HERE IS WHAT HAPPENED Nullification of this plan Despite the fact that Congress had placed control of both wages and prices in one agency, this unified plan of administration had gradually been frustrated by a series of Executive and administrative orders. The first step was Executive Order No. 1061, issued September 12, 1950, which created an independent agency known as the Economic Stabilization Agency. This aspect of the order conformed with the intent of Congress, but the President created two subsidiary administrative units within the agency: (1) an Office of Price Stabilization, and (2) a Wage Stabilization Board. Both the director of the price unit and the members of the wage board were made by Executive order appointees of the President, thus depriving the Administrator of the right to appoint his own subordinates and to establish his own administrative divisions. Administrator Valentine, however, sought to retain control over the set-up by reserving for himself the right to issue all wage and price orders and having one central legal, economic, investigating, and enforcement staff. The labor members of the Wage Board did not like being relegated to serving in a purely advisory role and got the public members of the board to join them in demanding complete autonomy for the Board. When Valentine refused to yield, the quarrel was taken to the President and Valentine was forced out. The new Administrator, Johnston, then issued a new set of internal administrative regulations under which both OPS and WSB were given virtual autonomy to make their own price and wage policies and were permitted to have legal, economic, and enforcement staffs of their own. Shortly thereafter they started issuing their own orders and regulations. In recent testimony all Johnston says that he does is retain veto power. Apparently no attempt is made to coordinate wage and price policies in particular industries or in particular cases. The general manufacturers' price-ceiling regulations issued by OPS selected a pre-Korean base period for prices, but permitted mark-ups for increased costs of labor up to March 15, 1951. While there have been variations in price ceilings for particular industries, generally speaking, the March 15 date has been the cut-off date for wage increases. The presence of this cut-off illustrates the indifference of ESA to congressional intent, for wage increases within the 10 percent formula and even in excess of the 10 percent formula have been going on steadily since March 15, thus cutting the margin between prices and labor costs. SO THEN WAGES STARTED UP Absence of any real effort to stabilize wages In contrast to OPS policies, WSB from its inception has made only half-hearted attempts to hold the wage line. When the first price-freezing order was issued last December with respect to automobiles, Administrator Valentine had to jog WSB into doing anything about wages in that industry-although this is a condition precedent to making the price order effective under the terms of the Defense Production Act itself. Finally, after one escalator clause had taken effect, WSB did recommend to him issuance of an order freezing wages in the industry. This was an empty gesture, for the next escalator clause was not to take effect for another quarter and Reuther publicly announced that he would strike every automobile company in Detroit if the Government interfered with the operation of the escalator clauses. Just about the same time John Steelman of the White House indicated that the administration was going to yield to labor pressure on escalator clauses. Intervening in the switchmen's strike he induced the carriers to sign a new contract which contained for the first time in railroad history escalator clauses based on the cost of living a scheme described by Marriner Eccles of the Federal Reserve Board, in testifying before a congressional committee, as "built-in inflation." (a) Coal increase.-During the year 1950, many spectacular wage increases had been granted, most of them after the outbreak of the Korean War. An exception to this rule was the coal industry which had been forced to grant a large wage increase to the mine workers just before the war. The WSB tentatively decided to adopt a percentage formula, with January 1950 as the base period. As Lewis at that time was negotiating for a wage increase with the operators which would have pierced any formula adopted, WSB obligingly withheld the effective date of its first general wage-stabilization regulation which required administrative approval of any wage increase made after January 25, 1951, until this increase had been made effective, both in bituminous and anthra cite. The anthracite agreement was actually not arrived at until 2 weeks after the January 25 date, but was approved as being "in contemplation" before that date. In order to avoid any controversy with Lewis, the Board issued General Regulation No. 2, over the dissent of the industry members, permitting wage increases until February 9, 1951, if the adjustment has been "contracted for" prior to January 25, 1951. (b) Broad exceptions to "freeze.”—On January 26, Johnston issued an order redelegating the wage-stabilization functions vested in him by Executive order to WSB (ESA General Regulation No. 3). On January 31, 1951, WSB then issued an order authorizing wages to be increased above its own ceiling pursuant to administrative action by Federal and State authorities acting under minimumwage laws. The practical effect of this order was to give the go-ahead signal to Secretary Tobin in his ambitious program to force an adjustment of wages upward in various industries by resort to the long-dormant provisions of the Walsh-Healey Act. (c) Adoption of excessive formula.-With complete power now in its own hands, WSB members wrestled in the month of February on the adoption of a formula, for even the industry members of the Board felt that the February 9 wage freeze was unfair to employees in industries which had not received general wage increases during 1950 and the first 5 weeks of 1951. It was tentatively agreed to approve all future wage increases up to a certain limit above the level of January 1950. The industry members contended that this limit should be fixed at 7 or 8 percent, as the cost-of-living index had risen only 7 percent since that date. The labor members argued that it should be fixed at at least 12 percent. Finally, the public members induced the industry members to come up to 10 percent and this formula was adopted by General Regulation No. 6, issued February 16, 1951, and subsequently approved by the Administrator. The labor members of the Board then walked out at the direction of the United Labor Policy Committee and Emil Rieve, president of the CIO Textile Workers Union and one of the labor members who quit, called strikes for wage increases in excess of the 10-percent formula-first in the New England textile industry and then in the southern textile industry. The immediate efforts of the administration to appease the labor group, who had already obtained a formula higher than the rising cost of living justified, indicated that even the mildest restraints on wages were doomed unless the unions were willing to accept them. (d) Approval of escalator clauses. For all practical purposes the WSB ceased to function after the labor walk-out. In an effort to please the unions, Johnston then, on his authority, issued General Regulation No. 8 on March 8, 1951, which gave full effect to operation of escalator clauses in collective agreements. This meant that the UAW-CIO and the IUE-CIO would get wage increases in the automobile industry and electrical products industry in excess of the 10-percent formula. Even this gesture failed to placate the United Labor Policy Committee but Johnston made his regulation effective notwithstanding. (e) Tandum wage adjustments.-As a result of the preferential treatment given the small minority of employees covered by union contracts having escalator clauses, ESA was almost immediately forced to make further concessions. These were incorporated in General Regulation No. 10, entitled "Tandum Wage Adjustments" under which approval was to be given to wage increases for employees whose wage rates were generally adjusted to conform with increases granted employees in other bargaining units of the same company, or in the same industry, or in the same labor market area. This regulation at first was rather narrowly drawn as it contained a cut-off date of February 9, 1951. The reconstituted Wage Stabilization Board, by resolution adopted May 8, 1951, however, directed its staff to disregard the cut-off date. (f) Open breaches in the formula.-Although Rieve's southern textile industry strike was unsuccessful, the strikes in the New England textile industry and threats of strikes in the packing industry resulted in agreements being signed for wage increases in excess of the 10-percent formula. It should be noted that these strikes and strike threats were really not strikes against management but against the Government itself, as the 10-percent ceiling regulation purported to have the force of law. Nevertheless, neither Johnston nor the Department of Justice made any attempt to invoke the criminal or injunctive provisions of the act against the striking unions. Early in May, after the administration had surrendered to labor on most of its demands and WSB was reconstituted, the Board had awaiting it hundreds of applications for approval of wage increases exceeding the formula, many of An indi which had been negotiated as a result of strikes or threats of strikes cation of now the Board wond at of them was foreshadowed on Ann 25. 7931. when Johnstol approved the recommendation of : temporazy emergenc 1911. way wage pant.. frantic al. increase to nonoperating rarost employees which exceeded the 10-percentili formni by 3 meteent The evense assigned by the wage pane was that the switchmen and vardmesters. As respit of the Steeiman settlemen: the previous winter hac heel giver 81 escalator contract which was bound to pierce the 14-nereel" ceiling. Therefore it was argued that it would be inequitable t give the nonoperating employees a less generoUS settiemer: Acting UDOL this cus. the pubite and lab members of WSB ther rated to approve the packingnouse settlement winch was 5 or 6 derrelt in excess of the ceiling formu... This was done over the objection of the industri members Was the desirability of "TESTIBL ". and one of the reasol- CITET Enter <rike this reasoning consistent will fore WSB to approve the increases in the Nou England textile maustry and other agreements n which emnioters vielded to unior pressure to wages 11: excess of the ceiling In the light of these decisions, WSB WI be forced to grant almost any wage increase if there is a strike or threat of strikt Disparity of enforcement J The Defense Production Act confers n immunity unor either labor unions. employees or empiovers who violate the wage-ceiling regniations. Pe: neither Johnston: nor WSE nave promulgated any regulations prescribing sly penalties for violations er attempted violations. This contrasts to the nolicies adonted under OPS under wie pot crimina and civ. penalties have heel invoked against companies who nave disregarded the price regulations, HOL. BURNET R. MAYBANK Chairman, Denate Committee on Banking and Current. 1 Washington DC. DEAR CHAIRMAN MAYBANK My name is Be: Robertsol My home is Emnoria. Kaus. i ar & veteral of the second Work. War. LEVILE septe in the Counte». intelligence Corps of LH War Department fron Januar 194 unt Ma 7946. I have three chiurez an thes are under 7 years of age I together with my brother, a combat veteral C Wor War I, an. it the beef-producing business. I am here representing u folioving peopie Approximate* 850 entizens a centra Kansa 1 the are: commonly known as the Fiin His comprising some 59 tOWD Members of this group include little farmers, big farmer # S'O‘KINE' big #Lockmel puckers hankers the Chamber of Commerce of Emper Kan an other affiliate grou I am also representing & common of Lue severa Oklahoma livestock: posudictions, namely, the Oratnom Livestoer Association the Osage County Livestock Association the Blue ber: Cartement ASSOCIUTÍOL, the Northwes: Oklahoma Cattlemen's ASSOCIELOL, ali O'T These two group Were Tories for the purpose of coping with our current emergency in the promueing ent of the investor business in these two immoOPTATIS livestock-producing area ai Our position is tus Dave Dese up nere for sever, anys endeavoring to hore an opportun* 10 slate our post 19: neve beer informed by Senator Mor roney, of Orianoma of Kausaz bring this to Lue antion et tu Denair Benim and through this statemen I wou the opportul addition to tuis Our position is a 10 iow> 1. We. the profuee America bet weet tuosi We Lee That The Bas U. -onsumers. 1er 1' al 101 eu*all Grawi 1a- beer here in tuk pronaring phase of this business anc the of aaooforo a verbiage disseminateu y various groups bet weet tear two prontufig aut consuming groups has greatly istorted our position untry, and experiais ut of the service ee enterprise aut 2. We wou like to pring to your ardentior, the fact that the veterans 6. this LAUDE 211 Qua that the pronex was TO urrency Committee WAS be heard verbally in L their rather marginal situation have low reserves, are vitally and destructively affected by this OPS order concerning the roll-back. I have specific examples from these people which I will be glad to present to you or the committee. 3. To show the utter unworkability of this order and the frustration which the producer faces in this matter, I would like to cite the following situation: Under the OPS order, we have been given to understand that the wide spread which exists between the price of good grade animals and commercial and utility animals is to encourage the feeder to place these cattle in the dry lot to add to the production of beef. I would like to state that in so doing their purpose was, as we understand it, to make these cattle undesirable to sell from a slaughter angle due to their higher relative value as feeders. Paradoxically, in creating this situation, it also creates a situation as follows: The great majority of range cattle of this country if sold to the slaughterer would grade Commercial and Utility. There are certain groups of these cattle not suitable for feeding which must be sold as Commercial and Utility cattle. I am a feeder and thus appreciate the feeders' position. I also have grazing cattle and thus appreciate the grassman's position. To me, the fact that if these grass cattle not suitable for feeding are sold at current levels set by OPS and thus discriminated against, and there are, I might add, many cattle from the South and Southwest and most of the range country, in general, for that matter, in these classifications. Therefore, you come to this situation. If you should raise the cattle not suitable for feeding to a suitable level, you automatically raise the price of feeder cattle, theoretically, to where it is not desirable for a feeder to purchase them. This, as with many other phases of this order, is just not workable. 4. We are faced with a rising population. We are faced with a current emergency. Production is of the essence. The greatest potentiality, should I say the greatest new frontier for production, is in conversion of the eroded lands of these United States to the production of livestock. Currently these lands are either lying idle or if they are cropped for several more years will be lying idle due to their marginal features, so the issuance of this order strikes directly at the small individual who would take advantage of this situation to add to his productive capacity and immediately affects our production and the long-range welfare of our country. (Incidentally, I was on my way to Alabama and Mississippi on the date that this order was issued with the purpose of establishing there on some of their unusued lands, by turning them to grass, a winter proposition which, in my own immediate operation would add immeasurably both from the angle of economic stability and the actual production of beef to my personal situation.) I would be glad to amplify on these conditions should it be necessary. 5. I would like to state that I, as a producer, and, incidentally, I believe that I am a qualified investigator due to my service with the Army over a period of several years, have diligently and thoroughly investigated the situation of the legitimate packing interests both little and big and this is my conclusion. I find that if this order were administered and the cattle were available, they would make a very fair profit; perhaps, if ample cattle were available, even a very large profit. But it is my opinion, due to the many unworkable ramifications of this order, that these cattle will not go to the legitimate processors but will be hung on many trees and in many lockers in this country, thus taking out of the normal chain of supply those cattle which would go to these processors. I agree with the premise already stated by several individuals that there are not sufficient qualified investigators, or just plain investigators for that matter, in this country to control this situation. 6. I would like to state that this group I am representing is interested solely in nonpartisan and nonspecial interest in this matter, that we realize that we, as producers, cannot sell our commodity unless we have people in a position to buy it. If there are inequities in this proposition, we ask you, the members of the Senate Banking and Currency Committee, who I believe are in a critical spot in this situation to listen to all of the pleas, not only for the producing but also from the consuming side, and arrive at such a position as you should deem equitable and workable. 7. Finally, I want to specifically state that it is our opinion that these controls will not work. BEN ROBERTSON. The CHAIRMAN. Go ahead, Mr. Carey. CATEMENT OF JANES E CAREY SECRETARY-TREASURER, 2. Camer. The Congres of Industrial Organizations, with its tart prepared to ( CH TO mantan our sul par in producing, friting, sacrie as we die n. Voric Wa We recognize that if we lose the Deure, ulit. Vær comes, the cost we all must vil if many times the "o of arming for defense. + know that the nius 14 Lier 16xes, more work, fewer things Lor. But these tasks must be met in the sprn of the democra y at tying it defend, it democratic sharing of the duties, the pousin irties, the summifies, the leadershi The defense program. our opinion, must be the best example of dem wract at work at does 10, neaL DIMLT LOPES to patriotism, bu down-to-earth Il work anc, & sense of purjeipation, for everyone in the job to be me. All but a small fraction of hbor in America £re ready to do their at in our aefens prograil. ut. Franty. We are disturbed to see that instead of efforts being Srected toward foCressor the gilring welknesses and injustices a the present Defense A there is a tendency in certain groups in Congress to Want to TRLEET the act further. This is proposed on The first is that the emergency is not as serious as 28d beer expertes, and therefore, we can relax or efforts. The second xcuse is that the people of the country are apathetic and just do not care what happens to the Defense Act. wo excuses. If that is the kind of philosophy that is going to come from Congress then we got as Tea TX. Not only labor and industry but our ging met 180, ani walt for Mr. Stalin to deliver his knock-out jin some Stocar nomine when we are sound asleep, 7-77 It is true that at the moment we are in what might be called a a breathing space between the first nprash of prices and inflationary fores, and the second ware which is but a few months away. Instead of this period being used to let down our guard it should be used to perfect our defenses, economic as well as military, and prepare our people for whatever emergency may arise This terms the doctrine of equality of sacrifice, and to help each man and woman to find his place in the defense picture. I want to speak very frankly on this matter. Labor agreed to support controls over itself in terms of wage stabilization.” But its acceptance was based on the principle set forth by the Wage Stabilization Board that there must be a rounded program of controls over credits and prices, profits and speculation, and so forth. Is 83702-51-pt. 2 -55 |