cases. This consultation would have given a greater sense
o f participation and made possible the expression o f regional view­
points in advance. Receipt o f more immediate and precise inform a­
tion about such determinations would also have been appreciated.
Secondly, the regional boards felt on occasion that the National
Board delayed unduly in announcing policy, or set it forth in an
unclear manner. A s indicated in chapter 2, most o f the policy o f
the National Board was, o f necessity, decided on a case-by-case basis.
This had the great advantage o f allowing form ulation o f policy in the
context o f a live situation. It meant, however, that the National
Board had to wait for an appropriate case in connection with which
it could make such policy; and then the statement o f policy was
partly in terms fitted to the case being decided, although the National
Board did, particularly in the opinions o f the public members, con­
sider the wider implications.
Thirdly, sometimes the policy established by the National Board
fo r Nation-wide application did not apply equally in all regions. The
locally accepted level o f substandards o f living was different in the*
* Ibid., p. 606.
8 Ibid., p. 645.
8
* Ibid., p. 769.




DISTRIBUTION OF AUTHORITY AND ITS RELATION TO POLICY

317

South than in Detroit. Local patterns o f fringe benefits varied
greatly with the type o f industry, the history and strength o f union
organization, and the policies o f employers and unions. Some o f
the regional boards would have preferred greater flexibility in
adopting general policy to local patterns.
Fourthly, the National Board modified the decisions o f regional
boards with considerable freedom. Some o f the regional boards
would have preferred that their decisions be upheld unless there were
clear error in procedure or interpretation o f policy. It was sometimes
considered that the National Board, on appeals, gave different, but
not clearly better, decisions.
B. P o l ic in g

th e

S yste m

The National Board, considering the gravity o f the responsibilities
with which it was charged, had to have some assurance that its agen­
cies would carry out national policy faithfully and effectively. It
could not assume a uniform ly satisfactory level o f good w ill, capacity,
and performance.
Four primary methods o f enforcement were utilized. One method
was the control over selection o f personnel. The National Board
placed great reliance on securing competent personnel. One o f the
public members expressed the generally accepted viewpoint when he
said that the quality o f the individuals operating the program was
more important than the adequacy o f the administrative machinery.3
8
Great stress was laid on the qualifications o f the chairmen, and to a
much lesser extent the vice chairmen, o f the agencies. Many o f them
were trained by the National Board, and all o f them were selected
and appointed by it. The National Board retained, and several times
exercised, the right to remove or transfer these officials.
A second method was consultation. When an agency was, in the
judgment o f the National Board, acting improperly, National Board
members were sometimes sent out to investigate the situation and de­
vise means fo r its improvement. On other occasions the Chairman
and even the leaders o f the industry and labor members were called
into Washington where National Board members sought to correct
the difficulties.
Another method was the reversal o f actions. I f an agency made a
decision contrary to national policy, it could be reversed either on
appeal or on the initiative o f the National Board. This was not
always an easy process, since vested interests in original decisions de­
veloped rapidly; but it was possible and was done.
A final method was the requirement o f reporting. The regional
boards sent many o f their decisions in dispute and voluntary cases to
8 Transcript, Executive Meeting, January 5 1943, p. 12.
8
,




318

DISPUTE SETTLEM ENT AND WAGE STABILIZATION

the National Board. Here they were examined, however inadequately.
When individual decisions appeared out o f line, they were called to
the attention o f the regional boards, and sometimes additional ex­
planations were requested.
One weakness in the ability o f the National Board to require agency
conformance with its policies was its lack o f direct control over the
industry and labor members o f the agencies. This was particularly
serious in those instances where the difficulties basically arose from
the partisan rather than the public members. This problem was
partly met by permitting the agency public members to refer to the
National Board for prereview o f any decisions on which they had been
outvoted.
Generally, the National Board was better off when it had relatively
conservative and cautious leadership on the regional boards and com­
missions, for it was easier to go beyond the original decisions than
to cut them back.
The policing powers o f the National Board proved largely ade­
quate. Some annoying deviations from general policy did occur, but
none was disastrous.

IV.

C o n c l u d in g O b se r v a tio n s

H istorical judgments are usually based on an oversimplification o f
the problems facing the persons who made the original decisions.
From the favored position o f the ex-post analyst, several revisions o f
National Board practice seem desirable, although they may well not
have been possible at the time and under the circumstances. The sug­
gestions, set forth below, are interrelated and several o f them cannot
stand by themselves. Each o f them is connected in some way to these
five basic tests o f administrative effectiveness that were discussed at
the beginning o f this chapter:
(а) Seasonably rapid processing o f cases,
(б ) Minimization o f internal friction,
(c) Achievement o f a satisfactory degree o f wage stabilization,
(d) Impression o f nondiscriminatory determination and applica­
tion o f policy, and
(e) Attainment o f voluntary acceptance under conditions where
merit and power did not always parallel each other.
These suggestions w ill be outlined as they relate prim arily to the
National Board, the regional boards, and the special agencies.
A.

T h e N ational B oard

1.
Had the National Board undertaken full-fledged regionalization
at a somewhat earlier date, the backlog o f cases, which plagued the



DISTRIBUTION OF AUTHORITY AND ITS RELATION TO POLICY

319

Board so much in 1943, would not have been built up to the same
extent. The fears about the regional boards proved to be largely
unfounded. The decentralization program yielded good results.
Had the regional boards been established 3 months earlier, some o f
the industry agencies might not have been necessary.
2. The National Board, from the start, might have had a larger
number o f public members. W ith more public members, several o f
them could have devoted more time to becoming acquainted with the
activities and problems o f individual Board agencies. This would
have permitted closer liaison between the National Board and its
agencies, and been effective in securing greater uniform ity o f action.
The public members could have visited these subsidiary groups more
frequently. Appeals might have been reduced or at least processed
more expeditiously.
3. Generally more personal communication between the national
and regional levels would have been helpful. Events moved too
rapidly for written orders to be entirely effective. The flow o f infor­
mation back and forth was most effective in face-to-face contacts.
The regional chairmen might well have gone to Washington more
frequently. This difficulty o f inadequate contact was experienced
primarily in the outlying regions.
4. Additional consultation officially between the National Board
and regional boards would have been desirable. The regional boards
might have been helpful in commenting on contemplated policy actions
or case decisions which affected their regions; or at least they would
have been better informed about the considerations involved and the
implications.
5. A greater rejection o f appeals by the National Board, except
where there was clear error, would have reduced the volume o f appeals
and, at the same time, have strengthened the agencies and given them
a greater sense o f stature and responsibility. Greater restriction o f
the acceptable bases for appeal would have reduced the almost un­
limited right o f appeal.
6. For stabilization purposes, more careful review o f a sample o f
agency decisions would have aided the achievement o f uniform ity.
B. R

e g io n a l

B

oards

1.
An increase in the number o f regional boards—to make a total
o f perhaps 20 or 25—would have had several advantages. The case
load would have been more evenly distributed, and the disposition o f
voluntary cases facilitated by the greater knowledge o f and contact
with local practices. A greater consistency in regional board mem­
bership would have been achieved. Some o f the strains arising from
intercity rivalries and differences in degree o f unionization and in
employer attitudes would have been lessened. More dispute cases
021297—50-----22



320

DISPUTES SETTLEM ENT ANiD WAGE STABILIZATION

could have been heard originally by the regional boards, instead o f
local ad hoc panels, thus speeding up the processing. Greater local
homogeneity in wage and fringe patterns would have made it easier
to apply National Board stabilization policy and adapt it to local
needs.
2. The granting o f additional autonomy to the regional boards,
within the framework o f a more flexible national Board policy, would
have given the regional boards greater standing in their communities
and permitted the closer matching o f policy with local conditions.
The regional boards m ight well have been given greater freedom to
establish policy, subject to appeal or review by the National Board.
3. The composition o f the industry and labor sections o f the re­
gional boards might have been under greater scrutiny by the National
Board. Had the regional boards been set up earlier and in less haste,
Board members might have been selected more carefully.
C.

In d u s t r y A g e n c i e s

1. Representatives o f procurement agencies should not have served
as public members o f industry agencies, as was the case in the original
form o f the W age Stabilization Board and Shipbuilding Commis­
sion.
2. The establishment o f commissions should have been lim ited
largely to situations where either a technical assignment was involved,
or the collective bargaining system was a relatively isolated one, as in
the maritime industry. This would have minimized the problems o f
integration.
3. F or some other situations, standing panels reporting to the Na­
tional Board might have been preferable. The National Board was
better able to see the over-all results, more skilled in reconciling pres­
sures, and more able to resist special influences than some o f the inde­
pendent commissions. The National Board might have set up a larger
number o f such standing panels, fo r example in the rubber and coal
industries. This would have relieved the Board so it could have di­
rected more attention to general policy formulation, the handling o f
appeals, and the coordination o f operations.
4. Separate treatment, where necessary, might sometimes have been
better achieved by differentiating policy rather than by setting up
special jurisdictions. This policy would have been available to all
who met its requirements, regardless o f jurisdiction. This is essen­
tially what was done with the local transit industry.
5. Commissions and panels might have been required to consult the
regional boards more frequently to obtain data about local patterns
and a better appreciation o f the regional point o f view. Each regional
board might have had one or more specialists to work with the indus­
try agencies. More group meetings o f chairmen o f regional boards




DISTRIBUTION OF AUTHORITY AND ITS RELATION TO POLICY

321

and industry agencies would have given the representatives of the
latter a better understanding of regional problems.
6.
A greater consciousness of the importance of jurisdictional lines
between the regions and the industrial agencies, and increased atten­
tion to their clear demarcation would have aided the achievement of
smoother operating conditions.
Viewed over-all, considerable wisdom was shown by the National
Board in making its decisions about decentralization. The size and
form of evolving problems could not be precisely seen; numerous con­
flicts in points of views existed; the burden of work was terrific; and
the time for investigation and contemplation was strictly limited.
Nevertheless, an organization was built up rapidly which worked with
reasonable precision and remarkable voluntary acceptance of its
actions.




CHAPTER

Problems of Case Processing

By Emmett B. McNattI
.

I. In t r o d u c t i o n

to evaluate our W orld W ar I I experience with govern­
mental controls over wages and industrial disputes necessarily involves
an examination and appraisal o f the methods, machinery, and prob­
lems o f case processing. The most soundly conceived program, based
upon economic, political, and other considerations, is bound to fa il if
it proves to be administratively unworkable. In other words, any con­
trol program over wages and labor disputes must provide adequate
machinery fo r its administration. The basic problem was to devise
rules and procedures that would best balance the need for speed with
the need for reasonably equitable and realistic treatment. In most situ­
ations, it was desirable that the parties receive a final answer from the
Board as soon as possible after a case was submitted. Although the
degree o f urgency varied greatly from one situation to another, rela­
tions between management and labor were likely to become a problem
i f their case remained undecided for a considerable period o f time.
On the other hand, a speedy conclusion that was patently unfair
could have done far more damage.
Specifically, this analysis w ill run in terms o f seeking answer to
such questions as the follow ing: W hat kind o f a case load were vari­
ous wartime wage stabilization and labor dispute agencies required
to carry in administering their programs? W hat administrative
problems were encountered in the processing and disposition o f these
cases, and how were these problems resolved? W hat was the actual
time required, and what was a reasonable time, for processing a wage
A

nt attempt

322




323

PROBLEMS OF CASE' PROCESSING

or a dispute case? Were there alternative procedures that could
have been used which would have reduced the processing time ? W ere
the delays incident to case processing sufficiently serious to impair
significantly the satisfactory operation o f wage and labor dispute
controls?
A.

T

C

h e

P

ase

B

tion

oard

rocessing

,M

a r c h

R

ecord

of t h e

N

ational

D

efense

M

edia­

19, 1941-J anuary 12,1942

A brief examination o f the experience o f the NDMB with case
processing is important as a background for the better understand­
ing and evaluation o f the later problems o f the NW LB and NW SB.
It was the first W orld W ar I I agency in the field o f industrial rela­
tions using individual case processing in discharging its responsi­
bilities.
The jurisdiction o f the NDMB was confined exclusively to handling
dispute cases certified to it by the Secretary o f Labor. It had only
mediatory and recommendatory powers in settling disputes. The
case load was handled by panels o f the Board consisting o f one public,
one labor, and one management representative. A staff member also
was usually assigned to the panel as an assistant. These panels exer­
cised all the powers o f the fu ll Board in settling disputes. Only
three cases were brought before the fu ll Board during its entire life.
The Board panel held hearings and attempted to obtain an agree­
ment between the disputing parties by mediation. I f mediation
failed, the panel prepared a report on the case with recommendation
to the Board fo r a final settlement.
During the 10 months o f its existence, the Board docketed 118 cases,
involving 114 disputes. O f these cases, 96 were disposed o f by the
NDMB, and 22 were referred to its successor, the National W ar Labor
Board.1 The average length o f time required for processing these
96 cases from the day the case was certified to the Board until it was
closed was 36.5 days.1 The longest time required for any one case was
2
210 days, and the shortest was 1 day. Only eight cases required 100
days or longer to process. Thus it is apparent that the case load o f
the Board was small, the processing machinery relatively simple, the
disposition o f cases rather speedy, and the staff, other than Board
members, required for processing, almost negligible.
B.

T

h e

Ja

C

ase

P

n u a r y

rocessing

R

ecord of t h e

N

ational

W

ar

L

abor

B

oard

,

12, 1942-D ecember 31, 1945

From its inception on January 12, 1942, to October 3, 1942, the
NW LB handled only dispute cases. From October 3,1942, to January
1 U. S. Department of Labor, Bureau of Labor Statistics, Report on the work of the
National Defense Mediation Board, Bulletin No. 714 (1942), p. 2.
2 Ibid. Compiled from case history data in this bulletin.




324

DISPUTE SETTLEMENT AND WAGE STABILIZATION

1,1946, the NW LB handled both dispute and voluntary wage stabili­
zation cases. The responsibility o f the National Board for the proc­
essing and disposing o f dispute cases began with the certification
the case to the Board from the Secretary o f Labor. B efore the
establishment o f the regional boards in March 1943, all dispute cases
were processed exclusively by the National Board in Washington.
Upon receipt o f the case it was docketed and assigned by the Board
to a tripartite panel or to a staff hearing officer. A hearing was then
scheduled and held, a report was prepared by the panel or hearing
officer, comments on the report by the disputants were filed, and the
case was presented to the fu ll Board. The Board considered this
report, and the record on which it was based, in executive session and
made its decision in the form o f a “Directive Order.”
Subsequent to the assumption o f responsibility fo r the administra­
tion o f wage stabilization in October 1942, and the establishment
o f regional boards in March 1943, the machinery fo r handling dispute
cases became more involved and the length o f time fo r processing
these cases necessarily increased. A wage stabilization memorandum
had to be prepared fo r each dispute case after October 1942 in which
an analysis had to be made as to the permissibility o f any wage
increases involved. This obviously required considerable extra time
and staff for processing. A fter the regional boards were established,
the National Board had to screen all dispute cases and decide which
cases to keep for final processing in Washington and which cases to
send to the regional boards and commissions. The processing o f a
case by these agencies followed the same pattern as that o f the Na­
tional Board. A fter a decision had been issued by the National
Board or one o f its agencies, either party had the right to request
reconsideration. In addition, the final action o f a Board agency
could be appealed to the National Board.
Obviously, with a machinery as elaborate as this, cases would take
a considerable time to process. In addition, the Board was overloaded
with 20,692 dispute cases during its life.8 Unfortunately, the records
are inadequate fo r a complete statistical summary o f the time con­
sumed in handling dispute cases. W e do know that o f the cases
decided in July 1945, 25 percent were decided within 3 months o f
their certification, 40 percent within 3 to 6 months, 20 percent within
6 to 9 months, and 15 percent required even longer.* In addition,
4

o^

8For a detailed statistical analysis, see U. S. Department of Labor, The Termination
Report of the National War Labor Board (1948), vol. I, pp. 479-502 (hereinafter referred
to as The Termination Report).
4 Based on a sample of cases decided in July 1945. Ibid., pp. 485-486. A few of these
cases remained unsettled for as long as 20 to 24 months before final disposition. However,
these cases were exceptional and were mainly due to factors over which the Board had no
control, such as representation disputes.




PROBLEMS OF CASEl PROCESSING

325

many o f these cases were not finally disposed o f until petitions for
reconsideration or review were completed.
There are indications that the elapsed time varied significantly
from these figures during different periods o f the Board’s history.
During the first 10 months, with only an indefinite stabilization re­
sponsibility and a small number o f cases, processing time apparently
was not so long. However, the impact o f a specific stabilization re­
sponsibility greatly extended the elapsed time. This occurred imme­
diately after the issuance o f Executive Order 9250 in October 1942
and again after the issuance o f the “ hold-the-line” order (9328) in
A pril 1943. Indeed, after the second o f these orders, processing
practically stopped until after its clarification 5 weeks later. F ol­
lowing a period o f readjustment, the processing time began to decline
until it reached the 1945 level stated above. Despite this improve­
ment, the Board still had a backlog o f 3,042 dispute cases on VJ-day.
Most o f these cases were subsequently returned to the parties for
settlement through collective bargaining.
The machinery for handling voluntary wage stabilization cases was
also rather involved and time consuming although not as elaborate
as that designed for disputes. The processing o f these voluntary cases
began with the filing o f a Form 10 application for a wage increase by
either an employer alone if the plant was unorganized, or by an em­
ployer and the representatives o f the one or more recognized unions
i f the plant was organized. These applications were filed with the
nearest office o f the W age and Hour Division o f the United States
Department o f Labor. A t this level the applications were given a pre­
liminary review to see that they were properly prepared, and then were
forwarded to the Regional Wage and Hour Office for another screening
before finally being sent to a regional board. Processing by a regional
board began by docketing the cases to be retained by it fo r final action
and forwarding the remainder to the National Board, or appropriate
commission. The case was then assigned to a wage analyst in the
wage stabilization division o f the agency for review and analysis, a
memorandum was prepared by the analyst and a decision rendered
by either the W age Stabilization Director or the Board. I f the case
fell within the delegated authority o f the W age Stabilization Director,
and was decided by him, it could be appealed to the regional board,
and then appealed again to the National Board. I f the regional board
decided the case in the first instance, it could also be appealed to the
National Board.
As with dispute cases, the procedure established for voluntary cases
required considerable time even under the best o f circumstances. In
addition, the Board’s problems were complicated by the enormous




326

DISPUTE SETTLEMENT AN!D WAGE STABILIZATION

number o f voluntary wage applications received during its life.5 The
available statistics, although not completely adequate, show the length
o f time required for processing voluntary cases at different periods o f
the Board’s history. O f the cases decided during July 1945, when
the Board was operating more expeditiously than before, 68 percent
o f those processed by regional boards were decided within a month
o f their receipt and only 12 percent required more than 2 months.6
F or a number o f cases, additional time was consumed in appeals to
the National Board. In the early days o f the program, for the reasons
indicated below, the processing time was considerably longer.7 On
the other hand, with the issuance o f Executive Order 9599 immediately
after YJ-day, the Board did drop all but about 2 percent o f its backlog
because the rest did not directly involve price relief.8
C.

T

h e

F

C

ase

ebr u a r y

P

rocessing

B

ecord

of

t h e

NW SB,

Ja

n u a r y

1946-

1947

The functions o f the National W age Stabilization Board were quite
different from those o f the NW LB. The dispute settlement function
was eliminated, except for a few minor duties.9
T h e chief function of the N W S B w a s to exercise indirect controls over w a g e
or salary increase, that i , to rule upon applications for approval of voluntary
s
increases which might be used as a basis for increasing prices or rent ceilings,
or which might result in higher costs to the Government. T h e Board deter­
mined whether such w a g e increases could be used in whole or in part for these
purposes. In addition, the Board exercised direct controls over certain adjust­
ments. Board approval w a s required before a w a g e decrease could be put into
effect and for the establishment of rates for n e w occupations, departments, or
establishments. Direct controls were also specifically maintained by Executive
Order No. 9672 over all w a g e or salary adjustments in the building and con­
struction industry and certain adjustments in the basic steel industry.1
0

The mechanics for processing these voluntary cases were practically
•From October 3, 1942, to August 17, 1945, the Board received a total of 453,373 Form
10 voluntary applications for wage or salary adjustments. Of that total, 97 percent were
disposed of during the same period. Ibid., p. 504.
• Summarized from a table covering July 1945. Ibid., p. 509. This same section of
The Termination Report contains a considerable amount of statistical data on the process­
ing of voluntary cases.
TThe backlog of voluntary cases rose steadily during the early months of wage stabili­
zation, increasing from around 5,000 in January of 1943, to its peak in June 1943 of some
26,000 cases. The backlog declined rather steadily the last 6 months of 1943, ending the
year with 17,040 pending cases. The backlog held fairly steady during the first part of
1944, increased to nearly 22,000 cases in July, before declining rather sharply the last 6
months of 1944 to 12,505 cases on December 31. In terms of the rate at which cases were
being closed, this represented a work load of about 3% weeks. In other words, the average
age of pending cases as of January 1, 1945, should have been around 3% weeks.
« The Termination Report, vol. I, p. 459.
•The Steel, Textile and Meatpacking Commissions were continued to carry out directive
orders already issued in dispute cases in these industries. The NWSB was also authorized
to appoint arbitrators in dispute cases where such appointments were called for under
previous NWLB directive orders or under collective bargaining agreements, and to receive
strike notices under section 8 of the War Labor Disputes Act.
1 U. S. Department of Labor, The National Wage Stabilization Board (1948), p. 7.
0




PROBLEMS OF CASE PROCESSING

327

the same as under the NW LB. However, during the early months o f
NW SB operation there.was no delegation o f authority to W age Stabi­
lization Directors and hence more original decisions by the National
and regional boards. During the latter months o f 1946 extensive dele­
gation o f authority to Wage Stabilization Directors resulted in original
decisions by the Directors in the great majority o f cases handled.
The NW SB did not have to handle nearly the volume o f cases that
had pressed in on its predecessor during the war, nor in other ways was
its task so complicated.1 In consequence, its elapsed time record was
1
better. O f the cases on which statistics are available, 73 percent
were processed within a month and 21 percent more by the end o f a
second month. As in the case o f the NW LB, however, it should be
remembered that this length o f case processing time does not include
additional elapsed time for those cases appealed, or reconsidered by
the Board or its agents. Nevertheless, on the basis o f this record, it
would appear that the NW SB did not have a serious problem of
delay in processing its voluntary applications.

II.

L imiting F a c t o r s

in t h e

Sp e e d

and

E fficiency

of

C ase P rocessing

The foregoing brief review o f the record o f the Boards suggests
that case processing time was not a serious problem for either the
NDMB or the NW SB. On the other hand, the considerable time
required by the NW LB to process many o f its cases requires further
examination in the light o f the combined criteria o f speed and
equity.
A . G eneral A

d m in is t r a t iv e

P roblem s

Among the more serious early administrative difficulties encoun­
tered by the NW LB in handling its load o f voluntary and dispute
cases were the problems o f recruitment and training o f personnel.
During the first 9 months o f the Board’s existence, when it was han­
dling dispute cases exclusively, this problem was not too serious and
did not retard appreciably the speed o f case processing; the case load
was fairly ligh t; the staff required was rather sm all; and competent
personnel were available, particularly from such agencies as the
former NDMB. But with the addition o f wage stabilization admin­
istration to the Board’s duties in October 1942 the necessity for rapid
recruitment and training o f a large staff to handle both the increased
dispute case load and the new flood o f voluntary applications presented
MFrom January 1, 1946, to November 9, 1946, when case processing closed, the NWSB
received a total of 22,292 voluntary cases. (Ibid., p. 264.) Extensive statistics of case
handling are provided in ch. 22 of the report of that Board, cited above.




328

DISPUTE SETTLEMENT AND WAGE STABILIZATION

a serious problem.1 T o cope with this problem, the Board made ex­
2
tensive use o f the National Roster o f Scientific and Specialized
Personnel which had been hastily assembled. In addition,vigorous
recruiting in other governmental agencies was resorted to, particularly
the various divisions o f the United States Department o f Labor, the
United States Employment Service, the National Labor Relations
Board, the Social Security Board, and various State agencies. Col­
lege and University staffs were combed fo r key personnel such as
public Board members, statisticians, economists, panel chairmen, etc.
Since all full-tim e staff appointments carried temporary civil-serv­
ice status, clearance with the United States Civil Service Commission
was essential before a recruit could be placed on the Federal pay­
roll. Technically all recruitment was from the civil-service-rolls,
but in actual practice the candidate was often recruited first and quali­
fied later by the C ivil Service. During the period o f most .intensive
recruitment (from about November 1942 to July 1943) the problem o f
civil-service clearance did not present many difficulties; prewar civilservice standards were relaxed fo r the new wartime appointments,
Board judgment as to the candidate’s qualifications fo r a particular
classification was generally accepted, and the wartime emergency
with its emphasis on speed was recognized. But as the problem o f
recruitment gradually shifted to one o f training, upgrading and
reclassification in the latter part o f 1943, civil-service clearance became
more difficult and frequently resulted in serious impairment o f staff
morale and efficiency. The Civil Service Commission insisted that
many job descriptions were so vague that it was impossible fo r them
to apply any normal standards and thus to judge accurately either
the original recruitment classification or Board recommendations
fo r reclassifications and promotions. The result was that too much
o f the Board’s time and energy in the latter part o f 1943 had to be
devoted to overcoming the resistance o f the Civil Service Commission
to proposed reclassifications and appointments.
Many o f these personnel difficulties were unavoidable and were
due to the unusual nature o f the Board’s operations. N ot only were
there a very limited number o f people experienced in the intricate and
com plex field o f dispute Settlement, but there were no people at all
with experience in the processes o f wage stabilization administration
inasmuch as this experiment had never before been attempted. The
uncertainty surrounding the nature o f the job to be performed, there­
fore, made the task o f judging experience and qualifications exceed­
ingly complicated.
Neither the national nor the regional board ever developed a form al
t raining program for dispute or wage stabilization personnel. Some
“ Although the NWLB total staff consisted of only 2,613 full-time employees at its peak,
over 85 percent of this total had to be recruited after October 1942. In addition, several
hundred part-time employees had to be recruited during these early months.




PROBLEMS OF CASE' PROCESSING

329

regional offices made an attempt to provide limited instruction along
this line, but in general the emphasis on speed was so great that new
personnel were immediately assigned tasks involving specific cases
and received their training in the actual processing and disposition
o f these cases. O f course some supervision was provided in this onthe-job training, but the main emphasis was on the individual’s own
initiative and competence.
Particularly in the first year o f the Board, administrative con­
fusion combined with the shortage o f experienced staff to cause serious
delays. However, even these difficulties had some compensations.
A s a form er Board Chairman concluded:
But the early adm inistrative confusion, such as it w as, had its own virtues. The
confusion consisted sim ply in the fa ct that jobs o f various sorts were assigned
to full-tim e staff members, ad hoc m ediators, arbitrators, panel chairmen, and
other special assistants, not according to any fixed plan or chart of operations,
but on the spur o f the moment, under the pressure o f events which could not
brook delay, and in accordance w ith what seemed at the tim e to be the capa­
bilities o f the persons who either were at hand or could be drafted. The result
w as that while some m istakes o f both commission and omission were made,
hidden talents were quickly discovered, initiative w as encouraged, and indeed
compelled, and enough men were trained with enough speed to enable the Board
to carry the greatly magnified burden of work which was soon to fa ll upon it
under the Stabilization A ct. F in ally, the high degree of responsibility dele­
gate^ to the staff evoked in them a loyalty to the Board’s undertaking which
never flagged throughout its existence. This delegation of responsibility to
relative am ateurs w as due not so much to conscious policy as to sheer necessity.
There sim ply were not enough experienced men to be had, and until the last
year o f the Board’s existence the work had alw ays increased faster than the
budgetary estim ates.1
8

Another early administrative problem bearing directly on the speed
and efficiency o f case processing involved the internal organization o f
the NW LB. Besides the office o f the Board itself, the operating staff
was organized under four main heads. This organizational pattern
was the same in both the national and regional boards. The Chair­
man o f the Board was the chief administrative officer and each divi­
sion o f the Board had a director who was responsible to the Board
for the efficient operation o f his division. The primary responsibility
o f the wage stabilization, disputes, and legal divisions was the proc­
essing o f cases. (In the latter part o f the Board’s existence the en­
forcement o f wage stabilization provided most o f the case load for
the legal division.) The administrative division’s principal job was
handling personnel and fiscal problems, arranging for necessary space
and physical equipment, etc.
The problem o f developing a smooth work-flow o f cases through
these divisions, and through the Board itself, was complicated by
u

The Termination Report, vol. I, p.




x x i i j

,

330

DISPUTE SETTLEMENT AND WAGE STABILIZATION

the early reluctance o f the Board to delegate authority and responsibil­
ity. Even though this reluctance was understandable in view o f the
inexperienced character o f most o f the staff, it became an impossible
task fo r the fu ll Board to hear and decide all cases after the institu­
tion o f wage stabilization in October 1942. The first step in the direc­
tion o f delegated authority was the organization o f regional wage
stabilization staffs under a regional director in November 1942. These
directors, however, had authority only to make recommendations to
the National Board on the basis o f a preliminary case analysis. When
the regional boards were established in February 1943, they were
given authority to make final decisions in both voluntary wage stabili­
zation and dispute cases, subject only to appeal to the National Board.
In addition, both the national and regional boards were forced by
the sheer magnitude o f the case loads involved to organize committees,
such as the new case committee, the appeals committee, and the post­
directive committee, to aid in the processing o f cases. Most o f the
committees were composed o f Board members; others consisted o f staff
members. Instead o f the Board’s fu ll complement o f public, labor and
industry members sitting on all cases, a quorum o f three or six was
typically used in routine cases with two or more divisions o f the Board
frequently sitting simultaneously. The establishment o f commissions
and panels such as the Trucking Commission, the Lumber Commission,
the Shipbuilding Commission, etc., was also resorted to in the effort
to expedite its work.1
4
Although these administrative delegations o f authority helped, the
National Board and its agencies were constantly plagued with the
intermittency and turn-over o f the personnel especially o f its partisan
membership. The industry members were recruited from their fu ll­
time jobs, many o f which were important to the war effort. Hence,
they found it increasingly difficult, as the work o f the Board increased,
to assume either full-tim e or even regular part-time Board assign­
ments. T o a considerable extent this was true also o f the labor mem­
bers, both regulars and alternates. T o a lesser degree, it was also true
o f the alternate public members.
This problem arose because the Board sought the participation o f
responsible partisan leaders. But it had the effect o f im pairing the
rapidity o f Board activities because there was lack o f continuity on
committees and on the Boards themselves.1
5
B . S p e c ia l P r o cessin g P ro blem s i n D is p u t e C a se s 1
8
1.
.—W hen an impasse
developed between an employer and his organized employees over the*

The NWLB and the Conciliation Service

1 The work of the NWLB Commissions is analyzed in ch. 8.
4
» See also ch. 6, pp. 259-260.
** For a routine procedure for handling dispute cases, see The Termination Report, vol. I,
pp. 47-52.




PROBLEMS OF CASE* PROCESSING

331

terms o f a new contract, or the interpretation o f an existing contract,
the procedure required that the mediating efforts o f the United States
Conciliation Service be invoked. Since the object, and only excuse,
fo r any governmental intervention in labor-management relations was
to secure an early agreement on disputed terms o f employment and
thus insure uninterrupted production and since an old, established
agency with a trained staff was available and normally discharged this
function, there seemed to be every reason for utilizing this agency as
the first resort in settling wartime labor disputes.
But the effectiveness o f the mediating efforts o f the Conciliation
Service depended, in the last analysis, on the extent to which both sides
preferred the results o f their own collective bargaining to an arbitrational conclusion o f their disputes.1 The vast m ajority o f negotia­
7
tions were concluded without reference to the Board, but all too fre­
quently calling in a conciliation commissioner was considered by one
or both o f the disputants as only a necessary routine that had to be
followed as a prerequisite to getting the case certified to the NW LB
by the United States Department o f Labor. Although it was inevi­
table that many o f the disputes would go on to the Board, it would
appear that hundreds o f cases and thousands o f minor issues were
tossed into the lap o f the Board for final determinations that might
have been bargained out between the parties, with or without the aid
o f the Conciliation Service. And, fo r many o f the cases which the
parties could not or would not settle by bargaining, however, the net
effect o f calling in the Conciliation Service was only to delay the final
certification o f the case to the Board by several days to a week or
more. The question may appropriately be raised at this point as to
whether or not the Conciliation Service should have been placed ad­
ministratively directly under the NW LB. Good arguments can be
advanced for and against this proposition. The principal argument
for this proposal was that the NW LB would then be in charge o f the
dispute from the time o f the first governmental intervention in the case
until it was closed. But there were practical and political reasons
why this course o f action might have been undesirable. A t the very
least, however, a closer liaison between the Conciliation Service and
the NW LB would have facilitated greatly the work o f both agencies.
In its early planning the NW LB expected the closest o f cooperation
with the Conciliation Service. The Board philosophically favored the
settlement o f cases without resort to authoritarian decisions. It hoped
and expected, as its early deliberations show, that the Conciliation
Service, as the mediation arm o f the Federal Government, would dis­
pose o f the vast m ajority o f dispute cases. The Board would estab­
lish national policy and the parties would follow it in good faith with
1 Fop a discussion of the effect of the NWLB on the process of collective bargaining see
T
ch. 1, pp. 44-46.




332

DISPUTE SETTLEMENT AND WAGE STABILIZATION

the aid o f Government conciliators. Only policym aking cases and
particularly difficult disputes would require settlement by the Board.
And, in relation to these types o f cases, the Conciliation Service would
be most helpful. I t would supply essential factual data and make
available inform ation on the viewpoints o f the parties.
The Board acted upon this theory o f the proper relationship between
the two agencies. Funds were provided through the Board to the
Conciliation Service so that the Service could appoint liaison officers
located in each regional board office and, additionally, hire more con­
ciliators.
The system, with a few notable exceptions, did not always function
in close approximation to the original theory. One result was an
overestimation o f the workload o f the Conciliation Service and a con­
sequent overstaffing; and a gross underestimation o f the dispute case
load o f the Board and, initially at least, understaffing.
Some notable exceptions existed to the general failure o f the co­
operative system. In a few regions, largely because o f the personali­
ties and philosophies o f the regional chairmen or disputes directors
and o f the liaison officers o f the Service, collaboration did develop, al­
though never to the extent originally envisaged. Frequently there
was distinct coolness and occasionally open hostility between the rep­
resentatives o f the two agencies. Instead o f close cooperation, the
relation became one o f form al referral by the Service o f cases to the
Board which equally form ally accepted them.
This failure o f the original dream to take physical shape is, in retro­
spect, understandable. It was founded in the attitudes o f many peo­
ple, who, in playing out their roles, viewed the relationship quite d if­
ferently from that anticipated by the National Board at the outset.
It was based, also, on certain administrative arrangements and de­
velopments :
1. Cooperation o f the sort desired depended on face-to-face dealings
Passing on both the facts and the feel o f a case required some intimacy
between the people in the Board and the Service who handled it. So
also did the acquainting o f the conciliators with all those niceties o f
current interpretations which would assure faithful presentation to
the parties o f Board policy as the basis for their own voluntary set­
tlement. A t the operating level some verbal exchange o f data and
ideas was essential. Quite the opposite occurred. Cases were passed
from hand to hand, and the conciliator at one end and the panel chair­
man or hearings officer at the other end were frequently quite fa r re­
moved. The conciliator passed the case to his national office, through
channels; his national office referred it to the National B oard; after
going through channels there, it ended up in the hands o f the regional
board; and from there, after some handling, it went to the panel chair­




PROBLEMS OF CASE! PROCESSING

333

men or the hearings officer. Not only were the ground-floor people
at both ends many steps removed from each other, but they faced the
case at quite different times. The handling process took tim e; and by
the time the case became hot for the panel it was cold for the con­
ciliator.
2. The parties were not always anxious for the Conciliation Service
to expend full effort on their case. One or both sides frequently de­
sired to pass on the effort o f effectuating an agreement to the Board,
and the risk and blame as well. Negotiations were often viewed as
something o f a farce, since rules o f the Board greatly restricted the
area for give-and-take. The Conciliation Service frequently was con­
sidered to be a way station to the Board, and since there would be many
exasperating delays later, it was often made clear that the case should
be sent on its way as expeditiously as possible by the Service. Good
service meant fast service.
3. There were many reasons why the conciliators did not wish to do
more than the parties wanted them to do. Should a conciliator settle
a case, if it involved wages or fringes, it still needed to go to the Board
fo r approval. I f the Board did not approve (and a few actual cases
o f this quickly taught the lesson), the conciliator lost face with the
parties. Every settlement involved a risk. Better to refer the case
quickly and take no chances. The record o f the conciliator looked just
as good.
Nor was there usually any great anxiety to help the W ar Labor
Board. Partly, this stemmed from the top. The relationship be­
tween the D irector o f the Conciliation Service and the National W ar
Labor Board was not a close working one. Partly, this attitude de­
veloped at the bottom. The green hands o f the W ar Labor Board
took all the glory, and, to boot, were paid higher salaries. Resent­
ment o f the professional toward the usurping amateur, o f the backseater toward the front-seater, o f the low-paid toward the higher
paid were compounded together.
L oftier motives were at work, too. The W ar Labor Board was not
always popular with the parties, but then it was a temporary agency
and expendable. The Conciliation Service, however, antedated the
war and would post-date it, too. Too close a connection with the Board
would taint the reputation o f the Service and impair its usefulness in
the future years. It was better, with an eye on the long run, to stand
at a discrete distance. Furthermore, a really confidential relation­
ship with the Board would have been somewhat unethical. T o be
fu lly useful to the Board, the conciliator would have needed to turn
over all his knowledge about each case. Since the conciliator often is
given information in private, this would have meant some betrayal o f
confidences.




334

DISPUTE SETTLEMENT AND WAGE STABILIZATION

4.
Board personnel were equally responsible for failure o f the
original policy. There was a tendency to disregard and even be dis­
dainful o f the Conciliation Service. Board officials were very busy.
'They were often more concerned with applying policy than with
achieving the settlement most satisfactory to the parties involved.
The Conciliation Service was a way station.
Taken together, the administrative arrangements and the attitudes
o f the parties, the concililiators and the Board officials explain the
general, but not universal, failure o f the policy o f cooperation, em­
braced at the start by the National Board.
2. Tripartite panels versus hearing officers.—The use o f tripartite
panels instead o f staff hearing officers lengthened the time required
to process a dispute case because the panels were exceedingly cum­
bersome. These panels were established from approved lists o f labor,
industry, and public representatives. But industry or labor mem­
bers o f the Board sometimes requested prereview o f the particular
panel candidates before their final selection to serve on a specific case.
Then considerable time was spent in notifying the panel members
o f their selection, determining their availability, arranging a suitable
time and place fo r the hearing, conducting the hearing itself, and
reassembling the panel members to write the panel report. A s a result,
irritating delays in this procedure were common.
The reason fo r the parties’ preference for panels over a hearing
officer, however, was understandable.1 They felt that their side o f
8
the case would be received more sympathetically and decided more
fa irly if they had a partisan representative hearing the case and par­
ticipating in the report and recommendation to the Board. The use
o f a staff hearing officer, however, could usually shorten the time o f
getting the case to the Board by several days, if not weeks. A special
but largely unsuccessful drive was instituted by the Board during
1945 to get the parties to agree to accept hearing officers rather than
panels in order to speed up this phase o f dispute case processing.
3. Other processing problems.—A fter a panel or hearing officer’s
report was completed, it was sent to the disputants fo r comment. This
also took time as the parties were often very slow in returning their
comments to the Board. Then if a wage issue was involved, (and
typically there was a wage issue in dispute cases) the case had to be
analyzed by the wage stabilization division and a memorandum pre­
pared on the permissibility o f the wage increase recommended by the
panel or hearing officer’s report. Delays in clearing the case through
the wage stabilization division were occasioned by about the same
factors as were involved in voluntary cases. These factors are dis­
cussed in some detail below.
1 For a discussion of the role of partisan panel members, see ch. 6, pp. 236-240.
8




PROBLEMS OF CASE- PROCESSING

335

But, even after a case was ready for the Board’s docket, it might
require additional time before the case was actually considered and
ample, could be requested and granted before the case was finally
decided by the Board. A Board public hearing on the case, for exdecided and a directive order issued.
A t least, three additional factors complicated the processing o f dis­
pute cases and lengthened the time involved therein. First, the strike
policy o f the Board ealled fo r the immediate cessation o f all proces­
sing o f a given case during a work stoppage. Enforcement o f the no­
strike, no-lockout pledge required this action, but it did result in
longer processing time for the cases involved.
Second, the special pressure by labor and industry Board members
to call up cases out o f turn resulted in shoving older cases farther down
on the agenda and lengthened their repose in the Board’s backlog.
A pressing emergency in a vital area o f war production may have oc­
casionally warranted such action, but too often these pressures were
used without such warrant.
Third, and more important by far than the other two in lengthening
case processing time, was the m ultiplicity and complexity o f the issues
involved in the typical dispute case. One case alone m ight easily
have 25,50, or even more, separate issues that had to be independently
heard, analyzed, and finally decided.1 Many o f these issues were
9
exceedingly complex (such as intraplant inequity problems) and re­
quired the most careful consideration before a fair and equitable judg­
ment could be reached. This demanded time—in the hearing, by the
panel, by the wage stabilization division, and by the Board itself.
What were the alternatives to a considerable amount o f elapsed time
in dispute case processing? One alternative, o f course, would have
been the freezing o f the status quo in industrial relations and employ­
ment conditions for the duration o f the war.2 But the acceptance o f
0
the principle o f flexibility in the settlement o f industrial disputes in
W orld W ar I I eliminated this possibility.
Another alternative that might have been resorted to was a require­
ment that the disputants submit only written briefs to the Board for
final action, thus dispensing with all oral testimony, public hearings,
panels, hearing officers, and reports. But the traditional American
concepts o f fair play, o f disputants having their day in court, o f
abiding by some kind o f due process in administrative law making, all
1 The large number of issues typically presented to the Board in dispute cases was the
9
result of the prevailing tendency of some of the parties to make little serious effort to
settle these matters on their own, but instead to turn them over in toto to the Board for
final adjudication. Despite strenuous efforts of the Board to get the disputants to bargain
out nonwage issues, even referring many issues back to the parties with instructions to
settle these issues themselves, the typical dispute case always had a number of unresolved
Issues which had to be decided by directive orders.
9 The closed-shop issue was thus frozen in World War I. For an extensive discussion of
9
the establishment of general standards, case-by-case handling and flexibility, see oh. 2.
921297—SO----- 23




336

DISPUTE SETTLEMENT ANiD WAGE STABILIZATION'

seemed to mitigate against this alternative. Final decisions nnder
this simplified arrangement furthermore would not likely have been
as sound, fair, or acceptable, as under the longer procedure in which
thoroughgoing analysis, debate, and consideration were given to each
disputed issue. Although it was well recognized that Board public
hearings rarely added anything new to the evidence already at hand,
the psychological value was usually tremendous. The losing party
tended to accept his loss with better grace because he felt that he had
had a fair hearing before impartial judges. In accepting the prin­
ciples o f flexibility and o f due process in dispute case settlement, there­
fore, it appeared inevitable that a considerable amount o f elapsed
time would be required in case processing; fairness to the parties in­
volved, soundness o f the judgment rendered, and acceptance o f the
final award all demanded it.2
1
Some improvements in the procedures could undoubtedly have been
made in the interest o f shortening case processing time, but i f serious
mistakes were to be avoided and m ajor dissatisfaction with disputes
decisions minimized, these possibilities were far more lim ited in dis­
pute cases than in voluntary wage stabilization cases.

C.

Special P

rocessing

P

roblems in

V

o l u n t a r y

W

age

C

ases

22

B y fa r the most serious obstacle to the more rapid processing and
disposition o f wage stabilization cases in the early months o f the
NW LB was the uncertainty and indefiniteness o f existing stabiliza­
tion principles or criteria. The four m ajor standards against which
voluntary wage increase applications were judged prior to A pril 8,
1943 (the maladjustment formula, inequalities, substandards, and e f­
fective prosecution o f the w ar), all posed many questions when ap­
plied to specific cases. Even the simplest o f these, the L ittle Steel
maladjustment formula, involved serious questions as to its correct
application to a specific case. It could not be applied, fo r example, to
a single employee, but only to an appropriate group o f employees; it
had to exclude changes in hourly earnings due to merit increases, pro­
motions, reclassifications, etc.2
3
The inequalities criterion was the most difficult o f all to apply be­
cause o f the extreme amount o f uncertainty and indefiniteness sur­
rounding its use in specific cases. The m ajority o f cases involved the
use o f this standard down to A pril 8,1943. W hat constituted a wage
inequality? No one could answer this question with finality; a large
amount o f discretionary judgment had to be used in every case. But
2 See, particularly Taylor’ comments on this point in Termination Report, voL I p. xxv.
1
s
,
2 For routine procedure for handling voluntary wage cases, see The Termination Report,
2
vol. I pp. 45-47.
,
2 At one time during this period some fifty-odd separate questions on the correct appli­
8
cation of the maladjustment formula were sent by the regions to the National Board for
interpretation and clarification.




PROBLEMS OF CASE PROCESSING

337

regional staffs were reluctant to use the large amount o f discretionary
judgment the use o f this standard required in view o f the limited
authority delegated to them during this period. The result was delay,
and an ever-increasing case backlog.
The substandard principle was in such an unsettled state before
A pril 8 that it was seldom applied by any regional board. There was
no agreement in either the regional boards or in the National Board
as to what was a substandard wage. And the effective prosecution
o f the war standard obviously was not a standard to be used by a
wage-stabilization director in the day-to-day processing o f cases.
The difficulty o f holding some kind o f a wage line with these stand­
ards, particularly the inequalities criterion, led to the issuance o f
the hold-the-line order o f A pril 8,1943. W ith the policy Directive o f
May 12, the wage bracket program was introduced to deal with inter­
plant inequities. Case processing, however, was practically stopped
between A pril 8 and late May 1943, and the backlog, o f course, climbed
steeply. But the application o f the brackets to specific cases also
posed terrific problems, and, at the same time, the vast m ajority o f
cases had to be decided under this standard. It was not until the fall
o f 1943 that this standard was developed sufficiently to serve as a
practical device fo r voluntary or dispute case wage processing.
The substandard principle was clarified somewhat in the summer
o f 1943 with the adoption o f 50 cents per hour as a tentative base,
and this helped considerably in moving some cases. But it was not
too simple to apply at best, in view o f the complications its use created
for the rate structure above 50 cents per hour. The tapering principle
was later developed to meet this problem.
The effective prosecution o f the war, or rare and unusual, principle
remained an indefinite standard to the end o f the war. It was de­
signed only fo r exceptional cases, and, therefore, was never o f any
utility in routine case processing, or in reducing the case backlogs.
The slow hammering-out o f most wage stabilization principles by
the case-by-case method, with the insistence that no general policy
was established in any specific decision, had important advantages
from a long range point o f view. This procedure, however, was
cumbersome, time-consuming, and accounted in no small measure for
the rapid accumulation o f a sizable backlog o f cases in the first year
o f the Board’s existence. Case processing simply could not proceed
in any orderly fashion in the absence o f definite, workable principles
as a guide. During the last year and a h alf o f the Board’s existence
many o f these difficulties had been overcom e; fairly definite principles
had been established; and case processing picked up real speed.
Only slightly less serious as an impediment to more rapid case
processing after A pril 8,1943, was the dearth o f necessary wage data




338

DISPUTE SETTLEMENT AND WAGE STABILIZATION

in disposing o f gross inequity, or bracket cases. In view o f the fact
that approximately 80 percent o f voluntary cases eventually had tp
be decided by the application o f stabilized wage brackets, and the
use o f these brackets involved the collection, organization, and interpre­
tation o f wage rate data by job classification and local labor market
area, the task was truly a staggering one. Starting out in the summer
o f 1943 with only the most scanty data o f this sort, the Board called
on the Bureau o f Labor Statistics to gather the raw material from
which stabilized rates were to be set. This prim ary source o f wage
data was supplemented by other available sources, such as past case
records. The B LS did an heroic job o f collecting a vast amount o f
wage rate data in a short period o f time, but the organization o f this
data by regional board staffs, and the establishment o f stabilized rates
by tripartite panels o f the regional boards for literally thousands o f
separate job classifications in hundreds o f local labor market areas,
proved to be a task o f such form idable proportions that it was never
entirely completed.
In a large number o f cases, tentative rates had to be set by staff
analysts on the basis o f estimates and judgment, using such inform a­
tion as was available. This frequently involved assumptions regard­
ing job descriptions which were usually missing and had to be guessed
at or secured by additional correspondence with the applicants. These
steps added up to days and weeks during which a case lay dormant
in the backlog. Anything approximating adequate wage rate in­
form ation necessary to process the typical inequity case was not avail­
able until well into 1944, and fo r many areas specific wage data fo r
specific job classifications were never assembled.
In addition, the Board was hampered in its early days by a lack o f
trained wage analysts. I t had to hire many with very little train­
ing and experience. Before employment with the N W LB, the typical
raw recruit had never even seen the wage rate structure o f a going
business concern, let alone known the meaning and use o f job
descriptions. And in regard to incentive systems, job evaluation
plans, and complicated intraplant inequity problems, the average
analyst was meeting a strange and new world, totally foreign to any­
thing in his past experience. When confronted with the task o f
applying indefinite principles o f wage stabilization to specific cases
under these conditions it is remarkable that the task was accomplished
as well, or as rapidly, as it was. As was indicated above, however,
on-the-job training proceeded rapidly and individual talents were
quickly discovered and utilized. By the beginning o f 1944 a group
o f fairly well-trained analysts had been assembled and case processing




PROBLEMS OF CASE PROCESSING

339

after this date was not seriously delayed by the lack o f trained
personnel.
Still another factor impeding more rapid voluntary case processing
in the early days o f wage stabilization was the limited delegation o f
authority, first from the National Board to its Stabilization Director
and to the regions, and second by the regional boards to their stabili­
zation directors. It became obvious very shortly after the wage
stabilization program was inaugurated that the fu ll boards themselves
could not hear and decide all the voluntary cases submitted to them.
There, however, was an understandable reluctance to delegate wide
authority fo r final case decision-in a period o f such great uncertainty
as to the proper interpretation and application o f wage stabilization
policies. Nevertheless, it resulted in delays o f considerable magni­
tude. It was not until the middle o f 1944, for example, that the
National Board delegated to its W age Stabilization D irector any
authority to make original decisions in voluntary cases, subject only
to appeal to the fu ll Board.
The administrative impossibility o f handling the case load in the
regions by the boards themselves forced early delegation o f some re­
sponsibility to the regional wage stabilization directors for making
original decisions. But it was still too little and too late in most
regions for rapid disposition o f large numbers o f cases. W ide re­
gional differences in the amount o f delegated authority to wage stabili­
zation directors in disposing o f cases by original decisions existed to
the very end o f the Board’s life. Processing was expedited in most
regions, however, by the use o f tripartite divisions or committees o f
the Board who heard and made original decisions in those cases not
falling within the delegated authority o f W age Stabilization Directors.
The use o f the field offices o f the W age and Hour Division o f the
United States Department o f Labor as original receiving stations for
Form 1 and Form 10 applications did lengthen the immediate process­
ing time, but in the long run the total elapsed case processing time
very probably was shortened by this procedure. The functions o f
the Wage and Hour field offices were—
to answer specific questions by employers and employees in their localities as to
the application o f the wage regulations (Form N W L B -1 ) and to aid employers
and unions to fill out applications (Form N W L B -10) for wage and salary
increases which had to be approved by the Board.2
4

These applications were then forwarded to the nearest regional W ar
Labor Board office for final disposition.
The fact that in over 60 percent o f the Form 1 cases ruled upon by
the W age and Hour offices the applicant was informed that a Form 10
need not be filed with the W ar Labor Board indicates the extent to

24The Termination Report, vol. I, p. 503.




340

D IS P U TE S E T T L E M E N T AN© W A G E S T A B IL IZ A T IO N

which the potential Form 10 load o f the Board was reduced.*8 But
even more, the original processing o f Form 10 cases themselves by
these field offices saved many hours and days in the N W LB when
these cases came up fo r analysis. The W age and H our staffs checked
incom ing Form 10’s fo r completeness o f inform ation and signatures,
returned them to the applicants when they were incomplete, and fre­
quently aided the applicants directly in filling out the Form 10’s
correctly. A ll this speeded up the actual processing time after the
case reached the Board itself. Despite the resentment often voiced by
applicants at having to file their petitions first with the local W age
and H our offices instead o f directly with the N W LB, and despite some
additional elapsed time in W age and H our processing and forwarding
to regional board offices, it was therefore generally believed that the
total elapsed processing time in the long run was shortened by the
use o f this agency. This was especially true in the latter days o f
wage stabilization as trained W age and H our personnel became in­
creasingly efficient in handling these Form 10’s. The convenience o f
having staff representatives in these local field offices fo r consultation
and advice on NW LB policies and procedures also weighed heavily in
favor o f filing Form 10’s with these offices rather than directly with
the N W LB.
A s in dispute case processing, special pressures by labor and in­
dustry Board members to take up cases out o f turn lengthened the
time it took other cases to pass through the Board. But this problem
in voluntary case processing was not as serious and did not occur
as frequently as in dispute cases. Fairly early in the Board’s career
the general principle o f taking up cases in the order in which they
were received was accepted— equity and fairness to the applicants
demanded it, and this policy in voluntary cases was rather closely
adhered to.
There were no alternatives to some elapsed time in processing volun­
tary cases if any kind o f a wage stabilization line was to be held.*8
Rubber stamping cases in the interest o f speed o f disposition without
adequate and careful analysis o f the facts involved would not only
have been grossly unfair to the applicants concerned (unless, o f course,
all cases were automatically approved) but would have quickly under­
mined all public confidence in the wage stabilization program.*
2
8
2 Ibid., p. 503-504 “In the period November 1, 1942-August 24, 1945, Wage and Hour
8
Offices received from inquirers for the first time a total of 214,335 requests for rulings
(see table 20). 86 percent of the requests were disposed of by ruling; 12 percent were
returned to applicants because of incompleteness and were not resubmitted by the appli­
cants or were sent to the War Labor Board for ruling; and 2 percent were otherwise
disposed or ♦ ♦ ♦ In 111,092, or 60.4 percent of the total number of rulings, It was
indicated that application on Form 10 was not required. In 66,949, or 36.4 percent of
the rulings, it was stated that application on Form 10 was required.**
2 It was recognized that delay itself was a stabilizing factor to the extent that the
8
status quo was maintained until a Board decision was rendered, although this was cer­
tainly not a basic reason for the procedures. (See ch. 4.)




P R O B LEM S O F CASE P R O C ES S IN G

341

But granting that some elapsed time was necessary in order to ren­
der an equitable decision on the merits o f individual cases, there were
desirable modifications to the rather involved, time-consuming pro­
cedures follow ed during the early days o f wage stabilization. The
adoption o f short standardized forms for wage memoranda, letters,
and decisions, was too long delayed. Improvements in the routing
and assignment o f cases to individual analysts could have been
achieved earlier. Organization o f the wage analysis staff by industry
groupings was slow in developing and never uniform ly adopted.
Better controls and record keeping would have shortened necessary
case processing time. In addition, o f course, various impediments to
more rapid case processing discussed above might have been elimi­
nated. Comparatively little time would have been saved by the
earlier use o f these modifications, however, if the job o f wage stabiliza­
tion was still to have been done with anything approximating fairness,
equity, and thoroughness.
D.

P

ro blem o f

A

ppeals

The factors lim iting the speed and efficiency o f case processing up
to this point have been discussed almost entirely in terms o f reaching
original decisions by the N W LB or its agents in voluntary and dispute
cases. But many cases were not finally closed with issuance o f a
directive order in dispute cases or an original decision in voluntary
cases. Amy administrative organization involving necessary and wide
delegation o f authority for its operation must provide for some kind
o f appeals procedure. The whole American system o f jurisprudence
is based upon this principle and the denial o f its use in a quasi judicial
agency such as the NW LB would have violated the traditional Ameri­
can concept o f equity and fair play. Petitions for reconsideration
and/or review lengthened total case processing time by days and
even weeks.
As has been indicated above, the National Board delegated complete
authority to its regional boards and commissions to make original
decisions in dispute and voluntary cases except in a limited number
o f cases in which original jurisdiction was reserved because o f the
size or national importance o f the case. But the right to appeal from
these original decisions was never denied. The usual procedure was
to appeal first to the regional board or commission fo r reconsideration,
and, if still dissatisfied, to appeal to the National Board fo r a final
answer. Complete statistical data on the number o f petitions for
reconsideration and review are not available. However, in the period
September 1,1944, to August 18,1945, regional boards received a total
o f 3,010 requests for reconsideration o f one or more items in the di­
rective orders issued by them in dispute cases.®7 And in the period
2 The Termination Report, rol. I, pp. 480 482.
7




342

D IS P U TE S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

from June 25, 1943, to August 18, 1945, the National Board received
a total o f 5,031 petitions to review one or more items in the directive
orders issued by the regional boards or commissions.2 In view o f
8
the fact that the regional boards and commissions closed less than
15,000 dispute cases by original directive order during the entire
period from January 12, 1942 to August 18, 1945, it would appear
that over 50 percent o f all original decisions by the regional boards
and commissions were appealed either to the regional boards and
commissions for reconsideration or to the National Board fo r review.
Appeals from original decisions o f regional boards in voluntary
cases were much less frequent. In the period December 3, 1943* to
August 17, 1945, the regional boards received 5,885 petitions fo r re­
consideration o f their decisions.2 And in the period from June 25,
9
1943, to August 17,1945, the National Board received only 2,689 peti­
tions fo r review o f regional board and commission decisions in
voluntary cases.3 When it is considered that the regional boards or
0
their agents rendered original decisions in over 400,000 voluntary
cases down to VJ-day, the percentage o f petitions for reconsideration,
and review o f regional board decisions was very small. It is im por­
tant to emphasize, therefore, that whereas appeals to the regional
boards fo r reconsideration and to the National Board for review were
an exceedingly important feature o f dispute case processing, they were
relatively insignificant in voluntary cases.
The real appeals problem in voluntary cases, however, occurred in
the form o f appeals to the regional boards from the original decisions
o f the wage stabilization directors. Some 96 percent o f all regional
decisions in voluntary cases from July 1, 1944, to August 17, 1945,
were made by regional wage stabilization directors under authority
delegated to them by their regional boards. W hile administrative
necessity required this wide delegation o f authority to regional wage
stabilization directors, it was clearly understood that any party to
such a case had an unqualified right to appeal the decision to the re­
gional board. Indeed, many labor organizations and some employers
follow ed the practice o f automatically appealing the decision o f a
wage stabilization director whenever anything less than fu ll approval
was granted. Between July 1,1943, and August 17, 1945* a total o f
52,410 cases decided originally by regional wage stabilization direc­
tors were appealed to their respective regional boards.3 Although this
1
represented only about 15 percent o f the 350,000 decisions rendered by
regional wage stabilization directors* the total appeals case load thus
created was terrific.
2 Ibid.
8
2 Ibid., p. 507.
9
3 Ibid.
9
« Ibid.




PROBLEMS OF CASE* PROCESSING

343

Appeals from regional board decisions in both dispute and voluntary
cases were handled by a tripartite division o f the National Board
known as the Appeals Committee. Appeals from each wage stabiliza­
tion director’s decisions were handled by a tripartite division o f that
regional board, also called an appeals committee. Appeals case back­
logs at both the national and regional levels, had become an alarming
problem by the end o f 1943 and reached a peak about the middle o f
1944. Bapid processing and disposition o f appeals cases by the na­
tional and regional appeals committees were hampered by the lack o f
clear-cut delegation o f final authority and jurisdiction by the respec­
tive boards; by the time-consuming appeals procedure, particularly in
disputes cases where filing o f petitions, briefs, and replies to briefs
often consumed weeks or even months; by the shifting personnel on
the appeals committees; by the difficulty o f securing a committee
quorum and hence follow ing a regular, steady time schedule o f work;
by the reluctance o f labor and employer members o f these committees
to make a final disposition o f the appeal without a hearing by a full
Board; by the difficulty o f securing a place on the agenda o f the full
boards for hearing reports and recommendations o f the appeals com­
mittees ; and by the limited staff available for the analyzing o f appeals
cases for the appeals committees.
No adequate data are available on the average length o f processing
time in these appeals cases.8 But the appeals case backlogs at both
2
the national and regional levels had become so large by the end o f
1943 and early 1944 that drastic steps were adopted to reduce them.
Appeals procedures were tightened in a variety o f ways, including
the imposition o f rigid time limits on filing petitions and replies
to briefs. Appeals committees spent more regular time hearing and
disposing o f pending cases. More analysts were taken off original
case processing and assigned to appeals case processing. W ider and
more specific delegation o f authority was made to the appeals com­
mittees by the boards. More time was given by the fu ll boards to
the disposition o f appeals cases. In addition, in order to discourage
a large volume o f appeals which had little or no merit, a tougher
policy was adopted by both the regional and national boards in the
form o f upholding the original decisions. The record shows that on
appeals for review during the period June 25,1943, to August 17,1945,
the original decisions were upheld in 80 percent o f the voluntary cases.
The original decisions o f wage stabilization directors, however, were
upheld in only 34 percent o f the appealed cases.3
3 Only one sample of some 800 disputes and voluntary cases appealed to the National
3
Board from regional boards between October 1, 1944, and December 31, 1944, is available
in this connection. The average length of time of processing appeals from regional board
directive orders to the issuance of a National Board directive order in disputes cases was
3 to 5 months. In voluntary cases, 2 to 4 months was required to process the appeal from
the regions to the National Board.




344

DISPUTE SETTLEMENT AND WAGE STABILIZATION

There is no question that the appellate procedures o f the NW LB
lengthened the time o f final case disposition and thus created a rather
serious problem, particularly in dispute cases. But were there any
alternatives to this extended time period in the processing o f appeals?
It is extremely doubtful that the Board could have functioned without
some appeals machinery. Appellate procedures are an indispensable
corollary o f any administrative organization using extensive delega­
tion o f authority. And a wide delegation by the National Board
was inevitable and desirable.
W ith the addition o f wage stabilization to the N W LB’s functions
in the fall of 1942, it had to establish regional boards and delegate
wide authority to them in handling both dispute and voluntary cases.
In turn the regional boards had to delegate wide authority to their
wage stabilization directors in disposing of voluntary cases. A c­
ceptance of the principle of delegated authority, particularly by a
tripartite organization in such a delicate area as industrial relations,
depended upon a careful reservation of the right of appeal by inter­
ested parties.

But this does not mean that procedures used by the Board could
not have been improved and the elapsed time or processing appeals
cases shortened. Consideration o f the appeals problem was too long
delayed by the Board, the early appeals procedures were too loose and
too indefinite, and the appeals procedure was too frequently used by
interested parties as a means o f delaying final compliance with Board
orders or decisions.
In contrast with the wartime experience, the processing o f appeals
raised no serious questions after VJ-day. The National W age Sta­
bilization Board encountered no serious problems either in terms o f
the size o f the appeals case backlog or in terms o f the length o f time
o f case processing. This was due in large measure to the larger
number o f trained staff personnel available for case processing, to
the use o f the standardized procedures and principles eventually de­
veloped by the NW LB, and above all to the drastic reduction in the
total case load the NW SB was required to handle after YJ-day.
E. P roblem or R e t r o a c t iv it y
Related directly to the problems o f case processing, particularly as
a causal factor in lengthening the time o f final case disposition by
appeals, was the issue o f retroactivity. Recognition o f the principle
o f retroactivity in both dispute and voluntary cases was generally
accepted as necessary even though it tended to extend the elapsed
time in case processing by the Board. It would have been difficult
indeed to have retained the adherence o f labor to the no-strike, no­
lockout pledge, or to have gained' the acquiescence o f labor to some
elapsed time in case processing, if retroactive adjustments had not




P R O B LEM S O F CASE! P R O C ES S IN G

345

been available. Retroactivity was thus the “ quid” for the “ quo” o f
waiting fo r orderly case processing and a final Board decision.
Furthermore it would have been grossly inequitable to have asked
employees to stay on their jobs and maintain uninterrupted war pro­
duction while their cases were pending before a governmental agency
if every day o f such pendency meant a loss o f income, and such a loss
would have been realized in most instances without the use o f the
retroactivity principle.
The Board’s general policy on retroactivity was rather well es­
tablished early in 1943, and was formalized for dispute cases in a
written policy statement on August 16, 1943.8 This policy provided
3
that Board decisions would be retroactive to the date o f agreement by
the parties or, in the absence o f such agreement, to the expiration date
o f their last contract. I f there was no agreement on the effective date,
and i f there was no previous contract, the Board would use the date
o f certification o f the dispute to the Board by the United States Con­
ciliation Service. Only under special circumstances would the Board
depart from this policy. Although a similar statement was never
form ally issued regarding the approval o f a retroactive date in volun­
tary cases, the Board’s policy was to approve the date agreed upon by
the parties, or the expiration date o f the last contract, if these dates
appeared on the face o f the application to be reasonable. Where
there was no union, and hence no previous contract, the date o f filing
the application was frequently used for retroactive purposes.
Next to maintenance o f membership, retroactivity was the most
common non-wage-rate issue which confronted the Board in dispute
cases. Despite the vigorous dissent o f industry members, the Board
m ajority turned a deaf ear to the contention that this retroactivity
policy frequently imposed an intolerable financial burden upon in­
dividual employers in disputes cases. Thus, the processing time o f
many cases was extended because appeals o f regional board retro­
activity decisions to the National Board by employers was one o f the
most common and troublesome problems in closing dispute cases.
In voluntary cases the retroactivity problem often took a different
turn. In these cases the Board had to be on guard against approving
employer requests for too early a retroactive date. In the tight labor
market prevailing during most o f the war period, competition for
labor caused most employers to seek wage increases as a means o f
holding present employees or attracting new ones. Under the pres­
sure o f these conditions employers often made wage adjustments for
their employees and then sought NW LB approval for these adjust­
ments later. Inasmuch as this type o f action was a clear violation o f
the wage stabilization law, retroactive approval o f the wage adjust8 The Termination Report, voL I, p. 167.
3




346

D IS P U T E S E T T L E M E N T A N D W A G E S T A B IL IZ A T IO N

ment was the only thing that would clear the employer. These at­
tempts to avoid liability fo r violations o f wage stabilization laws by
the use o f the retroactivity principle were handled rather sternly by
the Board. Strict adherence to the above-mentioned policy on retro­
activity in deciding voluntary cases meant frequent denial o f re­
quested retroactive dates, and, as a result o f such denials, frequent
appeals from these decisions.

III.

C o n se q u e n c e s

of

E x t e n d e d P r o c essin g T im e

Perhaps the most serious consequences o f the extended time in the
processing o f both dispute and voluntary cases were the strikes by
employees expressing their dissatisfaction with delays in case proc­
essing and attempting to secure earlier action by the NW LB on their
pending cases. Despite the rigid adherence o f the Board to the policy
o f stopping all case processing until the employees returned to their
jobs, these work stoppages were fairly common throughout the Board’s
existence. No exact data on the number o f man-days lost as a result o f
this type o f strike is available, but “strikes against the Board” as a
result o f the irritation and impatience o f workers with the length o f
processing time presented a problem o f no small importance.
Inability o f employers to secure an immediate answer to their re­
quests fo r wage increases also led to a considerable number o f viola­
tions o f the wage stabilization law.M A s was mentioned above, em­
ployer requests fo r retroactive approval o f their wage petitions were
often the result o f having made wage increases without waiting fo r
advance Board approval. Undoubtedly the length o f case processing
time in voluntary cases encouraged some violation o f the wage stabili­
zation law and added to the seriousness o f the problem o f enforce­
ment.
The length o f case processing time, furthermore, had a tendency
to im pair good industrial relations in many instances. Em ployer ap­
plications for voluntary wage increases which required weeks, and
sometimes months, to clear the Board, created employee dissatisfaction
and unrest and resulted in loss o f morale and production. N ot infre­
quently such delays resulted in employee loss o f confidence in the
employer’s “ good faith” in filing the voluntary petition. Employees
often directed inquiries to the Board either by mail or in person to see
if their employers had actually filed a petition, and, if so, whether or
not they were cooperating with the Board in the speedier processing
o f the case. Delays in case processing also impaired good industrial
8 For a discussion of the extent and seriousness of violations see ch. 10 of this study
4
on the problems of enforcement.




PROBLEMS OF CASE PROCESSING

347

relations in dispute cases, particularly when employer appeals from
original decisions delayed the issuance o f final directive orders by
days and weeks.
Both employers and employees were affected by the length o f case
processing time in connection with union organizational efforts. For
example, in a number o f cases a union organizational campaign was
begun after the employer had filed a petition with the NW LB for a
wage increase. In such a case, an immediate decision from the Board
approving the increase might very well have affected the outcome o f
the campaign. Consequently the union would want the case delayed
until after a representation election while the employer would want
immediate action. The Board’s policy in such instances was to take
the case up in its regular order, unless an NLRB election date was set
before case processing was completed. I f such a date was set by the
NLRB during this period, and it often was, case processing stopped
until after the election. Employer dissatisfaction with delay in these
cases was extreme, and bitter criticism o f Board procedures was the
normal result.
IV.

C o n c lu sio n s

Im plicit in the premise that there was a problem o f delay in the
processing o f at least NW LB cases is the question o f what is a “ rea­
sonable” processing time. W hat standard or yardstick should be used
as a measure o f the reasonableness o f case processing time? Opinions
on this question are bound to differ widely. The applicants themselves
are likely to consider any delay in case processing irritating, and de­
lays o f a month or more unreasonable. The general public and elected
officials are likely to be somewhat more tolerant but periods o f longer
than 6 weeks to 2 months are likely to be judged as excessive. The
administrators directly involved in this problem are likely to place the
most liberal construction o f all oil the concept o f reasonable process­
ing time. Few people, however, would disagree with the proposition
that there is such a thing as an unreasonably long time in case process­
ing and that an elapsed time o f 2 to 8 months in voluntary cases and
4 to 6 months in dispute cases would easily qualify as unduly long.
W ithin these limits there is obviously room for a wide area o f judg­
ment as to just what the precise standard should be.
The reasonableness o f any standard for case processing can be
judged only with reference to a number o f variables. First o f all,
the type o f case involved is o f m ajor importance. Anyone even
slightly fam iliar with the work o f the NW LB would readily agree that
a reasonable processing time for a dispute case would be considerably




348

DISPUTE SETTLEMENT AND WAGE STABILIZATION

longer than a reasonable time for a voluntary application. In both
dispute and voluntary cases the difficulty or sim plicity o f the case must
also be taken into account in judging the reasonableness o f processing
time. F or example, a dispute case involving several thousand work­
ers with 40 to 50 complex issues to be settled would obviously require
a different standard o f reasonableness than a small case affecting a
dozen or more workers with perhaps only one or two issues in dispute.
Sim ilarly, in voluntary cases the standard must be varied to take
account o f the number o f workers and job classifications involved,
the nature o f the wage issue, the availability o f necessary wage-rate
data, etc.
The reasonableness o f case processing time must also be related to
specific time periods in the Board’s history. A reasonable processing
time for dispute cases before wage stabilization, for example, would
certainly be far less than after this program was adopted in the fa ll
o f 1942. And a reasonable time for voluntary case processing during
the first year o f wage stabilization, when stabilization principles were
being slowly hammered out, wage-rate information and staffs assem­
bled, and techniques perfected, would certainly be different than that
during the last year o f Board operations, when many o f these problems
had been pretty well solved.
The quality, size, efficiency, and turnover o f staff personnel must
also be taken into account in establishing any standard o f reasonable­
ness for case processing. The Board had difficulty in recruiting and
training sufficient staff to handle its case load expeditiously. A rea­
sonable time for case processing with a staff narrowly lim ited as to
size and quality, with a rather heavy turnover, is one thing; a large
staff o f highly trained competent people during the entire life o f the
Board would have involved quite a different standard.
A nd finally the cooperation o f the parties involved in these cases
must be considered in setting up any standard o f reasonable processing
time. In both dispute and voluntary cases, if one or more parties
involved felt that their case was rather weak, they did not press for
early decisions; they would even delay the case by responding slowly
or not at all to Board requests for necessary information. Interested
Board members might also delay rapid processing o f these cases where
adverse decisions were expected.38
5
5
8 Still another suggested standard, and one quite different from any of the above, is
5
based on the psychological reaction of the parties affected. How much delay in case
processing will the parties and the public accept without rebelling against the program?
Judged by this standard, case processing time in general during World War II was not
prolonged beyond the limits of public toleration. But the use of this standard of reason­
ableness for case processing time is highly questionable in either war or peace. People will
tolerate a lot under the stress of national emergency. To set up some kind of a psycho­
logical breaking point as the standard against which to judge the reasonableness of such
a thing as case processing time would only be to establish outside limits for the program,




PROBLEMS OF CASE! PROCESSING

349

It is highly doubtful that all these variables can be combined into
one or more precise standards of reasonableness in case processing
time. Perhaps the best answer to the question of an appropriate
general standard during the latter period of the N W L B ’s existence
may be found in the suggestion of Chairman Davis that a reasonable
elapsed time in case processing should not exceed 3 weeks for voluntary
cases and 6 weeks for disputes. Although this standard was never
form ally adopted by the N W L B , it was used as a goal toward which
speedier case processing was aimed in the latter months of N W L B
experience. Should this standard be used for the earlier period, it
would be concluded that there was a rather serious problem of delay
in processing both dispute and voluntary cases during 1943 and the
first part o f 1944. But in the light of the lim iting factors during this
period discussed above, it is questionable as to how unreasonable this
longer case processing time was. Indeed, the alternatives to consid­
erable elapsed time in case processing were either severly limited or
nonexistent. I t may also be noted that if judicial review o f Board
decisions had been utilized the additional elapsed time in closing Board
cases would have been tremendous and very likely would have created
an intolerable problem of delay.3
6
D id the limitations on rapid case processing during the war period
seriously impair the efficient operation o f the wage stabilization or
dispute settlement functions of the N W L B ? The best judgment of
those who were directly involved in the administration o f the pro­
grams, as well as many close observers outside the Board, is that they
did not.*7 Delays in case processing did lead to considerable irrita­
8
tion and dissatisfaction on the part o f petitioners; they did cause
some strikes and work stoppages; they did lead to some violations of
the wage stabilization law, and to the impairment in some instances
o f good industrial relations. But appraised in terms of over-all re­
sults, the time required in case processing did not endanger the success
o f the programs.
In the case of the N D M B and the N W S B the record seems to indi­
cate even more clearly the conclusion that delays in case processing
never reached serious proportions, Vand therefore never impeded sig­
nificantly the efficient operation of these agencies.
3 Chairman Davis, in a letter to the Senate Judiciary Committee opposing legislation
0
which would make NWLB decisions subject to judicial review, cited the NLRB experience
with the length of time involved in court review. The average length of time between
the filing of a petition with the court and the court’s decision in one NLRB sample of
some 100 cases was 232 days. Mr. Davis said: “ We believe that similar delays would
gravely prejudice the effectiveness of the War Labor Board, which up to now had been
able to dispose of the disputes certified to it with reasonable dispatch, and to keep the
peace in the meantime.” The Termination Report, vol. I, p. 58. For a further discussion
of this part, see ch. 1 of this study.
8 See, for example, The Termination Report, particularly the comments in vol. 1 of
7
the chairmen of the various regional boards. These comments were all written after
VJ-day.




CHAPTER

10

Enforcement
By Benjamin Aaron

S in c e t h e term “enforcement” relates solely to securing observance
o f wage regulations, the N D M B had no enforcement responsibilities.
The enforcement problems of the N W L B and N W S B will be sepa­
rately discussed in this chapter.

I. E n f o r c e m e n t
A . N ature

of t h e

E

nforcem ent

P

by th e

NWLB

roblem

O f the many great tasks facing the National W ar Labor Board,
that o f enforcing wage-stabilization regulations was not the least
im portant; but it was, by all odds, the one undertaken with the gravest
misgivings and with the least enthusiasm. W hile the need for some
sort o f an enforcement program became apparent at a considerably
earlier date, little preliminary work on such a program was begun
until the latter part o f 1943, and complete instructions on how to
deal with the problem were not sent to the regional boards until the
fa ll o f 1944, 2 years after the first statutory regulation o f wages had
been imposed. In the end the Board was goaded into taking action
on enforcement at the urgent insistence of the regional boards and
industry commissions, which had been trying, with varying degrees
o f success, to cope with wage stabilization violations in the absence
of an integrated enforcement program.1
1 Some agencies of the Board could not afford to wait. The Detroit Area Tool and Die
Commission, faced with an extremely serious violations problem at the time of its inception
in December 1942, formulated and administered its own enforcement program during the
year of 1943. Further reference is made to the problems confronting this commission
on pp. 367-370 of this chapter.
350




ENFORCEMENT

351

I t is not surprising that the Board handled the problem of enforce­
ment so gingerly. The administration o f the wage-stabilization pro­
gram itself was undertaken with considerable reluctance, but with
the view that wage problems could not be divorced from nonwage
problems in the handling o f labor-management disputes. In the case
o f enforcement, however, some public and industry members o f the
Board, and the labor group as a whole, were never persuaded that
it was so intimately connected with the other functions o f the Board
that it could not be assigned to some other Government agency.
Moreover, there was a very natural desire on the part o f the Board
members to hold down, to the greatest possible extent, the number
o f administrative “do’s” and “ don’t’s” to be imposed upon employers,
unions, and individual employees, who were generally reported as
being already strangled by red tape. W age stabilization was an
unpopular innovation, concerning which most unions and employers
never ceased to complain. The complexities o f the numerous regu­
lations issued by the Board in the form o f “General Orders” were
the cause of constant anxiety and exasperation to those who were
covered by their provisions. This feeling was not entirely confined
to the Board’s “customers” ; some o f the Board’s staff members and,
one must admit, even some o f the Board members, never were fu lly
initiated into the mysteries o f the more complicated and technical
aspects o f wage-stabilization policy.
In the early months of the wage-stabilization program it was nat­
ural that the number o f innocent violations should exceed the number
o f deliberate evasions of the law, and the Board tended to react to unin­
tentional transgressions more in sorrow than in anger.2 A s time went
on, however, the number of cases in which perfectly clear regulations
were deliberately flouted increased, and it became obvious that the
national wage-stabilization policy could not be enforced by moral
suasion alone. W hile the Board officially took note o f this fact as
early as March 1943,3 it continued to demonstrate an unwillingness to
pursue a vigorous and intensive enforcement program. One o f the
questions which this chapter attempts to answer is whether the Board’s
reluctance was warranted under the circumstances.
2 The Board adopted, on November 6, 1942, General Order No. 11, which provided for
retroactive approval of certain innocent violations made prior to November 7,1942.
8
On March 22, 1943, the Board issued a public statement taking note of the alleged
violations which had come to its attention and stating, in part: “ Obviously, willful viola­
tions of the law must be stopped if the anti-inflation program is not to be impaired and
the critical manpower situation rendered more acute. Where the Board’s investigation
of the facts warrants, violators will be prosecuted immediately and vigorously. Ignorance
can no longer be pleaded as an excuse” [Wartime Wage Control and Dispute Settlement
(Washington: Bureau of National Affairs, 1945), p. 380]. For the reasons set forth in
the preceding footnote, however, investigation of the facts seldom was deemed to warrant
prosecution in this early period.

921297— 50-




-24

352
B.

DISPUTE: SETTLEMENT AND WAGE STABILIZATION
S ources

op t h e

B

oa r d ’ s

A

u t h o r it y

The sources o f the Board’s enforcement authority were the Stabiliza­
tion A ct o f 1942, Executive Order 9250, and the Regulations o f the
Director o f Economic Stabilization. The Stabilization A ct provided
that no employer should pay, and no employee should receive, wages or
salaries in contravention of the regulations promulgated by the Presi­
dent under the act, and it directed the President to prescribe the extent
to which wages paid in contravention should be disregarded by Gov­
ernment agencies in determining the costs or expenses o f any employer
for the purposes of any other law or regulation. Under this author­
ity, the President determined, and so stated in Executive Order 9250,
that “any wage or salary payment” made in contravention o f the
rules should be disregarded by the executive departments and other
Government agencies in determining the costs or expenses of any em­
ployer for calculating deductions under the revenue laws o f the United
States, or for determining costs or expenses under any contract made
by or on behalf of the Government.
The Stabilization A ct also provided that any deliberate violation
thereof was a criminal offense for which the violator was subject to a
fine o f not more than $1,000, or to imprisonment for not more than
1 year, or to both.4
The Regulations of the Economic Stabilization Director were is­
sued on October 27, 1942. They provided, in part, that in cases in
which a wage or salary adjustment was given in contravention of the
law (that is, without the approval of the Board or the Commissioner
of Internal Revenue5) , the entire amount of the wage or salary pay­
ment was to be disregarded by other Government agencies in calculat­
ing costs or expenses for income tax or other purposes. The regula­
tions were explicit in this regard, stating—
the amount to be disregarded is the amount o f the wage or salary paid or
accrued and not m erely an amount representing an increase in such wage or
salary.

The Regulations also imposed upon the Board and upon the Com­
missioner, within their respective jurisdictions, the duty to determine
finally whether wage or salary payments had been made in contraven­
tion of law ; and it was further provided that their determinations*
4 The Department of Justice was the agency responsible for handling cases warranting
criminal prosecution. However, “ no criminal prosecutions had to be undertaken for
violation of the Wage Stabilization Act nor did the Board refer any cases to the Justice
Department as appearing to warrant criminal prosecution” [U. S. Department of Labor,
The Termination Report of the National War Labor Board (1948), vol. I, p. 428 (herein­
after referred to as The Termination Report)]. Actually, there probably were some
violations which warranted criminal sanctions, but in view of the Board’s general attitude,
imposition of such sanctions would have been unthinkable.
* As mentioned in eh. 7, the Commissioner of Internal Revenue had jurisdiction over
salary adjustments for employees receiving $5,000 or more per year and for those receiving
less who were nonunionized administrative, executive, or professional employees.




ENFORCEMENT

353

“shall not be subject to review by the Tax Court of the United States
or by any court in any civil proceedings.”
The combined effect of these various statutory, executive, and ad­
ministrative regulations could, of course, have been staggering. I f
the Board determined that an employer had overpaid 100 employees
by 5 cents per hour for 16 weeks, and so certified to other Government
agencies, the hapless employer was subjected to income-tax deduction
or Government reimbursement disallowances, not for just the amount
of the overpayment of 5 cents per hour per employee, but for the
entire sum of wages paid to such employees during that period. A s
previously noted, once the Board made its determination and so ad­
vised the other Government agencies, the latter were required by the
regulations o f the Economic Stabilization Director to make the
appropriate disallowances. For many employers the consequences
of such action would have been completely ruinous. It is not surpris­
ing, therefore, that the Board showed extreme reluctance to impose
these severe penalties.
A fter the first few months of investigating violations, the Board
concluded that the requirement that the fu ll wage payment must be
disallowed in all cases did not sufficiently take into account various
situations which, in many cases, appeared to warrant mitigation of
the prescribed penalties. Accordingly, the matter was discussed with
Judge Vinson, the Economic Stabilization Director, with the result
that on July 13,1943, he advised the Board, in part, as follow s:
It is my opinion that the regulations of the Economic Stabilization Director
are properly construed to empower the * * * Board in making findings of im­
proper wage or salary payments, in accordance with its procedure in such cases,
to examine into the existence of extenuating circumstances and, in appropriate
cases, to recommend that the sanctions or a portion thereof should be with­
held * * *.
The adoption of such recommendations of the Board will, of course, be a
matter within the sound discretion of the other agencies. However, in cases
where the Board does not make any such recommendations the regulations ap­
pear to require that the sanctions be imposed.6
A fter experience with this procedure, there appeared to be no good
reason why the agency best informed of the circumstances of the
violation should make only a recommendation subject to review by
another agency. Therefore, on December 13, 1944, the regulations
of the Economic Stabilization Director were amended so as to give
the Board power, not just to recommend, but to determine finally
and to certify the amount to be disallowed to the agency or agencies
which would effectuate the disallowance. W ith rare exceptions, dis­
allowance was limited to deductions for income tax purposes.
a The complete text o f V inson’s letter is set forth in The Term ination Report, vol. II,
p. 749.




354

DISPUTE SETTLEMENT AND WAGE STABILIZATION

I t is appropriate at this point to consider whether the Board’s en­
forcement authority m ight better have been rooted more firmly in the
Stabilization A ct itself. The very broad and practically undefined
authority granted by the Stabilization A ct to the President, not only
to set up the stabilization rules but also to prescribe the penalties for
violation, represented a departure from normal legislative practice.
The further delegation of wide enforcement powers to the Board, as
provided in the regulations of the Economic Stabilization Director,
raised a specter of unconstitutionality which haunted some members
o f the Board’s legal staff throughout the period in which the Stabili­
zation A ct was in force.7
A part from the consideration o f possible constitutional objections,
it is probably true that an administrative agency generally can func­
tion more smoothly and with greater public cooperation if its autho­
rity is clearly spelled out in a statute. Considering the fact that dur­
ing the war a number of Government agencies were issuing a great
many rules and regulations which must frequently have confused and
irritated the average citizen, it is rather surprising that the Board’s
enforcement regulations were generally treated with such respect.
There is also the question whether the authority of the enforcement
agency should have been more limited in scope and less flexible in
application. A number o f possible alternatives suggest themselves.
The controlling law or regulation m ight, for example, have deprived
the enforcement agency of any discretion in determining the amount
o f the penalty for a wage violation, and could have specified either
that in every case the total wages paid should be disallowed as an in­
come-tax deduction or as a reimbursement item, or that only the
amount of the overpayment should be forfeited. Again, it might have
fixed a specified fine, without regard to the actual amount of illegal
payment involved in the individual case. It is to be noted that the
Stabilization A ct did provide for a specific fine for criminal violations.
The mere statement o f these alternatives, however, is sufficient to
reveal their essential impracticability. Some flexibility in the assess­
ment o f penalties for wage violations was absolutely necessary in
order to avoid grave injustices. Obviously, some distinction had to
be drawn between the innocent and the w illful violator, between the
employer who openly confessed his error and the employer who
7 The constitutionality of the Board’s enforcement powers could conceivably have been
challenged on several grounds. It might have been contended either that the statutory
delegation of authority to the President was too broad, or that the rules and regulations
implementing the statute were improper and illegal. A possible object of attack on the
latter ground was the provision in the regulations of the Economic Stabilization Director
that determinations by the Board or by the Commissioner of Internal Revenue that wages
or salaries had been paid in contravention of law should not be subject to review by the
Tax Court of the United States or by any court in any civil proceedings.
Actually, the Board’s enforcement powers were never challenged on constitutional
grounds. A suggested explanation for this remarkable record is offered on p. 361 of this

chapter.




ENFORCEMENT

355

deliberately sought to conceal it. The establishment of fixed penalties
in the statute would have deprived the enforcement agency of this
necessary flexibility in administering the wage stabilization program.
Moreover, if the statute had limited the penalty to the amount of the
overpayment, there was the possibility that many employers would
cheerfully pay the fine and continue their illegal wage practices.
Finally, as demonstrated by the Board’s experience, the uncertainty of
the penalty which might be levied against the violator under a system
permitting administrative flexibility in enforcing the law proved to
be a great deterrent upon employers, who were generally afraid to risk
incurring the maximum disallowances.8
The discretionary authority of the Board to specify less than maxi­
mum disallowances not only encouraged voluntary disclosure of vio­
lations, but also permitted the Board to correct as well as to punish.
In all cases in which an unlawful increase had been put into effect,
no findings of good faith were made unless (a) in the case of increases
which were approvable, a Form 10 was filed seeking approval, or (b)
in the case of increases which were not approvable, they were reduced
to approvable amounts or eliminated entirely.
This policy, initiated in the regions at a relatively early date, was
particularly effective. In February 1944 the general counsel informed
the B oard:
Our experience to date demonstrates that this has been a most effective means
of getting employers to roll back unlawful wage increases and of getting labor
organizations to agree to accept the roll-back.
We have not to our knowledge as yet run into a case where, a finding of
violation having been made, an employer has refused to roll-back an unapprovable wage increase. If such a case were to come to our attention we believe
that it would be possible to make a finding that so long as the unlawful increase
was continued in effect, it should be deemed to be a continued violation of the
law.9
It remains to consider whether more moderate limitations regarding
penalties might have been imposed upon the Board without impairing
the necessary flexibility of administration. The Board’s discretion
might have been circumscribed by specifying minimum and maximum
penalties. It seems clear that enforcement, even in this case, would
have been less effective and less equitable than it was under the methods
actually followed. It has already been indicated that the program
would have been less effective if the maximum penalty had been set at
an appreciably lower level; and equity would have been sacrificed by
specifying a minimum, since no penalty seemed warranted in cases of
innocent violations that were promptly corrected.

8Actually, it is not clear that the disallowances in the m ajority o f violation cases
exceeded the am ount o f the overpayment, but employers could never be sure o f the amount
o f penalty that would be assessed.
9National W ar Labor Board, Transcript, Executive Meeting, February 22, 1944, p. 577.




356
C.

DISPUTE; SETTLEMENT AND WAGE STABILIZATION

R e s p o n s ib il it y f o r E n f o r c e m e n t

Reference has already been made to the fact that some of the Boarc
members succeeded in persuading themselves that the task o f enforcing
the wage stabilization law should have been assigned to some othei
agency. The Justice and Treasury Departments were most frequently
mentioned as the logical choices. How this notion could ever have
been seriously entertained by anyone who was fam iliar with Boarc
policies and procedures remains a mystery. One shudders to think o1
the possible consequences of such division of authority. It is an indis
putable fact that the reasoning underlying many of the Board’s wag<
stabilization policies, to say nothing of the complexities of the regula
tions under which they were administered, were never fu lly under
stood or appreciated by other Government agencies.1
0
Assignment of the enforcement function to some other agency woulc
in all probability have led to the adoption of a rigid enforcement
policy, which inevitably would have provoked resentment and re
sistance. Moreover, the Board’s enforcement program placed greatei
emphas