extent in all plants and in all industries. The irregularity of these increases caused many maladjustments of the normal wage relationships between different plants and industries. A substantial majority of industrial workers had received more than a 15-percent increase. Some had received less. To correct

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these maladjustments the Board will consider requests for general increases in straight-time rates up to 15 percent above the level prevailing on January 1, 1941.

"MR. WALLING. What about the correction of inequalities and gross inequities? How does the Board propose to measure them?

"MR. DAVIS. The Board will grant increases to correct inequalities and gross inequities only when they represent manifest injustices which arise from unusual and unreasonable differences in wage and salary rates. Differentials which are established and stabilized are normal to American industry and will not be disturbed by the Board.

"MR. WALLING. You mentioned the fact that the Board is authorized to adjust wages which result in substandards of living. That is a field in which the Wage and Hour and Public Contracts Divisions have had a special interest for the past 4 years. Our listeners would like to know what the Board's policy will be in that respect.

"MR. DAVIS. In the President's message last April and again the Executive order of October 3, reference is made to the need for eliminating substandards of living. To date the Board has had to deal with few cases in which such substandards were a factor. For this reason, no general policy in this respect has been established. The Board for the present will not attempt to measure substandards of living by any fixed wage rate. Until sufficient experience has accumulated upon which to base a general policy, we will consider cases involving substandards of living upon their individual merits. "MR. WALLING. There is one more item in the policy which we have not yet discussed. Under the Executive order, the Board may approve increases in wages and salaries if such an increase is necessary to aid in the effective prosecution of the war. I assume, Mr. Davis, that the Board will measure every request for an increase on the basis of whether it is necessary for the effective prosecution of the war.

"MR. DAVIS. Certainly, Mr. Walling. But most of the requests which we have been receiving under that clause are requests from employers who want to raise their wages or salaries in order to hold their employees or to attract new workers."

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PRESIDENT'S MESSAGE ON 1944 BUDGET
JANUARY 11, 1943

The message of the President to the Congress transmitting the Budget for the fiscal year beginning July 1, 1943, generally referred to as the 1944 Budget (House Document No. 27-78th Congress, First Session), was printed in the Congressional Record of January 11, 1943 (89 Cong. Rec. 101-104), contains a discussion of the stabilization program which is here important.

That discussion, on page 104 of the Congressional Record above referred to, is as follows:

"We must assure each citizen the necessities of life at prices which he can pay. Otherwise, rising prices will lift many goods beyond his reach just as surely as if those goods did not exist. By a concerted effort to stabilize prices, rents and wages we have succeeded in keeping the rise in the cost of living within narrow bounds. We shall continue those efforts, and we shall succeed. By making effective use of all measures of control, we shall be able to stabilize prices with only a limited use of subsidies to stimulate needed production.

"Some would like to see the controls relaxed for this or that special group. They forget that to relax controls for one group is an argument to relax for other groups, thereby starting the cost-of-living spiral which would undermine the war effort and cause grave post-war difficulties. Economic stabilization for all groups—not for just the other fellow-is the only policy consistent with the requirements of total war. I have read of this bloc, and that bloc, and the other bloc, which existed in past Congresses. May this new Congress confine itself to one bloc-a national bloc.

"Stabilization goes beyond effective price control. Under war conditions a rise in profits, wages, and farm incomes unfortunately does not increase the supply of goods for civilians; it merely invites the bidding up of prices of scarce commodities. The stabilization of incomes and the absorption of excess purchasing power by fiscal measures are essential for the success of the stabilization program. I am confident that the Congress will implement that program by adequate legislation increasing taxation, savings, or both.

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Thus, we will help to 'pay as we go' and make the coming peace easier for ourselves and our children."

WAR LABOR BOARD'S STABILIZATION POLICY

Chairman William H. Davis, of the National War Labor Board, in an address delivered at a luncheon of the Boston Chamber of Commerce, on January 21, 1943, said:

"The President, in his Executive Order, told the Board that it should not approve increases over the level prevailing on September 15, except 'to correct maladjustments or inequalities, to eliminate substandards of living, to correct gross inequities, or to aid in the effective prosecution of the war.' One of the first jobs we had to do was to define these terms. We had to get a workable policy that would accomplish the over-all purposes set forth in the Act of Congress-the determined purpose of the American people to keep the cost of living under control.

"Fortunately the members of the Board, public, industry and labor had been wrestling with this problem ever since the Board was created last January 12.* Nearly a year ago the Board said in an opinion on an important case that labor could not expect in an economy geared to total war, to get wage increases which would keep day by day pace with the upward trend in the cost of living. Then, in July, 1942, in the Little Steel case, the Board evolved the so-called 'Little Steel formula,' which called a halt to the tragic race between wages and prices by placing a definite ceiling over general wage increases.

"The Board found that, about January, 1941, following a relatively stable period, prices and wages began to chase each other upward, and that the cost of living had gone up 15 per cent between that date and May, 1942, when the President announced his 7-point program to combat inflation. The Board also found that the wages in roughly two-thirds of all manufacturing had already risen at least 15 per cent, enough or more than enough to cover the cost of living increase, during that period. In the minority of cases, however, workers had not received increases sufficient to compensate them for the rise in living *January 12, 1942.

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costs. The Board felt that the former should not be granted further general wage increases, and that the latter were entitled to have their average straight-time rates brought up to a point 15 per cent above the January, 1941 level. In defining the word 'maladjustments,' as used in the President's Executive Order, the Board adopted, therefore, this 15 per cent formula.

"The Board then lumped the phrases 'inequalities' and 'gross inequities' together and in its statement of wage policy announced that it would adjust only those 'which represent manifest injustices that arise from unusual and unreasonable differences in wage rates.' It pointed out that established and stabilized wage differentials are normal to American industry and declared that such differentials would not be disturbed. Wages in this country are about as level as the Himalaya mountains, and the Board has no intention of trying to change their topography in the middle of a war.

"The Board also said in its wage policy statement that it had no intention of attempting to solve the manpower problems by juggling wage rates. It recognized that nothing but disaster could result from allowing John Jones to raise his rates in order to steal workers away from John Smith, and then letting John Smith, in turn, boost his wages to get them back again. This may be difficult for individual employers faced with a shortage of help, but I think all of you will recognize the unstabilizing effects of any other policy."

STATEMENT OF DIRECTOR OF ECONOMIC STABILIZATION

In a radio address, on February 9, 1943 (printed in New York Times February 10, 1943), the Hon. James F. Byrnes, Director of Economic Stabilization, said:

"We must not retreat in our fight to stabilize the cost of living. The act of Congress provided that prices, wages and salaries affecting the cost of living should be stabilized and except as otherwise provided in the Act such stabilization should, so far as practicable, be on the basis of levels existing Sept. 15, 1942. "We must hold that line. We must adhere firmly to that program. There must be no further increases in wages beyond the Little Steel formula except in limited and special cases to correct patently

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gross inequities and to rectify plainly substandard wages."

2. The Necessity For Controlling Inflation

The Office of War Information has recently released a little pamphlet entitled "Inflation," describing inflation, what it means for each of us and what we can do about it. Under the heading "It Rests With The People," it is said:

"In the consideration of all the measures in the President's program to control living costs the question naturally arises whether, with all the hardships and sacrifice involved, we actually can forestall inflation.

"The only honest answer is that it will rest with the people. Government can only take the hard unpopular steps that are needed if there is widespread popular support. Even when these steps are taken, they can be successful only if there is patriotic cooperation.

"Taxes can scarcely be drawn up harsh enough to mop up all the surplus spending power that will exist. The balance must be taken care of by the voluntary restraint of citizens in saving, not spending, as much as they possibly can.

"It may be that in any circumstances living costs will rise a little more. But the difference between a moderate price rise and an uncontrolled inflation is the difference between a mild stimulant and a gallon of alcohol.

"For the time being we are called upon to turn our backs on many of our former peacetime goals. Instead of restricting production and expanding consumption, we must expand production and restrict consumption. Instead of limiting hours and increasing wages, we must work longer and stabilize wages. Instead of raising prices, we must hold down prices. Instead of raising the standard of living, we must lower it.

"These things are not easy. But there is no avoiding them. If we fail to make these sacrifices willingly and intelligently, they will be exacted of us brutally and unintelligently by the forces of wartime inflation

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In that case we shall have gained nothing. We shall have handicapped our own war effort and have jeopardized the peace to follow by saddling our country with economic and social dislocations of a profoundly weakening character.

"With all the difficulties, there are sound grounds for courage. More than anything else, the struggle to avert inflation is a test of the intelligence, self-control, and patriotism of all the people. No nation ever had a better chance to pass that test."

The causes and effects of inflation and the methods of controlling it are aptly depicted below.

This case has an importance far in excess of the dollars or cents requested by the employees in their wage demands. The question of inflation is included. If the wage rise should be granted, the inflationary trend would receive such an impetus that it could not be stopped until its full course has been run. Behind the little

red caboose of this case is the "big engine" of John L. Lewis and his mine workers. If the little red caboose of these employees gets through, a dent in the National Wage Stabilization Policy will have been made, and the way opened for John L. to come through with such force that the Economic Stabilization Policy will no longer have any more effect than the old Maginot Line. Uncontrolled inflation will have arrived with results as disastrous to this country as the destruction of the Maginot Line brought to France and the other conquered nations. The situation will even be worse. This Nation will have been conquered solely by its own people, while France was conquered largely by its own people, but with help from outside forces.

4. Inflationary Price Rises Destroy Living Standards

In the "Little Steel" Case (1 War Lab. Rep. 324) the National War Labor Board discussed the effect upon living standards caused by inflationary price rises. On this subject the Board said:

"Indeed, it may be said that the main reason why we seek to prevent the cost of living from spiraling upward is that an inflationary price rise destroys everyone's standards, not equally but unequally and irrationally and with peculiar hardship upon the lower income groups. A wage increase granted to standard wage earners would not truly maintain their standards if it were to be followed by further increases in the cost of living; and such a renewal of the race between wages and prices would impose cruel hardships on substandard wage earners. To protect the workers' own standards it is, therefore, essential that in this case the wage adjustment should not be one that will lead to another cycle in the upward movement of prices.

"The President expressed this concern for labor's standards and indicated how rising living costs sap them away when, in his telegram on May 2 to the Shipbuilding Wage Stabilization Conference at Chicago,

he said:

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"There is no surer way to undermine the standards achieved by labor than to fail in our common effort to control the cost of living. Wage earners must do their part, by agreement, to stabilize wages or else the very standards for which we have striven so long will be eaten away by increased costs of living.

"It is, of course, true that to win the war all of our citizens who have a decent standard of living must and will be called upon to restrain their purchases and surrender many things they have become accustomed to. But, surely, when the country as a whole is called upon to sacrifice income for payment of war costs, that call should come not in wage determinations by the War Labor Board addressed to workers alone but in taxation by Congress, where all our citizens are represented, and where taxes can be so measured that the imposed reduction of income will fall equitably upon all groups according to their financial ability to contribute to the national purpose and to the preservation of the things for which we fight.

"With these principles in mind we have tried, in adjusting the wages in this case, to define a solid basis of stabilization, and at the same time to fairly evaluate and correct inequities that have already resulted from the past cycle in the upward movement of prices; and we have further taken into consideration certain inequities which arise out of the past history of this particular group of workers and the particular circumstances of the case.

"In this way the Board has tried to implement fair and equitable wage stabilization.

"We are convinced that the yardsticks of wage stabilization thus applied are fair and equitable and at the same time sufficient to prevent the cost of living from spiraling upward because of wage adjustments. We think they lead to a 'terminal' for the tragic race between wages and prices.

"On this basis labor will have made its move of self-restraint in the seven-point program. If all other groups likewise do their part we may expect to get and hold for the duration of the war stability of standards, and the freedom from apprehension that goes with such stability.

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"When the war is over we may expect, with our feet on the ground in a free world, to go forward together, with a renewed determination to improve the standard of living of the wage earners and, indeed, of all groups of our people."

In writing the opinion for the majority of the National War Labor Board in the cases of the Four Meat Packing Cos. (6 War Lab. Rep. 395), Vice-Chairman Dr. George W. Taylor, a public member, said:

"It has become increasingly evident that the stabilization of our domestic economy, as conceived by Congress and by the President, can only be achieved by a determination to maintain present levels, 'Dr. Taylor's opinion stated, "This applies to both wages and prices.""

"Increases in the cost-of-living since September 15, 1942, have understandably given concern and have raised doubts in many quarters about the possibility of effecting wage stabilization at present levels. On the other hand, recent wage increases have given rise to doubts about the possibility of maintaining the existing price level.

"The National War Labor Board feels that these increases point up the dangers of inflation so clearly as to necessitate the immediate exercise of co-ordinated efforts to prevent the start of another tragic race between prices and wages. The possible consequences of such a course are so detrimental to our domestic economy, and even to the prosecution of the war itself, as to call for the exercise of every effort to prevent such an occurrence.

...

Discussing the rise in the cost of living, Dr. Taylor pointed out that such increases as have occurred since November, 1942 "have not by any means been so pronounced or uncontrolled as to suggest that the National Stabilization Program cannot be achieved." These figures show, Dr. Taylor stated, that "wages in general can justly be stabilized at September 15, 1942, levels, although it should be frankly recognized that such stabilization demands a correlative stabilization of prices."

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Dr. Taylor made this very sage observation, which has particular application in this case:

"It should be noted that general wage increases applicable throughout a plant or an industry have a different effect upon the stabilization program than wage adjustments to correct inequalities or gross inequities in particular cases."