This 1949 Technicolor cartoon is a Cold War-era propaganda film aimed at American workers with the objective of convincing them that increased wages based on increased productivity bring about greater purchasing power.

The cartoon presents a tunnel vision capitalist view of economics. Rising prices are blamed on increasing wages for workers, so the only hope for wages to keep up is for workers to produce more. It also illustrates how the cost of production, overhead, the processing of raw materials, and labor combine to create the overall cost of a product.

The cartoon is a John Sutherland production. It is one of the "fun and facts about America" series, made "to create a deeper understanding of what has made America the finest place in the world to live."

Plot:
The film begins with a brief introductory sequence showing two cartoon figures – one representing prices and the other representing wages – playing leapfrog as each successively rises on the cost-of-living index. It then shifts to show Joe, a worker in the Dilly Doll Company, slightly down in the mouth because of a steady rise in the cost of living without an accompanying increase in wages. His joy over an increase in wages fades when he discovers that the price of a doll which he planned to buy for his little girl for a birthday present has also gone up. The manager of the store explains to Joe that he has had to increase the price because the factory is charging more.

As Joe is reflecting upon the thought that the raw materials for the doll which markets for two dollars cost only ten cents, a voice asks him whether or not he knows the value of the raw materials in a $1900 car. When Joe guesses $300, the voice tells him that the materials are worth only $22. An animated pictogram shows the raw materials in an automobile and the countless number of men needed to transform it into the finished product. A circle graph shows the proportionate costs involved in the manufacturing and marketing of the car. The direct and indirect labor costs are shown to be $1200.

Joe admits that he can understand this cost analysis for an automobile but still wonders what factors account for beef steak's costing one dollar per pound. The direct and indirect labor costs of feeding, fencing, housing, caring for, shipping, butchering and marketing "Bully Boy" are shown. As a butcher sells a pound of beef, his scales register each of these costs. In the case of this item, as in the case of the car, 85% of the selling price is attributable to direct and indirect labor costs.

The offstage voice helps Joe arrive at the conclusion that increased productivity would result in greater buying power and lower costs. Joe presents to his supervisor the idea of painting four dolls at once. The supervisor thinks it is a good idea and is shown going to the bank to borrow money to purchase new equipment. The increase in production results in another increase in Joe's wages and a decrease in the price of dolls. The summarizing statement points out that under this arrangement wages can keep ahead of prices.


BACKGROUND / CONTEXT

Wage-price spiral is an economic term that describes how prices increase when wages increase. It's a phenomenon that occasionally occurs when the general prices for goods and services increase, causing workers to demand a wage hike. The wage increase effectively increases general business expenses that are passed on to the consumer in the form of higher prices. It's essentially a loop or cycle that perpetuates itself by consistent prices increases.

The wage-price spiral deals with the causes and consequences of inflation, and it is therefore most popular in Keynesian economic theory. It is also known as the "cost-push" origin of inflation. (Another cause of inflation is known as "demand-pull" inflation, which monetary theorists believe originates with the money supply.)

Some argue that incomes policies or a severe recession is needed to stop the spiral. The spiral is also weakened if labor productivity rises at a quick rate. Rising labor productivity (the amount workers produce per hour) compensates employers for higher wages costs while allowing employees to receive rising real wages, and while allowing the company's margin to stay the same.



This post is for educational purposes only ; it is not an investment advice.
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