Form P 58
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General Executive Committee
Cvh.
THE RAILWAY LABOR BOARD AND
NATIONAL PROSPERITY
Hon. R. M. Barton, Chmn.,
Railway Labor Board,
Chicago, III.
My dear Mr. Chairman:
The Railway Labor Board is re¬
quested to consider in shap¬
ing its general course certain
aspects of the railway problem. In
what we recommend we speak for the
group of industries selling goods or
services to the railways.
We believe our recommendations to
be in the public interest. Prosperity
in the railway supply business sustains
general prosperity in two ways : First,
our activity prepares the roads to
handle heavy traffic when it comes.
Second, agricultural recovery in the
present instance depends upon restora¬
tion of domestic markets for farm
products through resumption of indus¬
trial employment and reinstatement of
payroll—a stage never reached follow¬
ing a depression until the railways are
again making large-scale purchases.
Our industries enlist millions of cap¬
ital, a large body of inventive genius, a
great force of executive managers, and
employees estimated to equal those
employed by the railways, or more
than 2,000,000.
CONTACT OF BOARD WITH
COMMISSION
^^UR recommendation is stated in
general terms in a resolution
adopted at our annual meeting Feb. 1,
1922, as follows:
"The Interstate Commerce Commis¬
sion has said: 'While the law makes
no provision for co-ordination between
the Labor Board and the Commission,
the desirability of contact between the
two bodies is appreciated. Since the
creation of the Labor Board informal
conferences have been held from time
to time, and will without doubt be con¬
tinued in the future. We have been
particularly solicitous to procure and
bave at hand such statistical informa¬
tion as may aid the Labor Board in its
work.' We urge initiation and main-
ten^ulce of such contact between the
Labor Board and the Commission as
will assure a relation of labor cost to
net railway income fair alike to the
Deflation of
T Deflation of labor cost is essen¬
tial (a) in the disputes now be¬
ing heard, the economies from which
are to be reflected in rate reductions;
(b) in the future, immediate and
remote, to facilitate rate adjust¬
ments by the Interstate Commerce
Commission whether for correction
of unsound traffic situations or for
accommodation of railway income to
the national need of additions and
betterments.
(a) THE CURRENT HEARINGS
Those disputes upon which hear¬
ings were begun Mar. 6 are a closed
docket. The day will come when all
these cases will have been adjudi¬
cated and their consideration cease.
The railway managers are collectively
pledged to devote the entire saving in
labor cost realized from these partic¬
ular disputes to rate reductions, ex¬
cept insofar as reductions from the
level established in 1920 shall have
been made effective in the meantime.
Both as to compensation of labor
and as to rates and fares the immedi¬
ate requirement is deflation to some¬
thing approaching normal, or at least
something containing the promise of
stability. Railway labor cost should
be reduced to a level in line with
what now prevails in other indus¬
tries in the same area for equivalent
service. Witnesses have been called
whose testimony is declared to prove
that railway labor cost is relatively
high and to indicate in figures the ex¬
tent of the disparity. For its effect
employees, the railways, the ship¬
pers and the public."
The considerations to which we in¬
vite your attention are these:
Labor Cost
both in laying the foundations for in¬
dustrial and agricultural recovery and
in maintenance of stable conditions
hereafter we earnestly urge upon you
that you give such testimony the full¬
est and most sympathetic considera¬
tion, and that your finding of fact and
your action predicated thereon be
made unmistakably in accord with the
conception that the public interest
and the national prosperity are par¬
amount.
(b) THE IMMEDIATE AND
REMOTE FUTURE
As this communication is written
the Interstate Commerce Commission
has completed hearings in an inquiry
to determine its program. On Mar. 1
authority under the terms of the Act
passed to the Commission to determine
what rate of return on the value of the
property it will aim at in its regulation
of rates designed to produce adequacy
of revenue, of income, of credit, of
additions and betterments.
It is said on the one hand rates are
too high and it is asked "Too high for
what?" On the other hand it is said
that the country is headed for a trans¬
portation famine in the next period of
prosperity. If what is meant by too
high rates is rates too high to produce
the maximum revenue from traffic
ready to move, the truth of this re¬
mains to be tested by an experience ex¬
tending over periods of prosperity and
adversity. Where so many larger fac¬
tors in business depression are opera¬
tive it cannot be said that any given
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rate schedule has been tested until the
major factors affecting agriculture and
business are corrected. The Inter¬
state Commerce Commission must
make a business guess and as the
years pass revise it by the light of
the facts. If what is meant, however,
is that any revenue or any net income
received by the railroads in the aggre¬
gate for any recent stretch of years, in¬
cluding wide tonnage fluctuation, is
too high for credit needs, the rebuttal
is to be found in the credit failure, the
stoppage of capital intake, the cessa¬
tion of enlargement of road and roll¬
ing stock.
Stability of Rates
TT Fluctuation of the rate level
in response to the rise and
fall of trafiBc volume would he in¬
tolerable.
To make these systems reasonably
efficient no income such as our roads
have averaged in recent years is high
enough. How much of the required
increase in income must come from
rates, how much can be yielded by
economies, experience will tell. The
Commission must make the shrewdest
forecast it can. It may be true—we
believe it is and that the Commission
will so declare—that production of
every kind must in the future undergo
some degree of de-centralization.
Each user of transportation will have
to be considered and his case perhai)s
experimented with by the Commission.
That body will constantly bear in mind
inflicting the minimum of loss and
hardship upon each group of those af¬
fected through changes in competitive
relation. Yet some degree of affliction
is inevitable. All the more vital is it,
therefore, to general confidence and
jwosperity that rate revision designed
to produce larger income shall be
gradual and not involve the whole
fabric as it did, doubtless unavoidably,
during federal control. A stable rate
structure, if in the long run it pro¬
vides satisfactory facilities, is the great
need of shippers, carriers and all
others concerned.
All rate adjustmenta contemplated
by the Commission can he intelli¬
gently projected only if there is an
accommodation of labor cost to
whatever revenue situation the Com¬
mission computes that the trafRc can
hear.
Labor Board Must Cooperate
T T T Until labor cost relatively to
other factors is complete it
will be not the Commission which
must cooperate with the Labor Board
hut the Labor Board which must
cooperate with the Conunission.
Since the law gives the Commission
no authority to require such coopera¬
tion the Labor Board is the more under
res[)onsibility to volunteer its aid.
What the Labor Board is urged to re¬
gard as its responsibility is the fullest
aid in accomplishing the purpo.se of
the law.
Congress in the Transi)ortation Act
of 1920 declared the ¡¡olicy of the gov¬
ernment in res])ect of railways. Sev¬
eral aspects were dealt with. To de¬
termine what the ])olicy is it is neces¬
sary to take these several ])rovisions
s
together as one piece of legislation.
Our correct interpretation will be one
which harmonizes these. Hence each
provision can be intelligently and re¬
sponsibly considered only in the light
of the others. Applying that method,
some of the purposes of the Act may
be summarized as follows:
FEDERAL RAILWAY POLICY
1 The function of transportation is
delegated to individual investment and
individual management, the govern¬
ment abstaining from participation.
2 The public is provided through
federal regulation and federal control
over State regulation with protection
in the enjoyment of just, reasonable,
and non-discriminatory rates and
practices.
3 The public is assured that in regu¬
lating rates and practices the federal
authorities will refrain from imposing
such restrictions as by impairing net
income and hence credit would disable
the carriers from providing adequate
additions and betterments.
4 The public is assured that in r^-
ulating rates and practices the federal
government will require of the rail¬
ways, and itself observe, due economy
and efficiency as affecting operating
costs.
5 The public is assured of protection
against interruption of railway service
through strikes.
6 Railway employees are assured of
fair and inqiartial adjudication of dis¬
putes with their managers over com¬
pensation and conditions of employ¬
ment.
A SUPPOSED CONTINGENCY
J N the course of time a situation may
develop where compensation of
railway enqdoyees is low in relation to
that of labor in the same region doing
similar work and in relation to the
rates and fares charged for transpor¬
tation to the public. In limiting the
authority of the Interstate Commerce
Commission to permit adequate rates
and fares the statute imposes the con¬
dition that railway management shall
be economical. Given such a situation
as we have supposed it would become
the duty of the Commission to adjudge
an increase in railway labor compen¬
sation not uneconomical in the statu¬
tory sense, and if in their judgment
the traffic would bear it, to order an in¬
crease in transportation charges to
meet the cost of the adjustment.
THE OPPOSITE CONDITION
A T other times the situation may be
reversed. The Commission may
find net railway income insufficient to
attract capital requisite for adequate
additions and betterments. It may
hold the opinion that the essential in¬
crease in net income cannot be sought
in a higher level of transportation
rates, or even that lower rates are im¬
mediately necessary. It would then
inquire into the possibility of savings.
In the largest item of operating ex¬
pense, the compensation to labor, it
might find a lack of economy either
in the rates of pay or in the conditions
of employment or in the efficiency of
labor, and announce that it would not
feel legally justified in aj)plying reme¬
dies within its .scoi)e until (leflation of
railway labor cost.
In other words, it would be too
broad a statement to say either that
labor cost must always be accommo¬
dated to a level of rates and fares pre¬
determined to be just and reasonable,
or that rates and fares must always be
accommodated to a level of labor cost
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predetermined to conform to the deft- time, the- second at another time. Ad-
nition of propriety set forth in the Act. justment is a matter of honest judg-
One factor may be out of line at one ment and common sense.
Latitude for Managers
fW Management should be left
^ to the managers.
We believe sentiment is growing for
a change in the strike-prevention pro¬
visions of the Transportation Act.
Various methods are specified by the
several proponents. Most of these ap¬
pear to agree on one point. They
think the advantages of delegating
the transportation function to indi¬
vidual investors and managers
chosen by them can be preserved
only by restoring integrity of control
over personnel by the officers held
responsible for results. They find
nothing in the Act clothing the Labor
Board with the duty or the authority
to create and maintain general condi¬
tions as to labor cost designed to dis¬
courage strikes. They assert that the
title under which the labor provisions
were enacted as well as the text of the
sections throughout clearly indicates
the purpose of Congress to have been
the prevention of specific inuninent
disputes by arbitral decisions.
The Interstate Commerce Commis¬
sion has entrenched itself in public
confidence. Many attribute this
largely to the steadfastness of that
body in insisting that the railway man¬
agers retain the largest possible de¬
gree of initiative, autonomy and re¬
sponsibility. The Labor Board is
threatened with abolition. We can
conceive no course which it could
now adopt which woidd more
strongly tend to perpetuate its ex¬
istence than to assume and maintain
the position that railway managers
should carry responsibility and with
it control in management of their
forces. Public opinion has said that
service shall not be interrupted by
strikes. Through Congress public
opinion has registered the pledge that
in place of strikes the employees shall
have recourse to an umpire.
One of the most promising opportunities of the Labor Board is to lead
public opinion in the discouragement of appeals to the Board with trivial
or uneconomic contentions and in the demand that the managers and the
employees cooperate in good faith to settle their ovm disputes.
With high respect.
Yours truly,
ALBA B. JOHNSON,
President.
FRANK W. NOXON, ^
Secretary.
Liberty Building
Philadelphia
March 23, 1922
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REQUESTS FOR COPIES
of this leaflet will be welcome from all
those desiring to place it in the hands
of their representatives or friends.
Copies furnished or sent direct to lists
upon application to Frank W. Noxon,
Secretary Railway Business Associa¬
tion, Liberty Building, Philadelphia.