PRESENT RAILWAY RATES AND WAGES MUST REMAIN

Mr. Amster is chairman of the executive committee of the Chicago, Rock Island and Pacific Railway Company, and a member of its board of directors. He also is president of the Citizens National Railway League.

There is little probability that the threats of railroad strike will materialize--First, because the Union leaders are too astute politicians to call a strike on account of the 12 percent wage reduction that went into effect last July by order of the Labor Board, for in doing so the railroad unions would not only antagonize the government, but would turn entire public sentiment against them, everybody realizing that the 12 percent from the high wages established during the war was a very small reduction. Second, because railroad employees cannot, under the law, strike on a mere suggestion of a further wage reduction. Third, the railroads themselves cannot reduce wages before first proposing same to their employees, and when the employees refuse to accept the reduction, then and only then can railroads petition the Labor Board for their ruling on the justification of the proposed wage reduction. These proceedings would require weeks and no decision could be had inside of sixty or ninety days, after which, if either of the contending parties are dissatisfied they might then, under the Transportation act, take the question to a Court, but even then it would be unlawful to call a strike. It is therefore perfectly obvious that in ordering the strike, the union leaders were not only defying the law but were premature as well.

Freight Rate Reduction Impossible

Now as to freight rate reduction at this time, that is absolutely impracticable and impossible. Impracticable because railroads are not earning the 5 1-2 percent rate on their property values as prescribed by law. Impossible, because the Interstate Commerce Commission has not the legal power to order a rate-reduction until the net revenue of the railroads is much in excess of the 5 1-2 percent on their valuation, which the railroads have yet failed to earn. The Transportation Act makes it clearly mandatory upon the Interstate Commerce Commission to prescribe such rates as will pay all operating expenses, including property upkeep and depreciation, and a net income of at least 5 1-2 percent on the value of the railroad property in public use.

Now everybody must realize that this 5 1-2 percent income, as provided by law, is not much of a profit; in fact, it is barely a fair rate of interest on money invested. No one can, therefore, fairly criticise railroad managements if they insist upon seeing that their roads get at least this meagre 5 1-2 percent income which the law allows them before they will accede to any rate reductions which certain shipping interests are clamoring for so that they may swell their own profits.

The railroads are standing on a solid moral and legal rock when they ask that the provisions of the Transportation Act (which calls upon the Interstate Commerce Commission to so co-relate wages and rates as to yield 5 1-2 percent net on property values) should be carried out, and all the clamoring of greedy shipping interests for reduced freight rates and of purblind labor leaders for maintaining high war wages, could in my opinion have little effect on the situation. Conditions under which railroad operation would yield less than 5 1-2 percent net on property values, would not only defeat the purpose of the Transportation Act, but would work against the interests of the country, as it would make it, absolutely impossible either to keep up the railroads to a high degree of physical efficiency, or attract a single dollar of new capital for extensions and improvement to provide transportation for the country's growth.

Transportation Act Must be Tested

The last few years have conclusively demonstrated that the American public does not consider the cost when it wants anything. Now it wants service above everything, and the railroads cannot give service if they are starved as in the past several years. I think the railway situation can only be adjusted by several measures. The government must insist that present rates and present wages remain for six months or one year to give the railroads, the employees and the country the opportunity to see what can be done under the Transportation Act.

Employees must agree to help eliminate waste caused by labor classification and the overtime provided in the McAdoo National Agreement. Railroads must agree that as soon as earnings reach the legally prescribed 5 1-2 percent on property values, they will reduce rates wherever it will stimulate business. I am convinced that these conciliatory arrangements would avoid the strike, allay business uncertainties and bring about an immediate business revival.