1942: Wages, Hours And Working Conditions

During 1942 wages came under regulation as part of a comprehensive Government program for controlling prices and the cost of living. The aims and general character of this program were set forth in a message by the President to Congress on Apr. 27. The program was further elaborated in an Act of Congress, followed by an executive order of the President, in early October. The War Labor Board translated the general features of this program into a specific formula of wage regulation by a decision made on July 16 in the case of the little steel (steel companies other than the United States Steel Corporation) companies. This decision provided that wage increases in 1942, except where wages were unusually low or out of line with comparable wages in other industries, should not exceed 15 per cent, the amount required to keep wages at their purchasing power in January 1941.

Actual weekly earnings, which reflected overtime and increased hours of work as well as advances in wage rates, exceeded, with few exceptions, the increases in living costs. The rise in hourly earnings was more moderate and in many industries, employing considerable numbers, fell short of the increase in the cost of living since January 1941. But in some instances the lag was due to substantial increases in wages won in 1940 and 1941.

The hours question was concerned mainly with the effect of the 40-hour week on war production. Many observers held that adherence to so short a week barred potential expansion in war output and placed an unnecessary strain on the country's manpower, particularly as the size of the armed forces was calculated to exceed 10,000,000. The most direct criticism of this complexion came from the farmers who, in the face of unparalleled demands for farm products, suffered from labor shortages and themselves worked exceedingly long hours. Organized labor held that the 40-hour week was no bar to longer hours and that the demand for a longer week was tantamount to a demand to reduce wages. Many industries did, of course, work more than 40-hours, but the 40-hour week kept hours much below the levels they reached in other warring countries, where average hours worked are reported to exceed 50 per week by substantial amounts.

The most important development in working conditions was the settlement of the closed-shop issue. This was done through a series of decisions of the War Labor Board, directing employers to include in their union contracts a maintenance of membership clause. Maintenance of membership provided that employees who voluntarily indicated their intention to join a union at the time a contract was signed were required to remain members for the duration of the contract. The clause was generally opposed by employers but all but a few accepted it when directed to do so by the board.

1941: Wages, Hours And Working Conditions

Business conditions in 1941 were the result of mounting Government orders for defense products and a boom in private business. As such they were unusually favorable to increasing wages and employment. Market forces and the demands of organized labor combined to raise wages continuously throughout the year. Wage concessions won from large industrial corporations, such as General Motors and United States Steel, spread to other industries and in the fall reached the railroad employees. During the twelve months the average hourly earnings of factory labor advanced roughly 15 per cent. Railroad labor's rates rose about the same amount. At the turn of the year American wages stood at the highest point for all times. Factory employees were receiving about 80 cents an hour; bituminous coal miners more than one dollar; and employees in the heavy industries, such as automobiles, close to $1.20.

These increases in wages far exceeded the rise in the cost of living. For some time living costs remained comparatively stable. But during 1941 they began steadily to rise. By December they had advanced nearly 10 per cent.

Employment and payrolls likewise recorded notable gains. Total civil non-agricultural employment increased from 37,500,000 to 40,700,000, or by more than 3,000,000, from November 1940 to November 1941. Manufacturing employment, in the same period, advanced 17 per cent. Expanding hours of work coupled with advancing wage rates and increasing employment accounted for still greater increases in aggregate wage disbursements, or payrolls. Thus while employment in factory industries increased 17 per cent, payrolls expanded 42 per cent.

These impressive movements in wages and purchasing power focused more and more attention on wage policy and its relation to threatened price inflation. Since the payments going to wage-earners and lower salaried workers accounted for more than 70 per cent of the national income, the rise in wages became the source of widespread fears of impending inflation. Inflationary price movements appeared all the more threatening because it was a foregone conclusion that, with the expansion of war production, the supply of civilian goods would become increasingly limited. Increased purchasing power, therefore, could be expected swiftly and cumulatively to bid up prices. Strict price control, combined with a policy of wage stabilization and steep taxes on labor income, was generally advocated. But organized labor successfully resisted the attempts to put a ceiling on wages.

The 40-hour week remained in force. Extra hours took the form of overtime for which employees received time and one half rates. The average hours worked by factory employees during the year were approximately 43 per week, but the machine tool industry worked more than 50 hours. Increased output was achieved mainly by the use of second and third shifts. After our declaration of war, there was a strong demand for the operation of plants 7 days a week. This measure required the use of swing shifts, whereby all employees worked 5 days a week but alternated in working on Saturdays and Sundays. The installation of the 7-day week was delayed by the demands of the unions that Sunday work be compensated at double the week-day rate. This issue was unsettled at the year's end.

The most notable change in working conditions was the gradual spread of the closed shop in American industry. The large companies succeeded in preventing its introduction into their plants. But whether they will be equally successful in 1942 depends largely on the policy of the Federal Government. See also BUSINESS; LABOR ARBITRATION; LABOR LEGISLATION; STRIKES.

1940: Wages, Hours And Working Conditions

Effects of Defense Program.

In 1940 the foundation was being laid for a business boom in the United States. Appropriations for national defense, totaling close to $20,000,000,000, as well as increasing purchases of war materials by England, added their influences to the usual forces of business recovery. The result was the beginning of a vast expansion in production and employment. Government contracts for ships, planes, trucks, munitions and the like were let throughout the year, but the magnitude of the defense undertaking was not fully apprehended until later in the year when the plans for the program had been more precisely formulated and the steps taken to expand industrial capacity began to make themselves felt. In the circumstances, the year 1940 should be counted as a transition period between a decade of lagging business and employment and a new epoch of defense or war expansion.

Increased Employment.

Employment, under the influence of defense orders, increased by more than 1,000,000 from October 1939 to October 1940. In the final months of the year (for which complete records at the time of writing were not available) physical production mounted steadily and at the turn of the year exceeded that of 1929 by close to 20 per cent. So powerful was the expansion in industrial activity that experts of the United States Department of Labor were willing to forecast the probable rate of increase in employment in 1941 at 500,000 per month. All types of industry contributed to the expansion. But the most spectacular gains were recorded in industries serving the defense program. By September 1940, blast furnaces, steel works and rolling mills were employing 22 per cent more persons than in the same month the year before. In the last quarter of 1940, this industry was operating at full capacity, in spite of the fact that new plants had been built during the year and total capacity had reached in December 1940 the highest level in the industry's history. Employment in shipbuilding during the same twelve months increased 46 per cent, while employment in the machine tool industry expanded 60 per cent. At the same time the aircraft production industry more than doubled its employment.

Labor Shortages.

This revolution in the labor market brought striking and unexpected consequences. In the metal, machinery and allied industries, shortages of labor, particularly among skilled craftsmen, supervisors, and draftsmen, developed. As a part of its defense program, the government undertook to deal with the problems of labor supply and, in cooperation with industry and educational institutions, made provision for training new labor and retraining the old. Efforts were made to restore apprenticeship systems that had been abandoned or restricted during the 1930's when the existence of a permanent army of unemployed made it seem unnecessary to retain the machinery for recruiting new labor. Negotiations were entered into with the trade unions to persuade them to drop their apprenticeship restrictions and rules setting limits on output. Employers were encouraged, where serious shortages of labor persisted, to simplify and subdivide industrial processes so that larger quotas of semiskilled and unskilled labor could be employed without impairing the quantity and quality of production.

Increased Wages.

Conditions of a tightening labor market and expanding business profits set in motion demands for increased wages and improved working conditions. Before the year was over wages began to rise. While there were few industry-wide raises in wages, increases began, particularly in the last quarter and in the defense industries, to be widespread. It may be estimated that the average hourly earnings of factory employees increased during the year by approximately 7½ per cent. The largest increases were gained in the aircraft industry, where the unions seeking to organize the employees of this industry, sought to raise aircraft wages to the higher levels already effective in the steel and automobile industries. In the several settlements arrived at in the last months of 1940, minimum wages in this industry were increased from 50 to 62.5 cents an hour and substantial increases were no doubt granted to employees falling within the higher wage brackets. Considerable as the wage movement of 1940 was, it will in retrospect be considered the first stage of a marked and universal rise in the wage level that is likely to feature the business history of this country in the next years.

Minimum Wage Orders.

Minimum wage orders issued under the Fair Labor Standards Act contributed also to the increase of wages in 1940. This law established a universal minimum wage of 30 cents an hour in industries engaged in interstate commerce, which is to remain in effect until Oct. 24, 1945, when it will be raised to 40 cents. Meanwhile, however, industry committees may recommend and the Administrator of the Act may order higher minima for particular industries. The first of such orders was issued in September 1939, and there have been a number since.

In addition minimum rates, ranging from 33 to 40 cents, were recommended for the carpet and railroad industries but were not yet ordered by the Administrator. These orders apply to the lowest paid employees, but an increase in the minimum is usually followed by upward adjustments in the rates of the better paid.

Hours.

Hours of work continued to be reduced during the year. The most general reduction was made effective on Oct. 24, 1940, when, by the terms of the Fair Labor Standards Act, the legal maximum was reduced from 42 to 40 hours per week. It was estimated that some 2,000,000 wage-earners were affected by this change, which virtually places the bulk of American industry on the 40-hour week.

No spectacular advances in working conditions were recorded during the year. The unions continued to make gains. Their major preoccupation was in winning more effective recognition and thereby gaining greater control over their members and better dues collections. In this they made some progress.

1939: Wages, Hours And Working Conditions

The prevailing levels of wages and employment in 1939 were the result of not only the economic forces working during the past year, but also the broad movement of wages and employment since and before the World War. In the face of these long-time developments the interpretation of current data, divorced from their historical background, is bound to be inadequate and misleading.

In the last quarter century, wages, hours and working conditions in American industry have been revolutionized. The maximum work-week of factory workers declined since 1914 from roughly 55 to 42 hours a week, or by 13 hours. In the anthracite and bituminous coal industries, the week was reduced from 55 to 52 hours, respectively, to 35 hours a week. And the work-week of railroad employees declined from 60 to 48, or by 12 hours.

Under the influence of the inflationary forces of the World War, the depressions of 1921 and 1930, and the labor policies of the country since 1933, the combined average rate of money wages (hourly earnings) of employees in manufactures, soft and hard coal mining, rail transportation and construction nearly tripled, increased by 180 per cent. As indicated in Chart I these money wages rose much more rapidly than the cost of living, since average real hourly earnings (the purchasing power of money earnings) doubled during the same period, 1914-39. Furthermore, since 1933 alone, the real hourly earnings of the employees in this group of industries increased by one-third.

At the same time, however, volume of employment failed altogether to keep pace with this phenomenal advance in the hourly rate of wages. While employment rose and fell with the recovery and decline in business activity, the aggregate number of jobs afforded by these five industries was in 1939, a year of business recovery, only a few per cent above 1914, twenty-five years earlier. Payrolls or total wage disbursements increased in the same period 100 per cent, but this advance, of course, was due to the rise in the price of labor and not to expansion in employment.

Since the work-force of the American economic system is composed of highly diverse groups of employees, engaged in an enormous variety of activities, the general prosperity of the country and the balance of its economy must depend upon the relative levels of wages and working conditions that prevail in diverse occupations. It is known, for example, that rates of wages are much higher in union than in non-union employments, in the North than in the South, in metropolitan centers than in rural areas. Taking the period 1914-39 as a whole, we find the rates paid to farm labor were in 1939 only 7 per cent higher than in 1914, while the rates of industrial wage-earners had increased 180 per cent. Quite clearly the wages of farm labor never recovered from the severe decline of 1921, nor did they participate in the great upsurge of industrial wages following 1933. In this period, moreover, the cost of living advanced 40 per cent. Consequently, the purchasing power of farm labor's wage rate was in 1939 less than in 1914, while that of the industrial wage-earner's rate had doubled.

In 1939 there was a resumption of the tendency, interrupted by the depression of 1938, of wages to rise and working conditions to improve. Greater business activity, as in the past, contributed to the restoration of wage cuts and the granting of increases in scattered occupations and industries. The application of the Fair Labor Standards Act continued to lift the wages of the lowest paid workers and, hence, to affect the general level of wages. The negotiation of collective agreements between union labor and employers exerted much the same influence. But the average rate of wages showed only a fractional advance in 1939.

Employment and payrolls, however, showed a more decided improvement. Since 1938 was a year of partly declining and partly improving business conditions, comparisons between the whole of that year and 1939 are likely to be misleading.

Hours of labor experienced no radical change in 1939. But the trend was still downward. Although no quantitative records are available to measure the extent of the improvement, it is probable that such improvements in working conditions as more liberal provisions for vacations with pay, stricter seniority rules and the like have continued. See also LABOR LEGISLATION; PRODUCTION AND TRADE.

1938: Wages, Hours, And Working Conditions

Rates of wages and the full-time work-week remained remarkably stable during 1938. In no large industry was there a general reduction in standards, although they may well have been reduced in isolated cases. The hourly earnings of factory employees declined less than 5 per cent and of bituminous coal miners less than one per cent. The passage of the Fair Labor Standards Act no doubt had the effect of raising the wages and reducing the hours of a considerable number of low paid employees, particularly in the South. But the number affected by the provisions of the Act is not known, and estimates range from 500,000 to several million.

In spite of the depression, labor continued to make improvements in working conditions by winning vacations with pay, improving seniority rules, obtaining more effective control over hiring and firing, and successfully resisting reductions in wages. In consequence, rates of wages in the great majority of American employments remained in 1938 close to their all-time peak, and nominal hours of work remained also at nearly their lowest point.

Because of the great increase in unemployment, however, labor did not fare nearly so well in actual earnings, however successful it may have been in protecting its nominal standards. Factory employees, for example, averaged $22.59 a week in the first ten months of 1938 as against an average of $25.11 in 1937, a decline of 10 per cent. The weekly wages of coal miners in the same period fell from $23.75 to $20.07, or nearly 16 per cent. Only railroad employees received higher weekly earnings in 1938 than in 1937. But in this industry most of the burden of unemployment fell on the labor which was laid off and not on those who remained at work.

A measure of the extent of the decline in jobs and wages during 1938 is afforded by the movement of payrolls and employment. From the peak month of 1937 to the low month of 1938, factory payrolls declined 36 per cent; payrolls in the bituminous coal industry, 47 per cent; and on steam railroads, 23 per cent. Employment from the peak to the low month declined, respectively, 25, 26, and 23 per cent. Since a general improvement in business began in June 1938, the record for the whole year, judged by the data available, is somewhat better. Average factory payrolls for the first 11 months of 1938 were 25 per cent below 1937. In bituminous coal, the decline during this period was the same. And in the railroad industry, where data are available for only the first 10 months of 1938, the decline was 13 per cent. See also LABOR LEGISLATION.