The Settlement of Wage Disputes

of price movements.-Section 3. The direct and indirect effects of upward price movements upon the distribution of the product.-Section 4. The direct and indirect effects

tant comparison and calculation of money values. The transactions of distribution likewise. How does the intervention of a monetary system affect the outcome of distribution? How does it modify the share of the wage earners in the total product of industry? The subject of prices and price levels is one of

to be able to express the position of this collection of prices by a single figure. To do this, use is made of various statistical devices by which this collection of prices can be combined into one price-which will be statistically repres

a few, or even in a great many of the prices which make up the price level, have no importance for the problem of wages. Indeed, if the price level remained nearly stationary there would be no necessity of undertaking thi

nges in the price level. They are irregular changes. That is to say, all of the individual prices which make up the pric

general price movement. Mr. W. C. Mitchell in his book on business cycles studied the relation between the movements of retail food prices (the figures ordinarily used in cost of living investigations) and general business conditions during the 1890-1910 period in the United States. He writes in conclusion that "these figures (i.e., of 30 retail food prices) indicate a certain correspondence between retail prices and business conditions. In 1893, indeed, the thirty foods rose slightly instead of falling, but they declined during the dull years which followed the panic, and rose again when prosperity returned. The rise was slow until 1

give a tilt to the whole industrial system which manifests itself in the outcome of distribution. The effects upon the distrib

price level, once stimulated, asserts itself, is both a delicate and lengthy task. It cannot be attempted here.[40] It suffices to note the ordinary distributive results of the process; wi

re rapid.[41] Thus Mitchell in his study of wage and price movements during the Greenback Period in the United States (1860-80) writes that "... The table shows an almost universal rise of wages during the war-though a rise far from equal to the advance of wholesale or retail price."[42] And in his study of price and wage movements from 1890-1910 in the United States he writes, "The figures indicate that the prices of labor are influ

marked, but there is nevertheless considerable variation in the amount of wage change.[44] These variations in wage change are to be explained by the fact that the wage earn

specially in industries in which the wages bill is an important part of the expenses of production. To quote Mitchell again, "The net resultant of these processes is to increase profits. Of chief

a falling off in the efficiency of industrial enterprises, and an increase in the cost of labor in a period of very rapid business expansion and rising prices-especially toward the end of the period. Mitchell writes: "... Prosperity is unfavorable to economy in business management. When mills are running overtime, when salesmen are sought out by importunate buyers, when premiums are being

fully utilized, and unemployment is small. More overtime is worked. The total earnings of the wage earners are likely to advance more than wage rates. The extent of the divergence between the increase in hourly or piece rates and weekly or yearly e

ngs for men was stated to be 103 per cent. as against 71 per cent. in hourly earnings. In the rubber and chemical industries the increases in weekly earnings were greater than in hourly earnings also, but not to the same extent as the above. In the textile industries the percentage increases were practicall

ll be affected sufficiently to prevent real wages from falling, particularly at the beginning of the period of rising prices, whether towards the end of the period real wages may not actually have increased-these are questions it is not possible to answer except as re

es, the tendency for wages to rise may continue to manifest itself for some time after prices have begun to drop. An example of such a period is furnished by the years immediately following the Civil War.[48] In the case of the price decline of the year-1920-21, however, wage decreases have come promptly-and this is more likely to be the ordinary case. Unless industry in general becomes more efficient during t

way as the dispersion which occurs in periods of rising prices.[50] Organization, however, is likely to play a more decisive part in resistance to reduction of wages than in demands for increased

own as depression, profits in most industries are apt to be quite low. Such was the 1893-96 period in the United States. During the period of forced liquidation and immediately thereafter, the number of bankruptcies is likely to be high.[51] No general statement is possible concerning the duration of such a period of depression and low profits; all accompanying circumstances play a complicating part in retarding or hastening business recovery.-The present depression of 1920-21 is almost of unprecedented duration, for exa

on as to the direct effects of falling prices is impossible. Each business c

may be constant and weekly and yearly earnings high. Thus the period of 1873-1896 in the United States was one of declining prices and it is generally admitted that that period was one of great industrial activity.[54] Moments of excessive activity are rarer in periods of falling prices than in periods of rising prices, but the average amount of unemployment may be either greater or less. Again, if th

yment grows and earnings fall more than wage rates. Or wage rates may remain comparatively steady, but weekly and yearly earnings will fall. The extent to which this fall in earnings will go depends upon the seriousness of the industrial maladjustments.[55] Still it is safe t

oblems of wage settlement. Before proceeding to this main purpose, however, it is desirable to pay particular atten

eased wage bill will add to the cost of production, and so raise prices; if the rise becomes general, the cost of living will increase and diminish the purchasing power of wages; this will produce a renewal of discontent among the working classes and result, perhaps, in a further demand, culminating in a stri

ted States may take place as a result of a steadily favorable balance in international trade. Bank reserves may mount, discount rates may fall, and if all other circumstances happen to be already favorable, a period of increased industrial activity may foll

ver one of static equilibrium. The gain of one group or agent of production may simply be another's loss. Each group or agent strives for a large return. If wages go up, profits may go down, or new methods of production may be devised, or strikes may cease. The

t, occurs. The various groups of wage earners may be better or worse off than before. When the price level has shown a prior tendency to rise, there is good reason to believe that the wage earners stand to gain by a vigorous policy of assertion. For then in particular, u

ssing through credit expansion may, indeed, continue beyond the point dictated by banking reserves. Thus depreciation ensues. This, in turn, is ordinarily limited by the desire to retur

ition and certain unchangeable economic laws. The idea is but the shadow of the theories of normal distribution mentioned in preceding chapters. It does, in common with these theories indeed draw attention to certain fundamental economic relationships. These Judge Brown has expressed well in one of his decisions which reads, "The element of truth in the 'Theory of the Pernicious Circle' is that, at a given stage in the history of a particular society, there is a limit to the amount which should properly be awarded for wages,-both wages and profits have to be paid out

TNO

n Prices in the United States," 1914-18. See also his "Gold, Prices and Wages und

d forests which have grown through decades, but upon the fruits of human labor during one or two seasons, frequent contradictions between the movement of prices on the one hand, a

ness Cycles." Also B. M. Ander

ell, "Business Cycle

d, Prices, and Wages under th

t 13. See also F. W. Taussig, "Results of Recent Investiga

onsiderable differences appear between, say, cotton mills and foundries, or building trades and shoe factories. However, no industry escaped a reduction of wages after 1893, and none failed to register

ll, "Business Cyc

ly to be an increase in the rate of labor turnover due to the rapidity of wage movements and the ease of getting a job; and lastly it is said that work is carried out with less energy when the workmen are secure in their employment. Mitchell goes so far as

estion arises as to whether wages mean earnings or rates. The railways maintain that the cost of living argument is fundamentally directed to the establishment of the proposition that earnings have not kept pace with the increase in the price of commodities, and therefore wages, in connection with the cost of living, means earnings. The employees, on the other hand, contend that the computation of the increase i

Wages and Prices under the G

ll, "Gold, Wages, and Prices under

ges 92-3, t

hell, "Business Cyc

id., pa

d., page

"Money and Prices,"

tchell, "Business

uction to the Study of Pri

ners' Case," Vol. I, S. Austr