Steel Shoulders a Relief Problem

I

DID you ever attend a convention of organized charity? If you did, the first thing which jumped to your attention was the deep cleavage of opinion regarding the very nature of philanthropy. How far has society the right to inquire into and direct the intimate concern of those whose living conditions fall below some approved standard? And to the directors of vast corporations the same problem constantly recurs. Does their responsibility cease when they have passed a man his full wage? Is business solely a bargain between employer and employed, and has a corporation carried it out when it fills the pay envelope with the week’s earnings?

Now the creation of workable conditions is often called paternalism, and paternalism has an intrusive and unpleasant sound. Call it what you will, it is not my purpose to argue the rights and wrongs of the matter, but rather to tell a chapter of history which to my thinking casts a white light upon a question that goes to the root of things. It is a chapter in the story of the United States Steel Corporation.

The example of the United States Steel Corporation is most impressive for two reasons: first, because of the large number of employees involved and the sums required to sustain them in adversity; second, because it shows a systematic programme matured for another purpose being adapted to employee relief under pressure of social adversity. The record shows that in the pinch United States Steel aided its labor to the extent of many millions. Legally there was no compulsion to do this, but the Steel directorate firmly upheld its chairman, Mr, Myron C. Taylor, who proclaimed early in the depression that, no matter how long it might last, no employee of record would go without the necessities of life.

How had this definite point of view on employer responsibility for employee welfare been reached? The answer takes us back to the founding of the Steel Corporation in 1901. From its beginnings the steel industry had been marked by ruthless competition and hence was highly sensitive to the swings of the business cycle. Whenever hard times hit the country, the steel towns would be on short rations. In the years immediately following the inception of the Corporation, substantial progress was made in stabilizing employment. While competition continued keen between Steel and its rivals, the various subsidiaries of the Corporation were gradually brought into full coöperation. Plant specialization not only produced of itself better steel; steadier work in these specialized plants also seemed to be producing better men, who in turn made better steel.

Better men could not be held without better living conditions. That became apparent as the Corporation took over or organized activities in new quarters, such as the Mesaba range in Minnesota, the Birmingham district in Alabama, and Gary, Indiana. At many points it encountered almost frontier conditions, in which towns had to be built swiftly near natural resources. In many coal areas the Steel Corporation came into possession not only of mines but also of houses, streets, and such public services as existed. There the problem was one of improving living and health conditions for employees. Speed was one consideration; efficient correlation of plants, housing, highways, railroads, and public services was another. Either the Steel Corporation could leave this community building and rebuilding to chance and the local politicians, or it could itself proceed with the task. It elected to do the latter, in line with expert advice in town planning and the conviction that good living conditions for labor would prove a sound investment for the company.

This conviction was firmly held by Judge Elbert H. Gary, who came into the steel business in the ’nineties from the profession of law and service on the bench. As a judge he was accustomed to weighing equities, accepting fiduciary responsibilities, and thinking of himself as a trustee. In addition, Judge Gary had in him a strong leaven of the patriarch; he wanted everyone in Steel to benefit from its operations.

In the Steel equation were elements peculiar to itself. Several of these have been mentioned; another was the fact that some of its most important operations in the Pittsburgh and Chicago districts were then manned largely by foreign-born labor. Not yet fully Americanized, these men of European origin were actuated by personal thrift rather than a desire for higher living standards. Also it should be recalled that when Steel’s welfare programme was initiated Judge Gary and his associates — and in fact nearly all the leaders of his day — were influenced by a sweeping public opinion in favor of welfare work as a short cut to social justice.

II

The welfare policy so evolved needs no apology, either as to plan or as to performance. In a project covering so large a territory and contacting so many human beings in their personal and family relationships, isolated instances of misdirected activity, friction, and unsympathetic personnel are bound to arise. To snipe at those exceptions to the rule from a safe distance is to miss the reality of the drive; the procession marches on, in spite of the stragglers who fall out of line or the minor disputes within the ranks. In this case the procession contains more than 225,000 men and women and their dependents — a total of several million persons, if to workers and their dependents are added other residents of Steel towns who benefit directly or indirectly by Steel payrolls and the Corporation’s community services.

It is worth noting that when Judge Gary asked his directors for the funds to carry on this campaign his arguments were both humanitarian and economic. This activity would pay eventually, he said, because healthy, well-disposed men did better work than half-sick, undependable, worried, or uninterested men. The world of steel is populated from top to bottom by practical men, all of whom understand that welfare, in the long run, pays its way.

Over a space of more than twenty years the Steel Corporation spent upwards of $10,000,000 a year for the welfare of its employees, and in that spirit administered the following properties as of June 30, 1934: —

25,347 dwellings and boarding houses leased to employees at low rental rates.

24 churches, the clergymen being chosen by the congregations and all business conducted under the rules usual to each denomination.

17 schools, owned, leased, or operated for apprenticeship, vocational training, and general education.

34 clubhouses, generally equipped with reading rooms, assembly and dance halls, gymnasiums, and in some cases swimming pools. Used as social centres for music and drama.

53 restaurants and lunch rooms, where meals are sold at moderate cost.

176 rest and waiting rooms.

120 playgrounds, many fully equipped; a large number of wading pools and swimming pools. Average attendance in summer 25,000 children daily.

17 swimming pools of large size, available for use by adults.

96 athletic fields, many of which are equipped with grandstands and with facilities for baseball, football, field events, etc.

19 practical housekeeping centres, in which American housekeeping standards are taught by demonstration. Usually used as residences for the various staffs of visiting nurses.

On the health, safety, and sanitation side the Corporation maintained: —

9 base hospitals with complete staffs and full equipment.

224 emergency stations for prompt treatment in case of accidental injuries and sudden illness.

406 company surgeons, physicians, and internes.

199 nurses, including those in training.

86 hospital orderlies and attendants.

33 visiting nurses.

24 sanitary inspectors on full time.

712 piped systems for drinking water.

628 wells and springs protected against pollution.

2452 complete comfort stations with closets, washrooms, locker facilities, etc.

5627 shower baths, available to workmen.

Steel’s inventory of accommodations and services shows a concern for the bases of family and social life — housing, religion, education, public health, industrial safety, hospital care, and recreation, including music, drama, libraries, and club activities of many kinds. No corporation in the world has a more broadly conceived programme for its employees, or carries that programme forward in as many differing environments with as many kinds and conditions of employees.

III

As a concrete example of progress in a unique and difficult situation, the Birmingham field offers an impressive lesson. When the Tennessee Coal, Iron and Railroad Company was taken over in 1908, the Steel Corporation became the leading employer in an area obviously backward in many of the aspects of modern life. The labor force, predominantly Negro, lived within fifteen miles of Birmingham in small insanitary villages. Marshes, mosquitoes, and malaria composed a triumvirate which afflicted a population powerless to cope with that enfeebling disease. Soon after acquiring ownership, the Corporation began to construct model housing in new groupings and to remodel the houses and rearrange the streets and public services in the old villages, with running water in every house and with ample yard and garden space. The villages contain commissaries, bathhouses, schools, churches, and clubhouses constructed by the Company.

These measures did not fully meet the challenge of disease, and in 1913 a Department of Health was formed with four divisions: sanitary, medical, dental, and base hospital. The department itself was on a par with other operating departments of Tennessee Coal & Iron.

The task facing this new department was equivalent to that encountered in sanitating Limon, Costa Rica, or Guayaquil, Ecuador, engineering and medical feats which attracted worldwide attention. In extent it has been compared to the sanitating of the Panama Canal area, which preceded the successful completion of that mighty work. If the terrible toll of malaria and other filth diseases was to be reduced, an area of hundreds of square miles required close and unremitting attention, and a population unschooled in health measures had to be educated in the decencies of modern living. On the preventive side the sanitary division undertook the following duties: to eliminate mosquitoes, ensure pure water supplies, clean and drain streets and alleys, cut weeds and grass, collect and dispose of trash and garbage, inspect work places and dwelling places, supervise stables for fly control, maintain quarantines for communicable diseases, and protect food supplies.

Whether those communities, some of which had little or no voting strength because the population was mostly colored, would ever have sanitated themselves is a question for which the practical answer is this: they had not done so and showed no intention of doing so. Either the Company must do the job, or there was little prospect that it would be done within any reasonable period. The task was not only beyond the grasp of those communities as an idea; it was also beyond their financial and scientific resources.

Consider, for instance, the elements involved in the campaign against mosquitoes, to take only one of the sanitary division’s triumphs. A survey of 1912 listed 8000 cases of malaria among the employees of Steel and their families resident either in or around the twenty-two Steel villages. In the villages alone were 4840 cases. Since tropical medical experience had definitely identified the mosquito as the chief carrier of malaria, the first step in fighting the disease was to rid the neighborhood of mosquitoes. As a result the incidence of malaria in the T. C. & I. villages dropped by more than nine tenths, from 4840 to 370 cases in one year, and at present malaria is one of the least of that area’s public health problems, with only ten to twenty cases a year.

The medical service set up at the same time established new standards. Nearly all employees availed themselves of these services at the low rate of $1.25 per month per family, which fee entitled all its members to professional treatment at the base hospital at Fairfield, Alabama.

This hospital became the clearing house and centre of the health department’s work. Thoroughly modern, it houses 310 patients and, with adjoining structures, accommodates a fixed staff of sixteen physicians, covering the various specialties; ten internes; fourteen graduate nurses; and training schools for both white and Negro nurses to a total in both schools of about seventy. Eight dental clinics are maintained, one at the base hospital and seven at the larger dispensaries. Pediatric clinics for both white and colored children are held in each village, with home visits by nurses and social workers. In an average year more than 200,000 patients were treated at dispensaries and nearly 100,000 calls made at homes of employees. Medical examinations of school children were inaugurated in schools for both white and colored pupils, with a total enrollment above 5000, most of whom had never seen a toothbrush or received regular instruction in personal hygiene.

IV

With facilities and services more or less similar to those in the Alabama district, Steel met the social and family needs of its workers in all the other areas where its plants are located. In the iron country of Minnesota, in the newly opened coal regions of Kentucky and the older coal and coke towns of Pennsylvania, Steel has its towns, hospitals, dispensaries, and the like, as in Alabama, but usually without duplication due to the color line. In the steel towns grouped around Pittsburgh, and in Gary, Indiana, the employees are afforded opportunity, under the provisions of the Corporation’s Home Owning Plan, to own their homes upon favorable purchase terms. In many areas it maintains general stores, open to all buyers, which are usually the most attractive in the community in both appearance and prices. Except where irresponsibility of certain groups of workers makes cash payments inadvisable from the family standpoint, store tickets are issued only upon request; in general, Steel workers are paid in cash and buy where they please. Steel meets local variations from a practical point of view, leaving to local direction the adjusting of its general policy to local needs. Gradually it has been widening the scope of employee participation in the operation of welfare services, especially in the field of recreation. This tremendous programme of human welfare was based upon industrial activity. Its backers looked upon the Steel towns and mining villages as busy places where men would go on creating under able direction enough wealth to provide a margin for recreation, health services, sanitary inspections, schooling, pensions, and all the other burdens.

Through nearly all the years of Judge Gary’s long leadership these flourishing conditions obtained. The Corporation prospered, expanded, and added to its surplus; its employees had full-time employment, rising wages, better living. Growing automobile demand for steel more than offset declines in rail orders, steel construction gained steadily, and through several years war demand was urgent. Such slumps as occurred were of short durat ion, ending in booms marked by rising tonnage.

Could this pace be maintained? While the whole country was marching recklessly toward disaster, the new head of Steel, Myron C. Taylor, quietly laid his plans to buttress his corporation as strongly as human foresight could arrange against the misfortunes which he foresaw in the offing as a result of America’s mad splurge.

When Mr. Taylor took over the leadership of United States Steel in 1928, not only was the boom in full cry, but also the Corporation was ending an epoch. That the outside world did not know. Every great consolidation succeeds or fails on the strength of its human resources. The original Steel Corporation was a combination of certain well-managed, successful units functioning under the men who had brought them up. The Corporation was not a unit, but a collection of units, and the great task of Judge Gary was to keep a number of strong individualists from working against one another. In this he was aided by that greatest of all ameliorators — a rising price level.

That epoch really closed several years before Judge Gary’s death. Not only had many of the original operating men retired, but also the steel business had changed into something very different from the business that the founders knew. And the task of the chief executive officer changed from one primarily of seeing that the companies did not get into one another’s way to one of reorganizing from top to bottom to meet the new needs of changing times. It turned out that the Corporation also had to be revised to meet that most difficult of all business situations — a declining price level.

The task of reorganizing is a very different one from organizing. It involves not only careful analysis but also a planning of both the human and the material elements. The planning of the material elements is not particularly difficult, for the problems resolve themselves into weighing the engineering facts in the scales of financial ability. Planning of the human element is a different matter, for a slip will undo every engineering improvement.

Mr. Taylor was fitted for his post because, in addition to a matured ability to weigh the material components of a business structure, he has the patience and the finesse to carry through the vast human engineering. And his has probably been the most difficult executive problem ever undertaken, for on top of the already complex problem came the depression, with its smashing of dollar values and relations.

Mr. Taylor entered the steel business after a substantial experience as a corporation lawyer, with a large background of financial and industrial experience and a wide range of personal interests, including art, music, education, and charitable activities. His interest in public affairs has been largely confined to intelligent observation and an occasional reticent but penetrating statement. By instinct he seeks to avoid the limelight, although complete avoidance is impossible for the head of so large a business in an America where big business is also big news. He guides, with a deep sense of values and a keen concern for corporate ethics and personnel feelings, the mighty organization confided to his care. Entering into his high responsibility reluctantly, he brought to his post a conservatism which led him to view Steel’s position, after the most painstaking analysis supported by a sound and farseeing judgment, not as one capable of infinite expansion, but as one in which the fruits of past progress required maturing.

It is significant that Mr. Taylor’s first important move in Steel’s reorganization had to do with the corporate structure and culminated in the forepart of 1929 with the redemption of more than $300,000,000 wort h of bonds and a resulting reduction of Steel’s fixed charges by some $30,000,000 a year. Thus the conservative management of Steel had in fair weather prepared for foul and girded itself for a long pull of adversity. Except for this farsighted action, it is doubt ful if Steel could have maintained its existing welfare services through the hours of their greatest need and at the same time have spent millions for the relief of out-of-work employees while the Corporation itself was running large deficits.

Before Mr. Taylor began to cast up critically the possibility of a major letdown in industrial activity, no one in corporate management anywhere had envisioned a situation in which for a long period work and wages would be scarce, deficits chronic, and large numbers of employees and their families without earned income. This unforeseen situat ion began to emerge when the depression cut steel tonnage in 1929. By the time bottom was touched in 1933, the welfare framework of the Steel Corporation had taken on an immense burden of emergency relief expenditures in answer to its leader’s determination that no steel worker or his dependents should lack the essentials of life.

This decision to assist employees until times improved was not an easy one to make. As we all know, it is difficult to keep perspective when we are hard up and to go on spending without prospect of immediate return, in the hope that better times are coming by and by. Corporations find this course even harder to follow than individuals, for they have to weigh all their acts in the light of their responsibilities to stockholders. In such circumstances the first and entirely natural reaction is to trim sail by cutting off corporate activities not directly productive of revenue. If Mr. Taylor had followed that course in the case of Steel, he would have shut off the whole welfare stream; but instead he continued the stream while changing its course somewhat to meet lack of orders and shortage of jobs. His conservatism was big enough to include the conserving of human values and home circles.

As in many other large industries the first readjustment to the new social strains was work-sharing. Hours of work were reduced in an effort to keep every employee in possession of at least some earning power. But as orders continued to decline, individual earnings in some cases fell below family necessities. Those in distress might be living in company-owned houses or in houses which they had purchased on installment. In either case there were no dispossessions, and every effort was made to see that the Steel family had shelter. It was also sure of medical service. Such wages as part-time workers earned were therefore available for food and clothing.

Work fell off more and more until the limits of efficiency were reached for work-sharing. After all, steel-making is a continuous process and as such the shifting of employees has limitations and disadvantages. Lay-offs increased; at the worst point, when steel production was only 10 per cent of the 1929 peak, thousands of employees were entirely without work. Steel provided for them. It met their family needs on food and clothing. It was able to do this gracefully without humiliating the individual because of two existing factors — the company-owned store, with its full stocks of general merchandise; and the knowledge already gained by its social workers of the family problems among the employees. Outof-work employees were given orders against which the store would deliver merchandise, the entries standing against the individual employee. In districts where stores are not operated, similar arrangements were made through local merchants, the company assuming the obligation and extending credit to the employees. For this purpose the Corporation advanced large sums to its out-of-work employees. Many of these advances were on open account, without interest, security, or evidence of note. This was in addition to direct relief extended for the same purposes. No administrative costs reduced this relief, for the work was all done by employees on company payrolls. Throughout these five difficult years the Steel Corporation has expended annually an average of $15,000,000 for relief, welfare, and pension purposes.

It will get part of this sum back. Hardly had the men returned to work when, little by little, they began to pay off their book accounts at the stores. However, the importance of the effort rests not in the figures involved, although they are large, but in the promptness and informality with which the situation was met. There is an old saying worth repeating in these days of bureaucratic ‘run-around’: ‘He who gives promptly gives twice.’ Also let it be remembered that expenditures for both welfare and relief came from a treasury whose reports were showing large deficits from operations. Money for workers’ benefits could be found when money for dividends could not be found. Workers and their families were fed, housed, clothed, and nursed out of surplus, a surplus which had been built up in good times and protected by farsighted action in reducing fixed charges. Strictly speaking, the first responsibility of management is to stockholders; in this case management made maintenance of workers a first responsibility.

In meeting the challenge of the depression as it affected employee sustenance, Steel once more stepped out in advance of legislation, just as it did in other respects here briefly summarized:

1. The Corporation’s activities relating to safety, sanitation, and welfare preceded by some time the laws, in many of the states in which its subsidiaries operate, touching these affairs, and no laws anywhere have been adopted setting standards as high as those of the Corporation.

2. The Corporation’s provisions for financially caring for injured employees preceded all Workmen’s Compensation laws; in fact, those first enacted were based, to a certain extent at least, on the Corporation’s voluntary accident relief plan.

3. The housing, sanitary, and general civic standards adopted and put into practice in Corporation towns are above those set by law.

4. Its pension system has been in force many years, and provides annuities for superannuated employees and those who become permanently disabled. No contributions of any kind are made by employees toward the support of this pension plan.

5. The encouraging of home gardens, with instructions in cultivating, as well as instructions in canning, were under way years before the subsistence thought came into general relief.

6. Spreading of whatever work is available at any given time as a matter of relief was inaugurated at the beginning of the depression.

As the depression recedes, its lessons will fade unless they are emphasized now before the details pass from our common consciousness. One of these lessons is that many employers of labor have willingly taken upon themselves responsibilities for employee welfare far beyond the line of duty. In doing so, they kept the worst shocks of adversity from reaching their employees, and in some cases they managed relief so competently and cheerfully that government relief seems cold and sluggish by comparison. Certainly the depression would have been far worse in the cities and villages where Steel operates if management had been unprepared in funds, organization, or humane consideration.

In remarks to stockholders and in other public statements, Mr. Taylor has described the aims, efforts, and responsibilities of the Corporation in dealing with problems incident to the depression. These excerpts illustrate the spirit which dominates its actions:

The management of the Corporation is burdened with a three-fold responsibility to its stockholders, its employees, and the general public. In maintaining a balance between these groups and in order to deal justly with all concerned, it has systematically and methodically taken successive steps to resist the decline in business and earnings by carefully conceived readjustments effected in a manner calculated to occasion a minimum of distress and dislocation in each of these groups. . . .

It has been the constant aim of the directors and executives of the Corporation to so conduct its affairs that it might withstand successfully not only the immediate shocks and difficulties which might arise to perplex it, but also to hold the Corporation, its properties, and associations in such position as to ensure its security, and to enable it to withstand with credit and honor whatever else might be in store for it in the future. To this task all concerned have contributed their utmost in effort, thoughtfulness, and coöperation, and a fine spirit of charity. . . .

No better example of coöperative effort can be found anywhere than that which has been set by the men and women of the United States Steel Corporation since this depression began, and it is safe to say there is no brighter page to be found in industrial history than that which the Steel Corporation wrote through this depression in its treatment of its employees.

Copyright 1986, by The Atlantic Monthly Company, Boston, Mass. All rights reserved.