(4) Steel profit reports as with all corporations- now overstate the industry's real earnings, because depreciation allowances permitted by Government are inadequate under today's inflation to cover replacement costs; that replacement costs have risen from 200 to 300 percent over prewar averages; that if depreciation were to be charged on the base of today's replacement values, it would be found that profits in 1951 were at least $180 millions lower than the amounts reported-or 30 percent below the reported total. (5) Steel's 1951 profits were not only 13 percent under those of 1950; but were still on the decline during 1951; they were earned at a lower rate in the second half of the year; that there was also a decrease in dividends to stockholders; that since taxes in 1952 will be higher than in 1951, then with the same volume of sales and with costs otherwise unchanged, the 1952 decline in profits can be even greater than last year's. (6) Total 1951 profits for the entire industry ran to little more than $700 millions, on the basis of preliminary estimates. For purposes of comparison: this profit of the whole industry amounts to less than the additional billiondollar wage costs (on basis $12 per ton) proposed by Government and union. THE UNION'S POSITION 17. The union claims that 16 cents an hour would have been required on January 1, 1952, to catch up with the increase in cost of living since their December 1950 contract was negotiated. 18. They contend that other industries have higher average hourly rates; that the major ones have received wage increases since December 1950. 19. The union argues that the recommendations do not adequately compensate for increased productivity; that this would justify an additional wage increase of 5 cents per hour for each year since 1950. 20. That the meager consideration of one and one-quarter premium pay for Sunday work is a far cry from the double time for Sunday work and time and one-half for Saturday work now generally enjoyed by American workers. 21. The union contends that the Board's action in recommending the union shop only extends the same kind of protection accorded unions in other industries. Comparison of steel companies' offer 1 with recommendations of the Wage Stabilization Issue 1. Length of contract. 2. Wage rate.. Board Companies' offer To end Mar. 30, 1953. 3. North-South differential..... Reduce differential by 5 cents.... 4. Shift differential: Second shift. Third shift.. 5. Vacations............. 6. Holidays.---- 7. Effective date of fringe adjustments in 3, 4, 5, and 6 above. 6 cents.. 9 cents.. 3 weeks after 15 years' service. Effective date of new agreement. 8. Premium pay for Sunday.... None........ 9. Union security.. 10. Contract issues.. WSB recommendation To end June 30, 1953. 121⁄2 cents per hour effective Jan. 1, 1952; additional 212 cents beginning July 1, 1952; additional 212 cents beginning Jan. 1, 1953; to run to July 1, 1953. Reduce differential by 5 cents. 6 cents. 9 cents. 3 weeks after 15 years' service. 6 at straight time when not worked; 6 at double time when worked. Effective first full payroll period following Mar. 20, the date of Board's recommendations, or as otherwise agreed. Time and one-quarter for work performed on Sunday to be effective Jan. 1, 1952. Maintenance of membership.... Form and conditions of union shop To be settled by mutual agree- provision to be determined in negotiations. General Motors provision suggested as possibility for mutual agreement. To be settled by mutual agreement. 1 Offer made during negotiations meetings held in New York City prior to Apr. 8, 1952. COMPARISON OF STEEL EARNINGS WITH LIVING COSTS AND OTHER INDUSTRIES 1. Steel companies claim the hourly earnings of steelworkers has increased higher than the cost of living. They submitted the following data. 2. Steel companies submitted the following tables in further contention of their claim: 3. Steel companies claim that the hourly rate of steelworkers is above the average of other industries. PERMISSIBLE WAGE INCREASES UNDER WSB REGULATIONS Nos. 6 AND 8 THE STEEL COMPANIES' CONTENTION Under regulation No. 6 (general 10 percent "catch up" formula): 10 percent "catch up" permitted__. Balance due steel workers, Dec. 1, 1951. Per hour $1.638 . 164 . 16 .004 Under regulation No. 8 (wage increases permitted to offset higher living costs after January 15, 1951): Steelworkers' current straight-time wage-- 1. 81 Permitted wage increase under old cost of living index January 15, 1951, to January 15, 1952 (1.81X4.75 percent). Balance due under regulation No. 6.... Total steelworkers' wage increase permitted___. .086 .004 .09 THE UNION'S CONTENTION The union argues that under section 5 of GWR No. 8 and section 4 of GWR No. 6, a base date other than the normal January 15, 1951, is justified. They contend that the October 15, 1950-the last Consumer Price Index available at the time of the negotiation of the 1950 increase is the proper base date. The increase in the Consumers Index (old series) from October 15, 1950, to January 15, 1952, is 8.8 percent. When applied against the current $1.81 wages the amount of the permissible increase would be 16 cents per hour. The following table indicates the increase in living costs and the permissible wage increase on the basis of the different base dates indicated: THE COST OF THE PROPOSED STEEL WAGE INCREASE AS ANALYZED BY OPS 1. The cost of the entire wage package proposed by WSB averages 23.3 cents an hour from January 1, 1952, to June 30, 1953. 1 2. Production of 1 ton of finished steel requires 17 man-hours.1 average cost of the proposed wage increase is $3.97 a ton. Thus, the 3. A fully integrated operation (including production of coal, iron ore, and limestone) requires 20 man-hours a ton. Thus, the proposed wage increase, plus an identical increase in ore and coal mines and quarries also retroactive to January 1, 1952, would raise the industry's total labor cost by $4.67 a ton of finished steel.1 Nonintegrated companies could pay out of this amount for an increase in the prices of purchased ore, coal, and limestone equal to the increase in wage cost of these materials. 4. The industry has claimed that the wage-cost increase is $6 a ton. This figure applies only if retroactive pay is charged to current operations; or else it applies only after January 1, 1953.1 5. The cost figures given above do not take account of increasing labor productivity which is bound to offset part of the wage rise. 6. OPS position is that purely hypothetical increased material costs cannot be taken into account in determining the justification for present price adjustments. 217 man-hours required to produce a ton of finished steel in a nonintegrated steel mill. 3 additional m an-hours (totaling 20) required per ton to produce iron ore, coal, and limestone in an inte grated mill. 1 Each of these statements is based on computations verified by the steel industry's own experts. Source: Estimated "Cost per hour and cost per ton," by Office of Price Stabilization and the steel companies. Net cost of WSB recommended steel wage to steel industry and Government NET COST TO STEEL INDUSTRY Estimate wage increase cost to July 1953 (basis average $4.67 per $600, 000, 000 300, 000, 000 Industries' cost for wage increase, January 1952 through 300, 000, 000 Less amount of Federal income and excess profit tax (70 percent) on $300,000,000-. 210, 000, 000 90, 000, 000 Net cost to steel industry for 18-month period.... Average net cost per ton for 14 months including retroactive wage increase, 90 cents per ton. NET COST TO GOVERNMENT TO JULY 1953 Loss from Federal income and excess profit tax.. $210, 000, 000 120, 000, 000 Net loss to Government for 18-month period____ Plus possible additional tax loss on lower dividends to stockholders. 90, 000, 000 EFFECT OF STEEL PRICE INCREASE ON THE GENERAL ECONOMY In the hearing before the Senate Labor and Welfare Committee on April 15, 1952, Governor Arnall stated: "A $12-a-ton increase in the price of steel would represent about 10 percent increase in price. It is estimated that such an increase would result in a general increase of approximately 5 percent in the cost of living or $300 per year per family." According to OPS the basis for this statement is that a steel price increase will— 1. Break the line on OPS price policies. 2. Make it necessary for OPS to grant special consideration to other industries. 3. Cause other industries to ask for increases to cover wage increases already given since July 1951 and OPS would be helpless. 4. Indirectly increase the price of commodities generally through a round of material and wage increases over the next few months that would be reflected across the board. 5. Create inflationary trend caused by consumer buying being stimulated by higher prices. Estimated $300 increasing living cost per family is reached as follows: Personal expenditures: $209 billion annually: 5 percent increase equals $10.5 billion. $10.5 billion divided by 35 million families equals $300. PROFITS PER TON OF SEMI AND FINISHED STEEL FOR 49 STEEL COMPANIES REPORTING TO AMERICAN IRON AND STEEL INSTITUTE The following represents the basis on which OPS estimated the profit per ton of steel before and after taxes. 1950 average price for semi and finished steel $113.20 (from Bureau of Census, Facts for Industry-Steel Mill Products issued Jan. 25, 1952.) "Semi and finished steel combined"-New Index-1947-49-100 percent. Before taxes After taxes $11.25 $6.59 20.26 7.07 6.00 41.80 14.26 5.27 3.00 4.90 17.26 6.17 Source: Prepared by Office of Price Stabilization from Department of Commerce, "Facts of Industry"; American Iron and Steel Institute. |