than 40 hours, although some workweeks as high as 48 hours are in effect. For example, in December a majority of workers in machine tools and copper-mining industries were already on scheduled workweeks of 48 hours or more. The 41-hour average compares to a peak of 451⁄2 hours in World War II when many industries were on a 48-hour schedule.

There are, of course, difinite limits to the extent to which production can be increased by increasing overtime. Absenteeism and declines in efficiency begin to cut in heavily after about 48 hours a week is reached.

THE EMPLOYMENT SERVICES ARE GIVING PRIORITY TO DEFENSE

United States Employment Service and the affiliated State employment services are already proving of invaluable assistance to employers and workers in the orderly filling of defense jobs. Preferential service is being extended to employers with defense contracts or in activities which the Government is encouraging to expand.

With agricultural production goals set higher than ever before, there will be an increased demand for farm workers at a time when inductions into the Armed Forces and the attractions of defense jobs will reduce the supply of farm workers. The farm-placement service of the public employment system has accordingly expanded and intensified its recruitment program.

The President's national manpower policy calls for full use of domestic manpower resources before foreign workers are brought in. The domestic supply of certain tpyes of harvest labor, however, has never been entirely adequate since World War II, and arrangements are now being made for the increased numbers of foreign workers who will be required as the manpower situation tightens.

WHERE POSSIBLE, THE WORK WILL BE BROUGHT TO THE WORKER

The large-scale migration of workers during World War II led to congestion and overtaxed housing, health, educational and other community facilities, and services in many localities. To avoid these consequences in the current program, the Government agencies concerned are taking steps to see that the labor supply in nonshortage areas will be used as fully as possible before additional jobs are created in areas of labor shortage. The Secretary of Defense on December 17 directed the military Departments to pay particular attention to the availability of manpower, in letting defense contracts.

In addition, every private employer is urged to follow the same policy in the placement of subcontracts, in the ordering of materials, and in the securing of services. Particularly, every employer should utilize local labor supplies to the utmost before undertaking out-of-area recruitment. Where the local labor supply is inadequate, workers can be recruited from other areas in the States or from areas outside the State through the clearance system of the public em. ployment service.

The movement of workers from jobs in less essential industries or services to defense plants should be encouraged, but "pirating" of workers by one defense plant from another should be avoided.

Movement of workers into defense industries will be impeded unless reemployment rights of transferred workers can be preserved and their seniority, pension, and isurance rights protected. Labor, management, and Government groups are working to formulate solutions.

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Most of the defense-production industries undergoing rapid expansion in the months ahead have historically had a higher wage structure than many other sectors of the economy. This will be an important factor in recruiting workers for these industries, although the differentials are less than they were in World War II. Experience during World War I indicates, too, that the longer average workweek in defene plants (with premium overtime pay) and greater opportunities for training and advancements were also important factors in attracting workers. If in unusual cases, however, these incentives prove insufficient to prevent serious manpower shortages in critical defense industries, adjustments in wages can be allowed under the wage-stabilization regulations.

EFFECTIVE USE OF MANPOWER WILL INCREASE PRODUCTIVITY

Many American workers are still employed in jobs which do not utilize their skills to the fullest extent. Efficient use of manpower requires the wider applicatio of progressive personnel policies, upgrading, training, and advanced techniques in labor relations and human relations.

To secure maximum utilization of his work force, each employer, private and public, should

1. Make the maximum use of skills of manpower already employed, including the systematic upgrading of workers to higher skill levels, the relaxation of retirement policies, and the modification of job specifications to eliminate under utilization of persons with needed skills, particularly among minority groups.

2. Keep manpower working full time and at peak productivity by providing favorable working conditions, health and safety programs minimizing time lost due to production factors, and eliminating unnecessary work.

3. Retain the present working force by minimizing those factors which contribute to turnover.

4. Establish effective assignment, induction, and training programs for newly employed workers.

5. Use part-time workers.

To assist employers in achieving these objectives, the public employment service has expanded its program of technical service in manpower utilization.

WORKERS WILL REQUIRE TRAINING FOR NEW JOBS

Two types of training are required to meet defense production requirements: 1. Training for immediate production needs introductory training on the job of new workers, refresher training for those returning to the labor market, and instruction required as a result of shifts from nondefense industries or upgrading of workers in the plant.

2. Training for longer range needs-for the skilled trades and for scientific, technical, and professional pursuits.

In meeting the immediate production needs, the primary responsibility for training his workers rests with the employer. The Department of Labor's "skilled improvement program" is available to give him such assistance as he requests for in-plant training. In addition, the Federal-State vocational education system will provide instructional personnel, materials, or facilities for defense training when they are beyond the capacity of individual employers. In this way, the needed training will be tailored to the needs in each locality and each plant.

As for the longer-range training needs, acute shortages have already appeared in some crafts. The Department of Labor, in cooperation with management and labor and State agencies, is expanding and accelerating its apprenticeship program to assure a sufficient number of craftsmen, especially in critical occupations.

HOUSING AND COMMUNITY SERVICES ARE CRITICAL IN A FEW AREAS

Experience in World War II demonstrated that housing shortages, inadequate public health measures, crowded schools and hospitals, overtaxed shopping and recreational facilities, and a lack of child-care facilities and services not only lowered workers' efficiency but made it difficult to retain the manpower recruited for defense industries.

Despite our general policy of bringing the work to the worker, other overriding considerations have already made it necessary to expand employment in several congested areas-for example, San Diego and Wichita-and in a few instances

in areas where housing and other community facilities and services are prac tically nonexistent. The latter is particularly true in the case of the Atomie Energy Commission projects at Paducah, Ky., and on the Savannah River in South Carolina.

To meet the problem of these and similar localities, an interagency Critical Area Committee has been established under the Defense Production Administration to designate "critical defense areas" and to consider steps to minimize the impact of the defense program.

Credit controls on private housing construction are being relaxed in such areas in order to stimulate production of part of the housing needed. The disposition of the remaining 300,000 units of war housing constructed by the Government during World War II has been halted, unused units reopened where needed, and priority for occupancy given to defense workers.

LONG-RANGE MANPOWER RESOURCES DEPEND ON HEALTH AND EDUCATION

In a long-term defense program, we cannot neglect the maintenance of our general standards of health and education without a loss of ultimate strength. Sickness keeps about a million workers off the job every day. We cannot afford this waste of manpower.

In order to maintain health standards, it is estimated that by 1954 we must train 21,000 physicians, 9,000 dentists, and 50,000 nurses more than are now practicing or being trained. Our training institutions in these fields must therefore be immediately expanded. This will require private, local, State, and Federal cooperation.

The Senate has passed a bill providing for expansion of our local public health services, in order to meet the needs particularly of strategic national defense areas.

The men and women who will be needed in the future for military service, for the factories and the farms are the children now in primary and secondary schools. In view of the long-range character of the defense program, it is important that we develop further the present American system of local, State, and Federal cooperation for meeting our educational responsibilities. In this connection, the need of eliminating overcrowding of schools and of providing adequate educational equipment and staff must be weighed against the other competing claims for scarce materials and manpower during the emergency period. Prompt action is particularly necessary where schools are overburdened because of the growth of defense activities.

SECTION VI. MAINTAINING A STABLE ECONOMY

All of the things we are doing-and must do-to strengthen America and the free world can be accomplished only if the American economy is kept firm and stable.

We can build a strong defense only with strong dollars.

We can plan and produce the things we need for our survival only if inflation is prevented from pushing down the value of our currency.

We can mobilize America's vast productive machine most effectively only if costs are stable and we have an orderly flow of materials.

We can mobilize most fairly only if prices and incomes are kept in balance. Consequently, we must win the battle against inflation.

WHAT MUST BE DONE?

The root cause of inflation lies in a simple relationship. Total demand for the goods and services which people want to buy exceeds the supply. When more and more money is bidding for the same amount of goods and services, prices are pulled up. As prices go up, workers ask for increased wages and other costs go up, pushing prices even further. In this way the inflationary spiral gathers momentum.

There are two ways to combat inflation:

1. To get demand and supply in better balance.

2. To prevent the normal effects of an unbalanced demand-and-supply situation by regulating prices and wages.

The first of these approaches gets at the causes of inflation. It does this by reducing the volume of purchasing power, while at the same time increasing

the supply of goods by every means which does not interfere with the defense program. The reduction of demand is accomplished by these principal means: (a) Reducing credit.

(b) Increasing taxes.

(c) Increasing savings.

The second of the approaches-regulating prices and wages-deals with the effects of excessive demand. It imposes artificial controls on the natural workings of a free economy. Figuratively speaking, it sits on the lid while inflationary forces are churning beneath. Unless the forces themselves are controlled by balancing demand with supply, they will eventually explode through the lid. We must not underrate price and wage control as an emergency measure. It is vitally important to sit on the lid, and sit upon it hard.

HOW SEVERE ARE THE INFLATIONARY PRESSURES?

By the end of 1950 we found ourselves in the midst of a spiral of inflationand our defense effort had just begun. By the end of 1951 it is expected our effort devoted to defense will have doubled, with 15 percent of total production going to defense. This means that, while we will expand our national product and income, a smaller proportion of our total production will be available for consumers to buy. Civilian supplies will be large during 1951-in some instances perhaps even larger than those available during 1950-but the amount of money available to buy these supplies will be even greater, as more people will be at work and they will earn more money. We cannot eat tanks and guns, but the men and women who get paid for making them compete with their money for the supply of available consumer goods. The efforts of these workers add to total buying power but of necessity the goods they produce are not available for consumption.

The extent of these pressures during 1950 and those which can be expected this year are illustrated by estimates of income and production of goods for consumption.

During the last half of 1950, before the major impact of the expanded defense program had been felt, we were forewarned of what the future had in store if stabilization controls were not applied.