Music Trade Review

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Inflation
study of this chart will show, for the
past 11 years, which came first, whether
increases in wage rates, or increases in
consumers' prices. There may well have
been instances in which the wage rates
in particular concerns or even industries
may have lagged behind the increases
in consumers' prices, but for industry as
(Continued from Page 15J)
It may be urged that wages do not
constitute the entire cost of production
and, therefore, are not the sole deter-
minant of the minimum prices at which
goods may be sold and production con-
tinued. There are, for example, raw ma-
250
240
240
1
230
220
210
230
t
INDEXES
CONSUMERS' PRICES
FACTORY WAGE RATES
and
OUTPUT PER MAM-HOUR
220
{[
210
1 9 3 9 TO DATE
200
200
/
190
190
j
AVERAG E
HOURLY
FACTOR If
WAGE
180
180
,
A
170
J
(
/
N
160
I
A
7
t
150
t
CONSU (NEBS'
PRIC ES ^^
140
130
N0R1 4AL
FACTORY
OUTPUT.
PER > $
/
150
1U0
130
JAL
FACTORY
OUTPUT "^~
PER
—MANHOUR -^ >
1
1
110
160
J
/V
120
J
170
120
110
:'_ _ J
100
-1 100
1940
1941
1942
19^3
1944
19^5
terials. But what are raw materials but
largely accumulated labor costs? Labor
costs exceed 80% of the total national
income. If the trends in factory wages
shown on this chart are fairly represent-
ative, as I believe they are, it becomes
crystal clear that wage increases with-
out parallel increases in productivity are
a major cause of the present inflation.
Effect of Wage Increases
One of the common arguments ad-
vanced by leaders of organized labor
and, indeed, by many others, including
some employers, is that labor must have
wage advances in order to cover in-
creases in consumers' prices. A moment's
14
1946
1947
1948
19J+9
1950
1951
a whole, it seems clear that wage rate
increases have throughout the last I I
years invariably preceded price in-
creases. If there is any one who doubts
that the 146% increase in wage rates
since 1939 had any part in increasing
consumers' prices, let him take another
good look at these two graphs and see
if any other plausible explanation can
be found.
The beginnings of inflationary in-
creases in wage rates, that is, increases
unaccompanied by increases in produc-
tivity, can be traced quite clearly and
simply to policies adopted by the gov-
ernment during the 1930's, such as the
passage of the one-sided National Labor
Relations Act that gave to the unions
extraordinary, unearned and unsound
bargaining advantages over employers;
the Wage and Hour Act that fixed mini-
mum wages beginning in the latter part
of 1938 at 25^ per hour, but now in-
creased to 75^ per hour, and with active
pressures for $1.00 or more per hour,
for the least experienced, least capable,
least employable persons in the econ-
omy; and, finally, the Walsh-Healey
Public Contracts Act which gave to the
Secretary of Labor the supreme au-
thority to fix minimum wages within all
concerns working on public contracts
amounting to $10,000 or more. The
minimum wage rates fixed by the Secre-
tary now range from 85fS up to $1.40
per hour.
Not one of these measures adopted
back in the 1930's made any pretense at
relating wage rates to possible increases
in man-hour productivity. They were in-
tended to increase the number of dollars
paid to employees and without relation
to productivity. They were clearly infla-
tionary in intent. We are now beginning
to reap the effects of these planned in-
flationary steps.
Wage inflation would normally have
resulted, long before 1950, in increasing
unemployment and economic crisis, but
for the fact that the government during
the past 11 years during both war and
peace has been the largest purchaser of
goods. Shortages have been the rule and
consumers have been willing to pay
whatever was asked. The wage patterns
set for government work have had to be
accepted by private industry. The gov-
ernment is still the largest purchaser of
goods and is certain to continue so, as
long as the present emergency lasts, con-
sequently wage rates have continued to
rise, not merely on government contracts,
but also in all private industry. Con-
sumers must now not merely pay twice
as much as they did in 1939 for the
goods that they themselves consume, but
must also pay greatly increased taxes to
cover the increased costs of goods bought
by the government.
In the history of inflation increasing
wage costs have never before played so
important a part. The emergence of this
new cause of inflation is so recent that
even most of the economists who are, of
course, familiar with the older patterns
of inflation, apparently know or under-
stand little about this cause. Most of the
economists are still urging solely mone-
tary and fiscal policies.
Effect on White Collar Salaries
This inflation has laid and is laying ex-
traordinarily heavy burdens upon most
of the people within this country. Among
THE MUSIC TRADE REVIEW. SEPTEMBER, 1951