Deflated

To U. S. Labor last week came news it had long feared. In the great mill cities of Pittsburgh, Gary and Youngstown, in dusty mining centres of the West, in congested New England textile cities, many a foreman broke the news to his crew: Pay was cut, in most cases by a round 10%. Leader of the movement was United States Steel Corp. (see p. 47). In quick succession similar steps' were taken by Bethlehem Steel Corp., Youngstown Sheet & Tube Co., National Steel Corp., Inland Steel, Jones & Laughlin Steel Corp., American Rolling Mill, General Refractories Co. Colorado Fuel & Iron Co., whose miners have already been cut (TIME, Sept. 7), reduced wages in other groups. The hard-pressed copper companies joined in--Phelps-Dodge Corp., United Verde, Inspiration Consolidated Copper, Utah Copper, American Smelting & Refining. Two big textiles, Amoskeag Manufacturing Co. and Pepperell Manufacturing, did likewise. Salaries were cut by General Motors Corp., Northern Pacific Railway, B. F. Goodrich Co., Delaware, Lackawanna & Western R. R. and two companies identified with the Mellons, Aluminum Co. of America, which claimed to have been contemplating the move for several months, and Pittsburgh Coal. Aluminum Co. of America is the largest aluminum smelting company in the U. S.; its largest stockholder is Secretary of the Treasury Andrew William Mellon, who let it be known that he had been unaware of wage-cut plans. United States Rubber Co. adjusted salaries to a new 5-day week. H. Edward Manville announced that, while the Johns-Manville dividend is safe, it too will probably follow. All through the week the list grew & grew. All through the land Labor frowned, scowled, wondered. Although the unprosperous railroads with their 1,300,000 workers and the still-prosperous utility companies with 1,147,000 employes maintained wages, the long-averted, much-discussed deflation of Labor had definitely arrived. In Wall Street the news was greeted with enthusiasm. But it would be months before the economic result would become visible. Of immediate concern was Labor's reaction. No Hell. A few months ago Dr. Julius Klein, Secretary Lamont's chief assistant and President Hoover's chief spokesman at the Department of Commerce, pondered the wage question and decided a general reduction would result in "hell to pay all over the country." Perhaps he reached this opinion because President William Green of the American Federation of Labor had warned that reductions would be "resisted with all the means at Labor's command.'' But last week there was no hell to pay, no evidence of a Hadean future. From President Green came no talk of strikes but a long, almost perfunctory statement which called the reductions "morally wrong and economically unsound." He talked of removing the steel tariff as retaliation for what he considered violation of the agreements reached at the President's Big Businessmen's Conference in 1929. Dr. Klein stuck by his hell statement but said that he did not think the movement would become general. Secretary of Labor Doak said the reductions were "much regretted" by his department. Other members of the Administration maintained a hurt and mournful silence. President Hoover, thought to have been told lately by Board Chairman Julius Barnes of the U. S. Chamber of Commerce that wage reduction was inevitable, had nothing to say but let it be known he was still opposed to any change in the U. S. standard of living. Most politicians denounced the move. Burly little Congressman La Guardia of New York demanded that the Government defer payments on its contracts for steel. But Representative Will Wood of Indiana (who would slash the Federal payroll) called it "the best that could have happened." Open Shoppers. Chief reason that Labor received the news without great agitation was that the reductions took place in industries having either no unions or unions too puny to protest. In the case of steel, the industry's only labor organization of any size is Amalgamated Association of Iron, Steel & Tin Workers. In 1920 when a great steel strike was called off, this union withdrew from the National Committee for Organizing Iron & Steel Workers, much to the anger of William Zebulon Foster, its secretary and treasurer, who was attempting to organize the industry in co-operation with the A. F. of L. This so-called "treason" was practically the turning point in the industry. The Amalgamated Association at present has only 7,900 men against 31,500 in 1930 and most of these are specialists working for small companies. Although its president, Mike F. Tighe, is a labor-leader of the old school, last week he had little to say. He observed: "Reducing wages is a great mistake, particularly when it is done with the fallacious idea of bettering business. . . . How can such competition between Labor and Capital aid in any business recovery?" In addition to their lack of organization, steel workers are widely scattered, of many nationalities. They work for rich and powerful companies. This is in contrast to the bituminous coal miners who work in congested areas for weak employers. What strength means is shown by the case of Pittsburgh Coal Co.. one of the two biggest in the field. After much labor trouble, Pittsburgh Coal in 1925 established an open-shop policy. Last week it announced a 10% salary reduction. It had made wage reductions that great, and greater, without difficulty during the summer. Sterling & Steel, Another reason for the calmness of Labor was the timing of the announcement. By first cutting its dividend and the salaries of big and little executives, United States Steel had shown that wage-slashes would be only a last resort. Never before had steelmasters done that. The news of Great Britain's going off the gold standard, on every front-page in the land, provided impressive finality when it was decided U. S. Labor's turn had come. Steel's announcement followed sterling's crash by 36 hours. The weather was still warm, hence the men's minds were less occupied with thoughts of overcoats and coal than they would have been were the announcement delayed. In addition to these psychological factors, two other forces assuaged the shock. One was that the purchasing power of $1 has increased more than the reduction in wages, although Real Wages are lower (see p. 47). The other was the unemployment factor.

Floaters. Last week President Green of A. F. of L. set the total U. S. unemployed at 5,600,000, contrasting with his estimate of 3,700,000 a year ago. Although United States Steel's estimated payroll of 220,000 compared well with the 229,585 of May 1930, the number of workers throughout the industry had been greatly reduced and the "stagger" system of part time work had become universal. The Department of Commerce's index of employment in the iron & steel industry was at 72.4% in July against 87.3% a year before. The result is a large "floating surplus" in steel towns. If the 517,000 steel workers whose pay was cut, or was in danger of being cut, were to walk out, many of them would find their jobs readily filled by unemployed under obligation to no union. A year ago, when the steel industry was operating at 60% of capacity instead of 29%,, there might have been trouble, regardless of lack of unions, had wages gone down. The same was true of the other industries which faced cuts last week, and which have been cut before. Copper miners have unions but they are not strong and they realize the copper companies could afford to shut down in the event of a strike.

Brothers, Last week Iron Age, whose subscribers are hard hit by the stoppage of railroad buying, said: "It is believed the railroads must follow whether they obtain partial relief through rate advances or not." The railroad Brotherhoods stoutly, even bitterly retorted that rail wages must stay up. It is in these Brotherhoods that U. S. Labor has established its strongest citadel and it is here that the wage-fight will reach its crisis. Although a 10% wage reduction would benefit the carriers as much as a blanket 15% rate increase, there have been no cuts except among salaried workers. Rail officials have been even stronger than was Steelman Farrell last spring in making clear that wage cuts would be the very last resort. Few people think that the Brotherhoods would accept a reduction without strikes and disorder. Their attitude towards the current state of affairs was clearly shown last week by an editorial in Labor, their magazine.

Said Labor: ". . . If this is the best our captains of industry can do they are morally and intellectually bankrupt and it is time to look for guidance elsewhere. . . . This depression ... is a panic of plenty. There is too much of everything except buying power. There is so much wheat that people are hungry. So much cotton that folks are half naked. So much housing that in Chicago women are sleeping in parks. . . . Too much of the national income goes into the hands of a few. ... A handful of men with their spare cash could buy the output of all the gold and silver mines of North America and many a sovereign State has a smaller income than the net profit of a single industrial magnate."

While Labor was releasing this editorial, in Cleveland a Brotherhood group was busy evolving a plan to ask Congress (through the I. C. C.) for shorter hours and weeks to bring some of the 350,000 unemployed Brotherhood members back to work. In Canada affiliates of U. S. Brotherhoods prepared to do battle with Canadian Pacific and Canadian National who last week were considering 10% pay cuts.

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