Business Fluctuations and the American Labor Movement 1915–1922 9780231879231

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2 BUSINESS FLUCTUATIONS A N D THE AMERICAN L A B O R MOVEMENT 1915-1922

STUDIES IN HISTORY, ECONOMICS AND PUBLIC LAW EDITED BY T H E F A C U L T Y OF POLITICAL SCIENCE OF COLUMBIA UNIVERSITY

Volume CX)

[Number 2 Whole Humber 247

BUSINESS FLUCTUATIONS AND THE AMERICAN LABOR MOVEMENT 1915-1922

BY

V. W. LANFEAR

AMS PRESS N E W YORK

COLUMBIA

UNIVERSITY

STUDIES IN T H E SOCIAL SCIENCES

247

The Senes was formerly known as Studia in History, Economia and Public Law

Reprinted with the permission of Columbia University Press From the edition of 1924. N e w York First AMS EDITION published 1968 Manufactured in the United States of America

Library of Congress Catalogue Card Number 68-57572

A M S PRESS, I N C . NEW

Y O R K , N Y. 10003

PREFACE T H R O U G H making in 1 9 1 9 a study of the wage awards of the United States labor adjustment boards, the author became interested in the more general question of business conditions and the labor movement, and therefore, at the suggestion of Professor W. F. Ogburn, chose this as the subject for his doctoral dissertation. This choice, however, was made with full recogntion of the limitations of any such study. Fragmentary and incomplete data have made it particularly difficult to draw any specific conclusions or to give an unqualified answer to any of the questions that naturally suggest themselves in connection with the business cycle and its social consequences. It is hoped, however, that the tentative results here obtained may be of some slight use as suggesting one method of approach to the consideration of this most vital economic problem. The author wishes to take this opportunity of thanking Professor W. A. Berridge of Brown University and Alvin H. Hansen of Minnesota University for recent information concerning unemployment and wages, and W. L. Crum of Yale University for helpful suggestions regarding the statistical treatment. T o Professor W. C. Mitchell the author is extremely grateful for the many helpful suggestions and criticisms he made after reading the manuscript, and finally he is indebted especially to Professor H. R. Seager, under whose critical supervision the treatise has been written. 201I 5

CONTENTS TAt • K

PREFACE

5

CHAPTER I General Survey.

.

9 CHAPTER

II

Wages and the Cost of Living

21

C H A P T E R III Employment and Unemployment CHAPTER

51 IV

Labor Mobility and Absenteeism CHAPTER V Changes in Attitude and Policies of Labor, 1915-1922 203]

67

. . .

86 7

C H A P T E R GENERAL

I

SURVEY

THE American Labor Movement has been defined in various ways by those who have written concerning it. A s used in this monograph, it is another name for the continuous attempts of organized labor in America to realize its desires and demands. T h e term is limited here to organized labor because there are no authentic data available relating to the desires and demands of unorganized labor. T h e attitude and programs of the American Federation of Labor and the Amalgamated Clothing Workers 01 America are taken as representative of the attitude and ideas of organized labor in general, because, in the first place, the majority of organized workers are connected in some way with one or the other of these organizations; and in the second place, reliable and consecutive data concerning labor organizations outside these two are not available. It may be said that the aim of organized labor as represented by the American Federation of Labor and the Amalgamated Clothing W o r k ers of America appears to be to " improve the status of the wage-earning classes by promoting an opportunistic or practical program of reform ". A business cycle may be defined as a succession of event» completed during the interval between a given point of time in a period of prosperity or depression, and a corresponding point of time in the succeeding period o f prosperity or depression. Some writers consider the period from 1915 to 1922 as a complete cycle, but according to our 20s] 9

IO

BUSINESS

AND

LABOR

1915-192Z

[206

definition of a business cycle, this period includes more than one cycle. There was not an unbroken upward trend of the business curve during the period of prosperity; f o r example, there w a s a recession in business activity in the latter part of 1 9 1 7 , and 1 9 1 8 w a s still more a period of declining profits. Further, there was a distinct reaction from activity a f t e r the Arnristite. In other words, the latter part o f 1 9 1 6 or the first part of 1 9 1 7 marked the peak of prosperity following the depression of 1914 and the revival of 1915. T h e upward swing of the business curve in the second half of 1 9 1 9 and the peak of prosperity in 1920, m a y be regarded as parts of a new cycle marked off f r o m the w a r cycle b y the brief period of depression in the first quarter of 1919. Entrepreneurs had prepared f o r falling prices a f t e r the Armistice, and were taken b y surprise when the great postw a r b u y i n g campaign developed in the early summer. To take advantage of the situation, they marked up prices and expanded the scale of operations as rapidly as possible. The latter part of 1919 seemed, therefore, to be a period of e x traordinary activity, arising f r o m unusual conditions created by the waT. VVe shall consider the period between 1915 and 1922, then, as including t w o business cycles. The y e a r 1913 was a time of slowly shrinking activity both in Europe and America. T h e depression had become pronounced early in 1 9 1 4 and the outbreak of the w a r added financial confusion and uncertainty to the difficulties with which business men had t o contend. T h e winter of 1914-15 was a period of severe unemployment in the U n i t e d States, and the revival o f activity produced by huge European orders did not make much headway until the middle of 1915. T h e year 1915, therefore, marks the beginning of the period o f prosperity, which lasted, except f o r the qualifications already mentioned, until the Armistice.

207]

GENERAL

SURVEY

A great depression began in the first quarter of 1 9 2 0 and did not reach its lowest ebb until the middle of 1 9 2 1 , at which time business conditions began to improve. While slow at first, the improvement gathered momentum as the months passed, until by the end of 1922 conditions had become " normal " in many respects. The general trend of business conditions can be more readily visualized by aid of a curve. The chart on page 16 shows the changing conditions of business, month by month, from 1 9 1 5 to 1922, and probably gives a trustworthy picture of the general trend during the whole period. Various methods have been used in an effort to compile a satisfactory business index from such data as tKe statistics of physical production, railway tonnage, bank clearings, etc. One of the most widely used indices of business conditions is that computed by the Harvard Committee on Economic Research. The figures for this curve of business conditions are compiled from Bradstreet's price index and Bradstreet's bank clearings outside of New Y o r k City, 1 which according to Professor W . C. Mitchell, who made a test of the seven leading American index numbers of prices, gives the best index of business conditions. 2 " T h e fact that Bradstreet's publishes the actual prices entering the index and describes its method of construction, gives one confidence in using the index." 3 The Harvard Committee, in working out this index of business conditions, found that such items as average prices ' S e e the files of the Review of Economic Statistics. D a t a for bank cìcarings are monthly averages, and Bradstreet's prices relate to the first day of the morrth. See also the files of Bradstreet's, and the Commercial and Financial Chronicle. 2 1

See Bulletin

Xo. 284 of the Bureau of Labor Statistics, p. 1 1 1 .

W . M. Persons, " A n Index of General Business Conditions," Review of Economic Statistics, April, 1919. p. 1 4 1 . F o r a list of the particular articles included in the index, see pp. 1 4 0 - 1 4 1 .

12

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l9lS-19et

[208

of railway bonds, industrial stocks, railroad stocks, volume of sales on the New York Stock Exchange, and New York clearings, all fluctuated readily upward or downward, depending upon speculation. These items were plotted as a separate group and called the speculative group, since they were found to be best suited for an index of speculation. It was also found that the series of items in which the fluctuations tended to lag behind the fluctuations of the speculative group, all had to do with business and industrial activity, and constituted the business group. This group was found to include " pig-iron production, bank clearings outside of New York City, Bradstreefs indices of