Inflation Wins Again

January 18, 1960

As this department two weeks ago predicted, and as it took no great clairvoyance to predict, the steel strike has finally been settled by a grossly inflationary wage increase. Continuing its mood of crystal-gazing, this department predicts that the victory for the steel union will let loose a tremendous wave of demands for another round of wage increases throughout industry; that employers for the most part will be compelled to yield to these demands; that the Federal Reserve authorities will be pressured into further expansion of money and credit to make the wage increases supportable, and that neither the Administration nor Congress will do anything in the slightest degree effective to halt the consequent inflation.

Never has this department more ardently wished that its predictions would turn out to be laughably wrong. But let us look at the facts.

If there was any will to resist inflation, the steel strike was the ideal test case. Steel wages even before the strike averaged $3.10 an hour. This was already 87 cents an hour higher than the average wage paid in manufacturing. It was already the highest wage paid to any major group in manufacturing. There was no question of “catching up with the procession.” The steelworkers were already way ahead of the procession.

CARDS WERE STACKED

These were among the reasons, in addition to loss of markets to foreign competitors, that led the steel companies to resist a further substantial wage increase. In addition, they were under ostensible pressure from the Administration not to grant an “inflationary” wage increase.

But as the strike wore on, it became more and more evident that the companies were engaged in a losing battle. Ostensibly, the government was “neutral”; it refused to “interfere”; it kept “hands off”; it left everything to “free collective bargaining.” But all the time, it was in fact interfering, through the operation of the Norris-LaGuardia and Wagner-Taft-Hartley acts, on the side of the strikers. All the time the union maintained intimidatory picket lines, the constant threat of violence, in case any company should try to resume production and to hire other workers. And all the time the Administration and Congress remained completely oblivious of this situation, and talked as if bargaining were really free on both sides.

It is true that Mr. Eisenhower finally resorted to the strike-injunction provisions of the Taft-Hartley Act, but both before and after he had done so he declared that he was losing patience, and rebuked both sides for not coming to an agreement. As he did this even after the companies had made an inflationary offer, they could only conclude that he expected them to make a still more inflationary offer to buy a settlement. Otherwise they faced a resumption of the strike, with threats in the background of compulsory arbitration or even seizure.

TOUGHNEXTTIME

The companies will now no doubt be roundly abused by some for having uselessly and expensively held out, and by others for finally yielding so much. And certainly the package increase of 39 cents an hour that they were forced to yield over a thirty-month period is far more costly than the settlement they might have obtained by offering more last June to avert a strike. But before we condemn the company managements we would do well to weigh the mounting pressures against them.

Only three nights before the steel settlement, New York City, already losing millions of dollars on its city- owned and -operated bus and subway lines, averted a strike only by offering an increase of 40 cents an hour over a two-year period. The private bus lines were forced to settle for an increase of 36 cents an hour. Immediately after the settlement Mayor Wagner announced that the people of the city were “sick and tired of . . . this terrible ordeal every year or every second year . . . I don’t propose to let it happen again.”

The politicians are always going to be terribly tough next time, but always capitulate, or force private industry to capitulate, this time. They have built up, by their own laws and appeasements, a Frankenstein monster they no longer dare to oppose.