Labour policy—false and true

by Lynden Livingston Macassey

Effect of Relieving Employers of Responsibility for Labour Management

One unfortunate, though inevitable, effect of the Munitions of War Act, and the regulation of labour by the Ministry of Munitions, was the extent to which employers ceased to manage the labour in their own works. Though profits were limited, work was plentiful, and prices ample; they were assured of business without much effort on their part. In addition, many employers resented, and probably not unnaturally, the intervention of the Ministry of Munitions in labour disputes, and when disputes did arise, instead of endeavouring to settle them with the men, contented themselves with reporting them to the Ministry. On the other hand, Trade Unions found it an easier matter to report disputes to, and discuss them with, the Ministry rather than go to the trouble, as before the war, of discussing them with each individual firm. Whatever may have been the real cause, the effect undoubtedly was that the passing of the Munitions Act in 1915, inevitable as it was, has contributed materially to the aloofness which now exists between employers and their workers.

It was not in the normal administration of labour by the Ministry of Munitions that harm occurred—it was when, for political considerations, particular action was forced upon the Ministry by politicians, that real detriment was inflicted upon industry. An example of that is the famous 12½ per cent. bonus. It is well-known that the Ministry and the Admiralty were strongly opposed to that fatal action, but it was thought expedient for Government to try and placate Labour not merely in reference to then existing difficulties, but with a view to possible political developments, and so the bonus was given. As Director of Shipyard Labour of the Admiralty, with over a million men who would be affected by the decision, I strongly protested against it. My protest was registered on the War Cabinet minutes; I stated it would subject the country to an extra annual wages bill of 95 million sterling; I was wrong to the extent of 7 millions, it proved in the end to be 102 millions.

Increases of Wages and Prices

One important question is the position in which the war left the workmen so far as standard of living is concerned; that involves some consideration of wages and prices. It is unnecessary for me to discuss that at length; Professor Bowley in Prices and Wages in the United Kingdom, 1914-1920, Oxford University Press, has now most ably dealt with the matter, and reference should certainly be made to that book on this crucial question. In his speech on January 29, 1920, at the Annual Meeting of the London Joint City and Midland Bank, Ltd., the Right Hon. R. McKenna succinctly described how prices rose:

“At the outbreak of war, throughout its course, and right down to the present moment, the Government have been large buyers of commodities, greatly in excess of their normal demands. The first consequence of the immense Government purchases was to stimulate production. Machinery was used to its full capacity; the number of people employed was greatly increased; women took the place of men, and there was a very considerable addition to the total national output. But enlarge the output as we would, it could not keep pace with the nation’s requirements. Demand outstripped supply, and, just as it happens when a period of comparative trade depression is succeeded by a trade boom, there was a natural rise in prices. At once more currency was needed, partly to pay the wages of the larger number of workpeople employed, partly because with higher prices shopkeepers keep more money in their tills. To the extent that more currency was issued the spending power of the community was increased. But up to this point the increase was not great. A new condition had to be introduced before any considerable rise could take place. There must be not merely an increase in currency, the total of which, in any case, only represents a small part of the public spending power; but, far more important, there must be a serious addition to Bank deposits. It was not long before this new condition arose. To meet the daily growing expenditure the Government had to borrow freely from the public, from the banks, and from the Bank of England. It is unnecessary to recapitulate the effects of this borrowing. Bank deposits increased enormously. There was no proportionate increase in the supply of goods and the usual consequences followed. Prices began to rise rapidly. The rise in prices was next followed by general demands for increased wages. As these now rose the cost of production rose too, and another turn was given to the screw on which prices were steadily mounting. But higher wages have got to be paid in legal tender money. In the course of the week the bulk of the money paid out in wages comes back through the shops to the Banks, and is paid out by them again to meet the next week’s requirements. But, as prices and wages rise, not all of it comes back, and each week a larger amount is retained in the pockets of the people, in the tills of shopkeepers, and in the tills and reserves of the Banks.

“We may stop here to ask, is there any stage in this process at which it would have been proper to limit the issue of currency? The main demand for currency is to meet the weekly wages bill. If wages increase, whether because more workpeople are employed, or because rates are higher, additional currency must be brought each week into circulation. If the supply were cut off, a substitute would have to be found. At the outbreak of war there was not enough legal tender money to satisfy our additional requirements and at once postal orders and even postage stamps were used to make good the deficiency. If men and women are to be employed and paid, means of paying them must be found, and an arbitrary limitation of currency would merely inflict intolerable inconvenience upon the public.”

Relation of Wages to Cost of Living

It is customary to measure the cost of living among the working-classes according to the basis of the Ministry of Labour. The Ministry works on an average pre-war working-budget of food, rent, clothing, light and fuel, and miscellaneous items, and ascertains its cost month by month. (See Labour Gazette, February 1921.) The cost in July 1914, is taken as 100, the greater cost each month since appearing as 100 and something; this is called the “index-number.” What the Ministry does, therefore, is to measure the average increase in the cost of maintaining the pre-war standard of living of the working-classes; it does not, however, take in account any modification of the standard, which, of course, was customary; as for instance margarine used when butter was not obtainable. Lord Sumner’s Committee on the Cost of Living to the Working Classes (Parliamentary Paper, 1918, Cd. 8980), showed by actual investigation that the index-numbers of the Ministry did not then represent current conditions, but were too high. On the other hand, the Joint Committee on the Cost of Living[10] is of the opinion the figures are under-estimates. All these matters are discussed very fully in the book by Professor Bowley, who gives his own modified index-numbers. Professor Bowley sums it up in these words: “There can be no doubt that some sections, especially the worst paid of the working-classes, were better off in the summer of 1920 than before the war, and it is probable that other sections were worse off. It is not possible to decide whether the average of all wages, measured in purchasing power, had risen or fallen.” If, however, one takes the wages in certain trades, for example, railways, mining, and engineering, and compares them with the cost of living since July 1914, they appear in the following relation:

	Ministry of Labour Cost of Living Index.	Professor Bowley’s Modified Index (p. 106)	Railway Wages.	Miners’ Wages.	Engineers’ Wages.
					Skilled.	Unskilled.
July 1914	100	100	100	100	100	100
” 1915	125	(120)	110	113	110	—
” 1916	145	(135)	120	129	111	—
” 1917	180	(160)	155	136	134	154
” 1918	205	180	195	187	173	213
” 1919	210	185	225	224	199	255
” 1920	252	220	280	260	231	309