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Subsidies for Rugged Individualists

ISSUE:  Summer 1939

The depression and political change have had a curious effect on the New England states. Some of them, notably Maine and Vermont, have taken up the ancient cry of states’ rights with the obvious intent of safeguarding special interests, and the exploitation of labor and similar practices have become the policy and boast of innumerable Yankee communities. In consequence, hundreds of manufacturers who during the ‘twenties would have been hurrying South, have of late been migrating to the outlying sections of New England in search of those handsome propositions embracing cheap labor, tax exemptions, cash bonuses, and other forms of local subsidy on which the South once had a monopoly.

In order to understand how this came about it is necessary to know the story of New England’s industrial decline, which had a full decade’s start on the national depression. By 1919 the region was not going ahead as fast as other sections; during the ‘twenties New England lost 255,875 wage jobs in manufactures, most of them to the South. By the time the bottom of the depression was reached, New England had lost 297,232 more jobs. In 1932, for instance, the total value of manufactured goods produced in Massachusetts was less than half of the 1929 total, Maine and New Hampshire, meanwhile, were losing in two ways, for while the number of wage earners engaged in their manufacturing industries declined by twenty per cent, their farm population during the ‘twenties decreased by fifteen per cent. This exodus, Avhich left a trail of idle factories, stranded workers, and desperate businessmen, naturally created an economic vacuum. Therefore, when the depression struck, throwing the consumer-goods industries into ever more violent competition, these hard-pressed communities were ready to receive with open arms the many concerns that were then looking for hide-outs where they could still do business profitably by slashing wages and otherwise reducing their operating expenses. Most successful in the bidding were the communities scattered all over New England (but concentrated in Maine, New Hampshire, and Vermont) that not only had the necessary plants or the willingness to build them but which could promise ample supplies of skilled but unorganized workers—communities whose years of industrial starvation made them willing to make every concession necessary to recapture local activity.

Recent gains made by the outlying sections of New England have been achieved chiefly at the expense of the industrial centers of Massachusetts and to some extent of those of the Middle Atlantic states. Between 1930 and 1936, for instance, Massachusetts lost more than three thousand job opportunities in the shoe industry alone to Maine, more than two thousand to New Hampshire, and about eight hundred to Vermont. During the critical 1932-33 period, according to Daniel B. Creamer’s regional classification of plant relocations, New England led all other sections with thirty-six per cent of the country’s relocated wage jobs in industry. In other words, New England showed almost three times as much of this activity as her industrial importance would warrant, having but a little over thirteen per cent of all wage jobs in industry. These figures, moreover, include neither the smallest plants (usually the most mobile), nor the new and quasi-new concerns (old concerns under new names), which also began to scamper into all corners of New England when the depression cracked its whip.

This migration of industry, however, did not enable the New England states to show any headway against the general decline for several years. But between 1933 and 1935 New Hampshire made a net gain of 110 industrial establishments and by 1938 she had gained at least ninety-seven more. Vermont had 142 more plants in 1935 than in 1933, and acquired in 1935-36, through relocation alone, some twenty-two plants employing 1,684 workers, coming chiefly from Massachusetts and New York. Most remarkable was Maine’s vigorous upswing from its 1933 bottom, a gain of 208 plants in two years; by 1938 Maine had fully a third more wage earners in industry than she had in 1933.

Most of these migrations, whether by outright relocation of plants or by the transfer of management and capital from one place to another, have occurred in the shoe and textile industries. These are inclined to be foot-loose for two reasons: first, both have relatively little money invested in sunken capital—this is particularly true in the case of shoe manufacturers, who now rent most of their machinery; second, both industries have a high ratio of labor costs to value added by manufacture, which dictates their attitude towards labor and keeps them migrating to take advantage of wage differentials, not to mention other temporary benefits.

Tax abatements and exemptions for industry, for which Southern communities set the pace during the ‘twenties, prevail all over northern New England today. There are no official figures, partly because the practice is illegal and partly because this favoritism varies from town to town and from year to year, depending on the bargaining ability of the town fathers. And it is the same with the other inducements which communities wave to attract industry—they vary according to local desperation. More and more towns are being asked to provide factories rent-free, to pay moving expenses, and to buy stock. The chairman of one local committee complained that of all the many manufacturers who had applied to him to learn what favors they could expect of the town for moving in, only one did not demand a cash bonus first. Quite a good living, in fact, could be made by a “manufacturer” hauling some second-hand machinery and his industrial expectations from town to town, collecting cash bonuses and manufacturing nothing.

An interesting story in this connection appeared in the Boston Herald. It described a town meeting at Rockland, Massachusetts, on November 20, 1938. The question before the meeting, presided over by the president of the Chamber of Commerce, was to decide what measures were to be taken to coax a shoe firm into the town. The meeting was opened with prayer. Five hundred citizens then voted to sponsor the raising of twelve thousand dollars to enlarge and recondition a local factory to suit the prospective client. But although a sum of twelve hundred dollars was subscribed immediately and everything pointed to a speedy raising of the balance, the newspaper account closed with a warning that Rockland had but two days to come across . . . or the shoe company might close with Brockton, Bridgewater, Whitman, or any of the several other communities that were also in the bidding.

In other words, the rugged individualists who are New England’s manufacturers have got their hands out for subsidy. Just as their predecessors insisted upon Federal aid in the form of tariffs, today’s manufacturers are putting pressure on local governments. And, unemployment being the universal problem, Yankee communities are not only learning to subsidize industry, but are busy cutting each other’s throats for the privilege of doing so.

Furthermore, there is an abundance of cheap labor in northern New England because of the instinctive anti-unionism of localities which are predominantly rural, where the pioneer-agricultural philosophy of each-man-for-himself hangs on. The prejudice against labor unions, of course, has been assiduously encouraged by those who stand to profit by the disorganization of the workers. The truth about unions rarely gets through the litter of reactionary journals which blankets the section.

The most striking example of Yankee anti-unionism was an exhibition in Maine’s shoe center, Lewiston-Auburn, where in 1937 the courts and the militia stepped in to break a strike which was all but won by the workers; nine labor leaders, one a grandmother, have finished a five months’ jail sentence for organizing the strike, which was neither a sit-down nor in any way violent. Although more than fifty per cent of the local shoe manufacturers are transfers from Massachusetts, other outsiders—even the United States Supreme Court—are not welcome in Lewiston-Auburn. “The manufacturers should not dare to accept and surrender to the five-to-four Wagner law decision. Our local manufacturers should insist that whatever the Wagner Act means, it does not apply to our Auburn and Lewiston manufacturers.” This appeared in the Lewiston Sun when local industrialists were becoming involved with the Labor Board. And in March, 1939, when those who had previously been found guilty of violating the Wagner Act were charged with violations of the Fair Labor Standards Act, the Sun editorialized: “If Maine were really that free and independent State you couldn’t have any such abuse of the Constitution of the United States as the arrest of men, of employers, for paying below a certain rate of wages. . . . It ought to be as impossible to fine and imprison Maine employers under a Federal law as to send in a German army to take Maine over.”

It is no mere coincidence that in America’s major industries all violations of the Fair Labor Standards Act that have been prosecuted at the time this is being written, have occurred in New England’s shoe shops and that all have resulted in convictions. Similarly, the National Labor Relations Board has met some of its most determined opposition in northern New England. Not one in ten of northern New England’s shoe factories is organized by a national union, and the situation in the textile factories is little different.

That low wages have gone hand in hand with antiunionism in New England is shown not only by the swarming of fly-by-night manufacturers to these regions but also by the old N. I. R. A. codes, which recognized these wage differentials between the industrial centers and the outlying areas and legalized them. According to the United States Department of Labor, such differentials have increased since the nullification of the N. I. R. A. and in some cases have resulted in wages below W. P. A. standards. Most authorities agree that industrial migrations to low wage areas have the effect of lowering wages still further. Indeed, the latest figures published by the Social Security Board show that average wages in Maine, New Hampshire, and Vermont are well below those in any other New England state; furthermore, average wages in Maine, the state which has gained the most from these recent industrial migrations, are below those of many Southern states, as well as being $223 below the national average.

Obviously most of the concerns which have been moving into Maine and the outlying areas of New England are doubtful assets to a community. In the first place, they seek out communities where labor is underpaid, and then seek to freeze wages at low levels or drive them even lower. The Department of Labor of Connecticut, referring to industrial establishments which entered the State during 1934-1936, has put this truth frankly: “It is among this group that sweatshops have flourished and that the Factory Inspection Department has prosecuted and convicted a large number of employers for violations of the labor laws.” In the second place, because of their arbitrary shut-downs and relocations of plants, they keep industries and the communities which depend upon them in a state of chaos.

It is evident that these migrating concerns come from somewhere, and there is no need to emphasize the desperate condition of towns which have thus been deserted. Furthermore, the manufacturer who turns his back on one community is likely to treat other communities in the same manner; if he migrates to take advantage of wage differentials or other local advantages which few communities can afford for long, there is every chance that other attractions elsewhere will eventually seduce him. As a matter of fact, even after he has settled down and is doing business in a town, the captain of one of these mobile industrial units is in a splendid position to threaten to leave the community, and thus keep labor docile and the local business men subservient to his policies. Often, indeed, a manufacturer can get his taxes cut or a union smashed simply by dropping a hint to the local Chamber of Commerce.

Such an employer, of course, does assume the guise of a local benefactor for a time. As long as he is operating at a good clip (saddling the community with a good part of his operating expenses)., his payroll will be impressive. Thus the local merchants are pleased, not caring that however substantial the total payroll, inadequate wages for the individual means economic anemia for the community. All experience has shown that a community that allows its labor to be exploited is impoverishing itself by a sure method. But this condition is being called “prosperity” in New England.

The many small and mobile plants competing for the market in the textile, shoe, and novelty industries have to face periodic inactivity, if not failure. And when one of these plants shuts down, the workers, having received only meager wages, are unable to weather the inevitable slack seasons except by going on relief or by living on credit from the local merchants. Thus the city auditor of Auburn, Maine, in explaining the local relief burden of 1938, made it clear that he had had to supplement wages paid in shoe factories and mills; the Lewiston Sun quoted him as saying, “It may be that there are more employed but when a fellow comes in and says he has six children and gets four or six dollars a week, I can’t let him starve.”

When the inevitable shut-downs and further migrations occur, then the local merchants who made such heroic efforts to lure in industry are desparate. Their town, in which they are the chief taxpayers, is full of unemployed workers who must be taken care of and their books are water-logged with accounts which can never be paid. Thereupon local gossip begins to boil with denunciations of the C. I. 0. or the A. F. of L. (as the case may be) for fomenting labor troubles and of F. D. R. for undermining business confidence. And in spite of the bitterness of the lesson, the communities cling to their policy of self-impoverishment more fiercely than ever. New committees are formed, more money is raised to play the same old system, and governors of states add their solemn blessings.

One state has had the wisdom and courage to speak out against fugitive industries, but it is not in New England. The North Carolina Department of Labor and Industries has warned its communities: “North Carolina has room for all legitimate enterprises and welcomes manufacturers of character and standing. But we have no place for the fly-by-nights who depend upon starvation wages and special favors to make profit on their operations. Any community that invests its money in a concern of this kind is headed for grief.”


Industrial migration, to be sure, is not merely New England’s problem. American industry can never enjoy stability nor will American communities know security as long as manufacturers are addicted to the artificial stimulants of local subsidy and sweatshop labor. During an era of industrial expansion, like the one which preceded the crash, the grasping for subsidy is more or less dormant; but during hard times it breaks out like an epidemic, and communities are then as easy to exploit as unorganized workers in an overstocked labor market.

It is clear that neither the communities themselves nor the states can be expected to grapple with the problem. Even if they were powerful enough to do so, the temptations to raid each other are irresistible. To minimize this industrial waste, this anarchy in the consumer-goods industries, some force greater than town or state is necessary. The Federal government with the Wagner Act and the Fair Labor Standards Act has probably done its utmost to stabilize industry. And although these admirable measures may remain on the statute books—in spite of the present hue and cry—the belief of many people that the Fair Labor Standards Act will equalize wage scales throughout the country and thus eliminate the injurious migrations of industry is unfounded. Under the terms of the Act wage differentials are allowable. Furthermore, most authorities agree that the Fair Labor Standards Act, like the Wagner Act, cannot function without the cooperation of vigorous labor organizations. For instance, it is well known that the N. I. R. A. codes were ripped to pieces by manufacturers long before the Supreme Court administered the coup de grace. Surely our experience with Prohibition demonstrated that legislation is vain unless supported by a large and well organized section of those it is designed to affect. Labor legislation, in other words, cannot mean much unless supported by strong labor unions.

It is significant that both the textile and the shoe industries, in which wages are notoriously low, migrations frequent, and conditions generally chaotic, are open-shop industries. The United Shoe Workers, the largest union in the industry, claims but fifty-two thousand members, or approximately one sixth of the total workers in the industry; the Textile Workers Organizing Committee has not yet signed up half the workers in its industry’s 5,870 plants. Neither union is yet in a position to wipe out abuses.

By contrast, clothing manufacturing, also a consumer-goods industry, and basically similar to textile manufacturing, is thoroughly unionized. The manufacturing units are small, very little capital is required, and style changes are a continual nightmare. But in spite of all obstacles and not least the sordid anarchy which existed when these two unions first entered the field, the Amalgamated Clothing Workers and the International Ladies’ Garment Workers have transformed fashion into a stable, profitable and model industry, not merely as far as the workers are concerned, but for the benefit of employers and public as well. Mr. Morris Green-berg, general manager of Hart, Schaffner and Marx, one of the world’s largest clothing manufacturers, in discussing the relationship which has existed between his company and the Amalgamated Clothing Workers, maintained that unions are indispensable to management and actually advocated the closed shop for maximum efficiency of operation. Besides establishing a thirty-six-hour week, inaugurating unemployment insurance in 1920, obtaining for its members the maximum wages and security that the industry can afford, the Amalgamated has introduced techniques in the production of men’s clothing which have increased profits, reduced waste, and saved overhead, and thereby multiplied profits for manufacturers. For as President Sidney Hillman of the Amalgamated has pointed out, the more industry is helped to operate efficiently, the greater the share of derived benefits labor can claim. “Until now,” he said in 1923, “labor has fought mainly from a sense of outrage against exploitation. Henceforth it will fight more and more from a sense of social and industrial responsibility.” The Amalgamated has lived up to this pledge, even to the financing of hard-pressed manufacturers.

Having organized its field of operations approximately ninety per cent, the International Ladies’ Garment Workers Union has also made tremendous progress in improving working conditions and stabilizing the industry. In its thirty-eight years of life the International has reduced working hours from seventy to thirty-two and one-half hours a week; it has encouraged all kinds of cultural activity, from musical revues on Broadway to scholarship at Bryn Mawr; it has raised real wages continuously and, in the case of the cutters, has already equalized them on a national scale. Cooperating with employers for the good of the industry, the International has signed thousands of agreements enforcing fair-trade practices, checking style piracy, and sponsoring uniform conditions in every market. Like the Amalgamated Clothing Workers, the International has adhered to a policy of “continuous organization,” which means pursuing runaway manufacturers wherever they go, in order to maintain decent working standards and to prevent cut-throat competition in the industry. In 1935, for example, when the Blue Dale Dress Company broke its contract with the union and moved out of New York City to avoid paying union wages, the International brought suit and the New York Supreme Court ruled that the Company was morally and legally obligated to return to Manhattan.

Certainly the Amalgamated Clothing Workers and the International Ladies’ Garment Workers, upon which many new unions are being modeled, give the complete story: stability in industry is the first and most vital concern of labor organizations. And because leaders like Hillman of the Amalgamated and Dubinsky of the International are economists and not orators of the old school, industrial engineers and not labor racketeers, they realize that only by scientific collaboration with management towards greater efficiency can they fulfill the worker’s dream of security. This aspect of unionism, to be sure, has not been emphasized as much as its importance would warrant—no doubt because wages and hours are easier conceptions for the press and the public to handle. But since the depression, the larger goal of security has become the prime quest of the average American. Consequently, damage to the workers’ sense of security threatens a union’s prestige. Chaos in industry, especially the wholesale loss of jobs by migration, is something that no union can afford to tolerate. It is this truth about unions that New England, as well as the South, needs to understand and to act on, if it is to have industrial health.


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