M A Y 1 9 4 6
MORE people were on strike late in January than at any other time in the history of the country. Likewise, the proportion of the work force on strike was greater than ever -- higher than during the great post-war strikes of 1919 or the great eight-hour strike of 1886. In fact almost as much time was lost from strikes during January and February as during the preceding two years. Despite the settlement of several important strikes, the period of great labor difficulties is far from over. The upsurge of strikes which followed the First World War lasted three years in Britain and over a year in the United States. When many of the agreements negotiated this winter in the steel, automobile, rubber, and electrical industries expire next year, the country is likely to be confronted with another great labor crisis. Paradoxically, the stiff wage advances (far greater than have ever been made before in the history of the country) will make for even bigger demands by the unions next winter because these increases will force advances in the cost of living.
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Have the strikes been worth their cost? Have they been a valuable experience
for employers, unions, and the government? Do they provide useful guidance for
handling future disputes? Will they help avert another large series of
shutdowns next winter? Or have they widened the gulf between unions and
managements and thus prepared the way for bigger and harder-fought
battles? What have government, unions, and employers to learn from them?
Let us begin with the government. Soon after V-J Day the President relaxed the wartime wage controls and announced that the basic labor policy of the government would be the restoration of collective bargaining. Price controls, however, were to be continued, and the general rule was that no wage increases might be used as the basis of price relief. Only a few exceptions to this general rule were recognized.
About four thousand wage increases were negotiated without strikes or lockouts and without disturbing the government's price policy. The government, however, did not long adhere to its twofold policy of relying on collective bargaining to settle disputes and of refusing to permit wage increases to be used as the basis for price relief. The first break in the government's policy came with the appointment of a so-called fact-finding board to recommend a settlement of the wage dispute in the oil industry. A second break came with the appointment of a factfinding board in the General Motors dispute. Each case meant that government wage-fixing was being substituted for collective bargaining.
Although the government had seized the oil plants and was later to seize the meat-packing plants, the reports of the "fact-finding" boards were recommendations only. The real sanction forcing reluctant employers to pay the recommended wages was the willingness of unions to strike rather than accept less -- plus, as I shall show, the willingness of the government to raise price ceilings. Likewise the sanction against reluctant unions was only the unwillingness of employers to pay more than the recommended rates.
Soon after the oil and motors disputes came the steel and meat-packing cases, in which the government's price policy, as well as its labor policy, was involved. In each dispute employers were willing to make only limited wage concessions without price relief. As a result, the government was confronted with a difficult dilemma. It might refuse to modify its price policy, thereby imposing a special disadvantage upon employers and workers in industries where labor costs were high relative to prices. Or it might modify its price policy in response to strikes or threats of strikes, thereby rewarding both unions and employers for using economic pressure to force changes in public policy, and encouraging them to use the same method to force future changes in public policies.
The government suggested specific wage increases in both the meat and steel cases -- again substituting government wage-fixing for collective bargaining. In addition, the government decided to modify its price policy and gave the steelmakers and meat packers sufficient price relief to induce them to concede the wages suggested by the government. The wage settlement of 18½ cents an hour in the steel case was suggested by the President himself. This suggestion was a major blunder and a body blow to collective bargaining. Thousands of union leaders had settled for less (indeed, four out of five settlements had been for less), and the employers had received no price relief. The President's recommendation made the leaders who had accepted less than 18½ cents seem like "easy marks."
Furthermore, since the President had said that the well-paid steelworkers were entitled to 18½ cents, even at the expense of consumers, union leaders have henceforth found it difficult to accept much less. Many contracts calling for less than 18½ cents are being made, but the chief settlements in Ford, Chrysler, General Motors, the rubber industry, General Electric, and others call for 18 cents or 18½ cents. Although these settlements were formally made by collective bargaining, in reality they meant government wage-fixing.
TWO major questions obviously confront the government. One is whether it should continue to bargain with unions and employers over its price policy. The other is whether it intends to continue to fix wages, or whether it will revert to its original policy of relying upon collective bargaining to settle disputes. To be specific, if the Office of Price Administration is still in operation next winter and if another great wage crisis occurs, should the government again bargain over the terms of its price policy and should it again name the wage increases for which it will give price relief?
If industrial efficiency rises rapidly during the next nine months, even stiff wage demands by the unions next winter may not raise questions of price relief. A quick rise in efficiency, however, will not be easily accomplished, because supplies of new equipment are extremely scarce. The Office of Price Administration can help industry increase efficiency by allowing liberal price ceilings on equipment and parts. Here is one of the many cases where increases in a few prices will help keep down many prices.
The chances are, however, that next winter's wage demands will again raise price issues. In this event, there can be no doubt concerning the proper course for the government to pursue. The issue is broader and more basic than the specific question of whether price policy should be made by bargaining between the government on the one hand and employers and trade unions on the other. In a democracy all groups have an opportunity to influence public policy through the elected officials of government. The use of economic coercion to force changes in public policies is incompatible with democratic institutions. Indeed, strikes to coerce the government are specifically outlawed in Britain -- as they should be in this country. Painful as the decision may be, the government has only one choice: to make clear that it will not bargain over its price policy.
The government will not find it easy to cease bargaining with employers and unions over the term of its price policy. The government has already engaged in so much bargaining of this sort that a declaration that it has turned over a new leaf and that it will no longer bargain over price relief would not be convincing either to employers or to unions and might have to be tested by strikes before the government's word was accepted. These strikes might be large and long. The alternative policy however, would also mean interruptions to production -- as recent experience has shown. The more successfully the government convinces both employers and unions that it will no longer submit to economic coercion, the less is the likelihood of strikes against the government.
The policy which the government adopts toward prices will determine the policy which it pursues toward the adjustment of wages. If the government refuses to bargain over price policy, it will be able to rely upon collective bargaining to settle wage disputes. In fact, it will be virtually impossible for the government to avoid bargaining over price policy unless it refrains from fixing wages. On the other hand, if the government bargains over price relief, it will be forced to fix wages, because it will have to name the wage increases for which it is prepared to grant price relief. This procedure, of course, would be incompatible with collective bargaining between employers and unions. Trade-union officials, having been caught once negotiating smaller wage increases than the President and his "fact-finders" later recommended, will be careful to make no binding commitments.
If the cost of living goes up appreciably between now and next winter, the government will be under great pressure to fix additional wage increases which will be approvable in case price relief is sought. The government should refuse, because raising wages would not cure the situation. A rising cost of living means that the demand for goods exceeds the supply of goods. Raising wages would simply make the situation worse, because it would make demand outrun supply more than ever. In other words, it would help bring about inflation by making higher prices produce higher wages, which in turn would produce higher prices. The only way to halt rising costs of living is to increase the output per man-hour.
WHY not let the government fix wages? What interest does the community have in whether the government fixes wages itself or relies upon collective bargaining to adjust differences over wages?
Collective bargaining has the drawback that the wages set depend upon the relative bargaining power of the parties and hence may not be "fair." In some cases the interests of the community may suffer because collective bargaining sets wage rates which seriously limit the expansion of certain industries which need to grow in order to make possible a high level of employment. Building construction might be a case in point. For these reasons, one can make a strong case for the view that collective bargaining should be conducted within the framework of a national wage policy.
The drawbacks to government wage-fixing, however, are formidable and far outweigh any advantages which it may have. One of the most important disadvantages of government wage-fixing is that the resulting wage structure is not likely to reflect accurately conditions in different industries and in different parts of industry. The recent steel case illustrates the point. The recommended 18½ cents has not been limited in its application to the companies engaged in producing steel. It has been extended to a large number of fabricators of steel scattered among more than sixty industries in which there is wide variation in competitive conditions. Some plants have been compelled to make far higher wage advances than their competitors. Some of these competitors had already made settlements with other unions, and some are not organized at all.
So long as demand for goods greatly exceeds supply, the effects of government wage-fixing upon the competitive position of the various steel fabricators may not be serious. After the most urgent "catching-up" demand has been met and when success in obtaining business depends upon production costs, many firms which gave the increase will have trouble in meeting competition.
Another serious drawback to government wage-fixing is that it prevents the terms of employment from being a matter of agreement between employers and unions. An agreement is important simply because it is an agreement -- a creation of two sides which must live with it, not something imposed on them from the outside. Since it is theirs, they must take the responsibility for making it work. The recommendations of a fact-finding board or of the President may coincide precisely with the terms which the union and the employer might negotiate. Nevertheless, the fact that this settlement is imposed alters the attitude of the parties toward it and makes it less workable than a negotiated settlement.
Fully as important as the nature of the settlement is the nature of the process which produces the settlement. Government wage-fixing tends to divide the parties and to keep them apart. In hearings before a fact-finding board, management and the unions stage a fight. They present opposing cases and make the minimum of admissions. Their effort is to persuade outsiders, not to persuade each other. The very process encourages bluffing, threatening, and playing to the galleries, and is likely to leave the parties farther apart rather than closer together.
Very different are the possibilities of negotiation. Bargaining can, of course, also be a matter of bluffing and threatening. Indeed, an able union representative has called collective bargaining "a war of nerves" in which victory goes to the side which keeps its nerve right up to the end when the other side breaks. Or the bargaining conference may simply be an occasion for one side to dictate terms to the other. None of these situations, however, represents collective bargaining at its best. At its best, negotiation becomes a mutual exploration of problems. It is a way by which each side learns more about the problems of the other, by which each side endeavors to persuade the other to accept at least part of its views, and by which the two sides work out acceptable compromises. Hence, it is informative and persuasive and tends to bring the parties closer together rather than to fortify prejudices and to perpetuate misunderstandings.
The foundation for good industrial relations is mutual interest in each other's problems and the will to cooperate in solving those problems. Such an interest and such a will cannot be imposed from without by government fact-finders, or by anyone else. They must be built from within by the parties themselves. They are created in large measure by negotiation -- the very process which shrivels and withers when the government fixes wages.
Finally, government wage-fixing would have disastrous effects upon the political life of the community. Certainly government wage-fixing would adversely affect the kind of men nominated for the Presidency. If the President were to be directly or indirectly the principal wage-setter of the country, many people would determine their preferences among the several candidates by the views of the candidates on wages. Other qualifications, such as views on foreign policy or fiscal policy or the capacity of the candidates as administrators, would become less important in determining the choices of many voters. Inevitably the difficulties of getting well-balanced and capable men nominated would be enormously increased. Government wage-fixing would need to have impressive economic superiorities to compensate for its bad effect upon the Presidency and upon the political life of the community.
WHAT questions do the recent strikes present for trade unions? Three stand out above others: --
1. Were the strikes necessary?
2. Were the results worth the costs?
3. Should unions rely in the future on collective bargaining or government wage-fixing?
The thousands of settlements made without strikes suggest that more skillful negotiating might have averted the strikes in General Motors, steel, meat packing, and electrical goods. Perhaps more skillful negotiation would have led both unions and employers to make further concessions -- though in view of the rivalry among unions and union leaders for prestige, further union concessions would have been unlikely. Given the demands of the unions and the necessity of forcing the government in some instances to change its price-control policy if the union demands were to be granted, strikes were inevitable. Most of the settlements made without strikes had been for rates substantially below the 19½ cents recommended by the "fact-finding" board in the General Motors case and the 18½ cents recommended by the President in the steel case. The U. S. Bureau of Labor Statistics has tabulated 149 increases which occurred between August 18 and January 10. Out of 87 increases which took the form of cents per hour only 6 were above 15 cents, and out of 62 percentage increases only 8 were above 15 per cent.
Were the strikes worth while from the union standpoint? They were hardly justified by the wage increases won. Not until early in 1948, for example, will the workers in General Motors be as well off as they would have been had they not struck and had they worked steadily without any wage increase whatsoever. Not until 1953 will the employees of General Motors be as well off as they would have been had they accepted the company's offer of 13½ cents. Two and a half years will be required before the employees of General Electric are as well off as they would have been had they accepted the company's compromise offer of 10 cents and 10 per cent. The employees of the U. S. Steel Corporation will require more than two years before they will have made up for their refusal of the company's compromise offer of 15 cents.
Certainly when the union members in the several organizations voted on whether to authorize a strike, few of them could have contemplated strikes as long as those in General Motors, Westinghouse, or even General Electric, and many of them did not expect to strike at all. The prediction by a CIO official early in December that the General Motors strike would last until the middle of January was vigorously denounced by the strike leaders as unduly pessimistic -- although it turned out to be far too optimistic. Some people argue that the time needed for wage increases to compensate for time lost will be diminished by overtime work which will be cause by the strikes. On balance, however, the higher wages forced by strikes will diminish the amount of overtime.
The strikes must not be judged, however, too much in terms of wage increases. Some of their unintended results are among the most important and the most useful. Successful collective bargaining presupposes a fairly accurate estimate by each side of the other side's strength and willingness to fight. In steel, automobiles, electrical goods, and a few other industries, the employers and the new union. have now each tested the other. Most of the tests were perhaps not long enough to be conclusive. Furthermore, the fact that the President had recommended a definite wage increase prevented the tests from being entirely satisfactory. Nevertheless, each side knows much more about the other than before and has more respect for the other's fighting qualities. This knowledge should help them negotiate compromises in the future.
Some of the new unions have been handicapped by interunion rivalries and also by competition among officers for position and power. These rivalries have made one union demand as much as another demanded, regardless of differences that may exist between the industries, and have made union officials reluctant to recommend compromises to the rank and file. The recent strikes may do a little to correct these conditions. Members now know by actual experience what a strike costs, and so do their wives. Many a steelworker, electrical worker, or automobile worker win have to postpone buying a new car for a year, and many wives of workers in these industries will not buy spring outfits this year. Members have also learned that a strike vote may mean an actual strike, that they had better not authorize a strike unless they are willing to engage in one, and that they can avoid strikes by permitting their officers to negotiate compromises.
Recent strike experiences may cause union members to be less tolerant of officers who precipitate long strikes for the sake of personal prestige -- in order to avoid accepting less than some other union or in order to get a bigger increase than some other union. If the strikes reduce the influence of union politics upon negotiations, they will make disputes next winter easier to settle. The influence of recent strikes, however, must not be overestimated. Perhaps these strikes have not been large enough or long enough to make union officers willing to go very far in accepting responsibility for compromises. Furthermore, rivalries between unions appear to be on the increase. Consequently longer and bigger strikes may be unavoidable.
Is the recent experience of unions with government wage-fixing likely to cause them to prefer government wage-fixing to collective bargaining? This is a question of great importance, because after the government relinquishes price controls, disputes will be much easier to settle by collective bargaining provided both parties wish to use this method. Union leaders are virtually unanimous in saying that they prefer collective bargaining to government wage-fixing, and yet no one can predict what they will do in a crisis. Government wage-fixing has not prevented strikes (perhaps it has increased their number), but it has given the unions larger wage increases than they could have won by bargaining. Furthermore, government wage-fixing has strong attractions for leaders who do not have a secure political position within the union. A "fact-finding" board relieves the leaders of the necessity of recommending compromises, because the recommended settlement comes from the government.
At this point one sees why government wage-fixing is incompatible with collective bargaining and why it increases the likelihood of strikes. The very prospect that the government will intervene tends to make each side inflexible and unwilling to compromise. Once the government has made a recommendation, the situation becomes more rigid than ever. It becomes doubly hard for a union leader to ask the rank and file to accept less than the recommendation. Thus government intervention, by interfering with the process of negotiation and by reducing the willingness to compromise, makes strikes more likely and also harder to settle.
Although government wage-fixing has helped new unions gain larger wage advances than they could have obtained by collective bargaining, it may not in the long run produce as high real wages as collective bargaining. Unions which learn to be dependent upon the government will be retarded in becoming strong bargaining agencies. Their leaders will be less likely to acquire skill as negotiators, and the members, knowing their gains came from government pressure, will be less strongly attached to the organization. Unions should recognize that government wage-fixing alters their role in industry. It handicaps them in developing effective day-to-day relationships with employers, and thus limits their capacity to contribute to plant efficiency. Since wages in the long run must come out of production, anything that makes unions less effective as intdustrial organizations limits their capacity to raise the wage level.
WHAT issues does the recent strike experience present to employers? The strikes have cost employers far less than employees because payments to wage earners are considerably more than overhead costs and profits together. Consequently, the loss of wages attributable to recent strikes will be from five times to ten times as large as loss of profits. Experience with recent strikes does make plain, however, that the choice between government wage-fixing and collective bargaining depends in large measure upon management. Since some unions and many government officials are not averse to government wage-fixing, collective bargaining must find its champions largely from employers and the older unions. Establishment of this fact is probably the most significant result of recent strikes from the standpoint of management.
Most employers are not yet prepared to become champions of collective bargaining -- to attempt to make it work so well that there is no demand for government wage-fixing. Most employers have been opposed to dealing with unions and wish to have as little to do with them as possible. Furthermore, they find many of the new unions difficult and, in some cases, unreliable. Frequently, the most responsible employees do not participate actively in the union. Sometimes they hold aloof from the union in order to win favor with management.
Good industrial relations must be based on the foundation of good relations between foremen and shop stewards. In many plants shop stewards and foremen are not working together effectively. Too often neither has proper understanding of the other's job and duties, and in some cases plant management and union business agents have not joined to see that foremen and stewards get on satisfactorily. If managements wish collective bargaining rather than government wage-fixing to settle wage disputes next winter, they must immediately adopt two policies. In the first place, they must start at once to develop better day-to-day relations with unions. In the second place, they must plan to do everything possible to make negotiation an effective process in which each side has confidence.
Good day-to-day relationships are important because, as each side develops confidence in its ability to get on with the other, each becomes more reluctant to bring outsiders into their affairs. The initiative in developing better relations in the shop must usually come from the employer, because management makes most of the decisions around the shop. Indeed unions can prosper on hate and misunderstanding as well as on understanding and coöperation -- though most members are undoubtedly happier when the union and the boss are on friendly terms. Furthermore, union representatives dare not risk being very friendly with management unless the employer has won a strong reputation for fairness among the rank and file.
The success of collective bargaining in averting government wage-fixing will depend in large part upon the quality of negotiations. There is as much difference in the quality of negotiators as there is in the quality of salesmen. At the beginning of negotiations one expects the two sides to be fairly far apart. Ably conducted negotiations bring them closer together. Complete agreement is unnecessary. If the compromises invented reduce disagreement to issues of secondary importance, strikes and lockouts will be prevented.
The opportunity for negotiators to invent acceptable compromises is improved when each side makes proposals. Many employers have assumed that demands should come from the union and have contented themselves by simply saying no. This is not a fruitful process. The members of the union measure the outcome of the negotiations by the disposition of certain demands. The more demands employers make, the greater is the opportunity to grant crucial demands of the union on terms which are acceptable to employers.
Even if collective bargaining fails to produce successful compromises, the next step is not inevitably government wage-fixing. Arbitration has been sadly neglected in recent discussions, but it has important advantages over "fact-finding." One is that the parties themselves have a chance to name the board, and thus to get the dispute into the hands of men who command their confidence. A second is that the parties define the issues to be considered. A third is that the parties bind themselves in advance to accept the award of the arbitrators.
Some progress in the use of arbitration as a device to avert government wage-fixing has been made. Little noticed, but highly important, has been the agreement made in January, 1946, by the railroads and all but two of the railroad unions to submit their important disputes to arbitration. In a nation which prides itself on the capacity of citizens to manage their own affairs, should not the National Chamber of Commerce and the national federations of labor be able to establish a panel of experienced arbitrators from which the parties might select boards to decide the unsettled parts of their disputes?
IT IS too early to judge how useful the strikes of the last winter have been to government, trade unions, and employers. Perhaps the government has learned to place more reliance upon collective bargaining to settle disputes; perhaps the strikes have made the members of unions more realistic and more willing to permit their leaders to compromise; perhaps employers have been impressed with the need for better day-to-day relations with unions and with the importance of improving methods of negotiation. These questions will be answered next winter when existing agreements come up for renewal. The manner in which negotiations are conducted will be one test of the usefulness of this year's strikes.
One should not expect the course of industrial relations in the United States to run smoothly for some time to come. The growing rivalry between unions and between union leaders will tend to keep union leaders from becoming interested in the problems of their industries, and will therefore hinder the development of better industrial relations. A multitude of difficult problems remain to be solved. Consider, for example, the complicated collective bargaining pattern which exists in some industries (particularly in the metal trades but in others as well), where certain competitors deal with one union, say the United Steel Workers, some with the United Electrical Workers, others with the International Association of Machinists, others with federal A. F. of L. locals, others with no union at all. Conducting bargaining under those conditions and working out a rational wage structure is difficult in the extreme.
Another tough question is the right of unions to employ strikes, boycotts, pickets, or other forms of economic pressure to force men to join -- even men who already belong to other unions. The Wagner Act purports to protect the right of workers to bargain through representatives of their choosing, but it gives little protection to the principle of voluntary choice when two unions are rivals for the men's affiliation. There is danger that within the next several years raiding of some unions by others will be carried on more vigorously than ever. The government will not be able to let strikes and boycotts be used to force men to join one union instead of another.
Most important of all the unsettled labor problems is the right of employees to interrupt essential public services, such as hospital service, electric power, subway, telephone, garbage collection, railway, and other services that must be supplied continuously. No one seriously contends that the people would tolerate the shutting down of all railway services or the cutting off of all light or power in New York, Chicago, or any other large city. Thus far, however, the country has no public policy for dealing with this type of strike.
Furthermore, the public does not seem to be impressed with the need for protecting its interests. A few short strikes have caused grave inconvenience -- the New York elevator operators' strike, the tugboatmen's strike, the telephone strikes and threats of strikes, the Philadelphia transit strike, the Pittsburgh power strike, and others -- but none of these stoppages or near-strikes aroused the public.
A carefully planned policy for assuring continuity of essential services is urgently needed, but it would be foolish to develop a policy to deal with this problem so long as the public is too indifferent to give strong support to whatever policy is developed. Hence the country must apparently learn the hard way by sooner or later going through a disastrous interruption of essential services.
Copyright © 1946 by Sumner H. Slichter. All rights reserved.
The Atlantic Monthly; May, 1946; What Do the Strikes Teach Us?; Volume 177, No. 5; pages 35-40