OUR LOWER PRICES BOGEY

CHARLES C. JENKINS May 15 1921

OUR LOWER PRICES BOGEY

CHARLES C. JENKINS May 15 1921

OUR LOWER PRICES BOGEY

CHARLES C. JENKINS

NEARLY ninety years ago, in a series of articles he was contributing to Fraser’s Magazine, under the title of “Sartor Resartus,” Thomas Carlyle wrote: “I say, there is not a red Indian, hunting by Lake Winnipic, can quarrel with his squaw but the whole world must smart for it— will not the price of beaver rise?”

Carlyle’s subtle inference as to the direct effect of the mood of Labor on the cost of life’s necessities has surely been made plain by the experience of the past few years when industrial unrest was inevitably followed by higher and higher prices. It is nevertheless philosophy that seems to have escaped the discernment of the erstwhile demagogue who preached a doctrine of higher labor costs with shorter hours of production and in the same breath demanded that the cost of what Labor produced be lowered when it reached the consumer. It was this same quack economist who fashioned a double-bladed axe that is now busy slashing both ways. He goaded the public into a mood that demanded a lowering of prices all round, and when he referred to the H. C. of L., he overlooked the coincidence that the initials for High Cost of Living are the same as those for High Cost of Labor—that Labor was the commodity having undoubtedly the greatest bearing on the cost of everything one has to buy; for without Labor, as everyone must know, nothing essential or worth while could be produced.

A Rule that Works Both Ways

T ET US use an illustration to show a little more clearly in what an intimate way the High Cost of Labor figures in the High Cost of Living and thereby note the inevitable circle in which the effect of a movement works:

We’ll say a plumber and a carpenter are looking in a tailor’s show-window. “Prices are still too high,” remarks the plumber. “I’d like to have a spring suit made up of that goods, but I’m hanged if I’m going to pay $65.00 for it. Clothes have got to come down before I buy.”

“Same here,” agrees the carpenter. “I’m going to make my old clothes hang out till prices get somewhere within reason.”

That same day the master tailor goes to his workmen. “Men,” he announces, “there are two courses open to you; either you accept a reduction in wages or we close up the shop indefinitely.”

The men naturally want to know the reason for such a sudden ultimatum. “Well,” explains the master tailor, “trade’s falling off at a remarkable rate and I’ve had my ear to the ground to find out the reason. The plumber, the carpenter, the butcher, the baker and others of our leading customers are holding off for lower prices. To get their business back, I’ve got to slash the price of clothes twenty to thirty per cent., and that means I’ve got to cut the cost of production or go out of business.”

Taken into their employer’s confidence and shown that reductions are absolutely essential all around, the men agree to a cut in wages and the little business is saved from the red flag of the sheriff.

But wait. It doesn’t all end there; the price-slashing movement completes its deadly circle with the precision of Fate. About this time the building contractor drops in to see the master tailor, who, by the way, is one of those progressive citizens who believes in keeping his money in circulation.

How about that row of houses you were talking of building up on the hill, Jim?” the contractor inquires casually.

Absolutely nothing doing,” declines the tailor. “I’m not^ going to build till the cost of building comes down. W’e ve had to reduce our prices, and what’s fair for one is fair for another. You contractors are highway robbers. Why, a little plumbing job I had done at my home cost me fifteen dollars a day for the men’s time alone, and—”

Thus the tailor continues to provide instances showing that the cost of everything in the construction line is away too high. The contractor, after seeing several other good prospects fade in thin air for the same reasons voiced by the tailor, finally calls in the representatives of his men.

Boys,” he tells them, “there are mighty few contracts in sight unless I can get the cost down. That means we’ve got to reduce the cost of labor and materials or remain comparatively idle for the season.”

There is only one answer: the plumber and the carpenter, who wouldn’t buy the tailor’s goods until the tailor had readjusted his business so that he could sell a suit of clothes at twenty to thirty per cent, less and had to cut the cost of labor to accomplish that end, find that the wave of protest to force lower prices which they helped set in motion has traveled the fateful circle and returned to smite their own pocket-books. It is only an illustration of what has really been happening and goes to show that the man who de-

mands that the world serve him at lower cost must be prepared to serve the world at lower cost himself.

The Ripple Goes On and On

THIS circle of readjustment and many others like it start even more disastrous circles of readjustment in motion that are country-wide in their scope. Thousands of tailors and building contractors throughout the land find themselves in the same position as the tailor and the contractor in the little story. They become panicky over a situation that had an artificial beginning. They decline to order new materials on the supposition, originated by the ultimate consumer, that prices will come down. Traveling salesmen return to headquarters with blank order-books, the wholesalers become over-stocked—and in turn the manufacturer, the producer of the raw material and the transportation organizations suffer. Factories close down for readjustments, railway freight earnings drop and thousands of men are thrown out of employment. One could go on tracing the dire effects almost indefinitely.

The demand for lower prices so insistently put forward by the public at large has, in fact, become a sort of commercial Frankenstein, a monster machine automatically operating a thousand slashing knives on the cost of everything. And the man on the street, witnessing its work, cries out in savage glee, “Hit ’em again—and again!” until in consternation he sees the wicked blade poised over his own pay-envelope.

The lower prices Frankenstein has been in operation in deadly earnest for somewhat over a year, but it has been within the past six months that Labor has suffered most acutely from its swiftly succeeding blows. From coast to coast newspapers have borne testimony to this in reports of factories closing and of wage reductions in most every line of endeavor—and in some cases reductions of wages with extension of working hours per day. This deflation of labor costs has not been uniform in many lines throughout the country, but it has occurred where the pressure proved great enough to force it. Readjustments of this nature have taken place in mining work at Cobalt, building trade reductions at Ottawa and elsewhere, a new scale of wages and a 49 to 50-hour week for Montreal plumbers, decrease of ten per cent, in elevator workers’ wages in some plants at the Head of the Lakes, a proposal to cut wages by ten per cent, in furniture factories at Stratford, reductions in big implement and meat packing plants, and other similar

incidents. Meanwhile, armies of the workless grew in the larger centres of population, unemployment in Canada reaching its peak in March.

Employers Put Cards on Table

IN SOME instances there have been voluntary acceptance of wage cuts, notably where the employees have been taken into the confidence of the firm for which they work and shown that a cutting down in labor costs was absolutely necessary. But, unless the observations of leading labor students of this phase of the situation are misinterpreted, these same men who have accepted a lower price for the product of their toil will demand lower prices for the necessities which they must buy. That mood is but fair and to be expected. Lowering of rents will possibly present the greatest problem until such time as construction under reduced costs supplies sufficient dwellings to take care of the urban populations. The rent problem also applies to the retail merchant, who finds he has the same overhead—and in some cases a higher one—to carry in this respect than he had to carry during the wartime carnival of high prices.

What do employer and employee individually think about the situation? Naturally, there is a conflict of opinion as to how reductions should take place and how much of a reduction is necessary. After several weeks of mixing with representatives of both in the larger Canadian cities, I think the composite opinions of employer and employee might be individually condensed to the following:

“It ought to be all very simple to reason out,” says the employer. “Before the cost to the consumer of manufactured goods is reduced to meet public demand the cost of raw material and of the principal commodity utilized in production, namely labor, must be reduced. Surely the financial difficulties many manufacturing firms are facing through lowered prices for goods produced on the former high peak of production costs ought to teach us that. It’s up to Labor to save the situation by accepting the inevitable.”

“There is nothing complicated about it,” argues the employee. “The cost of the necessities of life should come down before the working-man is asked to take a reduction in his pay. A reduction of wages means a reduction of the spending power of the nation. Will rents come down? Will taxes come down? Will our national debt be reduced? These things were incurred during the period of inflated values and part of them seem bound to remain as they were. How are we to meet these obligations with a lowered earning power?”

Workmen Offer Co-operation

IF THESE attitudes were to continue inflexible a national crisis would sooner or later be the result. Happily, however, there appears to be a new spirit of co-operation springing up between employer and employee in this crisis in Canada. A notable instance is that of the International Harvester Limited. At the Hamilton branch of this concern a reduction in wages and piece-work was declared necessary by the executives. The Works Council of the plant dealt with the matter and five of the representatives of the men spent five days investigating the records of the company upon which the proposed reduction in wages had been based. They were given the open sesame to the books of the firm, and at the end of the investigation made a frank announcement that they found the company was quite justified in making the reductions called for and that in all fairness the same should be accepted by the men. Here was a ease of commendable co-operation. The company, faced with either reducing wages or closing shop, put it up to their men and supplied proof of conditions; the men, after discovering the allegations of the company to be facts, in a reciprocal spirit of fairness accepted the reductions called for. There have been a number of similar instances of co-operation. A firm, whose name I am not at liberty to disclose, told a committee representing the workmen that there was a choice of three alternatives; reduction in wages, increase in production or close up shop. The men asked time to put in recommendations to the company and later declared that they could considerably increase production per day if certain suggestions on their part were put into service. The company in turn saw the wisdom of the suggestions made by the men, put them into effect and the result has been that they so far have found it unnecessary to make the wage reductions proposed. As an instance, one of the numerous suggestions made by the men was the removal of an oil-house in the yards which necessitated a wide détour on the part of a gang of men engaged in transporting material by hand from one building to another. The acceptance of this suggestion alone resulted in a considerable saving of time and labor.

Co-operation between employers and employees during

the present ticklish industrial situation is generally hailed as the readiest and most satisfactory solution of the greatest problem Canada has on her hands at the present time—that is the problem of readjusting values. A former official of the Canadian Manufacturers’ Association, in a public statement made recently, predicted a general impetus to business all over the Dominion once building operations, now held up by excessive costs, were got under way. He advised building material manufacturers, the builders and Labor to get together at a round-table conference. He was confident Canadian Labor would be ready to do the square and the fair thing under such circumstances. “We all have to play our part to bring back better conditions,” said he. “It seems to me that above all else we ought to give our attention to the question of housing. Architects’ offices are crammed full of plans held back simply on account of the high cost of building.”

Sir Frederick Williams-Taylor, general manager of the Bank of Montreal, in an address in Montreal, recently, took for the keynote of his remarks on the present situation, “Keep your eye on the ball,” implying that employer and employee must gauge the value they placed on their product and their efforts on the trend of the times. “What we want to-day,” declared Sir Frederick, “are lessened importations and greater production. But if you cut down importations you lessen national revenue. The answer to this is to increase the population by immigration, and to do this you must make this a cheap country to live in.”

What Workmen Fear Most TMPERIAL OIL LIMITED is a firm in which co-

operation of employer and employee has flourished to as great an extent as anywhere in the country. The pay-roll of this company is somewhere between $10,000,000 and $11,000,000 a year, and, I am told, every second man in the employ of the company is a shareholder in its stock. There is a board in every plant in Canada, composed of representatives of the company and its men, whose business it is to consider wages, hours of labor, environment, grievances and all other matters appertaining to the welfare of the workmen as well as the company. Victor Ross, vice-president of Imperial Oil Limited, expresses the opinion that the same co-operation which has made for success in that company’s dealings with its employees might be more widely copied by employers and employees all over the Dominion. On the other hand, Mr. Ross was ■ free to admit that building and development work had not opened up this spring in the volume that it should have and there must be a cause. This cause was no doubt the cost of labor and material. Thus the housing situation was being made more vexed. “However,” remarked Mr. Ross during the course of our interview, “I am not inclined to think that many strikes are caused by a mere desire on the part of the workman for high wages. It is the fear of wages insufficient to take care of the needs of himself and family and the fear of unemployment or oppression that in the main brings about the desire to strike.

“It seems to me,” Mr. Ross continued, “that this would be a very good time for manufacturers and employers of labor in general to show that there isn’t really any disposition on the part of employers to wreck labor institutions—and indeed that there hasn’t been any such desire in the backs of their minds. I have no doubt that there are other firms who, like ourselves, could get along at the present time with less men than they are employing, and did they have any wish to put up a fight against Labor have an opportune time to wage it.

Our answer to any intimation of that sort is that we have kept on our men. There was a great deal of unity between all classes of Canadians during the war. The workmen declared they were willing to ‘carry on’—and they did magnificently.

There was no individual claim to patriotism in those days when we were all inspired by a common ideal.

That fine spirit and the team work which it brought about on the part of employer and employee should be maintained. Now, if any time, it is particularly needed in this country.”

That labor costs are definitely to blame for the semi-stagnation of building operations at a time when building operations should be booming was, on the other hand, an opinion expressed by James G. Merrick, secretary of the Employers’ Association. Mr. Merrick is a lawyer and a student of economics.

“Excessive labor costs, shortened hours of labor, strikes and the like are all checks on production that tend to add to the cost of the finished article,” said Mr. Merrick. “And prices were so forced up by these means that the mass of the people decided they didn’t want the articles, irrespective of the urgent need, because of the undue cost of any and everything offered. Now the demand for manufactured goods has not fallen off one iota. It is probably greater by twenty-five per cent, than it was in 1914 for manufactured goods in general and greater by one hundred per cent, in connection with building demands. But people will only be forced by the greatest necessity to buy on what they believe is a declining market. That, my dear sir, is the principle at issue. The reason is that people are not anxious to put their money in investments that have not some certainty of success. The war-time level for wages has remained in vogue with railwaymen and construction men, though the public has long since demanded reductions in all other lines. People will not pay war-time levels for goods; then how can Labor persist in demanding war-time prices for its product? Before building construction can be started on the scale it should by now be operating there will have to be a shrinkage in building trades costs of not less than twenty-five cents an hour and in labor of not less than twenty cents an hour. General industry is fairly free from the long-term agreements fastened on railway and construction organizations and that is the reason labor costs are decreasing elsewhere in keeping with the trend of the times. Building and transportation rates are therefore still at the peak and present a distinct obstruction to the readjustment under way.

“Now,” concluded Mr. Merrick, “if the Labor organizations in the two last mentioned fields would accommodate themselves to reasonable reductions from war-level wages, normal conditions would be established in Canada within a few months.”

The Montreal Gazette in a recent editorial put forward somewhat the same contentions as those of Mr. Merrick in this terse language: “If wages are decreased proportionately to the cost of living, the factors will act and react one upon the other, deflation will be brought about, and an orderly readjustment to more moderate prices occur.”

TOM MOORE, President of the Trades and Labor Congress of Canada, however, sees matters from a somewhat different angle. “They, all seem to be willing to let someone else take the initiative in the deflation,” Mr. Moore observed during a chat recently with him in Ottawa. “Manufacturers and merchants each seem anxious to pass the burden along. It is quite natural for the employer who has goods on his shelves on which he cannot derive his former profits to ask his employees to share his losses with him, but it is a question as to whether, from an economic standpoint, this is not a mistaken policy. A lowering of the prices of commodities without any lowering of money wages of the laborers would be equivalent to increasing the buying power in the safest market we have—the home market.”

Mr. Moore pointed out that the largest part of our national debt was contracted on a basis of money interest

in 1917-18, interest rates being fixed by taking into consideration the purchasing value of the money interest to be paid. “We are now told by financial experts that the problem to-day is to produce sufficient goods to meet the interest on that debt,” argued Mr Moore. “The remedy

they would apply is to go back as nearly as possible to 1914 labor and farm produce prices, which would mean that the holders of the bonds for the debt would receive double the quantity of goods they would otherwise receive; in other words, the burdens of this debt would be doubled on the country. That’s what it would mean if we went back to 1914 cost of production. The interest on this debt is actually paid in goods produced and only nominally in currency.”

Mr. Moore attributed the quieter tone of business generally to the reduction made in wages in many lines and the large number of men thrown out of employment. “Men have not sufficient money coming in in wages to meet present high prices, and they cannot buy,” argued Mr. Moore. “Now the remedy generally suggested is that of reducing wages further so that the purchasing power of the masses will be still lower than at the present time. There should be no surplus of goods on the shelves of manufacturers or merchants. All the goods that are manufactured are needed by the people, and the remedy for the present semi-stagnation is not reduction of wages but reduction of margins between actual cost of production and the selling price. During the period of inflation many industrial concerns diverted their war time profits to the increasing of the size and capacity of their plants, and the volume of business in normal times is not sufficient to carry the overhead burden of such capitalization—except by placing an unwarranted amount for overhead charges on the cost of every article turned out by the plant.”

“A lowering of the wages of labor should not precede a fall in the cost of living,” concluded Mr. Moore, “and further it should not of necessity follow down the scale with any such decreases. Improvements in machine production should be reflected in improved standards of living for the workers. The workers know, and do not need any teaching, that they can only share in that which they produce. They are not foolish enough to participate in any policies that would lead to the destruction of necessary capital to maintain and develop industrial enterprises.”

RAILWAYMEN’S wages have been perhaps more in the limelight of late than any other. “The McAdoo award,” said D’Arcy Scott, a former member of the Dominion Railway Board, in an address before the Canadian Club at Toronto, “meant an immediate increase of $77,800,000 in wages to be paid by Canadian railways. The result of the McAdoo award and the award of the Chicago conference was an application from the railways for power to increase their rates forty per cent., which the Dominion Board granted. The high railway wages keep up wages in other industries, and retard a return to normal conditions.” The Government, he said, should deal with railway wages on their own merits.

Speaking of the McAdoo and Chicago award at Calgary, Hon. F. B. Carvell said the real iniquity of the rulings was not the amount of wages to be paid for work, but the conditions that allowed overtime. The chairman of the Dominion Railway Board struck a unique chord when he declared in the same address that he would like to see the day when Canadian business men, railway men and railway officials could gather around a table in Canada and settle their own differences, instead of adopting awards made in the United States.

On the other hand, Hon. Gideon Robertson, Minister of Labor, declares that railway wages in this country, considering the responsibilities railway men carry and the character of their work, are not too high. He added that railway engineers, entrusted every day with the care of life and property and subject to call of duty at all hours of the day or night, re'ceived but 89 cents an hour, or $7.12 for a hundred miles. Incidentally, at the ot her end of the division on their runs they had to pay for (heir lodging and meals out of their own pockets. Senator Robertson did not believe there was a locomotive engineer making over $800 a month.

Are Women Cause of Class Strife?

T L. PELTIER, Canadian deputy president, Order of Railway Conductors, seen at Ottawa, frankly commended the efforts of the Minister of Labor in arranging conferences between employers and employees. Mr. Peltier was of the opinion that such conferences should not only take up the question of wages and conditions of labor but should discuss economic issues, such as the international

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exchange, foreign trade, the national debt and other matters of national scope having a bearing on the sale and distribution of what labor produces.

Mr. Peltier did not think it was so much a question of high wages with the Canadian workman as it was of insisting that he receive reward for his toil that is sufficient to maintain himself and his family in a manner befitting a self-respecting Canadian citizen. It was the attempt to set up class that caused bitterness leading to industrial strife in this country, he said. “Let me tell you a story to illustrate the point,” urged Mr. Peltier. “I was riding one day in a beautiful big motor car with a well-known and successful Canadian manufacturer—a charming gentleman it is a delight to talk to—when he turned to me and said: ‘Peltier, these workmen are getting too much money.’ Then he laughed whimsically as the beautiful roadster took a graded curve with velvety ease. ‘Do you know, Mrs. Blank and I were out for a spin last Sunday when my foreman and his family came whirling along in a new car and gave us their dust. Now what do you think of that for modern audacity?’ The circumstances and the way this owner of a six thousand dollar car took it amused me. ‘Well,’ I replied, ‘the preachers used to be preaching against the poor man envying the rich. And the newspapers indulged in similar didactics. Now everything is becoming reversed: the rich man is actually envying the working-man.’ That struck Mr. Blank as so unique that he begged: ‘Do come to the house and tell that to Mrs. Blank.’ Though I did not then see his drift, I consented. Wine and cigarettes were brought in on a wheeled curate. Mr. Blank artfully brought the conversation around to motor cars, when Mr. Blank let it drop that they owned no less than three. Blank referred to the incident of his foreman passing them in his car on the Sunday previous and asked me to repeat what I had said to him about the rich now envying the working-man. I did so. ‘The preachers used to warn the poor against the sin of envying the rich,’ said I. ‘Now the shoe seems to be on the other foot; the rich actually envy the poor man.’ Mrs. Blank stared at me in consternation and_ she let her lighted cigarette fall heedlessly into the fold of her expensive gown where it did irreparable damage before the fire was smothered. Nevertheless, when Blank was driving me back to my hotel, I heard him chuckling to himself. Then it began to dawn on me why he wanted me to repeat what I had said to him to his wife. Blank didn’t in the least mindhis foreman having a car nor his running along in front of him or behind him on the road—but his wife, Mrs. Blank, did mind—most decidedly! Therein lies the root of most of our industrial troubles. On the other hand, the womenfolk of the workingmen will never consent to going back to pre-war standards of living. If you want trouble, make the women of the nation discontented. Our friend, Kipling, was right about the female of the species.”

J. A. Woodward, of Montreal, who is often described as a coming national leader of Labor and the publisher of The Railroader, insists that the present situation cannot heal itself. “What will grow out of it, if it is allowed to work out its own salvation, is perilous to contemplate,” he declared. The crying need of the country, Mr. Woodward added, is for politicians who can visualize the future and devise means of averting an industrial and financial crisis. From the standpoint of national welfare Mr. Woodward does not agree with those labor leaders who have been endeavoring to stem the tide of immigration to Canada. “Immigration in large

numbers to our unpeopled West and North would be our salvation,” he declared. “‘Every new man who goes into our hinterlands with an axe to cut down the trees is an asset and another unit in establishing the most valuable of markets—the home market. Every such man must be clothed and fed while he is helping to hew the raw materials into saleable products.”/ _ r, [ ’.

Mr. Woodward is a decided believer in co-operation between employer and employee, “but,” he points out, “if a lowering of costs has to be effected the employer must be prepared to shoulder some of the inconveniences that retrenchment brings with it; he cannot expect the workman to stint himself and his family while he sees his boss and family carrying on their oldtime extravagances in home and social life. The boss must be prepared to pool some of his accumulated wealth with the workman’s toil to meet deflation, or let me tell you there may be a day when he will have it all taken from him.”

Why Railway Wages Remained Up

FEATURE of the railway wage situation that has not been generally commented on is that ninety-two per cent, of the membership of the railway Brotherhoods concerned is located in the United States. It has been pointed out that the remaining eight per cent, of the members working on roads in Canada could not secure a lowering of the scale even if they wanted to. One authority stated that it was inevitable that the McAdoo award would govern till a change is accepted by the Brotherhoods. Another feature is that the McAdoo award was not simply a gift handed out; it was a concession the United States felt compelled to allow in order to retain railway labor at the time it was brought into vogue. The same demands were being made by railway labor in Canada with the result that the Canadian Railway War Board, which was empowered to act by the Canadian railways, advanced concessions somewhat similar under the same pressure as was felt in the States, and it was felt advisable to make the conditions uniform rather than run the risk of being compelled to grant something even more onerous.

S. J. Hungerford, Vice-President of the Canadian National Railways in charge of Operation and Maintenance, could not see that railway labor is particularly better or particularly worse than any other branch of labor in holding out for high wages or that it differs in its methods except that it is more strongly organized and therefore • in a better position to enforce its demands.

In Manitoba and the Western Provinces, organized labor has not yet recovered from the effects of the disastrous sympathetic strike of 1919. There are still two sets of labor units in the West—the international union and the O.B.U.-—resulting in divided forces. Leaders are now trying to obviate this division to some extent by securing a working agreement between the governing forces of the two bodies. The situation in the meantime has resolved itself into an effort on the part of Labor to hold what it has, with the employer generally willing to consent to maintenance of wage scales providing no other concessions are demanded. Contractors report an increase in individual production on the part of their workmen, owing principally to the lack of construction work this season and the consequent shortage of employment. J. W. Mitchell, Director of Employment for Alberta, recently reported an improvement in conditions in that province. The demand for farm-hands was largely responsible for this, 926 men being placed on agricultural jobs during the month of March alone. The United Farmers’

Associations have decreed a twenty-five per cent, reduction in farm_ wages. Fifty and sixty dollars a month is the amount being paid farm-hands in comparison with last year’s standard wage of eighty dollars a month.

Good Times are Just Ahead

ALL IN ALL, the lower prices bogey A need have no terrors for either employer or employee if both decide to accept the facts as they are and decide to meet the situation fairly. The danger lies in subterfuge on both sides or either side. Readjustment of the prices of life’s necessities must he completed and the sooner it is

completed the sooner will there be a return of public confidence, a rehabilitation of retail business, a reopening of factories, an increased building program, lower rents, and employment for everyone.

Leaders of thought seem all agreed that there is a real period of reconstruction just ahead—not the reconstruction many visionaries conceived would follow immediately on the conclusion of peace, but a reconstruction made imperative by worldwide exhaustion following the war period.

What matters it, say, if there are only half as many dollars in circulation, provided one can obtain twice the value or more for every dollar he spends?