Wages and the Cost of Living

Report Outline
Readjustments of Prices and Wages
Conflicting Views on Wage Policy
Recent Trend of Wages and of Living Costs
Pre-War and Post-War Wage Movements

Readjustments of Prices and Wages

For Ten Months commodity prices have fallen steadily. Sharp declines in wholesale prices have been followed—at a less rapid rate—by reductions in living costs. One of the consequences of this development has been a sharp controversy over the relation of commodity price readjustments to the future course of wages, for if living costs should become stabilized at present or lower levels and wages remain unchanged, employees generally would receive substantial gains in real wages and in purchasing power.

Opposition to wage reductions, at least in the immediate future, has been expressed recently by prominent business men who contend that wage cuts would reduce efficiency in production, would limit the markets for manufactured goods and other commodities, and thus would hamper the recovery of business activity. The soundness of this view is challenged by others who maintain that, to some extent at least, wages must share in a general readjustment of the prices of all goods and services. Downward wage readjustments have in the past attended periods of falling prices, although frequently the downward movement of wage rates has gone less far than that of prices, leaving wage-earners with a net gain in real wages.

The actual number of employees affected by wage cuts put into effect in recent months can not be determined because of the non-existence of sufficiently comprehensive statistical data, but reports of the federal Bureau of Labor Statistics and surveys by trade journals indicate that probably only a small proportion of the total number of industrial establishments have thus far made outright changes in wage rates. A majority of the reductions announced have been made in the textile, lumbering, and mining industries.