Senator TAFT. Besides the cost of the commodity to the wholesaler and retailer there are a lot of other items which probably have not gone up yet, but will later? Mr. HENDERSON. That is right. Senator TAFT. So that it should not follow the wholesale price exactly? Mr. HENDERSON. I believe there is a tendency to follow it with a lag. As Senator Barkley indicated, when you have a reduction in the wholesale price there is a lag. Senator TAFT. What is that last commodity on the right? Mr. HENDERSON. That is pork chops. All of these retail prices will tend to rise. Since the market is already reflected in the increase in wholesale prices, the man who is down at the delivery line, the retailer, is bound to have to increase his price, and that will produce automatically an increase in the cost of living. It may be that this 112 percent increase that we are experiencing now is manageable. But if many other items are not brought within control, unless we are able to hold the control we now have, and unless we are able to get a substantial discipline in farm commodities, there is no prospect of preventing a repetition of the World War experience. You can go on with your metals and control the basic costs of the steel industry, the basic costs of every large and heavy manufacturing industry, but if their costs of manufacture, due to wages, go up, then the Price Administrator, both by the terms of this bill and by the terms of our operations to date, has to permit an increase. Once that increase in industrial goods passes, as farmers increase their dollar price, that dollar goes over into the cost of living, and the wage earner again has the problem which he will face beginning the first of the year. He has had his wage increases eradicated in the basic industries, and in industries where he has not had an increase he faces a reduction in his standard of living, and, therefore, the whole vicious spiral tends to go into action. In other words, I am saying that the cost of living is so important that even before the outbreak of the war there was no other course for us left except to have a strong control over all the elements that go into the cost of living. This chart [indicating chart 11], called Percentage Increases in Prices, covers the rate of increase in recent months. It has been 27 months, roughly, since the outbreak of the war. This chart is based on an idea in an editorial in Business Week, which used the same check-up. We have broken down, first, the 28 basic commodities. The 28 basic commodities are commodities which are the most volatile; they are the ones which enter into the cost of manufacture and the cost of living. They have gone up, by the way, about 57 percent. At first the outbreak of the war accounted for most of this increase. They steadied off in the second 9 months, but a 27-percent increase has taken place in those commodities in the last 9 months. Wholesale prices in the first 9 months of the war went up only 412 percent. In the second 9 months-and that, I think, dates from the time when the Defense Commission began and we started paying some attention to the important items-they only went up 2.8, but since February wholesale prices have gone up 14 percent. AUG., 1939 TO MAY, 1940; MAY, 1940 TO FEB., 1941; FEB, 1941 TO NOV., 1941 I should like to drive home again the essence of the control of inflation. There was hardly any change in the cost of living in the first 9 months; less than 1 percent in the second 9 months. In the last 9 months it has increased 9.4 out of a total of 112 percent, and, as I indicated earlier, it is now going at the rate of 12 percent a month. Senator BROWN. That is based on prices as of August 1939? Mr. HENDERSON. Yes; that is right. I can pass this chart (chart 12) around to the members of the committee. It shows the course of prices on the various items that went into the cost of living. AUG., 1939 FEB., 1941 NOV., 1941 SOURCE: U.S. Bureau of Labor Statistics OFFICE OF PRICE ADMINISTRATION NO. 463 DIVISION OF RESEARCH Senator BARKLEY. Let me ask you a question about this chart (chart 10). Why is it that cheese went up proportionately so much more than butter, both being based upon dairy products? Butter represents now 150 percent of the 1939 level, and cheese about 187 percent. Mr. HENDERSON. I do not know. ASON D J FMAM J J ASON D J FMAMJ J A SOND 1939 1941 100% 95 ASON D J F M A M J J ASOND J F M A M J 1939 SOURCE U.S. Bureau of Labor Statistics 1940 100 95 JASON D 1941 OFFICE OF PRICE ADMINISTRATION DIVISION OF RESEARCH Senator CLARK of Idaho. Would not part of the difference be found in the lease-lend arrangement? Mr. HENDERSON. I do not know. It might have something to do with it. Senator DANAHER. May we have indicated for the record what the 28 basic commodities are that are treated in the first phase of the graph to which Mr. Henderson last referred? Mr. HENDERSON. I will put them into the record. Senator DANAHER. Will you please refer to table 12 appearing in the House hearings at page 245, which lists the 28 commodities referred to in the chart that you exhibited earlier? Mr. HENDERSON. The 28 commodities are: Wheat, No. 2 hard, and No. 2 dark; flaxseed, barley, corn, butter, tallow, hogs, steers, lard, sugar, coffee, cocoa, shellac, rubber, hides, rosin, cottonseed oil, print cloth, silk, wool tops, burlap, steel scrap, tin, copper, lead, zinc, cotton. This chart shows the course of the cost of living in the last war, by the major elements. Here is what food did and here is what clothing did and here is the course of rent [indicating on chart 13]. I should like to take up now what happened to real wages of Federal employees in the District of Columbia during the last war (chart 14). As you can see, their cash weekly wages went up, due to the fact that there were several special increases in Government salaries, particularly for the low-paid employees, during the last war. But even that rise in the cash weekly wage was not able to keep the standard of living from going down. And so between 1914. the outbreak of the war, and 1920 the average worker lost 25 percent in his standard of living. Wages in the eight important manufacturing industries went up 140 percent. Real wages, however, were only up 20 percent (chart 15). |