Labor and the War

LABOR shares with other groups in the community profound confusion concerning our relation to the war. Is it our war? Are we already in it? If not, should we get in it? Is aid to Britain a way of getting in the war or of keeping out of it? Labor is strongly against Hitler, probably more so than any group in the community, and wishes Britain to defeat him. Nevertheless, labor does not regard Hitler as sufficiently dangerous to warrant our fighting him. Consequently, labor simultaneously passes vigorous denunciations of Hitler and equally emphatic resolutions against our participation in the war. And yet labor, like the rest of the nation, would probably resent having our policy described as ‘fighting until the last Englishman.’

Up to the present, the defense program has meant sacrifice to virtually no one except some draftees and national guardsmen. Income from agricultural marketings is running about 8 per cent above a year ago. Corporate profits, though still low, are about 11 per cent above 1939. Labor has gained along with other parts of the community. Between July 1940, when the defense program started, and the first of the year, over 1.6 million of the unemployed went to work. Weekly earnings in manufacturing between July and December increased 7.3 per cent and payrolls advanced 25 per cent. In the meantime, the cost of living increased only about one half of one per cent.

Not only has the defense program up to now (March 28) meant sacrifice only to few, but labor is not convinced that defense and aid to Britain will require general sacrifice. This is shown by the fact that both the A. F. of L. and the CIO have published analyses purporting to prove that, in view of the large number of unemployed, the defense program can be executed without encroaching upon living standards. These analyses indicate, of course, that labor has little conception of the enormous obligations the country is undertaking; and the rest of the community, for the most part, has no better conception. The doubts of labor and the community concerning our relationship to the war, and the all but universal ignorance of the enormous task the country is starting, help to explain the attitude of both labor and the public toward many defense issues.


The best way to approach the labor issues raised by the defense program is to ask whether the program can be accomplished without general sacrifice. Can we have ‘guns and butter’? If we really propose to give Britain enough goods to assure her winning we arc entering a production race with most of the continent of Europe. Germany is already believed to be producing about 3000 planes a month, at least twice the British production. If Britain is to obtain a large margin of air superiority, the plane production which the United States is now planning for 1942 will have to be greatly increased and most of the output will have to go to the British. The 200 ships that we propose to build for the British are admittedly only a starter. Since last June the Germans have been sinking ships three times as fast as we are equipped to build them. It is unfortunate that the government has not been frank in telling the public the obligations which our foreign policy involves. The President asked for 11 billion dollars for armaments in the 1941-1942 budget, but the actual expenditures, including arms and ships for the British, are likely to be above 15 billion or 16 billion dollars in that year. If the war continues into 1943, armament expenditures in the budget for 1942-1943 will probably exceed 25 billion dollars.

Believers in guns and butter usually measure idle productive capacity by the number of unemployed. The Census indicates that the number has been greatly overestimated. According to the Census, there were about 9 million unemployed at the end of March 1940. This means that when the defense program started last July there were about 8.3 million out of work — as against 10.2 million estimated by the A. F. of L. and 11.3 million by the CIO. Probably one million or more of the unemployed were really unemployable, or at least not suited for factory work. Tests show that many of them have a very low handand-finger dexterity, and some of them have such a low mentality that they cannot pass a test fitting irregular shapes into holes. By January 1942, the growth of population will give us 900,000 more job seekers than in July 1940. The army and navy, however, will require about 1.5 million more men than in July 1940, leaving 6.7 million available to raise the national output above July 1940.

If we may assume that each of the 6.7 million possesses average competency and could produce $1800 worth of goods a year (the average output per worker in non-agricultural industries), full employment would add about 12.1 billion dollars’ worth to the annual product. Perhaps an additional 5 per cent gain could be obtained by increasing working hours, because many plants in July 1940 were operating less than 40 hours per week. Such a gain would increase the annual output by 4.2 billion dollars, a total gain of 16.3 billion. This is little above the rate at which we shall be producing armaments next January. Any further increase in the output of armaments or in the army and navy would have to be made up by higher managerial and labor efficiency, by technological progress, by drawing people who are not job seekers into the working population, by working longer hours, or by accepting a lower standard of living.

The conflict between guns and butter will become acute long before there has been complete absorption of labor. Indeed, it is beginning to become acute in March 1941, when 6 million men are still out of work. The difficulty is that the defense demand is not spread evenly over all branches of industry. It is concentrated in the main upon the durableequipment industries. In 1929, their biggest year, these industries produced 14.8 billion dollars’ worth of goods — about 17.4 billion at present prices. If our government and the British were to buy 15 billion dollars’ worth of armaments here in the fiscal year 1941-1942, they would be attempting to buy almost as much as the entire country spent for equipment in 1929. It would be equivalent suddenly to demanding the entire output of three automobile industries each as large as our present one. Obviously such a great production of defense goods cannot be accomplished without forcing drastic curtailment in the output of many forms of non-defense goods.

True, the capacity of many plants can be greatly increased by training workers and adding second and third shifts. Furthermore, there are many sleepily managed small family concerns around the country which could greatly increase output if compelled to do so by large orders with early delivery dates. The direct labor needs of the defense program will require that the number of skilled men in the metalworking industries be roughly doubled. Even this estimate assumes great economies in the use of skilled labor. Finally, it must be remembered that there are many points where defense output is limited not by lack of trained men but by lack of plant and equipment. Hence the demands of the program upon our capacity to produce are considerably greater than figures of proposed defense output indicate, because these demands include new buildings and equipment needed to produce defense goods.


In Germany there is a 10-hour day throughout the armament industry, but England, according to the London Economist, has found 55 hours the optimum working week. In the United States the Fair Labor Standards Act requires that time and a half be paid after 40 hours a week to most employees in interstate commerce. This is equivalent to a 50 per cent tax on all employment after 40 hours a week. Even though the extra money goes to the workman rather than to the government, from the standpoint of employers it is a tax. The law was passed at the time of great unemployment, and one of its purposes was to force the spreading of work. Obviously a law designed to deal with labor surpluses may not be suitable for a period of labor shortages.

There seems no doubt that the penalty overtime rates imposed by the Fair Labor Standards Act are having their intended effect of limiting hours of work. To that extent, of course, they retard the output of defense goods — except where output is limited by shortage of raw materials. In most defense industries, plants have not been operating more than five days a week. The principal exceptions are machine tools, where the working week in December 1940 was 50.6 hours, and the aircraft industries, where it was 44.6 hours. In December 1940, the working week in hardware and small parts was 43.3 hours; in heavy equipment, 42.7; and in electrical manufacturing, 42.8 hours. Moreover, in a large proportion of defense plants, particularly the metal trades, the shortage of men limited operation to one full shift and one skeleton shift. Mr. Knudsen recognized the retarding effect of the overtime rule when he said to the National Association of Manufacturers last December: ’We have cut 20 per cent off our machine time. Can we afford to do this? Cannot we stop this blackout, this lack of production from Friday to Monday, and get more use out of our equipment?’

Should the Fair Labor Standards Act be amended to make possible 48 hours per week at straight time for, say, two years? Many people will say that the answer to this question is obviously ‘Yes.’ And yet the case against amendment is a strong one. The tendency of the Act to retard defense output on new contracts can be overcome in large measure by setting delivery dates so early that employers must include a large number of overtime hours in figuring their costs and prices. You reply that this is unfair to the taxpayer. The extra cost to the taxpayer, however, may be very moderate, because the large weekly earnings produced by overtime work help employers to attract or hold men with little increase in hourly rates. The more moderate the rise in wage rates, the easier will be the ultimate problem of adjusting our economy to peacetime production. The taxpayer can afford to pay a little more for armaments now if thereby the return to peacetime production will be facilitated.

The real test of the Fair Labor Standards Act will come (probably early in 1942) when employment on defense production can expand only by reducing employment in many non-defense industries. Then we shall be squarely faced with the problem of whether to accept a lower standard of living in order to avoid amending the Fair Labor Standards Act. By 1943, when defense output is about 25 billion dollars, the sacrifice in living standards necessary to avoid amending the Act will be quite pronounced. Of course, to a limited extent a drop in living standards might be escaped by drawing into industry persons who have not previously been job seekers. The great advantage in accepting a lower standard of living is that the shortages of goods thereby accumulated would make easier the ultimate transition from a defense to a non-defense economy. Whether the shift is really facilitated, however, will depend upon whether the government is willing to limit demand sufficiently to prevent shortages of goods from producing a broad rise in prices. Such a rise would undo the good effect of the Act in creating shortages of goods. Consequently, whether or not the Act should be amended boils clown to whether the government is prepared to limit consumer demand drastically by heavier taxes and by sales of bonds to real savers.

The proposal to amend the Fair Labor Standards Act for the period of the emergency has provoked much loose talk about preserving ‘social gains.’ No one seems to ask what is a social gain or whether leisure is necessarily more important than goods. In times of national peril do not goods rise in importance and leisure decline? In so far as the Fair Labor Standards Act compels us to accept leisure when we would prefer goods, it prevents our achieving a social gain. The case against amendments of the Act is not that leisure is more important than goods, but rather that some present sacrifice of living standards may be desirable in order to mitigate the difficulties of returning to a peacetime economy.


The great rise in business activity associated with the defense program will produce numerous demands for wage increases. To some extent these wall be stimulated by the belief that business enterprises are about to make huge profits from the defense program. Some labor leaders attempt no justification of wage demands. They simply say: ‘This is our opportunity and we are going to make a killing.’ Other leaders take a long-run view of the wage problem. They realize that large increases now will aggravate the ultimate problem of returning to a peacetime economy. A high national union official recently said to me: ‘What the deuce is the gain in getting a dollar increase in wages and paying a dollar and a half increase in the cost of living? There is always a hereafter. Whges that go up like the devil are usually those that come down like a punctured balloon.’

What should be done about wages? Docs the United States need a national wage policy? If so, what should be its contents and how should it be made? Some increases in wages will be needed to attract men into the defense industries. The jobs there wall be temporary, and in many cases the cost of living will be high — especially for men who work in towns where housing is so scarce that they must leave their families behind and room. Wage increases which are not necessary to attract men into the defense industries should in general be made only when justified by higher productivity. In some industries the defense program will produce a drop in profits. In many industries profits will advance, but for industry as a whole profits in 1941 will be little, if any, above 1940. Some concerns, such as many railroads and railroad equipment companies and some steel companies, have made little or no money in ten years. Indeed, it must be remembered that at the beginning of the defense program profits were abnormally low — so low, in fact, that full employment was impossible. In 1939, for example, when industrial production was 15 per cent above 1926, corporate profits were less than half of 1926. In 1926, three out of five corporations made money. In 1937, the latest year of complete figures when profits were considerably higher than in 1939, only two out of five corporations made money and the net income of all corporations was only 3.57 per cent of their sales as against 6.38 per cent in 1926. In 1939, the hourly earnings of factory workers reached an all-time high — 22 per cent above the boom year 1929, despite the fact that the cost of living was over 15 per cent below 1929. Profits, however, were 64 per cent below 1929.

It must be remembered also that rises in profits created by the defense program will, in considerable measure, be temporary. This does not mean that labor should not share in the profits, but it is obvious that profits resting upon such a temporary foundation are not a satisfactory basis for permanent advances in wage rates. Labor’s share in temporary profits should take the form of temporary bonuses. Advances in permanent wage rates should be limited by the technological progress of industry. Otherwise the end of the defense program will bring cost-price relationships even more unfavorable to employment than those which existed before July 1940.

The problem of wage policy is intimately related to the problem of ‘guns and butter.’ If defense production is so large as to restrict the output of consumer goods, higher wages will do little to raise the standard of living of the workers. Their principal effect will be to raise the cost of living. If that happens, another wage issue will be raised because many people believe that wages should be increased in proportion to any advance in living costs. That idea may have validity in ordinary times, but it obviously does not apply when nondefense output can be increased only at the expense of defense production. A rise in the cost of living means that demand is outrunning the capacity of the consumer-goods industries and that workers are wasting a large part of their wages in bidding up the prices of a limited supply of goods. Wage advances would only aggravate the difficulty. The way to deal with the problem of a rising cost of living is not by general wage increases, but by fiscal policy. Taxes and sales of bonds to real savers (instead of to commercial banks) must be large enough to limit the demand for non-defense goods to the country’s capacity to produce them. The higher the volume of consumer income, whether because of large dividends, increases in permanent wage rates, or temporary bonuses, the more drastic must be the government’s efforts to limit non-defense demand.

The great importance of wage problems in the national defense economy indicates the need for a carefully formulated national wage policy. It is important that the national wage policy be reached by agreement between representatives of industry, labor, and government rather than imposed upon labor and industry by the government. The policy should recognize that all groups in the community have an interest in avoiding a spiral of wage-price increases and in guarding against a rise in costs that will eventually hinder the shift from defense to non-defense production. It should recognize that the success of such a policy depends upon the success of the government in controlling the cost of living. A national wage policy would be welcomed by many union leaders who remember the difficulties created by the collapse of prices in 1920 and 1921.


President Green of the American Federation of Labor in a recent broadcast said: ‘We commit ourselves to avoid strikes, not only for trivial reasons, but for scarcely any cause unless particular conditions become completely unbearable.’

The inception of the defense program was accompanied by a large rise in the number of strikes — 578 in the last quarter of 1940, as against 489 in the last quarter of 1939. Up to that time, strikes in 1940 had been less numerous than in 1939. Encouraging, however, is the fact that time lost from strikes in the last quarter of 1940 was considerably below 1939. But in January 1941 the number of man days lost was one third more than in December and nearly three times as large as in January 1940. A rise in strikes accompanied the first eight months of the war in both Great Britain and Canada. As employers and labor better appreciated the seriousness of the emergency, the number of strikes has tended to drop. For three months after the disasters of last May, the number of strikes in Great Britain was very low. More recently, however, it has started to rise.

A recent popular poll indicates that two out of three persons believe that strikes in defense industries should be prohibited by law. Fortunately, the two leading employers’ organizations of the country, the National Association of Manufacturers and the United States Chamber of Commerce, both know better. They understand that laws against strikes do not make men work. They know that strikes are symptoms and that the problem of preventing strikes is one of removing underlying causes. If any strikes are outlawed, they should be strikes to compel men to join one union rather than another. The Wagner Act provides machinery for settling such disputes by an election, and it should be used.

Some strikes have occurred in plants where unions are established and recognized but where the machinery for settling grievances has not been working smoothly. These are the easiest strikes to prevent. A recent walkout in a steel mill was provoked by a grievance which had gone unsettled for two years. It is not unnatural that there should be difficulties in settling grievances in many plants where unions are new. Sometimes the trouble is due to poor discipline in the union or to the inexperience of the local union leaders. Sometimes the employer has been unwilling to settle cases promptly because he did not wish the union to attract members by operating an effective grievance adjustment service. As employers and the new unions gain experience in dealing with one another, strikes in violation of agreements will become less frequent.

Some strikes are threatened when contracts expire because of the failure of the two sides to agree on the terms of new contracts. A good way of reducing the number of these strikes is to provide in the agreement that, if the two sides fail to agree on a new contract, they will invite mediation by the United States Conciliation Service and maintain the status quo for a period of thirty days. Contracts in defense industries which now lack a mediation clause should be amended to include one.

The most difficult disputes are those which arise when the men in a plant first form a union and demand an agreement. The spread of labor organization will produce many such disputes in the next year or two. The employer usually does not believe that the new union represents his men, and consequently is unwilling to give it much recognition.

The Wagner Act is designed, among other things, to reduce the number of strikes over the right of a union to represent a given group of employees. The Act does not help, however, when the new union has been recognized but the employer is attempting to keep it weak by refusing to make important concessions to it. In such cases the union may feel that a strike is needed in order to demonstrate its strength. Interests of the defense program require, however, that the two sides forgo a test of strength. The United States Conciliation Service may be reasonably successful in getting them to accept compromises which fairly well represent their relative strength.

In order to give conciliators a better opportunity to intervene in disputes of all sorts, it has been widely proposed that the ‘cooling-off’ provision of the Railway Labor Act be extended to defense industries. Canada is applying the waiting period of her Industrial Disputes Act to her defense industries. In World War I, Great Britain enforced a 21-day waiting period in the munitions industries. This restriction, however, did not prevent a jump in man days lost from strikes in Great Britain from 2,450,000 in 1916 to 5,650,000 in 1917, and to 5,880,000 in 1918.

A law imposing a compulsory waiting period would be mainly useful as a symbol of the state of public opinion. If the public strongly objects to interruptions of production, each side will be reluctant to assume responsibility for them. With the help of public opinion, conciliators can usually get compromises accepted; in the absence of it, the conciliator is greatly handicapped. The public is more likely to support conciliation when there is a strong National Board of Conciliation. Such a board has recently been organized to handle difficult cases referred to it by the United States Conciliation Service.


Organized labor believes that defense contracts should be withheld from firms which refuse to comply with decisions of the National Labor Relations Board and which appeal those decisions to courts. One might ask, ‘Why pick out the Wagner Act to enforce by withholding defense contracts? Why not include other statutes such as the Pure Food and Drug Act? Why not withhold contracts from any firm which violates any law?’

The most fundamental question raised by the proposal, however, is whether it is proper for administrative agencies to alter, by addition or subtraction, the liability which Congress has fixed for violating a statute. Obviously not. It would be a gross violation of administrative discretion for administrative agencies to add penalties to those provided by Congress. Another fundamental question raised by the proposal concerns the nature of the defense contracts. Is the government handing out favors or is it attempting to meet a national emergency? Should the people of the country be deprived of important shipyards, steel mills, or automobile plants because a particular employer violates a law, no matter how reprehensible his action? And should a firm which demands a court review of a Labor Board decision be regarded as a law violator?

Incidentally, the proposal overlooks the fact that the withholding of contracts would injure the employees of the violator quite as much as the violator himself. In fact, it would be difficult to devise a more ‘shotgun’ method of enforcement. The law should, of course, be enforced, but by methods which Congress has prescribed and without unnecessarily penalizing defendants for insisting upon their day in court.


Our efforts to produce large quantities of goods in a hurry will require the modification of certain provisions of trade agreements in many industries. Most of these modifications probably will not be difficult to negotiate, at least in cases where relations with the union and the employer are good. Changes that are likely to be needed include provision for operating on Saturdays and Sundays on straight time on condition that the individual employee does not work more than a standard working week; modification of oppressive overtime provisions of agreements — such as double time or triple time; amendment of seniority clauses to make it easier for men to follow their work when it is shifted to another department or to another plant; restoration of incentive systems in some plants where they were abandoned; modification of apprenticeship provisions to increase the training of apprentices.

The usual apprenticeship course is four years. Most of the boys, however, could be graduated in three years. This would make possible the graduation of four classes of apprentices in 1941 and 1942 in time to meet the peak demand for labor that is likely to come late in 1942 or early in 1943. In World War I, classes at West Point and Annapolis were graduated in two years instead of four. There are only about 110,000 apprentices in the United States today. The normal number ought to be between 800,000 and 900,000. Since the training of apprentices has been greatly curtailed during the depression, the number for several years ought to be well in excess of a million. Obviously, one cannot expect anything like a tenfold increase in the number of apprentices during the next few months, because there are serious obstacles to establishing apprentice training in plants that have never had it and are not organized for it. The best chance of promptly expanding apprentice training is by increasing the number of apprentices in those plants that already have well-organized training courses. This would require a temporary modification in the apprentice-journeyman ratio in such plants. It also might require modest compensation for employers who open their apprentice training facilities to industry at large.

Labor must look ahead to the day when defense production falls off and thousands of men are dismissed from defense industries. In return for concessions on working rules, unions may well demand that trade agreements provide for a dismissal wage.


Organized cooperation between unions and management for the purpose of increasing output and reducing costs started in the Rock Island Arsenal during World War I. During the last twenty years it has spread into a variety of industries — railroads, men’s clothing, women’s clothing, hosiery, steel, and others. In the main it has been confined to high-cost plants where the workers feared that the concern could not hold its own in competition and that they would lose their jobs unless they helped reduce costs. Experience has demonstrated that when committees of workers study ways of improving production methods they are often able to contribute many useful ideas.

The urgent production needs of the defense program call for a great spread of union-management cooperation. By far the scarcest kind of labor, and the most overworked, will be executives, from foremen to presidents. These men will have no 40-hour week and most of them will get no extra pay for overtime. During the long depression a large proportion of business enterprises neglected to build up their junior executive organization. Now they are required on short notice to manufacture articles with which they have had no experience and to find supervisory personnel for second and even third shifts. Executives will need all the help they can get in solving production problems. Unionmanagement cooperation is one way of giving them help. Unions as a rule are eager to give that help. The Steel Workers Organizing Committee has a man giving full time to supervising schemes of union-management cooperation. Of course, the union expects that in the case of each plant it will be completely accepted by management. It also requires that the machinery for adjusting grievances be working smoothly — one cannot expect cooperation from men who have a large number of unsettled grievances of long standing. Where conditions are favorable and where the policy has complete and vigorous support by top management and by top union leadership, union-management cooperation can do much to win the production race against Germany and also to reduce the conflict between guns and butter.

Several large plans for organizing the facilities of whole industries have been offered by labor leaders. There have also been proposals for joint committees to supervise production of whole industries. These schemes are of doubtful value. The place where labor is best able to make a contribution is right in the plant where men are dealing with conditions which they know better than anyone else.


Decisions being made today have important effects on the problem of shifting from defense to non-defense production. This problem arouses grave fears — probably greater fears than it should. The defense program will leave behind it an enormous backlog of demand based upon accumulated needs, not only in this country, but all over the world. After the defense program has been completed, many persons who will have bought national-defense bonds during the next several years will wish to convert part of their bonds into goods. The defense program, by compelling industry to train men on an unprecedented scale, will leave American business enterprises with the best-trained force that they have ever possessed. Every war has had important technological effects. This one will be no exception. It is likely to usher in an ‘alloy age’ that will open up many investment and employment opportunities.

The great danger is that the defense program and the war wall produce costprice relationships which will make it extremely difficult for industry to give full employment. An approximation to lull employment probably requires that cost-price relationships permit three out of five (instead of only two out of five) enterprises to make money and the proportion of profits to sales to be raised from 3.57 per cent (the figure for 1937) to about 5 per cent. Technological progress will achieve these changes quickly provided the wage and fiscal policies of the government during the defense period are not too detrimental to cost-price relationships. At present industry is spending about 200 million dollars a year on research. This is far too little. Expenditures on research should be increased as rapidly as practicable to a billion a year.

The main obstacle in the way of managing the defense program so as to avoid aggravating the difficulties of eventually shifting to peacetime production is the all-but-universal failure of the man in the street to perceive the enormous task which the country has undertaken. The facts have not been given to the public lest it balk at the sacrifice which they indicate. This general ignorance of the size of the job discourages realistic discussions of problems of working hours, wages, prices, and fiscal policy. It prevents the public from squarely facing the decision that must be made between working hours and the standard of living. It causes the country to overlook the need for a national wage policy and to tolerate an income tax which even this year will be paid by only one out of seven of the gainfully employed.

It is high time that a vigorous effort be made to show the country what an unprecedented increase in output it must achieve in order to win the production race with Europe. So long as the public does not see the size of the job, it is not prepared to support policies which our program requires. The allocation of resources to defense production will be achieved only by a rise in prices and costs that will greatly aggravate the ultimate difficulties of returning to non-defense production.