TABLE 8.--Percentage changes in prices and production of specified commodities in 1917 and 1918 First. It encourages the speculative accumulation and withholding of goods. This must result in a decline of final production by reducing the supply of raw materials available for such production. Nothing is more characteristic of an inflation than to have some producers crying for raw materials and unable to maintain operations for lack of them, and at the same time other producers holding raw materials far beyond their immediate and prospective requirements, solely in the hope of speculative profit. Second. Inflation discourages expansion of capacity by enormously increasing the dangers of such expansion. To expand when equipment costs are high is to invite ruin when competitors later obtain equipment at lower cost. For both reasons, unless inflation is prevented, production and productive capacity will be hampered at a time when their expansion is vitally necessary. This impairment of production and of productive capacity of course affects defense production as much as production generally, and may affect it even more seriously. Inflation thus not only causes the Government to pay a heavier cost for defense but prevents the country from getting the defense production it could otherwise secure. INFLATION AND WAGE EARNERS Wage earners and salaried workers constitute the largest single economic group affected by inflation. The serious impairment of their position under inflation has long been recognized by economists and by the leadership of labor itself. Wage rates, both piece and time rates, characteristically lag behind changes in the cost of living. Though piece rates, time rates, and the aggre gate earnings of workers as a whole may be rising rapidly, the even more rapid rise in the prices of the things wage earners buy causes a continuous impairment of their real income and their standards of living. uneven. The impact of inflation upon the economic position of workers is of course Some groups may be able to improve their position. Others may be able to hold their own. But for the bulk of wage workers inflation spells hardship and the impairment of living standards, efficiency, and morale. The history of wages during the years 1915-18 (table 9 and chart 40) shows that except in those industries closely connected with war production, wages rose less rapidly than did the cost of living. Data are available on the movements of real wages, that is, money wages adjusted for the cost of living, for 56 separate industries. In 38 of these industries, real wages declined. In only 18 did real wages increase. TELEGRAPH CHART 40 PERCENTAGE CHANGE IN REAL ANNUAL EARNINGS OF CARRIAGES. WAGONS, AND MATERIALS POST OFFICE SADDLERY AND HARNESS GOVERNMENT (EMPLOYEES IN D. C.) PUBLIC SCHOOLS (TEACHERS) CHURCHES (MINISTERS) DRUGGISTS PREPARATIONS NEWSPAPER AND PERIODICAL PRINTING BEVERAGES BOOK AND JOB PRINTING TELEPHONE - - - - - - - - MANUFACTURING (SALARIED EMPLOYEES) BUTTER, CHEESE. CONDENSED MILK CIGARS AND CIGARETTES MARBLE AND STONE CONFECTIONERY PLATED WARE BREAD AND OTHER BAKERY PRODUCTS LUMBER PLANING MILL-- MOTOR VEHICLE BODIES AND PARTS RAILWAY (CLERKS) SHIRT MANUFACTURING BOOTS AND SHOES STREET RAILWAYS FRUITS. VEGETABLES. CANNING AND PRESERVING WOMEN'S CLOTHING FURNITURE PAPER BOXES RUBBER GOODS SILK GOODS VEHICLES FOR LAND TRANSPORTATION AGRICULTURAL IMPLEMENTS HOSIERY AND KNIT GOODS ELECTRICAL MACHINERY. TRUNKS AND VALISES CLAY PRODUCTS PULP AND PAPER SLAUGHTERING, MEAT PACKING LUMBER AND TIMBER GAS AND ELECTRICITY MEN'S CLOTHING BRASS. BRONZE. AND COPPER FOUNDRIES AND MACHINE SHOPS PETROLEUM REFINING STEAM RAILROADS COTTON GOODS RAILROAD ROLLING STOCK GLASS TANNED. CURRIED, FINISHED LEATHER WOOLEN AND WORSTED GOODS BITUMINOUS COAL ANTHRACITE COAL - IRON AND STEEL WORKS, AND ROLLING MILLS COMPUTED FROM PAUL DOUGLAS "REAL WAGES IN THE UNITED STATES, 1890-1926" NEG. 39420 TABLE 9.-Percentage change in real annual earnings of wage earners by industries from 1915-18 Industries in which a decrease in real wages occurred: TABLE 9.-Percentage change in real annual earnings of wage earners by industries from 1915-18—Continued Percentage change in real annual earnings from 1915–18 (increase +) (decrease—) Industries in which an increase in real wages occurred: Source: Computed from Paul Douglas' Real Wages in the United States, 18901926. Striking confirmation of this result is found in the special reports of the period.' The Railway Wage Commission found that between 1915 and 1917 railway workers' expenses rose by 27 percent, while during the same period their annual income increased by only 10 to 14 percent. In 1915 the families of railroad 1 These reports, without exception, indicated a greater lag of money wages behind cost of living than is indicated by the corresponding statistics, based on secondary sources, presented by Douglas. This difference is found in the example of railway wages. workers were able to save an average of $76 per family after all expenses. In 1917 despite substantially higher money income, they sustained an average deficit; were obliged to cut into their savings or to run up bills at the corner grocery to the extent of $48 per family. In the case of the lower-paid workers' families, the average deficit was more than twice as great-$105. Thus, not only was the real consumption of railway workers curtailed during the war inflation but their ability to meet the hardships of the deflation was seriously impaired. În 1917 railway labor demanded an adjustment of wage rates. Early in 1918 the Commission, on the basis of these facts, awarded wage increases amounting to about 15 percent, which brought the average wage level nearly 37 percent above that of June 1915. Yet by April 1918, when the report was submitted and the award made, the living costs of railway workers had risen still further, CHART 41 1916 1917 1918 1919 1920 1921 60 60 TABLE 9.-Percentage change in real annual earnings of wage earners by industries from 1915-18—Continued Industries in which an increase in real wages occurred: Public schools (teachers). Steam railroads. Cotton goods-- Railroad rolling stock. Percentage change in real annual earnings from 1915-18 (increase +) (decrease—) +10 +10 +12 +15 +16 +18 Glass Tanned, curried, finished leather. Woolen and worsted goods. Bituminous coal--. Anthracite coal. +34 Iron and steel works, and rolling mills__ +34 Source: Computed from Paul Douglas' Real Wages in the United States, 18901926. +18 +28 Striking confirmation of this result is found in the special reports of the period.' The Railway Wage Commission found that between 1915 and 1917 railway workers' expenses rose by 27 percent, while during the same period their annual income increased by only 10 to 14 percent. In 1915 the families of railroad 1 These reports, without exception, indicated a greater lag of money wages behind cost of living than is indicated by the corresponding statistics, based on secondary sources, presented by Douglas. This difference is found in the example of railway wages. |