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Lewis Corey

The Decline of American Capitalism

PART TWO
Prosperity, Profits, and Wages

CHAPTER V
The Policy of High Wages

IN spite of the available facts, there was, in 1923-29, an almost universal belief that American employers had accepted the “policy of high wages” as the basis of prosperity. An economist wrote: “Increasing productivity of labor and industry, advancing wages, higher living standards, and greater consuming or purchasing power, is now the avowed policy and practical program of American industry.” ... An economic historian: “The cultivation of consuming power became the direct concern of manufacturers, with results that profoundly affected wages and price adjustments [recognizing] that to raise wages and reduce prices was the way to promote and safeguard prosperity.” ... The President’s Committee on Recent Economic Changes: “Leaders of industrial thought began consciously to propound the principle of high wages.” ... The dogma of the “policy of high wages” was generally accepted in Europe, although a German trade union delegation was skeptical and British employers frequently stated that American employers did not pay any higher wages than they had to. Two British investigators reported that not only did American employers constantly raise wages but that they never limited earnings on piece rates or cut rates! ... A German economist, after prosperity crashed into depression: “The industrialists had to revise their economic theories. Henceforward, in common with the principal groups of organized workers, they regarded high wages not as a costs item involving higher prices, but as an element creating increased purchasing power, and with it the potentiality of increased sales.” [1]

There were two basic assumptions in the dogma of the policy of high wages:

• In 1921-22, enlightened employers, recognizing that high wages promote and safeguard prosperity, voluntarily raised wages, whereupon prosperity burst forth in all its radiant glory.
• In 1923-29, the employers practiced the policy of high wages; they voluntarily and constantly raised wages, which rose higher and higher, to increase consumption, production, and prosperity.

But wages are not determined in this fashion, neither in an “unfettered” capitalism nor in a capitalism upon which are imposed the “controls” of state capitalism. The facts are clear:

• Real wages rose in 1921-22, but the increase was imposed upon the employers by falling prices and labor’s militant resistance to cuts in money wages.
• The rise stopped as a real upward movement after 1923; money wages and real wages were practically stationary in 1924-29, precisely when American capitalism was being touted as having accepted increasingly higher wages as its “avowed policy and practical program.”

The immediate post-war period was one of sharp struggle between labor and capital. Press and employers demanded a “liquidation” of labor and of “high wages.” According to one of the apologists of prosperity: “The burden of all business discussions, as well as political debates bearing upon financial and industrial problems, was the constantly reiterated declaration that there ‘must be a return to normalcy’ ... meaning a reversion to pre-war wages, industrial conditions and prices.” [2] In spite of the employers’ resistance, and by means of embattled struggle, labor forced up money wages, which in 1920 reached an exceptionally high level, an all-time high. In 1921-22, the employers’ resistance developed into a general offensive to cut wages. An ally of the House of Morgan, the National City Bank of New York, declared high wages were responsible for the depression and retarded revival. The National Association of Manufacturers and other employers’ organizations proposed to “deflate” the trade unions, whose “pretensions” were considered “menacing,” by means of the “American plan” of “open shop.” The unions, cajoled during the war, were now stigmatized as a menace to American democracy and civilization. Samuel Gompers, president of the American Federation of Labor, was met with derision and denunciation when he urged: “High wages, the best possible wages, are the greatest incentive to prosperity.” A storm of wage cuts beat upon the workers: hourly money earnings in manufactures were cut 15% in 1921 and another 5% in 1922; there were similar cuts in non-manufacturing industries, while the strongly unionized building trades workers had their hourly rates cut nearly 6%. [3]

Labor resisted the capitalist offensive. There were 2,226 strikes in 1920 involving 1,463,054 workers and 2,684 strikes in 1921-22 involving 2,711,809 workers. [4] Great strikes broke out in the mines and on the railroads. Rebellious memberships in the unions forced strike action upon the reluctant union bureaucracy; “outlaw” strikes disregarded the bureaucracy and agreements with the employers. Capitalism resorted to its usual methods of legal and physical force to crush the strikes. During the war, although strikes led by the Industrial Workers of the World were brutally suppressed, the government maintained a velvet-glove policy toward “patriotic” labor, under pressure of political necessity. But the iron fist was revealed immediately after the war. In 1919, President Woodrow Wilson denounced the coal miners’ strike as a “fundamental attack, which is wrong both morally and legally, upon the rights of society and the welfare of the country.” [5] The violence and other repressive measures against the miners and steel workers in 1919 were used again in 1921-22 to crush strikes. The courts issued injunctions upholding the employers against the workers; injunctions to limit picketing were declared constitutional by the United States Supreme Court, while it declared unconstitutional any law prohibiting the issuance of injunctions in labor disputes. [6] Injunctions helped to break the miners’ strike in 1921 and the railroad shop crafts’ strike in 1922. The strikes were animated by economic discontent, not political, but revolutionary thunder was in the air. In the four years 1919-22 there were 7,575 strikes involving 8,335,211 workers – an extraordinary expression of labor militancy. The Seattle six-day general strike in 1919 had many revolutionary implications – the strike council practically governed the city and labor guards maintained order in the streets. The most repressive measures were used against the left wing of the labor movement, the Communist Party and the Industrial Workers of the World; in many states mere membership in these organizations was made a crime punishable with severe imprisonment. Measures to prohibit strikes were discussed in Congress and state legislatures. An intangible but real factor was the proletarian revolution in Russia; the revolutionary overtones inspired militant workers to more aggressive action and affected the employers: revolutions do start with strikes.

As a result of labor’s resistance, of its immediate and potential power, money wages were not cut as much as the employers desired or as much as they might have been. In 1923, hourly money earnings even increased, although still 11% below 1920. Money wages were cut, but prices declined still more and real wages rose (the rise was more than offset by an increase in the efficiency and intensity of labor, resulting in a higher yield of surplus value). Practically the whole of the rise in real wages in 1921-29 took place in 1921-23.

The capitalist attitude toward higher wages was clearly revealed in the speeches and writings of Samuel M. Vauclain, president of the Baldwin Locomotive Works (an affiliate of the House of Morgan), and one of the most conspicuous mouthpieces of the policy of high wages:

In 1919, Vauclain had not a word to say about high wages; prosperity, he said, depends upon foreign trade.

In 1921, Vauclain urged unrelenting struggle against “high wages” and trade unions; industry is menaced “by extravagant demands of labor both as to rates and shortening hours.” One of the “requirements for prosperity” was “the adjustment of labor.” He thundered: “A general strike is threatened. Let the strike come. Pray for it. Pray for deliverance from outrageous regulations and wage schedules.”

In 1922, Vauclain again urged wage cuts, and condemned the strikes for higher wages of the miners and railroad workers. “They are talking,” he said, “about wages instead of work. Wages do not have to be lowered everywhere, but in many places they must be lowered to get going.”

In 1923, after higher real wages had been forced upon the employers, Vauclain said: “There is nothing in low wages; higher wages are an essential part of prosperity.” And one year later he proclaimed unctuously: “Higher wages have been a great blessing.” [7]

Real wages rose against the employers’ resistance; and in 1923-28, when high wages were proclaimed “the avowed policy and practical program” of American capitalism, real wages were practically stationary (Table III). In 1920-22 real wages scored an increase of 12%, because of lower prices, as hourly, weekly, and yearly earnings all declined. After 1923, the upward movement practically ceased: money earnings remained below 1920 and real earnings rose only slightly because there was no considerable fall in prices. Hourly money earnings were 3.6¢ higher in 1927-28 than in 1923, but full-time weekly earnings were constant, due to a moderate shortening of the hours of labor and to a probable decrease in wage rates, as changing processes or products made it possible to make concealed reductions by tightening the rates on new jobs, workers maintaining their customary earnings by working harder. Average yearly money earnings of all workers rose only $55 or 5%; the index of real wages was stationary in 1924-25 and then rose slightly. In manufactures, average yearly earnings in 1928 were lower than in 1923. Wages fell considerably in many groups, particularly in the industries depressed by the competition of newer products. Real hourly and weekly earnings in 1928 were 1% lower than in 1923 in cotton manufacturing, and 3% lower in men’s clothing; weekly money earnings in cotton manufacturing decreased from $21.24 in 1923 to $19.71 in 1928, in heavy equipment from $33.02 to $31.32, in wool manufacturing from $23.97 to $21.75. Wages were slashed among the coal miners and textile workers. The real earnings of railroad workers other than trainmen fell 1%. Although there were fewer strikes in this period, many workers struck against wage cuts or for higher wages, particularly in mining and textiles. The conclusion is inescapable: real wages rose in 1920-23, but thereafter were practically stationary. (In 1929 there was a noticeable rise in real wages and total wages, but it was wiped out by the depression; in fact the rise was bound up, antagonistically, with the spurt in production which marked the final aggravation of the forces of cyclical breakdown.) There was no policy of increasingly higher wages, an impossibility under the exploiting relations of capitalist production. [1*] From another angle this appears in the fact that for 1924-28, industrial wages (manufactures, mining, oil wells, quarries, construction and transportation) fluctuated around the 1923 level.

But there was a policy of increasingly higher profits. While wages were practically stationary, labor costs in 1929 were 9.5% lower than in 1923 and overhead costs and profits 10.6% higher, the one scoring an average yearly decrease of 1.3%, the other an increase of 1.7%. [8] Again the facts refute the theory that productivity rises before wages and wages necessarily rise as productivity rises. Real wages in manufactures began to rise in 1921 before any considerable increase in the productivity of labor, which forced employers to improve efficiency to safeguard profits. In 1921-23, labor shared in the gains of rising productivity. (A part of the increase in real wages came neither from higher productivity nor the lower prices of manufactured goods, but from the sharp drop in the prices of foodstuffs, which was ruinous for the farmers. [2*] Raw materials, moreover, were cheapened: their costs were $2,500 million less in 1923 than in 1919, while money wages rose only $500 million and “value added by manufacturing” rose $1,000 million; nearly one-half of the raw materials consumed in manufactures are agricultural products. [9] But rising productivity in 1924-29 was not accompanied by any corresponding rise in real wages; productivity rose 22% [10] but real wages were practically stationary. In the ten years 1919-29 the productivity of labor in manufactures rose 43%, and there were similar increases in mining, transportation, and the power industry; real wages rose not more than 20% (partly offset by increasing unemployment). In final analysis, higher wages depend upon higher productivity, but productivity always increases more than wages, in all stages of capitalism, whether “unfettered” or under “control.”

While real wages were practically stationary in 1924-29, relative wages fell sharply as profits rose, plainly revealing the antagonism between profits and wages. Relative wages, the share of the workers in the product of industry, fall continuously. The fall is usually greatest when the productivity of labor rises most rapidly, even if real wages increase, as profits rise more and the worker is cheapened by more productive labor. This appears clearly in the diminishing proportion wages constitute of “value added by manufacturing.” The proportion fell from 51.1% in 1849 to 40.2% in 1909, rose to 42.7% in 1923, and fell to 36% in 1929, when the proportion of wages to “value added by manufacturing” was 30% lower than in 1849. [11] There was, naturally, a great increase in labor’s yield of surplus value (Table IV).

The rate of surplus value, of unpaid labor, was 22.9% higher in 1929 than in 1914 and 27.1% higher than in 1923. It fell temporarily in 1923 because of the fall in prices and the rise in real wages of the two preceding years, with which the employers had not yet caught up. But they did catch up in 1925, when the rate of surplus value moved sharply upward. The rate fell again temporarily, and slightly, in 1931, but the rate moved up sharply in 1932-34 because of another great increase in the productivity of labor. Thus, in 1929, relative wages fell to the lowest point in American history in the midst of an extraordinary rise in the productivity of labor, surplus value, and profits. [3*]

While real wages in general were practically stationary after 1923, the wages of union workers (except miners) kept on rising, 25% to 50% and more. In the building trades, hourly wage rates rose 33% in 1923-29; in eight union trades, rates rose 30% and weekly earnings 22%. No such upward movement occurred in the rates and earnings of the workers as a whole. In 1922-29 the average yearly rise in a composite index of real earnings (factory workers, unskilled labor, clerks) was 1.9%; in the union index it was 3-7%. [12] The rise of union wages, in most cases, bore little relation to the rise of productivity in the particular occupations; it was determined primarily by the power and strategic position of union labor in the sheltered trades. Wages were often stationary or fell among masses of unorganized workers where productivity gains were exceptionally large. There was only a small upward movement in the salaries of clerical workers, whose work was being intensively mechanized during this period. The unusually large rise in union wages was used to “prove” that all wages were rising rapidly. It was responsible for the conservatism of union workers and particularly of the union bureaucracy, which accepted the mythology of prosperity and believed that wages would rise everlastingly in this best of all possible worlds. But unskilled, unorganized workers, who make up from 25% to over 50% of the labor force, made hardly any gains; their real earnings in 1923-29 were not much higher than in 1919. An index of the real earnings of unskilled workers in manufactures, building trades, agriculture, and on the railroads (1914 as 100) rose to 116 in 1919, fell to 108 in 1920 and 97 in 1921, and rose to 102 in 1922, 113 in 1923 and 116 in 1926. Unskilled earnings rose slightly in the next three years. During the World War unskilled labor scored considerable gains, because of the scarcity of workers, narrowing the differential between the wages of skilled and unskilled; then the differential widened again. [4*] One investigator concluded: “Apparently the increase in productivity that has taken place has not contributed its share toward the increase of the wages of unskilled labor.” [13]

How high, moreover, were “high wages” in the “Golden Age” of American capitalism, before the great depression? While among union workers, the aristocracy of labor, earnings ranged as high as $40 to $75 and more weekly, among other workers they were as low as $10 weekly. Average weekly earnings among unskilled workers were below $20. Nearly 2,000,000 workers in manufactures earned less than $1,000 yearly. Railroad workers were among the best paid, yet section hands earned an average of $17 weekly; 500,000 workers, one third of all railroad workers, earned less than $25 weekly. Average weekly earnings were below $20 in lumber mills, cotton, tobacco, candy, and canned goods. Women workers usually earned from $9 to $14 weekly. The average weekly salary of all employees in one chain store organization in 1929 was $22.71. In chain stores of the 5¢ and 10¢ variety, in spite of the phenomenal rise in sales and profits, average weekly earnings were $12, with 25% of the girls earning less than $10 – earnings “not sufficient to procure the necessities of life.” [14] Among the workers as a class (excluding farm laborers), earnings were probably distributed as follows: 2,000,000 workers earning over $2,000 yearly; 14,000,000 workers earning from $1,250 to $2,000; 12,000,000 workers earning below $1,250. (Unemployed workers in 1923-29 averaged nearly 2,000,000 yearly.) The average yearly family income was not much larger than the individual average of $1,250. An investigation in Chicago in 1924-26 established that the family income of semi-skilled and unskilled workers ranged from $800 to $2,400 yearly; the average was $1,500, with the father, mother and one or more children working in 42.8% of the families. [15] The average yearly family income among workers as a class was probably $1,700; family budgets based on “minimum requirements of health and decency” (excluding savings) were estimated as follows: New York City $1,875, Philadelphia $1,926, Detroit $2,032. [16] Accordingly:

• High wages were low wages in terms of adequacy to provide minimum requirements of living; grinding poverty prevailed, moreover, among millions of workers.
• High wages were low wages in terms of the increase in the productivity of labor and in production, which greatly outstripped the increase in wages: productivity rose from 15% to over 200%, the average 43%.
• High wages were low wages in terms of the possibility of still higher wages; all through 1923-29 (and this is characteristic of capitalism in all stages, “unfettered” or under “control”), wages could have been considerably higher if labor had shared in the gains of rising productivity and if the unused capacity of industry (25% to 75% in many cases, in the peak years 1928-29!) had been utilized to produce goods instead of standing idle because of the exploiting relations and contradictions of capitalist production.

To indicate the enormous progress implied in the policy of high wages, one of the myth-makers of prosperity [17] conjured up four stages in the determination of wages. The stages are fantastic, revealing an astonishing flight from reality; the reality shows the actual mechanism of wage determination under capitalism:

1. Prior to 1900: Barbarism; wages were decided by force; employers considered labor a commodity, the workers had no theory of wages to offer in arbitration proceedings. But real wages scored their greatest increase in American history.
2. From 1900 to 1916: Progress; organized labor insisted that wages should be adjusted to cost of living; reformers developed theories of “living” wages and “minimum subsistence” wages; the Clayton Act, which “declared” that labor is not a commodity, was hailed as a great achievement. But real wages were practically stationary.
3. From 1917 to 1922: Reversion to barbarism; employers and workers again resorted to force, “threw off all restraints” and a “deplorable condition” of “industrial conflict” decided wages. But real wages rose over 75%.
4. From 1923 to 1929: Magnificent progress; employers “recognized” that “advancing wages” are the basis of prosperity; “old wages, theories and standards were scrapped along with obsolete machinery and methods.” But real wages were practically stationary.

Two more stages may be added to complete the story:

1. From 1929 to 1933: Final exposure of the policy of high wages; employers cut wages drastically while the productivity of labor rose sharply; wages decreased more than in previous depressions.
2. From 1933 on: More progress, and the ballyhoo of Niraism; state intervention to “raise” wages and “spread” prosperity; lower real wages, total wages decrease while the productivity of labor and unemployment increase, profits rise, another major depression looms.

The depression destroyed the myth of the policy of high wages. Lip-service was paid to it at a conference of 400 “key” businessmen, called by President Hoover in December, 1929, which formed a permanent organization to “stabilize business” and to prevent the depression from developing any further. A solemn pledge was given that employers would not cut wages. The high officials of the American Federation of Labor solemnly accepted the pledge, and agreed to maintain industrial peace. One year later, Secretary of Commerce Lamont said: “It is a noteworthy fact that practically no cuts in wages have been made by the employers. This stands in marked contrast with the practice in previous similar recessions. It marks the widespread conviction that permanent progress in prosperity is dependent on liberal wages and consequent large buying on the part of the masses of the people, and that recovery from any temporary setback will be promoted by the same policy.” But the pledge not to cut wages was almost immediately violated. By April, 1930, William Green, President of the American Federation of Labor, was forced to “act” against the cutting of wages. “I propose,” he said, heroically, “to join the movement in the next Congress to reduce the tariff protection” of employers who cut wages. And six months after his statement about “no cuts in wages” and “prosperity is dependent on liberal wages,” Secretary Lamont said: “As the period of depression lengthens, many corporations are faced with the prospect of closing down altogether and thus creating more unemployment, or, alternatively, seeking temporary wage reductions.” [18]

All through 1930, wages were cut drastically by employers, including those who had given the “pledge” not to do so. They were cut 10% to 15% in manufactures. The cuts in the bituminous coal, textile, and boot and shoe industries were so bad that William Green classed the employers as “public enemies.” ... By 1931, the policy of high wages was forgotten even in words, and leading representatives of capital were repeating the sentiments of 1920-22: Liquidate labor and high wages! The Journal of Commerce insisted that wage cuts “are among the various aids to business recovery.” A convention of the American Investment Bankers Association demanded a cut in the wages of railroad workers, which were cut severely, to protect investors (including, of course, widows and orphans). The National City Bank: “Wage cuts are one of the encouraging features of the situation.” Albert H. Wiggin, chairman of the Chase National Bank, who all these years speculated in the stock of his own bank: “It is not true that high wages make prosperity. When wages are kept higher than the market situation justifies, employment and the buying power of labor fall off. Many industries may reasonably ask labor to accept a moderate reduction of wages.” ... All through 1931, wage cuts beat upon the workers with increasing severity. From a high of 133 cuts in any one month of 1930 they rose to 335 in March, 1931; cuts averaged 10% in manufactures and 25% in bituminous mining. In 1931, according to Census figures, total wages in manufactures were 37.8% lower than in 1929 and average yearly earnings 15.6% lower ... One of the meaner aspects was sweating women and children in homework. In Pennsylvania, violations of the child labor law rose from 10% in 1930 to 18.8% in 1931, and violations of the woman’s law from 3.8% to 17.8%. Earnings were as low as 12¢ an hour. In New York City clothing factories, women workers were paid from $1.75 to $2.75 for a week’s work ... The fall in prices was not enough to offset wage cuts, and real wages fell. Real earnings in manufactures in 1931 were 8% below 1929. In twenty-five manufacturing industries average weekly earnings decreased from $28.54 in 1929 to $17.10 in 1932, or 40%, and hourly earnings from 58.9¢ to 49.7¢, or 16%. In 1931, the hourly rate for unskilled workers in manufactures was 8% below 1901. The wages of hired farm labor were at the lowest level since 1916 ... Clerical workers suffered more than in previous depressions; their work is now so thoroughly mechanized that they are practically wage-workers. The salaries of women clerical workers in New York City fell 25% to 40%. This is one of many similar advertisements which appeared in the newspapers of New York City early in 1933: “Wanted, Stenographer-Bookkeeper: This position in small office requires capability, experience, and industry, easily worth $30 a week and more. Now offering $12-15 a week. No beginners.” The average earnings of clerical women workers were $11.39 weekly; employers deliberately depended upon “charity taking the place of an adequate wage.” One lawyer offered $8 weekly for an expert typist with a knowledge of German; another cut the salary of his secretary, a college graduate, to $6. ... Workers in professional occupations had their wages cut and work hours increased. Dentists offered assistants weekly salaries of $10 and less. College graduates, after preparing for professional service, of which there is a tremendous need, were offered this (advertisement in the New York Times and World-Telegram): “Graduates of Harvard, Yale, or Princeton to learn restaurant business starting as bus boys in famous Times Square restaurant; weekly salary begins at $15; splendid opportunity.” [19] Never was a myth as thoroughly exploded as the myth of the policy of high wages.

As a result of unemployment, wage cuts, and part-time work, wages fell to levels unprecedented in any other depression. Wages disbursed by corporations, probably 75% of the total, fell 21% in the worst year of the 1920-22 depression; in the worst year of this depression they fell 65% (Table V). The aggregate of wages, in the two years 1931-32, were not much higher than in the single year 1921, when the depression was at its worst. Total wages in 1932 were not only 65% below 1929 and half as much as in 1921-22, but were lower than in any year since 1910. In neither depression, however, did dividends and interest follow the fall in wages. They even rose slightly in 1921-22, while wages moved downward. In 1930, dividends and interest fell 1.8%, but were 7.7% higher than in 1928. As the depression became worse wages tumbled disastrously. Even dividends and interest, contrary to the former experience, were affected by the unusual severity of the depression. [5*] They were, however, fairly generously maintained. In the three years 1930-32, aggregate interest and dividend payments were 54.9% higher than in 1921-22, while wages were 25.2% lower. This is progress, undoubtedly, in the protection of the income of the owning class, but not in preventing depression, mass unemployment, and mass starvation. And the policy of high wages? In 1930-32 wages averaged only 54.6% of the 1929 level, dividends and interest 82.4%. Generosity in the payment of dividends and interest undermines prosperity and prolongs depression.

Beating down wages was the primary method of maintaining dividend and interest payments. Sometimes this assumed peculiarly revolting forms. The railroad managements, for example, secured a wage “deduction” on the plea that the saving would be used to stabilize employment, but it was actually used to pay dividends. A minor method consisted of downright swindle. In 1931-32 four of the largest New York guarantee mortgage and title companies paid dividends of $13,150,000, at rates ranging from 4.5% to 25%, after invoking the clause which permitted them to defer (that is, default) payments of interest and principal on mortgages. Holding companies plundered subsidiaries to maintain their own dividends. But interest and dividend payments were maintained also by dipping into surplus, for net income decreased severely and deficits mounted. Corporations retain a considerable part of their earnings; one part is reinvested, another part is put into cash reserves, salable property outside the business, and government securities. This practice represents an accumulation of “rainy-day funds,” according to one authority, “as an insurance that dividends will be maintained.” Out of these “insurance” reserves corporations pay dividends when earnings fall or deficits arise, both in prosperity and depression. In 1930, surplus amounted to $54,898 million; of this $10,000 million was invested in tax-exempt government securities, yielding an income of $536 million. Corporate surplus was “dipped into” to the extent of $10,760 million in 1930-31. [20] The corporation executives who practice dividend insurance sternly reject compulsory unemployment insurance as a menace to “our sturdy American individualism.” So do those rugged individualists, the stockholders, who do not consider it demoralizing to accept the “dole” of dividend payments which are not earned.

The officers of corporations not only take care of the stockholders (and of themselves as stockholders), but also take care of themselves as officers. In the depression of 1921-22, officers’ salaries were fairly well maintained, while net earnings fell and wages were slashed. In 1930-32, the fall in wages compared with salaries was even greater than in the previous depression. Salaries were higher than in 1921-22, wages lower. What fall there was did not affect the “big” captains of industry and finance. Many even managed to increase their compensation considerably. From 1929 to 1933, while the bank of which he was chairman was losing millions, Albert H. Wiggin “earned” $1,500,000 in salary and bonuses. He made more millions speculating in the bank’s stock. Upon retiring as chairman, Wiggin was voted a life salary of $100,000. The assets of the four largest life insurance companies shrank “alarmingly,” yet officers’ salaries rose from $970,000 in 1929 to $1,180,000 in 1932. These are all mutual companies, run solely, according to their masters, in the interest of policy-holders, particularly the widows and orphans. While wages were cut severely on the railroads, presidential salaries of $80,000 to $120,000 yearly were increased or maintained. The officers of public utility corporations, which did not cut rates although wages and prices fell, were very keen on taking care of themselves. Officers’ salaries in five electric companies in New York City were from 17% to 77% higher in 1932 than in 1927. One company, in 1933, simultaneously raised its officers’ salaries and cut the payroll 8%. Another raised administrative salaries from $149,700 to $230,000 and cut the payroll $1,500,000. The salary of the president of an aircraft company was raised from $100,000 in 1929 to $192,500 in 1932. One tobacco company in 1932 paid its president $2,627,000 in salary and bonuses. [21] The large corporations of to-day, where ownership is separated from management and control, resemble a feudal barony. They are run primarily in the interest of the officers and their financial capitalist masters. Then come the stockholders, who are plundered in many ways. Labor is a poor third.

Clearly there is a fundamental antagonism between profits and wages. It is irreconcilable. Wages are not determined under the “ideal” conditions assumed by bourgeois economists, whose wage theories accept the permanence of capitalism and justify the exploitation of labor. Within the limits of the value of labor power (itself an historical category), competitive conditions in the labor market, and the expansion of capitalist production, wages are determined by class power and class action. The movement of wages is, however, limited by conditions which perpetuate and increase capitalist exploitation. Even when wages rise, they fall relative to profits, which rise still more. Profits and wages move inversely: the one rises as the other falls. Profits may rise because wages fall or wages may fall because profits rise; but the tendency is for wages always to fall relatively to profits. This augments the mass of capital and its power to exploit the workers. But it simultaneously sets in motion the forces which create economic disproportions and cyclical breakdown, and cumulatively develops the elements of the decline of capitalism. The antagonism between profits and wages becomes stronger in the epoch of capitalist decline, when production tends to move downward because of the exhaustion of the long-time factors of economic expansion. Competitive conditions in the labor market are aggravated by the increasing mass of unemployed workers. The capitalist class beats down wages and standards of living to compensate for the fall in production and profits.

 
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Footnotes

1*. Still less was there any policy of high wages in the industries of the Southern states. The use of the newest, most efficient machinery, cheap raw materials and power, and a labor force the wages qf which were regulated by the standards of living of a region comparatively undeveloped industrially, gave the southern employers an opportunity to realize extra profits.

2*. In England during the “Hungry Forties,” when the productivity of labor and profits were steadily rising, the workers were starving. The situation was “relieved” by repeal of the Corn Laws, lowering food prices; real wages rose at the expense of agriculture, not of capitalist profits. Capitalist production completely ruined British agriculture. There is no danger of such complete ruin in the United States, but the tendency is in that direction.

3*. Falling relative wages are characteristic of capitalist production. The share of the German workers in the social product (1927 as 100) was 117 in 1913 and 94 in 1929. J. Kuczynski, Der Anteil des Deutschen Industriearbeiters am Sozialprodukt, Kölner Sozialpolitische Vierteljahresschrift, January 1931, pp.85-95.

4*. The differential in the wages of skilled and unskilled workers also narrowed in Europe during the war, but by 1930 it had again widened considerably. A.G.B. Fisher, Education and Relative Wages, International Labour Review, June 1932, p.745.

5*. Except interest on federal, state, and municipal bonds; this rose steadily until it exceeded $1,560 million in 1932. New York Times, January 29, 1934.

Notes

1. W. Jett Lauck, The New Industrial Revolution and Wages (1929), p.84; Victor S. Clark, History of Manufactures in the United States (1928), v.II, p.281; National Bureau of Economic Research, Recent Economic Changes (1929), v.I, p.xiv; Bertram Austin and W.F. Lloyd, The Secret of High Wages (1927), p.120; M.J. Bonn, The Crisis of Capitalism in America (1932), p.74.

2. Lauck, New Industrial Revolution, p.78.

3. New York Times, May 2, 1921; May 10, 1921; January 3, 1922; National Industrial Conference Board, Wages in the United States, 1914-1930 (1931), p.47; National Bureau of Economic Research, Recent Economic Changes, v.II, p.435.

4. Labor Research Association, Labor Fact Book (1931), p.138.

5. New York Times, March 22, 1919.

6. New York Times, January 4, 1921; February 11, 1921; March 8, 1921; March 24, 1921; November 24, 1921; December 6, 1921.

7. Samuel M. Vauclain, Optimism (1924), pp.6, 35, 37, 54, 81, 117, 213, 266, 301.

8. Frederick C. Mills, Economic Tendencies in the United States (1932), p.393.

9. Department of Commerce, Biennial Census of Manufactures, 1925, p.14.

10. Mills, Economic Tendencies, p.290.

11. Computed from material in the Census of Manufactures for the respective years.

12. Mills, Economic Tendencies, p.477; Department of Labor, Monthly Labor Review, November 1931, p.186.

13. Paul H. Douglas, Real Wages in the United States (1929) pp.177-82; Whitney Coombs, The Wages of Unskilled Labor in Manufacturing Industries (1928), p.121.

14. Labor Research Association, Labor Fact Book, p.83; United States, Department of Commerce, Census of Distribution, 1929; New York Times, February 5, 1930.

15. United States, Bureau of Labor Statistics.

16. Lauck, New Industrial Revolution, p.280.

17. Lauck, New Industrial Revolution, p.4.

18. New York Times, December 6, 1929; December 15, 1930; New York World-Telegram, April 6, 1930; New York Times, July 28, 1931.

19. New York Journal of Commerce, November 25, 1930; National City Bank of New York, Bulletin, May 1931; New York Times, January 12, 1931; May 16, 1931; December 2, 1931; Pennsylvania Department of Labor, Monthly Bulletin, November 1932; H.B. Myers, The Earnings of Labor, American Journal of Sociology, May, 1932, p.897; New York Times, April 10, 1931; Department of Commerce, Statistical Abstract of the United States, 1933, p.303; John T. Flynn, Starvation Wages, Forum, June, 1933, p.327; New York Times, February 27, 1933; New York Times and New York World-Telegram, October 5, 1933.

20. New York Times, January 19, 1934; William H. Lough, Business Finance (1922), p.475; Statistics of Income, 1930, p.213, and 1931, p.48.

21. New York Times, October 18, 1933; New York World-Telegram, April 12, 1933; New York Times, October 29, 1933; May 30, 1933; January 18, 1934.

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Last updated on 28.9.2007