Economic Data Utilized in Wage Arbitration [Reprint 2016 ed.] 9781512814057

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ECONOMIC DATA

UTILIZED

in

WAGE A R B I T R A T I O N

JULES

BACKMAN

Published for the

LABOR

RELATIONS

COUNCIL

of the

W H A R T O N SCHOOL OF FINANCE A N D COMMERCE by the

UNIVERSITY

OF P E N N S Y L V A N I A Philadelphia

1 952

PRESS

Copyright 1952 UNIVERSITY O F PENNSYLVANIA

PRESS

Manufactured

America

in the United

States of

Jules Backman is Professor of Economics at New York University in the School of Commerce, Accounts, and Finance. He is the author of many books and pamphlets on wages and prices. He has acted as economic consultant to manv industries, including railroad and steel, in the preparation of economic data used before fact-finding boards and arbitrators. He was associated with the Securities Exchange Commission, OPA, President's Cost of Living Committee, and New York Milkshed Price Committee. His most recent studies were Multi-Employer Bargaining (New York University Institute of Labor Relations and Social Security, August 1 9 5 1 ) , and Economics of Armament Inflation (Rinehart & C o , October 1 9 5 1 ) .

CONTENTS CHAPTER

PAGE

Preface

v

Introduction

1

Wage Data

4

C o s t of L i v i n g a n d Real E a r n i n g s

12

Worker's B u d g e t s

16

Wage Comparisons

19

C h a n g e s in Productivity

30

Ability to P a y

39

Economic Environment

43

Conclusion

46

Appendix

48

[iii]

PREFACE Wage determination through collective bargaining and by arbitration decision has been accompanied by a steadily increasing use of many kinds of economic data. These data have given rise to an emphasis of certain criteria, especially in arbitration, for deciding what wages are proper in a particular case. Because of the universality of use of such data and the widespread references to the criteria in arbitration proceedings, it seemed most desirable to examine their characteristics in this series. Such an examination has been made by Jules Backman in his study of Economic Data Utilized in Wage Arbitration. He is eminently qualified to make an analysis of this kind, having served as an expert in this field, usually on behalf of management, in many proceedings before arbitrators and fact-finding boards. It is significant that Professor Backman views the economic data and economic criteria as useful but to a limited extent in arbitration proceedings. They provide "a central area from which it is difficult for the arbitrator to stray very far and justify the decision he has reached." He concludes that the statistical facts do not "enable the arbitrator to reach a precise figure in every instance." As a matter of fact, there are many cases in which the range of difference supportable by reference to "respectable" statistical data is wider than the actual difference between the union and the management party to the wage dispute. An example of such a situation is referred to by Professor Backman in the section setting forth his conclusions. He does not fail to appreciate the necessity of striving toward an arbitration award which "the parties can live with," and sees that no fetish can be made of a particular wage criterion or of a set of wage criteria. Under a collective-bargaining system, there is but one way—note, one way only—in which the terms of employment [v]

can be determined. That is by an agreement between union and management, even though a work stoppage may be necessary to bring about a meeting of minds. What it takes to avoid a strike or to get a work stoppage terminated often becomes crucial criteria of wage determination. Can it be said, then, that the various economic data and economic criteria have no place in the process? Of course not! We need to understand the nature of these data, as well as their uses and limitations, to insure that reason will not only assist the development of sound conclusions but also to make possible the avoidance of ill-advised work stoppages. Perhaps these ends would be more fruitfully sought if the economic data and the various criteria for wage determination were looked upon primarily as tools for facilitating agreement-making—for inducing the modifications of extreme positions at least to the extent necessary to bring about a meeting of minds. Perhaps the data and criteria under discussion serve a major purpose in arbitration when they are used to explain a decision in such a wav as to make it genuinely acceptable to both parties. Unless voluntary arbitration is looked upon bv both parties as producing workable results, the consequence can be a preference for trial by combat in fixing the wage terms of labor agreements. As a matter of cold fact, parties at an impasse in collective bargaining generally do prefer the strike or lockout method to arbitration of basic wage terms. In anv event, voluntarv arbitration of agreement terms is not extensively practiced. Where such arbitration lias been engaged in, deep dissatisfactions with the results are not uncommon. In view of these facts, it is but reasonable to conclude that the arbitration of the basic wage terms of labor agreements has been of quite limited usefulness as a means of avoiding work stoppages in this area. One may also be excused for further concluding that possible improvements in such arbitration might well be the subject of concentrated attention by those interested in industrial relations. In such terms, the report on Economic Data Utilized in Wage Arbitration by Jules Backman is of [vi]

notable value. Its careful studv • should assist materially in J

attaining an improved understanding of the roles played bv economic data and economic criteria in the arbitration of the wage terms of labor agreements. GEORGE W . T A Y L O R

Philadelphia July 1952

[vii]

ECONOMIC DATA UTILIZED IN WAGE ARBITRATIONS1* INTRODUCTION

There are few published economic statistics that have not been introduced into some wage arbitration. In major national cases, tremendous quantities of statistics may be submitted to show many phases of national economic activity in addition to figures dealing with the industry or companies involved. In local wage arbitrations, on the other hand, the presentation of data may be kept to a minimum by both parties. Company statistics are frequently used to supplement industry-wide or national statistics. Economic data dealing with local conditions from city or state agencies are used to supplement national data prepared by agencies of the federal government. In addition to all the published and company statistics, special studies often are made to portray a particular situation. These studies may range from a national study of spending habits in a given industry, as was undertaken by the steelworkers for the 1944 wage case, to studies of local or company data, as, for example, a study of withholding tax returns to determine the number of claimed exemptions of a company's employees. It must not be thought that the parties will agree upon "the facts" merely because they are published by an official agency. An important part of the arbitrator's problem is to attempt to reconcile conflicting interpretations or applications of the available statistics. This point may be illustrated by the conflict concerning the rise in the cost of living, which was an important factor in many arbitrations during the war and early postwar years. It is also reflected in the conflicting positions advanced by the parties as to the proper date • Reference notes at end, page 50.

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from which to measure changes in the economic variables introduced. For example, from what date should a rise in the cost of living be measured? Should it be from the date of the last contract? Should the arbitrator take into consideration longer term periods, such as the changes since 1939, or the change since the end of the war? What weight should be given to prospective changes in the cost of living as reflected in changing wholesale prices? Another aspect of this same problem is the determination of the wage data which may properly be used in such comparisons. Should the emphasis be given to basic wage rates, straight-time earnings, gross hourly earnings, weekly earnings, or annual earnings? What weight should be given to so-called fringe adjustments? Depending upon the interests of the parties, one or another of these measurements will be emphasized. And it should be noted that the parties are not always consistent from year to year in the wage data they emphasize. Thus, for example, many employers during the war years utilized the increase in weekly earnings as evidence that the economic well-being of their workers had improved despite rising living costs, and hence that wage increases were not necessarv. At the end of the war, when hours were cut back, and with them weekly earnings, many of those who had emphasized weekly earnings shifted to hourly earnings because a better case could be made on that basis. If the data are to be helpful, they must be presented in a manner which assists the arbitrator to reach his decision. A piling of fact upon fact creates a record, but not necessarily a usable record, for the arbitrator. It has been found helpful in many arbitrations to present the facts so that they point up certain important factors which may be considered to have a bearing upon the determination of what is a proper wage in a particular circumstance. Any or all of six criteria of wage adjustments may be emphasized: 1. Changes in the cost of living and real wages. 2. Budget studies. 3. Wage comparisons. [2]

4. Changes in productivity. 5. Ability to pay. 6. The economic environment. Data concerning each of these criteria may not be presented by the parties in every proceeding. In many local arbitrations, for example, little attention is paid, at least statistically, to the national economic climate. On the other hand, in wage cases of national import, as, for example, the 1949 steel wage case, such questions may be given considerable attention." In particular proceedings, one or another of these criteria may be deemed bv the arbitrator to be of outstanding importance. Thus, during the 1946-48 period, livingcost changes were given considerable emphasis by arbitrators in the pattern-making cases, while in other cases the so-called "national pattern" mav have been of dominant importance. The data available, and how thev can be and have been used, will be examined in terms of these criteria. It is within this framework of reference that the best tools are made available to the arbitrator. He must understand these tools. He must do a little homework in economics and statistics, as well as in human relations and in law. Before entering into that examination, it should be emphasized that a proper wage decision involves much more than a weighing of statistical facts. In many instances intangible factors, such as the indicated bids or offers by the parties in private bargaining, or past wage history, or related matters, will be of considerable importance. The statistical facts, however, are an important part of the presentation. They do not enable the arbitrator to reach a precise figure in every instance. If it were possible to do so, one would need only a slide rule and not an arbitrator. The statistical facts are important primarily in providing a central area from which it is difficult for the arbitrator to stray very far and to justify the decision he has reached. They provide him with a series of pegs on which to hang his arbitrator's hat. Although use of these criteria will not give the precise answer, they do narrow the area of difference and contribute to make the arbitration award more acceptable to the parties.

[3]

It is therefore incumbent upon both parties to present the appropriate data completely, accurately, and in good faith. Unless this is done, an almost insuperable burden is placed upon the arbitrator, and the possibility of an unwise decision is increased. The quantity of statistical data is so voluminous that a mere listing would take up most of the space available for this study. It is necessary, therefore, to emphasize the more important statistical data and the sources from which they can be obtained. 3 Similarly, many of the published statistics are subject to numerous qualifications. Critical analysis of some of these series would take up more space than is available in this entire pamphlet. Attention is directed, therefore, only to those criticisms which seem to be the more important. In other words, it is necessary to tread a path between a mere compilation of statistics and exhaustive analyses of their uses and infirmities. This necessarily means painting a picture of uses and available statistics in broad outline. Illustrations are drawn from presentations before fact-finding boards, as well as in arbitration, because the data utilized are substantially the same in both types of hearings. Because the trends and levels of wages are important in connection with most of the criteria, it will be useful to discuss first the wage data available and then to examine the other data utilized in connection with each of the criteria.

WAGE DATA

What wage data furnish the appropriate basis for comparison? This is an important question. The answer differs, depending upon the criterion which is being examined. Five basic types of wage data may be used individually or in combination: 1. Basic wage rates. 2. Average straight-time hourly earnings. 3. Average gross hourly earnings. 4. Average weekly earnings. 5. Annual earnings. [4]

The more comprehensive data are available for average straight-time hourly earnings, average gross hourly earnings, and weekly earnings. The data available for basic wage rates and annual earnings are more fragmentary, and in many instances are available only on a company basis rather than on a national or an industrv basis. Most of the available data apply to production workers rather than to clerical workers.4 1. Basic wage rates: Basic wage rates represent what may be called labor's occupational price list. This is the price listed in the contract for the job. These data are not available in the usual overall wage compilations published by federal, state, or private agencies. However, thev are available periodically for some industries. Thus, for example, Editor and Publisher magazine each year compiles the rates paid to the various newspaper mechanical trades (e.g., stereotvpers, tvpographers, mailers, pressmen, photo-engravers, etc.) for leading cities. The U. S. Bureau of Labor Statistics from time to time publishes data showing basic wage rates in particular industries,15 between different communities,6 and for leading companies.7 An individual company can obtain these data from the union contract. It can calculate a weighted average of basic wage rates very simply. The number of workers in each classification is multiplied by the basic rate in that classification. The resulting totals are added together to secure a grand total which is then divided bv the total number of workers. Complications arise when the schedule consists of piece rates rather than hourlv rates. Wage negotiations and arbitrations usually • are concerned with changes o in basic

wage rates. However, there are many instances where general wage increases are granted and are not fully incorporated in the basic starting rates. This has been true, for example, in the retail trade. 2. Straight-time hourly earnings: Actual straight-time 'hourly earnings often are higher than the contract rate.8 This situation arises for a number of reasons. Thus the contract rate mav be a starting rate, which is accompanied by rapid progressions. It mav reflect a policy of merit increases

[5]

or of incentive payments. The adoption of shift differentials in many industries during the past decade also has contributed to raising straight-time hourly earnings above basic wage rates. From time to time the U. S. Bureau of Labor Statistics publishes studies showing straight-time earnings for particular jobs in various industries.9 The Bureau of Labor Statistics publishes data for gross hourly earnings in many industries. However, the Bureau also has published a formula for eliminating the effect of overtime premium pay and thus makes it possible to convert gross hourly earnings to straight-time earnings.10 This formula is applicable only to production workers who are paid by the hour. It is not applicable to white-collar workers receiving a weekly wage because the treatment of pay for absenteeism is different. The National War Labor Board during World War II used straight-time hourly earnings to measure what happened to wage standards. The best measuring rod by which to gauge what has happened in the wartime economy to hourly wage standards is average straight-time hourly earnings statistically adjusted to discount the movement of workers into higher paid war industries. These adjusted straight-time earnings may be said to measure the changes in average pay for an hour's work received by employees who have not shifted from the industry in which they were customarily employed.11 Similarly, in determining the magnitude of wage increases to be permitted under the anti-inflation program in 1951, the Wage Stabilization Board utilized "average straight time hourly earnings, including prorated night shift differentials."12 3. Gross hourly earnings: Gross hourly earnings tend to exceed straight-time earnings because they include payments for overtime in addition to all other wage payments.13 The Bureau of Labor Statistics publishes monthly data for 23 manufacturing industry groups, 196 manufacturing industries and 47 nonmanufacturing industries. This detailed breakdown is available only since the beginning of 1947. [6]

Prior to that year, data were made available for 157 industries and industry groups. Where long-term comparisons are made, it is important to make sure that the data used prior to 1947 are comparable to those since that year. 14 In addition, average hourly earnings data are published for production workers by 43 states and for many of the areas in those states.1"' Detailed data for individual industries also are available bv states and cities. Thus, for example, New York State publishes average hourly earnings for 111 manufacturing and 16 nonmanufacturing industries and industry groups on a state-wide basis. In addition, detailed breakdowns by industries are reported for New York City, the Albany-Schenectady-Troy area, Buffalo, Rochester, Syracuse, and other sections of the state. 10 The composite figure for all manufacturing industries sometimes shows different rates of change from the individual industry components. This development may occur because of a change in the relative importance of the number of workers in different industries. Thus, for example, from 1939 to April 1949, average hourly earnings as reported by the Bureau of Labor Statistics rose from $0.633 to $1.376, or 117.4%. However, part of this rise reflected the fact that a larger proportion of total employment was found in the durable-goods industries on the later date. Since the durablegoods industries have higher average earnings than other industries, this shift in composition of the labor forcc tended to raise the national average. If the 1939 distribution of manhours were used to derive the weighted average at the beginning and end of the periods cited, the average for all manufacturing would have risen to $1.346 or 112.6%.17 Sometimes problems may arise as to how to compute hourly earnings. For example, in railroad wage cases, there has been a continuous debate between the carriers and brotherhoods over whether hourly earnings for operating employees should be computed on the basis of hours worked or of hours paid for. Since hours paid for are more than the hours actually worked, higher hourly earnings are shown when actual hours worked are used as a basis of measurement. 18 [7]

Similarly, as payroll taxes increase, the discrepancy between reported hourly earnings and what an hour's work actually costs a company may become of considerable importance. Here again the railroads furnish a good illustration, since the payroll tax paid by the employer exceeds 6 per cent of wages up to $300 a month, and hence becomes an important factor in wage costs. A similar situation will develop in other industries as the social security tax rate is increased. Because the gross hourly earnings data are affected by overtime, they find less favor in the eyes of arbitrators and most students of these problems than do basic wage rates and straight-time earnings. However, in the absence of marked changes in the number of hours worked and hence in the amount of overtime, the gross hourly earnings data do provide a good approximation of trend. 4. Weekly earnings: Weekly earnings data are usually available from the U. S. Bureau of Labor Statistics and from the various state departments of labor for the same industries as the average hourly earnings data cited above. In addition, separate data are sometimes made available for men and women. This is true for New York State and New York City. In the calculation of weekly earnings, problems sometimes arise because an industry uses part-time workers. In the retail trade, for example, weekly earnings cannot be computed by taking the total payroll of the affected workers and dividing by the number of workers. Such an average would be too low for the full-time workers because the average is pulled down by the relatively low weekly earnings of parttime workers. Similarly, when a company compiles weekly earnings for use in arbitration proceedings, it must be careful to select periods which are not distorted by overtime payments, holiday pay, etc. Sometimes data may be presented to show the change in status of workers who have been continuously employed in the industry over a period of time. Such data, which are frequently referred to as identical workers' studies, reflect the full effect of general wage increases, merit increases, [8]

and promotions for those who stayed with a given company. Usually such data show larger increases than average weekly earnings as customarily reported.19 Average weekly take-home pay is another concept which is sometimes introduced. Take-home pay usually refers to the amount left to the worker after deducting income taxes and social security taxes.-0 The Bureau of Labor Statistics publishes such data for workers with no dependents and with three dependents each month. Since taxes are higher than they were before World War II, long-term changes in takehome pay are smaller than the increases in weekly earnings. On the other hand, because of the early postwar reductions in taxes, take-home pay in the years 1946 to 1950 showed larger increases compared with 1945 than did weekly earnings. While such comparisons are of interest, they usually have been given little weight by arbitrators since higher taxes are an obligation of all citizens as determined by the Congress, and should not be compensated for by wage increases. Conversely, tax reductions provide no basis for wage reductions. 5. Annual earnings: Industry-wide data generally are not available for actual annual earnings. The U. S. Department of Commerce does publish data tor eighty-four industries and industry groups for what are described as "full-time equivalent" employees. This is not an actual earnings figure, but rather a computed figure which is derived by dividing wages and salaries in an industry by the number of full-time equivalent employees.11 For individual companies, actual average annual earnings can be computed by dividing the total annual payroll for the full-time workers affected by the number of those workers. 6. Non-wage benefits and working conditions: In addition to the wage data described above, a new consideration has been added in recent years by the various non-wage benefits which have been received bv employees. These have become of considerable magnitude and are growing in importance

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each year. During 1949 and 1950, the major development was in the field of pensions and social insurance. But these non-wage benefits take other forms. Thus, for example, in the coal industry the following types of adjustments have been made in addition to the general wage increases: 1. Elimination of lamp and smithing charges. 2. Free tools. 3. Increases in vacation pay. 4. Portal-to-portal pay. 5. Pay for lunch period. In other industries, they take other forms. However, the general effect is the same, namely, an increase in unit labor cost to the employer (unless offset by gains in productivity) and an improvement in working conditions or a reduction in the number of hours worked or the shifting of costs formerly borne by the worker to management. These developments, while not reflected in the pay check in all instances, do add to the real income of workers. Thus, for example, when social insurance programs are introduced, the worker may find it necessary to spend less of his salary for medical expenses, thus having more money available with which to buy other goods. This is just as truly an increase in real income as an increase in his weekly pay check. Data concerning these non-wage benefits can be obtained from various sources.22 Such studies have been made by the National Industrial Conference Board, 23 the U. S. Bureau of Labor Statistics, 24 and other agencies. 25 Contracts are published for leading companies by Prentice-Hall, Commerce Clearing House, and the Bureau of National Affairs. In some industries, such as the transit and coal industries, comprehensive studies have been made to determine the cost of these nonwage benefits. The increasing cost of these types of benefits is making it increasingly necessary to consider them in evaluating changes in real earnings of workers. However, many types of fringe adjustments are not reflected in the average hourly-earnings data reported. Table I shows a useful summary of the different types of fringe benefits and indicates which are included in the published hourly[10]

TABLE I CHECK L I S T OF F R I N G E B E N E F I T S A N D O T H E R I T E M S I N B L S SERIES OF PRODUCTION W O R K E R E A R N I N G S * A

Item

^

Total Payrolls Include Exclude

B

=

Total Manhours Include

c

Average Hourly Earnings1 Include Exclude

fringe" Benefits Paid for by Employers Time w o r k e d at p r e m i u m rates: Overtime Special shifts ( n i g h t , h o l i d a y s , etc.) Time paid for but not w o r k e d : Vacations taken d u r i n g p a y period reported 2 Holidays Portal-to-portal time Stand-by time e a r n e d a n d p a i d r e g u l a r l y each pay p e r i o d 8 . . Rest p e r i o d s , lunch p e r i o d s , etc Jury, witness a n d v o t i n g time Sick l e a v e Guaranteed w o r k w e e k , p a y m e n t s r e q u i r e d under Authorized a b s e n c e Employee w e l f a r e benefits: ( C o m p a n y contribution o n l y ) fWorkmen's compensation jOld A g e a n d S u r v i v o r s ' I n s u r a n c e fUnemployment Compensation fTemporary d i s a b i l i t y i n s u r a n c e Pensions W e l f a r e fund G r o u p insurance (life, h e a l t h , accident, h o s p i t a l i z a t i o n ) . . . . Profit-sharing p a y m e n t s p a i d r e g u l a r l y each p a y p e r i o d 8 Medical service Severance p a y Employee discounts Recreation a n d clubs Free meals, fuel a n d other p a y m e n t s in k i n d Bonuses e a r n e d a n d p a i d r e g u l a r l y e a c h p a y p e r i o d 3 Illness or injury ( a m o u n t p a i d in excess of legal r e q u i r e m e n t s ) . Cafeteria a n d restaurant (deficit o n l y ) Educational refunds Military i n d u c t i o n p a y Special e m p l o y e e clothing Safety a p p a r a t u s , etc S u g g e s t i o n s , p a y m e n t s for A d m i n i s t r a t i v e cost of e m p l o y e e benefits Wages Paid by Employers Straight-time w a g e s for time a c t u a l l y w o r k e d Retroactive p a y ¡elected items Paid by Workers* (Worker contribution o n l y ) fWithhotding tax fOld A g e a n d S u r v i v o r s ' I n s u r a n c e fUnemployment C o m p e n s a i t o n fTemporary d i s a b i l i t y i n s u r a n c e Employee g o v e r n m e n t s a v i n g s b o n d purchases Union d u e s Group i n s u r a n c e (life, h o s p i t a l i z a t i o n , etc.) Pension p l a n s Special clothing a l l o w a n c e Damaged w o r k ' " R e g a r d i n g this check list, the C o m m i s s i o n e r of L a b o r Statistics has c o m m e n t e d that it " i s of course true in an item-by-item c o u n t " that " f e w f r i n g e benefits are i n c l u d e d in B I S statistics. B u t , " he continues, " i f the :ost or i m p o r t a n c e of the p a y m e n t s were c o n s i d e r e d , then p e r h a p s it m i g h t be demonstrated that, for m a n y industries, B L S statistics d o include a s u b s t a n t i a l proportion of f r i n g e p a y m e n t s . In v i e w of the f r a g m e n t a r y data on the costs of f r i n g e p a y m e n t s , it m a y b s p r e m a t u r e to state c a t e g o r i c a l l y . . . that ' a v e r a g e hourly »mings cannot be r e g a r d e d t o d a y as a close a p p r o x i m a t i o n to the a v e r a g e cost of e m p l o y i n g labor for a n lour.' For m a n y industries, o u r figures m a y be sufficiently close to be u s e f u l . " t Legally required payments. 1 T h e items w o u l d be treated s i m i l a r l y in the a v e r a g e w e e k l y e a r n i n g s figures, since they are the product >1 average h o u r l y e a r n i n g s a n d a v e r a g e w e e k l y hours. 2 I f workers elect to w o r k d u r i n g v a c a t i o n p e r i o d , o n l y actual hours w o r k e d by such workers are i n c l u d e d ; fash payments for v a c a t i o n s not taken are e x c l u d e d from payroll total. 3 I f p a i d i r r e g u l a r l y , p a y m e n t s are not i n c l u d e d in p a y r o l l total. 4 C h i e f l y those u s u a l l y d e d u c t e d from w o r k e r ' s pay check by e m p l o y e r , w h o acts a s a g e n t for g o v e r n m e n t , labor unions, etc. o T h e s e items are i n c l u d e d in terms of p r o d u c t i o n w o r k e r ' s e a r n i n g s , but are e x c l u d e d for purposes of Indicating e m p l o y e r ' s costs. Source: G e r t r u d e D e u t s c h , " F r i n g e Benefits in W a g e S t a t i s t i c s , " B u s i n e s s Record, N a t i o n a l Industrial Conference B o a r d , F e b r u a r y 1 9 5 1 , p . 5 4 .

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earnings figures and total payroll figures of the Bureau of Labor Statistics. 1 '" T h e foregoing survey has indicated the main types of wage data available. Each of these types of data has its use and significance. Thus, for example, changes in hourly and weekly earnings may properly be compared with changes in living costs. Budget comparisons, on the other hand, have little meaning when the comparison is made with hourly earnings. Here the figures of greatest interest are weekly or annual earnings. Comparisons with changes in productivity usually require hourly-earnings data because productivity data are most often made available in terms of output per man-hour. W a g e comparisons with other industries may involve hourly, weekly, and/or annual earnings. As will be noted later, in some types of comparisons, all three must be used in order to make fruitful comparisons and to reach proper decisions.

COST OF LIVING AND REAL EARNINGS T w o agencies publish comprehensive indexes showing changes in consumers' prices—the U. S. Bureau of L a b o r Statistics and the National Industrial Conference Board. T h e B L S data are used most often. They are available for thirtyfour cities. T h e national index is a composite of the index for these cities and is the index used most widely. However, when a proceeding involves a company located in one of the cities for which B L S data are available, the local index is frequently used. This index portrays the changes in the cost of a relatively fixed budget of goods and services customarily purchased by families of wage earners and lower-salaried clerical workers. T h e consumers' price index does not reflect unusual changes in the pattern of expenditures, as, for example, increased food expenditures because the family eats in restaurants more frequently. Nor does it reflect the greater costs of transportation when the family moves from the city to the [12]

suburb or the greater housing expenditures if the family moves into better quarters. These latter developments involve changes in the level of living rather than in the level of prices. In the absence of extraordinary developments in the economy, the reported index of consumers' prices does provide a fairly accurate measure of the trend in prices of livingcost items for the groups to whom it can be applied. However, it is important to keep in mind the type of qualifications outlined below, because they do play a role during periods of major price movements, and particularly in a defense and war economy. How much has the cost of living risen? This seems like a simple question, but in many instances it is very complicated. What time period is being considered? Shall changes be measured only since the last contract date or should longterm relationships be considered?-'7 What allowance should be made for a movement of living costs in the opposite direction prior to the last contract date? For example, the consumers' price index reached its postwar peak (prior to the post-Korean rise) in the summer of 1948. In the following year prices declined, and many contracts made in 1949 provided for no wage increase. When these contracts expired or were reopened in 1950, consumers' prices were rising. If the measurement of changes in living costs were made from the date of the 1949 contract, a rise could be shown. If, on the other hand, the comparisons were based upon the 1948 level of living costs, which prevailed when the previous general wage increases were negotiated, little or no rise could be shown because the 1950 increase was not much larger than the 1949 decline. 28 Another problem that sometimes arises is: Does the reported index show the actual rise in living costs? During World War II, problems were created because of quality deterioration, disappearance of low-price lines, black-market prices, and the virtual elimination of special sales. As a result of these factors, which could not be measured adequately in the official index, there was general agreement that the official

[13]

index did not reflect the full rise in living costs. Labor groups charged that the magnitude of the understatement was considerable. 29 As a result of a comprehensive examination by a Committee appointed by President Roosevelt, it was concluded that the official index understated the wartime rise by several points.30 While this understatement disappeared in the postwar period,31 the fact that it was still present to some extent in 1946 affected postwar comparisons. A similar situation developed as a result of the understatement of the rent component of the index because of the failure of the index to reflect the full impact of higher rents for new housing in the postwar period. The Bureau published estimates of the magnitude of this understatement at various times in the postwar period.3- In 1951 it published revised indexes which showed the full rise in rents. Adjustments for such understatements should be made both in the base period, where that is necessary, and in the terminal period. Another important problem arises in determining whether or not the consumers' price index, as reported, applies to a particular income group. The weights used in the consumers' price index were derived from an expenditures study covering income groups with average earnings of $1,524 in the 1934-36 period.33 On the basis of the rise in prices from 1934-36 to 1950, the average expenditures would be about $2,800. Under these circumstances, what is the applicability of the index to those workers who are earning less than these averages or to those who are earning more? During the war period it was generally agreed that the rise in living costs for those in the lowest income groups was greater than shown by the official consumers' price index. This situation arose primarily because low-income groups spend a larger proportion of their incomes for food, and it was the prices of food which rose the most. Similarly, they were most affected by the disappearance of low-priced goods. Conversely, there was probably a smaller rise in living costs for those earning substantially more than the expenditures study upon which the index was based. Thus an individual earning

[14]

$6,000 a year uses a larger share of his income for taxes and savings, while a smaller proportion is spent for food. The result is a somewhat smaller increase in living costs than shown by the national average. The parties may not limit themselves to a presentation of data concerning past movements in the cost of living. Attempts may be made to project future trends. This is particularly true when prices are rising. In such instances, movements in wholesale prices may be cited to indicate what is going to happen in retail prices. This tendency was particularly apparent in the latter part of 1950, when wholesale prices were advancing vigorously while the consumers' price index had recorded a relatively small change. The Bureau of Labor Statistics publishes two wholesale price indexes: a daily index of twenty-eight spot primary market prices, and a comprehensive index covering almost nine hundred commodities. The spot price index is a very sensitive one, covering raw materials and imported commodities, which usuallv advance more and decline more than the B L S comprehensive wholesale price index. The comprehensive wholesale price index, in turn, tends to fluctuate more than consumers' prices. This is illustrated in the following tabulation: 1939 to 1948 Peak 28 spot commodities (Aug. 1939 = 100) Comprehensive wholesale price index (1926 = 100) Consumers' price index (1935-39 = 1 0 0 )

1948 Peak to 1950 Low (per cent change)

+253.0

-34.3

+119.8

-10.6

+

-

77.6

4.6

An examination of price history during the years prior to 1939 shows similar relationships. Under these circumstances, the spot index is of little value as an indication of the magnitude of rise in retail prices. While the comprehensive wholesale price index provides a better guide, it does fluctuate

[15]

much more than retail prices, and that fact must be kept in mind. The evidence concerning changes in living costs may go beyond the statistical facts outlined above. Thus arguments may be made concerning the applicability of changes in living costs to the particular proceeding or at the particular period. An economic analysis may be presented to show that rises in wages along with rises in living costs during periods of advancing prices will accentuate the inflation, or it may be held that reductions in wages in line with cuts in living costs will prevent workers from improving their living standards or will contribute toward furthering a recession. Attention is called to these problems in order to indicate that the "facts" presented may often go far beyond the statistics presented.

WORKER'S BUDGETS The budget approach to wage determination and wage adjustment has not been given much emphasis by arbitrators. However, in a number of arbitrations and fact-finding hearings, unions have introduced the results of budget studies to support claims for higher wages. Usually these budgets provide detailed breakdowns of expenditures for food, clothing, housing, fuel and light, etc. Budgets may be used to demonstrate that workers cannot meet minimum subsistence standards, or to show that the prevailing wage does not equal some vaguely defined "American standard of living." They also may be used to establish a goal which the workers would like to attain. Budgets are available to cover each of these three objectives. The most widely used budget studies are: 1. City Worker's Family Budget prepared by the U. S. Department of Labor and made available for thirty-four cities as of June 1947. This budget is brought up to date by applying changes in the consumers' price index and taxes from October 1950, the last B L S revision, to the date of the hearing. This budget is described by B L S as follows: [16]

The family of four includes an employed father, a housewife not gainfully employed, and two children under 15. The budget was designed to represent the estimated dollar cost required to maintain this family at a level of adequate living—to satisfy prevailing standards of what is necessary for health, efficiency, the nurture of children and for participation in community activities. This is not a "subsistence" budget, nor is it a "luxury" budget; it is an attempt to describe and measure a modest but adequate American standard of living.34 2. The Heller Budgets issued by the Heller Committee for Research in Social Economics, University of California. The Committee publishes the following four budgets for San Francisco. a. Family of an executive. b. Family of a white-collar worker. c. Family of a wage earner. d. Dependent families. These budgets are published as of September each year. The Hellei Committee defines the first three budgets as follows: The Heller Committee budgets are an attempt to measure the cost of maintaining the commonly accepted standard of living of three different occupational groups in an American community. By "the commonly accepted standard of living" is meant the sum of those goods and services that public opinion currently recognizes as necessary to healthful and reasonably comfortable living. « 0 0 Although the Heller Committee believes that the individual items included in the budgets will be generally accepted as necessary for a healthful and reasonably comfortable standard of living, it recognizes that the total cost of these items exceeds the incomes of many families in the specific occupational groups. This discrepancy is inherent in the difference between the standard and the general level of living. The standard of living of a given socioeconomic group is composed of those goods and services which the individual earnestly strives for with some reasonable possibility of attaining and which, moreover, community opinion recognizes as legitimate aims. The actual plane of living is determined by the income which the family has to spend, i.e., the prevailing level of wages and salaries, in relation to the price level.33 Except for the dependent family's budget, the Heller Committee budgets represent goals and usually are set at a

[17]

higher level than other budgets. Very few wage earners earn enough to meet the standards of the Heller four-person wage-earner budget. 36 3. State budgets, which are designed to show the cost of living of a young woman living either with her family or alone.37 These budgets usually are compiled in order to provide data for the establishment of state minimum-wage standards. This does not necessarily mean that these budgets are set at subsistence levels. In New York State, for example, the budget is designed to provide "a standard of minimum adequate maintenance and protection of health." 4. Emergency or subsistence budgets have been compiled in the past. Thus the Works Progress Administration set up what was called an emergency budget during the depression thirties.38 This budget was brought up to date by the Textile Workers Union in cooperation with the BLS in 1944. 39 5. Expenditures studies are sometimes compiled in order to record actual spending rather than to establish some goal such as is inherent in many of the budgets. The U. S. Bureau of Labor Statistics has published such studies from time to time. 40 Another illustration is provided by the special expenditures study prepared by the Steelworkers for use in the 1944 steel wage case.41 One of the problems that arises in connection with the use of budgets is the fact that they are usually based on a fourperson family consisting of a husband, a wife and two children, usually about eight and thirteen years of age. Very few families are of this composition, and hence budgets must be used with great caution. The Bureau of Labor Statistics' Technical Advisory Committee, which consisted of government and university economists and labor representatives, has pointed out: The fact that the Committee would emphasize is that a single budget cannot represent the requirements of all family types, nor of a single family throughout its life span.42 The Bureau of Labor Statistics recognizes that the cost of a budget would be less for smaller families and estimates that " . . . the dollar costs of goods and services for a family [18]

of two persons is about 65% of the costs for a family of four; a family of three persons is about 84% of the costs for the four person family . . . " 4 S Data can be compiled showing the number of claimed exemptions of a company's workers. These data are obtainable from Treasury Form W-4 which deals with withholding taxes. On the basis of such data, it is possible to obtain a composite picture of the average number of claimed exemptions of the company's or industry's labor force. 44 The basic problem which arises in connection with the budget approach is that in this country, unlike certain European countries, no effort has been made to relate wage payments to the family responsibilities of workers. The use of a synthetic family, therefore, creates problems because some workers have greater and others have fewer responsibilities. Budgets have been given greatest weight primarily in establishing a dividing line for substandard wages. Budgets appear to have been given little weight in connection with the determination of wages for those above that minimum. 45

WAGE COMPARISONS Comparisons with wages in other companies or in other industries very frequently are the core of the material presented to the arbitrator. As one experienced arbitrator, Professor Emanuel Stein, has observed: Unions and managements are generally agreed that wage comparisons are a valid criterion in wage adjustments, if indeed they are not the single most important criterion. To the former, wage comparisons are a means of ascertaining whether they are doing as well as others in the industry or in the area; to the latter, comparisons are important for their implications for production costs and become more important as the industry is more competitive or as labor costs comprise a larger portion of total costs. Where unions and managements disagree is in the determination of what kinds of comparisons are appropriate and in the conclusions to be drawn from particular comparisons.40

[19]

Wage comparisons may apply either to minimum starting wages or to average wages. They may be concerned with the relative levels of wages or changes in wages. They may involve comparisons of base rates, hourly earnings, weekly earnings, or annual earnings. What Are Comparable Wages? One of the key questions is: What are comparable data? The types of comparisons made include: 1. Comparable jobs in the community or industry. 2. Wages paid bv other companies in the industry. 3. General level of wages in the local labor market. 4. National averages. For clerical salaries, comparisons can be made in many cities with the surveys prepared by the U. S. Bureau of Labor Statistics and the National Industrial Conference Board. Each of these types of comparisons involves serious problems. Thus it is often difficult to determine comparable jobs in the communitv. Job descriptions mav be, and usually are, very misleading. As George W. Taylor remarked in a public utility case: It is virtually impossible to find those jobs in the community which are identical in even the important respects to the jobs found in the utilities, and making rate allowances because of differences in job content or work characteristics is scarcely an exact science.47 Similarly, many problems arise in making comparisons with other companies in the industry. In some instances, the data for other companies are not publicly available. Occasionally such data can be obtained on a confidential basis and be introduced without designating the companies involved. When the company introduces such data, there are usually objections from the union on the grounds that they cannot check them. Arbitrators often agree to permit the information to be introduced after they have been given the names of the comparable companies on a confidential basis. Sometimes emphasis is given to the general level of wages in a local market, and particularly to the wages paid by companies which mav be employing similar tvpes of labor or may be competing for labor in the local market. Thus the telephone

[20]

companies frequently have emphasized the importance they attach to local labor market surveys in determining their wage rates. The easiest type of comparison to make, and the one which probably is least fruitful, is the comparison with national levels of earnings in other industries. In most local industries such comparisons would appear to have little applicability, but often they are advanced by both parties to the dispute. David L. Cole, in a New York City Omnibus arbitration, attempted to establish some prioritv of importance for the different tvpes of wage data presented to him: Reference has been made by both parties in this case to wages in other firms. The arbitrator believes that it is possible to establish a ranking of relevancy to this case of wage levels or wage changes in other concerns, ( a ) Wages in the transit industry in New York City are most significant, ( b ) Wages in the transit industry in dominant companies serving populations of one million or more are relevant in accordance with the practice of the parties and collective bargaining and arbitration procedures in the industry generally, ( c ) Wages in public utilities are less directly related. ( d ) Wages in manufacturing generally—steel, auto, rubber, etc., are least relevant. 48 A number of the problems that arise in attempting to make inter-industry wage comparisons were outlined by the arbitration board in the 1948 New Jersev Bell Telephone case. To some extent, each industry tends to develop its own wage pattern independently of any other industry. The profitability of the industry, and whether it is a growing or declining industry are among the factors causing variations. Even within an industry, there are frequently major differences in wage rates paid by different companies for the same or substantially similar work. Prior to World War II, this lack of uniformity was evident even in the case of common labor, the entrance rates for common labor varying materially from industry to industry. . . . The real impetus to wage comparisons came, however, with the war, the labor shortages and the wage stabilization programs. Intra-industry and inter-industrial comparisons became a commonplace as employers and unions joined forces in an effort to gain advantages under the War Labor Board, now arguing that they must be permitted wages as high as certain other establishments in order to over-

[21]

come interplant inequities, and now that they must be permitted higher rates than other establishments in order to maintain historic differentials. Perhaps under the stress of war conditions, it was understandable that many strained and peculiar comparisons were made, defended, and approved. But there is little warrant for that sort of behavior today. I f , in the formulation of a wage policy, it is desired to pay wages equal to those being paid in similar occupations, then occupations have to be found which are really similar. And if, as appears to be the case here, there are no similar occupations, some other reasonable basis of wage policy should be established. Briefly, it does not seem to us to be reasonable to continue the comparisons of telephone workers with the metal trades workers. . . . At the least, if comparisons are made with the metal trades they might also be made with other industries, in order to determine whether the relative position of the telephone workers has improved or deteriorated over a period of time. Such historical relationships may provide a more useful guide to wage policy than comparisons made at a particular moment of time.49 (Italics added.) Many other problems arise and must be considered in making inter-industry comparisons. In some industries, such as construction, coal, and apparel, high hourly or weekly wages do not reflect the relative economic well-being of the workers involved because of the high degree of seasonality in those industries. Thus, if the wages of workers in an industry in which work is available fifty-two weeks a year are compared with such seasonal industries, annual earnings may provide a better basis for comparison than hourly or weekly earnings. Such seasonal industries may also effect significantly the average wage in a given area. Thus, for example, employment in the apparel industry accounts for about onethird of all manufacturing employment in New York City. The weekly earnings reported for the apparel industry do not reflect the fact that such workers may be unemployed fifteen to twenty weeks a year. Comparisons also have limited value in many instances because of significant variations in the relative importance of wages to total costs or total income. Thus, for example, in petroleum refining, wages and salaries account for less than 10 per cent of the total value of products shipped. In contrast, [22]

the average is 65 per cent in the bituminous coal industry, and above 50 per cent for railroads. The impact of a given percentage increase in wages would obviously be significantly different between these industries. Thus, for example, a 10 per cent rise would be equal to less than 1 per cent of sales in the petroleum industry, but more than 6 per cent of sales for bituminous coal. The resulting difference in pressure on costs and prices is readily apparent. Similarly, the economic contribution made by workers may vary widely. Thus, for example, retail wages usually are lower than in manufacturing industries because the value added by such workers tends to be lower. The foregoing indicate some of the problems which make it necessary to treat wage comparisons with great care. These limitations must be kept in mind when the data are examined within the framework discussed below. Intra-Company or Intra-Industry Comparisons: The above discussion has been concerned with comparisons among industries and companies. Where the workers of a company or an industry are organized into several unions, another type of wage comparison may become important, namely, the wage relationships between the various groups of workers. Thus, when railroad cases do not involve all the railroad unions, the comparative changes in wages among operating employees (road and yard) and non-operating employees frequently are emphasized by one or both parties.50 These types of comparison have also been important in arbitrations involving newspapers, construction, retail stores, and other industries with multi-union representation. An interesting variation of this situation is found in connection with building service workers in New York City. The Realty Advisory Board negotiates for the owners of office and loft buildings and apartment houses, while Local 32B, Building Service Employees International Union, AFL, represents the building service workers in all types of building. However, the office and loft-building employees and apartment-house employees are covered by different contracts. The office and loft-building contract is negotiated several months before the apartment-house contract. One of [23]

the dominant considerations in the apartment-house wage adjustment usually is the prior agreement reached with office and loft employees. As a fact-finding board pointed out: In the foregoing wage analysis, we pointed out that the relation of apartment house workers to their union brothers employed in Manhattan commercial buildings constituted by far the most impressive comparison. It was also impressive because of its impact. The apartment house worker may not know or particularly care what is happening to office workers or factory hands. But he cares devoutly as to the earnings of elevator operators and porters."'1 This situation persisted in the postwar years, despite the fact that apartment house income was limited b y rigid rent control in contrast to the flexible controls exercised over rents in office and loft buildings. LEVEL OF W A G E S

Comparisons of levels of wages usually fall into the following categories: 1. Direct comparisons with other companies or industries at the time of the arbitration. 2. Changes in relative ranking as compared with other industries over time. 3. Geographic wage differentials. T h e direct comparisons with other companies or industries involve all the considerations previously discussed. The most important problem is the selection of appropriate wage data for comparison. As George W. Taylor has pointed out: The comparative wage rate criterion is a very uncertain one in actual use. Under certain circumstances, comparative wage rates in the area can be the most compelling of all the criteria. That is when a very tight labor market prevails. It is not possible, however, to look upon comparative wage rates as the sole criterion. It implies bringing somebody up to an established level. . . . That approach avoids the main problem in wage determination. What makes that wage level change, both within an industry and within an area, is of great importance. Once a movement has taken place and a new level has been established, comparative rates can become extremely important. The usual use of the com-

[24]

parative wage criterion dodges the factors which make wages change in the area.5- (Italics added.) Comparisons of levels of wages over periods of time often are made by indicating the changes in the relative ranking of the given company or industry as compared with other companies or industries. This is usually a very opportunistic type of standard. When management finds that the relative ranking of its workers has improved, it calls attention to that fact. Conversely, when the relative position has deteriorated, labor gives it considerable emphasis. Thus, for example, the railroad brotherhoods, in various hearings held before arbitration boards and presidential fact-finding boards in the past decade, introduced comprehensive exhibits to demonstrate that railroad workers had lost their relative position as compared with other workers since 1921. In some instances, they also emphasized the relative loss of position since 1936. 53 In an arbitration involving the Publishers Association of New York and the Mailers' Union, the union advanced as one argument for a wage increase the fact that New York City mailers were in third place in 1941 in a ranking of seventeen leading cities, while in 1949 they had dropped to twelfth place. In that arbitration, the majority of the board found that: The record clearly shows, however, that there is no procession of cities in which procession each city takes an appropriate place; that there is no pattern between cities; that these relationships vary, so far as the Mailers are concerned, from year to year; and that the rankings on which the union relies are illusory rather than real. If, for example, 1940 had been chosen instead of 1941, New York would have been the 11th of the cities, but it was 3rd in 1941. . . . That wage comparison of comparable cities is a proper element for consideration in these proceedings is not to be questioned. However, these comparisons must be considered with caution. To be useful, these cities should be in fact comparable, and the basis on which such comparison can be seen should be shown to enable the Board to make use of all such data intelligently, if at all."54 (Italics added.) No fixed or fast rule can be made to apply concerning the

[25]

relationships between wages of the same types of workers in different cities. As economic conditions change, relationships would change. This is particularly true when comparisons are made between expanding areas, such as Dallas, for example, and areas which may be declining in relative importance, such as New York City. In the mailers' case, the board recognized that "The record, moreover, contains data which justify an assumption that New York has for some years been losing its relative position to other areas which are to some extent forging ahead of it both in general industry and in the newspaper field." A number of factors contribute to the explanation of changing wage relationships. Among those which may be emphasized are the maturity of an industry, i.e., is it an expanding or a declining industry; the stage of the business cycle; the organization date of the union, i.e., is it a new or an old union; the ability of the industry to raise prices, i.e., is it a regulated or non-regulated industry; the relative importance of labor costs; competitive pressures; geographic shifts of an industry, etc. These are all dynamic factors which influence relative levels of wages. It is important for the parties and the arbitrator to go behind the fact of changing relationships and to deal with the reasons for these changes. The third phase of comparison of levels of wages is concerned with geographic wage differentials. Under the slogan, "Equal pay for equal work," the demand is frequently made to eliminate such differentials. Comprehensive data prepared by the Bureau of Labor Statistics, the U. S. Department of Agriculture, and various state departments of labor, are valuable in connection with this problem. The explanations advanced for geographic wage differentials have included: relative abundance of natural resources; differences in labor productivity; differences in cost of living; rate of capital formation; extent of union organization; size of communities; rates of population growth; economic characteristics of areas; and tradition. 53 To support or criticize the foregoing factors, many types of data might be introduced. No list of such data is being [26]

given here, but in most instances the subject matter would indicate the type of data required. CHANGES IN W A G E S

During the postwar period, considerable emphasis has also been given to changes in wages. As in the case of comparisons of wage levels, data have been utilized showing changes elsewhere in the same industry or in the same community, and national "patterns." A major postwar development has been the emphasis given to national wage patterns. In many arbitration proceedings, it appears to have been the line of least resistance to take the settlements in such key industries as steel, automobiles, electrical equipment, etc., and to reach a decision that the wage increase in the instant case should be close to or similar to the increases in those industries. This procedure has tended to minimize the resistance to the award both by management and by labor. ' 6 Nevertheless the facts show that there have been wide variations in the settlements reached in the various postwar "rounds." Thus, for example, a study of changes in hourly earnings from September 1945 to February 1947, which embraced substantially the first round of wage increases, showed the following: Cents per Hour Increase 5.0 -17.5 17.5 - 20.0 20.0 - 30.0

No. of Industries 61 43 49

No. of Workers 5,904,000 3,721,400 6,132,300

It will be noted that most of the increases were above or below the 17.5 to 20.0 category which embraced the socalled 18 cent "pattern.""' 7 The record of past wage changes indicates that, regardless of the period selected, diversity rather than uniformity has been the main characteristic. Despite this record, workers in many industries insist upon receiving wage increases at least as large as those granted in leading industries. In hearings before arbitration boards, the record in other industries is emphasized, particularly after a wage movement is well under wav.

[27]

There is a difference between national wage movements and national wage patterns. A national wage movement refers to a general change in the level of wages in which most industries participate, although the amounts of the change will vary among industries in light of the special factors previously discussed. Such movements are characteristic of periods of sharp declines or advances in prices or wellsustained levels of business. National wage patterns, on the other hand, refer to relatively uniform changes in wages in most industries. 58 Too often the parties and arbitrators appear to have failed to distinguish between wage movements and wage patterns. When longer term changes are emphasized, they really become a variation of the relative ranking problem which was discussed earlier. Sometimes, in order to drive home a point as emphatically as possible, both the shifts in rankings and the actual changes will be introduced in evidence. However, they are merelv two ways of saying the same thing, and do not provide anv additional proof of the point being made or disputed. When considering changes in wages in other industries, should emphasis be given to changes in cents per hour or to percentage changes? During the war and postwar period, wage increases generally have been in terms of cents per hour. As a result, higher-income workers usuallv have been able to show an unfavorable status on a percentage basis even though in absolute terms they may have received wage increases as large or larger than those received bv lowerincome workers. In considering this question, the Presidential Board in the 1949 Steel Wage dispute concluded as follows: The question then arises, Which is the proper criterion for approaching the inter-industry wage-rate inequity question—the relationship among the increases in cents per hour or in percentages of increases? The Board believes that the cents-per-hour measure is the preferable one because the increases before and after the war were given in cents rather than in percentages and because, thereby, the tendency has been to give the lower-paid workers the higher percentages of increase.-"59

[28]

Here again, the emphasis given by the parties will depend upon which comparison seems to give the best results. The arbitrator is faced with the task of examining the results of both types of calculation as well as the practice in the industry in the past. Non-wage factors: The comparisons of the various tvpes of wage data previously described often are supplemented by other types of data designed to show the relative position of the worker. Thus, for example, labor turnover figures mav be introduced to show that workers are satisfied with their jobs (low turnover) or that they are dissatisfied with their jobs (high turnover). A companv mav prepare a tabulation showing long tenure for most of its employees in order to emphasize this same point. One large retail establishment has introduced data in several arbitrations to show the large percentage of its executives who were promoted from the ranks as an indication of the opportunities available to its employees. Regularity of employment may be emphasized to compensate for lower rates, or seasonality of employment may be emphasized to explain whv rates are and should be higher. Various types of fringe adjustments also may be emphasized as a supplement to wage comparisons. Thus the effort may be made to show that vacation allowances are liberal or niggardly; or that the number of holidays with pay is larger or fewer than the national average; or that shift differentials are not comparable; or that overtime provisions vary significantly. With the recent emphasis upon pensions and social insurance, the relative gains in these fields has been given increasing attention. Arbitrators are certain to hear about it from the company when the pension plan in effect is more liberal than that in other companies or industries, or to hear about it from the union when it is less liberal. These wage supplements have become a significant aspect of collective bargaining and hence are of increasing importance in arbitration proceedings. The aggregate cost of these fringe increases has become so great in some industries that they affect, to a large degree, the significance of comparisons of wage data. This problem of wage comparisons is one of the most diffi-

[29]

cult ones facing an arbitrator. He will be aided most if the parties make an orderly, comprehensive presentation of all of the facts. The use of illustrations is not very helpful to the arbitrator or to the parties, unless it can be shown that such illustrations are typical. The arbitrator cannot make bricks out of straw. If the data are unsatisfactory, he will be limited in his use of them. There seems to be no point in attempting to force comparisons where useful data are not available. If the parties do present all of the pertinent facts, the arbitrator does get the "feel" of the situation, even though he may not be able to measure the comparisons with any degree of precision.

CHANGES IN PRODUCTIVITY

The productivity criterion has been receiving increasing emphasis since the end of World War II. The adoption of the annual improvement factor in the General Motors Corporation contract with the United Automobile Workers, CIO, has provided an important stimulus toward thinking along those lines. It has become recognized increasingly that real improvements in the standard of living of workers and other groups in the economy depend largely upon increases in productivity. To state it differently, a rise in the level of living depends upon an increased supply of goods and services—and the availability of this larger supply is influenced to a significant degree by changes in productivity. Thus, for example, the American Federation of Labor in its Labors Monthly Survey for May-June 1949 stated that "wage increases should now be based on past or future increases in productivity to prevent undue rises in costs." Similarly, the Council of Economic Advisers has stated that: A sound first rule to apply now is that the general level of wage rates should at least be maintained. Beyond that, there is a strong presumption in favor of having money wages move upward over

[30]

the years to participate in the gains of technological progress and increased productivity.60 Productivity is most commonly measured by relating changes in physical output to changes in labor input. The customary procedure is to derive for a series of years an index of the volume of production of a given industry and an index of the total man-hours paid for. 61 Dividing output by manhour input supplies the index of productivity. Man-hours are selected as a divisor because data are readily available. The lack of comparability of machines and the inability to reduce capital investment to any common denominator, as can be done for the man-hour data, make the use of the man-hour measure of productivity unavoidable. The sharp increases in productivity over the past few decades have not reflected a greater amount of effort by labor, although in some instances greater training of workers has contributed to the increased production finally achieved. Basically, the main factors in the increased output have been more capital input and greatly improved technological processes and management "know-how." Productivity data are obtainable from the U. S. Bureau of Labor Statistics for leading industries.6- Long-term data are available in the studies of Dr. Solomon Fabricant of the National Bureau of Economic Research. 03 Which are the most significant data to use in connection with wage adjustments: national averages; industry averages; company averages; or the average for a designated group of employees in a company? The record of productivity over the past half-century reveals an annual increase of about 2 per cent for the entire national economy. For manufacturing industries, the rate of increase has been about 3 per cent. Increases in productivity during the decade of the forties failed to match the earlier record in manufacturing industries. Over long periods of time, the changes in wages and in output per man-hour have been similar for all manufacturing industries. However, in the short run, they have shown little relationship. The short-term deviations have tended to aver-

[31]

age out over several business cycles. Thus, after a comprehensive study, Clark Kerr concluded: "Man-hour output and average hourly [money] earnings in manufacturing moved quite divergently in three-fourths of the years, 1919 to 1948, and in every one of eight sub-periods."114 "Yet if the statistics for the quarter century, 1919-45, are taken, they would seem to indicate, surprisingly, that . . . productivity and money wages did, apparently, keep pace with each other."65 (Italics

added.) In this connection, too, it must be emphasized that during the war and postwar decade hourly earnings have more than doubled and have far outstripped the modest gains in productivity. As a result, unit labor costs have increased markedly and have contributed to the pressure for higher retail and wholesale prices. Productivity gains differ widely among the various industries from year to year as well as over the long term. Some expanding industries, such as rayon, electric light and power, and plastics, have reported rapid increases in output per man-hour. On the other hand, industries such as meat-packing, ships and boats, and cotton goods, have had records well below the national average. Kerr has pointed out: From 1939 to 1947, output per man-hour rose 100 per cent in the rayon industry and fell 10 per cent in anthracite coal. . . . Any close reflection in wage setting of this divergent change would have impossibly distorted the wage structure. Moreover, such distortion would have been completely unacceptable to the anthracite miners even under other leadership than that currently available. Any arbitrator or union or employer negotiator who attempted to follow such a maxim would find his decisions lacking in compliance. Within my own arbitration experience, cases have been argued almost simultaneously involving industry-wide bargaining systems where application of this principle, using the same base period, would have doubled the wages of one group and cut those of the other in half. Neither such decision would have fallen within the outermost limits of expectation of either of the parties subject to it. Adoption of this principle for the determination of wages, plant by plant or occupation by occupation, would miss reality bv an even greater margin. 66

[32]

T o the extent that wage increases in line with national rates of gain in productivity exceed the industrv-wide productivity gains, price rises or lower profit margins are necessarv. Those industries in which productivity gains are highest necessarily must share such gains with the whole economy, including below-average industries, bv reducing their prices or by providing better quality products at the same prices, or by a combination of both. Unless the gains in productivity were distributed in this manner, increases in real living standards would be possible for only limited sectors of our population. Other groups would be condemned to a static or declining level of living. Most measurements of productivity are on an industry or national basis rather than a company basis. Productivity measurements reflect trends in the past and are not automatic guides to future productivity. On an industry or national basis, projection of past trends into the present or future is perhaps more warranted (although even there we are not dealing with natural law) than for an individual firm. The weight of large numbers mav provide a large degree of protection in the former instance. Changes in wages in accordance with changing productivity in an industry or in a specific companv would create a chaotic wage structure. As Professor Slichter has stated: There are two basic objections to increasing wages in a given company or industry in proportion to the rise in the output of that company or industry brought about by better management or technological progress. One reason is that such increases would introduce unjustified inequalities into the wage structure of the community. The rate of technological progress varies greatly among industries. . . . If wages were increased in these various industries in proportion to the rise in productivity, the wage structure would soon have little relationship to the skill and responsibility required of the workers or to the relative attractiveness or unattractiveness of working conditions. Common laborers in technologically advancing industries would be receiving far more than skilled workers in other industries. The second objection to increasing wages in a given industry in proportion to the increase in output per man hour in that industry is that such an increase would prevent the economy from produc-

[33]

ing the largest possible output and thus would limit the rise of the standard of living. The inequalities in the wage structure would prevent industry as a whole from producing the largest possible product, because the rise of wages in the industries where labor productivity was increasing most rapidly would tend to prevent these industries from reducing their prices to consumers, and thus from expanding output and employment. Thus, the growth of employment would be impeded at the very points where labor was gaining most rapidly in productivity.67 Sometimes an effort is made to portray changes in productivity for a particular group of workers. This has been done, for example, in some railroad wage cases. Of course the ability of any group of employees to contribute to the productivity of a company or industry usually is tied up very closely with the contributions made by other employees. In the railroads, for example, the productivity of engineers cannot be considered apart from the contributions made by switchmen, maintenance men, ticket sellers, signal men, etc. The efficiency with which other employees perform their tasks plays a vital role in the successful performance by the group appearing before the arbitrator. It is usually impossible to segregate, analyze, or evaluate the contribution to the overall picture by a segment of the workers in a company or industry. In the railroad industry, no emergency board or arbitration board has ever accepted the contentions of particular groups of employees where they attempted to measure the gains in productivity in terms of their own jobs. In addition to the problems previously indicated, several others arise in connection with the use of these statistics. Our knowledge about productivity measurements is still inadequate. Productivity accounting is as yet in its infancy. Some frequently cited measures have been painfully and slowly developed on a national basis. But even the global measures have a broad zone of uncertainty. Thus Solomon Fabricant has stated: "No one familiar with the basic data and their limitations would call the final estimate precise. He would prefer to speak of a range, say of 1.6 to 2.2 per cent per annum. But putting the trend that way does not provide a

[34]

simple standard by which to direct or adjust other economic variables." 08 Pitfalls also arise because of changes in the product mix, that is, in the composition of the production of an industry or the economy. 6 9 Thus, for example, Robert R. Nathan presented unduly high estimates of the gains in steel productivity to the Presidential Steel Wage Board in 1949 because he had not taken into consideration this change in product mix. This came about because he constructed an index of productivity by chaining his estimates to those contained in an index compiled by the Office of Price Administration for the years 1939 to 1944. During the war years, output per man-hour in the steel industry increased considerably because of the increased importance of some types of products which required fewer man-hours than did others. The result was an increase in output per man-hour due to change in product mix, which increase was reversed when the composition of steel production reverted more closely to its prewar pattern of relative importance. 70 Another interesting illustration is found in the bituminous coal industry. Output in underground mining averages less than .7 tons per man-hour, while in surface mining, the average is more than 1.8 tons per man-hour. The overall figures on productivity from 1939 to 1948 recorded a rise of 21 per cent. However, an examination of the underlying data revealed that the relative importance of surface mining had increased from 9.6 per cent to 23.2 per cent in the same period. Since output per man-hour in surface mining was almost three times as great as for underground mining, this increase in relative importance of surface mining had a significant impact upon the industry's productivity figures. In fact, it was estimated that approximately two-thirds of the 21 per cent rise in productivity was due to this factor. 7 1 Productivity measures must be examined to determine whether or not factors such as those outlined above have played a significant role in the results presented to the arbitrator.

[35]

In comparing changes in productivity, it is important to keep in mind that these gains provide a fund out of which all gains to workers can be paid. Thus social-security and pension-fund costs cannot be considered separate from increases in wages when comparisons are being made with productivity gains. If part of the gains take the form of larger welfare-fund payments, those same gains cannot also be obtained in the form of higher direct wages. T o state it differently, changes in total labor payments per hour rather than changes in hourly earnings must be considered the appropriate basis for comparisons with productivity gains. Changes in productivity must also be considered against the background of changes in volume. Sharp increases in the volume of production within short periods of time usually are reflected in large gains in output per man-hour. Thus, for example, revenue ton-miles per man-hour showed sensational gains for the railroads during World War II, largely as a result of the increase in volume. During the postwar period, output per man-hour declined despite the extensive dieselization of the railroads, largely because of the decline in passenger and freight business during that period.7L> Sharp changes in volume must be given careful consideration in any attempts to utilize short-term gains in productivity as a factor in wage adjustments. It was noted earlier that the gains in national productivity have been highly irregular in the past despite the average long-term gain of 2 per cent. It is the long-term gains in productivity, not the year-to-year changes, which are significant. W e need a more careful examination than has been made of the desirability of adjusting wages by a uniform amount each year, as is done in the General Motors contract, with the implicit assumption that productivity changes in a similar manner. What are the proper wage figures with which to compare gains in productivity? Should they be compared with changes in money wages, or in real wages? 73 While there may be merit in comparing changes in real wages with productivitv for the entire economic system over long peri-

[36] '

ods of time, such comparisons within a single industry do not appear to have much significance. Real wages reflect changes in living costs, which have little or no relationship to productivity changes in any specific industry. The course of the general price level, which in turn affects real wages, is completely beyond the control of any specific industry. Actually, increases in money wages, rather than increases in real wages, provide the appropriate type of short-run comparison with changes in productivity, since such a comparison indicates the extent to which wages can be or have been increased without incurring increases in unit labor costs. Of course wages may also rise because of other factors than productivity; for example, because higher prices increase the value of the output produced. But to the extent that wages are advanced for this reason, the increases are not due to greater productivity, but rather to increases in prices. Unit-labor costs: The relationship between changes in output per man-hour and in hourly wages may be portrayed in a single figure, namely, unit-labor costs. When unit-labor costs rise, it means that hourly wages have increased more than output per man-hour. Conversely, a decline in unitlabor costs reflects the failure of wages to rise as much as productivity, or a decline in wages while productivity remained constant, or a more rapid decline in wages than in productivity. Until recently the U. S. Bureau of Labor Statistics made available unit-labor cost figures for a number of important industries. 74 For individual companies for which productivity data are available, changes in unit-labor costs can be calculated by dividing an index of total wages and salaries by an index of total production. Where a company produces a wide variety of products, the calculation of an index of total production is very difficult. With productivity measurements assuming ever-increasing importance in wage arbitrations, the various limitations to these measures previously described have become of greater significance. Considerable emphasis has been given to annual improvement factors based upon long-term gains in national pro-

[37]

ductivity, particularly since the General Motors Corporation contract in 1950. A number of very important questions must be raised in connection with the use of the annual improvement factor for the economy generally. Annual rates of productivity gain in the past have been very irregular. Yet such programs apply uniform increases in wages. Moreover, there is no assurance that the past average rate of gain will continue in the future. This caution is particularly significant during a defense or war economy, since past experience has shown that average productivity during such periods may decline or show little change. It is also important to note that this approach to wage-making is being introduced after a decade in which increases in wages have outstripped by a wide margin the gain in productivity. The emphasis upon long-term gains of 2 per cent and 2.5 per cent and the objective of raising real wages by the same amount overlooks the importance of non-wage factors, such as pensions and social insurance, which also represent gains in real earnings. It also ignores the fact that labor may share in the gains in productivity by buying goods of better quality at lower prices and by working fewer hours as well as through the increase in wages, which usually is emphasized under such plans. To the extent that annual improvement factors are adopted widely and are based upon uniform national increases in productivity, wage relationships would tend to be maintained as they were at the start of the program. Yet changes in wage relationships have been an important factor in the effective functioning of our dynamic economy. During periods of business boom, higher wages have been a typical phenomenon. That such increases are called annual improvement factors instead of by some other name doesn't change that essential fact. To what extent would industry be willing or able to raise wages generally during periods of declining business activity when a surplus of labor, rather than a shortage of labor, prevails? The average gain in productivity for the economy as a whole reflects the combined experience of all companies.

[38]

Some companies have a better-than-average increase, while others have a less-than-average increase. General Motors has indicated that it hopes to be able to increase its productivity by a greater percentage than the 2Vi per cent annual improvement factor. Companies which are not in this fortunate circumstance will be less likely to adopt such a program, since for many of them the net effect would be an increase in unit-labor costs and hence pressure on prices. What may be a satisfactory program for one company—General Motors—will not necessarily fit the needs of other companies where the basic factors at work are considerably different. Finally, it seems in order to close this section on a warning note. Productivity gains represent only one of the factors to be evaluated in determining the proper wage. The entire complicated and complex process of wage determination cannot be resolved by agreeing upon annual increases in wages based upon national gains in productivity—or, for that matter, by the use of any other simple formula.

ABILITY TO PAY Ability to pay has been given considerable emphasis by many unions in the postwar period. This has been a recurrent theme in connection with each of the postwar demands. Most large unions have had special studies made of the profitability of the companies in their industry. 75 Various types of profits data are utilized to prove this point. Thus comparisons may be made between present profits before taxes and after taxes and those in the preceding year or other years in the past. These profits mav also be related to sales or to net worth to indicate the nature and purported significance of the increases shown. SOURCES OF D A T A :

In addition to companv data, figures are available for industries and for the entire economy. The main sources include the following: [39]

1. U. S. Department of Commerce—quarterly estimates for total corporate profits and annual estimates for leading industries. 2. Council of Economic Advisers—current estimates of total corporate profits. 3. Bureau of Internal Revenue—comprehensive statistics from income-tax returns are made available several years later. 4. National City Bank—total profits and return on net worth for leading manufacturing and nonmanufacturing corporations. 5. Federal Reserve Board—profits and sales for leading corporations in six major industry groups. 6. Federal Trade Commission and Securities and Exchange Commission—relation of profits before and after taxes to sales and to net worth for all private manufacturing corporations. Separate data are reported for twentv-two different industries or industry groups. In addition, these agencies publish data showing profits bv size of corporation so that comparisons can be made between the experience of small, medium, and large corporations. 7. Other compilations are made available by various publications including the Wall Street Journal, the New York Times and the Journal of Commerce. 8. Where published, data for individual companies can be obtained from Moody's, and Standard and Poor's financial services. P R O B L E M S IN U S E OF PROFITS D A T A :

Arbitrators do not appear to have given much weight to the abilitv-to-pay argument. If wage increases have been warranted by other factors, they have been granted by arbitrators. Substantial profits have indicated mainly that these higher wages could be paid. If other factors were not favorable, the existence of substantial profits appears to have had only minor influence. Thus, for example, many arbitrators refused to grant wage increases in 1949, despite record profits in 1948 and, in some cases, in 1949. The steelworkers, [40]

through Robert R. Nathan, made an elaborate presentation of the steel industry profitability, present and projected, before the Presidential Steel Industry Board in the summer of 1949. Nevertheless the Board refused to recommend a general wage increase. Similarly, the low profitability of the railroads has not restrained emergency fact-finding boards from recommending substantial wage increases during the postwar period. After these increases were granted, the railroads then had to go to the Interstate Commerce Commission to obtain rate increases in order to be reimbursed for the wage increases. The railroad unions generally have taken the position that the profitability of the railroads was not the concern of the wage board, but of the Interstate Commerce Commission. Arbitrators seem to have given more consideration to inability to pay when such inability was genuine and could not be readily overcome by price increases. This appears to have been a factor influencing some arbitrators in the transit industry. Sharp controversies have developed concerning the significance of profits data. Many economists have contended that reported profits were overstated in the postwar period because they included inventory profits and because depreciation charges have not been high enough to meet replacement costs. The unions often have contended that profits were understated because excessive reserves have been set aside by management. A comprehensive literature has developed dealing with this problem of postwar profits.76 The significance of the profits data in each case must be decided on its own merits. Government agencies have recognized the presence of inventory profits. The U. S. Department of Commerce publishes its profits data before and after an inventory valuation adjustment. 77 Similarly, that agency has recognized the existence of the depreciation understatement: In light of the basic general difficulty of measuring capital consumption, accounting depreciation charges have not been revalued to reflect changes in the current prices of capital goods, [41]

though stick revaluation (Italics added.)

is indicated

on conceptual

grounds.™

T o the extent that profits have been calculated without allowing for these factors, they include amounts which must be set apart to replace inventories and plant and equipment at higher prices. There are many difficulties which arise in connection with any attempt to set wages on the basis of profits. As in the case of productivity, such a basis for wage-setting would create a chaotic wage structure. Professor Slichter has pointed out: It is obvious that a wage structure based upon ability-to-pay would limit production and thus prevent the achievement of the highest possible standard of living. Not only would it discourage improvements in methods and management by subsidizing inefficiency and by imposing the equivalent of a tax upon efficiency, but it would prevent the best distribution of men and other resources among enterprises.79 Profits fluctuate very widely from good times to bad. A consistent following of the ability-to-pay theory would result in much wider fluctuations in wage rates than those that take place now. Any attempt to utilize the ability-to-pay theory on a broad scale also involves the necessity for projecting profits. Past profits are no proof of future ability to pay. Most arbitrators are not in a position to make forecasts of earnings. A difficult problem is the determination of what part of the profits should be used for wage increases. W h e n total sales expand, total profits would be expected to expand. T h e r e is no scientific standard available to determine what part, if any, of total profits is "excessive." T h e difficulties experienced in determining fair rates of return for public utility industries, despite several decades of experience, illustrate the nature of this problem. 80 Under these circumstances, it is easy to understand why the ability-to-pay argument has not become a primary criterion in wage determination. In manv proceedings, management points out earlv in the hearings that it does not [42]

intend to present data concerning its ability to pay. Nevertheless profitability does provide an important part of the background in a proceeding. Where profits are large, the arbitrator tends to lean toward a more liberal reading of the significance of the other criteria and to make an award based on the higher alternatives presented. The converse tendency prevails where profits are low or are declining.

ECONOMIC ENVIRONMENT

In addition to the data bearing upon the five criteria previously discussed, another factor in mam arbitrations is the general economic environment in which the company or industry finds itself. In major national cases, data may be presented concerned with the outlook for business activity; the presence of inflation or deflation; the importance of sustaining purchasing power; the relationship between wage adjustments and employment; etc. In connection with specific industries, emphasis may be given to factors affecting those industries or to changes in local environment. When these questions are complicated, practically anv series of national data mav be introduced into the case. An example of comprehensive presentations of national economic data was found in the hearings before the Presidential Steel Wage Board in 1949. Union and industry witnesses presented data dealing with the following statistics, among others: changes in gross national product; changes in national income and its distribution; magnitude and significance of investment in plant and equipment; changes in production, inventories, total government spending and retail trade; total employee compensation divided between military and private compensation; etc. One table contained changes in fifty-two different economic series covering all phases of the economy. Among the publications and sources cited were: Council of Economic Advisers; Survey of Current Business; Federal Reserve Board studies of Consumer Finances; National City Bank Monthly Letters; AFL [43]

Labor's Monthly Survey; Economic Reports of the President; Joint Committee on the Economic Report; McGraw-Hill study of business expenditures; National Industrial Conference Board studies; etc. Use was made of statistics published by every important agency of the government. 81 Another interesting illustration of the diversity of economic data that mav be utilized in connection with the economic environment is found in the data presented to the Board of Arbitration in the wage case involving railroad non-operating employees in 1947. Among the data utilized by Eli Oliver, union economist, were the following: industrial production; electric power production; quotations concerning the cost of the 1929-32 depression; employment and payrolls; corporate profits and capital expenditures; consumers' expenditures; quotations from various authorities concerning the factors contributing to economic progress; quotations showing the relationship between farm prosperity and higher wages; progress of education in the United States and the educational attainment of children; quotations and data showing the relationship of health and illness to economic status; changes in life span and rate of infant mortality; consumption of butter, cheese, meat, citrus fruits, snapbeans, lettuce, spinach, and tomatoes; sales of electric washers, electric refrigerators, vacuum cleaners; telephones in service; etc.82 When it is remembered that in this particular arbitration a total of forty exhibits was presented by the parties, and 3,252 pages of stenographic minutes were taken during daily sessions lasting almost a month, the wide scope of the additional data utilized can be easily visualized. Of course the scope of economic environment data presented in the average arbitration is not quite so extensive as outlined above. Nor does the writer mean to imply that the inclusion of all the data cited was necessary to reach a fair decision. However, when either party introduces evidence, it often is necessary for the other party to answer it. And thus statistics pile on top of statistics until the arbitrator is inundated. [44]

Each industry is beset with its own problems. The data presented by the parties will depend primarily upon the nature of the problem. A few illustrations will indicate how diverse this industry-wide data may be. One of the key problems in an arbitration involving apartment-house workers in New York Citv in 1950 was the existence of rent j

control. To indicate the impact of this factor upon the owners, the following types of data were presented: studies by the Office of Housing Expediter showing the financial experience of apartment houses during the war and postwar years; relative changes in rents in New York City and thirtythree other cities during the war and postwar years; relationship between rental income and national income; relationship between expenditures for housing and for housing operations; differences between increases in costs in tenant-occupied and owner-occupied space; changes in costs of building materials, fuels, and utilities, repairs and maintenance and property taxes; changes in occupancy. All of these data were concerned with the economics of rent control and of rental properties. In connection with the bituminous coal dispute early in 1950, a presidential board was appointed. Among the materials submitted to this board was a study showing the decline in importance of the bituminous coal industry. The data presented included: change in relative importance of coal, petroleum, and natural gas as a source of fuel; indicators of fuel economy, including decreasing amount of coal required per kilowatt hour of electricity, per 1,000 gross-ton miles of freight, and per ton of pig iron; dieselization of railroads and impact on coal demand; relationship between income originating in coal industry and national income; coal exports; relationship of changes in coal production and total industrial production; and extent of mechanization of coal industry.83 The foregoing illustrations could be multiplied many times. However, they illustrate the diversity of statistics and the types of problems for which statistics may be mobilized. While in most cases the types of data utilized in connection

[45]

with the first five criteria are broadly similar, the data dealing with economic environment must be hand-tailored to meet the problems which are important in the specific industry or company. Sometimes, as in the coal illustration, many of the data used are concerned with the industry. In other instances local data mav not be available,7 so that it becomes j necessary to utilize national averages or aggregates to portray the local situation. Where the special problems of an industry are being considered, it is not necessary to introduce all of the data regarding that industry. Emphasis usually is given only to those tvpes of data which have a specific bearing upon the point being emphasized. As the foregoing discussion has indicated, any type of figure or fact may find its wav into discussions of economic environment. To indicate the problems which arise in connection with each of these statistics would necessitate an extensive compendium evaluating most of the statistics available. Accordingly no effort has been made to indicate what is right or wrong with these statistics.

CONCLUSION The more important statistics presented to arbitrators have been discussed and some of their limitations pointed out. It must be kept in mind, however, that the statistics do not represent all the facts that must be considered bv an arbitrator. Government policy, past history of relationships between the parties, the period of time for which the award is to be effective, 84 and similar considerations, must also be considered by the arbitrator. The ability of the parties to "live with the award" is also an important fact that cannot be quantified statistically: The importance of this factor has been well illustrated by David Kaplan, Chief Economist of the International Brotherhood of Teamsters, AFL: Now I know of an incident where an arbitrator didn't pay any attention to this particular question, this trying to make a settle-

[46]

ment within the reasonable expectation of the parties. . . . By and large the whole thing could have been settled for about a 10^ wage increase. . . . The argument was made before this arbitrator that the wage rates of these machinists were below the wage rates of iron workers who were doing the same kind of work. . . . This involved erection machinists and they were 40? an hour below the iron workers' rate and actually the machinist was a much more highly skilled man. And it was unjust to have that much of a differential between the iron workers' rate and the machinists' rate for doing that same type of work. Now that argument had a tremendous appeal to this arbitrator. . . . To our great consternation he granted the men a forty cent increase which, of course, flabbergasted the employers. . . . We had to go to those employers and say, "Look, we know you can't face this. We know that if you went into this kind of a proposition a lot of our men would not even have a job because you wouldn't be able to compete. It would be cheaper for firms to go out and hire their own machinists to work directly for them rather than to come to these machine shops. Let's make a deal. We'll settle for a ten cent increase." Now we didn't like to do that to this fine old gentleman, but it just had to be done to save the parties.8"' Unions would not always be happy to receive what they demand, nor is management always happy with an award that is too low. Management recognizes that it must compete for a limited labor supply in periods of shortage and that it must meet market wage rates. 86 The basic statistics must be evaluated together with these other considerations in order to arrive at an equitable award. Finally, it must be emphasized that a cataloguing of statistical data and other facts alone will not insure a fair decision. Each of the facts listed does not have equal weight or the same weight under all circumstances. In many respects, an analogy may be drawn to the baking of a cake. It is not only necessary to know what ingredients to use but the proportions in which they should be combined. At different times, the relative importance of the various wage criteria may vary significantly. In periods of sharply rising prices, for example, the cost of living criterion mav dwarf all others in importance. Similarly, the emphasis and weight to be given to specific facts will varv from time to time. The com-

[47]

binations that result in a fine cake (award) under one set of circumstances may give an inedible cake (unworkable award) in another. It is in determining the proper weight for each fact that the arbitrator faces his most challenging task.

APPENDIX M A J O R SOURCES O F S T A T I S T I C A L D A T A

The more important statistical information utilized in wage arbitrations can be obtained from the following sources: 1. Survey of Current Business of the U. S. Department of Commerce. Each month the Survey contains a forty-page compilation showing monthly or quarterly data for one year for important economic series. The July issue is particularly valuable because it presents forty-eight tables of national income data, including many breakdowns by industries. In addition, each issue contains several articles which analyze significant economic problems. Many of these analyses are pertinent in wage arbitrations. The biennial Statistical Supplement also is very useful. It was last published for 1951. 2. Economic Report of the President. Published in January and July. Includes a very valuable statistical appendix which gives data for a period of years, usually from 1929 to date. 3. Monthly Labor Review of the U. S. Department of Labor. Contains detailed data by industries for average hourly and weekly earnings, average hours worked, labor turnover, employment, payrolls, and other data. Also contains the consumers' price index. In addition, many of the articles provide valuable wage data, as has been indicated in various footnotes. Illustrations include: occupational wage rates, productivity, geographic wage relationships, expenditures studies, technical explanations of the Department's indexes, etc. Special studies of productivity and unit-labor costs are made available from time to time. 4. The Economic Almanac published annually by the National Industrial Conference Board. The 1951-52 edition contained 589 pages of statistical data covering all phases of economic life. This is a very useful volume for surveying long-term changes. 5. Statistical Abstract of the United States published by the Bureau of the Census, U. S. Department of Commerce. The 1950 edition contained more than 1,000 pages of tables. Statistical

[48]

lata usually are shown for very long periods. It also contains jonsiderable data by states. 6. Biennial Census of Manufactures published by the Bureau of the Census. While these data are available only through 1947, Ihey provide a very valuable, comprehensive picture of many aspects of the operations in 452 industries. Data also are available for long periods of time and by states. Because of changes in classification and coverage, long-term comparisons must be used very carefully. 7. Federal Reserve Bulletin published by the Board of Governors of the Federal Reserve System each month. Contains longterm statistical series. The Board's comprehensive surveys of consumer finances usually are reported in several different issues each year. The above list provides the basic sources of data which usually are required in arbitration proceedings. They may be supplemented by many other sources of data. Thus, for example, the Bureau of Mines, U. S. Department of Interior, compiles voluminous statistics dealing with all types of minerals. Comprehensive wage data also are available in the reports made in connection with the social security programs. Data and articles analyzing the data appear in the Social Security Bulletin. There is also a useful annual supplement, the Social Security Yearbook. The U. S. Bureau of Agricultural Economics in its various publications provides voluminous materials showing the agricultural situation, e.g., Agricultural Situation (monthly), The Demand and Price Situation (monthly). The Department of Agriculture annually publishes the Yearbook of Agriculture. The 1949 issue contained more than 900 pages of statistics and descriptive information relating to agriculture. Comprehensive statistics dealing with all phases of transportation are compiled and published by the Interstate Commerce Commission. Useful compilations of railroad data are found in Railroad Transportation published by the Association of American Railways and A Yearbook of Railroad Information published by the Committee on Public Relations of the Eastern Railroad Presidents Conference. The Federal Trade Commission publishes special studies which often contain valuable data showing labor costs in the industries studied. In addition, profits data are compiled for a number of industries and for companies of different sizes. Data showing wages, hours, and other labor conditions are compiled in many states by their Departments of Labor. The U. S. Department of Labor assembles the industry-wide averages

[49]

c o n t a i n e d in these state reports, and publishes them e a c h m o n t h in its publication Hours and Earnings. Valuable d a t a also c a n b e o b t a i n e d for m a n y industries either from t r a d e publications or from the industry's t r a d e association. E c o n o m i c studies of w a g e problems a r e a v a i l a b l e in various e c o n o m i c publications. Particularly useful is t h e Industrial and Labor Relations Review, issued quarterly b y t h e N e w York S t a t e School of Industrial a n d L a b o r Relations, Cornell University. O t h e r e c o n o m i c publications w i t h o c c a s i o n a l articles dealing w i t h t h e s e p r o b l e m s include Quarterly Journal of Economics, The Review of Economics and Statistics, Journal of Political Economy, Southern Economic Journal, and American Economic Review. REFERENCE

NOTES

1. The writer wishes to express his thanks to Professor Emanuel Stein, Professor A. L. Gitlow, and Mr. Marvin Levine of New York University and to Mr. M. R. Gainsbrugh, Chief Economist, National Industrial Conference Board, for a number of helpful suggestions; to Jacques Singer for checking the material; and to Mrs. Lynn Abrams for her usual efficient handling of the manuscript. 2. Robert R. Nathan, A National Economic Policy for 1949, Analysis Prepared for Congress of Industrial Organizations, July 1949, 52 pages; and Jules Backman, Economics of a Fourth Round Wage Increase, Testimony on behalf of Steel Companies before Presidental Steel Board, August 1949, 287 pages. 3. A very useful discussion of the more important government statistics by the specialists who compile them is found in P. M. Hauser and W. R. Leonard, editors, Government Statistics for Business Use, John Wiley and Son, Inc., 1946. 4. Production and related workers are defined as working foremen and all nonsupervisory workers (including lead men and trainees) engaged in fabricating, processing, assembling, inspection, receiving, storage, handling, packing, warehousing, shipping, maintenance, repair, janitoral, watchman service, products development, auxiliary production for the plant's own use (e.g., power plant), and recordkeeping and other services closely associated with the production operations. 5. Sec, for example, U. S. Bureau of Labor Statistics, "Union Wages and Hours: The Baking Industry, July 1, 1948," Bulletin No. 954, Washington, 1949. 6. "Occupational Wages in Philadelphia and San Francisco," Monthly Labor Review, December 1950, pp. 684-87. 7. See "Wage Chronology No. 11, Aluminum Company of America," ibid. (December 1950), pp. 688-92. Chronologies also have been issued for American Woolen Co. (December 1948), Northern Cotton Textiles Associations (January 1949), U. S. Steel Corporation (February 1949), bituminous coal mines (March 1949), Chrysler Corporation (April 1949), Armour & Co. (June 1949), Swift & Co. (July 1949), full fashioned hosiery (August 1949), General Motors Corporation (September 1949), and Pacific Longshore Industry (May 1950), Western Union Telegraph (February 1951),

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Federal Classification Act Employees (March 1951), Ford Motor Co. (April 1951), New York City Printing ('May 1951), Chicago Printing (July 1951), North Atlantic Longshoring (August 1951), Bethlehem Atlantic (September 1951), Big Four Rubber Companies (October 1951). The months refer to issues of the Monthly Labor Review. 8. Some contracts provide for a range of basic rates. In such a situation, actual hourly earnings may be substantially above the minimum contract rates, but still fall within the rate range. 9. "Intercity Wage Differentials, 1945-46," Monthly Labor Review, June 1948, pp. 599-604. This study summarizes the comparisons for twenty-two manufacturing industries and six non-manufacturing industries. Where possible, the wages in a designated industry have been compared for each of twenty-two cities by the Bureau. 10. "Elimination of Overtime Payments from Gross Hourly Earnings," Monthly Labor Review, November 1942, pp. 1053-56. 11. Report to the President on the Relationship of Wages to the Cost of Living and the Changes Which Have Occurred Under the Economic Stabilization Policy, Public Members, National War Labor Board, February 20, 1945, pp. 14-15 and Appendix D. 12. Wage Stabilization Board, Regulation No. 6, February 16, 1951, Sec. 3 ( c ) . 13. The factors distinguishing gross average hourly earnings and straighttime hourly rates are summarized in Daniel Creamer, "Behavior of Wage Hates During Business Cycles," Occasional Paper 34, National Bureau of Economic Research, 1950, pp. 2-4. 14. Data for the period 1890-1926 are available in Paul H. Douglas, Real Wages in the United States, 1890-1926, Houghton Mifflin Company, 1930. 15. These data are summarized each month in U. S. Department of Labor, Bureau of Labor Statistics, Hours and Earnings, Industry Report. 16. New York State Department of Labor, Labor Market Review, published each month. 17. "Economics of a Fourth Round Wage Increase," op. cit., pp. 35-36. 18. In the first quarter of 1947, average hourly earnings on the basis of actual hours worked were $1,564, as compared with straight time rate of $1,288 an hour. J. Elmer Monroe, Railroad Men and Wages, Washington, D. C„ July 1947, pp. 29-32. 19. The writer made such a study for use in the 1944 steel wage case which was heard before the Steel Panel of the National War Labor Board. It was found that from January 1941 to January 1944, 265,787 employees out of 432,000 had been continuously employed in the steel industry. The average wage for these steel workers was $58.50 in January 1944, as compared with $52.49 reported as average weekly earnings by the U. S. Bureau of Labor Statistics. The Steel Case, Industry Statements Presented to the Steel Panel of the National War Labor Board, 1944, Vol. 1, pp. 350-53. 20. During the war vears, purchases of Series E bonds under payroll deduction plans also were considered as deductions from weekly earnings in determining take-home pay. Where there are contributory social security plans, they also involve deductions from weekly earnings. 21. Full-time equivalent employment measures man-years of full-time employment. The latter is defined simply in terms of the number of hours customarily worked at a particular time and place. There is no uniform standard for all industry everywhere. For industries having an appreciable degree of part-time employment, the Department of Commerce reduces the number of part-time employees to

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the equivalent number of full-time employees. The calculation is performed as follows: Annual total wages and salaries paid to full-time employees in an industry are divided by the average number of full-time employees on the payroll to secure average full-time equivalent earnings. When total salaries and wages paid to all employees (both part- and full-time) are divided by average full-time equivalent earnings, full-time equivalent employment is derived. Edward F. Denison, "Revised Estimates of Wages and Salaries in the National Income, 1929-43," Survey of Current Business, June 1945, p. 17. 22. Comprehensive estimates of employer contributions for social insurance are published annually by the U. S. Department of Commerce in its national income estimates. See Table 34 of annual national income estimates in Survey of Current Business for July each year, beginning with 1947. 23. The Conference Board publications include: "The Social Security Almanac," Studies in Individual and Collective Security No. 7, March 1949; "Handbook on Pensions," Studies in Personnel Policy No. 103, April 1950; "Company Group Insurance Plans," Studies in Personnel Policy No. 112, January 1951; Union Health and Welfare Funds, March 1947. 24. U. S. Bureau of Labor Statistics, Digest on Selected Health, Insurance, Welfare, and Retirement Plans Under Collective Bargaining, July 1950. 25. The Hidden Payroll, Economic Research Department, Chamber of Commerce of the United States, 1949. 26. For a more detailed discussion of this situation, and data showing the cost of various types of wage and salary supplements, see Gertrude Deutsch, "Fringe Benefits in Wage Statistics," Business Record, National Industrial Conference Board, February 1951, pp. 54-59. 27. George W. Taylor, "Criteria in the Wage Bargain," Proceedings of New York University First Annual Conference on Labor, Emanuel Stein, editor, 1948, pp. 77-78. 28. In August and September 1948, the consumers' price index was 174.5 (1935-39 = 100). It did not reach this figure again until October 1950, when the index averaged 174.8. Thus, from the summer of 1948 until the fall of 1950, no net increase in living costs occurred. 29. George Meany and R. J. Thomas, Cost of Living, January 25, 1944. 30. Report of the President's Committee on the Cost of Living, Office of Economic Stabilization, 1945. 31. U. S. Bureau of Labor Statistics, Consumers' Price Index and Retail Food Prices, January 15, 1947 (mimeo.). 32. Ethel D. Hoover and Bruno Schiro, "Estimate of New Unit Bias in CPI Rent Index," Monthly Labor Review, July 1949, p. 49; U. S. Bureau of Labor Statistics, Consumers' Price Index and Retail Food Prices, October 15, 1950 (mimeo.). 33. Faith M. Williams and Alice C. Hanson, "Money Disbursements of Wage Earners and Clerical Workers, 1934-36, Summary Volume," Bulletin No. 638, U. S. Bureau of Labor Statistics, 1940. 34. "The City Worker's Family Budget," Monthly Labor Review, February 1948, p. 133. 35. Quantity and Cost Budgets for Three Income Levels, The Heller Committee for Research in Social Economics, University of California Press, 1950. p. 3. 36. For an examination of the Heller Budget and its use in wage negotiations, see Jules Backman, "The Heller Budget in Wage Negotiations," Studies in Personnel Policy No. 82, National Industrial Conference Board, July 1947.

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Among tlit' problems raised in connection with the Heller Budget, are the following: a. Living costs in San Francisco are higher than in other cities. b. Heller Budget is substantially greater than earnings of American workers. c. It is based upon assumption of four-person family. d. It is pitched substantially higher than other budgets. 37. U. S. Department of Labor, Woman's Bureau, "Working Woman's Budgets in Twelve States," Bulletin No. 226, Washington 1948. Hazel Kefauver, "State Budgets for Single Women Workers," Monthly Labor Review, December 1950, pp. 698-701. The states for which such budget data are made available are Arizona, Colorado, Connecticut, District of Columbia, Kentucky, Maine, Massachusetts, New Jersey, New York, Penrv sylvania, Utah, Washington. 38. Margaret L. Stecker, "Intercity Differences in Costs of Living in March 1935, 59 Cities," Research Monograph XII, Works Progress Administration, Washington, 1937. 39. Substandard Conditions of Living, Textile Workers Union of America, CIO, 1944. See Jules Backman and M. R. Gainsbrugh, "Subsistence Budgets, 1944 Model," Management Record, National Industrial Conference Board, October 1944, pp. 279-86, for a critical examination of the TWUA Budget. 40. Dorothy S. Brady, "Expenditures and Savings of City Families in 1944," Monthly Labor Review, January 1946, pp. 1-5. 41. The Steelworhers in 1943, United Steelworkers of America, 1944. 42. "Workers' Budgets in the United States: City Families and Single Persons, 1946 and 1947," U. S. Bureau of Labor Statistics, Bulletin No. 927, 1948, p. 8. 43. Ibid., p. 27. 44. Claimed exemptions differ from size of family in many instances. This is particularly true when more than one person in a family is working or where a second person in a family has outside sources of income. It may be desirable as a matter of family strategy for separate returns to be filed. However, data presented in the 1952 Steel Wage Case showed approximately the same results whether actual family size or claimed exemptions were used. See Jules Backman, The Economic Position uf the Steelworker, Companies' Exhibit No. 3, before the Steel Wage Panel, Case No. D-18-C, p. 37. 45. Report to the President by the Emergency Board (W. M. Leiserson, Chairman) NMB Case A-2953, December 17, 1948, p. 30. Decision of Jerome Michael, Realty Advisory Board on Labor Relations, Inc. (N. Y.), and Building Service Employees' International Union, Local 32B, AFL, March 15, 1949. 46. Emanuel Stein, "Criteria in Wage Arbitration," New York University Law Review, October 1950, pp. 729-30. 47. Decision of George W. Taylor: Consolidated Edison System Companies of New York and Utility Workers Union of America, Brotherhood of Consolidated Edison Employees, CIO, March 12, 1947. 48. Decision of David L. Cole, New York City Omnibus Corp. et al. and Transport Workers Union of America, CIO, June 18, 1947. 49. Decision of Paul Hays, David L. Cole, and Emanuel Stein: New Jersey Bell Telephone Company, Plant Department and Telephone Workers Union of New Jersey (August 29, 1948). 50. See, for example, Report to the President by the Emergency Board

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(Roger I. McDonough, Chairman), \MB Case So. A-3290, June 15, 1950, pp. 35-38. 51. Findings and Recommendations of Fact Finding Board (Arthur S. Meyer, Chairman), Realty Advisory Board and Local 32B, Building Service Employees International Union, A F L , July 11, 1950. 52. Tavlor, "Criteria in the Wage Bargain," op. cit., p. 79. 53. To counter the claim that railroad workers should maintain a position similar to that in some past period, the writer presented a comprehensive exhibit (Carriers' Exhibit No. 17) to the Emergency Board (Dr. William M. Leiserson, Chairman) in the non-operating wage case in November, 1948. Among the evidence cited to show that changing rather than static relationships are typical in the economy, were the following: Federal Reserve Board announcement of new base period for government index numbers; data showing changing wage relationships and changing price relationships; a series of quotations critical of the parity price concept for agriculture; data showing changes in consumption of foods; widely varying rates of economic progress in different fields; regional shift in the cotton textile industry; shift in source of energy; changing composition of labor force; and comments from economic literature indicating the importance of changing wage relationships. The foregoing are illustrative of the widely varying types of economic data that may be used to demonstrate the significance (or its lack) of one aspect of comparative wages. 54. Majority Decision, George W. Alger, Chairman: Publishers' Association of New York City and International Typographical Union, International Mailers' Union No. 6', A F L , August 3, 1949. 55. John R. Abersold, Problems of Hourly Rate Uniformity, University of Pennsylvania Press, 1949, pp. 48-58; Joseph W. Bloch, "Regional Wage Differentials, 1907-46," Monthly Labor Review, April 1948, pp. 371-77; R. A. Lester, "Results and Implications of Some Recent Wage Studies," in R. A. Lester and Joseph Shister (editors), Insights Into Labor Issues, Macmillan, 1948; John V. Van Sickle, "Geographical Aspects of a Minimum W a g e , " Harvard Business Review, Spring, 1946, pp. 277-94. 56. John T. Dunlop, "American Wage Determination: The Trend and Its Significance," Economic Institute on Wage Determination and the Economics of Liberalism, Chamber of Commerce of the United States, January 11, 1947, pp. 34-48. Dunlop refers to key wage bargains "which effectively condition, within narrow limits, the whole structure and level of wage and salary rates." 57. Jules Backman, "Hourly Wage Dispersion," American Economic Review, December 1947, pp. 918-26. " 58. For a discussion of the arguments for and against uniform wage patterns, see Jules Backman and M. R. Gainsbrugh, Behavior of Wages, National Industrial Conference Board, March 1948, pp. 68-72. 59. Report to the President of the United States on the Labor Dispute in the Basic Steel Industry by the Steel Industry Board, September 10, 1949, p. 43. 60. Midyear Economic Report of the President, July 1949, p. 8. 61. These techniques are described at length in Solomon Fabricant, Employment in Manufacturing, 2 8 9 9 - J 9 3 9 , National Bureau of Economic Research, New York, 1942; and in Productivity and Unit Labor Cost in Selected Manufacturing Industries, 1919-1940, U. S. Bureau of Labor Statistics, February 1942. 62. See U. S. Department of Labor, Trends in Output per Manhour,

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A fining, 1935-1949, August 1950. Similar studies are available for other industries including electric light and power, hosiery, clay construction products, rayon and other synthetic fibers, steam railroads, etc. See U. S. Bureau of Labor Statistics, "Productivity Trends in Selected Industries, Indexes through 1950," Bulletin Xo. 1046, October 1951. 63. See, for example, "Employment in Manufacturing, 1899-1939," op. rit.; also, Solomon Fabricant, "Labor Savings in American Industry, 18991939," Occasional Paper Xo. 23, National Bureau of Economic Research, November 1945. Useful data are also available in some publications of the National Industrial Conference Board. See, for example, Productivity and Progress, May 1946. 64. Clark Kerr, "The Short-Run Behavior of Physical Productivity and Average Hourly Earnings," The Review of Economics and Statistics, November 1949, p. 309. 65. Ibid., pp. 301-2. 66. Ibid., p. 306. 67. Sumner H. Slichter. Basic Criteria Used in Wage Xegotiations, January 1947, pp. 22-23. 68. Solomon Fabricant, "Of Productivity Statistics: An Admonition," The Review of Economics and Statistics, November 1949, p. 309. 69. Survey of Current Business, January 1951, p. 7. 70. The combined production of ingots, blooms, billets, tube rounds, sheet and tin bars, plates and hot roll bars increased in relative importance from 13.7? of total shipments in 1939 to 34.7% in 1943. Bv 1948, the proportion had declined to 18.3? or only moderately above the prewar production. "Economics of a Fourth Round Wage Increase," op. cit., p. 239. 71. Jules Backman, Bituminous Coal Wages, Profits and Productivity, presented before Presidential Coal Board, February 1950, Southern Coal Producers Association, pp. 56-58. 72. U. S. Bureau of Labor Statistics, Productivity in Steam Railroad Transportation, 1935-1948 (mimeo.), January 1950. 73. Money wages adjusted for changes in living costs by using the consumers' price index. 74. See for example: Productivity and Unit Labor Costs in Copper Mining, 1935-1947, U. S. Bureau of Labor Statistics, 1948. Other important industries covered include: steam railroad transportation: 1935-1942 ( 1 9 4 3 ) ; bituminous coal mining: 1935-1947 ( 1 9 4 8 ) ; electric light and power ( 1 9 4 8 ) ; iron mining ( 1 9 4 8 ) ; etc. 75. See, for example, The Nation's Most Prosperous Industry, an accounting of the postwar financial experience of American Textile Manufacturers, Textile Workers Union of America, CIO, January 1948; Robert R. Nathan Associates, Inc., Economic Position of the Steel Industry 1949, July 1949. See also issues of the CIO Economic Outlook and various newspapers published by the larger unions. 76. Sumner H. Slichter, "Profits in a Laboristic Society," Harvard Business Review, May 1949; Thomas H. Sanders, "Depreciation and 1949 Price Levels," Harvard Business Review, May 1949; George Terborgh, Inflation and Postwar Profits, Machinery and Allied Products Institute, May 1949; Jules Backman, How Real are 1948 Profits?, Economic and Business Foundation, March 1949; Profits, Report of a Subcommittee of the Joint Committee on the Economic Report, 1949; Solomon Fabricant, "Business Costs and Business Income Under Changing Price Levels," in Five Monographs on Business Income, American Institute of Accountants, July 1, 1950.

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77. Survey of Current Business, National Income Supplement, July 1947 and July issues each year. 78. Ibid., July 1947, p. 11. 79. "Basic Criteria Used in Wage Negotiations," op. cit., p. 27. 80. For a more detailed discussion of the problems which arise in connection with the use of the ability-to-pay criterion, see "Economic«: of a Fourth Round Wage Increase," op. cit., pp. 51-60, and the references cited in the previous footnotes in this section. 81. "Economics of a Fourth Round Wage Increase," op. cit., and "A National Economic Policy for 1949," op. cit. 82. Employees' Exhibits 8 and 11, Before the Arbitration Board (Dr. William M. Leiserson, Chairman), National Mediation Case No. A-2595, Arbitration 91, Chicago, Illinois, 1947. 83. "Bituminous Coal Wages, Profits, and Productivity," op. cit. 84. For example, during periods of rising prices, arbitrators often point out that they have been influenced by the duration of the contract where another reopening is scheduled or a new contract is to be renegotiated within six months. 85. Wages and Employment, Conference Proceedings, University of Wisconsin Industrial Relations Center, April 29, 1950, pp. 13-15. 86. An interesting illustration occurred in the steel industry in 1948. Under a reopening in a contract containing a no-strike clause, no wage increase was granted after negotiations in the spring months. However, after the General Motors Corporation and other companies had granted third-round wage increases in May and June, the steel industry agreed to increase wages in July. The many companies which raised wages late in 1950 and early in 1951 (for example, coal) before contracts were terminated provide additional illustrations of this point.

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