Wage Policy in the Defense Program

Abstract

The question of wage policy is a perennial one in capitalistic society, but it attracts popular attention primarily in periods of wide business-cycle swings. Thus in any period of sharply rising or falling business activity, accompanied by rather pronounced swings in prices and costs, the question of proper wage policy becomes a subject of active, and frequently hot, debate. It is not surprising, therefore, that the defense program with its rather intense business activity and rising cost of living should once again thrust this question into the foreground. What wage policy should be followed in the present defense emergency program? Should wages be increased, and if so, by how much? Should a ceiling as well as a floor be placed on wages? Should wages be geared rather rigidly to some kind of cost-of-living index? And would this arrangement help keep down rising prices and inflation and thus protect labor's real wage from impairment? What wage policy would best facilitate the shift from defense to nondefense production when the present emergency has passed? These and other questions seem to indicate the need for a carefully formulated national wage policy, The peculiar nature and importance of wages in our economic system, however, makes the formulation of such a national wage policy no simple or easy matter. In the first place wages represent a cost of production to industry and as such must be given careful consideration in any national wage policy. Second, wages represent a distributive share going to wage earners and as such they influence very directly consumer demand and purchasing power, which in turn, of course, influence very directly the course of the business cycle. Third, wages in a price economy measure the relative wellbeing of the wage earner group; their standard of living fluctuates more or less directly with the wages received. An examination and appraisal of certain current proposed wage policies in the defense period may thus be worth while.