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Statement by the President Upon Issuing Order Modifying the Wage-Price Policy

February 14, 1946

IN MY MESSAGE to Congress on the State of the Union, I said: "... everyone who realizes the extreme need for a swift and orderly reconversion must feel a deep concern about the number of major strikes now in progress. If long continued, these strikes could put a heavy brake on our program."

These work stoppages have continued and some of them are serious enough to threaten our economy with almost complete paralysis.

They are accompanied by inflationary pressures that also threaten the stability of our economy.

At such a time, it is necessary for the Government to bend every effort to put our economy back to work, to assert control over the forces of inflation in the interest of all the American people, and to remove any doubt that the Government means to enforce its program. I call upon management, labor, farmers--the American people as a whole--and their representatives in Congress to give this effort their unqualified support.

Let me review some of the recent developments. Last August I announced a wage price policy under which the determination of wages was returned to free collective bargaining within the framework of the present price level. Labor and management were set free to adjust wage rates to whatever extent was possible without raising prices. I urged industry to negotiate wage adjustments in order to cushion the reduction in the take-home pay of millions of American workers resulting from the loss of overtime, downgrading, and other factors. I emphasized that wage adjustments would have to vary from industry to industry, or firm to firm, according to the merits of each situation.

I had confidently hoped that, as a result of free and sincere collective bargaining, our reconversion program would proceed vigorously and in an orderly fashion. And, indeed, under this policy many thousands of wage adjustments have been made by mutual agreement without affecting prices. Nonetheless, collective bargaining has broken down in many important situations. Several major strikes are in progress. Vitally needed production is lagging.

It is imperative that production in great volume be accomplished. We face real difficulties. Many workers have found their weekly pay greatly reduced. Many companies, squeezed between costs and prices, are not in a position to wait through a six months' period as heretofore required before seeking price adjustments. This is especially true in some instances where there is a complete change from war production to civilian production. It is likewise true in the case of small companies which lack the ample reserves of many large corporations. Many small businesses were at a disadvantage during the war. They must not be so in peace.

I am now modifying our wage-price policy to permit wage increases within certain limits and to permit any industry placed in a hardship position by an approved increase to seek price adjustments without waiting until the end of a six months' test period, as previously required.

If the general level of prices is to remain stable in the next few critical months, the immediate price relief in such cases must be conservatively appraised. It must, however, be sufficient to assure profitable operation in the test period to an industry not producing at low volume. If the expected improvement in earnings should fail to materialize in any industry, OPA will move promptly to review its action. Appropriate relief in line with the modified policy may be accorded, where practicable, to individual firms.

I am authorizing the National Wage Stabilization Board to approve any wage or salary increase, or part thereof, which is found to be consistent with the general pattern of wage or salary adjustments established in the industry or local labor market area since August 18, 1945. Where there is no such general pattern, provision is made for the approval of increases found necessary to eliminate gross inequities as between related industries, plants, or job classifications, or to correct substandards of living, or to correct disparities between the increase in wage or salary rates since January, 1941, and the increase in the cost of living between that date and September, 1945.

This wage program, therefore, takes into account the thousands of wage agreements reached before and after V-J Day. While many groups of wage and salary earners may qualify for increases under this policy, in order to bring their pay into line with the increased cost of living, or with the existing wage levels of the industry or area, the program is not to be interpreted as permitting indiscriminate wage increases. The executive order provides that the Stabilization Administrator shall determine those classes of cases in which a wage increase may be put into effect without requiring prior Wage Stabilization Board approval and without any waiver of any rights to ask for price relief. These cases will include all those in which the increase will clearly not have an unstabilizing effect. It is contemplated that many of those increases coming within the present pattern of wage increases will not have to have individual approval. I hope that free collective bargaining will be used to the fullest possible extent.

Increases outside and beyond this general policy cannot be approved without subjecting the workers and the public to the danger of inflation. It is to the best advantage of the American worker, above all other groups, that the price line be held.

The change now being made in our wage and pricing standards can succeed only with the support of business, labor, Congress, all the agencies of the Administration, and the rank and file of the American people.

I am directing that all administrative agencies use their full legal powers, including emergency powers delegated to them under the Second War Powers Act, to assist the Office of Price Administration in meeting the Government's responsibility for retaining control over the forces of inflation.

Priorities and allocations powers will be used vigorously wherever necessary to prevent increases in prices. There will be a strict enforcement of inventory controls. The resources of the Treasury and Justice Departments will be called upon when necessary to assist in enforcing these controls.

I trust that the Congress will: (1) extend the stabilization statutes without amendment and will do so with all possible speed so that there may be no question in anyone's mind concerning the determination of the Congress to see the fight against inflation through to the finish; (2) extend the subsidy program for another full year; (3) enact promptly the Patman Bill to establish price controls over housing (present speculation in the real estate market is one of the most dangerous aspects of the present situation and one which works particular hardship on our millions of returning veterans and their families); (4) extend promptly the Second War Powers Act, so that the emergency powers we found necessary during the war may continue to be exercised wherever necessary in dealing with the economic aftermath of war.

Only by measures such as these can we hope to retain our controls as a people over our own economic future. But even these measures will fail us unless the American people dedicate themselves to support of the national economic stabilization program.

I welcome this because I am determined that this country shall avoid the misery and disaster of inflation and that our vast resources of purchasing power shall be a stepping stone to a fuller, richer life rather than be permitted to spend themselves in a brief orgy of inflation and disaster.

I call upon both management and labor to proceed with production. Production is our salvation. Production is the basis of high wages and profits and high standards of living for us all. Production will do away with the necessity for Government controls.

I call upon the American people to close ranks in the face of a common enemy--the enemy which after the last war turned our military victory into economic defeat. I call upon every citizen of this great Nation to join in a united effort to consolidate our military victories this time by winning through to final victory over inflation.

Note: The text of Executive Order 9697 "Providing for the Continued Stabilization of the National Economy During the Transition from War to Peace" (3 CFR, 1943-1948 Comp., p. 507) was released with the President's statement.

Harry S Truman, Statement by the President Upon Issuing Order Modifying the Wage-Price Policy Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/232455

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