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Harry Allen

Railroad Profits Climb High

But Companies Resist Wage Demands Made by 1,250,000 Workers

(December 1942)

From Labor Action, Vol. 6 No. 51, 21 December 1942, p. 2.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The profits of the railroad companies in 1942, as compared with the same period in 1941, have increased so enormously (121 per cent gross and 60.2 per cent net AFTER federal tax payments) that the OPA and Economic “Stabilizer” James Byrnes have deemed it publicly expedient to petition the Interstate Commerce Commission to cancel the freight and passenger rate increases granted the railroads last spring.

Nevertheless, the companies are preparing to resist strenuously the demands of the four railroad brotherhoods, the switchmen’s and the fifteen non-operating unions for substantial wage increases to meet rising living costs. The New York Times reports that the OPA and Byrnes petition “was intended as a warning for the five (operating) unions not to ask for a wage increase.”

The weapons that the railroad bosses intend to utilize in the wage dispute are indicated in a recent editorial of the Wall Street Journal:

“Under the whole dispute” between the companies and the rail workers “lies the fundamental question which has never yet been answered: ‘How much is too much?’ and another: ‘Are security holders people?’”

Wages or Dividends?

Workers can agree that these are the issues involved, although they draw different conclusions. In other words, two main questions emerge out of the dispute: one, the “legitimacy” of the wage demands of the railroad workers; and, two, the fundamental question of the private property system itself – of capitalist ownership and control versus workers’ ownership and control.

In endeavoring to show the “unjustness” of the wage demands of the railroad workers, Elisha N. Friedman, railroad-consulting economist, states (New York Times) that the average yearly wage of the passenger engineers is $3,650; passenger conductors, $3,322; and freight engineers, $3,237 – or an average of $3,333.

To get this average Friedman cites wage figures at the very top group of railroad workers. Indeed the Wall Steeet Journal itself admits that the average yearly wage of employees in the train and engine service at present is only $2,600 plus – a discrepancy of $700 per year!

Moreover, the railroad companies and their apologists always endeavor to single out the better-paid four brotherhoods to “cover” the greater exploitation of the more numerous lower paid railroad workers: the maintenance men, laborers, carmen, even the machinists, etc. Sufficient proof of this distortion of the actual situation is the fact that the fifteen non-operating unions are making as one of their main demands today a minimum wage of 70 cents per hour, or a weekly wage of $28 for forty hours – hardly a munificent wage scale.

The top section of the railroad workers (the four brotherhoods) after several decades have obtained gains and rights which most workers have yet to achieve. They attained their status through their strategic position in the industry, by strong union organization, and by the threat to exercise their striking power to effect their demands.

For example, it was NOT “good will” by the railroad corporations, but strong unionism which has resulted in the rail men establishing wage allowances ranging up to five years for permanently discharged workers; and in lifting yearly wage averages for the engine and train workers from $1,346 in 1916 to the present level. The problem for other rail workers is to aim for the standards achieved by the brotherhoods.

The “Poor Railroads”

In great anguish, Mr. Friedman declares: “The whole concept of private property (on the railroads) is rapidly dissolving ... The investor is being expropriated.” Where will it all end, he cries, as he expands on the “excesses of labor.”

Well, what about the “pauperized” railroads? A constantly decreasing share of railroad revenues, Mr. Friedman states, is left for paying fixed charges (after deducting operating costs); i.e., for interest payments, dividends, surplus, etc. Not that there isn’t anything left; there just isn’t enough, says Mr. Friedman.

However, note that even in the years 1932–37, there were never any losses for the railroads, although in this same period, the employment of workers was at its lowest. The railroads, earned money. It was not the railroad owners and the coupon clippers, bless their souls, who had to go hungry or subsist on relief.

Still, railroad spokesman and apologist Friedman is concerned with the “decreasing ability to pay a return to security holders who have supplied the funds necessary to build the plant and provide the equipment.” Friedman ignores the obvious fact that these same investors have in the course of years been repaid many times over in interest payments and dividends. For the most part, the original investors and purchasers of stocks and bonds have handed down these securities to their children or others, who have lived without having to lift a finger ever since.

Over a Billion in Profits

The truth is that today, as before, the investors or stockholders are neither active nor useful factors in the railroad industry. Nevertheless, they continue to receive the benefits of labor’s efforts in the form of interest, profits or dividends – all variations of leeching. And, like leeches, they are completely unnecessary in running a railroad.

For the current year now ending for Class I railroads (the group under consideration), NET earnings available for interest, dividends and surplus – after payment of all expenses and taxes – are $1,525,767,289 (or over one and a half billion dollars). Or more than 5 per cent of the total railroad plant investment of $26,000,000,000. The “net” available for 1942 for interest charges, dividends and surplus is nearly three times the interest charge – a tidy income and profit even for “big shots.”

Moreover, the Wall Street Journal reveals that in actuality the net capitalization outstanding against plant investment is only eighteen billion dollars, the other eight billion having come from surplus labor – that is, profits realized from labor and turned back into the investment – into the means of production. These figures alone challenge the case of the railway companies’ spokesmen and validate the demands of the railroad workers for wage increases. The railroads still run at a substantial profit; and car loadings are at their highest.

“How much is too much?” Well, certainly not the wages received by railroad or other workers. Not while workers continue to give surplus labor to the employers – surplus labor which then becomes transformed info profits and dividends for the bosses and coupon clippers.

What, then, of Mr. Friedman’s complaint that “the investor has been starved ... the unfortunate investor in railroad securities who has created jobs for the workers, who in turn expropriate him.”’ The investor – the poor, forgotten man who creates jobs for the workers, and so on.

Nationalize the Railroads

To test the alleged value of railroad owners and stockholders, let the railway workers take over control and management of the railroads. Let us observe, then, if with investors and owners eliminated are superfluous and unnecessary baggage, the roads will not run as well or BETTER – plus better wages and working conditions for the whole mass of railroad workers. The best interests of the railroad workers lie in that direction.

Today, not only should an railroad workers – the Big Four, the switchmen and the fifteen non-operating unions – demand and receive wage concessions. They should go further and demand the nationalization of the railroads under workers’ control. Theirs is the ability to run the railroad industry. The fundamental questions which the Wall Street Journal asks can only be properly answered along these lines.

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