HomeMy WebLinkAboutThe Huron Expositor, 1921-09-23, Page 6e.
Unemployment -Freight Ra'
--and the Railways
The indicator of true prosperity is Employment. The presence of unem-
ployed men, unemployed machinery, unemployed railway equipment, and unem-
ployed capital in Canada is reason enough, therefore, for every large Canadian
business interest to study its relation to the general problem—to see whether any-
thing in its power remains to be done to advance the general prosperity of the
country.
In this connection the railway companies have been specially interested.
Freight Rates touch everyone, and, because they touch everyone, are always close
to the public consciousness and more converl(iently at tacked than the true causes
of depression which are less easily discerned and more difficult, if not indeed im-
possible, to control.
Furthermore, the railways while joining with everyone else in the general
agitation for deflation of prices and wages—found themselves recently in the
I Freight Rates and Unemployment:
With a large part of the world's population idle, or only par-
tially efficient owing to wars or disturbed political conditions—with
inventors in many parts of the world almost afraid to expose their
inventions, organizers afraid to organize, capital hesitating to in-
vest—a corresponding proportion of world production is missing.
The total of goods available for the world is less than normal. Those
who do not produce—speaking generally -cannot buy! Few pur-
chasers—few sales; few sales—little employment. This is the great
world-wide fundamental of the unemployment situation.
The condition is international, not local to Canada. If Can-
adian railway rates were a determing factor in making the sale
prices of our export goods, in other words if Canadian prices were
higher in international markets than the goods of our competitors,
then railway rates would be contributing 'to unemployment in Can-
ada by depressing our sales abroad, lowering the number of our
customers, and the orders coming to our producers.
But in the first place the real effect of freight rates on price
making is a debatable point. This is proven
(1) by the fact that prices fell last fall after the rates were
increased instead of rising as the retail trades had prophesied;
(2) by the fact that a 10 per cent. reduction. on western coal
rotes, offered in order to stimulate coal movement in the summer
months, was followed by a drop in the coal tonnage offering instead
of an increase.
In the second place, assuming for the purpose of argument they
did have. serious effect. •Oanadian export rates are lower and not
higher than the rates in countries with which Canada may be com-
pared. Mile for mile the haul from western Canadian points to
the head of navigation is cheaper than in the United States. The
+sport rate on grain is lower than it was last. August.
In other words, in international. competition, on her chief items
of export, Canada is helped by her railway rates. So far as inter-
national trade is concerned, they are alleviating unemployment rather
than aggravating it!
Inside Canada the same is true. Although it is a very difficult
joint to prove or disprove, the railways in Canada are sincere in
claiming that, by and large, goods are carried more cheaply in
Canada than in the United States. Canada had one blanket reduc-
tion of 5 per cent. last January, whereas there is still n decrease, '
nor immediate prospect of a blanket decrease in the UnitAd States!.
II. The Trend of Freight Rates:
With the exception of war and post-war conditions—the whole
tendency of freight rates in this country, as in any other progressive
country of its kind, is downward. As Canada's population rises, as
our industries multiply and the density of traffic becomes more near-
ly, like that of older countries, some of the principal costs of rail-
way service can be subdivided among a greater number of shippers
and travellers, levying on each, therefore, a smaller fraction of these
costs than before. For twenty years prior to the war, traffic was
on the increase. For twenty years, therefore, the railways have
been adjusting rates downward—quite apart from special decreases
put in effect by the Board of Railway Commissioners. These re-
visions have been skillfully applied by experienced, practical econ-
es
seemingly anomalous position of demurring when it was proposed to lower rail-
way rates. ' They were made to appear as though they were endeavoring with
one hand to put wages down and with the other hand to keep rates up, thereby
securing for their own treasuries instead of passing on to the Canadian public,
any saving effected on the wage rolls. They were placed in the equivocal posi-
tion of having urged blanket increases of rates when wages went up—and of op-
posing blanket decreases when wages were seemingly decreased.
The following stateme nt is offered, therefore, with a view to exhibiting what
the railways believe to be the true relation of railway freight rates to the ques-
tion of unemployment, outlining the history of Canadian rates, explaining some-
thing of the groundwork of ratemaking and clearing up the seeming anomalies
referred to, so that none may remain as possible causes for future weakening of
confidence between the public and the carriers.
omists—that is, by the Freight Traffic experts of the railways, whose
business it is to know all branches of industry .intimately, so that
the benefit of these voluntary rate adjustments would go to "key
commodities," thus stimulating further growth of the country, in-
crease in traffic, and in the end, further reductions of rates. The
difference between giving a reduction to a "key industry" rather than
spreading over all kinds of goods is illustrated in the case of a
certain small railway which by concentrating rate reductions on
lumber enabled the spills of that region to remain open and the peo-
ple to remain at work, whereas if the effect of the reductions had
been scattered over all the gods carried by that road each family
would have been able to save a small handful of silver in a year
(provided the decreased rates had been passed on as decreased prices
by storekeepers)—but there would have been alrnost no employment!
So much for the day to day reductions arranged on thousand's
of articles by the Traffic Departments of the roads. In .1.907 a sub-
stantial reduction in Eastern rates was made. In 1914 a very ma-
terial cut was applied in the.Weat. So that the transcontinental
lines entered the war period with a depressed earning power,
Now while all—even the railways—see the desirability for low
freight rates, there are certain limits beyond which no one urges re-
ductions. Of course there are theorists such as Mr. Bernard Shaw,
who believed that all railway service should be free. But leaving
aside views so far in advance, as yet, of public opinion, it is assum-
ed by most people that a railway will give best service at least cost
because, of course, even free railways must be paid for by the
taxpayer—when their managements are allowed to show their nettle
by meeting the obligations of their properties out of their earnings.
It is usually reeognized that these obligations fall into two groups:
Group I.—To pay their employees; to pay for current supplies
of materials, such as coal, etc.; to payfor repairs and replace-
ments.
Group IL—To pay such a wage or hire for the use of the ciapital
which built these railways as will make Canadian railway securities
always desirable, and easily marketed whether. as bonds or stocks.
This involves more than the mere payment of the established rate
of dividend in the case of privately owned roads. It involves the
earning aleo of some surplus- a safety margin of income over ex-
penditure, which will assure investors of complete safety. This princi-
ple of a surplus was definitely established by the judgment of the
Board of Railway Commissioners in 1914, under the chairmanship
of Sir Henry Drayton—and upheld by its judgment of 1920, When
the matter was again considered exhaustively. On this principle
rests Canada's ability to enter the money markets wherever she
may need and feel confident of bringing back funds for extending
her railways as she may require in the future.
War conditions, following the western and Eastern rate ad-
justments, brought the railwaj managements sharply up against
these fundamental problems. Comparing the Government's figures
for 1907 against 1919—the last year for which the Railway Blue
Book is available --the wage bill of the railways rose 306%!Coal
545%! Ties 320%! But neither the volume of tragic nor the scale
of freight rates increased in consparable degree during that period!
The actual revenue per ton per mile (winoh is the real proof or dis-
proof of the matter) advanced only 20% over 1907. The year 1920
enlarged the discrepancy, although an increase of 35% on Western
lines and 40% in the East was supposed to yield enough additional
revenue to meet the increased wages. The increased wages were
effective from May lst—the increased rates not until September 1.
The effectiveness of that increase depended on the volume of traffic
remaining at a fairly high level. It did so for a time, then began
to drop. To -day it is very low. Nevertheless a 5% decrease was
applied in January. For the first 6 months of 1921 as compared to
the first 6 months of 1920 the volume of traffic on the most fore
tunately situated Canadian road fell 26.72%! And its revenue on
this business, in spite of the higher rates, fell 11.14%!
The net result of these changes has been a state of emergency
in the offices of even the most fortunately situated of all Canadian
roads. Wages could be paid and bills met on time. Even the usual
dividend was paid and a very slight surplus—one of the factors in
maintaining the reputation of Canadian railway securities, was earn-
ed! But this was only done bay deferring work that must ultimately
be done on current account. Suoh- economies cannot long be con-
tinued without eating too far into the broad safety margin which
the Canadian roads maintain! Nothing but slackened speed of
trains and reduced Canadian industrial efficiency can result if these
savings have to be, long continued. Falling ,traffic still further ag-
gravates the condition. Maintenance cannot continue to be sacrificed
to .protect the credit of our railway securities! Neither can be
neglected!
In May the managements approached the task of reducing their
wage bills. For the first time in many years it was the manage-
ments and not the men who were taking the initiative. They had
been forced to adopt the war -Mime increases granted in the United
States—where 92% of the membership of the railway unions lie.
Therefore when the reverse movement was undertaken,in that coun-
try the Canadian roads at once gave due notice and a provisional
and conditional decrease of roughly 10%—corresponding to -the same
movement in the United States—'was put in effect, tentatively, as
from July 15th. This reduction has not been accepped by the United
States membership of the unions, where a vote is being taken on
the question—nor by the Canadian membership, who have applied for
o Board of Conciliation. Every resource of the managements will
be used to sustain this imperatively necessary and only too moderate
reduction of their wage bills—which account for 60% of the coat of/
operation—they are compelled to regard the matter as still unsettled
end therefore not to be considered as a basis for the reduction of
railway rates—a view which a majority of the Board of Railway
Commissioners has just expressed in its judgment.
III. In Conclusion:
The railway managements welcome deflation of railway rates
and are working steadily toward that end. On two grounds, how-
ever, they asked that any general decrease be deferred:
FIRST.—aBecauae the so-called wage decreases are not yet as-
sured and cannot be until the parallel decreases in the United States,
where 92% of the union membership lies (and where no general
freight rate reductions have been ordered), are settled.
SECOND.—Because the volume of traffic in the immediate fu-
ture is problematical and any serious decline, if coupled with a de-
crease in rates, would have very grave effect on even the most
favorably situated managements.
The railways have spoken against blanket decreases on the
grounds that it would be .in the interests of the country as a whole
to concentrate any beneficial effect to be expected, on "key com-
modities" rather than distribute them over all classes of goods, there=
by benefitting only the distributors.
They have been actuated throughout by the desire to assist in
the process of deflation—objecting only when that- process might
seem to threaten their solvency and injure them—and through then
—the ultimate interests of the Canadian public.
The RAILWAY ASS CIATION of Can.
263 St. James Street, Montreal, P.Q.
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