Camouflaged Fourth Round

September 26, 1949

The report of the President’s special Steel Industry Board was an adroit political document. For those who were content to bounce along the headlines, it carried a fine air of “impartiality.” It is not surprising that so many editorial writers hastened to acclaim the board for its “statesmanship.”

The board did, indeed, make some unexpected concessions to the industry’s case. It admitted that its profits were “volatile.” It pointed out a number of fallacies in the unions’ “productivity” and “purchasing power” arguments. It found that “there are no inequities of steelworkers at present which require redress through a general wage-rate increase.” And on the ground that “it seems desirable at this time to stabilize the level of wage rates,” it rejected the union’s demands for a straight wage increase.

But the board then immediately turned around and approved pension and insurance benefits which by its own admissions were equivalent to a wage increase of from 8 to 10 cents an hour. Just why it would be so bad for the steelworkers to get another pay boost in the form of a straightforward hourly increase, and just why it would be so good for them to be forced to take it only in the form of pension and insurance benefits, the report never made clear. Following a befuddled argument, it rejected a “general increase in rates of pay” for the puzzling reason that it is “just as likely to affect output and employment unfavorably as it is to affect them favorably.” One would suppose from this that if the chances were equal, the steelworkers should be entitled to the benefit of the doubt.

The real argument against a fourth round pay increase is, of course, that to force a further increase in production costs now would tend only to reduce output and employment. But this argument is just as strong against an insurance and pension boost equivalent to 8 to 10 cents an hour. It is, in fact, stronger. For the moment the companies could no longer supply every worker with at least a 2,000 hour work year, the hourly cost of the insurance-pension plan would mount even higher. This would raise breakeven points even more than a straight wage increase and would intensify the cost problem of the companies in a recession. And even more serious, insurance-pension plans, as the board admits, “once installed, become more or less permanent.” In fact, if experience with John L. Lewis is any guide, forced pension plans to which employees do not contribute—and it is precisely such a plan that the board wishes to impose—are worked up to ever more costly and extravagant levels.

It is impossible to call attention here to all the non sequiturs, inconsistencies, and self-contradictions with which the report is riddled. Some random examples will have to do.

The board turns down a straightforward wage increase on the implied (though never clearly stated) ground that it would force price increases. But when it insists that the companies must add the equivalent of 8 to 10 cents an hour to their payrolls for insurance-pension plans, it not only assumes that this would be no excuse for a steel price increase, but implies that it would somehow be followed by “higher profits.” And if these “do not result in benefit to the consumer in the form of lower prices, there would be justification for the union to renew its demand for increase of wage rates!” In other words, if one payroll boost doesn’t bring down steel prices, try, try, again.

The board finds that a “social obligation . . . rests upon industry to provide insurance against the economic hazards of modern industrial life,” but doesn’t tell us who is going to insure industry itself against the economic hazards of modern industrial life.

The strangest paragraphs in the report are those in which the board affects to deplore “the habit of turning to government” to settle labor disputes “instead of arguing it out in collective bargaining.” Now who on earth do you suppose appointed the board and forced the companies to go before it?