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The Case for the

Guaranteed Annual Wage

BY MARY T. "WAGGAMANf



Nihil Obstat:

John M. A. Fearns, S.T.D.,

Censor Librorum.

Imprimatur

:

© Francis Cardinal Spellman,
Archbishop of New York.

New York, August 16, 1948.

Copyright, 1948, by

The Missionary Society of St. Paul the Apostle

in the State of New York

PRINTED AND PUBLISHED IN THE U. S. A.

BY THE PAULIST PRESS, NEW YORK 19, N. Y.



The Case for the Guaranteed

Annual Wage

(Formerly) Associate Economist, U. S. Bureau of Labor

Statistics and Associate Editor, Monthly Labor Review.

THE SOCIAL ACTION DEPARTMENT

N. C. W. C.

By

THE PAULIST PRESS

401 West 59th Street

New York 19, N. Y.

BY

MARY T. WAGGAMAN

Published for



The Case for the Guaranteed

Annual Wage

I. By Way of Prologue

Wartime production levels continued into 1947. Employ-

ment and income disbursements were maintained at a hitherto

unreached volume in a peace period. Unemployment, there-

fore, has not seemed to constitute the same first-magnitude

problem that it did before World War II.

The present burning quest of economic planners is to dis-

cover means to utilize to the nth degree the amazing produc-

tive possibilities of our marvelous America. Their optimistic

mapping, however, cannot preclude the remembrance of the last

bitter depression with its jobless legions. The involuntary idle-

ness in the twelve years following 1929 has been estimated

as costing the people of the United States the equivalent of

275 billion dollars of real income. This loss if it had been pro-

ductively used, according to some computers, “would have

been sufficient to build all the railroads in the country; to have

substantially rebuilt the cities and to have permitted the re-

placement of all obsolete and obsolescent equipment in the

entire country.” This terrible experience aroused a crescendo

clamor for security which included the guaranteed wage as

one of its important expressions.

A recent pamphlet of the Congress of Industrial Organiza-
tions asks “are we to go back to the old way before the war?”

The way which meant that steel workers “were employed only

three days a week and the men in the labor force of the auto

industry had opportunity for employment only six or eight

months per annum. .There was always a dull season and when

times were bad the season was even duller. Millions of workers

remained unemployed for years.”

The same pamphlet gives a picture of the physical and psy-

chological conditions of unemployed workers and their families

and of the continual anxiety of those who have jobs which may

fold up at any moment.

[ 2 ]

OMcURed



It seems only rational for workers to insist upon round-the-

calendar wages which would at least tend to implement, in part,

two of the objectives of that once famous document, The

Atlantic Charter—freedom from fear and freedom from want.
It goes without saying that discharges and lay-offs contribute

heavily to both fear and want in the wage-earning world.

The subject of the guaranteed annual wage has recently

been conspicuous in headlines of the press and its discussion

swarms with pros and cons in labor and management literature.

Another indication of the significance of the drive for an

annual wage guarantee is the Government’s interest in the

matter.

On February 27, 1947 the Advisory Board of the Office of

War Mobilization and Reconversion transmitted to President

Truman an enormous mimeographed report of the Board, em-

bodying the findings on guaranteed wages of the Guaranteed

Wage Study Staff under the direction of Murray W. Latimer.

The printed report includes two auxiliary studies—one an eco-
nomic study by Professors Alvin H. Hansen of Harvard Uni-

versity and Paul A. Samuelson of the Massachusetts Institute of

Technology and the other a survey of guaranteed wage plans

prepared by the United States Bureau of Labor Statistics. This

series of studies was authorized by the late President Roosevelt

and $200,000 was appropriated for the project. Experts wrestled

with the investigation for over eighteen months.
1

The O. W. M. R. Advisory Board states that the “Report

represents a major contribution to the sum of knowledge in this

field and deserves serious consideration by Government, labor,

management and the public.”

According to the C. I. O. Executive Board this report is

“ample proof of our contention that guaranteed wage plans will

1 The members of the Advisory Board of the O. W. M. R. which

transmitted the report were: Eric Johnston, former President of the

Chamber of Commerce of the United States now President, National

Producers of Motion Pictures of America; Anna M. Rosenberg, Con-

sultant on Labor Business and Personal Relations; A. S. Goss, Master

of the National Grange; Philip Murray, President of the C. I. O.;

James G. Patton, President of the National Farmers’ Cooperative;

Nathaniel Dyke, Jr., President of Cole Manufacturing Company; Edward

A. O’Neal, President of the American Farm Bureau Federation; T. C.
Cashen, Chairman, Railway Labor Executives Association; George H.

Mead, President of the Mead Corporation; William Green, President,
A. F. L.; George W. Taylor, Chairman, Professor of Economics, Uni-
versity of Pennsylvania.

[ 3 ]



help end the intolerable evils of unemployment and advance the

welfare of the entire nation.”

The ever expanding discussion of “the guaranteed annual

wage” is accompanied by much nebulous thinking and even the

term itself is tacked on to plans which are really not what they

are labeled.

Some celebrity has said somewhere that “all argument arises

from mistaken definition.” As a lot of people have rather misty

notions as to what a guaranteed annual wage actually is it

seems well to clarify this controversial subject, in accordance

with the up-to-date lines laid down by the Guaranteed Wage

Study Staff of the O. W. M. R. Advisory Board. Their weighty

document declares a guaranteed wage, as treated in the study,

to be an employer-employee arrangement depending “upon the

existence of some verbal or written statement by an employer

conveying to the employees affected the knowledge that he

has undertaken to provide them with a wage or employment

for a period of time not less than three months.” This com-

mitment by the employer is to be distinguished from a right or

privilege set up by Government intervention in favor of em-

ployees for an employer’s wage guarantee and a larger guaran-

tee than would otherwise be possible. Other advantages of Gov-

ernmental action in connection with guaranteeing wages will

be noted later. The plans covered by the Report of the Guar-

anteed Wage Study Staff are voluntary arrangements by the

employers themselves or by agreement between employers

and employees.

To be reported as a guarantee the scheme must be some-

thing beyond a mere smoothing out of pay irregularities

through wage advances or loans. However, if an employee

returns wage advances only if he continues in the service

of the employer who made the advances and only from earnings

which exceed the stipulated wage per week, the plan may be

regarded as an actual wage guarantee.

The definition of a guaranteed wage must also include its

payment “to all or a defined unit or group of employees,”

and such persons must continue to have an employment re-

lationship with the employer.

Guaranteed wages are often spoken of as “guaranteed an-

nual wages.” “A guaranteed annual wage,” according to the

report upon which this pamphlet is largely based, “is a special

case. Usually the employer undertakes a substantial guarantee

[ 4 ]



but not necessarily for the calendar year.” Many union agree-

ments run for a year, and this has resulted in some instances

in regarding guaranteed wages as annual.

In many cases a guarantee may be abrogated by the com-

pany’s directors or suspended in the event of catastrophes.

In January, 1946, guaranteed wage plans were functioning

in over 500 establishments and covered more than 60,000

workers. The experience with such plans is reported in general

as “highly successful” in many concerns. More of these

schemes are reported for industries closely concerned with

consumer demand than in industries primarily having to do

with non-consumer markets.

On the whole, these guarantees have been “remarkably im-

pervious to depression” and the “guarantees offered under the

bulk of the plans are not niggardly,” a recent issue of the

American Machinist reports.

While the study of wage guarantee schemes included some

which could not be classified as annual wages, under approxi-

mately 90 per cent of the plans full time wages are paid for the

period guaranteed and almost two-thirds of the currently func-

tioning schemes “guarantee employment for the full year at

full time hours of pay.” Also over one-third of all the schemes

now in operation include practically all the labor force of the

establishment and three-fourths guarantee forty-eight weeks

or over of full employment for twelve months.

A closer study of the findings of the Guaranteed Wage Study
Staff shows that while the protection will not be complete, the

establishment of some such wage guarantee plans will “mark

a significant advance in security for the group affected.”

II. Attempts to Promote Wage Guarantees Through

Legislation

Two federal statutes—the Social Security Act of 1935 and
the Fair Labor Standards Act of 1938, include provisions to

stimulate directly or indirectly wage guarantees. In general,

these particular provisions have been somewhat of a fiasco.

Under the Fair Labor Standards Act of 1938 a company

which agrees “with a bona fide labor organization to employ

specified workers on an annual basis” is exempted from pre-

mium overtime pay requirements. The National Labor Rela-

tions Board must certify the organization “as the collective bar-

[5]



gaining agent.” Moreover, “the exemption was conditioned on

a limitation of the annual hours of work to not more than 2080

and premium overtime must be paid on hours in excess of

twelve in one day and fifty-six in any one week.” Since the

Act became operative, according to the Government’s guaran-

teed wage report, only sixty such agreements or proposed

agreements have been filed with the U. S. Department of Labor’s

Wage and Hour Division which is charged with the administra-

tion of the Act. At the close of eight years apparently only six

plans involving a waiver for overtime were functioning. Recom-

mendation has been made that the Act be amended to allow

flexibility in regard to hours of work exceeding the stipulated

limits and the “recognition of guarantees in industries where

the standard work week is less than forty hours.”

As noted elsewhere, guaranteed wage problems are closely

allied with the matter of increasing and extending unemploy-

ment compensation benefits. The late President Roosevelt

in transmitting the report of his Committee on Economic Se-

curity to the Congress, January 19, 1935 stressed that
—
“An

unemployment compensation system should be constructed in

such a way as to afford every practicable aid and incentive

toward the larger purpose of employment stabilization. ... In

order to encourage the stabilization of private employment,

federal legislation should not foreclose the States from estab-

lishing means to induce industries to afford even greater

stabilization of employment.”

Under stipulated conditions employers who guaranteed

wages were to be permitted to reduce their contributions for

unemployment insurance. Parallel with this proviso was the

permission under the Social Security Act for States to cut the

rates of their employers under certain conditions on approxi-

mately the same terms. As the reduction in rates without the

wage guarantee carried no additional financial obligation for

the employer, the provision concerning the wage guarantee was

of no advantage to him. As a consequence, those drafting

State bills were not interested at all in this matter. Of the

seven States (California, Florida, Idaho, Indiana, Minnesota,

Oregon and Wisconsin) which did include provisions concern-

ing wage guarantees, all have eliminated such provisions. Since

the Social Security Act became effective none of these States

has allowed a lower unemployment insurance contribution rate

because of the operation of a guaranteed employment scheme.

[ 6 ]



The Social Security Act and the State legislation stemming

therefrom have consequently had no lasting influence on wage

guarantees.

The scant accomplishment through the intended legislative

stimulants indicates that effective wage guarantee schemes

must be largely individualized. This fact makes legislation

along the lines of encouragement a good deal of a riddle.

However, it might be unraveled. Previous efforts have resulted

from mistaken concepts of the particular type of stimulus re-

quired—for instance, that a wage guarantee can be a substi-
tute for unemployment insurance. In fact, the two are recipro-

cal and should be combined rather than separated. Therefore,

legislative encouragement for wage guarantees would accomplish

more if it allowed guarantees as supplements to jobless benefits.

Ml. Further Discussion of Link-up of Wage Guarantees

with Unemployment Insurance

It may be recalled that under the Wisconsin Unemployment

Insurance Act employers who guaranteed wages were wholly

exempted from contributing to unemployment insurance. How-

ever, this kind of coordination is not desirable because regard-

less of the generosity of the guarantee there will usually be

some kind of joblessness that can be attributed to an employer

who guarantees wages which will properly come under the

general unemployment compensation scheme. Moreover, the

general insurance scheme will undoubtedly be adversely affected

as employers whose employment hazards are not so great will

avail themselves of these exemptions, while employers with

difficulties in the way of employment stabilization will continue

contributing to the general insurance scheme.

The correlation between unemployment benefits and guar-

anteed wages can be made most effective by providing un-

employment benefits for workers with guaranteed wages when-

ever (if they did not have such guarantee) they would receive

unemployment compensation benefits. For example, if a com-

pany had no available productive employment the employees

would be eligible for unemployment compensation under the

law of the State and the remainder of the guaranteed amount

would be paid by the employer.

.As things are now, a worker cannot be assured his full

time wage when he is jobless unless he is guaranteed by

[ 7 ]



his employer full wages for the whole unemployment period.

When unemployment benefits are increased, say, to half of

an unemployed person’s pay, the jobless worker would receive

full pay if his employer would guarantee his wage for half of

his period of idleness. Every employer would then be able

to guarantee a greater percentage of full time earnings under

such a supplementation scheme than he could otherwise afford.

Unhappily, the supplementing of wage guarantees by un-

employment insurance is at present illegal as such guarantees

are considered earnings and consequently preclude the idle

worker from receiving unemployment benefits. If, however,

such supplementation were madedegal it might well be a shot

in the arm to the wage guarantee movement as was old age

and survivors insurance to voluntary retirement schemes.

In brief, from a number of angles a close link-up between

wage guarantees and unemployment compensation would be

exceedingly advantageous.

In the first place, the right kind of correlation would cut

the costs of wage guarantees. Secondly, the facilities of em-

ployment offices in connection with unemployment insurance

would be very helpful in making sure guaranteed wage plans

by individual employers did not produce at times superfluous

pools of unemployed and underemployed people, and, if wage

guarantees and unemployment compensation were effectively

correlated each would strengthen the other along constructive

lines. Unemployment compensation provisions pique the imag-

ination. The present extraordinary peacetime volume of

employment, the enormous accumulation of unemployment in-

surance funds, and the continued acceleration of the nation’s

economy make the liberalization of unemployment compensa-

tion benefits both urgent and practicable. The unemployment

insurance cost calculations of the mid-thirties are declared to

be as outmoded as the American life insurance experience

tables which have recently been undergoing revision.

Based on current resources with subnormal contribution

rates, but with a permanent reinsurance fund such as was set

up pro tem by the 1944 War Mobilization and Reconversion

Act of 1 944 unemployment insurance will permit greater income

security. In the major industrial states benefits can be in-

creased to “65 per cent of pay (within maximum and minimum

weekly limits of $32.50 and $5.00 respectively) for as long as

thirty weeks in the year to persons who qualify at present.”

[ 8 ]



IV. Successful Ventures with Wage Guarantees

In the United States experiments with wage guarantees

began more than a half a century ago, but only a few had been

tried out previous to 1933. Plans which overcame their begin-

ning difficulties are impressive in their survival record.

Early in 1946 the U. S. Bureau .of Labor Statistics found

347 guaranteed schemes which met the requirements of the

definition laid down for inclusion in its report. Of these plans

196 were operating at the time of the study. In comparatively

few instances, however, was the guarantee called an “annual

wage.”

However, the majority of the schemes guaranteed employ-

ment for a stipulated number of weeks per annum and hours

per week. As a matter of fact, these employment guarantees

and also the small number of guarantees which were explicit

as to wages “did guarantee wages for the total number of hours

a year over which employment was guaranteed.”

Of the 128 schemes guaranteeing full time employment

for a whole year, thirty-nine covered all employees as soon

as they were hired or within thirty days after that date. The

remaining employees were subject to further requirements in

connection with length of service or limitations as to coverage.

As already noted, the experience with wage guarantees is

reported in general as “highly successful in many establish-

ments.” More of these schemes are reported for industries

closely concerned with consumer demand than in industries

primarily having to do with nonconsumer markets.

Up to the present the movement for wage guarantees

supplies, as it were, an index of feasibility. The guarantee can

be of advantage to both employers and employees. A consider-

able number of firms have been able to operate schemes for

prolonged periods, the average for plans functioning in 1946

was nearly ten years. Reasons for discontinuing wage guar-

antees were found to lay conspicuously in particular individual

situations, in legislation and war rather than in business slumps,

competitive problems and other influences involving high costs.

Nearly two-thirds of the 196 plans guaranteed employment

for the entire year at full time hours of pay. The great ma-

jority of the schemes guaranteed fifty-two full weeks of employ-

ment or pay in lack of employment. Eighty-five per cent of

166 plans had full time wage guarantees for forty weeks or

more.

[ 9 ]



The Experiments of the “Big Three”

The so called “Big Three” with wage guarantees are namely

Proctor and Gamble (manufacturers of soap and soap prod-

ucts), George A. Hormel and Company (a meat packing house),

and the Nunn-Bush Company (makers of fine shoes).

Brief accounts of these examples of high achievement in

the field under review are given below:

The Proctor and Gamble Plan

Proctor and Gamble have had an employment guarantee

scheme since 1923, the terms of which have been subject to

various modifications. Leaving aside the whys and wherefores

back of the numerous modifications, all the changes have been

instrumental in lessening the benefits in coverage provided in

the original scheme. Even the changes resulting from the

depression have never been abrogated.

The Revised Guarantee dated April 15, 1941, which is

still effective provides that employees located in the factories

specified “whose pay is computed on a hourly rate and who

have had at least twenty-four (24) consecutive months of

employment preceding the application of the plan to their

employment, the undersigned company hereby guarantees

regular employment for not less than forty-eight (48) weeks

(or its equivalent) in each calendar year less only time lost

by reason of holiday closing, vacation with pay, disability due

to sickness or injury, voluntary absence or due to fire, floods,

strikes or other emergency whether like the foregoing or not,

and subject to certain provisions.” Among these provisions

are: that regular employment means “employment for not less

than the hour week established from time to time by the com-

pany”; that the company may under the guarantee transfer

an employee to a job other than the one at which he usually

works at the rate of pay for the job to which he is transferred.

Whenever the Board of Directors so decides the terms of

the guarantee may be changed to seventy-five per cent of the

established hours week less loss of time for the reasons re-

ferred to above.

The company also reserves the right to discharge a worker

at any time also the right to withdraw the guarantee or to

modify or terminate the contract.

It has never been necessary to create a reserve fund. In

•

[ 10 ]



1945 the President of Proctor and Gamble reported to the

American Management Association that the amount paid out

by the Company on the financial guarantee had never exceeded

three per cent of the annual payroll and that such per cent was

in an unusual year.

The plan has resulted in a notable increase in employment

stability as shown in production records and the decline of

labor turnover.

The Hormel Scheme

The Hormel Scheme has attracted an immense amount of

attention, especially because of its operation in the packing

house industry which is characterized by a tremendous turn-

over and violent employment oscillations.

The top flight feature of the plan is that each employee

included under it is guaranteed fifty-two pay checks per annum,

each such check “being equal to at least the product of the

number of hours in his standard work week multiplied by his

hourly rate.”

In general, a shift from one job to another means the same

or higher pay. In accordance with the agreement of the com-

pany with the union, the Hormel wage guarantee may be modi-

fied or canceled.

Combined with its annual guaranteed wage the company

also has a work budget incentive plan, a joint-earnings pro-

vision, a profit-sharing trust and various insurance features.

A study of the Company’s development reveals that the
annual wage gave rise to conditions which called for or at

least made highly advisable production bonuses and similar

devices.

Any detailed appraisal of the Hormel Annual Wage Scheme

should take into consideration the other payments and credits

available to the company’s labor force. These provisions are

analyzed in the Report on Guaranteed Wage and Employment
Plans made by the U. S. Bureau of Labor Statistics and pub-

lished as Appendix C of the Report on the Guaranteed Wage
Study Staff. The limitations of space will permit only of this

reference here to these progressive measures.

Hormel is convinced that provision must be made for as-

sured regular employment. If this is not done no annual wage

plan is practicable. If this is done, no annual wage guarantee is

necessary. However, this employer acknowledges that when

[ill



he first operated his business merely on a good intentions basis

requisite planning and arrangements to have workers on the

payroll were too frequently neglected. This neglect on the

part of management eluded discipline. The upshot of this

situation was to make planning an obligation and guarantee

annual wages.

The Hormel Annual Wage Scheme “has provided manage-

ment with a double-barrelled technique and increasing labor

efficiency, first through the efforts of supervisors and second

(and more effective) by the efforts of the workers themselves

to police the plant against slackers and to earn group incentive

payments.”

In summary, in his own words, Hormel’s industrial goal is:

“First security of employment, second, a fair weekly rate of

pay with extra pay for extra effort put forth, and, third, a fair

share to each one of us if our business enjoys good fortune

or if our combined efforts produce extra prosperity.”

In the judgment of experts, Hormel’s labor force rates,

higher in efficiency than do the workers in rival plants.

Possibly the greatest return on the Hormel project is the

establishment’s capacity because of its stable corps of workers

to shift from low to high production without a jolt.

The Nunn-Bush Guarantee

The Nunn-Bush Plan was originally termed “Fifty-Two

Pay Checks Each Year” but at present is referred to as “Share

the Production.” The scheme does not conform to what is

usually considered a guaranteed wage plan as it does not

guarantee any minimum amount each week or year to the

workers included under the scheme. However, since the be-

ginnings of the experiment in 1935 no worker covered has been

paid less in any week than the amount paid when the plan

was inaugurated, namely thirty-seven times the hourly wage

which was being paid for the job classification prior to the

introduction of the plan. The only guarantee in the scheme

“is that a management-union agreed upon group of workers

with greatest seniority (currently, 595 in the Milwaukee plant)

shall have a continuous employment relation with the company,

that is, that these particular workers must be employed when-

ever there is sufficient work available.”

A notable characteristic of the scheme is its “flexible pay

principle,” which provides that the earnings of all members of

[ 12 ]



the labor force who have had two years of service shall con-

stitute “a predetermined proportion of the wholesale value of

the output.”

In brief, the plans combined considerable employment and

wage security with a novel general wage determination method.

The wage determination policy supplies a basis for an

entente cordiale and teamwork between labor and management

which make for the elimination of difficulties which may arise in

less prosperous times and the guarantee of the employment

relation provides a continuing partnership feature to the project.

From time to time interesting modifications have been

effected which cannot be taken up in detail in this report.

Weekly drawings are now computed at 1/52 of the workers

estimated earnings per annum, which earnings are 2080 times

our existing rates per hour for the job classification. This

means that the drawings are based on a forty hour week. After

these weekly drawings a considerable residue has been avail-

able for monthly payments.

The Nunn-Bush employees have not only escaped lay-offs

but their per annum income has never declined below the

starting level. Moreover, the take-home pay per week has

been much more regular than the volume of employment, shift-

ing only upon occasions when the drawing rate was changed

and in case “there was an annual disbursement of any excess”

in the Group Salary Fund.

As to the cost of the Nunn-Bush Scheme, there is the pos-

sibility of a deficit in the group fund. There is also the pos-

sibility of the company’s having to finance nonwage outlays

connected with production for inventory, together with the

hazard of loss on such inventory. However, no final loss is

reported from either of these risks,* the first of which is now

declared negligible because of the workers’ wartime pay

reserves.

V. The Question of Costs

Wage guarantee experience yields no weighty evidence as to

what a definite scheme might cost the employer over a con-

siderable period. A company guaranteeing wages ordinarily
agrees to pay the guarantee whether or not it has enough em-

ployment to cover such guarantee. The probable expenses of

the undertaking will be the determining factor in deciding

whether any or how large a guarantee is practicable. In other

[ 13 ]



words, the setting up of wage guarantee schemes is dependent

upon the financial obligations which employers may incur in

connection with these plans. Such costs must not be too high

or foresighted employers will not dare to venture on such haz-

ardous undertakings. It seems that cost accounting in connec-

tion with institution of wage guarantees is indeed complex,

and the results of various statistical struggles as presented

in the appendix of the Final Report by the Guaranteed Wage

Study Staff clinch this impression. The items which have

to be taken into consideration call for super-bookkeeping, and,

of course, costs vary with the kind of wage guarantees estab-

lished. Cyclical see-saws and seasonal slumps affect certain

industries more severely than others. Different factors in wage

guarantee schemes influencing costs are limitations in the

guarantee in the way of financial liability, coverage, and ter-

mination of liability. Competitive conditions must be reckoned

with. The unpredictable behavior of the business barometer

and also the intangibilities of improved industrial relations in-

crease the tribulations of estimators.

Manifold are the pitfalls lurking in the line of march of

different enterprises and different industries. There is no

inflexible measuring rod for determining the reasonable amount

of the gross costs of wage guarantees. Such costs, as noted

above, would have to be considered in relation to the benefits

accruing from more harmonious industrial relations such as

declines in labor turnover or greater productivity and later on

increased stabilization of employment requirements.

The gross cost of wage guarantees include primarily direct

payments to the workers for whom productive employment is

not available. Other costs may include those resulting from a

shifting of production processes in manufacturing for stock

and subsidiary products, in making changes in distribution

methods, etc.

The total gross payments for idle time for the 1937-41

period under each of three guaranteed plans for forty-seven

cases were tabulated. The average annual costs were found

to run between zero to 0.4 per cent of the total aggregate pay-

roll for the lowest cost case to over 30 per cent for the highest

cost cases.

Through an analysis of these cases it was shown that the

gross cost could be cut down, by appropriate limitations, to

an average of under 6 per cent per annum even in the high

cost cases.



The key cost question is “Whether or not if a guaranteed

wage plan is properly set up, there are any net costs, that is,

whether the gross costs are offset by savings of various kinds.”

Indeed, in some instances it is reported that after a more or

less extensive operation of wage guarantees, credit items may

approach and even cancel gross costs.

In appendix tables ratios are given which are to be re-

garded “as measures of the burden of net costs of a wage

guarantee on prices or profits or a burden—distributed between

the two.” It is estimated that each 1 per cent of payroll by

which a guarantee increases net cost would require in the tele-

phone industry

—

0.37 per cent increase in telephone rates or a reduction of

profits by 1.6 to 1.7 per cent in the industry. ... In the

case of U. S. Steel or Bethlehem Steel it would result in

about 0.4 per cent increase in the prices of their products,

or 3.4 to 3.9 per cent reduction in their profits or some

combination of lesser changes in both. In the case of Gen-

eral Motors it would result in less than 0.3 per cent increase

in prices or about 1^4 per cent reduction in profits or vari-

ous combinations. In the case of Swift and Company it

would result in about 0.12 per cent increase in prices or

somewhat less than 10 per cent reduction in profits or vari-

ous combinations.

By and large, industrialists who venture on wage guarantees

may be said to assume no little risks.

The data on costs gathered by the Wage Guarantee Study

Staff indicate that the maintenance of a wage guarantee at

regular rates for not less than a full time number of hours each

week for fifty-two weeks in a year “may be beyond the reach

of a very large group of establishments. If a guarantee goes

beyond practicable limits, it may be self-defeating, something

less costly must be found.”

As already noted, to the degree that employers utilize the

influences at their command, the cost of guaranteed wages can

be considerably cut. Furthermore, under suggested legislation

allowing the supplementation of wage guarantees by unemploy-

ment insurance benefits, numerous companies who could not

otherwise operate full pay plans would be able to establish

such schemes.

[ 15 ]



VI. Precautionary Measures

The importance of selecting the proper restrictive provisions

to meet certain situations has been strongly emphasized in con-

nection with wage guarantees. In cases where the hazard is

from the wheel of the business cycle, a limitation on annual

payments is the prescribed safeguard.

Furthermore, a wider sweep of the horizon reveals that the

topmost economic resultant of a wage guarantee scheme is the

maintenance of wage incomes and consequently of the buying-

power of the labor force. This is of real significance at the start

of a business decline when the upkeep of wage incomes might

avert a serious slump.

If the company’s risk in operating a wage guarantee plan is

due to highly seasonal activities, some definite restriction on

the scope of the guarantee may be necessary. A restriction
on the length of time the benefits are to be paid after per-

mannt lay-offs is also advisable and upon occasions is a “must”

procedure. Unless otherwise provided, the time for which

benefits are to be paid should coincide with the time the

workers retain their reemployment rights. If the employer

already provides dismissal compensation, the guarantee wage

scheme can be correlated with that compensation.

Limitations in guaranteed wage schemes would of course

reduce the workers incomes. On the whole, however, even with

limitations the wage guarantees analyzed would result in a

minimum income of approximately 75 per cent of full time

in the most unfavorable year and an average income of more

than 90 per cent with unemployment compensation at existing

levels.

The figures, however, do not include the incomes of those

whose, jobs are finally terminated and whose guaranteed wages

are of limited duration.

An analysis made by government experts of employment

experience in forty-two establishments in 1937-41 showed that

“where labor requirements are relatively stable, full-time earn-

ings can obviously be guaranteed to substantially all employees

at all times. Such cases may be rare, but many are by no means

unique. Among the cases analyzed, there were nine establish-

ments distributed among eight different industries that would

fall within this class.”

On the whole, guaranteed wage experience discloses, as

already noted, that a large number of establishments have met

[ 16 ]



with considerable success with these wage stabilization plans.

This experience also indicated that the great majority of em-

ployers making these guarantees have not had to limit their

commitments to a painful degree and that guaranteed wage or

employment schemes are quite elastic, adaptable to various

individual conditions, and of value for many purposes.

In general:

(1) The guarantee should be in such form as to provide complete

protection during slack periods in normal years;

(2) The benefit formula should be such as to avoid any lag between

the start of any cyclical down-turn in employment and the beginning

of payments for non-productive time so as to afford the greatest possible

degree of protection against declines in consumer income disbursements.

(3) In so far as possible limitations should operate at the end rather

than at the beginning of periods of substantial payments.

VII. Employment Stabilization

An analysis of the experience of companies which have made

deliberate efforts to minimize the fluctuations in mere opera- ,

tions in so far as these variations were not cyclical or of long

term origin warrants the conclusion that there are many

measures that business can use to stabilize further the ups and

downs of employment. Indeed, there is convincing proof that

employers not only can control to some extent the ebb and flow

of their business activities but that wage guarantees will stimu-

late them to make greater efforts to navigate on an even keel.

The following devices are listed by the Guaranteed Wage

Study Staff as of value to employers who desire to stabilize

employment:

(1) Manufacture for stock;

(2) Creation of products supplementary to or having a demand dove-

tailing with existing products;

(3) Training employees for a variety of jobs and making transfers

from one job to another as production requirements shift;

(4) Maintaining a centralized personnel department to assure that

no new workers are employed unless there is genuine need for them

and that there is no new employment at a time when there exists

unemployment among suitable workers;

(5) Deferring maintenance and improvements for slack periods of

the year;

(6) Making intensive analyses in order to make reasonable fore-

casts of demand of product demand and schedule production on the

basis of such forecasts;

[ 17 ]



(7) Assure the coordination of various departments of the estab-

lishment
;

(8) Adopting a price policy which gives workers some incentive to

buy in slack periods.

It seems quite obvious from authoritative studies that suc-

cessful employment stabilization schemes result in appreciably

higher profits. This being the case, the querie immediately bobs

up why have not these schemes been more widespread? The

reply seems to be that the mere possibility of profits will not,

as a general rule, serve as an adequate incentive. If, how-

ever, a wage guarantee be combined with a supplementation

scheme, as suggested under a proposed amendment to un-

employment insurance legislation, the impetus will be strong

enough to multiply constructive efforts.

In general, it seems to be a rational assumption that what-

ever the stabilization inducements experience rating presents,

the incentive for stabilization under a wage guarantee scheme

. would be very much greater. It is pointed out that under

experience rating a company will regularize its employment to

save unemployment insurance contributions ranging from 1^4

to 4 per cent of the payroll. Under a wage guarantee scheme

the savings would be much more substantial. An additional

advantage is the fact that employer-employee relations are

much closer under wage guarantees than under unemployment

compensation.

The conclusion is reached that in the final report of the

Guaranteed Wage Study Staff that employers can not only

control employment stability at least to some extent but that

wage guarantees would lead industrialists to take the re-

sponsibility of a larger control than would incentives based on

experience rating.

To the degree that employers avail themselves of their

existing opportunities, they could cut down the cost of wage

guaranteed schemes.

VIII. Guaranteed Wages and Federal Tax Legislation

A business man with prudent proclivities who has set up a

wage guarantee scheme which is subject to cyclical hazards

will endeavor to distribute that risk over a considerable period.

He will store up reserve funds in times of prosperity to offset

possible expenses in less fortunate days. Present legislation,

[ 18 ]



however, places some hurdles in the way of distributing this

hazard over 12 months since payments into this reserve pool

will not likely be permitted as a business expense. Conse-

quently, it is thought advisable to promote the establishment

of reserve funds for companies which are willing to forego

entirely any interest in these funds.

Contributions properly protected to a guaranteed wage

trust should be interpreted as business expenses and allowed

the same exemptions as any other proper cost for carrying on

business.

IX. Various Secular Viewpoints

At times the subject of the guaranteed annual wage be-

comes painfully polemical among certain employers. Important

employers’ associations have published comprehensive reports

on wage guarantees in which, of course, various bogeys are

conjured up which tend to impede the way to the particular

objective under discussion. Yet, as reported elsewhere, a sub-

stantial number of progressive industrialists have demonstrated

that wage guarantees can be made to function successfully,

and Eric Johnston former President of the Chamber of Com-

merce of the United States, asked in 1944 “the widespread

adoption of annual wage plans.” He was also one of the mem-

bers of the O. W. M. R. Advisory Board who signed the con-

clusions concerning the Report on the Guaranteed Wage, issued

by the U. S. Government Printing Office May 15, 1947. How-
ever, another representative of Big Business, Paul Hoffman,

who is chairman of the Committee on Economic Development

takes the position that “as long as we are at the mercy of the

business cycle’s traditional swings, we’re unable to guarantee

an annual wage.” Bradford B. Smith, Representative of the

Carnegie Illinois Steel Corporation before the National War

Labor Board, in May 1944, referred to the “economic audacity”
of the demand of the steel workers for a guaranteed wage in

view of the past status and the status of the steel industry at

the time the demand was made.

Labor unions do not all have the same slant on the guar-

anteed annual wage, but Mr. William Green, the President of

the American Federation of Labor and Mr. Philip Murray,

the President of the Congress of Industrial Organizations have

made some important statements on the subject.

In the American Federationist of April, 1945, Mr. Green

[ 19 ]



declared that “there is no simple single formula for an annual

wage plan which could be applied indiscriminately in any em-

ployment situation. An effective annual wage plan must fit the

operating realities of a particular firm or a particular industry.

It must not be used as a device to lower the established wage

standard of workers brought under the plan.”

Nor is an annual wage plan satisfactory if it provides stable income

to one group of workers at the risk of decreased stability of employment

and income for the rest of the employees in the same establishment. . . .

To make an annual wage plan acceptable to all workers, and to justify

its adoption, the plan must be an outgrowth of mutual agreement

between the union representing the employees and the management,

dictated by the practical experience of both.

Mr. Green also referred to the increase of the purchasing

power of the workers through annual wage guarantees. The

extension of the schemes, he contends, “can become a major

stabilization factor in industry.”

However, he voiced the belief that other means must also

be taken to promote the steady increase of the workers’ buy-

ing power in order to expand post war markets. The stabiliza-

tion of the business cycle and of job opportunities is also

required. He stressed the need of “an integrated program of

economic and fiscal policies” for the purpose of giving “a con-

tinued balance to the entire economy.” In brief, “if we are to

march toward full employment after the war, our first and

essential step must be the assurance of higher real income to

the great mass of American wage earners.”

Dr. Emerson Schmidt, Economic Research Director for the

Chamber of Commerce of the United States, holds that depres-

sions are the outcome of war, monetary and credit problems,

and the convulsive character of capital formation and invest-

ments. This is the explanation, he thinks, of the dubious atti-

tude of economists in regard to the purchasing-power pros-

perity theory and the potentialities of the guaranteed wage for

working out certain industrial puzzles.

In the Foreword to a pamphlet “Guaranteed Wages the

Year Round,” published by the Department of Research and

Education of the Congress of Industrial Organizations, Mr.

Philip Murray, President of that Congress says:

“The war has destroyed a terrible enemy. Depression de-

stroys our own people. We must now prevent a downward
plunge from full wartime employment into hard times. . . .

[ 20 ]



We must develop ways of mobilizing our nation for continuing

prosperity.

“The guaranteed annual wage will help to achieve this goal.

If employers will agree to give labor regular work and pay,

the whole community will benefit. When plants and men are

idle, farm prices fall and business loses, ... A floor under the

income of wage-earners would mean a floor under the national

income.”

The problem requires the best cooperative effort of all groups of

citizens. It is gratifying that so many have already given their support

to the guaranteed wage idea.

The first responsibility for working out methods of providing steady

jobs rests with management. Labor stands ready to offer suggestions

and to help overcome difficulties.

Walter P. Reuther, President of the United Automobile,

Air Craft and Agricultural Implement Workers, upheld in

June 1944, the “soundness of a guaranteed annual wage on

the effect which stabilized income would have for labor on the

purchasing power of the nation.”

In Advanced Management of September 1945, Herman

Feldman, Professor of Industrial Relations in the Amos Tuck

School of Business Administration, Dartmouth College, cau-

tioned that “a concern or industry must be well on the way

to finding the secrets of stabilization before it can take on

substantial obligations for annual wages.”

The late Wendell Willkie stated that “an annual wage to

those who work in plants with long seasonal or periodic shut-

downs seems fair and necessary. And our post war economy

must be built on a high wage level if we hope to furnish a

market for the goods of an expanding peacetime production.

Our wheels can keep turning only if our workers can keep

spending.”

The World-Telegram of March 29, 1945, declared:

We need regularity in our economic order—the expecta-
tion of regular pay for the worker, the expectation of

regular business for the industrialist, the expectation of

regular return for the investor.

We could start with a guaranteed wage. . . .

We have a hunch it’s coming. Not tomorrow, maybe nor
even the day after. But it’s in the cards.

[ 21 ]



X. Some Catholic Attitudes

Over a decade ago the late Dr. John A. Ryan maintained

that social justice demands “wages and hours which will insure

continuous employment, a decent livelihood and adequate

security for all workers.”

The Most Reverend Bernard J. Sheil, Senior Auxiliary

Bishop of Chicago, in an address before the Seventh Constitu-

tional Convention of the C. I. O. in that city, November 20,

1944, said in part:

Another answer that labor can give to the persistent

questioning of the common man is the guaranteed annual

wage. From every standpoint this seems to me a fun-

damental requirement for full employment; for economic

stability; for peace; finally for dignified human living.

* * * *

I believe that the guaranteed annual wage for the work-

ing man is just, it is socially necessary; it is economically

feasible; it is a democratic imperative.

According to the Most Reverend Francis J. Haas, Bishop

of Grand Rapids, there can be no question as to the justice

of the annual wage. “The burden of proof for uninterrupted

income does not rest upon the workers. It is for opponents

of this right to prove—which of course they cannot—that the
worker does not have this right. Indeed the right of every

able-bodied worker to a guaranteed income forms the first

charge on industry, to be met before that of all other claim-

ants.”

Rev. Benjamin L. Masse, S.J., Labor Editor of America,

suggested several years ago the possibility of the enactment by

the Federal Government of a measure pledging the Govern-

ment to guarantee up to 85 per cent of “any annual wage

contract which labor and management, as a result of collective

bargaining, might freely make” or any similar commitment of

an employer to his nonunionized workers. Father Masse also

stated that “every normal adult workingman whose only access

to the wealth of nature is his pay envelope has a right to an

annual family living wage.” After pointing out that the regu-

larizing of employment as a move in the right direction is quite

widely recognized, this labor expert warns that a grave de-

pression within the next ten years “could conceivably destroy

[ 22 ]



our system of private enterprise and so could the intensification

of industrial unrest. The argument for Government assistance

is that it would enable industry to do now what it wants to do

anyhow but has no hope of doing in the near future.”

The Most Reverend Richard J. Cushing, D.D., Archbishop

of Boston, has spoken words of praise for those who are at-

tempting, through that “agreement of plans and wills” to which

Pope Pius XI refers, to work out details of the guaranteed an-

nual wage. His reference to the subject is quoted here from the

text of his address to the C. I. O. Convention in Boston, Octo-

ber 13, 1947:

I have read with interest some of the deliberations of both

management and labor concerning the so-called Guaranteed

Annual Wage. I know labor’s position on this proposal.

The worry of the working man has traditionally been this:

jobs today—but what will happen tomorrow? Up to now
many millions of Americans have been unable to answer

that question for themselves. As a consequence they live

in a fear which God never intended should be theirs. A
wage earner must have steady work and pay this week,

next week and all the year round if he is to have security.

Only an annual wage is an adequate wage. So runs the labor

argument and it is a hard argument to answer.

There can be no doubt that some economic solution must

be found so that a man may intelligently plan his future

and make provision to discharge those responsibilities which

have been placed on him by God Himself. It must be an

intelligent and fair provision which does not make him the

unnecessary beneficiary of charity or cause him to lose

pride in his daily work. It may or may not be the so-called

“Guaranteed Annual Wage,” but it must be something close

to it and I hope that a fair exchange of views on this sub-

ject between management, labor and the representatives of

the public will lead to an answer consistent with the needs

and decent demands of labor.

The following excerpts from Papal Encyclicals seem per-

tinent to the subject of guaranteed annual wages:

It is shameful and inhuman, hojvever, to use them (the

workers) for gain and put no more value on them than

what they are worth in muscle and energy.

[ 23 ]



Among the most important duties of employers the prin-

cipal one is to give every worker what is justly due him.

Assuredly, to establish a rule of pay in accord with justice,

many factors must be taken into account, but, in general,

the rich and employers should remember that no laws

either human or divine, permit them for their own profit

to suppress the needy and the wretched, or to seek gain

from another’s want. (Leo XIII, the Condition of Labor.

New translation, 1942, paragraphs 31 and 32.)

First and foremost Christian morals must be reestab-

lished, without which even the weapons of prudence which

are considered especially effective, would be of no avail to

secure well-being.

So far as the Church is concerned at no time and in no

manner will she permit her efforts to be wanting, and she

will contribute all the more in proportion as she has more

freedom of action. (Leo XIII on the Conditions of Labor.

New translation, 1942. Paragraphs 82 and 83.)
In determining the amount of the wage, the condition

of a business and of the one carrying it on must also be

taken into account; for it would be unjust to demand

excessive wages which a business cannot stand without its

ruin and consequent calamity to the workers. If, however,

a business makes too little money, because of lack of

energy or lack of iniative or because of indifference to tech-

nical and economic progress, that must not be regarded

a just reason for reducing the compensation of the workers.

Let them both workers and employers strive with united

strength and counsel to overcome the difficulties and ob-

stacles and let a wise provision on the part of public' au-

thority aid them in so salutary a work. . . .

But another point, scarcely less important and espe-

cially vital in our times, must not be overlooked: namely,

that the opportunity to work be provided to those who are

able and willing to work. . . .

And this same social justice demands that wages and

salaries be so managed, through agreement of plans and

wills, in so far as can be done, as to offer the greatest pos-

sible number the opportunity of getting work and obtain-

ing suitable means
4
of livelihood. (Pius XI on Recon-

structing the Social Order. New translation, 1942 from

paragraphs 72, 73 and 74.)

[ 24 ]



It will be noted that Pope Pius XI, in the latter quotation,

stresses the necessity of an “agreement of plans and wills.”

Taken in context this refers to the so-called Industries and

Professions system, which is really the heart and soul of the

Papal plan for economic reconstruction. What Pius XI is say-

ing is that stability of wages and employment cannot be guar-

anteed (except under rare or exceptional circumstances) *by

the isolated efforts of individual businesses alone. What is

called for is the establishment in each of the major industries

of an Industry Council, made up of freely chosen representa-

tives of labor and management, together with a representative

of the public. To do what? To work out jointly the eco-

nomic stability and prosperity of the industry. The separate

industries thus organized should federate by regions and should

choose a National Economic Council, likewise representing

capital, labor and the public.

The function of these industry councils or occupational

groups is described as follows in the 1946 Labor Day State-

ment of the Social Action Department of the National Cath-

olic Welfare Conference:

In each industry the occupational group should include

all interested parties: labor as well as capital; employees

as well as employers. Employers and labor and the other

subdivisions of other occupations would keep their rights

of separate assemblage and vote inside the occupational

groups and their right of separate organization. These

groups would “bind men together not according to the

position which they occupy in the labor market but accord-

ing to the diverse functions which they exercise in society.”

The occupational groups would seek to modify competition

\ by maintaining standards of fairness with regard to wages,

hours, prices and business practices
;
to avoid private indus-

trial dictatorship by enabling labor to share in all industrial

policies and decisions, and to exclude political or bureau-

cratic industrial dictatorship by keeping the immediate and

day to day control in the hands of the agents of production.

They would be prevented from injuring the consumer or

the common good by governmental action, “directing,

watching, stimulating and restraining, as circumstances

suggest or necessity demands.” This form of government

control is very different from and very much less than that
contemplated by collectivism. Moreover, the consumers

[25]



could protect themselves through some form of representa-

tion in relation to the governing bodies of the occupational

groups.

In a word, the occupational group system would aim to

bring into industry sufficient self-government to reduce to

#
a minimum the conflicting interests of the various indus-

trial classes, to place industrial direction in the hands of

those most competent to exercise it and to permit only that

amount of centralized political control which is necessary

to safeguard the common good.

The Labor Day Statement goes on to say that “the alterna-

tive to an organized partnership for the common good is to

give way, as it were by default, to a succession of legislative

reforms, which cannot and will not get to the heart of the

difficulty.” Which means, in terms of the present discussion,

that the guaranteed annual wage—again, except in rare or
exceptional cases—cannot be established in the United States
unless labor and management jointly come together, on a basis

of equality, to work out the problem through an “agreement

of plans and wills.”

XI. High Lights of Summary of the 0. W. M. R.

Guaranteed Wage Study

The wide adoption and proper coordination of wage guar-

antees with unemployment compensation protected against

exorbitant costs, and amply financed would advantageously

affect the country’s economy. These plans because they are

instrumental in maintaining the workers’ purchasing power

will not only tend to diminish seasonal and other transient in-

dustrial ups and downs but may even have an influence on

business cycles.

By regularizing buying power through steadying wage in-

come, the market for consumers’ goods tends to become more

stabilized and in turn also the requirements for capital equip-

ment by consumer goods industries. Such guarantees even have

an effect on the demand for durable consumers’ goods and

home building.

However, it would be very dangerous to conclude that wage

guarantees alone will do away with depressions. A combination

[ 26 ]



of devices is called for in order to hold employment at a high

level.

“Compensatory fiscal policy; public works and housing pro-

grams; social insurance; minimum wages; anti-monopoly meas-

ures; programs to expand and safeguard foreign trade; appro-

priate monetary and banking policies; and so on.”

These various measures should be brought together and

made to function efficiently. They should be reinforced by a

well defined and confirmed policy of the Government for the

maintenance of high employment. In an economy in which

these measures function successfully wage guarantees can aid

in establishing a desirable price system, can bring about con-

ditions favoring technological progress rather than retarding

it.

In the matter of industrial relations the Final Report of

the Guaranteed Wage Study Staff includes a cogent brief for

wage guarantees as indicated by the following excerpts:

“One of the most essential functions of the maintenance of a

high-level economy is harmonious industrial relations. There

are sufficient short-run differences in the interests of labor and

management to make difficult the achievement of harmony

without adding an additional unnecessary cleavage with respect

to employment security. The danger of such a cleavage lies

in the experience rating provisions of unemployment compensa-

tion laws which make it to an employer’s interest to beat down

the benefit claims of his employees ... a source of trouble in

the face of a serious recession.”

“If guaranteed wage plans did no more than remove con-

flict from the one area where, among all others, it is wholly

out of place, they would justify themselves abundantly.”

“But the extensive multiplication of wage guarantees can

accomplish more. Such schemes will help to eliminate ‘fear

from labor-management relations and from the economy, per-

mitting the lifting of those restraints in production which have

long been characteristic of employment insecurity.’
”

* * * 5ft

“The guaranteed wage used with care, with full recognition

of its limitations and with eyes open to dangers in exceeding

those limits, can become an integral part of a rounded program

for greater security, for harmonious industrial relations and a

more lasting prosperity.”

[ 27 ]



XII. Unanimous Conclusions of the O. W. M. R.

Advisory Board

Although the following conclusions of the Advisory Board

of the Office of War Mobilization and Reconversion involve

some repetition they are given to show to what extent that

body unanimously reacted on the findings of the Report on

Guaranteed Wages. These conclusions were recorded in a

letter to the President of February 25, 1947 transmitting the

Report:

1. The adoption of wage guarantees “should be referred

to free collective bargaining” and “should not be the subject

of legislative action.”

2. Employment stabilization through effective wage or em-

ployment guarantees wherever practicable is a problem with

which both employers and employees are concerned and for

which each party has a definite responsibility because of the

bearing of the problem on the nation’s general economic se-

curity.

3. Advance' toward economic stability through guaranteed

wages is influenced by existing social insurance and minimum

wage legislation, fiscal and tax policies and other legal pro-

visions. It is, therefore, necessary to study these laws with a

view to their coordination in the interest of stabilizing em-

ployment.

4. The wage guarantee is important but it is “not an all

sufficient tool” for the upbuilding of the nation’s economic

security and stability.

5. There is urgent need here and now for nation-wide

economic security and stability in the interest of world peace.

Since wage guarantees tend to eliminate fluctuations in the

labor market further studies should be made. Moreover, Gov-

ernment agencies should supply data to those interested in such

guarantees.

XIII. The President's Letter of March 18 # 1947, to the

Chairman of the Council of Economic Advisers

In line with the O. W. M. R. Advisory Board’s recommen-

dation, the President wrote to the Chairman of the Council of

Economic Advisers requesting that body “to study the im-

plications of the guaranteed wage, particularly as a device for

[ 28 ]



helping to stabilize employment, production and purchasing

power.”

The Secretary of Commerce and the Secretary of Labor

were requested to furnish information on wage guarantees in

connection with problems of stabilization in various industries.

XIV. Interest of International Labor Office in

Guaranteed Wages

The International Labor Office has recently completed a

report on minimum security income which includes a study of

guaranteed annual wages and other wage schemes designed to

provide assured earnings for the steel and other metal trades.

The subject of guaranteed wages is scheduled for discus-

sion at the 1948 International Labor Conference.

The International Labor Organization is composed of rep-

resentatives of Government, employers and labor from fifty-

three countries.

XV. Epilogue

For the greater encouragement of Catholic participation in

the movement for guaranteed wages and allied devices to pro-

mote the welfare of the workers, an additional eloquent excerpt

from the Papal Encyclical on Reconstructing the Social Order

is given below:

“Let well merited acclamations of praise be bestowed . . .

upon all those both clergy and laity, who we rejoice to see, are

daily participating and valiantly helping in the same great

work, our beloved sons engaged in Catholic Action who with

singular zeal are undertaking with us the solution of the social

problems in so far as by virtue of her divine institution this is

proper to and devolves upon the Church. All these we urge in

the Lord again and again to spare no labors and let no diffi-

culties conquer them, but rather to become day by day more

courageous and more valiant.” (Paragraph 138, new transla-

tion, 1942.)

It seems pertinent also to stress the quickening directive of

Pius XII in his address of September 8, 1947 to 200,000 men

gathered in St. Peter’s Square: “What you can and ought to

strive for is a more just distribution of wealth. This is and this

remains a central point in Catholic doctrine.”

[ 29 ]



N. C. W. C. STUDY OUTLINE

I.

1. Sketch briefly some of the conditions giving impetus to recent de-

mands for a guaranteed annual wage.

2. Cite evidence of the U. S. Government’s interest in such a device.

3. Give, definition of a wage guarantee.

II.

1. What two Federal statutes include provisions to promote wage

guarantees ?

2. What recommendation has been made for the amendment of the

National Fair Labor Standards Act with reference to the employ-

ment of workers on an annual basis?

3. What makes legislative efforts to encourage wage guarantees so
difficult?

III.

1. Would it be desirable wholly to exempt employers with wage guar-

antees from contributing to unemployment insurance?

2. How can a link-up between guaranteed wages and unemployment
benefits be made most effective?

3. Why is the liberalization of employment benefits so practicable at
the . present time ?

IV.

1. How many wage guarantee schemes meeting the requirements of
thfe definition of the government’s recent report, were functioning

early in 1946?

2. Has the experience with wage guarantees been successful?

3. What have been the reasons for discontinuing wage guarantees?

4. What has been the result of the Proctor and Gamble scheme?

5. What has the Hormel plan provided for management?

6. Cite some of the advantages to employees under the Nunn-Bush

project.

V.

1. What is likely to be the determining consideration in launching a

guaranteed wage plan?

2. What do the gross costs of wage guarantees include?

3. What is the core cost question?

4. Give figures as to how estimated costs of wage guarantees would

affect profits in certain companies.

5. What would be the effect of supplementing wage guarantees by

unemployment benefits?

[ 30 ]



1 .

VI.

What safeguard is necessary where the chief hazard in a wage guar-

antee arises from business cycles?

2. If the company’s dominant risk in guaranteeing wages is involved

in acute seasonal shifts in employment, what action is counseled?

3. Give some of the findings as to employment experience in forty-two

establishments in 1937-41.

VII.

1. How can employers reduce non-cyclical employment disturbances?

2. Why are not employment stabilization schemes more widespread, as
authoritative sources indicate such stabilization increases profit?

3. Compare employment stabilization inducements with those under

wage guarantees.

VIII.

1. Why is it thought advisable to encourage the setting up of reserve
funds for companies with wage guarantees?

2. How should the contributions to such funds be interpreted?

IX.

1. What are the reactions of some employers on the subject under dis-

cussion ?

2. Quote a few statements of the President of the A. F. of L. on the

guaranteed annual wage.

3. What are some of the results that the President of the C. I. O.
thinks will follow from the reform proposed?

X.

1. What declaration has been made by the Most Reverend Bernard J.
Sheil concerning the guaranteed annual wage? Name another out-
standing bishop and a Jesuit labor editor who have expressed them-

selves strongly on the subject.

2. What did Leo XIII say about the wage earner’s remuneration?

3. What is the principal duty of the employer, according to this same
Pontiff?

4. Give statements by Pius XI on the determination of the amount
of the wage and the importance of affording work opportunities.

XI.

1. Would wage guarantees be of benefit to our national economy?

2. What devices in addition to wage guarantees are necessary to avert
serious depressions?

3. What is one of the most dynamic factors in maintaining a high level
of employment?

XII.

1. To what should the adoption of wage guarantees be referred, accord-
ing to the unanimous conclusion of the O. W. M. R. Advisory Board?

2. What further studies relative to guaranteed wages are recommended
by that Board?

[ 31 ]



XIII.

1. What government agencies has the President charged with the
supplying of additional information on wage guarantees.

XIV.

1. What recent report of the International Labor Office includes a study
of certain guaranteed annual wage schemes?

XV.

1. Qupte the Papal appeal to Catholics engaged in social action, taken
from paragraph 138 of Quadragesimo Anno? (New translation 1942).

REFERENCES
Principal Source

United States. Office of War Mobilization and Reconversion. Office of
Temporary Controls. Report to the President by the Advisory Board.

Murray W. Latimer. Research Director. January 31, 1947.
(Printed copies of the report were issued by the U. S. Government

Printing Office, May IS, 1947).

Other Sources

American Federationist, April 1945. Your Postwar Income. William

Green.

American Machinist, February 27, 1947. Plus and Minus of the Annual

Wage. B. Finney.

Congress of Industrial Organizations. Department of Research and Edu-

cation. Guaranteed wages the year round. 1945 (Facts for Action pub.

N. 124).

National Catholic Welfare Conference. Encyclical of Leo XIII on the

Condition of Labor. New translation, 1942.

National Catholic Welfare Conference. Encyclical of Pius XI on Re-

constructing the Social Order. New translation, 1942.

Princeton University, Department of Economics and Social Institutions.

Industrial Relations Section. Selected references. No. 1, Guaranteed

employment and income stabilization, 1945.

[32 ]



Brief Additional Reading List

Advanced Management, September 1945. Annual wage plans and some

of their practical problems. Herman Feldman.

American Economic Review, December 1945. Annual Wage Guarantee

plans. Bibliographical footnotes. Rita Ricardo.

Brookings Institution. The guarantee of annual wages. A. D. H. Kaplan,

1947.

Chamber of Commerce and Board of Trade of Philadelphia Industrial

Relations Committee. Annual wage and guaranteed employment. W. R.

Buckwalter, December 1945. (Industrial relations series No. 8).

Commonweal, The. May 3, 1946. Guaranteed wages. Harry Lorin

Binsse.

Commonweal, The. October 25, 1946. Next logical step. J. C. Cort.

Economic and Business Foundation. Proceedings of a Conference. New
Wilmington, Pa., April 25, 1946. The guaranteed annual wage. A. D. H.

Kaplan et al.

Fortune, April 1947. The guaranteed wage: imposed on all industry, it

would serve no one; adopted by some businesses, it might benefit all.

Harvard Business Review, April 1946. Studying the worker’s income.

E. E. Witte.

Harvard University. Graduate School of Business Administration.

Division of Research. The guarantees of work and wages. Joseph L.

Snider. 1947.

International Labor Review. January-February, 1946. Annual wage

plans in the United States.

National Association of Cost Accountants. Guaranteed Annual Wages.

Bulletin 27. July 1, 1946. F. E. Coho. Bibliography.

National Industrial Conference Board. Annual wage employment guar-

antee plans. September, 1946.

National Industrial Conference Board. Will the guaranteed annual

wage work? An evening with the economists, 1946. (Studies in busi-
ness economics No. 5).

Personnel Journal, December, 1946. Annual guarantees. Harry Poland.

R. R. Nathan and Associates. A national wage policy for 1947. Decem-
ber, 1946.

Stanford University Press. The guaranteed annual wage—an annotated
bibliography of source material. Juliet C. Vradenburg. 1947.

United States Bureau of Labor Statistics. Monthly Labor Review, April,

1945. Guaranteed employment and annual wage provisions in union

agreements. A. Weiss.

United States Department of Labor. The guaranteed annual wage and

other proposals for studying the worker’s income. Laura A. Thompson,

April, 1945.

United States Steel Workers of America. The guaranteed annual wage.

Philip Murray, 1945.

University of Minnesota. Guaranteed annual wages. J. Chernick and

G. C. Hellickson, 1945.