Senator CAPEHART. I agree with that. I think maybe that might give flexibility that would permit the employees and the employers to handle matters themselves rather than Washington doing it. Dr. TAYLOR. I would just say this in general: If such a provision were enacted into law, it should be in general terms certainly and not inflexible. Senator CAPEHART. It would be an index that you would arrive at and then it would permit wages to reflect a proportion of that index, right around that index. Dr. TAYLOR. As one who operates in industrial relations I would prefer more flexibility to meet unknown problems. We just don't know what lies ahead. The CHAIRMAN. Any further questions? If not, Doctor, we want to thank you for your testimony. (Dr. Taylor's prepared statement follows:) STATEMENT OF GEORGE W. TAYLOR, CHAIRMAN, WAGE STABILIZATION BOARD There are no proposed amendments to the act peculiarly related to wage stabilization. Rather, I appear before you to urge the extension of title IV so that we may continue to discharge the important stabilization responsibilities assigned to us under it. Likewise, we support the reenactment of title V, relating to the settlement of disputes, so that it will be available if resort to its procedures becomes necessary and justified. The Wage Stabilization Board was first established as a nine-man tripartite agency on September 9, 1950, by Executive Order 10161, issued by the President under title IV of the Defense Production Act. Mr. Cyrus Ching took leave from the Federal Mediation and Conciliation Service to serve as Chairman of the Board during the initial period of its operations. He has recently returned to his post as Director of the Federal Mediation and Conciliation Service. As you know, the work of the Wage Stabilization Board came to a virtual standstill when the three labor members withdrew on February 15, 1951. A complete wage stabilization policy had not then been formulated. Indeed, only the barest beginnings had been made. For a period of about 2 months, management and their employees had to deal with many problems of wage determination not covered at all by the rules which had been laid down. These parties resolved such problems in ways that seemed proper to themselves. As required by law, they submitted their solutions for the approval of the Wage Stabilization Board. It is grossly unfair, in my opinion, to say that in these submissions management and labor simply seek to "break through the ceiling." The fact of the matter is that they had to carry on their wage determination activities in the absence of a clearly defined wage stabilization policy. The many cases that went in to the backlog of the Wage Stabilization Board were, in effect, requests of the parties for the Board to tackle unresolved policy questions. Only recently, on May 8, 1951, did the Wage Stabilization Board resume its functioning and then as an 18-man tripartite Board with certain limited dispute settlement responsibilities in addition to its wage stabilization duties. The Board was reconstituted by Executive Order 10233, issued on April 21, 1951. For your information, there is attached a copy of this Executive order together with a short biographical sketch of our Board members. The new Board faced the immediate task of acting not upon disputes-there were none before the Board-but upon a large accumulation of wage policy questions raised by managements and by their employees because no rounded wage stabilization program had been available for their guidance. As just indicated, the responsibilities of the reconstituted Board fall under two headings: (1) Wage stabilization, and (2) settlement of certain types of labor disputes. It is my purpose to discuss each of these responsibilities. 1. Wage stabilization.-At the outset it is important to recall the reasons why wage stabilization is an essential ingredient of the defense mobilization program. Wage stabilization is, of course, only a part of the total mobilization program; I but we think it is a highly essential part. On December 18, 1950, in its first official statement, the original Wage Stabilization Board indicated the role of wage controls in the national effort to curb inflation. Representatives of labor, and the public on the Board unanimously agreed that the u 1 1 Art, fundamental cause of inflation is the tendency for consumer purchasing power to increase more rapidly than the supply of consumer goods and services. Moreover, no proper claim can be made that direct wage controls can do the whole job of wage stabilization. As the Council of Economic Advisers stressed in its January 1950 report to the President: "There are factors which will make it extremely difficult to achieve the objective of holding total wages available for spending in line with the availability of consumer goods. The obstacles are fairly obvious: (1) The great number of new workers called for by the defense effort, and the longer hours, will result in more total wage earnings even without any increase in wage rates; (2) there will be a few instances where some wages must be raised to facilitate the recruitment of workers for defense production; (3) there is the problem of insuring that some incentives exist, particularly to effectuate shifts toward defense production." The basic attack on inflation must be through such fundamental measures as taxation, credit control, and increased production. Speculative forces acting upon wages and prices must also be prevented from blunting the effectiveness of the basic attack. Purchasing power inevitably rises in a time of full employment. People work longer hours, more people go to work, and workers shift from lower paying to higher paying industries. At a time when our plants and our manpower are fully utilized for the production of civilian goods, defense production necessitates the diversion of materials and manpower from civilian to military production. When we substitute guns for butter, the inflationary problem is heightened. We are forced to add to our total production by using what would in ordinary times be marginal mines, plants, and equipment. These facilities are costly. When national defense is at stake, cost cannot be a primary concern. But to secure their use, the general price level tends to be raised unless other methods, such as subsidies, are relied upon. Needed increases of production also require that additional employees be brought into the labor market. Many workers must be induced by higher wages to leave their regular jobs and their regular homes to work in defense plants. The result is that the wage level is pushed up. The consequences can be serious. Utilization of high-cost facilities and securing of new manpower can seriously distort price relationships and wage relationships. These are facts and not theories. We have already seen how the establishment of great defense plants in essentially rural communities has resulted in the introduction of wages substantially above the area rate. In this general setting-and urgent defense mobilization which unleashes inflationary forces-wage stabilization can make three distinct contributions to our mobilization program. 1. Wage stabilization operates to minimize competitive bidding for labor when labor markets are tight. Without wage stabilization in an inflationary period. one firm may bid labor away from another only to have the other firm raise wages to get the workers back. Each employer acting individually is forced to raise wages in a desperate attempt to solve his manpower problem, and the resulting wage spiraling aggravates both our manpower and our stabilization problem. 2. Wage stabilization seeks to maintain the normal wage and salary relationships among various groups of workers to the fullest possible extent. Uncontrolled inflation permits the strong and strategically placed employees to grab the lion's share at the expense of the white-collar workers, the unorganized, and even the weaker organized groups. Normal relationships in these particulars have already been disturbed. We must prevent its aggravation. 3. Wage stabilization buttresses price control. Prices can be pulled up by runaway demand, such as occurred shortly after Korea, when everyone frantically purchased goods in an effort to get set for expected shortages. Prices can also be pushed up by spiraling costs as resulted after Korea, when employers rapidly raised their wage scales in an effort to insure a future labor supply. Price control is difficult, if not impossible, without wage controls. Congress has already abundantly demonstrated its awareness of their close relationship. It is important to recognize also that the wage system has more to do in our kind of a society than create purchasing power for wage earners. When people are paid according to the work and skill involved in their jobs there exists an incentive to production. That is also the basis for stable industrial relationships. But when differentials are upset, we can expect to find lower morale, lower production, and the inability to get the right workers at the right place at the right time Since such considerations are of extreme importance, it is significant that in enacting the Defense Production Act, the Congress stated among the purposes of title IV * * * * * that of preventing * * economic disturbances, labor disputes, interferences with the effective mobilization of national resources, and impairment of national unity and morale *"; and further, that there should be "full consideration and emphasis [on] the maintenance and furtherance of sound working relations, including collective bargaining and the maintenance and furtherance of the American way of life * ** [Moreover] * * * in stabilizing and adjusting wages, salaries, and other compensation [the President] shall make such adjustments as he deems necessary to prevent or correct hardships or inequities." The task of stabilizing wages must thus be undertaken with several major objectives in mind. Attainment of one objective only to lose others would not be effective wage stabilization. A balanced program is needed. It is essential to halt wage spiraling, to correct hardships or inequities, and to do so without seriously interfering with the effective mobilization of national resources. Many, many persons have told me in serious tones: "The job cannot be done." It has to be done even though the obstacles are formidable. May I briefly review some of the steps taken by the Board and by the Economic Stabilization Administrator in getting wage stabilization under way. In January 1951 drastic action was necessary to stop the runaway of prices and wages that began with the Korean hostilities. Wage increases were being widely made to match advances in the cost of living, in anticipation that the cost of living would move higher, and in efforts to prevent future manpower problems. As labor agreements expired, they were renewed with wage increases which became successively higher with later negotiations. Some agreements were not reopenable and continued with the old wage rates. Some companies and industries were depressed and their workers received no increases and even wage reductions. Others were prosperous and reopened firm contracts. Many increases were rushed through without waiting for contract reopening or other wage review periods in order to get under the wire before controls took effect. The freeze with its unavoidable inequities thus stopped an intense and chaotic movement of wages and salaries. The immediate task was to develop a policy which would permit the correction of these inequities-in other words to create orderly movements. The strength of our country has been in the freedom of management and labor to work out their own problems. They have developed a wage structure which is diverse and complex but, nevertheless, has fairly well established interrelationships. It is not a simple undertaking to stabilize such a structure especially after strong and diverse movements had gotten under way only to be stopped in their tracks by the wage freeze. * There are approximately 45,000,000 nonagricultural wage and salary earners in this country. There is tremendous variation in the wage and salary practices for these 45,000,000 people, depending on the type of industry they are in, the type of work they do, and to some extent the area of the country in which they are located. A wage stabilization program meeting all the wage problems encountered cannot, of course, be developed overnight. It is a job which can only be done carefully, step by step, in relation to real problems. The Economic Stabilization Administrator, Mr. Johnston, expressed this thought on February 27, 1951, when, in approving the 10-percent formula as a first step in the creation of the wage stabilization policy, he wrote to Mr. Ching: "It is obvious that wage problems are too numerous and too difficult to try to cover with the blanket of one formula, or two, or six. A step-by-step approach that recognizes these complexities is the better and fairer way to develop equitable and workable wage standards in balance with the whole objective of economic stabilization." These characteristics of wage stabilization were perhaps first obscured by the issuance of General Wage Regulation No. 1 which froze wages at the levels prevailing on January 25, 1951. Yet, it was made very clear at the time that these regulations were emergency measures designed to bring price and wage movements to a sharp halt and only to give the Economic Stabilization Administration time to develop detailed and equitable control regulations. The freeze was a technique and not a policy. The President, in his April 26 message to Congress on the renewal of the Defense Production Act, called attention not only to the fundamental fact that the freeze regulations were by their nature only interim procedures but also to the delay in establishing wage stabilization policies. He pointed out that: * * * "In the case of prices, the Office of Price Stabilization has been moving ahead with the adjustment process since the January freeze [but] in the case of wages, unfortunately, the process of changing over from the wage freeze to a fair, longer-run wage stabilization program was interrupted by the split-up under the act. Likewise, we support the reenactment of title V, relating to the settlement of disputes, so that it will be available if resort to its procedures becomes necessary and justified. It did seem to me that instead of The CHAIRMAN. In other words, most of your statement is in connection with title IV, the retention of title IV. Dr. TAYLOR. Yes; the retention of title IV of the act. The CHAIRMAN. And it relates indirectly to wage stabilization. The one wouldn't be any good without the other, is that it? Dr. TAYLOR. Yes, sir. One brief portion of the statement deals with the limited dispute settlement functions which were assigned to us by the President under the recent Executive Order No. 10233. Senator CAPEHART. What do you mean when you say no proposed amendments to the act peculiarly related to wage stabilization? Do you mean to the new act? Dr. TAYLOR. That is correct. There are no proposed amendments to the new act submitted by the administration. Senator CAPEHART. No proposed changes in the existing act. The CHAIRMAN. I am glad to have you put that on the record officially because in substance that is what I told the Labor Committee of the Senate who thought if there was any change in basic labor law they should be consulted. I took it upon myself as chairman of the committee to say if there were any changes in the labor laws concerned, and if those basic changes were changes for the good that they should be enacted, I would notify them. In this bill, however, I saw no change in the basic labor law other than that which was put into effect last year. In other words, then, you agree with what I told the Labor Committee. Dr. TAYLOR. Yes, sir. Senator CAPEHART. Dr. Taylor, does that mean, then, that you feel the present act is sufficient to control wages? Dr. TAYLOR. I think, Mr. Senator, at this stage before we have had more experience certainly we should try the present procedures and present rules relating to our wage stabilization functions rather than going ahead further as we did during World War II, for example, where wage stabilization was tied with a no-strike pledge and a dispute settlement board covering all labor disputes. It seems to me that at this stage we should gain experience with the more limited proposal. Senator CAPEHART. Do you feel if it does become necessary to control wages 100 percent, you have sufficient authority in the existing law to do it? Dr. TAYLOR. I think there would be. The one question would arise as to whether the disputes settlement machinery would have to be revised. As matters now stand, the very limited disputes settlement function which we have are derived from Executive Order No. 10233. There is in the present act provision for a title V kind of labor board, which legislative history indicates would be designed somewhat along the powers of the War Labor Board as it existed in World War II. The CHAIRMAN. It existed in World War II purely as a temporary measure. With the expiration of this bill, it would expire. There is no permanent change. That is the one thing I wanted to emphasize. I felt I was right in it. Dr. TAYLOR. Yes, sir. Senator BRICKER. What do you believe are the powers given you by the President of the United States in the Executive order outside of the consideration of wages? Dr. TAYLOR. The limited disputes settlement function that I referred to. There are two areas in which the Board has been assigned responsibilities. One, should management and labor in a particular case request our board either to make a recommendation or a decision as respects difficulties between them. The Board is empowered to act as that kind of voluntary arbitration tribunal. Senator BRICKER. That would be entirely outside the functions that you have under this law. It is just simply because you are there and they agree to accept your arbitration, as you might call it. Dr. TAYLOR. That is correct. I wouldn't want to say that it does not flow in any respect from the problems raised by the Defense Production Act. Senator BRICKER. It might flow from the problems, but do you think that the authority is founded in this act? Dr. TAYLOR. No, sir; I do not. The second area of labor disputes in which the Board may have responsibilities is if there is a dispute substantially affecting the defense production program, the President. may ask our Board to recommend to him with respect to fair and equitable terms of settlement. Senator BRICKER. Is that the only place where there might be any conflict, if there were a national emergency or a problem that would have a great public interest that might cross the authority under the Taft-Hartley Act? Dr. TAYLOR. It is conceivable that a dispute would fall within the criterion that I just mentioned, substantial interference with defense production, and also be an industry-wide dispute which would create a matter of national peril, in the words of the Taft-Hartley Act. I would judge that in such a case it would be the discretion of the President as to which of these quite different tools would be followed. I think I should say that the choice of our agency to make recommendations in such a dispute would not preclude the use of the TaftHartley emergency procedures. Senator BRICKER. You don't think there is any great overlapping or that there likely will be in practice? Dr. TAYLOR. I don't think so in practice, nor that the use of the one precludes the use of the other. Senator BRICKER. You could not preclude the use of the TaftHartley Act in matters of industry-wide importance. Senator CAPEHART. The President could use your Board under the Taft-Hartley Act, could he not, the fact-finding board? Dr. TAYLOR. Yes; he could. I have mentioned before the Senate Labor Committee that I think it probably would be inadvisable to do so. Our Board lacks subpena power. A Board established under the Taft-Hartley Act would have subpena power, and there are other differences. Senator CAPEHART. Would not your Board be given subpena power under the Taft-Hartley Act? Dr. TAYLOR. It could be given, but the procedure Senator CAPEHART. You are limited to single, individual cases. Dr. TAYLOR. It is a matter of judgment as to whether or not our Board should act as a Taft-Hartley board. From an industrial |