CABINET MEETING, FRIDAY, OCTOBER 19, 1945
Opened the meeting by reciting an opinion of the War Labor Board that it could no longer be effective in labor disputes. The opinion suggested a new board with the power to act and which would command the respect of labor and management. It was held that we must have a more definite wage-price policy than that expressed in the Executive Order of August 19th. President asked John Snyder to commence discussion with respect to the development of a new wage-price policy.
Policy as set up restores collective bargaining to labor and industry when price is not adjusted. There are exceptions in which some price raises are advisable and necessary. Certain industries think they can absorb wage increases from 8 to 12%. However, there are others that would find it impossible to absorb even this amount. Labor on the other hand is asking for 30% increases which industry feels it cannot absorb without increasing prices. This is based on loss of take home pay and cost of living index.
Thinks the thing to be considered is price policy.
Wallace and others feel that if exceptions are made in price increases it will be impossible to administer. On the other hand, in the case of steel, unless prices are increased, we are facing a long strike. The question is are we to face danger of inflation or danger of bogging down in reconversion. Any increase in basic commodities will reflect through many other items. Price increases will be directly attributed to wage increases. If we once desert the hold-the-line policy we lose control. We will not know where we are going or how far. He suggested that the definition of maladjustment, etc., in the executive order should be more specific.
The farmer will have some losses in take home pay by termination of subsidies. He will resent adjustment to working men if no relief is granted to farmers. Farmers know that they will have to take losses and they are prepared for them. If labor gets same pay in peace as in war, the farmer will want equal treatment.
Prices and wages were frozen before we had attained proper parity. Sees no objection to allowing wage increases in those industries which can absorb higher wages. Wages should be based on ability to pay. He believes labor-management boards should not be composed of counter-balancing influences as in the case of the War Labor Board. Boards should represent the Government and not either side in disputes. Some corporations have made enormous profits during war and have built up tremendous surpluses. He feels that the Government should conduct a study, industry by industry, to determine ability to pay and where possible, these industries should be made to pay.
Gross national production will flow in first half of 1946, forty billion dollars less than the first half of 1945. He sees seven million unemployment. This will not affect income of business much because of tax adjustments. He feels that the farmers viewpoint on this situation is unenlightened. If labor received 30% increase which it will not, farm prices would have to face additional increases. He believes there are two approaches to the question of wages and prices. (1) Presuppose the existence of peacetime collective bargaining with prices held by OPA. (2) Second approach was submitted in a memorandum to the President on October 2nd. We should do everything possible to avoid a steel strike. Such a strike would bring on a tremendous inflation.
Prices cannot be controlled by OPA if some method is not devised to hold wages.
Suggests a period until July 1, 1946 to have industry grant wage increases then if at that time, they show inability to pay concessions could then be made. If prices are allowed to go out of bounds we are sunk economically and politically. Recited the fact that the Stabilization Act is still on the books. This problem should be worked out by the Executive departments and should not be sent to Congress. The case cannot be tried ex parte.
A proper definition of inequities and maladjustments is what he wants. We cannot afford to have a knock-down steel fight between labor and management or industry. We cannot let prices go hay-wire. He requested that those most interested prepare a memorandum outlining their views to be submitted to him before the following Sunday.