Telling Prices What to Do

July 28, 1947

In 1939, according to the Bureau of Labor Statistics, average weekly wages paid in all manufacturing industries were $23.86. In bituminous coal mining they were almost exactly the same—$23.88, In January of this year, weekly wages in all manufacturing industries had advanced 98 percent to $47.02. In the same period, weekly bituminous coal wages had been boosted 191 percent to $69.54. These were the highest weekly wages paid in any industry. The cost of living had gone up only 53 percent. The wholesale price of bituminous coal went up in the same period 43 percent.

Such was the situation before John L. Lewis’s final triumph a few weeks ago. Then he boosted the hourly wage rates of soft-coal miners from $1.18½ to $1.63⅛. He won $13.05 for an eight-hour day against $11.85 for a previous nine-hour day. This means that for the most productive periods the miners’ weekly wages were raised from a former $69 to $75 to $78, depending upon when overtime begins.

All during the period that Mr. Lewis’s strike threats were forcing the soft-coal industry to add another rise of about 30 percent in total labor costs, President Truman did nothing. Or rather, he seemed to do everything to strengthen Mr. Lewis’s hands. Though the Taft-Hartley bill was finally enacted over his veto, his known opposition made it weaker than it would otherwise have been (particularly in dealing with an industry wide union like the United Mine Workers). By calling it “unworkable” he encouraged unions to flout it or treat it with contempt.

Immediately after the damage was irreparably done, however, the President expressed “deep concern,” not about the wage increase itself, but about the possibility of “a substantial increase in the price of coal.” This, he feared, would “renew the inflationary spiral.” “The people of the country,” he went on, “have the right to demand that their prosperity shall not be imperiled by immediate increases in the price of coal and in the price of steel.” In other words, he finds nothing to fear when Mr. Lewis or any other labor leader forces any increase whatever in wages. Our economy, it appears, is only “imperiled” when such wage increases are reflected in prices.

Mr. Truman did not stop to tell us what the result would be if this increase were not reflected in prices. In 1946 the average net operating profit margin to American mines on a ton of soft coal was 13 cents. The United Mine Workers Journal—which can be counted upon for a low estimate—contends that the cost of soft coal will not be raised more than 65 to 67 cents a ton by the new labor settlement. If the price of soft coal did not go up now, therefore, this would mean an average net operating loss to the mines of something in the neighborhood of 52 cents a ton. Would it help the miners, or the steel industry, or production and employment, if the soft-coal mines had to close down because they were losing money?

Do Mr. Truman’s advisers know by just how much the coal mines and steel companies should or should not increase the price of coal or steel in order to make just the “right” profit? In view of the heavy losses in the coal or steel industry in bad years, do Mr. Truman’s advisers know just how high profits should be in good years to attract both the absolute and relative amounts of new venture capital to assure the right production of steel or coal in relation to other production? Do they know what the profits of industry in general should be to accumulate or attract sufficient new capital to provide new jobs and bring about a permanent increase in real wages?

Mr. Truman’s coal-price statement is even more disturbing to the business outlook than the latest forced boost in coal wages and the distortions in the economy which it will set up, serious as these are. For Mr. Truman’s statement is a resumption of the effort to talk down prices by exhortation and veiled warnings. It looks suspiciously like the groundwork of a campaign to restore price control. To encourage a further increase in labor costs while holding down prices would be, of course, the quickest and most certain way to bring prosperity and production to a halt.