Page Twelve 



THE I. A. A. RECORD 



December, 1932 



Why The Depression Continues 



; : ;. (Continued from page 9) 



contract in them. Since the war, 

 rents have reflected the high wages 

 which have prevailed in the building 

 trades and building material indus- 

 tries. Construction costs are one of 

 the "key logs" in the jam. 



Debts and interest rates on long 

 term indebtedness are an inflexible 

 element in the situation, and a very 

 important one. Debts always have 

 increased importance in a period of 

 reaction, after a boom period has 

 Induced a general increase of them. 

 Interest rates in themselves are not 

 inflexible, for market rates are as 

 changeable as any economic factor, 

 but legal contracts to pay money 

 are not easily changed. The sub- 

 ject, which always involves the 

 money question, is too complex for 

 a full discussion here, but reference 

 is made elsewhere to the tendency 

 of interest rates to decline in peri- 

 ods of depression, and so far as the 

 debt burden is increased by a fall of 

 commodity prices, the effect always 

 has been temporary. 



Debts Not So Crushing 



A general and rapid fall of prices 

 always is due to derangements in 

 the economic system which inter- 

 fere with the normal flow of prod- 

 ucts into consumption. When 

 order is restored, as it always has 

 been and will be again, prices re- 

 cover, and the debts are found not 

 to be so crushing as they appeared 

 in the time of panic. 



Finally, wages constitute the prin- 

 cipal factor in economic relations, 

 because they are the chief item of 

 costs in nearly every industry and 

 therefore the chief factor in the 

 making of prices. The greater part 

 of the aggregate income of all the 

 people of this country is first re- 

 ceived as wages and salaries, and 

 subsequently expended for commod- 

 ities and services. . . . 



We have seen that personal com- 

 pensation in the form of wages and 

 salaries is the principal factor in 

 the costs of government and in the 

 rigidity which characterizes them. 

 There is great popular sentiment 

 against any proposal to reduce 

 wages, and wage rates therefore 

 have a high degree of rigidity. On 

 the other hand, largely because 

 wage rates are so rigid, emplojrment 

 and actual wage-earnings are sub- 

 ject to great fluctuations, and this 

 is one of the chief reasons why de- 

 pressions sink as deep and last as 

 long as they do. 



For in a period of depression 

 large numbers of people find their 

 Incomes unavoidably reduced, and 

 if the things they would like to buy 

 do not decline in price there must 

 be a drastic reduction in the physi- 

 cal volume of their purchases, and 

 unemployment results. 



The present state of disorder, the 

 worst ever known, is due primarily 



to the war, which forced many vio- 

 lent changes in industry and trade. 

 It created an unlimited demand for 

 man-power and caused a vast shift 

 of labor into war industries, which 

 was induced by bidding up wages, 

 and of course had an influence 

 upon all wages. Moreover, the cost 

 of living rose rapidly, on account 

 of the extraordinary demands of 

 Europe for foodstuffs and other 

 necessities, and this properly was 

 taken into account in fixing wages. 



In all the past, on account of con- 

 tinuing improvement in methods of 

 production, transportation and dis- 

 tribution, wages have normally 

 moved on an upward course, and it 

 has become a habit of mind to ex- 

 pect them to do so. Furthermore, it 

 has become a fixed principle of or- 

 ganized labor never to permit a ret- 

 rograde movement. With the usual 

 rate of wage advancement this was 

 possible, but the rise from 1915 to 

 1929 was wholly abnormal, and could 

 not be made in real wages (com- 

 modities) out of current production. 



The country was not creating 



Index of Hourly Earnings 



Agricultural Implements 



Automobiles 



Boots and Shoes 



Chemicals 



Electrical Mfg 



Hardware 



Leather 



Machines and Tools 



Machinery — Heavy Equipment 



Meat Packing 



Printing — Book and Job 



Rubber 



modities) , has upset the equilibrium 

 of all industry and forced millions 

 of wage -workers out of employment. 

 Industrial costs are relatively so 

 high that products cannot be sold. 

 The labor leaders treat the situa- 

 tion as a conflict between employ- 

 ers and wage-workers and denounce 

 the former for seeking wage reduc- 

 tions. This is an Inadequate and 

 mistaken view. The responsible 

 head of an industry very properly 

 endeavors to conform to conditions 

 as he meets them, in order to con- 

 tinue doing business and affording 

 employment for his working force. 

 The conflict which develops when 

 the industrial system is thrown out 

 of balance is not primarily between 

 employers and employes, but be- 

 tween different sections of the eco- 

 nomic system, over the terms upon 

 which their products shall be ex- 

 changed. There is no fundamental 

 conflict of interests, for all of these 

 groups would be best served by find- 

 ing a fair basis upon which their 

 products and services could be read- 

 ily exchanged and enter into use. 



Simple Average of these Industries 



CLASS I RAILROADS 



* June Source 



Base 

 1914 

 100 

 100 

 100 

 100 

 100 

 100 

 100 

 100 

 100 

 100 

 100 

 100 



Year >■. 

 1929 ■ 



July 

 1932J 



100 236.58 209.42 



100 251 '231 



National Industrial Conference Board. 



wealth at that rate, and the at- 

 tempt to convert these money- 

 ( credit- ) wages into commodities 

 drove up the cost of living, render- 

 ing the nominal wage advance 

 largely fictitious, in the sense that 

 it did not carry any such increase 

 of purchasing power. These wage 

 rates never should have been re- 

 garded as other than emergency 

 rates, intended to compensate for 

 the existing depreciation in the 

 purchasing power of money or, in 

 other words, the rising cost of liv- 

 ing. They were not effective in in- 

 creasing real compensation at the 

 time, and the attempt to maintain 

 them later, when they did represent 

 a substantial increase of real com- 

 pensation (after the fall of com- 



Occupat ion 



The preceding table gives figures 

 showing the rise of wages upon the 

 railroads and in twelve leading in- 

 dustries from 1914 to 1920 and their 

 comparative level in the month of 

 July, 1932. The calculation is based 

 upon average wage rates in 1914 as 

 100, the figures for 1929 and 1932 

 representing average wages in these 

 years in percentages of 100. Thus, 

 wages in the agricultural imple- 

 ment industry in 1929 were 235 per 

 cent of wages in 1914, or 135 per 

 cent higher, and in 1932, 104 per 

 cent higher. 



The following table gives in cents 

 per hour a showing of union wage 

 scales in the principal building 

 trades in 1913 and 1932, with the 

 percentage of increase, as given in 

 the Mon thly Labor Review: 

 Cents Per Hour 



Year 



1913 



Bricklayers 67.1 



Building Laborers 29.9 



Carpenters 50.1 



Cement Finishers 56.5 



Inside Wiremen 51.3 



Painters 47.1 



Plasterers 64.9 



Plumbers 59.7 



Stonecutters 57.3 



Structural-iron workers 60.6 





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