Round Two

No sooner had John Lewis lumbered back to the showers than the C.I.O. danced into the ring. Last week it began its impatient fight for a second round of wage boosts. It was armed with a 71-page "report" for which it had paid Robert R. Nathan Associates, Inc. $12,000. Nathan's simple conclusion, which neatly fitted the C.I.O. strategy, was that management could indeed pay higher wages--and without raising prices.

Planner, Inc. The name--Nathan--was familiar. Shortly after V-J day in 1945, Robert R. Nathan & his colleagues in OWMR predicted that there would be 8,000,000 unemployed in the U.S. before spring, 1946. Later he recommended a general wage increase. He said wages could go up without boosting prices. He was wrong in his prediction. There was no noticeable employment slump. And wages went up, but so did prices in a rising spiral of inflation.

Nathan's experience as a businessman is limited, although he started early enough; at eight he ran a newspaper route. Later he sold silk stockings to help himself through the University of Pennsylvania. From there, he went directly into the Government, where he burgeoned as a New Deal statistician. He advocated all-out production before the war when even the Army was still moving with caution.

A large, youngish (37) man who looks something like a more alert Primo Carnera, he likes to wrestle playfully with friends and pull out their neckties. He became a rabid planner. Last winter, with the general exodus of planners from the Truman Administration, Nathan also left and organized the Robert R. Nathan Associates, Inc.

Challenge to Labor. Nathan's unsurprising findings and explosive conclusions were these: although hourly wage rates have increased, labor's real wages have gone down because of 1) elimination of overtime, and 2) rising living costs (up nearly 20% since January 1945). If the present trend continues, he said, a wage increase of 23% will be necessary to bring real wages back to the January 1945 level.

Turning to corporation net profits. Nathan found that they have increased 50% over the war peak of 1943, and are approaching $15 billion for 1946 (according to Department of Commerce figures). This compares with average annual profits for 1936-39 of a little less than $4 billion. Return on net worth in the last quarter of 1946, Nathan estimated, will be 9.1%; this compares with a net return in 1936-39 of 2.9%.

In other words, Nathan concluded, U.S. corporations in 1946 made a "lavish profit," and show every sign of continuing to do the same in 1947. Therefore, industry can grant labor a substantial wage boost without raising prices. The total boost could be $5.1 billion for workers in manufacturing plants--in percentage, 21% ever present rates. U.S. business as a whole, he figured, could grant a 25% boost.

In effect, the "report" asked all U.S. workers: What are you waiting for? In a way, they were waiting for something just like the Nathan report to spark their long-planned wage drive with "facts."

Wages v. Profits. But facts, like the Bible, can be used to justify almost anything. Industry economists immediately claimed that the Nathan report was full of gimmicks. One of them: he used as a standard for wages a peak period (January 1945) when labor was mining a war bonanza. On the other hand, he took as a standard for corporation profits the comparatively depressed period of 1936-39.

There was no denying that the rise in living costs had outstripped the rise in wages in the past six months. But industry, which prefers to take the long view, pointed out that since 1939 the cost of living has risen 54%, while dollar earnings have risen 93%--a 25% rise in real wages. To people on more or less fixed incomes--a large segment of U.S. society not in organized labor's camp--this point was important, not to say poignant.

As for corporation profits, who could predict what they would be in 1947? Strikes, for instance, would pull the rug out from under the best of prospects. The shaky state of the stockmarket, which Nathan brushed off as merely "bad psychology," reflected industry's deep concern.

What Is "Fair"? Nathan's sweeping "projections" did not consider industry's condition in detail. There are 420,000 U.S. corporations, and not even Nathan would claim that all of them showed a profit. But his report was enough to make them all targets of labor's new drive. C.I.O. leaders denied this, but the report was hardly out when the U.A.W.'s peppery redhead, Walter Reuther, announced a drive for a 23 1/2-c--an-hour wage rise in the automotive industry.

The auto industry is just beginning to see daylight. Even after tax credits, the automobile industry showed a net loss of $5.49 million during the first nine months of 1946. But Reuther justified his demands on the basis of his own calculations as to 1947 prospects.

As for a fair return, who is to say what is "fair"? Industry depends on good years to carry it over the bad. Only about 50% of all U.S. corporations, on an average, make a profit in any one year.

In general, industry accepted most of Nathan's facts but decried his conclusions and--most of all--his implications, which in effect would put a ceiling on profits, discourage risk capital, tend to squeeze out marginal enterprises, and otherwise disturb the machinery of free enterprise.

On the Record. The Nathan report failed to distinguish between what might be and what would be. He said wages could be raised without raising prices. The record was against him. Prices broke through Government controls last year. Now controls have been removed. Management, interpreting facts in its own way and using its own judgment, will certainly raise prices if it has to raise wages. Even as the C.I.O. got ready to swing the Nathan club, General Motors' President C. E. Wilson stated flatly that price rises would follow wage rises as night follows day. Whether the policy was stupid, as Reuther declared, this was the reality, and responsible labor leaders had to reckon with it.

Some corporations might be able to grant wage rises without raising prices. But the question is whether labor leaders will be willing to settle for some rises in some plants. Judging by their past records, they will not. Labor leaders, who are a highly competitive lot, insist that wage rises be industry-wide and, in the long run, industries-wide. It is significant that this week Reuther, Phil Murray, the boss of C.I.O. and of the steel workers, and the bosses of the electrical workers sat down together in Pittsburgh to plan a common strategy and a united attack.

U.A.W. negotiations were already under way with Chrysler, Packard, Kaiser-Frazer and Hudson. United Electrical Workers will begin their fight with Westinghouse and General Electric on Jan. 4. Phil Murray's Steelworkers bargain next month to replace a contract expiring Feb. 15.

Murray and Reuther, at least, do not want to strike. They recognize the disastrous possibilities of another series of work stoppages such as shook the economy last year. But they are in this thing up to their necks. The strike is virtually their only weapon and, if they insist on getting what they are now demanding, they might ultimately have to resort to it.

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