EMPLOYER WEAPON 4. Rigid and discriminatory wage controls have provided employers additional weapons against workers and their unions. Some managements have been able to effectively short-circuit organizing campaigns by using the chilling question, "Why join a union when all it can get you is 5.5 per cent?" Hostile employers whose shops are already organized have benefited from the suspicion, hostility and skepticism of the rank-and-file union members who blame the union for their impossible-to-understand pay cuts. Many local unions are undergoing internal difficulties and an increasing number of competent and responsible local union officers have been defeated for re-election because of the plight of their contracts before the Cost of Living Council. 5. Contracts undergo incredible delays before they are decided by the Cost of Living Council. A decision takes at least months and often a year. If either party appeals a decision—which is often the case-the final outcome may take years in coming. It is not unusual for our union to negotiate a new contract before the final decision on the expired one has been rendered. The effect on negotiations is chaotic and stifling. 6. Workers pay for these delays. When increases are totally or partially approved many months or a year after the contract was to go into effect, the Cost of Living Council often does not permit the approved increases to be paid retroactively. Each day and each month of bureaucratic delay, therefore, takes additional money out of workers' pockets and puts it into corporate treasuries. 7. The wage decisions of the Cost of Living Council are incredibly capricious and arbitrary. Those which concern food workers are really made by the Food Wage and Salary Committee, where an alliance of management and public members hold sway. The Council's rules and guidelines seem to mean nothing. Longestablished relationships between the wages of different occupations are upset without qualm. Long-established relationships between labor markets are destroyed with little care. The Council's and Committee's own "precedents" are overturned from one case to another. The Committee's or Council's treatment of contracts negotiated by various unions reflect national politics and relationships to the Administration as well as the vagaries of economic stabilization. HUGE PRICE INCREASES 8. The 1973 cutbacks-the efforts to keep wages around 5.5 per cent in the food industry-occurred at the same time that food prices increased 22.5 percent. Ironically, our members probably have the most direct experience on food price increases. They know more about them than either the Cost of Living Council personnel, economists, legislators or even housewives, for they mark up prices weekly or several times a week at the orders of food retail executives in the stores. 9. Workers are expected to absorb the increased cost of living while their wage increases are kept around 5.5 per cent and the cost of living skyrockets much higher. But business groups are allowed the so-called pass-throughs. No increased business cost need be absorbed. Increased business costs are passed on to the consumer and perhaps a little more is added. 10. The so-called control of business profit margins probably exists in papershuffling only. In our detailed testimony, we show the increases in profits in various parts of the food industry during the 1973 "control" period. If the Committee doubts our skepticism, perhaps it might find out why retail meat prices went down so little in September through November 1973 when cattleprices plummeted. What happened to profit margins then? 11. Economic protests by groups against the bungling of the Cost of Living Council or other parts of the Nixon Administration generally result in the massive layoffs of food workers. In May 1973, consumers boycotted meat to protest high prices and cattlemen held back shipments to maintain them. In July, August and September 1973, cattlemen were incensed at the beef prico freeze and held back shipments. In February 1974, truckers refused to haul goods in order to win better treatment. In each of these cases and in others, the result was massive unemployment and loss of wages for our members. Every time someone in the economy sneezes because of the draft caused by the so-called stabilization program, our members catch pneumonia. 12. The sacrifices which our members have made have hardly won them the thanks of a grateful nation. Some managements in the food industry still come. before you and complain about inflationary wage settlements. Various Congressmen and Senators still delight business audiences by lambasting the "labor bosses' greed." Far more serious, our members are continuously asked by their fellow citizens to defend their wages against the charge of forcing meat and food prices on their continuously upward spiral. You can imagine how this salt feels in their wounds. ABUSE AND MOCKERY To summarize these background factors, let me say that our members have been used and abused. Their patriotism has been taken advantage of. Their desire to abide by the law has been made a mockery. They have been cheated out of wages. Their families' income has been reduced. Their union contracts have been shredded. They have made sacrifices to the great benefit of their employers. And still, they are accused of causing inflation. Our members recognize these facts and they are damned angry. In meeting after meeting, the example of the independent truckers is brought forward. Why don't we do the same, they ask? Union officers urging restraint are reminded very pointedly about the years of restraint and what the results have been. Many members blame their union, as well as the President and Congress, for the economic trickery which has hurt them so badly. Our lobbying and our many court cases against the blatant inequities of the Act and the Cost of Living Council's actions appear quite irrelevant to them. Why did the union finally accept the mickey-mouse controls instead of leading the members into massive walkouts to force a change in the stabilization structure, they ask? The farce of the so-called economic stabilization has been exposed at the same time as the apparent Presidential corruption has. The problems of inflation, wage control, energy crisis, milk scandal, ITT case, Presidential taxes and campaign contributions, may be nicely compartmentalized to lawyers and perhaps to politicians. But they melt into one rotten mess to a packinghouse worker or a meatcutter or a poultry worker. They believe government policies are for sale and they are paying the bill. CONFIDENCE IN COLLECTIVE BARGAINING The workers' loss of faith is not limited to their government and its policies. Confidence in collective bargaining has suffered as well. The contract between labor and management setting wages and working conditions was once considered sacred. It no longer is. As we previously said, employers run to the Cost of Living Council shortly after negotiating and signing the agreements to denounce them as inflationary. The Council changes them by fiat. The provisions of the freely negotiated agreements have been shown to be meaningless in the last two and one-half years. Then, why should workers believe in them? Why should they obey them? Why should they not go on wildcat strikes as British workers do regularly-whenever some problem occurs? Under these circumstances, what should you do about the Economic Stabilization Act? Please do not consider me insulting when I tell you honestly that what you do may possibly not matter too much. You can deliberate about the continuation of controls, what the controls should be, whether standby controls are desirable, whether you should give full responsibility to the President again, what policies are wise and which are politically beneficial. The fact of life is that many workers regard the legislation as irrelevant. They just don't believe in it anymore. In 1974, economic policy may be made and remade on an emergency basis by the Administration and Congress in response to what happens in the streets--as occurred during the independent truckers' strike, the independent gasoline dealers' protest and so many other non-labor actions. Please believe me when I tell you that we shall do all we can to avoid this disaster. We have to. If we are the leaders of workers, then it is our job to practice leadership. But, I greatly fear that the Administration and Congress have probably used up our leadership and our strength with the charades of economic stabilization during the last two and one-half years. In fact, you may have used them up before the main event has begun. RETRIEVAL OF FAITH Needless to say, food prices are not only increasing, but their upward rate is accelerating. Holding food industry wage increases to 5.5 percent has had no effect on food price inflation. It has simply fattened corporate profits. The U.S. Department of Agriculture predicts that food prices will increase some 12 percent this year. That means-based on the Department's past performancesthat they may rise 24 or 36 percent. We have had wage controls, but we have had little price or profit control. Our Union, therefore, urges that Congress ought to attempt to retrieve the faith of workers by attempting price and profit control and letting wages go free to catch up for the losses of recent years. If you decide against such an approach, then we suggest, secondarily, that you drop the whole farce of controls. They have little or no effect on prices and probably none on profits. They do lower wages and that process is simply creating a bitter and resentful labor force. Perhaps God will stop inflation. Certainly the Administration and Congress have shown no ability-and sometimes little inclination to do so. STATEMENT OF PATRICK E. GORMAN, SECRETARY-TREASURER AND CHIEF EXECUTIVE OFFICER OF THE AMALGAMATED MEAT CUTTERS AND BUTCHER WORKMEN (AFLCIO) ON THE ECONOMIC STABILIZATION ACT My name is Patrick E. Gorman. I am the Secretary-Treasurer and Chief Executive Officer of the Amalgamated Meat Cutters and Butcher Workmen (AFL-CIO). The Amalgamated is a labor union with 500,000 members organized in more than 500 Local Unions throughout the United States and Canada. The Amalgamated and its Local Unions have contracts with tens of thousands of employers in the meat, retail, poultry, egg, canning, leather, fish, sugar and fur industries. DISASTER AT HAND In our 1972 and 1973 statements to this Committee, we warned about the mushrooming inequities of the so-called economic stabilization program, the rigidity of wage controls, the lack of meaningful price and profit controls, the increasing bitterness among workers, the workers' decreasing faith in their government's fairness and the deterioration of collective bargaining. Unfortunately, the great harm which we predicted would result from the inequitable controls is now becoming a reality. This accuracy is of little comfort to our Union. What has occurred in the socalled economic stabilization program in 1973 has been a disaster to many of our members. They have been kept to a 5.5 percent wage increase level, while food industry prices increased 22.5 percent. Their contracts have been torn to shreds as the Cost of Living Council cut as much as $2,000 from the workers' pay during the contract term. Bureaucratic bungling has delayed consideration of contract increases by the Council for months and even more than a year. The Council then punished the workers for its own procrastination by forbidding retroactivity for their long-delayed wage increases. How the so-called economic stabilization has worked in the food industry in 1973 and what its effects have been is difficult to describe in a rational fashion. A malevolent Alice in Wonderland would have an easier time. However, in this statement, we shall attempt to deal briefly with (1) the economic aspects of stabilization, and (2) the experiences of our members before the Cost of Living Council. 1. UNBOUNDED INFLATION Dr. John Dunlop deserves credit for an unusual degree of candor for spokesmen of the Executive Branch. In his February 6 testimony before this Committee, he conceded that the year 1973 and Phase IV price controls "saw rapid inflation unmatched" since 1948, with the exception only of the year 1950. Government and private economists had forecast a 3 percent price rise for the year 1973. In fact, a 5.3 percent rise occurred in the year's deflator of the Gross National Product and an 8.8 percent rise in the Consumer Price Index from December of 1972 to December of 1973. The January 1974 Consumer Price Index brought further rise of 1.0 percent. In the food sector of the economy, where the rigid wage controls of Phase II had been continued and intensified during the year, Dunlop's scorecard marked up the heaviest defeat for the crusade against inflation. Dunlop cited the Department of Agriculture's prediction on February 13, 1973, that retail food prices for that year "would average about 6 percent above 1972." In reality, retail food prices averaged 14.5 percent above 1972. By December, as Dunlop pointed out, the average price of food at retail was 20 percent above the level of December, 1972. By January of this year, the total rise in food prices under the "controls" of Phase III amounted to 22.5 percent. FALSE PREMISES From the beginning, it should have been obvious that Phase III economic policy was based on false premises. The Administration assumed by January 1973 that the battle against inflation was essentially won. Only a few minor skirmishes remained to be fought. Stabilization had been generally effective, it was announced, with the exception of some continuing pressures on food prices. The health care and the construction industries also remained as isolated troublespots. These comfortable assumptions had no basis in fact. They led to a massively mistaken policy. We shall offer no detailed analysis on that general failure and the impact of inflation on the total economy. In our opinion, however, the premature celebration of victory over inflationary tendencies ignored at least two basic elements: (1) The preference of highly concentrated industry for limited output at higher prices rather than expanded production at stabilized prices, and (2) The degree to which the U.S. economy had been made vulnerable by dollar devaluation to world inflationary trends. NO MEANINGFUL PRICE CONTROL In the food industry, Phase III was based on a series of paradoxes as well as fallacies. Farm prices-the cost of raw agricultural products continued to be specifically exempted from controls. They had risen 19 percent from December 1971 to December 1972 and accounted for more than 80 percent of the increases in the consumer price of food and some 90 percent of the increases in the consumer price of meat. This was the real inflationary dynamic in the nation's food economy, but it was ignored. There was not even a pretense of controls. Controls were supposedly applied to the costs and profits of processing, transporting and retailing foods. Yet, according to the U.S. Department of Agriculture, this element in food costs-the cost of getting food from farm to retail markethad increased only 2.9 percent from the fourth quarter of 1971 to the fourth quarter of 1972. The performance here was close to the Administration's own ideal goal of inflation; no more than 2.5 percent a year. To soften the discriminatory nature of applying price controls only to this part of the industry, the Administration made certain that the controls were elastic, flexible and often meaningless. They were a bother to the industry, to be sure. They brought about many, many conferences in Washington in which industry sought and often got relief. But they were hardly rigid, tough controls where price increases had to be approved by a tri-partite committee, including adversaries of business. UNFAIR WAGE CONTROLS This type of control was reserved only for the wages of workers in the food industry. They, together with workers in the health and construction industry— alone among U.S. workers-were kept under rigid, mandatory controls. Any contract providing more than 5.5 percent wage increases had to be approved by the Cost of Living Council before any amount over this guideline could be paid. As we shall show later in actual case histories, this procedure meant, in practice, that the increases really had to be approved by the management representatives and their public member allies of the Food Wage and Salary Committee of the Cost of Living Council. This discrimination against workers made even less sense than the rest of food industry "controls." In the first place, food industry wages could hardly be considered high and, therefore, a specially needed target for control among the incomes of various parts of the U.S. labor force. Average hourly earnings in December 1972 were $3.95 an hour for all manufacturing, but only $3.72 for food processing and $3.24 for food retailing. Secondly-and more important-food industry wages had shown no inflationary trend whatsoever. Actual 1972 increases in hourly earnings were 5.7 30-463-74-25 percent in food processing and 5.5 percent in food retailing as compared with 7 percent in all manufacturing and 6.2 percent in the entire private economy. Food workers had actually increased their earnings by less than the amount allowed other employees under the old Pay Board guidelines which were the governing rules in 1972. But the workers were to be allowed even less in 1973 and Phase III. The rigid controls which were applied to food industry workers alone and the rampant inflation had the inevitable result of reducing employees' real wage levels. Average hourly earnings for food processing workers in December 1973, after adjustments for increased living costs, amounted to $3.64 an hour as compared to $3.72 in December 1972. For workers in food retailing, the decline was from $3.24 an hour in December 1972 to $3.15 in December 1973. The real wages of meat product industry workers fell by 18 cents an hour in the same period. EMPLOYER WEAPONS AND PROFITS The Phase III control over food industry wages has been a powerful weapon in the hands of employers. With it, they have been able to sidetrack, delay and deny many wage increases negotiated in good faith. With it, they have been able to short-circuit union organizing drives. "Why join a union when all it can get you is 5.5 per cent?" is a normal, chilling question in company-sponsored literature during organizing campaigns. And hostile employers whose shops are already organized have benefited from the suspicion, hostility and skepticism of rank-and-file union members who blame the union for their impossible-to-understand pay cuts. An increasing number of competent and responsible Local Union officers have been defeated for re-election because of a "wage stabilization" policy for which they are no more responsible and which they do not understand any better than their members. Industry profits, on the other hand, did very nicely under Phase III. Despite controls which management executives bemoan so greatly, profits increased steadily at a good rate in all parts of the food industry. We are enclosing tables of announced profit figures for major supermarkets, food processing companies and meat companies. Some firms did better than others, but average increases in all or part of 1973 as compared to 1972 were 34.7 per cent for retail grocery chains and 41.6 per cent for meat corporations. These figures, especially such profit gains as 153.3 per cent for Kroger, 61.3 per cent for Del Monte and 66.3 per cent for Iowa Beef compare very well with the 5.5 per cent wage increases permitted workers. GOVERNMENT SCHIZOPHRENIA As if the government's other idiocies in food policy were not enough, its total approach to the problem of restraining food price inflation also had an element of schizophrenia. The right and left hands of the Administration were working in massive opposition. On the one side, the Cost of Living Council proclaimed the need for rigid limitations over wages and prices in the food industry. On the other side, the Department of Agriculture policy continued to work for the creation of scarcities which would inevitably continue upward pressures on farm prices. In explaining the failure to predict food price inflation in 1973, Dr. Dunlop observed, "The most important single source of the underestimation in 1973 was the failure adequately to relate the United States economy to the world economy, particularly when large agricultural stockpiles no longer served as a buffer." In other words, the Administration had simply underestimated the impact of farm policies in 1972 which had kept 60,000,000 acres of land out of cultivation, had paid out nearly $5 billion to farmers to curtail production and, at the same time, had enormously increased the export of U.S.-produced farm commodities. Food price problems in 1973 reflected in part a giant "miscalculation" of domestic and foreign demand for food-a "miscalculation" which just may have been aimed at influencing certain farm state votes in November 1972. FUTURE FOOD PRICES What about the future of food prices? Unfortunately, our Union cannot share the comfortable assurances given recently-once again-by the Secretary of Agriculture Earl L. Butz, that food prices will stabilize in the second half of 1974. |