Susan Green Archive   |   Trotskyist Writers Index  |   ETOL Main Page

Susan Green

Price Boosts Cut Labor’s Purchasing Power

Purchasing Power of Wages Cut by 10 Per Cent in 1946
as Corporation Profits Zoomed to Dizzy Heights

(14 April 1947)

From Labor Action, Vol. 11 No. 15, 14 April 1947, p. 1.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The March issue of Economic Outlook, CIO magazine, has a compilation of wages, prices and profits and their co-relation that should fill a reader with indignation. Here, in graphic form, is exploded the capitalist pre-fabricated fiction that increased wages have forced prices up. Here also, in black and red, we see the profit motive riding roughshod over the nation and taking cruel advantage of the shortages all over the world.

First let it be noted that the Economic Outlook did not pluck its figures out of a hat. Its sources are the published financial statements of the companies mentioned, the reports of the government Bureau of Labor Statistics and information given by the Bureau of Census of the Department of Commerce. Also, so fair-minded was the Economic Outlook that it excludes any year when a company lost money in the pre-war period 1936–39, thus making the current bonanza appear comparatively lower than it actually is.

Now let’s have the attention of the housewife whose radio dins into her ear hour after hour that if it weren’t for those grasping workers, prices would not be so high. In its charts on meats, the Economic Outlook shows that during 1946 actual wholesale price increases reached 90.6 per cent above 1945. However, wage increases of those grasping workers in the meat industry during 1946 warranted only a 1.6 per cent increase to pass on to the consumer the entire wage boost. Thus 89 per cent of the 90.6 per cent rise in meat prices had nothing at all to do with wages.

Where Did the Rest Go?

In other foods the price increase needed to reflect wage increases was a mere 1.8 per cent, whereas food prices rose 57.9 per cent during 1946. In textiles the disproportion between wage increases and price increases Was a bit less, wage rises warranting a 6.7 per cent price increase, whereas wholesale prices actually increased 31.8 per cent during 1946. What about that 25.1 per cent? And here’s a set of figures that will interest the homeless veteran especially. Prices of iron and steel which go into building, climbed 16.7 per cent last year, of which only 1.9 per cent could be accounted for by higher wages. That other 14.8 per cent was added just because.

From the above it must not be assumed that it is necessary for the capitalists to pass on wage increases to the consumer in,order to maintain the same level of profits—not that we are particularly concerned about profits. As the United Auto Workers proved back in 1945, the auto industry could then have absorbed a 30 per cent wage increase and still increased its profits. The Economic Outlook gives another example:

“Food profits in 1946 were what they were because of the short-range view of industry that the public should pay as high a price as the market would bear. Wholesale prices of food products increased 58 per cent during the two years 1945–46. During this same period, hourly wage rates went up 21 per cent. But as we have pointed out in previous Outlooks, an increase in hourly wage rates doesn’t require an identical increase in prices by any means. According to the 1939 census of manufacturing, wages represented less than 9 per cent of the value of the product in the food industries. This means that food companies could maintain their same profit level by increasing prices only 2 per cent. With increased productivity and efficiency of operations, most industries could absorb this increased wage cost WITHOUT PASSING ANY OF IT ON TO THE PUBLIC. But passed on as it was, the food industry increased prices MORE THAN 30 TIMES what was needed to take care of the wage increase.”

The above should be enlarged, framed and pasted over every radio in every home. No matter how figured, wage increases are not the reason but only the flimsiest of pretexts for the greedy price spiral.

These inflationary price boosts actually cut the purchasing power of wages by nearly ten per cent in 1946. Profits, however, have reached new dizzy heights. The big four in the meat industry, Armour, Swift, Cudahy and Wilson, increased their profits in 1946 over 1945 respectively as tollows: 228.3 per cent, 33.2 per cent, 168.3 per cent and 105.1 per cent. Other outstanding profit increases of 1946 over the previous year are for National Biscuit Company, $19,700,000 against $10,500,000; American Woolen Company, $22,400,000 against $8,300,000; United States Steel, $88,700,000 against $58,000,000.

Still another way to grasp the enormous take of capital is to see how the return on investment has climbed since the beginning of the war and especially during 1946, when price controls were abolished. On the couple of bucks a worker may have in the savings banks he gets these days about 1% per cent interest. Before the war he got more than that, maybe 2 or 2½ per cent. Now watch what has happened to the percentage of return of what the capitalists invest. For Cudahy Packing the rate was 3.49 per cent pre-war, 8.1 per cent in 1945 and 16 per cent in 1946; for Pacific Mills it was 4.1 per cent pre-war, 7.8 per cent in 1945 and 38.4 in 1946; for Continental Baking 8.6 per cent pre-war, 11 per cent in 1945 and 24 per cent for 1946; for Inland Steel 13.6 per cent pre-war, 12.7 in 1945 and 17.4 in 1926.

What a commentary on the capitalist system! Remember the full-page advertisements by the National Association of Manufacturers promising that if price control was abolished, goods would flow into the consumer markets and prices would come down. The capitalists moved heaven and earth, but especially their Congressmen, to end price control. Now we see the reason, which indeed was very easy to foresee. Instead of prices coming down, they were marked up and up, and every working class family that has had to pay these prices to live, has added its hard-earned dollars to the pile of profits the capitalists have accumulated.

Workers are again bestirring themselves for wage increases to wipe out the actual wage cut that soaring prices have meant to them. Workers will not stand for the declining standard of living which static wages and skyrocketing prices have resulted in. Now you’ll hear something from the bloated capitalists. They will scream that they cannot afford to raise wages, that higher wages will force prices up more. However, that bluff has been exposed, and how!

Susan Green Archive   |   Trotskyist Writers’ Index  |   ETOL Main Page

Last updated: 3 January 2022