Senator DOUGLAS. Just one question, and perhaps it was covered in the earlier discussion in answer to some of Senator Taft's questions. The President under section 206 of the Taft-Hartley law, when a substantial part of an industry imperils national health, safety, you have the provision that he may appoint a Board of Inquiry, it does not require him to appoint the Board?

Dr. TAYLOR. That is correct.

Senator DOUGLAS. Is it your feeling that this, therefore, is an alternative process?

Dr. TAYLOR. Yes; and as I indicated earlier, Senator, I think it is different from beginning to end, different criteria for invoking, different powers of the Board, different means of gaining an agreement. I think it is different from beginning to end.

Mr. FRIEDIN. The inapplicability of your Norris-La Guardia Act comes into play only under your Taft-Hartley procedure.

Senator DOUGLAS. Well, I do not care at all for the Taft-Hartley procedure, so if this is an alternative I welcome it.

Senator HUMPHREY. As I understand the procedure now under Taft-Hartley, rather than to circumvent or in any way limit the provisions of the Taft-Hartley Act in a certified dispute, this acts more or less as another way station or another station of conciliation and/or adjudication?

Dr. TAYLOR. Another tool with quite different purposes and different uses. I think both of them are discretionary.

Senator HUMPHREY. In the initial stages?

Dr. TAYLOR. And certainly if it is so urgent that a strike has to be terminated and the strike must be terminated, there would be no alternative but not to use our procedure because we do not get a strike terminated if one persists.

Senator HUMPHREY. You know why I am asking these many questions about Taft-Hartley. I want it crystal clear for the record that what is being proposed has no relation to the Taft-Hartley Act; it is an additional supplemental kit of labor-management tools.

Dr. TAYLOR. Indeed so.

Senator HUMPHREY. To increase the possibility of voluntary settlement of a dispute, in other words. The Taft-Hartley is based upon a Board of Inquiry reference to the President without recommendations.

Dr. TAYLOR. Votes on the employer's last offer.

Senator HUMPHREY. That is right, and it goes to the Attorney General for an issuance of an injunction. Your procedure is certification by the President to the Board, the Board to make recommendations, to encourage equitable settlement and voluntary settlement and in no way limiting the ultimate power of the President to do (1) to use the procedures of Taft-Hartley Act if he deems it necessary or to do (2) to use the procedures of the Selective Service Act, which of course means seizure. Those two weapons of compulsion are still available; is that correct?

Dr. TAYLOR. Indeed they are.

Mr. FRIEDIN. I wonder whether this observation might be added with respect to this Taft-Hartley Act question, Senator? That is that the President has imposed on this Board with respect to the Labor-Management Relations Act precisely the same injunction that Congress intended in title V should be imposed on a title V board.

In other words, the President in the Executive order used precisely the same language with respect to refraining from any action inconsistent with the Labor-Management Relations Act.

Senator HUMPHREY. I merely wanted to get this summation because I am confident that this is a point of controversy in the amendment to the Defense Production Act and one of the real purposes of the hearing this morning was to clarify to the best of our ability the policy and program of the Wage Stabilization Board under the new Executive order and its reference and relationship to all existing labor law.

Dr. TAYLOR. Yes.

Senator HUMPHREY. Now I merely make this observation, and I am not going to ask you for a comment, but I wish you would think about it. As I recall the provisions of the Defense Production Act as passed in the Eighty-first Congress, second session, any wage increase will be passed along through price increase. In other words, under the old OPA as I recall it there was not direct reference made in the law that wage increases should necessarily be added on to prices, but I recall distinctly the debate, and I am sure my colleague, Senator Douglas, recalls it, that amendments were introduced, and I recall adopted to the original proposal of the Defense Production Act as it came from committee, stating that where there is a wage increase that within itself is prima facie statistical evidence for passing it along in a price increase. Do you recall that?

Mr. FRIEDIN. I do not find any provisions in the act, Senator. Dr. TAYLOR. I think we could relate your comment to certain of the regulations that have been issued, and we will look at them. .Senator HUMPHREY. I would like to have you look at it. The reason I mention this is because if that is the case, the problem of stabilization is very, very difficult because it places a premium upon employer and employee to agree because there is no sacrifice on the part of the employer. He can merely add on the wage increase to his price, and if you get this percentage mark-up you get an additional percentage of profit. So it puts a real premium on the inflationary cycle.

Dr. TAYLOR. I think probably the closest section of the act that gets to that point is 402 (c).

Senator HUMPHREY. Yes; that is the section that I am looking at. Dr. TAYLOR. Yes.

Senator HUMPHREY. Paragraph 2207 of the act.

Dr. TAYLOR. It is probably differently numbered.

Senator HUMPHREY. I see.

Dr. TAYLOR. The President [reading]:

in determining and adjusting ceilings on prices with respect to materials and services, shall give due consideration to such relevant factors as he may determine to be of general applicability in respect of such material or service, including the following: Speculative fluctuations, general increases or decreases in cost of production, distribution, and transportation, and general increases or decreases in profits earned by sellers of the material or by persons performing the service, subsequent to June 24, 1950. In stabilizing and adjusting wages, salaries or other compensation, the President shall give due consideration to such relevant factors as he may determine to be of general applicability in respect of such wages, salaries, or other compensation.

Senator HUMPHREY. I think the legislative history, the debate that is recorded in the Congressional Record, will indicate the intent.

Dr. TAYLOR. We are glad to have your suggestion, and we will look up the legislative history bearing on that section.

Senator HUMPHREY. I would like to get an interpretation from you. I may be very wrong, but I recall that the debate and the amendment was introduced by Senators Bricker and Wherry.

Mr. FRIEDIN. The conference report, Senator, does not contain any such interpretation of the act.

Senator HUMPHREY. It was in the last days of the session.

Mr. FRIEDIN. I believe that the Price Administrator in his most recent manufacturing regulations has permitted only cost increases up to a certain date to be taken into account, thus excluding other cost increases, which indicates that he is not interpreting the act in that fashion.

Senator HUMPHREY. I thought it was worth exploring, and I hope I am definitely wrong because it surely would make a most difficult problem to stabilize prices if you have a premium on passing along the wage increase into a price structure.

do

Dr. TAYLOR. Yes.

Senator HUMPHREY. I have nothing else to ask. Senator Douglas, you have any more questions?

Senator DOUGLAS. We are looking up to a point here.

Dr. TAYLOR. I am informed that there has been something in the legislative history relating to the hardship and inequity provision of the act.

Senator DOUGLAS. I am simply content myself with the observation that if the Senator from Minnesota is correct in his suspicion and an increase in wages will be reflected as an increase in prices and if the price control operates on a percentage of the mark-up, then what we may have to face is a gigantic system here, which certainly leads to a padding of costs and increase in prices, and I am sure you will be just as careful as we would be.

Senator HUMPHREY. I want to make this clear, that I am not at all certain about this observation which I made, it is merely a matter of recollection. Yet it has been a matter of concern as I expressed to you before, Dr. Taylor.

Dr. TAYLOR. Yes.

Senator HUMPHREY. I felt that we should make a study not only of the legislative history, but the way this has been interpreted by the other governmental units.

Dr. TAYLOR. It has a bearing on the wage stabilization responsibility.

Senator DOUGLAS. You may find some protection to guard against this danger, section 402 (b) (5). It is not necessary to read it, but it may give you some protection.

Dr. TAYLOR, I understand that applies during the period of selective controls.

Senator DOUGLAS. I see.

Dr. TAYLOR. So that we are in general control now, Senator.

Senator HUMPHREY. Thank you very much, Dr. Taylor; we are very grateful to you. Your testimony has been most informative, and I am sure will do much to clarify many of the questions and doubts as to the program.

Dr. TAYLOR. Thank you for the opportunity we have been given to appear before you.

(Whereupon, at 12:05 p. m., the hearing was closed.)

WAGE STABILIZATION PROGRAM

TUESDAY, MAY 22, 1951

UNITED STATES SENATE,

SUBCOMMITTEE ON LABOR AND LABOR-MANAGEMENT RELATIONS OF THE COMMITTEE ON LABOR AND PUBLIC WELFARE,

Washington, D. C. The subcommittee met, pursuant to recess, at 10: 40 a. m., in the Old Supreme Court Room, the Capitol, Senator Hubert Humphrey presiding.

Present: Senators Humphrey, Pastore, and Taft.

Also present: William H. Coburn, clerk, Senate Labor Committee; Mrs. Eve Finnegan, clerk, Labor and Labor-Management Subcommittee; Ray R. Murdock, counsel, Labor and Labor-Management Subcommittee; Thomas E. Shroyer, professional staff member; Jack Barbash, economist; Dwyer Shugrue, administrative assistant to Senator Ives.

Senator HUMPHREY. Mr. Johnston, we will begin our hearing for today. First of all may I express my personal appreciation for your willingness to come before our subcommittee and to offer your observations on the economic stabilization program and with particular reference to the Wage Stabilization Board-and its functions.

As you know, we had Mr. Taylor with us a few days ago, the Chairman of the Wage Stabilization Board. He discussed with us in some detail the program of the Wage Stabilization Board particularly as it refers to the disputes functions. Some of the members of this subcommittee are necessarily detained this morning because of the very heavy committee schedule. However, we do have Senator Pastore, of Rhode Island, with us, and we have the representatives of other members of the subcommittee. Senator Ives' administrative assistant is here, Mr. Shroyer from Senator Taft's staff is here, and the staff representative on this subcommittee for minority members is here, and then our own subcommittee counsel and our own economic analyst.

So without any further ado I would like to have you proceed. I think it might be better if we withheld any questioning until after you have finished reading your statement.

STATEMENT OF ERIC JOHNSTON, ADMINISTRATOR, ECONOMIC STABILIZATION AGENCY; ACCOMPANIED BY FRANK WHITEHAIR, GENERAL COUNSEL, ECONOMIC STABILIZATION AGENCY; AND DR. GEORGE W. TAYLOR, CHAIRMAN, WAGE STABILIZATION BOARD

Mr. JOHNSTON. Would you like me to read the statement, Senator? Senator HUMPHREY. I think that would be well.

37

Mr. JOHNSTON. All right, sir.

If these were business-as-usual times, I wouldn't be here before you today as a Government official, a bureaucrat. And I certainly wouldn't be the bureaucrat whose job symbolizes control over the American freeenterprise economy.

I would have no stomach for imposing strict limits on the wage increases which free American workers could receive after free collective bargaining. I would shrink from the idea of imposing strict ceiling prices on virtually everything sold in America.

And I would have no reason whatsoever for wanting to explain to a subcommittee of Congress why I think a Board in Washington must be available as a forum for hearing a wide variety of normal labormanagement disputes. I would have no reason for wanting to explain such a belief because, frankly, under normal business-as-usual, I wouldn't harbor that belief.

I wouldn't believe in special Government machinery for normal industrial disputes any more than I would believe in price control or wage control. I dislike controls. And I dislike interferences in the normal collective bargaining process.

I dislike the necessity for doing these things, but, at the same time, there are a lot of other things we are doing in America today that I also dislike the necessity for doing-things such as shipping our troops overseas to fight and die; such as taxing ourselves to the limit-and then some-to support huge military forces; such as using up our natural resources at a phenomenal rate; such as limiting the right of free American business to produce whatever it wants to produce.

But while we dislike the necessity for doing these things, we also recognize that these are not normal times, not business-as-usual times, and that the necessity for doing many things we don't like to do is an overriding necessity.

This subcommittee has been engaged for some years in the study of labor-management relations and the members of this subcommitteeperhaps more than any other group in America-know that even in normal times the relationship is a terribly complex one.

And you gentlemen know that today, under the stress of a largescale mobilization program and strict controls on the free choice and free movement of American business and American labor, the field of management-labor relations can be an explosive one.

You know that the vast productive effort we need to build our own security and the security of the free world cannot be left to chancenot to the chance flow of materials and manpower, not to the chance flow of vital end products, and not to the mere chance of continuing labor-management peace.

Normally the free collective bargaining process in America is the accepted way to meet industrial relations problems. Under free collective bargaining, we have had eras of industrial peace and eras of industrial strife, but, by and large, labor management have worked out their differences in a satisfactory way.

Whenever either side has resorted to unfair practices, has tried to take advantage of special circumstances, or has driven to its goals with a public-be-damned ruthlessness, it has suffered, in the final analysis, from its own excesses and its own stupidity.