Prices, Profits, and Wage Control

Report Outline
Inflationary dangers in the defense boom
Prices, Cost of Living, and Price Control
Wages and Profits in Defense Emergency
Wage Controls in Belligerent Countries
Special Focus

Inflationary dangers in the defense boom

President Roosevelt warned Congress, in a special message, July 30, asking for enactment of price-control legislation, that “inflationary price rises and increases in the cost of living are today threatening to undermine our defense effort.” More vigorously worded warnings of the economic dangers inherent in the defense boom and of the imminence of a runaway inflationary movement, barring the prompt application of corrective restraints, have been uttered by Leon Henderson, administrator of the Office of Price Administration and Civilian Supply.

Henderson told an audience at Atlantic City, July 14, that the “honeymoon months” of the defense boom were drawing to a close, and that a protracted period of higher prices and of shortages was at hand. Appearing before the House Banking and Currency Committee to testify on the price-control bill, August 5, the administrator declared that the United States stood “at the brink of inflation.” He referred to the fact that total payroll disbursements had reached an all-time peak and asserted that they constituted “the most dynamic and volatile element pressing on prices.”

Close Relationship of Wage Control to Price Control

Despite the importance of wages as an element of cost, and thus of price, the administration's price-control bill specifically excludes wages as a subject of control. Before the House committee, August 7, Henderson conceded that it was obvious “that a price inflation cannot be curbed if wages or any other cost is allowed constantly to rise.” He contended, however, that “the mechanism of price control is completely unsuited to the control of wages and salaries.” After mentioning progress toward wage stabilization in the shipbuilding industry through regional pacts, and predicting extension of such methods to the aircraft and other industries, he added: “I am not blinking at the fact that as we get forward in the program, the emergency will call for more rather than less special kinds of treatment, including the mediation board, stabilization pacts, or legislation to limit what wages can be, and thus take it out of the area of collective bargaining,”