An inquiry into the use of cost-of-living figures in wage adjustments

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Content AN INQUIRY INTO THE USE OP COST-OP-LIVING FIGURES
- IN WAGE ADJUSTMENTS
A Thesis
Presented to
the Faculty of the Department of Economics
The University of Southern California
In Partial Fulfillment
of the Requirements for the Degree
Master of Arts
by
John Carl Wounsch
• 2 ?
January 1949
UMI Number: EP44692
All rights reserved
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This thesis, written by
J.olm..Gj3irl...Wx).uE)uach...........................................
under the guidance of h.ls... Faculty Committee,
and approved by all its members, has been
presented to and accepted by the Council on
Graduate Study and Research in partial fu lfill
ment of the requirements fo r the degree of
.........Ma.ster. .of .. Ac .t. s ............
................
Dean
D ate ......
Faculty Committee
3 rt>
* )
(feJ lU ' ?A
V ^
TABLE OP CONTENTS
CHAPTER PAGE
I. INTRODUCTION............................... . . 1
The problem ........ . . . . . . . . . . . . 2
Statement of the problem ........... 5
Importance of the study ................ 4
Related investigations................. 7
Survey of available literature ............. 7
Scope of the investigation . . . . . . . . . . 9
Method of procedure ..... ............. 11
Organization of the remainder of the thesis 12
II. THE CONSUMERS PRICE INDEX AND ITS ESSENTIAL
FEATURES................................ 14
The structure of the Index ......... 14
The general purpose of the Index.......... 15
The administration of the I n d e x ..... 15
Goods and services that make up the com
ponent parts of the I n d e x ......... 17
III. GENERAL MOTORS WAGE FORMULA BASED UPON A LIVING
STANDARD INCREMENT ............................ 20
Annual improvement factors and formula . . . 20
How General Motors workers share benefits • 21
Further wage adjustments explained ........ 22
Addition to the formula............. 22
iii
CHAPTER PAGE
Comments by authorities in the field of
labor relations, pertaining to General
Motors agreement with United Automobile
workers ...... ..................... 22
General Motors * past labor relations
analyzed.................................. 28
IV. AN ATTEMPTED EVALUATION OP STANDARDS OF LIVING
THROUGH A SURVEY OP FAMILY BUDGETS ........... 31
Sixteenth century England . . . ........... • 32
Seventeenth century England ................. 32
Statistical studies of living costs .... 33
Quantity budgets of goods and services . . . 37
Change in budget concept................... 39
Origin of present budget as used in calcu
lations for Consumers Price Index .... 41
V. THE SOCIAL AND ECONOMIC INFLUENCES IN DETERMIN
ATION OF AN AIMER I CAN STANDARD OF LIVING . . . 44
Wages and their relation to cost-of-living • 44
Precursors of the wage system ........ 45
Early concept of wages and standards of
living............................. 46
Wages fund theory and standard of living . . 47
Karl Marx, the Socialist, and his theory of
wages and standards of living ...... 49
iv
CHAPTER PAGE
Demands for labor ....................... 54
Supply of l a b o r ...................... 55
Bargaining theory ..... ............. .. 55
VI. -WAGES AND PURCHASING POWER AS A MEANS OF
ATTAINING AN ADEQUATE STANDARD OF LIVING . . . 59
The nature of wages ............. 59
Real wages ................................ 60
Wages as a means of livelihood ....... 61
Wages and purchasing power........... 62
Purchases at different income levels .... 64
Added income reflected in higher standard of
living............................... 69
VII. HOURS OF WORK AND LEISURE TIME AS AN AID IN THE
ATTAINMENT OF A HIGH STANDARD OF LIVING . . . 73
Hours of work in earlier times ....... 73
Working hours in Great Britain in the early
1800' s ............................... 75
Working hours in the United States in early
t ime s ....................... 76
A hundred year’s campaign in the United
States for shorter hours ................. 78
Labor’s arguments for shorter work week . . 80
Employers’ opposition to shorter working
hours .................................. 81
S I
CHAPTER PAGE
Labor unions' pressure for shorter working
hours . . . ..................... 85
Government regulation of hours ............. 87
Hour legislation and the courts........... 88
Principle of freedom of contract ...... 88
Federal hour laws ................. 89
Federal Government regulation of hours in
interstate commerce . . . . . . . . . . . 90
Fair Labor Standards A c t ................... 91
Summation of this chapter................. 92
VIII. SUMMARY OF FINDINGS, CONCLUSIONS, AND RECOM
MENDATIONS . . . . ............................ 94
Standards-of-living summary ........ 94
American standard . ......... ....... 95
Achievement of American standard.......... 96
Job tenure and security of workers......... 97
Are workers now on American standard of
living?........................... 99
Problems to be faceds Conclusions ..... 101
Recommendations............................ 102
BIBLIOGRAPHY.......................................... 106
APPENDIX............................................... 114
LIST OP TABLES
TABLE PAGE
I. Distribution of the Cost of the City Worker's
Family Budget in Birmingham, Alabama, March,
1946 and June; 1947........ ........ .. 18
II. Wage-Earner Family Expenditures in 1944 Compared
to 1934-1936 ..........' ........................ 66
III. Expenditures of City Families of Two or More
Persons at Different Income Levels in 1944 • . 70
LIST OF FIGURES
FIGURE PAGE
1. How GM-UAW Wage Formula Will Affect Workers
Hourly Pay in 1948 .....................• . • 23
2. Consumers* Prices............... 43
3. Hours and Earnings of Factory Employees .... 43
4. Labor Supply and Demand C u r v e ........... 57
5. Trends in the Labor Force, 1940-1948 ........... 63
6. Personal Income, Consumption, and Saving .... 68
7. Growth of American Labor Union Membership . . . 86
8. Prices, Wages and Purchasing Power (average
weekly earnings) in All Manufacturing Industries 86
CHAPTER I
INTRODUCTION
In periods of rapid and profound social change, such
as that in which the people of the United States have been
involved during World War II and especially during the post
war period, there is need of exercising the highest wisdom
and intelligence in meeting present, and satisfactorily
planning for future, needs of the workers of America. The
strong emotional excitement due to inability to forecast the
future and the consequent feeling of uncertainty and unrest,
the sense of insecurity and anxiety, and the general and in
creasing recognition of the urgent need of immediate, more
satisfactory adaptation and adjustment of wages and working
conditions, have made it difficult to think clearly in
defining industrial policies and setting up wise programs
for their achievement.
Due to rapid economic and social changes in the post
war era, it has been extremely difficult for employers of
labor to ascertain, with any degree of accuracy, what wage
adjustments were needed to cover increased cost-of-living
and to provide the worker with an acceptable standard of
living, based upon the prevailing cost-of-living indexes,
and desirable working families' budgets.
THE PROBLEM
Immediately after the United States entered World
War II, December 7, 1941, it became evident that wages of
labor did not keep pace with the increased cost of living.
It therefore became necessary for labor to ask for increased
wages in order to meet the increased cost of living. During
World War II the phrase ’ ’cost-of-living” became a standard
idiom in wage negotiations. It was not long, however, before
the phrase had different meanings, as stated by Paul P. Pigors
and Charles A. Myers, who said:
The wartime controversy over revision of the War
Labor Board's 'Little Steel' wage formula showed that
the term 'cost-of-living' means different things to
different people. It is especially important in wage
negotiations to talk In terms that are understood by
everyone•1
With the hope that some workable solution of these
major issues in wage negotiations based upon cost-of-living
could be found, President Truman called a Labor-Management
Conference on Industrial Relations in November 1945. After
several weeks of discussion, the Conference adjourned with
no agreement between management and labor on the issue. This
Conference was a disappointment insofar as it was unable to
achieve any meeting of minds on the major, specific problems
facing industry and labor. The discontent of workers was
1 Paul P. Pigors and Charles A. Myers, Personnel
Administration (New York and Londons McGraw-Hill Book
Company, Inc., 1947), p. 218.
3
expressed in the numerous and prolonged strikes which took
place during the winter and spring of 1945-1946. Settling
of the strikes resulted in a general lifting of wage levels,
but proved to be a short lived victory because price controls
were simultaneously relaxed and the cost-of-living advanced.
Not only did Congress fail to keep cost-of-living in check,
but as Florence Peterson has stated, likewise failed to enacts
. . . proposed bills to guarantee full employment,
raise the minimum legal wage level, liberalize and
extend the coverage of social security and unemployment
benefits, provide health insurance and housing programs,
and retain the employment service in the Federal
government.2
She further stated thats
Congress failed to act on union sponsored legis
lation as a means of smoothing the transition from a
war to a peacetime economy.3
Statement of the problem. The purpose of this study
was to ascertain to what extent cost-of-living indexes are
used in present labor-management wage agreements.
In other words, the purpose of this study was to
answer and clarify the following questions:
1. What are the essential features of the Consumers
Price Index?
^ Florence Peterson, Survey of Labor Economics
(New York and London: Harper Brothers Publishers, 1947),
p. 499.
3 Loc. cit.
2. What is the general purpose of the Consumers
Price Index?
3. How is the Consumers Price Index administered by
the United States Department of Labor?
4. What quantities of various commodities, goods,
and services actually make up the Index?
5. What is the most outstanding use of cost-of-living
figures in labor wage adjustment during recent
wage negotiations?
It will be the investigator's aim in the next chapters
to answer these questions and to clarify the issues raised.
Importance of the study. The importance of wage adjust
ments based on cost-of-living is realized when statistics bear
out the fact that in July, 1948, the total civilian employed
labor in the United States numbered 61,615,000, the highest
in the history of the nation.^ These figures are more im
pressive when it is noted that the estimated total income of
the United States in the calendar year of 1948 was estimated
at some two hundred fifty three billion dollars, of which
5
amount the wage earners of the country received $136,600,000.
Closer scrutiny also reveals that the average earnings
4 United States Department of Labor Statistics,
Monthly Labor Review, Vol. 67, No. 1, July, 1948, p. 3.
^ Los Angeles Times, United States Department of
Commerce Statistics, January 3, 1949.
of workers in manufacturing industries has increased from
i
$25*86 per week in 1939 to $54.12 per week in August of 1948.
Taking the hourly wage as a basis of comparison we find that
the wages of industrial workers has increased from 63.3 cents
per hour in 1939 to 134,9 cents per hour in August of 1948.
It is also interesting to note that the average weekly hours
worked has made little change from the peacetime industrial
era of 1939 to that of the post war period of 1948. The
average weekly hours worked by Industrial workers in 1939 was
6
37.7 hours per week as against 40.1 hours worked in 1948.
The importance of labor to the nation*s economy and
the well being of those who labor for a wage, to the nation
as a whole, is well demonstrated by what Florence Peterson
has to say in regard to the importance of laborr
The life of every person in the United States,
whether engaged in business or the professions, whether
a politician, housewife, farmer, or worker himself, is
effected in some way by the existence and activities of
labor organizations. This will continue so long as we
maintain a democratic form of government and a system
of free enterprise in business, because organizations
of workers are a natural concomitant of a competitive
economy and an evidence of a free society.*?
It will therefore be the investigator’s intent to
discover from available literature, and factual information
from other sources, what has been done or can be done in the
® United States Department of Labor Statistics,
Monthly Labor Review, Vol. 66, No. 5, May, 1948, p. ’ 573*
V Florence Peterson, American Labor Unions (New York
and Londonr Harper and Brothers, 1945), p. 41.
field of labor relations to maintain the present high level
of employment and to correlate the workers take home pay
("earnings") to the cost-of-living, based on the American
standard of living. As James Myers has so well stated*
Labor has learned--or is learning--that the mere
raising of wages does not necessarily improve its own
economic welfare. If prices also rise--as so often
happens--labor is just where it started.
Organized labor suffering and struggling to gain
higher wages, but losing out because of Increasing
prices of the goods which they must buy for their own
family needs, has been likened to an army which gives
back at the end of each week all the territory it has
gained.®
Prom the foregoing it is important that the wage
earner’s pay envelope and take home pay bear a favorable
ratio to the cost-of-living. It is also deemed important
and necessary that the worker be guaranteed tenure and
security on the job. From available statistics it is found
that In the years 1935-1939, there were on the average 2,862
work stoppages a year, resulting in 1,130,000 workers losing
16,900,000 working days a year. This figure had increased
to 3,693 work stoppages in the calendar year of 1947 with
resultant loss of 116,000,000 working days to 4,600,000
workers, a terrific toll in loss of wages and much needed
production. During the past year of 1948 the work stoppages
have been fewer and have averaged from 00.1 to 1.10 per cent
8 James Myers, Do You Know Labor? (New York* The John
Day Company, 1943), p. 134.
7
of total working time of industrial workers. This is still
a high figure for it is to be noted that in September of 1948
Q
160,000 workers lost 2,400,000 man days through labor disputes.
RELATED INVESTIGATIONS
Survey of available literature. Prom a survey of
available literature dealing with wage adjustments based upon
cost-of-living figures, a few specific investigations covering
this subject have been found. To be more specific, the use
of cost-of-living figures in wage negotiations is not new.
In fact, the United States Department of Labor states:
The United States Anthracite Coal Strike Commission
of 1902 used cost-of-living data to some extent in
making its wage settlement and as early as 1910 the
wage contracts of some groups of railway workers were
revised to make allowance for price movements.10
It is noted, however, that prior to World War I cost-
of-living figures were not sufficiently comprehensive to be
used effectively. During World War I more satisfactory data
became available and were frequently the controlling factor
in wage determinations. In the post war years of World War I,
particularly between 1919 and' 1922, a number of union agree
ments provided that wages would be adjusted according to changes
in the cost-of-living figures of the Bureau of Labor Statistics.
9 United States Department of Labor Statistics,
Monthly Labor Review, Vol. 66, No. 5, May, 1948, p. 479.
10 United States Bureau of Labor Statistics, Bulletin
No. 569, 1925, p. 205.
8
It is interesting to note some of the clauses con
tained in labor contracts during the post war period of
World War I, In a contract between the Times Printing
Company and Post Intelligencer Company and the Seattle,
Washington Photo-Engravers’ Union No. 23, of March 23, 1921,
the contract carries the following stipulations
It Is understood that the index number for Seattle,
December 20, 1920, as determined by the United States
Department of Labor is 94.1. It is mutually agreed
that should the index number for Seattle as determined
by the United States Department of Labor at or about
December, 1921, be 75 or less or 113 or more, then
automatically as of January 1, 1922, the wage as
determined in this agreement shall be 10 per cent less
or 10 per cent more (as the case may be) until June 30,
1922, and thereafter until a new agreement is determined
upon between the parties to this agreement.H
Traditionally, however, organized labor has opposed
the gearing of wages to the cost-of-living, claiming that
such a policy'freezes'* the level of "real wages" and deprives
employees from participating in the benefits of expanding
business, increased productivity, and obtaining a larger
share of the national income.
Unions also regard cost-of-living as one element and
not the major factor in wage agreements. They claim that
such clauses tend to lower wages when prices drop.
For this, and prevailing low prices in cost-of-living
prior to World War II, it was not surprising that of some
7,000 wage agreements, less than 5 per cent had clauses for
11 Ibid., p. 205.
adjustment of basic rates of pay based upon cost-of-living
indexes. In contrast to wage agreements concluded prior to
1939, it was found that, “approximately a third of all wage
agreements consumated in 1942 had reopening clauses based
12
upon cost-of-living changes.*’
During World War II, however, cost-of-living agreement
clauses relating to wage adjustments were either eliminated
or made inoperative#
This was a result of the War Labor Board's order that
such clauses should not be enforced after October, 1942 if
the wage adjustments under an automatic escalator clause
would raise rates in excess of 15 per cent above the average
13
straight-time hourly rates prevailing on January 1, 1941.
The above cited National War Labor Board's order,
together with labor's innate distrust of pegging wages to
changes in the cost-of-living, combined to reduce the fre
quency of cost-of-living "escalator1' clauses in contracts
during World War II.
SCOPE OF THE INVESTIGATION
This study was largely a research study into clauses
contained in labor-management contracts. In this connection
12 United States Department of Labor Bulletin, May,
1942* p. 144.
13 General Order 22, National War Labor Board,
Monthly Labor Review. Vol. 66, No. 3, March, 1948, p. 253.
1G
it was deemed advisable to include in this thesis represen
tative excerpts from wage -adjustment contracts containing
cost-of-living escalator clauses.
The following clause, contained in a contract between
Building Trades Employer’s Association of the City of New
York and Building and Construction Trades Council of Greater
New York and Long Island (AFL), illustrates such an escalator
clause based upon cost-of-living changes during the life of
the agreement:
The Master Agreement Trades Unions and the Master
Agreement Trade Associations agree that during the period
of this agreement the wage rates and hours of employment
and special conditions relating to hours and wages for
the master agreement unions shall be in accordance with
the attached schedule of established rates, including
the special conditions as noted on said schedule.
In the event that the cost-of-living index for New
York City as published by the Bureau of Labor Statistics
for the month of April, 1949, shall be more than 15$
above the cost-of-living index for New York City as
published by said Bureau of Labor Statistics for the
month of January, 1948, then, and in such event, an
adjustment in wages shall be made for the period from
July 1, 1949, to June 30, 1950, upon the following
basis, namely:
One-half (^) of the amount of the percentage in
excess of said 15$ shall be multiplied by three ($3.00)
dollar hourly rate and then corrected to the nearest
multiple of five (5$). The amount resulting shall then
apply uniformly to all Master Agreement Trades and be
added to the hourly wage rate for the period from
July 1, 1949, to June 30, 1950. In the event that cost-
of-living index as stated above is less than 15$ above
the cost-of-living index as stated above, then, and in
such event, there shall be no change in the wage rates
for any of the individual master agreement trades unions
during the period of this agreement.
14 united States Bureau of Labor Review, March, 1948,
pp. 295-299.
11
Cost-of-living escalator clauses have also been used
widely in Europe. In Great Britain, cost-of-living adjust
ments were extended during World War II. Cost-of-living
adjustment was also practiced in Great Britain during World
War I.
Wages of nearly all industrial workers in the Scandi
navian countries have been adjusted during World War II and
in the post war period, in part by means of escalator clauses
embodying cost-of-living changes.
These escalator clauses pertaining to cost of living
were abolished in Sweden in December, 1946, but are still in
force in Denmark and Norway. In Norway, each upward adjust
ment requires approval of a governmental wage board set up
under anti-inflation legislation adopted in 1945.
16
Wages of workers in Finland, Switzerland, and Italy
have also been augmented during the war and post war period
by cost-of-living supplements which were based on the move
ment of the cost-of-living index.
Method of procedure. Data on recent use of cost-of-
living indexes in wage adjustments was secured from the
United States Department of Labor and its Bureau of Labor
Statistics.
15 British Ministry of Labour Gazette, June, 1944, p. 94.
16 United States Bureau of Labor Review, March, 1948,
pp. 295-299.
12
Texts on labor economics were perused as well as
technical and business journals, in order to cover a wide
field and later to condense this material to that required
for the thesis at hand.
Organization of the remainder of the thesis. The
problem, which included a statement of the problem, importance
of the study, related investigations, scope of the investi
gation and method of procedure, was presented in the first
chapter.
Details of the administration of the Consumers Price
Index and its essential features, and its service to business
men and others interested, are given in Chapter II.
Chapter III presents the wage formula used in the
General Motors Corporation contract with United Automobile
Workers (CIO) which embodied, in addition to cost-of-living
considerations, a standard of living increment.
An evaluation of levels of living with a historical
survey of family budgets, and a study of present family
budgets related to United States Bureau of Labor Statistics,
Consumers Price Index are contained in Chapter IV. This is
followed by a presentation of the social and economic in
fluences in the determination of an American standard of
living in Chapter V.
Wages and purchasing power, as a means of attaining
an adequate standard of living, is the subject matter of
13
Chapter VI* An attempt was made to trace the theory of
wages from the early English writers on the subject to the
modern economic conception of wages by recent authorities in
the field*
Chapter VII presents hours of work, leisure time, and
their influence upon standards of living. Also included in
this chapter, is a short discussion of labor organizations
and their effect upon workers 1 demands for improved working
conditions. The conclusions and recommendations, Chapter VIII,
bring the investigation to a final resume*
The Bibliography is a list of all the books, periodi
cals, government publications and unpublished material related
to the subject of this study. The Appendix contains a copy
of the salient points in the General Motors Corporation
agreement with United Automobile Workers of America, pertain
ing to the standard of living increment.
CHAPTER II
THE CONSUMERS PRICE INDEX AND ITS ESSENTIAL FEATURES
The structure of the Index, The Bureau of Labor
Statisticsf Consumers Price Index (more commonly referred to
as the cost-of-living index) shows the trend of prices of
the goods and services purchased by city families of moderate
income. The Index shows how much more or less it costs in
any year (or month) compared to any other year (or month) to
buy a bill of goods and services typically purchased by an
average family of the middle income group. The typical
family on which the consumption is based is composed of four
members— an employed father, age 38j a mother, not employed,
age 36; a son in junior high school, age 13; and a daughter
in grade school, age 8, The family lives in a separate house
or apartment.
The budget of the family, on which the Index is based,
is not a "luxury" or a "subsistence” budget but is designed
to represent the goods and services required to maintain this
size family at a minimum level of "adequate living."
The Index is made up of about 200 items comprising
goods and services of the average, middle-income family, as
described, and residing in any one of thirty-four large cities
included in the Index. These 200 items are selected from
about 1,400 items, which the average family requires for
15
maintaining an ’ ’adequate living.”
The general purpose of the Index. The purpose of the
Consumers Price Index is to keep a constant record of the
cost-of-living. Prom a base index of 100, the average for
the five year period 1935-1939, it is possible to determine
in percentages.the movement, up or-down, of the cost-of-
living for any given time.
The purpose of the Index is to furnish information to
anyone who requests it. The importance of the Index is
manifested by the fact that a mailing list of 14,000 business
firms are receiving the statistics monthly, while an average
of 3000 make special requests each month for specific data
pertaining to cost-of-living. In addition, the Index is
studied carefully by labor organizations, welfare organi
zations, and state and Federal agencies for specific data.
The administration of the Index. The United States
Department of Labor is responsible for the administration of
the Bureau of Labor Statistics and its resultant Consumers
Price Index Publication.
The field work of gathering statistics is conducted
by thirty full-time field agents. These agents are carefully
chosen through the Federal Civil Service System and undergo
a four week course of training before being allowed to collect
price information.
16
Rent information is collected directly by the agents
from a sample of renting families. Once a year a bureau
agent goes in person to the home; then for three subsequent
quarters the Bureau collects rent reports by mail, followed
at the end of the year by another visit to the home. Prices
for street car transportation, public utilities, etc. can be
collected wholly by mail, due to requirements of filing rates
with public utility rate making authorities.
Pood prices are collected by 125 part-time agents
usually housewives and school teachers, or ex-government
employees, who have the qualifications to meet Civil Service
requirements for work of this kind. They are people who
live in the community and visit local stores around the middle
of each month to price the fifty articles on which the food
index is based.
The stores where the prices are obtained have been
carefully selected to represent the places where moderate-
income families purchase the bulk of their consumption goods.
Chain, independent, department and specialty stores are all
represented.
The Consumers Price Index is currently based upon
prices in thirty-four large cities. (There are twenty-two
additional cities which are priced for food only.)
At one time during World War II the Bureau prepared
indexes for seventy-five cities, including smaller ones, but
17
over forty of these were dropped in the cut-back In the
Bureau’s work in the post war period.
It is estimated that the thirty-four large cities
covered represent about 60 per cent of the large cities in
the United States, so that, in fact, the bulk of the urban
working population is covered by the Index.
Goods and services that make up the component parts
of the Index. The cost of goods and services included in the
city worker's family budget for four persons in June 1947,
ranged from $2,734 in New Orleans to $3,111 in Washington,
B.C., the lowest and the highest cost cities among the thirty-
four surveyed by the Bureau of Labor Statistics.
The component parts of the budget or Index are food,
housing, clothing, medical eare, transportation, other goods,
and services* The relative cost of different elements in
the budget can best be illustrated by the analysis of the
figures for a single city.
For the purpose of this study the city of Birmingham,
Alabama was selected because it was noted that it ranged in
the middle group of costs of the thirty-four cities comprising
the Index (see Table I, page 18).
It is noted that food comprises the largest single
item. In June, 1947, the cost of fobd for the family under
discussion ranged from $1,000 in Cincinnati to $1,100 in New
York and Seattle. Housing, the second largest item ranged
18
TABLE I
DISTRIBUTION OF THE COST OF TJJE CITY WORKER'S
FAMILY BUDGET IN BIRMINGHAM, ALABAMA
MARCH, 1946 AND JUNE, 1947
March, 1946 June, 1947
Item Amount
Per Cent
of Total Amount
Per Cent
of Total
Food $824 32.7 $1057 36.4
Housing 671 26.6 702 24.2
Clothing 357 14.2 425 14.6
Medical Care 155 6.1 161 5.5
Transportation 248 9.8 261 9.0
Other Goods and Services 266 10.6 298 10.3
Total Goods & Services $2521 100.0 $2904 100.0
Sources United States Department of Labor, Bureau of Labor
Statistics, Washington, D.C., Monthly Labor Review,
Vol, 66, No, 2, February, 1948, p. 155,
19
from $>446 In New Orleans to §756 in Washington, D.C*
Clothing, on the other hand, ranged from §400 to
about $>475, while transportation varied from §183 to §290.
Transportation in the budget contemplates all travel, recre
ational as well as that needed to get to and from the place
of employment, school, etc*
Medical care was shown to average from 5 to 7 per cent
of the total cost of goods and services, or from §127 to §202
in the thirty-four cities comprising the Index.
Other goods and services, under which are included
personal care, barber shop, beauty shop, tobacco, books, etc.
ranged from §278 to §330. It will be the purpose in the
next chapter to show how the above described Consumers Price
Index was used in wage determination by General Motors
Corporation and the United Automobile Workers of America in
their contract negotiations of May, 1948.
CHAPTER III
GENERAL MOTORS WAGE FORMULA BASED UPON
A LIVING STANDARD INCREMENT
Annual improvement factors and formula. It is stated
by economists and industrial writers that the most outstanding
as well as the most unexpected industrial relations event of
1948 was the wage agreement reached between General Motors
Corporation and the United Automobile Workers (CIO) on May 25,
1948. The agreement provided for eleven cents an hour
increase, effecting 225,000 auto workers and was the result
of nearly forty bargaining sessions between the parties*
The contract calls for eight cents per hour immediate
cost-of-living adjustment and an annual improvement factor,
or standard of living adjustment, of three cents per hour*
Both of the components of the wage increase have
significant aspects* Probably the most important feature, in
the long run, is the smaller three cent adjustment designed,
in the words of the company, ”to assure the General Motors
worker that the buying power of his hour of work will increase
as the nation’s industrial efficiency improves.1 1
The present three cents per hour adjustment is to be
matched with a similar three cent increase a year later and
is in no way conditioned upon subsequent upward or downward
movements of living costs* Rather, it is a recognition that
21
wage earners are specifically entitled to share in the
benefits resulting from improved technological developments
and from the growth of the national economy.
It is explicitly designed to increase the purchasing
power of workers in contrast with the concept of ’ 'freezing,"
atfa static level, of wage earners’ participation in the
fruits^of a dynamic, expanding economy.
How General Motors workers share benefits. The eight
cent immediate cost-of-living adjustment was granted to
restore a "parity1 1 between the hourly earnings of General
Motors employees and living costs reflected by the National
Consumers Price Index of the Bureau of Labor Statistics for
April 15, 1948, compared with that for the year 1940. To
maintain an equitable wage-living cost balance during the two
year agreement period, the parties further agreed that quarterly
adjustments in wages should be based upon the movements of
the Consumers Price Index. These quarterly wage reviews pro
vide that for each increase (or decrease) of one to fourteen
points of the Bureau of Labor Statistics Index, wages shall
be adjusted by one cent an hour. This adjustment factor was
determined by establishing a ratio between the current level
of hourly earnings of General Motors employees (about $1.50
per hour) and the April 15 Consumers Price Index of 169.3
(1935-1939 a 100).
22
Further wage adjustments explained* No limit was
placed upon the upward wage adjustments which may be author
ized owing to subsequent increases in the cost-of-living* A
limit or "floor" was, however, written into the agreement as
regards reductions in workers 1 rates of pay because of
declines in prices* This "floor" or downward limit was set
at"five cents an hour; no wage decrease shall occur should
the Consumers Price Index fall below 164.7, the level pre
vailing in the autumn of 1947.
Addition to the formula. Under the formula as written
into the wage clause of the United Auto Workers-General Motors
agreement, therefore, the current eight cent cost-of-living
increase can be reduced by no more than five cents, thus
leaving a permanent residual increase of three cents in
addition to the three cent "improvement" increase.
In terms of approximate average hourly earnings of
General Motors auto workers, the agreement advances wages
from $1.50 to $1.61 per hour and automatically guarantees
that earnings will not fall below $1,56 an hour during the
first year of the contract and below $1.59 per hour during
the second year of the contract, when an additional three
cents an hour annual "improvement" increase becomes effective.
Comments by authorities in the field of labor relations,
pertaining to General Motors agreement with United Automobile
H O W 6M-UAW W A G E F O R M U L A
W ILL A F F E C T W O R K E R S H O U R L Y P A Y
IN 1948
TO COMPENSATE
FOR INCREASED
C O S T OF LIVING
8*
FOR IMPROVED
STANDARD I
OF LIVING
LJIJHUH
T IT I
TOTAL
1946 INCREASE
I I *
QUARTERLY, BEGINNING AUG. 29,
WAGES WILL BB ADJUSTED IN
ACCORDANCE WITH THE B-L-S.
CONSUMERS* PRICE IN D EX.
*
°4i
Op,
^C on sum ers' Price Index,
8.L.S.
t
3*
3*
rm
r**_
i i
I i
i i
I i
I i
1 1
i i
I i
i ;
i i
ill I I I I I 9 i 1 1 1 1 1 1 1
l U I I I I I1 Iiiiii!
I I I I U I I 1 1 1 1 1 1 1 1 1 3 1 1 1
ill i r liiif r i1
ill ii1 irm r
i n ii i " ' ■ ' i i W v l i V ' i
i i i i i i j j j i i i i J i i i i i
■ill l u i w i i i n l u i i l i l l l l i
T O C O M P E N S A T E
F O R IN C R EA S ED
C O S T OF LIVING,
WORKERS WIU
GET 14 MORE
FOR EVERY
INCREASE OF
1.14 P O IN T S
IN CPI
FOR IMPROVED
STANDARD
OF LIVING
■— il l i ■ l l l l l I l l l l , ■ PERMANENT
i i i i i i i i i i i i i i i i i i i i i i l i C O S T OF LIVING
I I I U I U I I I I I I I I I I I I I I I IM l l l i l l l l l l
INCREASE
FOR IMPROVED
STANDARD
OF LIVING
6 4 NET INCREASE GUARANTEED
REGARDLESS OF HOW MUCH CPI DROPS
6 L a b o r In fo r m a tio n B u lle tin
24
workers. As would be expected, the wage agreement concluded
between General Motors Corporation and United Automobile
Workers (CIO) produced a great deal of comment in technical
and business journals.
Life magazine in an editorial under the heading of
"The G. M. Contract Links Wages to Living Costs and Adds
Something for Progress." This editorial statess
. . . recognition by management that wages should
bear a direct relation to cost of living is a decided
gain for labor. There is validity to labor's complaint
that wages usually lag behind advancing prices. And
r as Norway has shown, there are some wider national
advantages in linking wages to the cost of living. In
Norway inflation has been somewhat retarded because
employers have realized that inflationary prices would
automatically zoom the wages that1 are largely pegged to
a living cost index.
The editorial goes on to says
The linking of wages to cost of living statistics is
clearly an act of justice. As such, it puts the General
Motors solution within the category of the "just wage"
which has been the preoccupation of Christian moralists
since the time of the Catholic schoolmen of the Middle
Ages. However, a capitulation by General Motors workers
for a mere cost-of-living settlement would be tantamount
to selling their souls for a mess of pottage. By
American standards it is not cost of living but standard
of living that we should keep our eyes open on.^
In granting the so called increment factors of three
cents per hour for 1948 and 1949, it is assumed that General
Motors Corporation believes that technological improvement
and efficiency will continue during 1948-1949 at the same
1 Editorial, Life magazine, Vol. 24, No. 26, June 26,
1948, p. 38.
25
rate as in the past. It assumes that by mass production and
increased efficiency it will produce more for less and so be
able to pay the three cents per hour improvement factor with
out difficulty.' This assumption on the part of General
Motors also fits in with the central motive of our productive
system, which assumes that increased production can be
absorbed by lowering prices and by raising wages so that more
consumers have power to buy.
General Motors has, in effect, taken the average rate
of technological improvements in United States industry—
2% a year over the past 100 years--and translated it
into three cents per hour. This puts a sharp spur on
management to make at least that much progress.2
A number of prominent publications devoted editorials
to the living standard or improvement factor. Collier's
magazine in an editorial entitled, "Here is Something to
Think About," stated the followings
The annual improvement factor is a new and an
ambitious consideration. Only a large and thoughtful
organization could dare promise to increase effic
iency annually, so that it could afford to make a
wage increase based on improved production. Behind
that pledge to improve industrial processes and to
share the fruit of improvement are research, engineering,
advertising and mass production. Invention, following
scientific experimentation, is the way to such a goal.
A large corporation rich in manpower can risk such a
bet on its future, but too many lesser industrial
enterprises lack such aids to improvement. Nevertheless,
where an enterprise does grow and better its produc
tivity, it is wise to distribute wisely these gains.®
2 Ibid., p. 58.
3 Editorial, Collier's magazine, Vol. 122, No. 7,
August 14, 1948, p. 78.
26
As would be expected, not all financial and industrial
writers agreed with General Motors in granting a share to
labor for increased production and technological advancement*
One of those who did not agree with the General Motors Cor
poration was Henry Hazlitt. In an article in Newsweek he
stated:
It must be remembered that this long-run average
increase in labor productivity has not been automatic.
Its continuance can not be taken for granted. It
has taken place in America because capital accumulation
has been steadily raising man-hour productivity on the
average by putting more and better tools into the hands
of the workers.4
It is evident that Hazlitt is not fully in accord with
the granting of what may be called a bonus for workers as
partners in a technological improvement. He states further
in this connection:
Capital accumulation has only been possible by
sufficient high profits to enable corporations to
plow new capital back into plant expansion. If
corporate profit margins are reduced by taxation or
excessive wage increases to where they are dangerously
narrow, "annual improvement" increases even on the
average will no longer be possible. Labor will then
find itself moving into lower instead of higher living
standards.^
Mr. Hazlitt, in the same article, claims that in some
industries the physical output per man-hour has actually
declined. Others, however, do not agree with Mr. Hazlitt in
4 Henry Hazlitt, Newsweek, Vol. XXXI, No. 23, June 7,
1948, p. 70.
5 Ibid., p. 70.
27
the article cited, in that Mr. Hazlitt bases his figures on
the war years, namely 1941-1945 and confines his study and
research to the shoe industry, cement industry, and non-
ferrous metal refining industries. Other writers question
Hazlitt's contention that productivity is declining in
industry by citing the above mentioned industries. They
state that it is a well known fact that during the war years
of 1941-1945, many of the more progressive workers left the
industries which Hazlitt quotes and sought work in better
paying war industries. This caused a lowering of efficiency
in the industries he claims lost efficiency. Mr. Hazlitt
goes on and says*
An investigation by the United States Bureau of Lahor
Statistics shows that the physical output per man-hour
dropped in the boot and shoe industry from an index
number of 113.2 in 1941 to 105.9 in 1944. In the
cement industry the drop was from 108.3 in 1941 to 83.8
in 1944, and in non-ferrous metal refining from 108 in
1940 to 95.9 in 1945. How can industries or firms in
which man hour productivity is actually declining afford
to pay automatic ’ ’annual improvement increases”?®
That other industries are wondering if labor will
demand an ’ ’improvement factor” in addition to increased wages
based on cost-of-living is considered by an editorial in
Business Week, which states?
There is some concern over the settlement formula
(General Motors Corporation and United Automobile Workers,
CIO) on other labor fronts. Some workers have a narrower
gap between 1940 and 1948 buying power; their union may
not be willing to settle for less than 11 cents raise
6 Ibid.-, p. 70.
28
which would be due them under General Motors formula,
and companies with a larger gap to close are not happy
about facing demands for more than 11 cents.
Both management and labor, however, are inclined to
feel that a pattern has been made and that it could
be tailored to individual cases.?
General Motors 1 past labor relations analyzed. Prom
the recent labor contract between General Motors Corporation
and the United Automobile Workers (CIO), #56808 eonsumated
on May 25, 1948, there is imbodied in this contract, in
addition to the provisions covered in this chapter, a number
of other benefits to the employees. Some of these benefits
are made up of leave of absence to veterans, vacation pay,
(vacation allowance instead of aetual vacation), and paid
holidays for factory workers who are paid on an hourly basis.
According to President C. E. Wilson, of General Motors Cor
poration, who is credited by economic writers for proposing
the improvement factor and standard of living increment
formula in the contract mentioned above, General Motors has
also initiated labor improvement trends in the past.
Business Week magazine in an editorial sayss
General Motors has initiated labor trends in the past.
A year ago it approved the idea of paying hourly employees
for holidays which normally would have been lost. Thus
compensating them in the same manner as salaried employees.
Its hopes that better relationship with labor will
^ Editorial, Business Week magazine, No.978, May 29,
1948, p. 96.
29
result, that the nation’s bargaining road will be
smoothed. ®
Thus it appears that the General Motors Corporation
in the post war period has endeavored to promote a better
understanding with its employees.
This is in contrast to the turbulent labor relations
which the Corporation experienced in 1936 and the late
thirties. As one writer has stateds
It was not the size of the pay envelope that caused
the sit down strike at General Motors in 1936, which
involved 40,000 workers directly and 110,000 indirectly,
and paralyzed sixty plants of the giant Corporation in
fourteen different states. It was the pent up resentment
of men in revolt against being de-humanized, against
being only a badge— a number, a mbot in thrall to a
vast and intricate succubus of machinery draining them
of energy, threatening to cast them on the scrap heap
after a few short years. It reflected long simmering
rebellion against humiliation inflicted by the imperson
ality of a great corporation which, no more callous than
its rivals, sapped the health and vitality of its workers
and then turned them over to the government to support
as soon as approaching middle age began to dimminish
their usefulness.^
A number of other writers are also of the opinion
that General Motors Corporation’s labor policy in the past
has at times led to serious labor management disputes
resulting in strikes and labor disorder. It is believed by
the same writers that the recent concluded labor agreement
® Editorial, Business Week magazine, No. 979, June 5,
1948, p. 98.
9 Herbert Harris, American Labor (New Haven: Yale
University Press, 1939), pp. 268-269,
will set a new pattern in peaceful labor negotiations,
which in turn can be followed by other large employers of
labor.
It will be the writer's aim in the next chapter to
evaluate standards of living, different family budgets and
through a short historical survey, show their progressive
development.
CHAPTER IV
AN ATTEMPTED EVALUATION OF STANDARDS OF LIVING
THROUGH A SURVEY OF FAMILY BUDGETS
The level of living expressed in a family budget by
the Bureau of Labor Statistics varies from time to time, and
from place to place, according to the customs and standards
of society and the productivity of the economy.
That the level of living necessary for social satis
faction does not rest on material needs alone was recognized
by Aristotle, whom Dorothy S. Brady quotes as having said:
Man nevertheless being human, needs some external
prosperity. His nature alone is not sufficient to
support his thinking; it needs bodily health, food and
care of every kind. We must not however suppose that,
because one cannot be happy without some external goods,
a great variety of such goods is necessary for happiness.
For neither self-sufficiency nor moral action demands
excess of such things. We can do noble deeds without
being lords of land and sea. For moderate means enable
a person to act virtuously,1
Yet the slow progress of economic development, and
the recurrent plagues and famines had left unsatisfied so
many of the basic wants that as late as the fourteenth
century Langland supposedly sang in "Piers Plowman":
These three, no more; but three are needful,
The one is clothing to save thee from chill,
United States Department of Labor, Monthly Labor
Review, Vol. 66, No. 2, February, 1948, p. 171, Aristotle:
On Man in the Universe, Ethics Book VII."
The second is meat, for thy health's sake,
The third is drink when thou driest.^
SIXTEENTH CENTURY ENGLAND
By the sixteenth century, Sir Thomas More had visions
in Utopia of a level of living that would include windows in
every cottage and meat once a week; but he realized that
these might be among the "many things in the utopian weal
publique which in our cities I may rather wisshe for then
hoope after." This was simply a recognition of the reality
of want in a world where the simplest requirements could not
be realized. Sir Thomas, even in his utopian dreams, could
not look forward two centuries to the time when freedom and
invention had made much more than his wish possible; to the
time when English social scientists compared estimates of
family needs and actual living patterns with all the obser
vance that their studies revealed not only the need but also
the possibility for social action to eliminate levels of
living below acceptable standards.
SEVENTEENTH CENTURY ENGLAND
England during the seventeenth century became the most
advanced country in Europe in mining and manufacturing, with
2 "piers Plowman," Passus I, 20. Circa, 14th Century,
quoted by Dorothy S. Brady in Labor Review, United States
Department of Labor, Vol. 66, No. 2, February, 1948, p. 171.
a general level of living higher than any other country.
Living conditions of wage earners were improving but the
agricultural population remained at a low level of subsistence.
It was in this period of growth in material welfare that the
"Political Arithmeticians" began to describe the economy in
statistical terms and to measure the minimum level of living.
It was toward the end of this century that Gregory
3
King prepared his remarkable picture of the economic level
of western countries. France and other countries sent
technical experts to study English methods of manufacturing
and these observers returned with the conviction that freedom,
invention, and high levels of living among all population
groups were interrelated.
Statistical studies of living costs. Development of
studies of family budgets and cost-of-living began in the
nineteenth century with the advance of modern industrialism
and promised improvement in living conditions of the masses
of the population. One of the first studies made of individual
family income and level of living was made by Frederic Le Play
in the 1830's. Ernst Engel, a student of Le Play’s, analyzed
the data collected by Le Play and E. Ducpetiaux and formulated
his theory of the relationship between income and the
3 King Gregory, "Natural and Political Observations
and Conclusions upon the State and Condition of England, 1698,"
Quoted by Dorothy S. Brady, Ibid., p. 171.
54
proportionate expenditures on food, which was published in
1895. Ducpetiaux became known as an early worker in the
field of statistics through a study which he conducted under
the auspices of the Belgian Statistical Bureau. The study
was concerned with comparisons of the adequacy of workers 1
family living with other population groups.
The intense belief in the possibility and desirability
of improvement in living conditions began to stimulate
statistical studies of living conditions in the United States
during the years following the Civil War. State bureaus of
labor statistics made more than one hundred separate studies
of family living conditions between 1870 and 1900. The United
States Bureau of Labor Statistics began making such studies
in 1888, as instructed by Congress.
One of the foremost states to pursue studies of labor
conditions and family cost-of-living was the state of
Massachusetts, which through Henry Kemble Oliver, and
Carroll D. Wright carried on many studies in labor statistics
that later became patterns for other states to follow.
The results of a survey of housing conditions in Boston
were presented by the Bureau of Labor Statistics of the state
of Massachusetts in its first annual report in 1869. The
report was presented in language that aroused public con
science, it stated for example:
How the owners of the heathenish dens which we have
visited, reeking with pestilent filth, and germinating
35
the spores of disease--dens contrived and constructed
as with a purposed stoppage of light and air, God1s
free, priceless gift to all, yet given to all without
money and without price, seem not only to act on the
principle of getting the most money for the least goods
supplied, with little regard to weal of individual or
of society, but to act, also, on the principle of
shutting out, besides, all the light and air of whole
some morals, thus robbing the soul of its normal rights,
as they have the body of the decencies of life.^
In the seventeenth annual report (1886) by the Bureau
of Labor Statistics, State of Massachusetts, published a
study of food consumption in which Professor W. 0. Atwater
studied the data in terms of nutrition; and in cost-of-
living section in the fifteenth annual report (1884), he
presented statistical analyses of the Massachusetts surveys
made in 1875 and 1879, comparing the results with Engel's
analyses of Belgian data and with English studies.
Most of these studies failed to treat family income
and expenditures in a realistic manner* It was taken for
granted that if an average worker's family with a certain
income, had managed to "save" something out of that income
over the course of the year, It was concluded that that
income was sufficient to provide the family needs* As one
social service worker has statedi
A large number of studies compared their findings
with those of Ernst Engel. The writers appeared to be
groping for a position in the scale of expenditure
percentages that could be used as a norm. Such an
4 State of Massachusetts Bureau of Labor Statistics,
Report of Housing Conditions in Boston, 1869, Quoted by
Dorothy S. Brady, Ibid., p. 173.
36
idea has persisted to the extent that recent discussions
of the housing problem have made use variously of a
figure of 20 or 25 per cent as the "standard" proportion
of income that should be spent on housing.5
Because of significant changes in the price level and
a growing awareness of the substantial differences in the
prices of the same goods and services in different places,
it was realized, around the beginning of this century, that
the uses of budget levels (such as the balance of expenditures
and income) based simply on studies of family expenditures,
were definitely limited. Such determinations could not be
applied to later dates if the price level had changed. They
could not be applied to different localities without first
ascertaining whether the prices in the different places were
the same.
Studies of family living expenditures began in the
4
twentieth century to include more and more data on the
quantities of goods purchased. The comprehensive survey
made by the United States Department of Labor in 1901 included
data on the quantity and cost of the important foods purchased.
The survey made by the Bureau of Labor Statistics in 1917-1919
included data on quantities of foods, clothing, furnishings,
and some miscellaneous articles.
The studies made by Federal agencies since 1930 have
further increased the information recorded on the quantities
5 Helen M. Humes, "Rent and Income, What is the Relation
ship?" The Journal of Housing, April, 1946, pp. 72-73.
of goods and services purchased
37
Quantity budgets of goods and services. This develop
ment in the basic studies of family living made possible the
construction of quantity budgets (list of goods and services)
in a realistic manner. While budget lists have been based
on individual's experience only those with a basis in
statistical fact have been given any widespread recognition.
To a large extent, in this country, quantity budgets were
constructed initially upon request of some legal authority;
and the determination of the budget level was, to a consider
able extent, dependent upon the immediate use to be made of
the results. In accordance with an act of Congress approved
in 1907, .which provided for investigation of the condition of
women and child workers, the Commissioner of Labor prepared,
with other information, a study of living conditions and the
cost of a ‘ 'minimum standard -of living" and the cost of a
"fair standard of living" in cotton-mill communities. These
were the first budgets in this country which prices were
applied in determination of the total cost of the budget.
In 1917 Professor William P. Ogburn of the University
of Washington on the request of -the Arbitration Board for
Seattle Railway Industry prepared a detailed budget for
families of street railway employees which became known as a
"minimum comfort budget."
38
In 1915 the New York City Bureau of Personal Service,
in cooperation with the Bureau of Municipal Research, prepared
a budget for the purpose of standardizing the salaries of city
employees. For the same reason the Bureau of Municipal
Research of Philadelphia prepared a budget with calculations
of its cost in* 1917.
At the request of the Joint Reclassification Committee
of Congress in 1919, the Bureau of Labor Statistics prepared
"tentative*' quantity and cost budgets for a government
worker's family of five persons and a single man and single
woman in government service.
Professor Ogburn presented an adaptation of the govern
ment worker budget for coal mining families with calculations
of its cost for United States Bituminous Coal Commission in
January, 1920. For the calculation of the cost of the budget,
Professor Ogburn used prices collected by agents of the Bureau
of Labor Statistics in several coal mining communities.
In June, 1920, the Bureau published a quantity budget
for a worker's family of five but did not present any calcu
lation of its cost. In 1921 the California State Civil
Service Commission appointed a special committee to prepare
budgets for laborers', clerks*, and executives', families and
for unmarried clerks, male and female. These budgets were
the forerunners of those prepared and priced annually by the
Heller Committee for Research in Social Economics of the
39
Department of Economics of the University of California.
Arbitration boards and commissions in the period immediately
after World War I were responsible for many determinations
of the cost of family budgets, which sometimes were adapta
tions of the Bureau of Labor Statistics budgets and sometimes
budgets specially developed.
Beginning in 1919, the National Industrial Conference
Board prepared budgets and estimated their cost for a number
of specific industrial communities.
All of the budgets described thus far recognized
nutritional needs in the construction of the list of foods;
most of them accepted the generally available housing in
determination of housing cost; all of them included some
provision for recreation and education.
Change in budget concept. In reading discussions of
family budgets following World War I, it was the opinion of
most social workers;, and to some extent economists, that the
United States could approach a level of unmatched prosperity
with a resultant well being, or at least a tolerable level
of living, to all families. Employers and employers organi
zations also made budgets for specific situations and these
budgets fundamentally agreed more than they differed with the
budgets prepared by government agencies or academic groups.
When it appeared that budget totals implied a far greater
national income than existed at the time, the reaction was
40
not an echo of Sir Thomas More's pessimism but rather a
puzzled ’ ’something must be wrong with our calculations.”
Perhaps it was wrong to compare the budget with the
earnings of one individual, especially in view of the
pressures to allow women to enter the labor force in almost
all occupations with equal pay for equal work. Perhaps it
was wrong to assume that all workers support four or five
persons on their earnings.
Many of these conceptual problems might have been
solved before now but for the depression of the 1930’s which
presented a new and difficult challenge. In 1936, the Works
Progress Administration published Quantity Budgets for Basic
Maintenance and Emergency Standards of Living.
As the name implies, these budgets were prepared for
the purpose of maintaining an adequate standard of living at
the lowest economic level, and to establish quantity estimates
of goods and services necessary to maintain that standard.
Although these budgets served their purpose of
appraising relief, in both the original calculations of their
l
cost in March, 1935, and later estimates prepared by the
Bureau of Labor Statistics, they presented a problem of long
standings the variation in cost of the same goods and
services from place to place.
The United States Department of Labor has at times
been subject to severe criticism by Congress for its inability
41
to produce figures necessary for every American family to
strive to enjoy decent living, as expressed by Congressman
Albert Engel of Michigan in the following remarks:
Unless the Labor Department can give us cost of
living figures based on the right of every American to a
decent living, including decent food, decent housing
and decent clothing, it had better discontinue pub
lishing information along this line.®
Origin of present budget as used in calculations for
Consumers Price Index. In the spring of 1945 the Labor and
Federal Security Subcommittee of the Committee on Appropri
ations of the House of Representatives directed the Bureau of
Labor Statistics "to find out what it costs a worker's family
to live in the large cities of the United States.”
The Subcommittee indicated that it wanted to know the
relative differences in living costs between cities and in
addition, the total number of "dollars required for the
average worker in overalls to live in these cities.”
Guided by the standards established by the technical
committee and following the methods which it outlined, the
Bureau of Labor Statistics first developed the list of items
and quantities making up a budget for a city worker's family,
and then obtained prices for this list of goods and services
and worked out dollar totals for thirty-four large cities in
the United States. In determining this budget, a family of
6 Congressional Record, 79th Congress, 1st Session,
Vol. 91, Part 2, pp. 2442-2449.
42
four was used as the basis for the calculation; it was ex
pected that budgets would later be developed for families of
larger or smaller sizes. This procedure has been found to
give dependable over-all results.
The budget came into being in 1946 and is not a
"subsistence” budget nor is it a "luxury” budget; it is an
attempt to describe and measure a modest but adequate standard
of living.
In Chapter II of this thesis is set forth the
essential features of the Consumers Price Index, of which
the family budget discussed in this chapter forms the basis.
Having presented in this chapter the historical back
ground of budgets with associated standards of living, it
will be the writer's aim in the next chapter to show what
social and economic influences have determined the present
high American standard of living, and how wages and working
conditions of the American worker make this standard of
living possible.
CONSUMERS* PRICES
BUREAU OF LABOR STATISTICS INDEXES, 1 9 5 5 -3 8 • 100
200
A L L ITUS. F O O R A M D AMAAEL. M A N T H L T ,
Rim, MLceno oath.
180 180
160 160
APPAREL
140 1 40
ALL ITEMS
120 V— * 120
RENT
100 100
80 80
60
1 9 3 8 1940 1 93 6 1 94 2 1934 1944 1946 1 93 2
t 0 4 * o o r t o r t m m o s o r w r t o t o u mwt t r t ' t *
HOURS AND EARNINGS OF FACTORY EMPLOYEES
BUREAU O f LABOR STATISTICS OAT A. WITHOUT SEASONAL ADJUSTMENT
DOLLARS PER WEEK
M unm uT
60
DOLLARS PER*WEEK
6o i r AVERAGE WEEKLY EARNINGS
50
50
40
40
3 0
30
20
CENTS PER HOUR
CENTS PER H O U R
— j 140
AVERAGE HOURLY EARNINGS
140
120
120
100
100
80
60
60
HOURS PER WEEK
50 u«s=— a
HO UR S PER WEEK
50 I
AVERAGE HOURS WORKED
40
30
30
1948
1946
1940 1938
1936 1934
L atest Figures
CHAPTER V
THE SOCIAL AND ECONOMIC INFLUENCES IN DETERMINATION
OF AN AMERICAN STANDARD OF LIVING
Wages and their relation to cost-of-living. It is
often said that we live in a wage economy, which means that
a majority of the people live at the present time under a
system whereby fixed amounts of money are paid and received
by them for work and services performed. As wage earners
are receivers of a fixed salary, all are vitally interested
in the cost-of-living and what their wages will buy of a
given quality of food and services. The writer stated in
Chapter I that, statistically, the employed industrial wage
earner is today receiving an average of $54.12 per week, as
compared to $23.86 in 1939 for approximately the same number
of hours work per week. The question asked at this point is
believed to be both proper and logical, in view of increased
prices for all that the workers need to buy. We are told
that the cost-of-living has risen from an index base of 100,
(the average cost-of-living index for 1935-1939), to a record
high of 174.5 on September 15, 1948. We may therefore ask,
are the workers, with their increase in wages in view of the
inflationary cost-of-living, able to maintain an adequate
standard of living? In Chapter III of this thesis it was
45
stated that General Motors Corporation granted, in addition
to an increase of wages, a living standard increment of
three cents per hour, during 1948 and 1949, in order to help
their thousands of employees to maintain a desirable
standard of living.^
' An attempt will be made in the remainder of this
chapter to discuss the social and economic influences in
labor-management relations which have given impetus to such
gestures on the part of employers as that manifested in the
wage adjustment contract between General Motors Corporation
and United Automobile Workers (CIO) of May 25, 1948, and
around which theme this thesis is built.
PRECURSORS OP THE WAGE SYSTEM
The wage system is largely a result of the Industrial
revolution, although the wage system preceded the industrial
revolution, it was the introduction of power machinery and
the factory system of production which created a large class
of workers who were entirely dependent upon wages for their
living*
The basic and fundamental economic change was the shift
in the importance of labor relative to capital investment in
the manufacturing process, and the complete separation of the
1 Figures by the United States Department of Labor,
Bureau of Labor Statistics, Monthly Labor Review, Vol. 67,
No. 1, July, 1948, p. 3,
46
worker from the ownership of the instruments of production
and the disposal of the product. This brought forth the un
resolved question between workers and the owners of capital
as to the amount each contributes to the joint product, and
how each shall share in the proceeds.
These questions still remain to be answered and are
the constant source of labor-management disputes and usually
form the basis for all labor relations problems.
These questions and problems have been the subject of
early economic and political writers, as they are today the
subject of a great deal of attention and subject for legis
lative endeavors to smooth the way to peaceful negotiation
between labor and management.
The recent trend in wages appears to be that the
workers should be paid a "living wage" that will maintain
them and their families on a standard of living, compatible
with that known and accepted as an American standard of
living and commensurate with the level of occupation or
profession pursued by the individual.
Early concept of wages and standards of living. Most
early English economic writers held the theory that wages
were limited to the price that had to be paid for labor, due
to the fact that labor was a commodity, whose price was con
trolled by the same market conditions as other commodities.
This concept was called the "Iron Law" of wages, and according
47
to the iron law theory of wages, the price of labor was
determined by the mechanical forces of supply and demand,
and like the price of-any other commodity its value is
ultimately based on its cost of production. As stated by
David Ricardos
The natural- price of labour is that which is
necessary to enable the labourers to subsist and to
perpetuate their race without either increase or
diminution.2
Wages fund theory and standard of living. The wages
fund theory like that of the subsistence theory was the work
of early English political economy writers. The wages fund
theory was developed by John Stuart Mill and like that of the
subsistence theory was based on the Malthusian theory of
population and the law of diminishing returns. According to
the proponents of the wages fund theory it would operate
something like the following.
While the wages fund determines the market rate of
wages at any particular time, wages in the long run are
always determined by the ratio of population to the supply
of food, and the only way to improve wages is to check popu
lation growth. If one group of workers, through legislation
or trade union pressure, secures an advance in their wages,
they absorb an unduly large part of the wages fund and this
2 David Ricardo, Principles of Political Economy and
Taxation, J. R. McCulloch, editor, in The Works of David
Ricardo (London: John Murray, 1876), pp. 50-51.
48
leaves less for other workers. Likewise, if employers are
taxed to provide for the poor, this reduces the amount of
capital available for wages, and the level of wages is con
sequently lowered. Wages can be increased only at the
expense of profits, but a reduction in profits causes a
decline in savings and hence in the capital from which the
wages fund is derived. The outstanding authority on popu
lation problems, Thomas R* Malthus, said in this connection*
It may naturally appear hard to the labouring class
that, of the vast mass of production obtained from the
land, the capital, and the labourer of the country, so
small a quantity is at present determined, and must
always in the future be determined, by the inevitable
law of supply and demand.^
In discussing the feasibility of statutory minimum
wages, John Stuart Mill said:
Such an obligation acknowledged and acted upon would
suspend all checks, both positive and preventative; there
would be nothing to hinder population from starting
forward at its rapidest rate; and as the natural increase
of capital would, at the best, not be more rapid than
before, taxation, to make up the growing deficiency, must
advance with the same gigantic strides . . . let them
work ever so efficiently the increasing population could
not, as we have so often shown, increase the produce
proportionately* the surplus, after all were fed, would
bear a less and less proportion to the whole produce and
to the population; and the increase of people going on
in a constant ratio, while the increase of produce went
on in a diminishing ratio, the surplus would in time be
wholly absorbed; taxation for the support of the poor
would engross the whole income of the country; the payers
and receivers would be melted down into one mass. The
check to population either by death or prudence could
3 Thomas R. Malthus, Principles of Political Economy,
(London: William Pickering, 1836), 2nd edition, p. 279.
49
not then be staved off any longer but must come into
operation suddenly and at oncej everything which places
mankind above a nest of ants or a colony of beavers
having perished in the interval.4
It is not difficult to appreciate the hard road
laboring classes had to travel in their endeavor to improve
working conditions and standards of living.
As late as 1874, a well known Irish economist, J. E.
Cairnes, in criticizing a contemporary who took exception
to Malthus by maintaining that "subsistence tended to increase
faster than population," expressed his views regarding the
prospects of workers in the following wordss
The margin for the possible improvement of their lot
is confined within narrow barriers which cannot be
passed, and the problem of their elevation is hopeless.
As a body they will not rise at all. A few, more
energetic or more fortunate than the rest, will from
time to time escape, as they do now, from the ranks of
their fellows to the higher walks of industrial life,
but the great majority will remain substantially where
they are. The remuneration of labour as such, skilled
or unskilled, can never rise above Its present level^
As one American author has so well stated, is it any wonder
that nineteenth century economics was called the dismal
science.
Karl Marx, the Socialist, and his theory of wages and
standards of living. The fundamental thesis of Marx’s
4 J. S. Mill, Principles of Political Economy (New
York: D. Appleton Century Company, 1883), Vol. 1, pp. 445-446.
5 J. E. Cairnes, Political Economy (New York: Harper
and Brothers, 1875), Lecture VII.
50
economic and political philosophy was that labor creates all
value; that ”... the value of a commodity is determined by
the quantity of labor expended during its production.”
According to the argument put forth by Marx, raw
materials have value only to the extent that labor was em
ployed in producing and getting them to the market, and
capital equipment is a conversion of raw materials and labor.
Marx goes on to say that it is labor which produces
all wealth, but labor is actually paid only its cost in
subsistence--the difference or surplus value is retained by
the employers.
It is interesting to note that Marx's theory of
surplus value followed closely the thinking of Adam Smith,
the founder of classical economics. Smith held that it was
labor which created economic value and that rent and profit -
were deductions from the product of labor. As Smith stated:
. . . that it was but equity that they who feed,
clothe, and lodge the whole body of the people should
have such a share in the produce of their own labour
as to be themselves tolerably well fed, clothed and
lodged.?
Marx, however, disagreed with Smith that workers are
entitled merely to be ’ ’tolerably” well fed. According to
® Karl Marx, Wage-Labor and Capital (New York: New
York Labor News Company, 1902), p. 43.
* 7 Adam Smith, Wealth of Nations (New York: E. P.
Dutton and Company, 1911), Vol. 1, p. 70.
51
the Marxian philosophy, wages should amount to the total
value of the product; and if workers had control of industry,
which Marx advocated, there would be no employing class to
appropriate the surplus value which belonged to labor. Marx
in his socialistic philosophy did not think in terms of
individual laborers receiving the total value of their pro
duction but in terms of the surplus value going to the state
which would be controlled by the workers.
It was not until late in the nineteenth century that
the Malthusian theory of population and diminishing returns
from the land (food supply) was questioned. Then it was
observed that the rate of population increase tends to be
lower instead of higher, with improvements in the standard
of living. If this was true, a rise in wages might reduce
rather than increase a nation’s supply of labor, excluding
of course the factor of immigration. Also it was observed
that "high” wages had another effect--they Increased the
efficiency of labor. This latter was recognized by Adam
Smith a century earlier but his immediate successors had
given little attention to his statement, as followst
. ♦ . the wages of labour are the encouragement of
industry, which, like every other human quality, im
proves in proportion to the encouragement it receives.
A plentiful subsistence increases the bodily strength
of the labourer and the comfortable hope of bettering
his condition, and of ending his days perhaps in ease
and plenty, animates him to exert that strength to the
utmost. Where wages are high, accordingly, we shall
always find the workers more active, dilligent, and
52
expeditious than where they are low.®
During the latter part of the nineteenth century a
number of the classical economists calne to the conclusion
that low wages were by no means equivalent to low costs. One
of these economists, namely N. W. Senior, made the observa
tion that while wages in England were three times as high as
in Ireland, the cost of production in England was no greater.
This caused Senior to states r,It may be supposed, indeed,
that the price of labour is everywhere, and at all times, the
same.
Recognition of the factors of labor's efficiency was
a radical departure from the concept of labor as mere numbers
or a rigid "lump of work” because it differentiated between
the nominal cost of labor represented by the wages which
workers receive, and the real cost of labor, which depends
upon the relation of wages to the volume and value of the
goods produced.
From this it was concluded that if higher wages resulted
in higher productivity this affected not only the supply of,
but also the demand for, labor.
The supply was augmented because more man-hours were
available as a result of the increased intensity and skill of
8 Ibid., p. 75.
9 N. W. Senior, Political Economy (Londons Charles
Griffin and Company, 1863), 5th edition, p. 151.
53
labor; the demand tended to expand because persons with
money at their disposal, attracted by the prospects of the
larger profits resulting from lower labor costs, would be
encouraged to invest larger portions of their funds instead
of spending their money for present enjoyment. Instead of a
rigid wages fund which could be augmented only slowly with
the growth of the surplus products of industry, investment
funds for the employment of labor came to be thought of as
flexible circulating capital which expanded or contracted
according to the confidence investors had in their ability
to make profits.
This new attention to labor productivity or efficiency
as a factor in the value or price of labor not only dis
credited the absolutism of the wages fund doctrine but pointed
the way to a new theory— that of marginal productivity, which
deals in terms of increments, the small addition or sub
tractions of labor at the "margin."
One American economist explains the meaning of
marginal productivity theory ass
One aspect of a general theory of value, and is
premised on the fact that the amount of goods and
services produced is dependent upon willingness and
ability of consumers to purchase. Basic to economic
value are two conditions, ability and scarcity, which
in the market place are manifested as demand and
supply.9
9 Florence Peterson, Survey of Labor Economics (New
York; Harper and Brothers, 1947), p. 240.
54
The reader may ask at this point how does this theory
affect the wages of labor? The author quoted has this to say
in this respects
With respect to labor’s share or value, the theory
holds that wages tend to be fixed at the point that
represents the employers estimate of the contribution
of its number of units of labor which he will employ
will be determined by what he must pay for the marginal
unit of labor in comparison to the cost of the marginal
units of land (rent) and capital (interest), and by
what he thinks his own marginal risks should yield in
the way of profits.
In other words, the supply of labor in relation to
the supply of land, capital, and business enterprise
determines its marginal productivity value, and the
level of wages paid will equal the exact value of the
marginal unit.10
Demands for labor. In reading the above explanation
of marginal productivity as applied to labor and wages it
would appear that shades of Mill’s ’ ’ Wages Fund Theory” had
been incorporated in the explanation. However, a closer
scrutiny clarifies this point.
The marginal productivity theory differs from the
wages fund theory in that the amount of capital available
for employing labor is not regarded as a fixed pro
portion of the total income from industry. It is a fund
which may be added or reduced-by the action of investors
in accordance with the relative attractiveness of In
vestment as against present enjoyment--investing in
stocks or bonds or spending for personal comforts and
luxurie.s. The fund, however, remains elastic only
within certain limits, and these limits are determined
by preference which investors have for spending their
money immediately or putting it by to bring in future
income. This preference for present pleasure or
spending, referred to as "time preference” or
10 Ibid., p. 241.
55
"discounting the future,1 1 acts as a resistant against
the flow of capital into industry and measures the
cost price of capital,!!
Fundamentally, according to this theory, the demand
for labor is a demand for the products of labor, and as the
author goes on to say:
. . . the demand at any time is dependent upon general
economic conditions and the need and desires of con
sumers. The total volume of production, therefore,
ultimately determines the receipts of all factors in
volved in production. But the theory of marginal pro
ductivity as applied to wage determination is concerned
with the ratio of the receipts going to capital and
labor or, more specifically, the value assigned to
labor by the owners and managers of capital. In this
sense, the demand for labor is represented by the amount
of capital made available by employers for investment
in wages.!2
Supply of labor.
The supply of labor is also elastic within certain
limits, and these limits determine the cost price of
labor. Fundamentally the supply of labor is contingent
upon the total population, but population is relatively
inelastic. The elasticity of supply at least within
short periods of time and for particular demands, depends
upon such factors and conditions as the proportion of
the population available for work (for example, not
needed in the military forces), the acquired skills and
intensity of work of those in the labor force, and the
willingness of workers to accept jobs at a given price.
Bargaining theory. Again quoting the author, who says:
The marginal productivity theory rests upon the assump
tion of equal bargaining powers between the buyers and
11 Ibid., p. 242.
12 Peterson, op. cit., p. 242.
13 Ibid., p. 245.
the tellers of labor In a perfectly "free” labor
market; otherwise there will be Interference in the
competitive forces of supply and demand which will
cause an unnatural "equilibrium" or wage level. It
is a theory which holds that the mechanistic operation
of unconscious forces will bring about normal or
"natural" rates of wages which, because they are
"natural" are therefore right and best for all concerned.
There is thus a supply curve for labor as well as a
demand curve. The supply curve is indicated by SS in the
diagram referred to in Figure 4; and the point of inter
section of the two curves, E, is the point of equilibrium
which determines the level of wages. According to the
marginal productivity theory, this is true because if any
employer sought to pay less, workers would leave him and go
elsewhere since there are unfilled demands; likewise, if
workers insisted upon morethan the equilibrium wage, they
would not be employed because there are enough available
workers to supply the demand at this figure. However, should
the demand for labor be reduced, as shown by DI DI, and the
supply remain the same, the wage level would drop to a new
point of equilibrium El.
To summarize the theory of wages discussed, marginal
subsistence determines the level of minimum wages or else
workers could not survive; marginal productivity establishes
the maximum level because marginal employers can not pay
more in a competitive system. In a progressive society the
14 ibid., p. 245.
VOLUME O F LABOR
PRICE ( WAGES )
<0.
U
OF LABOR
U
C O
difference between subsistence and productivity levels tends
to widen, and the extent to which actual wages rise above
subsistence depends largely upon the supply of labor relative
15
to the demand.for labor.
Having in the present chapter discussed theory of
wages, family budgets and its resultant effect on standard
of living, it will be the writer’s object in the next chapter
to show to what extent social and economic influences
determine the American standard of living.
15 Ibid., p. 254
CHAPTER VI
WAGES AND PURCHASING POWER AS A MEANS OP ATTAINING
AN ADEQUATE STANDARD OP LIVING
An attempt was made in Chapter V to show the various
theories of wages, beginning with the early English writers
and closing the chapter with the more modern conception of
wages and workers 1 share in production.
In this chapter an attempt will be made to discuss
remuneration to workers in the form of purchasing power of
their take home pay "earnings” and how this in turn is
reflected in an adequate standard of living.
For discussion in this chapter, no attempt has been
made to differentiate between wages, savings, and salaries,
all of which have been treated as wages for the purpose of
simplification.
The nature of wages. Wages mean different things for
different persons and to the same person in their several
capacities. A wage earner is primarily interested in the
wages he receives for his labor, but he is also Interested
in what the wages will buy in goods and services, in which
role he is acting as a payer of wages to others, directly in
the case of services and indirectly in the case of manufactured
articles and commodities.
60
Real wages. Real wages and their implication has
been treated by one author as follows:
Earnings or take-home wages provide the means for
livelihood, but the kind or standard of living which
can be obtained from a given amount of wages depends
equally as much upon what can be bought with those
earnings.
The purchasing power of a dollar of wages--that is
money wages in relation to costs of commodities and
services which workers need and want--is expressed as
“real wages." "Real" wages increase if prices fall
and wages remain the same, or if both rise, but wages
to a greater degree. Likewise, “real” wages decline
if prices rise even though wages remain the same, or
both wages and prices rise, but prices increase
relatively more than wages.^
It is the belief of many that at the present time,
due to inflationary trends in our economy, workers are more
interested in the “earnings” (take-home pay) than in wage
adjustments, per se. It was stated In Chapter I that
American industrial workers pay had increased from f>23.86
per week in 1939, to $54.12 per week in August of 1948.
How much of this increase in wages can be termed
"real wages" may be asked when it is noted that cost-of-
living, according to the United States Bureau of Labor
Statistics, has increased from a base of 100 (average 1935-
1939) to 174.5, for the month of September, 1948. Taking the
components of the Consumers Price Index separately and using
the same dates for base and comparison, we find that food has
1 Florence Peterson, Survey of Labor Economics (New
Yorks Harper and Brothers, 1947),p. 261.
61
increased from 95*5 to 215.2; apparel from 100.5 to 201.0;
rent from 104.3 to 118.5; house furnishings from 101.3 to
198.7; and miscellaneous and services from 100.7 to 152.7
In view of these statistics it becomes important to
ascertain to what degree the accepted American standard of
living can be maintained in light of increased cost-of-
living. These inflationary trends with resultant increased
cost-of-living are greatly responsible for present labor un
rest and talk of a "fourth'1 round of increased wages; this
in order to compensate in some degree for increased cost-of-
living and bring about a larger take-home pay— "earnings."
Wages as a means of livelihood. To the employer,
wage payments represent cost expenditures; to employees,
wages represent the means by which they and their families
live. How well they live depends upon how much they receive
in wages and how much they must pay for the things they buy,
namely, their "real wages." The level of living thus depends
upon the amount of money which the worker takes home in his
pay envelope as well as the prices which he must pay for the
goods and services he needs and wants. As far as an entire
family is concerned, its level of living is also contingent
upon the number of wage earners in the family in relation to
the number of persons dependent upon its wages.
It should also be noted in passing that the level of
living and standard of living is not wholly dependent upon
62
wages and individual income. In the United States such
important items as free education, at least at the high
school level, helps to raise the standard of living by such
tax supported services which otherwise would have to be
borne by the individual.
Wages and purchasing power. Todays wage earners in
America number approximately sixty-one million, see Figure 5i,
and with their families form a large and most important
segment of the market for consumer goods and services. Wages
therefore provide the ultimate means by which most of the
goods produced are taken off the market. It is not only the
amount of the aggregate wages which affects purchasing power,
but also the general levels of wages received by the various
groups of workers. With the same total national payroll, the
pattern of purchasing would be radically different if half
the workers were employed at relatively high wages while the
other half were only partially employed or were earning ex
tremely low wages. Thus, the volume and kinds of goods and
services purchased are affected by both the numbers and the
proportions of families at various levels of income. Many
studies in sociology have been made pertaining to family
income and family expenditures, the best known of these
studies was made by Friedrich Engel which came to be known
as "Engel’s Law." The basis of this study was an inquiry
into the income and expenditures of workingmen’s families in
80
75
70
65
60
55
50
15
1C
35
!.b
1 0
5
0
TRENDS !N THE LABOR FORCE, 1 9 4 0 -1 9 4 8
'.IONS OF PERSONS
MILLIONS OF PERSO
TOTAL LABOR FORCE
INCLUDING ARMED FORCES
I X / / v v J
M il ~
CIVILIAN LABOR
FORCE
EMPLOYED PERSONS
EMPLOYED IN
NONAGRI CULTURAL
INDUSTRIES
tMPLOYED IN
AGRICULTURE
UNEMPLOYED
1 1J■I■ ■ I ■ * i ■ I ■i 1 i ■ I 1 ■ ■ ■ I 1 ' 11 1 1 1 1 1 ' 1 1 1 1 1 1 1 1 111111■111■1T1 1 1 I i ‘ I 1 ' I ‘ ' I i ' I i ' I i i 1 i I n I i i I i i I “ I I i I i i I I I
B U R E A U O F TH E
64
Belgium in the 1890’s. The theory of Engel's Law states that,
"the proportion of outgo used for food, other things being
equal, is the best measure of the level of living of the
population," and further that "the poorer an individual, a
family, or a people, the greater must be the percentage of
income necessary for the maintenance of physical substance
and again of this a greater portion must be allowed for food."
The theory of Engel’s Law cited has been confirmed by
social workers in this and other countries. Not only have the
premises of the theory been confirmed but it has been further
refined by an investigation of the food purchased.
It is found that the diets of poorer families include
a larger proportion of cereal foods, vegetables, and pro
portionately less meat, dairy products, and fruits, than the
diets of the so-called well-to-do or families in the higher
income bracket.
Purchases at different income levels. Studies made in
1917-1919 and 1934-1936, and again in 1944, revealed some
interesting information on the changing character of purchases
by wage-earners.* families in this country. In 1934-1936,
families were spending considerably more for food than would
have been required compared to the foods purchased twenty
years previously; their diet was much nearer nutritional
standards with a considerably greater consumption of milk,
oranges, lettuce, and other vegetables. The worker’s family
65
spent less on clothing in 1934-1936 than would have been
required to buy the equivalent of that purchased in 1917-1919.
This was probably due to the introduction of centrally heated
dwellings, which reduced the necessity for warm clothing as
well as the desire to have automobiles and radios rather than
new clothes.
Relatively few families had automobiles in 1917-1919,
whereas 50 per cent of the families had them in 1934-1936.
Radios were unknown in the earlier period, but more than
three-fourths of the employed wage-earners families in 1934-
1936 owned radios. Nine-tenths of the families who rented
houses had bathrooms in 1934-1936, compared with slightly
over one-half in 1917-1919.
More movies, permanent waves, silk stockings, and many
other items had been added to the family spending during
this twenty year period.
In 1944 the average income, after taxes, of family wage
earners and clerical workers in large cities was $3,113. The
average size of these families was 3.46 persons, compared to
3.6 in 1934-1936. Although their incomes were considerably
higher during the war period, it was not possible for workers
families to buy automobiles and other desirable consumers
goods due to restrictions imposed by the government. There
was, however, an expansion of consumption of both food and
clothing, as indicated in Table II.
66
TABLE II
WAGE-EARNER FAMILY EXPENDITURES IN 1944
COMPARED TO 1934-1936
Expenditure s in 1944
Items Expenditures
in 1934-1936
Actual At 1934-
1936 prices
Per cent more
at 1934-1936
prices
Food #508 #966 #689 35.6
Housing
fuel and light 367 434 384 4.6
Clothing 160 425 295 84.4
Furnishings 60 81 56 -6.6
Miscellaneous 410 779 629 53. 4
Datas Unpublished material, United States Bureau of Labor
Statistics
67
On the basis of the same price levels, families in
1944 spent almost 85 per cent more for clothing and 36 per
cent more for food than they did ten years previously. Their
miscellaneous expenditures, which included recreation among
other items, were 53 per cent greater. Significantly, the
average wage earner family in 1944 was able to lay aside more
than $400 for gifts, contributions, and savings (not shown as
an expenditure in Table II), whereas in 1934-1936 the net
difference between expenditure and income was only $12 a year.
Unfortunately, however, for accurate statistical purposes,
the studies were made under adverse conditions, namely, the
study 1917-1919 was made while the nation was involved in
World War I, the study of 1934-1936 was made during depression
years, and therefore not wholly reliable, while the study made
in 1944 was made under World War II conditions, which restricted
purchases of many goods and services and in turn diverted
purchases into channels which -under ordinary economic con
ditions would not have happened.
The important point which should be emphasized is that
there has been a constant progressive improvement in the
standards of living of American wage-earning families during
the past twenty-five years. This increase in standards of
living has resulted in a greater demand for goods and services
of a higher quality than in previous decades by wage-earning
families. It is further manifested by changing patterns of
216
192
163
144
120
96
72
48
24
0
-24
ATES
LARS
216
192
168
144
120
96
72
48
24
0
-24
L RATES
IS OF DOLLARS
PERSONAL INCOME, CONSUMPTION, AND SAVING
DEPARTMENT OF COMMERCE ESTIMATES, ADJUSTED FOR SEASONAL VARIATION
ANNUALLY 1929-38; QUARTERLY 1939-
ANNUAL
BILLIONS OF D 01
PERSONAL INCOME
DISPOSABLE
INCOME „
CONSUMPTION
EXPENDITURES
7 NET PERSONAL
SAVING
1930 1932 1934 1936 1938 1940 1942 1944
. V \
1946 1948
90000 o r Gorsoooos o r r o t n o r m orseore srsreo
fcATC iT T iaw iES
Rfcoweor—
ttrAVMWt
69
purchases by workers’ families of such durable consumers
goods as automobiles, refrigerators, deep freezes, radios,
televisions and by more wholesome recreation, vacation
trips, etc.
It has been stated that a productive system that pays
high wages creates purchasing power to buy the products which
labor helps to produce* This is what the American productive
system has found to be true. The American working family, by
reason of a high standard of living and being the recipient
of a high wage, is able to buy the products which it helps to
produce, thereby creating demand for goods, services, and
continued demand for labor.
Added income reflected in higher standard of living.
How income adds to the well being of the worker's family and
low income in turn is distributed is shown in Table III with
associated data. Sufficient, however, is to point out that
according to a survey made in 1944, it was shown that families
consisting of four persons who had an average annual income
of approximately $5,000 spent almost 50 per cent more for
food, twice as much for clothing, almost three times as much
for recreation, and about 70 per cent more for housing, than
families of equal size with an average income of $1800.
However, the food budget of the $5,000-income families
amounted to only 22 per cent of their total expenditures, in
contrast to 40 per cent for the lower-income families. These
70
TABLE III
EXPENDITURES OF CITY FAMILIES OF TWO OR MORE PERSONS
AT DIFFERENT INCOME LEVELS IN 1944
Level of Income
Expenditures $1275 $1865 $2069 $2439 $3027 $3882 $4967
Fooda 555 701 733 797 913 1043 1150
Clothing 163 234 250 283 364 462 623
Housing*3 403 473 499 546 628 723 845
Auto & Transp. 55 86 98 119 156 182 261
Medical care 94 105 105 104 123 149 190
Miscellaneous0 137 189 192 202 226 279 370
Personal taxes 32 86 119 180 270 402 559
Gifts and
contributions 47 66 73 86 119 119 203
Net savings®
or deficits -211 -75 0 122 228 523 766
Average number
of persons 2.78 3.03 3.05 3.10 3.13 3.69 4.01
Average number
of earners 1.15 1.22 1.24 1.27 1.31 1.51 1.97
a - Includes alcoholic beverages,
b - Includes rents, or current operation expenses of home
owners (principal payment on mortgage excluded), fuel,
light, refrigeration, household operation, furnishings,
and equipment,
c - Includes personal care, recreation, tobacco, reading and
formal education, and other expenses,
d - Includes income, poll, and personal property taxes,
e - Includes life and annuity insurance premiums, and social
security taxes.
71
are comparisons of expenditures of families of the same size#
In Table III are shown the average expenditures, by income
level, for all city families consisting of two or more persons#
How important it is that the lower Income groups of the
country be aided in improving their economic condition is
shown in a survey made of the nation’s potential buying power
2
in 1945. According to this survey, the 20 per cent of the
families in the highest income brackets, received almost one-
half of the total income for that year and held over three-
fourths of the total liquid assets. In contrast, 22 per cent
of the total income was spread among one-half of the families
who had practically no liquid assets for future spending#
During this year of war "prosperity," 17 per cent of the
families in the country went into debt, 13 per cent met their
current expenses but saved nothing, and 20 per cent saved
small amounts which, in the aggregate, amounted to 3 per cent
of all personal savings during the year#
Discussions in this chapter of wages, purchasing and
power has been concerned only with the worker as head of the
family, and discussion has centered around individual earnings
instead of family earnings. Many working families, by reason
of more than one wage earner, are able to have automobiles
and luxuries to a greater extent than in families where there
2 "A National Survey of Liquid Assets," Federal Reserve
Bulletin, Federal Reserve System, Washington, D.C., June, 1946#
72
are only one wage earner. In 1944, due to the demand for
war workers, there were two or more wage earners in 28 per
cent of the families whose earnings were between $2,500 -
$3,000, in half of the families with incomes of $3,000 -
$4,000, and in two-thirds of those with incomes of $4,000-
$5,000 or more a year.
This raises the question whether or not, in a con
sideration of wage rates and the cost-of-living, it should
be assumed that an adult’s wages should be sufficient to
cover all the family’s expenses* If the family purchases of
bare necessities, as well as luxuries, are contingent upon a
second or third earner in the family, this obviously has
general economic as well as social implications and will be
discussed more fully in the balance of the thesis*
An attempt has been made in this chapter to relate
wages and purchasing power to the attainment of an adequate
standard of living, based upon the budget investigations and
recommendations of the United States Department of Labor,
Bureau of Labor Statistics*
It will be the writer’s objective in the next chapter
to show to what extent shorter working hours and more leisure
time for wage earners will aid in the attainment of a
desirable standard of living*
CHAPTER VII
HOURS OP WORK AND LEISURE TIME AS AN AID IN THE
ATTAINMENT OP A HIGH STANDARD OP LIVING
Hours of work in earlier times. Labor economists
agree that the two most important ways in which workers are
able to receive benefits from technological advancement are
increased ’ ’real” wages and reduction in hours of work. The
level of wages and the length of working hours prevailing in
any country are a measure of its workers 1 standard of living
and an indicator of its industrial and political development.
Without the aid of power machinery,the great mass of people
must not only subsist on the bare essentials, but spend most
of their working hours eking out their meager subsistence;
without the benefit of democratic participation in their
country's government, workers are deprived of the means of
obtaining their share of the comforts and leisure resulting
from the use of labor-saving machinery.
Reduction of working hours can take various forms.
Annual vacations and holidays without loss of pay is one way,
actual reduction of the working day is another way, while
reduction of the working day as well as the working week is
still another way in which to reduce the time spent on the
job and to ensure more leisure time to the workers.
74
During the middle ages, primitive lighting arrange
ments and the danger of fire limited the work day to daylight
hours, and in many cities in Europe and England night work
was officially prohibited. The eight hour day was more or
less customary for tradesmen, and according to some authori
ties was required under most of the trade guilds. Legend
attributes to King Alfred the Great of England the saying
"Eight hour's work, eight hour;’s sleep, eight hour’s play,
make a just and healthy day."
In time, as the government became more dominated by
great land holders, decrees were enacted to increase the
working day. During the fifteenth and sixteenth centuries
England passed a number of laws specifying that during the
summer all laborers must work from 5:00 A.M. to 8:00 P.M.,
with two hours for meals and rest. By the end of the seven
teenth century the hours of craftsmen had been extended but,
except for agricultural labor during the growing season, the
workday was seldom longer than ten hours.
Toward the end of the eighteenth century with the
introduction of power machinery, when the working day should
have been shortened, it was instead increased. Instead of
bringing comfort and leisure to the workers’ families, women
and children were forced to work and labor long hours in
unsanitary factories and mines.
Hours were longer than under the handicraft system
75
because employers insisted that when they invested money in
machines, the machines must be kept working as long as
possible, and since the work was purely mechanical, the last
hour of work was as valuable as the first. Because the
operation of the machines required no particular skill,
children as young as six or seven years of age could attend
them; in the textile industries especially, the labor of
children and women was preferred to that of adult males. It
was stated by one employer in this country, who first applied
power to weaving cloth in this country, as followss
The saving in operating 60 looms by water instead
of the old way by hand, amounted to about $40 per day.
Besides this saving, we got rid of 60 weavers, the
most of them men who in those bygone days were in
temperate and exceedingly troublesome, and substituted
for them 30 girls, who were easily managed and did
more and better work.-*-
Working hours in Great Britain in the early 1800»s.
During the early 1800fs the factories in Great Briatin, the
only industrialized country at that time, were as long as
19 and 20 hours a day and 90 to 100 hours a week. In 1842
the working day in English mines was 14 to 15 hours, not
only for men but for women and children who were used in
hauling coal. Obviously no human being could withstand such
work hours for long; but the supply of labor was plentiful
1 Manuscript theory of Joshua Aubin, quoted in History
of Wages in the United States From Colonial Times, Bureau of
Labor Statistics, Bulletin No. 604, p. 8 6.
76
and employers were not concerned with child mortality or
premature physical breakdowns. As early industrial history
of England tells us, it was customary to have pauper children
from London and other towns brought by cartloads to such
cotton factory districts as Lancaster and Yorkshire. The
atrocities visited upon these boys and girls, housed in
horribly overcrowded and unsanitary dormitories and literally
driven to death in the mills, form one of the darkest chapters
in the history of childhood.
As would be expected, people became concerned about
such working conditions and between 1802 and 1832 the British
Parliament enacted legislation prohibiting night work by
children and restricting their hours to 12 actual working
hours a day. In 1848 a 10 hour day was legally established
in England for all industrial labor.
Working hours in the United States in early times. In
the United States, the working conditions were not much better.
With the change in this country from a home-craft industry to
that of a factory system, long hours and child labor became
as prevalent as in England. The use of women and children in
the mills and factories was looked upon as unqualified good
which made possible the development of manufacturing without
2
taking man from agriculture. As Alexander Hamilton stated:
2 Report on Manufactures, 1791, p. 29. Quoted in
History of Wages, Bureau of Labor Statistics, p. 85, Ibid,
77
"It made women and children more useful than they
otherwise would be" and enabled them to escape the evils of
idleness and destitution. Children as young as seven years
were employed in american textile mills; in 1832 at least
two-fifths of all persons working in New England factories
were between seven and sixteen years of age; they worked
never less than 10, seldom less than 12, and often 14 or 15
hours per day.®
As history of wages in the United States tells uss
Many of the New England textile manufacturers maintained
company boarding houses for their "mill girls" who lived
under a rigorous paternalism which controlled working
conditions and not only regulated the dwelling places and
food of their operatives but dictated the time of going
to bed and the rules of social intercourse .... In
one of the early factory tracts, issued by the Female
Labor Reform Association of Lowell, complaint is made
of the wearisome extent of corporation control.
At the close of the days work, the operative was said
to be watched to see that her footsteps did not "drag
beyond the corporation limits" and whether she wished
it or not she was subjected to a manifold inconvenience
of a large crowded boarding house where, too, it was
said that the price paid for her accomodation was so
utterly insufficient that it would not insure to her
the common comforts of life.4
In 1840 the normal work week in Massachusetts textile mills
was 84 hours; two years later it was reduced to 78 hours for
women and, by legislation, to 60 hours for children under
twelve years of age.
& Ibid., p. 88
4 Loc. cit.
78
Men, however, continued on the 84 hour schedule until
1850, when their time was shortened to 72 hours per week.
During the 1850's the 66 hour week became prevalent Tor
women in New England textile mills, although 72 hours pre
vailed in New York mills until 1867 and in Carolina mills as
late as the 1880's.
Hours in other occupations were equally long, even
among the skilled trades. Many machinists and printers
worked 14 hours per day, 84 hours per week and as late as
the middle of the nineteenth century; the work schedule for
most bakers was 12 to 14 hours per day, seven days a week.
Building tradesmen worked from sun up till sun down, which
meant long hours during the summer months but shorter hours
during the winter.
A hundred year's campaign in the United States for
shorter hours. Long hours of work in the United States were
not endured without protest.
As early as 1791 some carpenters in Philadelphia
went on strike for ten hour days. When they lost the
strike, in retaliation they organized a cooperative
and contracted for jobs at 25 per cent below the
current rate established by the master carpenters.^
In 1835 the carpenters, masons, and stonecutters of
Boston joined in a strike for a ten hour day which won
® John R. Commons, and Associates, History of Labor
in the United States (New York: The Macmillan Company, 1918),
Vol. 1, p. 110.
79
sympathy among workers throughout the country* Trade unions
from various cities sent them money and passed resolutions
to stand by the “Boston House Wrights” who, “in imitation of
the noble and decided stand taken by their revolutionary
fathers have determined to throw off the shackles of more
mercenary tyrant than theirs.®
In the same years the Paterson, New Jersey textile
workers demanded that their working day be reduced to 10
hours, and in Philadelphia both building trades mechanics
and factory workers joined in a mass movement for a 10 hour
day. These demonstrations turned the tide in favor of
shorter hours and several cities and a number of private
employers were forced to establish the 10 hour day. The
campaign which had lasted more than a hundred years was on.
First to be attacked was the "sun to sun" work day*
After the 10 hour day was won the fight continued for the
8 hour day, and then the five day week. The fight was long,
and during the past thirty years while journeymen worked a
48 hour week, many other workers were on 60 and 65 hour or
longer work week. By and large, the 10 hour campaign which
was begun in the 1830's lasted until the middle of the 1890*sj
on its heels was a quarter century's struggle for the 8 hour
day, thus the 44 hour week. Followed by the relatively sudden
® John B. McMaster, History of the People of the United
States (New York: D. Appleton and Company, 1914), Vol. V, p. 84.
80
and general adoption of the 40 hour week.
Labor f s arguments for shorter work week. During the
hundred-year campaign for shorter hours of work, many reasons
were advanced to encourage and justify changes in work
schedules. Some of the arguments were purely economic, while
others were premised on human justice and social welfare.
One of the most effective arguments put forth was thats
Work from "sun to sun" was held to be incompatible
with citizenship, for it did not afford the workman
the requisite leisure for consideration of public
questions, and therefore condemned him to inferior
position in the state.7
In general the argument was for leisure time and self
improvement, which in turn would result in a higher standard
of living, but the effect of long hours upon health was also
stressed. Demand for shorter hours also came to be common
when unemployment became more prevalent among the industrial
workers. This demand took the view that work should be
spread over a larger number of workers and as technology
advanced, hours could be shortened, thereby spreading the
work among a greater number of workers.
When this argument was originally used, organized
labor was willing to accept reduced hours with a cut in
weekly wages on the theory that the shorter day would decrease
the supply of labor and thus enable workers in time to raise
their wage rates.
7 Commons, op. cit., p. 170.
81
This, however, did not prove to be the case. It was
found that productivity increased, both from constant
technological advancement and from increased productivity on
the part of labor. When this in time became apparent,
organized labor changed its position and demanded reduced
hours with no reduction in weekly wages, that is shorter
hours accompanied by increased hourly rates, a position
which organized labor has steadily maintained.
Employers ' opposition to shorter working hours. It
was decided by organized labor that reduction in work
schedules could only be achieved in three wayst (1) by
pressure of organized labor, (2) by legislation, (3) by
voluntary action of employers. As would be expected the last
proved to be the most difficult to achieve.
In spite of apparent logic that the use of labor-
saving machines should result in shortening the hours of
human labor, reduction in work time with few exceptions has
been obtained only after prolonged struggles and against
bitter employer opposition. At every stage employers have
contended that an 8 hour day would deprive them of profit,
lower the wages of their employees, raise the prices of their
commodities, and make it impossible for them to meet com
petition in this country or from foreign countries.
To further bolster their arguments, they offered as
evidence studies made and financed by manufacturers,
82
to show that as late as 1918 a 52 hour week In the
manufacturing industry, was necessary in order to
obtain maximum efficiency.8
In perusing reports of -the struggle for shorter
working hours one is rewarded by reading some ludicrous
statements on the part of employers. The following is illus
trative of such a statement. When the 10 hour day was up for
discussion in 1870 an owner of a bleachery stated that he
had* "invariably noticed that when men are kept at work
until 10*00 P.M. they live a better life in better health,
as they keep indoors instead of sitting outdoors and
smoking.
That some employers opposition to a reduced work week
had not changed materially in the interim to 1902 is shown by
the statement of the President of the National Association of
Manufacturers, who in opposing an 8 hour bill in 1902 said,
"Such a bill is a socialistic and artificial measure which
controverted the inalienable right of the individual to use
his time as he saw fit."^°
Less than twenty-five years ago another president of
the same association, in expressing his views in opposition
8 Marlon C. Cahill, Shorter Hours, research reports,
(New Yorks Columbia University Press, 1932), pp. 248-249.
9 First Annual Report, Massachusetts Bureau of
Statistics of Labor, 1870, pp. 223-224.
10 D. M. Parry, Disastrous Effects of a National Eight
Hour Law, pamphlet, 1902.
83
to the 5 day week, stateds
."Six days shalt thou labor and do all thy work." So
reads the fifth of the great Commandments and for sixty
centuries it has been accepted as the divinely prescribed
standard of economic effort. It is the perfectly fixed
basis of human achievement and social contentment.il
The same association president, in regard to leisure
time which was indicated by the proponents of the 5 day week,
as a desirable goal for workers to achieve, did not agree
with them and had this to say in regard to leisure times
More leisure is sought, it is said, to provide
larger opportunities for the cultural processes. Let
it not be forgotten in this connection that there is
quite as close relationship between leisure and crime
as between leisure and culture. When, therefore, we
reflect upon the black, appalling fact that ours is
the most crime-ridden nation on earth, as well as the
easiest living, should we not conclude that it would
be well for us to curtail some of the opportunities
for culture already perverted to criminal uses?12
The association president in hiis concluding argument
for opposition to the 8 hour work week, sums up his statement
with the followings
These constant attempts to amend the decalogue and
to adapt by alterations the moral law to appetites
developed by easy and loose living constitute the out
standing peril of our unprecedented prosperity.13
That employers as a rule were not in favor of reduced work
day or five hour week is stated by Florence Peterson who sayss
11 L. T. Beman, Five Day Week (New Yorks H. W. Wilson
Company, 1928), p. 65.
12 Loc. cit.
13 Loc. cit.
84
Upon another occasion, happily unaware of the
business collapse and subsequent ’ ’reforms" which
were to take place within a few short years, the
same spokesman for the Manufacturers Association
expressed gratification that the workers 1 time was
fully taken up with their jobs.
That the reduced work week and leisure time for im
provement of the worker’s standard of living was not com
patible with the concept of the Manufacturers Association
President who, in early 1929, stated;
They, the working masses have for the most part
been so busy at their jobs that they have not had time
to saturate themselves with false theories of economics,
social reform and of life. They have projected in
their natural growth by the absence of excessive
leisure .... I do not, therefore, share the view
that leisure as an end is a worthy or desirable
aspiration.15
An exception to the opposition to the shorter working
day and shorter work week, was Henry Ford who, in 1914,
shocked the nation's industrial management by introducing
the 8 hour day, when most industries were commonly on a 9 and
10 hour work day. Industrial leaders were equally shocked
in 1926 when Henry Ford adopted the 5 day week in his manu
facturing industries. Ford gave as his reason for instituting
the shorter week the necessity for providing workers with
more leisure time so that they would be better consumers. In
his announcement he said;
14 Peterson, ££. cit., p. 426.
15 John E. Edgerton, "34th Annual Convention Pro
ceedings, " National Association of Manufacturers, 1929, p. 23.
85
The harder we crowd business for time the more
efficient it becomes. The more well-paid leisure
workmen get the greater become their wants. These
wants soon become needs. Well-managed business pays
high wages and sells at low prices. Its workmen have
the leisure to enjoy life and the wherewithal with which
to finance that enjoyment. The industry of this
country could not exist long if factories generally
went back to the 10 hour day, because the people would
not have the time to consume the goods produced.
For instance, a workman would have little use for an
automobile if he had to be in the shops from dawn until
dusk. And that would react in countless directions,
for the automobile, by enabling people to get about
quickly and easily, gives them a chance to find out
what is going on in the world— which leads them to a
larger life that requires more food, more and better
goods, more books, more music— more of everything.
Just as the 8 hour day opened our way to prosperity,
so the 5 day week will open our way to still greater
prosperity.i®
Labor unions 1 pressure for shorter working hours. Many
persons other than wage earners have been interested in the
question of working hours and upon occasion have assisted in
getting them reduced. But it has been the workers themselves,
through their unions, who are chiefly responsible for the
fact that weekly hours of work have been reduced by one-half
during the past hundred years. In their efforts to shorten
their hours of labor, workers have used every tactic and
means at their disposal. They have appealed to the general
public as well as bringing pressure upon employers through
peaceful negotiations and, when necessary, through boycotts,
strikes, and threatened strikes.
Peterson, 0£. cit., p. 430.
GROWTH OF AMERICAN LABOR UNION MEMBERSHIP
M IL L IO N S
90 0 1905 1910 1915 1920 1925 1930 1935 1940 1945- 6 - 7 - 8 *
* ESTIMATE.
PRICES, WAGES and PURCHASING POWER (average weekly earnings)
SINCE VE-DAY
Here is what has happened, since
the war in Europe ended, to factory
workers, as shown in BLS reports.
The top line shows the trend of the
Consumers Price Index, the middle
line shows what happened to aver
age weekly , pay checks and the '
bottom line shows what happened
to purchasing power. The bottom
line balances "a v e ra g e w eekly
m oney earnings" against "con
sumer prices" as shown in the two
top lines.
in all manufacturing industries
100
APRIL 1945=100 JUNE 1946 OCT. 1946
87
It is also interesting to note that non-union workers
have likewise benefited from organized labor's struggle for
reduced working hours., Although the work week for un
organized workers was generally four to six hours longer
than that in unionized trades until the leveling effect of
recent legislation, the trend of hours for the former was
likewise downward, although at a different level.
Government regulation of hours. Regulation by the
government of hours and work have been directed toward four
general ends and have assumed two distinct characteristics.
The several purposes are indicated by the groups of employees
covered? workers directly or Indirectly employed by the
government; women and children; men engaged in occupations
which are especially hazardous either to themselves or to the
public; and finally, all workers, regardless of sex or age,
kind of employer or employment. Hour legislation for workers
employed on public works and public contracts is an expression
of the government's willingness to exercise its prerogatives
as an employer of labor to establish certain labor standards.
In addition to the Federal government's regulation of hours,
the various states and communities have likewise endeavored
to regulate hours within their jurisdiction.
While health and safety have also been factors in the
enactment of general hour laws, economic motives have been pre
dominant, as is evidenced by the circumstances of their passage.
88
Hour legislation and the courts. According to
Florence Petersons
Legislative and judicial action on the regulation
of hours during the past hundred years reveals the same
gradual shift in position as has taken place with
respect to other phases of labor conditions. During the
early years of the movement it was a question of legis
lative acceptance of a responsibility to shorten the
hours of work of wage earners; later the issue hinged
more upon judicial application of hour legislation to
the principles of freedom of contract and police power
of the state.17
Principle of freedom of contract. The principle of
freedom of contract used by the courts in invalidating hour
and other labor legislation was based on the Fourteenth
Amendment of the Constitution, enacted after the Civil War
for a very different purpose, which says, "No State shall
deprive any person of life, liberty, or property without due
process of law.”
The courts held that labor is property and therefore
a laborer has a right to sell his labor and to contract with
his employer like any other property owner. The courts took
the position that any laws which sought to regulate labor,
Interfered with the individual's freedom of contract and
property rights. Aggressive counter arguments, which finally
became decisive, held that labor is not property; that the
individual worker actually has little choice or freedom in
his employment contract but obeys the compulsion of circumstances;
17 Ibid., p. 446.
89
and that the police power of the state for protection of
health, safety, and welfare is paramount to an individual's
freedom of contract.
Federal hour laws* As early as 1868 the Federal
government enacted an 8 hour day law for workers employed on
Federal public works, but this was never seriously enforced.
In 1892 another law was passed which limited work on Federal
public contracts to 8 hours a day, except in cases of
emergency. Since the term emergency was never clearly
defined, the 8 hour limit was easily avoided. The act was
materially strengthened in 1913 by an amendment which pro
vided that every contract to which the Federal government is
a party shall contain a provision that no laborer or mechanic
in the employ of the contractor or sub-contractor shall be
required or permitted to work more than 8 hours in any
calendar day except when the President of the United States
has suspended the hour limit during a national emergency,
such as war. In such emergencies, time-and-one-half rates
are provided for work in excess of 8 hours.
The Federal government's regulation of hours on con
tracts for its own use was further strengthened by the so-
called Walsh-Healey Public Contract Act passed in 1936. This
act provides for a basic 8 hour day and a basic 40 hour week
on all contracts entered into by the United States Government
for the manufacture or furnishing of materials, supplies, etc,
90
in excess of $10,000. The Act also prohibits the employment
of boys under sixteen and girls under eighteen years of age,
and also sets certain sanitary standards for health and
safety of workers.
Federal Government regulation of hours in interstate
commerce. The Federal government has from time to time
passed laws which‘control the hours of transportation workers,
such as those engaged in railroad work, aviation and maritime.
In 1907 a law was passed by Congress in which the
hours of employees engaged in, or connected with, the move
ment of trains across state borders were limited to 16 con
secutive hours, and the hours of employees not connected
with the movements of trains were limited to 9, in day offices
which were continuously open, and to 13 in offices which were
open only during the day.
The Adamson Act of 1916 provided a basic 8 hour day for
railroad trainmen for the purpose of computing compensation,
that is, overtime rates*
By Federal legislation passed in 1936 and 1938,
licensed officers and sailors on ocean going and Great Lakes
merchant vessels are on three-watch basis when at sea, and on
8 hour day when in safe harbor.
Under power delegated to the Civil Aeronautics Board,
it has prescribed a maximum 8 hour day, 30 hour week for
first pilots on commercial planes.
Fair Labor Standards Act. Important as the regulations
are that have been described above, none is as important, nor
does it affect the number of workers like the Fair Labor
Standards Act, sometimes referred to as the "Wage and Hour Law.
The Fair Labor Standards Act was passed by Congress in
1938, and provided for a maximum work week and a minimum wage.
These provisions applied to all employees engaged in inter
state commerce or in the production of goods that entered
interstate commerce. The minimum hourly wage was fixed at
30 cents for 1939 and provided for automatic increases until
reaching 40 cents an hour in 1945. The Act also provided
for maximum hours to be worked. It provided for a three-step
downward revision of hours: a maximum of 44 hours during the
first year, 42 hours during the second year, and 40 hours
beginning October 1, 1940.
The Fair Labor Standards Act was unprecedented in that
it provided for minimum wage rates for all classes of workers
(except those in local, intra-state occupations over which
Federal government control cannot be exercised, according to
the Constitution).
When the Act was established, it covered between 12
and 13 million workers, more than two-thirds of whom
were engaged in manufacturing. Almost 700,000 workers
were directly benefited when rates were automatically
raised to 30 cents an hour in October, 1939.1®
18 ”Two Years of the Fair Labor Standards Act,"
Monthly Labor Review, September, 1940, p. 551.
92
Inasmuch as the minimum wage rate was set at 40 cents
an hour to become effective in October, 1945, the government
reported that most of the industries covered by the Act were
paying more than the minimum due to increased living costs
and competition for workers due to the war efforts 1941-1945.
As was to be expected, not only did the workers covered
by the Act benefit but those who were not engaged in manu
facture which entered interstate commerce likewise benefited.
It was explained in this chapter that workers who were not
members of a labor organization benefited from organized
labor’s campaign for shorter hours and increased pay, by
reason of generally improved working conditions.
The Pair Labor Standards Act had the same effect on
workers and industry in general. As the war efforts demanded
*
more and more workers, the local industries had to raise their
wage scales to meet the wage scales and working conditions
of those industries which were subject to the provisions of
the Pair Labor Standards Act. This was especially true of
the employment and working conditions in the southern states,
in which working conditions and hours of labor improved
greatly under the Act. A move is now under way in the present
Congress (81st) to increase the minimum wage from 40 cents to
75 cents per hour, due to increased cost-of-living.
Summation of this chapter. It may be said, therefore,
that more progress has taken place in the improvement of
93
working conditions during the past fifteen or twenty years
than had previously taken place in seventy-five or a hundred
years. As one author has stated:
The wages of skilled workers remained stationary or
even declined after 1784, while those of unskilled
workers rose from $4 to $7 or $8 per week, as late as
1827 a wage of $9 a week was common among both
skilled and unskilled working men.
It may therefore be concluded that conditions of wage
earners in the United States have made tremendous strides in
the past fifteen to twenty-five years, and that the standards
of living have likewise been raised to higher levels*
It has been stated by outstanding authorities in the
field of labor economics that labor's aim is three-fold.
It is also stated that the basic needs of the human beings
who make up American industry's working force are contingent
on fulfillment to the greatest extent of the following three
conditions :
1. Economic - an adequate plane of living and the
necessary amount of job and wage protection.
2. Psychological - the personality needs of freedom
of action, self-expression, and creative outlets.
3. Social - the ties and bonds of group relations and
community life.20
19 David J. Saposs, History of Labor in the United
States (New York: Longmans Green and Company, 1908), p. 105.
20 Clinton S. Golden and Harold J. Ruthenberg,
The Dynamics of Industrial Democracy (New York: Harper and
Brothers Publishers, 1942), p. 7.
CHAPTER VIII
SUMMARY OP FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
Standards-of-1i ving summary. The purpose of this
study was to ascertain to what extent cost-of-living figures
have been used in past and present wage negotiations. For
this purpose a review was made of recently concluded labor-
management contracts. It was found in this study that, while
the cost-of-living indexes of the United States Department of
Labor were not specifically stated in most of these contracts,
nevertheless, they formed the basis in nearly all of the
contracts negotiated between labor and management since the
ending of World War II.
In fact, cost-of-living formed the basis for the
rounds of wage increases granted organized labor in the post
war period. It is likewise the main reason set forth in
labor's present demand for the fourth wage increase since the
ending of the war, in order to establish a fair ratio between
wages and cost-of-living.
This ratio, between wages received by labor and cost-
of-living, has been one of the most controversial subjects in
employer-employee relations from the earliest times. The main
purpose of this study, however, was not to make an exhaustive
study of the cost-of-living versus wage ratios, but more
specifically to make a study of the standard of living
95
increment and how this formula could be used to achieve what
has come to be called an ’ ’ American standard of living.” It
was stated in previous chapters that the American wage earner,
unlike his European fellow worker, was not satisfied with a
mere cost-of-living, or subsistence wage* He wanted a larger
share of the productive effort of the country manifested in
what is now known as the ’ ’ American standard of life.”
American standard. After having outlined the aims
desired in this study, it next became necessary to ascertain
with some accuracy (1) what Is meant by an American standard
of life, and (2) how can this be achieved on the part of the
American wage earner?
In order to find out what is inherited and what is
presently added, in maintenance of the American standard
among wage earners, a study was made of available literature
in regard to the terms used. The result of the study revealed
that the term ’ ’ American standard" among wage earners is a
state of well being on the part of a wage earner and his family.
More specifically, in levels of living, it is manifested
in sufficient income and steadiness of work to plan adequately
for social as well as economic and biological needs. It con
templates, if single, sufficient income to afford marriage,
bringing up of children, adequate housing, food, clothing,
recreation, savings, education of children, etc. It also
should Include a margin over and above the necessary
96
expenditures for food, clothing and shelter, to be used for
the added "comfort level" which, in other words,, means the
"Ame ri c an s t andar d."
This comfort level is the ability of the wage earner
to acquire an automobile, a radio or television set, a
refrigerator, or other consumer durable goods which, by our
concept of modern living, are considered a "must" in American
homes.
Achievement of American standard. Having attempted to
explain and clarify the term "American standard of life" on
the part of American wage earners, an attempt will now be made
to show how this anticipated level of wage earners may be
reached.
An endeavor has been made in Chapter III of this thesis
to show how one large corporation, namely General Motors
Corporation, has added a so-called standard of living incre
ment to its workers1 payroll. Since this action, on the part
of General Motors Corporation in May, 1948, a number of
larger employers of labor have attempted to carry out similar
provisions in their recently negotiated labor-management
contracts.
As explained in Chapter III, it is firstly an attempt
on the part of management and employers to compensate em
ployees for their share in constant technological improvement
and added productivity. It is secondly an effort to guarantee
97
to its workers that their take home pay, (earnings), will
have a fair ratio to cost-of-living and that while wages are
pegged to a cost-of-living index in the form of an escalator
clause, the standard of living increment is independent of
this provision and is in form of a long range planning,
"steady climb of real wages," and added purchasing power for
the workers.
Job tenure and security of workers. In the research
study of material for this thesis it was found that while
large corporations and employers of labor such as General
Motors Corporation, Chrysler Corporation, Ford Motor Company,
United States Steel, and others, could guarantee constant
technological improvement and added production, thousands of
smaller independent employers could not do so. The reader
may ask at this point, how can workers at these smaller
plants be guaranteed an American standard of living if their
employers are unable to pay a standard of living increment,
over and above a wage based upon prevailing cost-of-living
like that done by large corporations?
In such cases as those noted above, would not the wage
based upon cost-of-living be a mere subsistence wage? That
this question or problem has caused considerable discussion
among labor economists was stated by some writers that while
labor unions, by concerted action, were able to drive a hard
bargain in wage negotiations, it nevertheless set a pattern
98
for other workers and they in turn benefited, whether union
members or not. Other writers took the opposite view and
held that only the Federal government through its application
and enlargements of the wages and hour law could guarantee
the achievement of an American standard of living for all the
wage earners. It was stated by the United States Department
of Labor that when the Fair Labor Standards Act was passed in
October, 1938, it immediately benefited 2,700,000 workers by
giving them a wage order minima of twenty-five cents per hour.'*'
It likewise benefited 950,000 workers when the statutory minima
was raised from twenty-five to thirty cents per hour*
It is further stated by the United States Department
of Labor that during the ten years enforcement of the Fair
Labor Standards Act and the six years in which the divisions
have also enforced the Walsh-Healy Act, restitution of nearly
$112,000,000 in back wages, owed some three million employees,
has been agreed or ordered to be paid by more than 150,000
p
employers.
This does not include sums collected by employees as
a result of employee suits.. The restitution figure of
$4,256,761 in the fiscal year of 1948 represents a substantial
decline from such amounts during the war years, the peak of
which was $20,920,956 in 1942.
1 United States Department of Labor, Monthly Labor
Review, Vol. 67, No. 3, September, 1948, pp. 271-273.
2 Ibid., p. 272.
99
Child-labor inspections during the ten year period
resulted in findings that over 16,000 of the inspected
establishments employed approximately 60,000 children
in "oppressive child labor," contrary to the child-
labor provisions of the Pair Labor Standards Act. Of
the minors illegally employed, four-fifths were under
16 years of age, the minimum age for general employ
ment, and one-fifth were 16 and 17 years of age working
in occupations which had been declared hazardous for
workers under 18 years.3
It is taken for granted that the achievement of an
American standard of living can not be brought about under
working conditions described above and shows the necessity
of the Federal government's participation in any nation-wide
attempt to bring about a needed and.desirable change.
Are workers now on American standard of living? Prom
available data at hand it may be granted that organized labor
Is achieving the goal of an acceptable or comfort standard of
living, it may be disputed however, that they have reached
the level of an ideal American standard. On the other hand,
it has been proven by this study that a majority of the
present working population, by reason of inflation and con
sequent cost-of-living, are far from attaining the level of
living contemplated. As one writer has stated:
. . . On the basis of information at hand It may be
concluded, then, that although the United States is able,
from a standpoint of existing natural resources, labor
energy, and technical equipment to provide health-and-
decency-livings for unskilled worker's families and
comfort livings for semi-skilled and skilled workers *
families these "absolute" standards of well-being have
3 Ibid., pp. 271-273.
100
not been realized even in the most prosperous years,
for most of the workers' families. The incomes of the
great mass of the unskilled and of about half of the
semi-skilled workers' families have been insufficient.4
While this statement was made prior to World War II,
the period during the war and subsequent post war period has
seen little change in wage improvements for the unskilled
and semi-skilled worker.
It is even noted that those workers who, during the
World War II period by reason of price control and lower cost-
of-living were able to effect savings, have in the post war
period been unable to maintain the accepted level of living
and have had to supplement present income with pre-war and
war period savings, in order to maintain acceptable standards
of living. As stated by the United States Bureau of Labors
In 1947 about 34 per cent of the families composed
of a husband, wife, and two children under 18, in
Washington, D.C. area, had incomes below $3,458, the
amount which would have been required at June 1947
prices to maintain such a family at the "modest but
adequate" level of living described by the Bureau of
Labor Statistics, City Worker's Family Budget. About
29 per cent of all four-person families, with husband
and wife and two other members at all ages, had incomes
below the budget level. Survey also showed that single
persons fared even worse than families on the average.
34 per cent having incomes below budget requirements.*
The above condition is also reflected In statistics
pertaining to "net personal savings." Recent figures
4 Carroll R. Daugherty, Labor Problems in American
Industry (New Yorks Houghton Mifflin Company, 1941), p. 148.
5 United States Department of Labor, Monthly Labor
Review, December, 1948, Vol. 67, No. 6, p. 622.
101
released by the United States Department of Commerce shows
that while net personal savings reached their height during
1944-1945, they are now withdrawn to the pre-war level of
1940. The inflationary post war period with increased cost-
of-living is also manifested by increased child labor being
added to the labor force, presumably by families who find it
difficult to make an adjustment between income and expendi
tures. Figures in September, 1948 show that young workers
14 through 17 years of age numbered about two and a half
million; more than twice as many as were employed in 1940.
While this number was below the war time peak, it was still
double the pre-war figure of 1,060,000 of March, 1940.®
Problems to be faceds: Conclusions. From the study
thus concluded it may be stated that while a large segment
of the wage earners of the United States have by reason of
labor organizations and collective bargaining achieved a
fair standard of living, the great mass of unskilled and
semi-skilled workers are still on a marginal subsistence
level of living standard. This is especially true of the
southern states and the so-called economically backward
sections of the country. It is obvious that the provisions
of standard-of-living increment discussed in Chapter III of
this thesis will not apply to them.
6 United States Department of Labor Statistics.
Monthly Labor Review, Vol. 67, No. 6, December, 1948, p. 589.
U n i v e rs i t y O f S o u t h e rn C a l i f o rn i a USmf
102
It may be possible that vocational training and
education in general can bring about a higher level of
occupational skill, which in turn will reflect in greater
earning power and income.
If we take this for granted, how may we overcome the
so-called inelasticity of labor, that is, will the worker be
able to sell his skill in the market or locality offering
him the best price and working conditions?
The writer must leave the solution to these questions
with the reader, sufficient to say they are complex and will
require much deliberation both by labor and management as well
as judicial umpiring by the government.
Recommendations. It was brought out in this study
that in spite of high national income and employment, there
is still a large number of wage earners in this country who
are by lack of income unable to achieve a desirable standard
of living, let alone an ideal American standard of living.
These workers fall in the categories of unskilled,
semi-skilled and itinerent workers, who by reason of low
wages and unsteady employment are compelled to live on
marginal and sub-standard levels of living.
It was pointed out throughout this thesis that in all
the world, and in the United States especially, there is a
/
constant raising of levels of living. In the United States
this has been accomplished by technological improvements, mass
103
production, private initiative, intelligent workmen, and
government cooperation with private enterprise in formulation
of laws and regulations compatible with the best interests
of labor and management.
It was to be expected, however, that in a country like
the United States, where individual freedom and laissez faire
prevailed, governmental regulations dealing with such sub
jects as wages and hours, minimum wages, and child labor,
would not be accepted without objections and claims to be
infringent on individual freedom. These objections perhaps
had valid reasons when the country was young and opportunity
existed to exercise individual freedom like "go west young
man", etc, but as the choice of freedom became more difficult
to attain and opportunities for selling one's labor became
fewer, it was therefore necessary that the government step In
and regulate commerce and industry which in turn included
labor and working conditions.
One of the most important of such attempts to regulate
labor and working conditions was the passing of the Fair
Labor Standards Act, in October, 1938, referred to previously
in this chapter. It was stated how this Act had by its
application raised the standard of living to millions of wage
earners, who prior to the passing of this Act had no means of
improving their wages or working conditions*
It was also stated in this chapter that lack of income,
104
lack of steady work, and insecurity, is not consistent with
a desirable standard of living, much less the attainment of
an American standard of living, for wage earners* It is
therefore the recommendation of this investigator that the
proposed changes in the Pair Labor Standards Act and the
Social Security Agency be accepted and passed as follows:
1. The present retirement schedule be increased to
provide a couple, (man and wife), with a minimum of $100 to
$125 per month based on $50 or $60 per week earnings*
2. Allow persons drawing old age pensions to supple
ment their pensions by their own savings* This would guarantee
the incentive of saving and providing for old age at a level
commensurate with a person's ability to earn and save. It
would also take the stigma out of old age pensions as many
states now require an applicant to state that he has no assets,
in other words, the taking of a pauper's oath.
3. Increase the participation for pensions and un
employment up to $5,000 per annum instead of the present
maximum of a $3,000 income*
4. Allow unemployment payments, based on past earnings,
with a minimum. However, strict control should be exercised
to see that all physically able to work do not draw unemploy
ment compensation if suitable employment is available.
5* Make provisions for a national health and sickness
program to cover wage earners on same participation as the
105
program now in use in the states of California and. Rhode
Island*
6. Enlargement of the social security program to
include all gainfully occupied persons, agricultural workers,
domestics, self-employed, etc.
7. Attempt to install the annual wage, or guaranteed
work period, in those industries as establishments where such
an arrangement can be worked out.
8. Increase the present minimum wage from the present
figure of 40 cents per hour to what is needed to maintain a
fair standard or comfort standard of living, at least 75 cents
per hour.
9. Federal legislation should be passed to exclude
minors less than 16 years of age in factorys pmd. shop work,
where the products of such an establishment enter interstate
commerce.
10. Enlarge the present Federal aid under the Smith-
Hughes Act and pass needed legislation to appropriate funds
to the less fortunate states for vocational education and
teacher training. It is also suggested that employment
offices throughout the nation be returned to the United States
Department of Labor and that the vocational guidance and
counseling programs within these offices be enlarged to
adequately provide for the need of those who need these
services in order to make a wise vocational choice*
SELECTED BIBLIOGRAPHY
107
A . BOOKS
Baerwald, Friedrich, Fundamentals of Labor Economics. New
.York: Declan X. McMullen Company, 1947. 464 pp.
Cahill, Marion C., Shorter Hours, Research Reports. New
York:,Columbia University Press, 1932. 360 pp.
Cairnes, J. E., Political Economy. New York: Harper and
Brothers, 1875. Lecture VII, 148 pp.
Chamberlain, Neil W., The Union Challenge to Management
Control. New York: Harper and Brothers, 1948. 338 pp.
Commons, John R. and associates, History of Labor in the
United States. New York: The Macmillan Company, 1918.
Vol. 1, 480 pp.
Daugherty, Carroll R., Labor Problems in American Industry.
New York: Houghton, Mifflin Company, 1941. 1008 pp.
Douglas, Paul H., The Theory of Wages. New York: The
Macmillan Company, 1934. 639 pp.
Dunlop, John Thomas, Wage Determination Under Trade Unions.
New York: The Macmillan Company, 1944. 231 pp.
Durant, John D., The Labor Force in the United States, 1890-
1960. New York: Social Science Research Council, 1948.
284 pp.
Foster, Z. W., American Trade Unionism. New York: Inter
national Publisher, 1947. ■383 pp.
Golden, Clinton S. and Harold J. Ruttenberg, The Dynamics of
Industrial Democracy. New York and London: Harper and
Brothers Publishers, 1942. 358 pp.
Gregory, Oscar Charles, Labor and the Law. New York: W. W.
Norton Company, Inc., 1946. 467 pp.
Harris, Herbert, American Labor. New Haven: Yale .University
Press, 1939. 459 pp.
Iserman, Theodore R., Industrial Peace and the Wagner Act.
New York: McGraw-Hill Book Company, Inc., 1947. 91 pp.
Johnson, Julia E., The National Labor Relations Act. Should It
be Amended? New York: H. W. Wilson Company, 1940. 416 pp.
Lester, Richard Allen, Economics of Labor. New Yorks The
Macmillan Company, 1941. $313 pp.
Malthus, Thomas R., Principles of Political Economy. Londons
William Pickering^ 1336. 2n3 edition, 480 pp.
Marx, Karl, Wage Labor and Capital. New Yorks New York Labor
News Company, 1902. 186 pp.
McMaster, John B., History of the People of the United States.
New Yorks D. Appleton and Company, 19X4. Vol. V, 398 pp.
Mill, J. S., Principles of Political Economy. New Yorks
D. Appleton Century Company, 1883T Vol. 1, 407 pp.
Millis, Hardy Alvin, Economics of Labor. New Yorks McGraw-
Hill Book Company, 1938, Vol. I, 584 pp.; 1938, Vol. II,
453 pp.; 1945, Vol. Ill, 930 pp.
Myers, James, Do You Know Labor? New Yorks The John Day
Company, 1943. 240 pp.
Peterson, Florence, American Labor Unions. New York: Harper
and Brothers Publishers, 1945. 338 pp.
_______ , American Labor Unions, What They Are and How They
Work. New Yorks Harper and Brothers Publishers, 1945.
930 pp.
_______ , Survey of Labor Economics. New York and London:
Harper and Brothers Publishers, 1947. 843 pp.
Pierson, John H. G., Full Employment and Free Enterprise.
Washington, D.C.: Washington Public Affairs Press, X947.
183 pp.
Pigors, Paul P. and Charles A. Myers, Personnel Adminis
tration. New York and Londons McGraw-Hill Book Company,
Inc., 1947. 218 pp.
Ricardo, David, Principles of Political Economy and Taxation,
J. R. McCulloch, editor, in the works of David Ricardo.
London: John Murry, 1876. 381 pp.
Ross, Arthur M., Trade Union Wage Policy. Berkley, California
University of California Press, 1948. 133 pp.
Saposs, David J., History of Labor in the United States.
New Yorks Longmans Green and Company, 1908. 688 pp.
109
Senior, N. W., Political Economy. London; Charles Griffin
and Company, 1863. 5th edition, 486 pp.
Siedman, Harold, Labor Czars, A History of Labor Racketeering.
New York; Liveright Publishing Corporation, 1938.- 317 pp.
Smith, Adam, Wealth of Nations. New York; E. P. Dutton and
Company, 1911. Vol. 1, 307 pp.
Steen, Emanuel and Jerome Davis, Labor Problems in America.
New York; Parrar and Rinehart, Inc., 1941. 1000 pp.
Taylor, Guilford Albion, Labor Policies of the National
Association of Manufacturers.' Urbana, .Illinois; The
University oIr-Illinois, 1928. 184 pp.
Yellen, Samuel, American Labor Struggles. New York; Harcourt
Brace and Company, X936. 398 pp.
Yoder, Dale, Labor Economics and Labor Problems. New York;
McGraw-Hill Book Company, Inc., 1933. 630 pp.
B. PERIODICAL ARTICLES
Feldman, Herman, "The Annual Wage--Where Are We?" American
Economic Review, pp. 823-847, December, 1947.
George, Edwin B., "Should Pull Employment be Guaranteed?"
Dun1s Review, pp. 17-19, October, 1947; et. seq. pp. 20-
22, November, 1947; et. seq. pp. 18-20, December, 1947.
"G. M. Boss Passes Wage Idea to 'Personnel Executives,"
Business Week, No. 979, pp. 98-99, June 5, 1948.
"G. M. Ties Wages to C-of-L," Business Week, No. 978, p. 96,
May 29, 1948.
Hazlitt, Henry, "G. M. and UAW Contract," Newsweek, No. 23,
XXXI:70, June 7, 1948.
"Here is Something to Think About," Colliers, No. 7, 122;78,
August 14, 1948*
Humes, Helen M., "Rent and Income, What is the Relationship?"
The Journal of Housing, pp. 72-73, April, 1946.
"The G. M. Contract Links Wages to Living Costs and Adds
Something for Progress," Life, No. 26, XXIV:38, June 28, 1948.
110
C. PUBLICATIONS OP LEARNED SOCIETIES
AND ORGANIZATIONS
Belloc, Bartlett Nedra, "Wages in California--War and Post
war Changes," Institute of Industrial Relations.
Berkeley, California! University of California, 1948.
97 pp.
Beman, L. T., "Five Day Week," National Association of
Manufacturers. New Yorks H. W. Wilson Company, 1928.
65 pp.
Brooks, Robert Romano, editor, "Labor on New Fronts," New
York Public Affairs Committee, 1938. 32 pp.
Brower, Beatrice F., editor, "Cost of Supplemental Benefits,"
Management Record, National Industrial Conference Board,
Inc., New York, September, 1947. 257 pp.
Chamberlain, Neil W., editor, "Collective Bargaining Pro
cedures," American Council on Public Opinion.
Washington, D.C., 1944. 141 pp.
"Cost-of-Living Statistics— Methods and Techniques for the
Post War Period," Studies and Reports, New series, No. 7,
Part 2. Distributed in United States by Washington
Branch of I.L.O., 1947. 56 pp.
Davies, Ernest, editor, "American Labor, the Story of American
Trade Union Movement," Fabian Society, New York, 1943.
100 pp.
Edgerton, John E., 54th Annual Convention Proceedings,
National Association of Manufacturers, 1929. New York:
H. W. Wilson Company. 23 pp.
"Employment Stabilization: Industry's Progress Toward Steady
Work and Steady Pay," National Manufacturers. Association.
New York, 1948. 48 pp.
Metz, Harold W., editor, "Labor Po.licy of the Federal Govern
ment," The Brookings Institution. Washington, D.C.s 1945.
284 pp.
Parry, D. M., "Disastrous Effects of a National Eight Hour Law,"
National Association of Manufacturers, 1902. 22 pp.
Ill
Poliak, Otto, editor, "Social Adjustment in Old Age,"
Social Science Research Council. New York, Bulletin
No. 59, 1948. 199 pp.
"Prices, Wages, and Inflation," Proceedings of the Academy of
Political Science, Vol. XXIII, No. 1, May, 1948. 96 pp.
Stelnhaus, Henry W., editor, "Financing Old Age," National
Industrial Conference Board, Inc., New York, 1948. 63 pp.
"The Economics of the Guaranteed Wage," Chamber of Commerce
of the United States, Economic Research Department,
Washington, B.C., 1^48. 25 pp.
"Use of Cost-of-Living Indexes and Budget Studies in Wage
Adjustments," Selected References No. 22. Princeton,
New Jersey; Princeton University, Industrial Relations
Section, 1948. 4 pp.
Wheildon, L. B., editor, "Security for the Aged," Editorial
Research Reports, Vol. II, No. 6. 1205 19th Street, N. W.,
Washington, D.C., 1948. 16 pp.
D. GOVERNMENT PUBLICATIONS
Aubin, Joshua, "Theory of Joshua Aubin," United States Bureau
of Labor Statistics, Bulletin No. 604^ Washington, B.C.:
United States Government Printing Office, 1940. 180 pp.
Brady, Dorothy S., "Family Budgets; A Historical Survey,"
Monthly Labor Review, Vol. 66, No. 2, February, 1948.
Washington, D.C.; United States Government Printing Office,
1948. 115 pp.
"Earnings and Hours," Monthly Labor Review, Vol. 66, No. 5,
May, 1948. Washington, D.C.s United States Government
Printing Office, 1948. 164 pp.
Engel, Albert, "Hearings, House of Representatives, 79th
Congress," Congressional Record, 79th Congress, 1st Session,
Vol. 91, Part 2. Washington, D.G.; United States Govern
ment Printing Office, pp. 2242-2449.
First Annual Report, Massachusetts Bureau of Statistics of
Labor, 1870. 224 pp.
112
Hurwitz, Abner, "District of Columbia Family Income in
Relation to Bureau of Labor Statistics Family Budget,"
Monthly Labor Review, Vol. 67, No. 6, December, 1948.
Washington, D.C.S United States Government Printing
Office, 1948. 118 pp.
"The Labor Month in Review," Monthly Labor Review, Vol. 67,
No. 1, July, 1948. Washington, D.C.t United States
Government Printing Office, 1948. 117 pp.
"The Use of Cost-of-Living Figures in Wage Adjustments,"
United States Bureau of Labor Statistics, Bulletin No.
369. Washington, D.C.: United States Government Printing
Office, 1925. 64 pp.
"Two Years of the Fair Labor Standards Act," Monthly Labor
Review, September, 1940. Washington, D.C.: United States
Government Printing Office, 1940. 136 pp.
Tuney, Dorothea, "Ten Years Operations Under Fair Labor
Standards Act," Monthly Labor Review, Vol. 67, No. 3,
Washington, D.C.t United States Government Printing
Office, 1948. 131 pp.
"Wage Adjustment to Cost of Living,Under Union Agreements,"
United States Bureau of Labor Statistics, Bulletin No.
369. Washington, D.C.: United States Government Printing
Office, 1942. 106 pp.
Whelpton, P. K., "Forecasts of the Population of the United
States 1945-1975," United States Department of Commerce,
Bureau of the Census. Washington, D.C.t United States
Government Printing Office, 1947. 113 pp.
"A National Survey of Liquid Assets," Federal Reserve
Bulletin, Federal Reserve System. Washington, D.C.f
United States Government Printing Office, 1948. 10 pp.
E. UNPUBLISHED MATERIALS
Ansted, H. B., "An Analysis of the Group Bonus System as Used
by the General Motors Corporation." Unpublished Master’s
thesis, The University of Southern California, Los Angeles,
1924. 65 pp.
115
Casey, Martin E., HThe Social Influence of the Labor Move
ment in the United States." Unpublished Master’s thesis,
The University of Southern California, Los Angeles, 1939.
139 pp.
Cooper, Blanche, "The Economics of Saving and the Standard of
Living." Unpublished Master’s thesis, The University of
Southern California, Los Angeles, 1941. 1Q5 pp.
Jensen, Finn Bjorn,."Legislative Control of Labor Disputes
in Norway," Unpublished Doctor's dissertation, The
University of Southern ’ California, Los Angeles, 1941.
245 pp.
McCreary, Jack Ervin, "The Political Activities of Labor
Unions in the United States," Unpublished Master’s
thesis, The University of Southern California, Los
Angeles, 1940. 119 pp.
Pierson, Leslie Ervin, "An Analysis of Problems in the
Administration of Wage Incentive Plans." Unpublished
Master’s thesis, The University of Southern California,
Los Angeles, 1947. 97 pp.
•
Vincent, James Melvin, "A Study of Accommodation as a
Conscious Social Process Reflected in Employer and
Employee Relationships in the United States at the
Present Time." Unpublished Doctor's dissertation, The
University of Southern California, Los Angeles, 1928.
343 pp.
P. NEWSPAPERS
- Los Angeles Times, January 3, 1949.
APPENDIX
115
UAW-GM WAGE CLAUSE
The text of the wage clause in the General Motors
Corporation-United Auto Workers agreement reads:
Paragraph 101
(a) All employees covered by this agreement shall
receive an increase of 11 cents per hour effective May 29,
1948. Three cents per hour of this increase is to provide
for improvement in the standard of living of employees and
will be added to the base rate of each wage classification
for the term of the agreement. Eight cents per hour of this
increase is for the purpose of providing for the increase
which has taken place in the cost of living. It is agreed
that only 5 cents of this 8 cents will be subject to reduction
so that, if a sufficient decline in the cost of living occurs,
employees will Immediately enjoy a better standard of living.
Such an improvement will be an addition to the 3 cents an
hour annual improvement factor underwritten by the Corporation
and will make a total of 6 cents to be added to the base rate
of each wage classification, as of May 29, 1948*
(b) A further increase of 3 cents per hour for sin
improved standard of living will be made in the base rate of
each wage classification effective on and after May 29, 1949.
(c) These increases in base rates as provided for in
paragraph 101 (a) and paragraph 101 (b) shall be added to the
wage rates (minimum, intermediary and maximum) for each day
work classification. The 5 cents per hour increase for the
cost-of-living allowance provided for in paragraph 101 (a)
shall be added to each employe's straight-time hourly earnings
and will be adjusted up or down each three months in line with
the cost-of-living allowance provided for in paragraph 101
(f) and 101 (g).
(d) In the case of employes on an incentive basis of
pay the increases in base rates provided for in paragraph 101
(a) and paragraph 101 (b) shall be added to the earned rate
of all Incentive workers until local plant managements and
the local unions reach an agreement for factoring this
Increase into the wage structure of incentive classifications.
The 5 cents per hour increase for cost-of-living allowance
provided for in paragraph 101 (a) shall be added to each
employe's hourly earned rate and will be adjusted up or down
each three months in line with the cost-of-living allowance
provided for in paragraph 101 (f) and 101 (g).
116
(e) The cost-of-living allowance will be determined
in accordance with changes in the "Consumers 1 Price Index
for Moderate Income Families in Large Cities"--"A11 Items,"
published by the Bureau of Labor Statistics, U. S. Department
of Labor (1935-1939 equals 100) and hereafter referred to as
the BLS consumers' price index.
(f) The cost-of-living allowance as determined in
paragraph 101 (a) shall continue in effect until the first
pay period beginning after September 1, 1948. At that time,
and thereafter during the period of this agreement, adjust
ments shall be made quarterly at the following times:
Effective Date
of Adjustment Based upon
First Pay Period BLS Consumers 1
Beginning on Price Index
or after: as of:
September 1, 1948 July 15, 1948
December 1, 1948 ............................ October 15, 1948
March 1, 1949 January 15, 1949
June 1, 1949................................. April 15, 1949
September 1, 1949 July 15, 1949
December 1, 1949 ............................ October 15, 1949
March 1, 1950 January 15, 1950
In no event will a decline in the BLS Consumers' Price
Index below 164.7 provide the basis for a reduction in the
wage scale by job classification.
(g) The amount of the cost-of-living allowance which
shall be effective for any three-months period as provided
in paragraph 101 (f) shall be in accordance with the following
table (except that the five cent cost-of-living allowance
effective May 29, 1948, will not be changed on any subsequent
adjustment date unless the cost-of-living index has increased
or decreased more than one full index point from 169.3).
Thereafter, the table shall govern--:
117
Cost-of-Living
Allowance, in
Addition to
BLS Consumers’ Wage Scale by
Price Index Job Classification
164.6 or less ............. none
164.7-165.8 1/ per hour
165.9-166.9 2/ per hour
167.0-168.1 3/ per hour
168.2-169.2 4/ per hour
169.3-170.5 5/ per hour
170.4-171. 5 .............................. 6/ per hour
171.6-172. 6 7/ per hour
172.7-173.8 8/ per hour
173.9-174.9 9/ per hour
175.0-176.0 10/ per hour
176.1-177.2 11/ per hour
177.3-178.3 12/ per hour
178.4-179.5 13/ per hour
179.6-180.6 14/ per hour
180.7-181. 7 15/ per hour
181.8-182. 9 .......... 16/ per hour
183*0-184.0 17/ per hour
184.1-185.2 18/ per hour
185.3-186.3 ........ 19/ per hour
186.4-187.4 .............'. . .......... 20/ per hour
187.5-188.6 21/ per hour
188.7-189.7 22/ per hour
and so forth with one cent adjustment for each 1.14 point
change in the index.
(h) The amount of any cost-of-living allowance in
effect at the time shall be included in computing over
time premium, night shift premium, vacation payments,
holiday payments, and call-in pay.
(i) In the event the Bureau of Labor Statistics does
not issue the Consumers * Price Index on or before the
beginning of the pay period referred to in paragraph 101 (f),
any adjustments required will be made at the beginning of the
first pay period after receipt of the index.
(j) No adjustments, retroactive or otherwise, shall be
made due to any revision which may later be made in the
published figures for the BLS Consumers * Price Index for any
base month.
118
(k) The parties to this agreement agree that the
continuance of the cost-of-living allowance is dependent
upon the availability of the official monthly BLS Consumers'
Price Index in its present form and calculated on the same
basis as the index for April 1948 unless otherwise agreed
upon by the parties.
Sources United States Department of Labor, Monthly Labor
Review, Vol. 67, No. 1, July, 1948, pp. 3-4.
V n fv a rs P y e* Southern C a lifo rn ia U f e l S S I

Asset Metadata

Creator Wounsch, John Carl (author)

Core Title An inquiry into the use of cost-of-living figures in wage adjustments

Contributor Digitized by ProQuest (provenance)

Degree Master of Arts

Degree Program Economics

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag economics, labor,oai:digitallibrary.usc.edu:usctheses,OAI-PMH Harvest

Language English

Advisor Leonard, Joy L. (committee chair), Phillips, E. Bryant (committee member), Pollard, Spencer D. (committee member)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c20-437043

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Identifier EP44692.pdf (filename),usctheses-c20-437043 (legacy record id)

Legacy Identifier EP44692.pdf

Dmrecord 437043

Document Type Thesis

Rights Wounsch, John Carl

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the au...

Repository Name University of Southern California Digital Library

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