1. Those absolutely necessary to the continued operation of each line.
2. Those absolutely necessary to the reasonably satisfactory handling of traffic.
3. Those not absolutely necessary but which would reduce the cost of operation sufficiently to justify fully the expenditure.
Under such a policy we carried on for over three years. Each year increased the burden of troubles and anxieties due to advancing costs of materials and wages, as you may now see.
Our first year, (and the first post-war year,) 1919, far from seeing any let up to the accumulation of embarrassing labor conditions originating in the McAdoo award and its many supplements, or a reduction in costs of material, brought an aggravation of the situation. The United States Government’s decision to accept the losses of the United States railroad administration as war expenditures, was official recognition of the disproportion between expenses and gross earnings. We carried on without charging any of our difficulties to war account.
Freight and passenger rates in 1919 remained stationary, while wholesale prices, according to the Department of Labour’s index, advanced from 286.5 to 322.7, and the average annual wage of railway employes increased from $1,061.20 to $1,315.93.
In this year, due to the large amount of deferred maintenance which was essential to bringing the property up to normal conditions, the increase in labour cost alone was $19,000,000, and in materials $2,500,000. The increased cost of our labour was more than half of the total annual revenue of the Dominion Government when Sir George Foster became Minister of Finance.
“From bad to worse” describes the situation in 1920, from the operating point of view. The Canadian National, in common with other Canadian railways, was carrying the accumulated burdens of the McAdoo award and its oppressive supplements, etc., as well as still higher costs for coal, materials and supplies. The inadequacy of earnings in this situation was fully recognized; but the rates question was not dealt with in Canada. The continuation of the United States Government guarantee of pre-war profits to the railroads up to September, 1920—twenty-two months after the armistice—prevented increases of charges over there to meet the increased wages. As we were operating under United States wage rates it was felt that the Railway Commission should hold us down to United States freight rate levels.
In this year, too, another crushing blow was dealt the railways by the Chicago award, which was adopted in Canada under strike pressure. The award which was made in September, but was retroactive to May 8th, increased wages by over 25 per cent. This, applying to more than four months’ back pay involved a payment by the Canadian National of almost six million dollars.