Freedom to Bargain

February 26, 1962

In January electrical workers in New York City, who had been working a 30-hour week at $4.40 an hour ($6.60 for overtime), struck and demanded a twenty- hour week at higher pay. They finally settled for a basic five-hour day and 25-hour week at $4.96 an hour, with a guaranteed sixth hour at $7.44, or $161.20 for a 30-hour week. The shorter week was demanded in spite of the fact that a serious shortage of skilled electricians already existed in the New York area.

There is hardly need to point out that the new contract (particularly if it becomes a “pattern”) must reduce national production, raise the cost of factories and homes, reduce our ability to compete abroad, create unemployment, and lead to further inflation. The Kennedy Administration and even the AFL-CIO have disapproved the settlement. Yet the unreasonable demands were made and granted.

And now, to prevent a repetition of anything like the 116-day steel strike of 1959, or even abnormal stockpiling, the Administration has already intervened in the steel wage negotiations to plead with both sides for “industrial statesmanship” and “an early and nonin- flationary settlement in the public interest.” Wages in the steel industry are already $3.24 an hour compared with an average in all manufacturing of $2.36.

FIXING RIGHT WAGES

Behind this intervention is the implication that the government knows what a proper or statesmanlike wage ought to be. This implication, in spite of many reservations, is found in the latest annual report of the Council of Economic Advisers. “The general guide for noninflationary wage behavior,” it tells us, “is that the rate of increase in wage rates (including fringe benefits) in each industry be equal to the trend rate of overall productivity increase.” After describing “important modifications” of this guide, it concludes that “productivity is the central guidepost for wage settlements. Ultimately, it is rising output per man-hour which must yield the ingredients of a rising standard of living. Growth in productivity makes it possible for real wages and real profits to rise side by side.”

It is gratifying to find explicit government recognition that real-wage rates are limited by productivity. But the truth is that neither “overall productivity” nor “output per man-hour” can be accepted as a wage-rate guide. “Overall productivity” is not productivity of labor, but of land, labor, management, and capital combined. “Output per man-hour” is a misleading ellipsis for output per man-machine-hour. The council report itself admits this at one point: “Output per man-hour rises mainly in response to improvements in the quantity and quality of capital goods with which employees are equipped.” Now if the rise in productivity is mainly owing to the creation and use of more and better machines, and if all the money earned by these machines (and needed to amortize them) is to be sucked into high wages for the workers who use them, what incentive is left for new investment?

EMPLOYERS COERCED

Why is the government drifting toward the idea of compulsory wage arbitration? The reason is that our one-sided labor laws grant so much power, privileges, and immunities to the labor unions that they can make unreasonable demands which the employers are impotent to resist. The latter find their own freedom to bargain abridged. The employers are legally forced to “recognize” and “bargain with” specific unions that are legally granted exclusive bargaining power. In addition, unions are allowed to use mass picketing and intimidation to prevent anybody else from taking the jobs that the union members have voluntarily vacated by a strike.

If these one-sided laws were repealed, if freedom, not merely of “collective bargaining” but of all bargaining, were restored, competition of workers and employers would set workable and “noninflationary” wages, prices, and profits, without need of coercive government slide rules. If two-sided freedom of bargaining is not restored, we will continue to drift toward compulsory arbitration, government wage and price and profit fixing, and totalitarian controls.