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The answer is given by chart II and table I in the pamphlet-Raising the Workingman's Scale of Living. That is this red one. Senator ROBERTSON. Without objection, they will be included in the record.

(The pamphlet referred to will be found in the appendix, p. 863.)

Mr. KING. These show that, in the 90 years from 1849 to 1939, capital investment per worker increased ninefold. It was this which caused the gross value of the worker's product to be multiplied by seven, and his hourly real wage rate to be more than quadrupled. Here you have the basic cause of the workingman's increase in real income.

The monopolization did not increase the percentage but the capital investment increased the total output and the percentage division remained constant.

WORKING CLASS INJURED BY LABOR MONOPOLIES

The truth is that, during the last two decades, the average American factory worker would have prospered far more had there never been a labor union in the United States. As charts I and II in What Raises Wages-Labor Unions or Better Tools? show, the percentage share of the Nation's new spending power going to wages remains nearly constant year after year. The term "new spending power”—I use that term for the purposes of convenience is used to cover the algebraic sum of the national income and the change in the volume of circulating medium. That, when they are printing more money through the Government of the banks that add to the national income because it gives the people more money to spend.

Senator ROBERTSON. But it slows down the velocity of circulation. Mr. KING. Sometimes; and when they are retiring funds, as they have been in recent years, that tends to diminish the new spending power and cuts down, therefore, the amount of money that will be spent in the Nation. Studies that I have made show that the amount actually spent goes right along with the spending power. There is very little divergence in the two quantities. So that the aggregate demand for goods in the Nation as a whole depends upon the amount of new spending power available.

The principal constituent in the Nation's aggregate new spending power is the national income. It, in turn, is governed mainly by production. It follows that all featherbedding and restrictions on output imposed by labor unions cut, in like proportion, the income of employees for they, too, are buyers of goods. As you all know, new houses have been selling at outrageously high prices largely because building workers have been restricting output. The railway unions are striving vigorously to force the railroads to carry useless workers on every Diesel engine. This would raise freight charges. John L. Lewis, as you have heard, is limiting coal workers to 3 days' production a week. This results in high-priced coal. And I am told that union leaders are urging the Senate to pass section 630 of the armed services appropriation bill providing that

no part of the appropriation shall be made available for any person, firm, or corporation which uses stop watches or time-measuring devices for time studies and related purposes.

Here is featherbedding to the nth degree. And every resulting cut in production will inevitably mean lower total real income of employees as a whole.

Still

But featherbedding is not the only result of labor monopolization which reduces sharply the total income of the laboring class. more inimical to the prosperity of the average workingman is the practice of pricing labor out of the market whenever a business recession occurs, something which we have been experiencing in a mild way during the past few months.

Charts I and II in my study entitled "Would a Fourth Round of Wage Increases Benefit Factory Workers?"-you have that thereprove conclusively that the actual factory wage total depends primarily upon the Nation's aggregate of gross new spending power.

(The pamphlet referred to will be found in the appendix, p. 865.) Mr. KING. The composition of this item is shown in table I. Reference to the figures there presented reveals that this latter quantity is, in turn, dominated by the gross national product. Obviously, when workers are idle the national product will fall. But why do workers become idle? Simply because the labor monopolies set wage rates higher than the existing volume of new spending power will justify.

FACTORS DETERMINING THE VOLUME OF EMPLOYMENT

Strangely enough, the whole relationship of employment volume to gross new spending power is capable of an ultrasimple mathematical demonstration. All that is necessary is to subtract 211⁄2 billion dollars from our Nation's gross new spending power for the month. Take 14.4 percent of the remainder. That gives the total wage bill for the month in all of the factories of the United States. The last column of table VI shows how close this simple formula comes to giving the correct answer, despite the presence of a multitude of interfering factors.

Obviously, if one divides the total factory wage bill by the average hourly wage rate for all factories, the quotient will be the total number of hours of employment. It follows that, the lower the wage rate, the more will be the hours of work performed, and vice versa.

WHY UNEMPLOYMENT HAS RISEN IN 1949

A glance at chart 4 shows that, during the early part of 1949, the actual average factory wage rate was above the rate which would give full employment, hence unemployment rose sharply. Recently, however, an improvement in gross new spending power has lessened the excess of the actual wage rate over the rate which would give full employment, and there seems to be a tendency for unemployment to diminish.

LABOR LEADERS TEND TO PRICE LABOR OUT OF MARKET

In May 1949-that is the last date for which official figures are available-actual average hourly earnings of factory workers stood at $1.38. Had the rate been reduced to $1.31 the effect would have been to restore full employment rather promptly. But the leaders of the great labor monopolies did not then, and still do not, show the slightest interest in keeping wage rates at a level which will keep everyone employed.

Instead, they have been pressing with utmost vigor for a wholly unwarranted fourth round of wage increases.

If gross new spending power should continue to decline, it seems almost certain that the monopoly leaders would prevent the necessary downward wage adjustments, and thus would cause a repetition. of the chronic unemployment for which they were primarily responsible during the decade of the 1930's. As I have shown in table VI of my book The Causes of Economic Fluctuations (published by Ronald Press), on the average, during that whole decade, unemployment cost the people of the Nation one-sixth of their total potential income. This was the result of pricing labor out of the market. And for this overpricing, prime responsibility rests upon the great labor monopolies which controlled wage rates.

I have inserted here a little additional material brought out by Mr. Lewis' recent attempt to get fringe benefits.

FRINGE BENEFITS

Recently, finding it difficult to get direct wage increases in the face of falling demand, labor leaders have been calling for such indirect additions to pay as pensions for the aged and compensation for disability. In time of recession, such payments are just as certain as wage additions to increase the prices of the products of industry and thus lessen the possible volume of sales, thus giving rise to unemployment.

Furthermore, the increased cost of products burdens the unorganized members of the population. The situation of the farmer illustrates this point. In a recent letter, Mr. Fred H. Sexauer, a director of the Dairyman's League, puts the matter thus:

GENTLEMEN: The unfairness of pension demands in the fourth round of wage increases impels me to write you.

Thus far I have seen little mention of their effect upon farmers. I suppose that that is due to the indirectness of the impact. It is this which I wish, through this letter, to call to your attenion.

Pensions affect raw-material costs, transportation costs, and manufacturing costs-particularly where they are applied on an industry-wide basis. They thus become real taxes upon the user of the products.

The cost of pensions will be found in the prices of the groceries he buys, the fee of the doctor who calls on him, the price of the auto he rides in, the truck which hauls his milk, the tractor in his field, the gasoline delivered for his machinery, the feed brought to him by rail and truck from distant points, the freight charge for transporting his product to market and distributing it there.

Because of the industry-wide character of pensions, the user's only recourse is to go without the products affected. Pensions become taxation without representation. Those who are participants in a union monopoly where they can apply similar practices may recoup such costs by belonging to the preferred class of pensioners.

Farmers cannot. They are still highly competitive as regards production and most marketing. Their economic status is the base of our economy. They feel the full impact of rising costs in the products which they buy on the one hand, part of which are pension costs, and the decline in prices, on the other hand— which has ranged from 10 to 50 percent during the year-depending on the product.

Farmers and others subject to the whims of economic pirates will have to finance and carry and repair the protection for the few, who, through monopolistic privilege, have added their burden to the many.

Monopolistic power in the hands of a few unions in basic or key industries allows them to prey upon society generally, just as the robber baron of the Middle Ages in his impregnable castle preyed upon the countryside, the traveler, and the trader. He and his men worked in their own way. But the position he held made it possible to get more than his share by a force peculiarly his own.

Pensions for a small percentage of the workers through monopolistic union control of key industries at the expense of farmers and other workers are the loot of modern robber barons in our present society.

As in the Middle Ages, the farmer, the trader, the professional persons, the workers in most industries will be at the mercy of the robber barons of the modern age, the members of the monopolistic unions controlling the key industries.

I wonder to what extent business leaders will yield, as some have in the past, to labor monopoly demands and be content to pass the pension and other increased costs on to farmers and others.

Sincerely yours,

FRED H. SEXAUER.

I agree with his analysis. Moreover, careful analysis leads to the conclusion that insurance against disability and old age should be carried not by employers but by companies specializing in the insurance business. In the long run, they are best fitted to protect the interests of the employees.

In the third column of the folder which you have before you, entitled "Should Employers Insure Their Employees Against Old Age and Disability," I attempt to explain why this is true. I will not go into that. You can read it in the folder.

(The pamphlet referred to will be found in the appendix, p. 878.) Now, the question is: What is now sound policy?

Sooner or later we are all too likely to be faced with another great shrinkage in demand like that characterizing the 1930's. If and when this occurs, do you feel that it is sound policy to leave in the hands of the labor leaders power to paralyze the Nation's industries? Would it not be wiser to recognize the fact that labor leaders are no more paragons of virtue than are captains of industry, and that hence both should be treated alike?

When the leaders of a powerful pressure group persistently advocate policies inimical not only to the public at large but to their own followers, and when they attempt by threats to dictate the actions of our elected representatives and officials, is it not, indeed, time for Congress to clip the wings of these would-be dictators? Ought not Congress to pass legislation forbidding combinations or organizations of any kind to push prices of either commodities or labor above the levels which competition would determine?

Is it not desirable to prevent any group from interfering with freedom of contract? Do you feel that Congress should continue to allow any class the special privilege of preventing honest American citizens from working where they please, when they please, and on what terms they please? In brief, is it not high time to reestablish in our Nation economic freedom and equality before the law? These are the questions which I leave with you for your thoughtful consideration.

Senator ROBERTSON. Doctor, we thank you very much for your

statement.

Mr. KING. If you are at liberty to so do, I will be glad to have these other documents included.

Senator ROBERTSON. Without objection, we will let the counsel for the committee go over them. We are under some restraint in the amount that we can print.

These hearings will stand recessed until 10 o'clock tomorrow morning.

(Whereupon, at 12:25 p. m., the committee was recessed to reconvene at 10 a. m. Wednesday, August 17, 1949.)

ECONOMIC POWER OF LABOR ORGANIZATIONS

WEDNESDAY, AUGUST 17, 1949

UNITED STATES SENATE,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C.

The committee met, pursuant to adjournment, at 10 a. m., in room 301, Senate Office Building, Senator A. Willis Robertson presiding. Present: Senators Robertson, Sparkman, and Capehart. Also present: Mr. L'Heureux, counsel for the committee. Senator ROBERTSON. The committee will please come to order. The first witness this morning is Mr. J. V. Van Sickle, professor of economics. Will you please be sworn?

Do you solemnly swear that the evidence you are about to give this committee will be the truth, the whole truth, and nothing but the truth, so help you God?

Mr. VAN SICKLE. I do.

Senator ROBERTSON. We shall be glad to hear you.

TESTIMONY OF JOHN V. VAN SICKLE, PROFESSOR OF ECONOMICS, WABASH COLLEGE, CRAWFORDSVILLE, IND.

Mr. VAN SICKLE. My name is John V. Van Sickle. I have been teaching economics off and on for about half of the last 35 years; 2 years at Harvard College (1915-17) as assistant in economics and tutor in the division of history, government, and economics; 4 years at the University of Michigan as assistant and then associate professor (1924-28); 8 years at Vanderbilt University (1938-46) as professor, research professor, and for about half of the period chairman of the department. Since September 1946 I have been chairman of the department of economics at Wabash College, Crawfordsville, Ind.

Almost exactly one-half of this 35-year period was spent off campuses; 2 years in the armed services in World War I; and some 15 years in Paris, Vienna, and New York; with the American Embassy, Paris (1919-20); with the Reparations Commission and the Office of the American Technical Adviser to Austria in Vienna (1920-23); with the Social Science Research Council and the Rockefeller Foundation (1928-38), with my time about equally divided between travel and residence in Europe and the United States.

My doctoral thesis and my earlier writings were in the field of taxation. Since 1938 I have published a book on the economics of the South entitled "Planning for the South: An Enquiry Into the Economics of Regionalism" (1943) and numerous articles on various aspects of the wage problem. I have testified on labor issues before the House Committee on Labor, the Joint Committee of Congress on

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