Sec. 1. The hope for industrial peace in the United States.
Sec. 2. A policy of wage settlement composed out of the
principles already set forth.
Sec. 3. What results might be expected from the adoption of
these principles as a policy?
Sec. 4. The matter of economic security for the wage earners
likely to be important for industrial peace. Hardly
considered in this book. The question has been presented to
the Kansas Court of Industrial Relations.
Sec. 5. Certain new ideas concerning industrial relationship
have come to stay. They indicate the probable current of
future change.
THE SETTLEMENT OF WAGE DISPUTES
CHAPTER I--INTRODUCTORY
Section 1. In any attempt to formulate principles for use in the
settlement of wage disputes, past experience furnishes much
guidance. What this experience consists of.--Section 2. Such
principles as have been used in the settlement of wage disputes
have usually resulted from compromise; reason and economic analysis
have usually been secondary factors. However, industrial peace
cannot be secured by a recurrent use of expedients.--Section 3. The
attitude most favorable to industrial peace.
1.--The industrial life of the United States is marked by an almost
continuous series of open struggles between the employers and wage
earners of its highly organized industries. No one defends these
struggles for their own sake. There is a general inclination, however,
to regard them as a necessary accompaniment of industrial activity and
change. It must not be supposed that all labor troubles are merely wage
controversies--that is to say, that they are all incidental to the
settlement of the wage incomes of the laborers. Many of them arise in
whole or part from a shifting and conflict of ideas about various other
aspects of the industrial order. It is possible, however, to
concentrate attention upon those conflicts which center around the
settlement of wages.
There is a quick and somewhat tumultuous stream of investigation
directed to the invention and formulation of principles which could be
used as a basis of settlement of wage controversies. In various
countries such principles have been formally set forth and used. The
awards of the War Labor Board are an example of their imperfect
application. In the Industrial Court of the Commonwealth of Australia we
have an example of the consistent use of one set of wage principles. The
material that has arisen out of this process of discussion and
experimentation is of the utmost value to any one endeavoring to work
out a wage policy for industrial peace in the United States. It forms a
body of doctrines. It gives evidence both as to the chief subjects of
wage controversy, and indicates the suitability or the shortcomings of
many of the principles or doctrines that might be proposed. Thus in any
investigation of principles of wage settlement--with a view to
industrial peace--we are not without the guidance of experience.
This experience consists, firstly, of the principles worked out and
applied in the decisions and orders of the courts or boards which have
served as agents of wage settlement in the United States, England,
Canada and the Australian dominions. Of almost equal value is the
material growing out of those great industrial conflicts of recent
years, in which claims have been put forward and agreement has been
sought on the basis of some definite theory of wages. Such, for example,
is the material prepared and presented in the course of the railway wage
arbitrations in the United States and England. Such also is the evidence
and material presented in the course of the inquiry recently held in
Great Britain upon the wages of transport workers.
2.--It should be understood that the principles which have been used in
wage settlements in the past were not ideal solutions. That is to say
they were not arrived at solely by the use of reason, directed to the
discovery of what is just and what is for the general good. The
situation has been rather that described by Mr. Squires, when he writes:
"Too often in the past arbitration has followed the line of least
resistance. With much unction, the lion's share has been awarded to the
lion. Decisions proposing another settlement were speedily forgotten
because not enforced. Those submitting to arbitration frequently did so
with the mental reservation that the decision to be acceptable must at
least approximate the conditions they felt they would be able to
establish by a show of strength. From this position to one of complacent
acceptance of arbitrary decisions, applied not to an isolated group but
seeking to comprehend all labor or a given class, is a long step for
both employers and employees." And again: "In arbitrary wage
adjustments the absence of well defined and acceptable standards to be
used in wage determination as well as the difficulty in enforcing awards
that did not conform closely to the law of supply and demand has forced
arbitration to resort to the expediency of splitting the difference.
Cost of living, proportionate expense of labor, and net profits, when
taken into account have been more often evoked in defense of claims made
than as a means of determining what claims were just under the
circumstances."[1]
So, also, with any attempt to devise principles which might serve as the
basis of a policy of wage settlement in the United States. They would
represent the effort to develop standards by which conflicting claims
could be resolved. It is not desired to signify agreement by this
admission with those who believe that all principles of wage settlement
must be purely passive, with those who argue that wage settlement must
perforce be nothing more than a recurrent use of expedients produced on
the spur of the occasion out of the magical hat of the arbitrator. All
that is meant is that no policy of wage settlement will succeed if its
results diverge too greatly from the interests which it, in turn, would
guide and restrain. Any policy of wage settlement must take into
consideration the moral and social circumstances pertinent to the
dispute as well as the economic. It must express active social and
ethical claims as well as recognize economic facts. It must be supported
by the sense that it is at least moderately just.
Most attempts, furthermore, to settle wage disputes by the use of
defined principles have resulted in an incoherence of policy due to the
necessity of bowing to the facts of force. This interference of force
and the consequent disturbance of policy is likewise to be expected in
all future attempts. For, in all human affairs private interest will, on
favorable occasions, revolt against laws or rules which restrain it.
Again, in the United States all past attempts to settle wage disputes by
reference to principles have been isolated and sporadic. They have,
therefore, been virtually foredoomed to failure. For as will be made
clearer as we progress, any successful attempt to base wage settlements
upon principles will demand the consistent and courageous application of
these principles for a not inconsiderable period, and to all important
industries alike. Otherwise compromise and a search for any way out of
the immediate crisis is the only possible principle of settlement. Any
well-conceived policy of wage settlement must have regard for a far
wider set of forces and facts than are presented by any single
controversy. The objects of any policy could only be attained through a
long series of decisions ranging throughout the field of industry, and
related to each other. This, it is trusted, will become plain as the
difficulties of formulating policy are discussed.
3.--Prof. Marshall in his great book has an arresting passage on the
importance of the tendency to organization which characterizes the whole
field of industry. He writes: "This is not a fitting place for a study
of the causes and effects of trade combinations and of alliances and
counter alliances among the employers and employed, as well as among
traders and manufacturers. They present a succession of picturesque
incidents and romantic transformations which arrest public attention and
seem to indicate a coming change of our social arrangements now in one
direction and now in another; and their importance is certainly great
and grows rapidly. But it is apt to be exaggerated; for indeed many of
them are little more than eddies such as have always flitted over the
surface of progress. And though they are on a larger and more imposing
scale in this modern age than before; yet now, as ever, the main body of
the movement depends on the deep, silent, strong stream of the
tendencies of normal distribution and exchange which 'are not seen' but
which control the course of those episodes which 'are seen.' For even in
conciliation and arbitration the central difficulty is to discover what
is the normal level from which the decisions of the court must not
depart far under penalty of destroying their own authority."[2]
Writing in England in 1920, it seems to me as if the events of change in
England were more than the surface movements he speaks of, and that
slowly but definitely industrial arrangements are undergoing
modification so as to give scope to new energies and ideas which will
modify the "normal" distribution and exchange as he conceived it. The
future in the United States is even less clearly marked. There too new
purposes and claims are arising and will seek adjustment with
established arrangements.
The attitude of all those who really desire industrial peace must be
that of readiness to judge such forces of change as may become active,
by the balance of good or harm they seem to promise. For that is the
attitude which alone can make possible a fusion of the conservatism of
experience and of established interest, and the radicalism of hope and
desire--by which fusion society can experience peaceful development.
FOOTNOTES:
[1] "New York Harbor Wage Adjustment," B. M. Squires,
_Monthly Review of the U. S. Department of Labor_, Sept.,
1918, page 19.
[2] A. Marshall, "Principles of Economics," 7th Edition,
page 628.
CHAPTER II--SOME PERTINENT ASPECTS OF THE PRESENT INDUSTRIAL SITUATION
Section 1. The chief aims of any policy of wage settlement for
industrial peace defined--the chief tests to be passed. A knowledge
of present industrial facts essential to the formulation of sound
policy.--Section 2. The present economic position of the wage
earners.--Section 3. Their relations to the other groups in
industry. The acceptance of the practice of collective bargaining
essential to any policy of wage settlement in the United States
to-day. Trade unionism must prove itself fit for this
responsibility, however.--Section 4. The economic position of
capital in the present industrial order. Its service to production.
The problems to which the accumulation of capital has given
rise.--Section 5. The economic position of the directors of
industry. Industrial control an attribute of ownership. Two
important suppositions used in this book, concerning: a. The forms
of industrial income; b. The possible spread of public ownership,
and its consequences for a policy of wage settlement.
1.--The problem of wage settlement may be regarded as the task of
elucidation or invention of methods and principles in accordance with
which the product of industry might be shared among the wage earners and
the other participants in the product with relative peace and
satisfaction. It is necessary and permissible, as has been remarked, to
separate this problem from other closely related problems. However, any
policy of wage settlement that might be adopted would be also an
important influence in other industrial issues outside of those it
settles directly. It would affect in numberless ways the relations
between the groups concerned in production. It follows that no policy of
wage settlement will work successfully unless it accomplishes two ends.
First, it must represent convincingly the effort to divide the product
of industry so as to satisfy the most widely held conceptions of justice
in the industrial system. Second, it must contribute, wherever it is a
factor, to such an adjustment of industrial relations as will command
the voluntary support of all groups whose cooperation is necessary for
the maintenance of industrial peace.
For the accomplishment of these two objects, any policy must be based
upon a knowledge of the present economic position of the various groups
engaged in industry, and of the present state of industrial relations
between them. It is obviously impossible to review these matters
adequately in this book. The most that can be attempted is a brief
survey of those aspects of these questions with which the problem of
wage settlement must definitely concern itself. Such a survey will
occupy this chapter. If it serves no other purpose, it will serve the
important one of making clear the source of certain general
presuppositions with which the problem of formulating a policy of wage
settlement for industrial peace is approached.
2.--It is convenient to deal with the general field under survey by
considering in the order stated, the present economic position, firstly,
of the wage earners; secondly, of those who own invested capital; and
thirdly, of those who direct industrial activity. Questions of
industrial relationship between these groups can then be presented at
the point at which they arise most pertinently. Such a loose order as
this is dictated by the desire to avoid all questions except those which
inevitably arise when studying the problem of wage settlement.
To begin with the wage earners. The task of giving exact scope to the
term "wage earners" may be shirked. The term may be taken to include, at
least, all those grades of workers whose incomes would be governed
directly by any scheme of wage settlement. When using the term in the
course of theoretical discussion, as in the ordinary analysis of
distribution, it may be taken to include also other grades of workers,
whose incomes probably would not be so governed, as for example,
assistant or department managers of large businesses.
The recent past has witnessed important changes both in the economic
position of the wage earners, and in the relations between them and the
other groups engaged in industry. A close connection may be traced
between the two lines of change. Up to the beginning of the present
century, at any rate, it may be asserted that the wage earners of the
country were not separated from the rest of the industrial community,
either socially or economically; although at all times throughout the
last century, there was to be found a section of recent immigrant labor
which had not yet found its way into the main channels of economic
society. The farms, the shops and private businesses of the small and
semi-rural towns; these were the common origins and discipline of our
industrial leaders and of the more skilled groups of wage earners. There
was no great difference either of educational or of industrial
opportunity between the mass of men. The few great financial centers of
the East may have been the home of an established and separate economic
class, but this class was not one of the most important industrial
forces. The standard of life as well as the economic prospects of all
wage earners who had been thoroughly absorbed into the community
encouraged a feeling of equality and independence. The tradition of our
period of industrial expansion was that most men should seek to operate
their own farm or business (and be their own master). This tradition
could flourish as long as a great variety of industrial opportunity
existed for the ordinary individual. The first stages in the development
of our natural resources, the course of mechanical invention and
improvement, the rapid growth of our population--all these changes
stimulated independent enterprise, and offered great hopes of success in
enterprise to men possessed of common sense, energy, and character. No
family felt itself placed in a fixed position in the industrial scale
except by reason of its own inferior powers of utilizing opportunity.
The wage earners were those workers who worked for some one else, but
they did not form a separate class different in experience and outlook
from their employers. The possession of wealth, under such circumstances
indicated individual capacity, temperament, and ambition.
That phase of American industry is certainly not entirely past, although
it has not persisted to the extent that some of the industrial leaders
whose rise was contemporaneous with the earlier stages of industrial
expansion, are wont to argue. At the present time able and determined
individuals, who in youth are manual workers frequently succeed in
discovering openings to the higher industrial positions. The need for
business ability is still too great to be supplied by any one level of
society; all are drawn upon. The thought that each man can attain to the
possession of a business of his own, or to a position of importance in
some big business, is even now a common conviction and inspiration among
the more skilled groups of wage earners. Yet the economic position of
the wage earners in industry has undergone genuine change.
The chief characteristics of the present situation are familiar
knowledge. First of all, the percentage of employers to wage earners in
industry has decreased.[3] Again most new undertakings in the important
branches of productive industry require a large amount of capital, a
specialized and rather rare capacity for organization and a considerable
knowledge of a wide sphere of industry. Indeed, the undertaking of new
business enterprises has itself become to no small extent the function
of organizations rather than of individuals. Further the personal
cooperation between employer and the best men among his wage earners
which was in the past the ordinary method of business education is not
often practised now. Industry is not a good education for the skilled
and able wage earners. Industrial management has usually taken the view
that there is no need or profit in educating the wage earners beyond the
requirements of their specialized task. The gap between ordinary wage
work and managerial work and ownership is in most industries great--the
path upward hard to discover.
The jobs which carry the easiest opportunities for advancement in many
important industries are now the subordinate positions in the various
executive, administrative or sales branches. These jobs tend to be given
to young men from that section of society which has affiliations, direct
or indirect, with the management of industry. The growth in importance
of these branches has led to the development of a specialized form of
education for industrial leadership which the wage earner does not
receive. Indeed, with the ever increasing complexity of the problems of
business enterprise, prolonged education, itself, has become of more
importance in determining individual chances of success. All these
developments have greatly lessened the chances of the ordinary wage
earner for any position of ownership or control. They have tended to
separate the wage earners from the groups controlling industry; they
have taken away in a large measure the inspiration which work receives
from hopes of steady advancement. When that hope is gone only the hope
for high wages is left, and that is not a sufficiently potent common aim
to insure the cooperation required for so complex an activity as modern
industry.
Simultaneously with the revolution in industrial structure and
interacting with it in many ways, there has occurred a great change in
the composition and character of the wage-earning body. The change that
occurred between 1870 and 1910 in the sources of the immigration which
has furnished the United States with the bulk of its supply of unskilled
and semi-skilled labor, is a commonplace of American industrial history.
The effects of this change have been largely governed by other
industrial events, chief among which may be put the increased
concentration of industry in and around a relatively small number of
cities or regions. For as Mr. Chapin in his study of the sources of
urban increase has stated: "Immigration has been the chief source of
urban increase in the United States during the past quarter of a
century."[4]
There has assembled in each of our great cities a mass of workers, many
of whom are of recent alien origin, quickly habituated to the routine of
existence in crowded city streets and busy factories. The interchange of
opinion and of sympathy between these lowest grades of industrial
workers and the rest of the community is very imperfect. Their
industrial position and outlook tends to be that of a separate class. As
a rule, they are unorganized. It is of these grades of labor that Prof.
Marshall has written "Some of these indeed rise; for instance,
particular departments of some steel works are so fully manned by Slavs,
that they are beginning efficiently to take the place of Irish and
others who have hitherto acted as foremen: while large numbers of them
are to be found in relatively light, but monotonous work in large
cities. They may lack the resolute will which put many British, German
and Scandinavian immigrants on terms of equality with native Americans.
But they are quick withal, versatile; and as a rule, easily molded; they
take readily to the use of machinery; and they have no tradition that
could prevent them from doing their best in using semi-automatic
machines, which are simple of handling, while doing complex work. Thus
America has obtained a plentiful supply of people who are able and
willing to do the routine work of a factory for relatively low wages,
and whose aptitudes supplement those of the stronger races that
constitute the great bulk of the white population."[5] They have sought
chiefly such improvement in their position as might come from increased
wages. They have remained in the regions of the will and of thought
subject to those who controlled industry; for they themselves have been
in a strange environment, and so have not been able to display, to any
considerable extent, the qualities requisite to industrial leadership.
The difference of viewpoint and even of economic interest between the
groups of skilled craftsmen in industry and the unskilled grades is
being gradually reduced. Industrial developments have tended to
emphasize the measure of common interest between all grades of wage
earners. The steady trend to standardization in production and to
simplification of the machine processes has lessened somewhat the
difference between the character of the work of the upper and lower
grades of labor. Modern industrial developments have led to an increased
emphasis upon "general ability" and a lessened emphasis upon "special
ability." To quote Marshall again, "Manual skill that is so specialized
that it is quite incapable of being transferred from one occupation to
another is becoming steadily a less and less important factor in
production. Putting aside for the present the faculties of artistic
perception and artistic creation, we may say that what makes one
occupation higher than another, what makes the workers of one town or
country more efficient than those of another, is chiefly a superiority
in general sagacity and energy which are not specialized to any one
occupation."[6] As labor organization tends to become recognized as a
regular part of the framework of industry, as the duties put upon trade
union leadership are broadened in order that industry may give the wage
earners collective representation, it is to be expected that stronger
bonds will arise between the skilled and unskilled grades of wage
earners than those which unite them at present.[7]
The position of the female industrial workers remains to be noted since
the employment of women in industry seems likely to increase. Women are
employed, on the whole, on the lighter and more routine stages of the
process of production. They have shown capacity, endurance and
steadiness upon monotonous and nerve straining work both upon machine
and hand tasks. It seems likely that they will continue to displace men
in many of the simpler mechanical jobs. Many individual women wage
earners have risen to tasks of responsibility and direction. This number
will be greatly added to by improvement in the education of women for
industry and by their continued self-assertion. Nevertheless, it is
likely that the great bulk of women wage earners will continue to be
employed as at present upon relatively simple, light and unskilled work.
Such, in briefest outline, is the economic position of the wage earners
in American industry to-day. There is a diversity of outlook and of
animating spirit among the various groups or classes. There is no very
settled opinion among them as to the place of the wage earner in the
industrial system. There is besides a diversity of racial and sex
faculty and adaptability.
3.--Change and diversity also mark the relationships between the wage
earners and the other industrial groups. Up to the very recent past, the
connection of the wage earners with the enterprise in which they served
was limited practically to the fulfillment of the individual wage
contracts which were made. The obligation of the wage earners to the
enterprise which employed them has been considered at an end with the
performance of the work they were employed to do. Similarly, the
obligation of the enterprise to the wage earners has been considered
fulfilled by the payment of wages earned. The wage earners have been
called upon to give their whole-hearted efforts to their work by reason
of the belief that such effort was to their own interest, and by reason
of their own hopes and desires for advancement. The American wage
earners have usually tackled their jobs with energy, good will, and
sincerity.
It is impossible to attempt to sketch here the development of the
practice of collective bargaining, and the various concepts of
industrial relationship to which the rise of trade unionism has given
impulse. We are now in the midst of a struggle brought about by the
efforts of the wage earners to add to their traditional rights of
freedom of contract and of enterprise certain other rights. These may be
collectively described as the right to organize and to use their
organized strength collectively in all ways which may be reconciled with
the public interest. Some of the greatest industrial conflicts of recent
years have been consequences of the efforts of the wage earners to
establish these additional rights both in fact and in law (as for
example the strike in the steel and iron industry in 1919). Much headway
has been made in the establishment of the rule of collective bargaining
in industry. The scope of the matters usually settled by that method
varies greatly between individual, establishments and industries.
Organized labor has frequently received official recognition by the fact
of its representation on bodies concerned with the investigation or
control of the conditions of labor, or with general questions arising
out of, or closely connected with, industrial activity--especially
during the war. The President's Second Industrial Conference, which was
appointed to make recommendations concerning the most urgent problems of
industrial relationship that had been accentuated by the war, emphasized
the need for the "deliberate organization" of the relationship between
employer and employees in large industries, but contributed little to
the matters in dispute. Their view was expressed as follows: "To-day we
have a complex interweaving of vital interests. But we have as yet
failed to adjust our human relations to the facts of an economic
interdependence. The process toward adjustment, though slow,
nevertheless goes on. Right relations between employer and employee, in
large industries, can be promoted only by deliberate organization of
that relationship. Not only must the theory that labor is a commodity be
abandoned, but the concept of leadership must be substituted for that of
mastership." The attitude of the community has been to take no step in
advance of what resulted from the trial of argument and force by the
directly interested parties. But it is probable that in the future
public opinion will be more positive and will grant to labor
organizations fuller recognition and greater participation in the
control of industrial activity than heretofore.
It will be impossible to develop any policy of wage settlement while
certain of these questions of industrial relationship remain
unsettled--particularly the question of the acceptance of the method of
collective bargaining. Any proposals of wage policy must put that
matter, at least, on firm ground. It is probable that in order to
administer any policy of wage settlement some means of representation
for the wage earners will be indispensable. And it is likely that
satisfactory representation can only be obtained by the organization of
the wage earners. Furthermore, this organization will have to be on a
wider scale than shop organization, although shop organization may also
be useful. Thus it may be said that it will be found necessary in any
attempt to secure industrial peace in the United States by the
enforcement of a policy of wage settlement, not only to recognize labor
unions where they already exist, but also to give encouragement to some
form of organization where none exists.[8]
If in the trying times immediately ahead the trade unions give proof
that they are more than servants of craft interests; if they stand up as
democratic institutions capable of exercising power in industry and not
abusing it; if their leaders show they can be humble, when made
powerful, then that opposition to the growth of trade union power which
is based on a genuine concern for the public welfare will be disarmed.
If the trade unions show none of these qualities, the common sense of
the community will resist them in the name of traditional equality and
democracy. Popular movements such as trade unionism must make mistakes
constantly, but because of the spirit behind them, they have great
powers of recovery. The trade union movement, as a whole in the United
States, has not yet shown a thorough comprehension of the economic
system of which it is a part; it has, therefore, often erred in its
efforts to end an evil or injustice. Particular unions and leaders have
often pursued mean, short-sighted and self-seeking policies--which have
reflected upon the whole movement. Much like other economic groups, when
their own interest has not coincided with the general interest, they
have frequently put their own interest first.
It is the test of all great popular movements, however, that they show
they possess the ability to pursue a just and generous policy even while
they are hard pressed, provoked by injustice, and maligned. That is the
trial which trade unionism faces in the United States to-day; it is the
example trade unionism must set before it can expect willing acceptance
as a fundamental industrial institution. Unless the union movement
proves itself intelligent, disciplined, and aware of ethical
considerations, a continuance of industrial conflict will be inevitable;
for any practicable policy of wage settlement for industrial peace will
require union participation.
4.--Let us pass now to the economic position of "capital" (the owners of
capital) in the industrial order which uses it (of which they are a
part). In a society where labor works upon the gifts of nature almost
unaided by instruments invented by man and fashioned by previous human
labor, the society must content itself with small numbers or little
product or both. Modern industry has been shaped, perhaps predominantly,
by the effort to support large numbers at a high standard of economic
existence. Production has become greatly subdivided among specialized
groups. In industry to-day, the wage earners of various kinds perform
their tasks with the assistance of such equipment, machinery, and
general organization as will serve to make their labor result in a large
product. The means which make possible this effective employment of
labor in industry are what we mean by the term "capital."[9] The section
of the community which owns and directs the investment of the bulk of
these means has received the name of capitalists.
Almost all the capital accumulated within the United States is
privately owned. Since the beginning of our industrial history the
opportunities for accumulation have been left to individuals and the
capital which industry has used has been provided by private owners. We
have depended upon the personal motives of individuals to persuade them
to refrain from the immediate consumption of some part of the product of
industry which has come into their possession, and to lead them to put
their savings at the further command of industry.
The circumstances which have governed the course and direction of this
accumulation, and the question of the amount of economic cost that it
involved have been the subjects of much capable exposition and of very
violent differences. Much accumulation has resulted from the fact that
industrial or rent incomes have been at certain times distinct surpluses
over the possible consumption of the individuals in receipt of them.
Much has been prompted and maintained by the efforts of men to move
ahead to success and power--that is by ambition and rivalry; much by the
idea that pecuniary success is itself an achievement, a mark of ability
and leadership. The ordinary hopes of the multitude of men, such as the
desire for a secure existence for themselves and their family, and the
wish to figure among their friends as an equal, have been the steadiest
motives of all. Saving is not one of the most deeply implanted habits.
It is a habit that is closely bound up with the qualities of personal
ambition, calculation and the desire for responsibility. That is the
reason why rich men are so seldom very likable. It is the reason also
why those who are the most needy are at times least disposed to save
when they have a chance. And if in the immediate future, the
responsibility for accumulation is to be more widely diffused than at
present, there will have to be a general cultivation of these
qualities--qualities, indeed, most requisite for a complex, mechanical
civilization like our own.
The accumulation of capital, as has been said, enables industry to
utilize such methods of production as result in a high volume of product
for a given expenditure of effort. Much of the hopefulness and energy
which has characterized our industrial life arose out of the belief that
the continuous course of capital accumulation, since it made possible
the utilization of new inventions and improved methods of production,
was preparing the way for a future that would be marked by even a wider
distribution of comfort than men saw around them. Thus it has been urged
that by devotion to industry and by consuming less than was produced,
the time would come when the world would be so well equipped that none
of its workers would have to be in want of the economic essentials of a
satisfactory life. In Mr. Keynes words, "Society was working not for the
small pleasures of to-day, but for the future security and improvement
of the race,--in fact for 'progress.' If only the cake were not cut,
but was allowed to grow in the geometrical proportion predicted by
Malthus of population, but not less true of compound interest, perhaps a
day might come when there would be at last the enjoyment of our labors.
In that day, overwork, overcrowding and underfeeding would come to an
end and men secure of the comforts and necessities of the body could
proceed to the nobler exercise of their faculties."[10]
Under the guiding force of this conviction, and in the United States,
with the extra stimulus of the belief that individual effort was
throwing open vast new resources to the world, the course of
accumulation has been viewed with approval and in the spirit of
emulation.
We, however, have recently been assailed by growing doubts in regard to
the idea of economic progress based upon capital accumulation. We have
witnessed the growth of severe tensions between those who receive the
greatest share of the income from accumulated wealth and the other
groups engaged in production. It is pertinent to inquire into the
reasons for this change of feeling; for, within the sphere of its
operation, any policy of wage settlement must aim to lessen or eliminate
this cause of discontent.
First of all it must be observed that the bulk of the accumulation has
been accomplished by a relatively small number of individuals. If this
concentration of wealth were peculiar to the United States it might be
attributed to the fact that this country has undergone exceptionally
rapid expansion, during which the opportunities for accumulation were
both unusual and irregularly distributed. But the explanation seems to
lie deeper, for the same condition is to be found in all advanced
industrial nations. The opinion may be ventured that it is
characteristic of such industrial arrangements as have prevailed in the
United States, that the tendency towards diffusion of the results of
advances in production (obscured, besides, by the growth of population)
should lag seriously behind the tendency towards concentration.[11]
The condition of inequality of wealth, heretofore a condition of the
process of capital accumulation, is one of the chief causes of the
embitterment of industrial relations. Firstly, it is one of the factors
which tend to the creation of separate group interests. A high degree of
inequality of accumulated wealth leads to a concentration of the control
of the larger industrial enterprises within the hands of a small
section of the community. The interest in high returns from accumulated
wealth appears to be a group interest. And, indeed, if the lag of
diffusion behind concentration passes a certain point it is in reality a
group interest--in the sense of being opposed to the general interest.
Secondly, great inequality of wealth leads to the growth of institutions
incompatible with the purposes of a democracy. These are a cause of
economic antagonism, which has its reflection in industrial relations.
Thirdly, it has evil psychological effects. In a country bred upon the
general ideas of democracy, not even political equality and a wide
distribution of economic necessities and comforts will suffice to
produce general contentment, if a top stratum of the community is
possessed of the social advantages of vast wealth. Few are satisfied
with their lot as long as they see others, often through no qualities of
their own, more satisfactorily endowed with worldly goods. Lastly,
although great inequality of wealth makes possible a high level of
production, it also makes great waste possible.
Thus, grave dissatisfaction surrounds that very process of capital
accumulation which has been regarded as the high road of economic
progress. Grave doubts have arisen as to the ultimate attainment of the
vision at its end. The task is presented of directing and safeguarding
the course of capital accumulation. It is evident that no policy of wage
settlement can, of itself, do a great deal in this regard. Something it
can do. That, it is ventured, should be along the following lines: it
must aim to effect a distribution of the product of industry in which
the return to the owners of accumulated capital does not exceed a point
determined by weighing the following considerations:
First, the service of capital in production, the sacrifice involved in
much accumulation, and the need of assuring capital accumulation, as
discussed above.
Secondly, the evil effects of inequality of wealth as discussed above.
Thirdly, the fact that the health, energy, and intelligence of those
that carry out the work of production are no less important factors in
effective production than capital itself. And that the possession and
use of these qualities by individuals is to a considerable measure
dependent upon their economic position here and now.
These various considerations, it need hardly be said, cannot be weighed
mechanically, but only by the use of the informed judgment.
The policy of wage settlement must, in addition, give indirect
encouragement to the growth of such industrial beliefs and institutions
as will enable the wage earners to participate in the control over the
conditions of production. Only then will the effect of industrial
methods on the welfare of the wage earner receive constant attention,
and the desire of the wage earners for self-improvement be given
encouragement. In these directions, then, the policy of wage settlement
can and should safeguard and direct the course of capital accumulation.
5.--The preceding discussion bears directly upon the next question to be
considered, namely, the present economic position of those who perform
the work of direction in industry. Only one or two aspects of this
subject require attention in this investigation.
It may be remarked, to begin with, that those who own the capital
invested in industrial enterprises thereby possess the most general
powers of control and direction over them. These powers they may
exercise personally or through their agents--but in either case, the
fact of ownership is the decisive influence in the settlement of these
questions in which the wage earners are most interested. The fact that
some of the capital invested in particular enterprises may not carry
with it any rights of control or direction--as for example, the capital
invested in railway bonds, or the temporary borrowings from the banks
contracted by most industrial concerns--does not affect this truth. It
is entirely conceivable that enterprises might be carried on wholly with
the use of such capital as gave no title to control over the conduct of
the enterprise; but at present, the opposite, generally speaking, is the
fact. And as is to be expected the work of direction is dominated
normally by the necessity of earning profit for the owners of the
enterprise--though many other sentiments and motives may and do mingle
with the motive of profit-making. These facts form the basis of two
suppositions, by the aid of which the argument of this book is carried
out.
The first one is to this effect: that if rent incomes (in the sense of
Ricardian rent) are left out of consideration, since they will not be
directly affected by the policy of wage settlement, the product of
industry is distributed in two major forms. These are to wit: that which
is received by workmen in direct return for their labor, which is called
wages; and that which goes to those who own, and therefore govern,
directly or indirectly, the operation of industrial enterprises, which
is called profits. It is hardly necessary to remark that the same
individual may be in receipt of both forms of income. The second form of
income "profits" is a mixed form of income which may be analyzed in
different instances, into very different quantities of the elements
which make it up. This mixed form of income, which goes to the owners of
industry by virtue of their dual connection with industrial
enterprise--the connection of ownership and direction--contains in some
forms of enterprise a large element of what has been called "the wages
of management"; in other forms this element may be almost entirely
absent. So too with the element of "interest" and with the other
elements which may enter into it. Throughout this inquiry the term
"profits" will be used to indicate this mixed form of income.
The second supposition supplies an answer to a question that must be
faced in any attempt to formulate a policy of wage settlement for
industrial peace in the United States. That question is whether it shall
be taken for granted that the desire for private profit will continue to
govern the performance of the tasks of industrial direction. The wage
policy that is developed in the course of this book is based on the
assumption that the large majority, if not all, of the industries which
would be included in it, were it adopted, will remain privately owned
and operated. At the same time, it is by no means outside of current
possibilities that certain of our greatest industries may change over
into some form of public ownership; and that this ownership would be
accompanied either by direct public operation, or very considerable
public regulation of their operation. Therefore, we are led to ask
whether a wage policy conceived on the assumption of private ownership
and control would be applicable to industries under public ownership.
The answer will be different according to circumstances. If the regime
of public ownership should become general, as is contemplated in the
orthodox socialist theory, it is likely that, then, an attempt would be
made to rest wage policy on principles fundamentally different than any
that would be practicable under a regime of private enterprise. On the
other hand, if public ownership should be extended only to a very few
though important industries such as the railroads and coal mines, it is
almost certain that the principles underlying the settlement of wages in
the publicly owned industries would have to be the same as those applied
in the privately owned. The general policy of operation might differ,
however, in other respects. Thus, a policy of wage settlement formulated
on the assumption of private ownership would not become unsuitable in
the event that some industries became publicly owned.
The relations between those who carry out the actual work of direction
in industry and the wage earners have been touched upon already from the
point of view of the wage earners. It has been stated that the policy of
wage settlement should give encouragement to such arrangements as will
enable the wage earners to participate in the control over the
conditions of production. Alongside of this general aim may now be put
one other, which cannot in any way be embodied in the terms of wage
policy, but which should be given a leading place in the calculations of
those who execute the wage policy and therefore possess educative
influence. That purpose is to try, by the educative power of their
position to give vitality to the idea that those who direct industry
have a duty to weigh the public interest in their operations, and to
emphasize the necessity of seeking a basis of cooperation with the wage
earners which will give them all possible chance to find their work
healthy and interesting.
FOOTNOTES:
[3] A. Marshall, Appendix N, "Industry and Trade," entitled
"The Recent Increase in the Size of the Representative
Business Establishment in the United States," has drawn up
some tables on this very subject.
He writes, "The table given below shows that the 208,000
establishments engaged in manufacture in 1900 had increased
to 268,000; but meanwhile the total value of their output
had increased from $4,831 M to $8,529 M: that is, their
average output had increased from 232,000 to 318,000: if we
go back to 1850, when workshops, etc., were reckoned in, we
find the average output of an establishment to have been
less than 4,000 dollars." And again "Industrial
establishments having a less output than 100,000 dollars
accounted for 20.7 per cent. of the whole in 1904; but only
17.8 in 1909. In the same years the share of establishments
with output between 100,000 dollars and 1,000,000 dollars
fell from 46.0 to 43.8, while that of grant businesses with
not less than 1,000,000 dollars output rose from 38 per
cent. to 43."
[4] _Publications of the American Statistical Association_,
Sept., 1914.
[5] A. Marshall, "Industry and Trade," p. 149. See for
analysis of occupations of immigrants, "Report of U. S. Ind.
Commission," Vol. IX.
[6] A. Marshall, "Principles of Economics" (7th edition),
page 206.
[7] In an analysis of the trend toward union amalgamation
published by Glocker in 1915, he concludes that "Instances
in which the self interest of the skilled workers demand
their amalgamation with the unskilled are still rare,
however. If common laborers are admitted in the near future
to unions of other workers in the same industry, they will
be admitted not from self interest, but from more altruistic
motives, from a growing spirit of class consciousness
attended, perhaps, by a correspondingly growing realization
of class responsibility"--"Amalgamation of Related Trades in
Unions." _American Economic Review_, Sept., 1915, page 575.
[8] Under the Kansas Industrial Court Law passed in 1920, no
provision in that direction is made. The Court is instructed
to deal either with organizations or with individuals. It is
likely that the Court, in its efforts to get disputes
settled before they reach it, will find it necessary to
encourage organization. A related question which is bound to
arise sooner or later is in regard to the stand that the
court will take in disputes arising out of attempts to
organize an industry.
[9] It should be observed that the above definition of
capital as the "means which make possible the effective
employment of labor in industry" is a functional definition.
To make the definition good, so to speak, it would be
necessary to enter into an analysis of a complex series of
interactions including a study of the action of the banking
systems, and the methods of industrial finance. To attempt
to state the various forms of capital would involve the same
process--for capital is to some extent a secretion of the
whole industrial organization. For present purposes it is
better to disregard the finer shades of interaction involved
in the process of creation of capital and the provision of
capital to industry important as they are.
It will suffice to take note only of the simpler and most
fundamental aspect of the process. Thus it is not
misleading, for present purposes, to say that the capital
which is at the command of industry in the U. S. at the
present time is the result of accumulation in private hands
of some part of the product of past labor.
[10] J. M. Keynes, "Economic Consequences of the Peace,"
pages 18-20. See also A. Marshall, "Industry and Trade,"
Appendix P headed "Possibilities of the Future."
[11] In the very interesting study made by Prof. Bowley on
"The Change in the Distribution of the National Income,
1880-1913" (Great Britain), page 27, a similar conclusion is
stated.
See also the article of Prof. A. A. Young entitled "Do the
Statistics of the Concentration of Wealth in the United
States mean what they are commonly assumed to mean?" In the
March, 1917, issue of the _Journal of the American
Statistical Association_.
CHAPTER III--THE PRINCIPLES OF WAGES
Section 1. A knowledge of the forces governing existing wage levels
essential in any attempt to work out a policy of wage settlement
for industrial peace.--Section 2. Wage incomes determined by great
number of forces. The three most important and constant among these
stated.--Section 3. These three to be taken up in order. The volume
of the flow of wealth in the country of the worker the first to be
considered. Its relation to wages indirect, as all product is joint
result.--Section 4. The scientific management theories of wages
based on a misconception of the relation between the productive
contribution of labor and wages. These theories merely an
elaboration of one method of wage payment. They have perceived one
important truth, however.--Section 5. The "group-demand" theory of
wages as held by some trade unions, based on a similar
misconception. Valid, sometimes, from group point of view; unsound
from point of view of labor in general.--Section 6. The second
important force determining wages is the relative plenty or
scarcity of the different groups or agents of production. How this
governs the share of the product going to wage earners.--Section 7.
Many important modifying forces to the influence upon wages of
relative plenty or scarcity. The most important
considered.--Section 8. The forces determining the sharing out of
the product of industry summarized. The idea of normal equilibrium
in distribution a mistaken one.--Section 9. A brief analysis of the
factors which determine actual plenty or scarcity of the different
agents of production at any one time.--Section 10. The third
important force introduced--the relative plenty or scarcity of
different kinds of labor. The existence of relatively separate
groups of wage earners discussed. The nature of an investigation of
the principles of wages.
1.--In the preceding chapter, an attempt was made to mark some of the
broader tests which will confront any policy of wage settlement for
industrial peace and to foresee the ends that must be accomplished. An
effort was made to define some of the conditions of industrial peace. To
what extent these conditions are attainable, and how they are to be
sought, remains to be studied. The starting point of further study is a
knowledge of the forces which govern the distribution of the product of
industry at the present time in the United States--that is, a knowledge
of the principles of distribution. Our intention, however, is to
undertake that study only in so far as it is necessary to explain how
wage incomes are determined. Such a partial study of the principles of
distribution with the special purpose of making clear the factors that
govern wage incomes will occupy the next two chapters. They will
constitute a statement of wage principles.
2.--The distribution of the product of industry between the wage earners
and the other groups who share in it is a continuous process in which
each group asserts its own interests and purposes. Wages are settled
through a series of separate bargains between the wage earners and the
owners or directors of industrial enterprises. The outcome of these
bargains, as regards wages, is determined by the interaction of a great
number of circumstances or forces, some of which are relatively more
constant and more important than others. We will begin our study of wage
principles by considering those forces which are relatively the most
important and the most constant.
These have been cogently summarized as follows: "... the volume of the
flow of wealth in the country of the worker; the relative plenty or
scarcity of different agents of production; the relative plenty or
scarcity of different kinds of labor."[12] They may be taken up in the
order stated, at the same time noting the way their action is modified
and complicated by other factors.
One preliminary comment may be admissible. It is to the effect that
there has been in the past a tendency to view the problem of
distribution (and so, of wages) as if it consisted of making clear by
analysis the balance or equilibrium of a few given and unchanging
tendencies--which were deduced from human and physical nature. These
forces furthermore, were frequently held to be universal; the
conclusions based on them have often been likened to physical laws. Such
a view obscures the fact that any analysis of distribution is but a
description of the working of a particular industrial society at a
particular time. To mistake what is a description of a particular
society for a study of the action of physical laws has the effect of
leading men to believe that the present must forever reappear in the
future.
3.--The first factor, "the volume of the flow of wealth in the country
of the worker," was never more under discussion than to-day, when from
all sides demands are heard for the material means necessary to the
realization of desires. As the matter is ordinarily put, the greater the
product of industry is, the more there is for distribution among all.
The truth of this statement seems obvious. Yet in interpreting it into
policy more than usual care must be taken lest it be forgotten that
other things may make a larger contribution to satisfactory living than
an increase in these possessions which make up the flow of wealth.
Instances are by no means lacking of increases of production obtained at
the sacrifice of something more important to human life than the
additional product secured. There is a "mean" here also between labor
and leisure.
All this, however, reads like a lawyer's brief about a simple matter.
The greater the volume of goods and services resulting from the labor of
society, the more there is to share out; and the greater in amount will
the share of the wage earners be, even if their relative share is not
increased.[13]
The volume of production depends upon the quantity and quality of each
and every agent that assists in production, and upon the organization of
the separate powers, and above all upon the progress of invention and of
the industrial arts. It depends directly upon: first, the natural
resources of the country--which are ordinarily summarized in economic
discussion under the term "land"--"by land is meant the material and the
forces which nature gives freely for man's aid, in land and water, in
air and light and heat;"[14] second, the "accumulated provision for the
production of material goods"--capital--which was discussed in the
preceding chapter; thirdly, on the labor of men and women--on the degree
of spirit, skill, energy and intelligence which characterizes that
labor; fourthly, on the quality of leadership which manifests itself in
industrial affairs, and the success with which the elements of
production are brought into well directed cooperation; fifthly, on the
progress of invention and the industrial arts.
The relationship between the volume of production and wages is indirect.
Though it is true that the larger the product, the higher wages will be,
all other forces remaining the same, the connection between them is by
no means simple or direct. That is because the wage earners share in a
product to the making of which other agents contribute. In our present
industrial system work is done under direction, and by the aid of tools
and machinery; it is highly subdivided. It is impossible to determine
the contribution to total production of any group of workmen, or of all
workmen. The product is a joint result in which the part played by any
one group, instrument, or factor of production cannot be traced. Who,
for example, is able to say how much productive activities have been
aided by the invention of the telephone and the growth of the telephone
system? The problem of the distribution of the product of modern
industry is so difficult and so much to the fore because so many
different people contribute in some way or other to the product and have
a claim upon it.
Wage incomes may be affected by changes in the volume of the product, no
matter what the cause or nature of the change. If suddenly some new
chemical fuel were discovered in the laboratory, or some business
efficiency expert were to discover some formula which made motors go
round, the labor now spent in coal mining could be turned to other
tasks. The volume of economic goods produced would be increased. The
product to be distributed would be greater, and wage incomes would rise.
A similar result would ensue if the magic formula of the expert endowed
all workingmen with greater skill and energy. Any addition to or
subtraction from the capacity of any agent of production tends to affect
not only its own income, but that of all claimants. The reward of any
one agent of production, for example, labor, depends not only on its own
part in production, but upon the contribution of all other factors. A
craftsman in the United States may be no abler than his fellow workman
in France, but may receive twice his wage.
This line of reasoning must be qualified in one respect. There is some
competition for employment between the several agents of production.
Their relative efficiency will affect the demand for them, and so will
also affect the share of the product each receives most directly. That
is a phase of the subject that will be considered at greater length at
another point.[15]
4.--Given an industrial society at work like the United States,
producing each year a varied flow of commodities and services, the
question arises as to what determines the share of that flow that goes
to the wage earners. We have already seen that the larger the product
is, the higher wages are likely to be. But what determines the sharing
out? That is the next matter to be considered. First, however, let us
examine briefly two theories of wages which are more or less current in
certain quarters, and which are built upon partial or complete
misunderstanding of the connection between wages and the work actually
performed by the wage earners.
The first theory, or rather group of theories, is that to which some of
the leaders of the scientific management movement have given their
sanction. The central idea of this group of theories is that in the
output of the wage earners, considered either as individual output or as
the output of a small group engaged on a common task, is to be found
the final and just measure of wages. It is frequently assumed in the
course of the reasoning used in support of these theories, that wages
can and should measure a separate contribution which the individual wage
earner makes to production. The positive, although hazy, belief which
ordinarily underlies the scientific management theories of wages can be
perceived in the following quotation from a speech of one of the leading
advocates of the movement. "There are two ways in which wages can be
advanced. One is the natural method, the proper method, the beneficial
method, the one that tends to the uplift of the world. That is to make
the advance depend absolutely on the effort of the worker. When the
worker delivers more, it is perfectly proper that the returns should go
up. In other words as unit costs go down wages can very properly rise,
and they should rise. Under these circumstances, the worker is
tremendously interested in seeing that the unit costs go down. There is
a regular mathematical law here. Only to a certain extent can the unit
cost go down and only to a certain extent can the wages go up.... On the
other hand, when you raise wages without any connection whatever with
the unit cost you inevitably find that the worker takes his bonus in the
form of more leisure...."[16]
At the risk of repetition, it may be remarked that the output of an
individual or a group of individuals is of necessity but a contribution
to a joint product, and is dependent upon many other things besides the
effort of the individual. And, therefore, even if the view that each
individual should get what he produces were found to be acceptable as a
basis for distribution, any attempt to base wages solely upon
considerations of individual or group output must rest on a false
assumption. Any laws or principles for the determination of wages must
reckon with a far wider and more numerous set of considerations than
those taken into account by the scientific management theories of wages.
These can only be understood by a study of the economic facts and
arrangements which govern distribution, and by weighing many questions
of social and economic expediency. To talk about basing wages solely on
the effort of the worker is to ignore the obvious fact that much of the
most laborious work is the worst paid.
The exponents of scientific management have not discovered a law of
wages; they have simply elaborated a method of wage payment. Mr. G. D.
H. Cole has expressed that well. "Clearly, although scientific
management methods may reduce the possible margin or error in
determining piece-work prices, they cannot altogether remove it, and
even if the time that ought to be taken for a job is clearly established
a further complication confronts us. All the time-study in the world
cannot show how much ought to be paid for a job. It can only show at
most the length of time a job ought to take. That is to say, it cannot
determine what is to be the standard of living or of remuneration of the
workers.... This, indeed, is only another way of saying that Scientific
Management has only devised a further method of payment under the wage
system."[17]
The exponents of these theories fell into the error of believing they
have unveiled a law of wages because they grasped one important truth.
That truth is that where the productivity of labor is high, where labor
is efficient, there is a greater chance, all other circumstances being
the same, of securing high wages than when the reverse is the case. Or
as the matter has been put in one of the reports of the U. S. Industrial
Commission (1912-16) "A close causal relationship exists between
productive efficiency and _possible_ wages. Greater efficiency and
output makes _possible_ higher wages in general and better conditions of
employment and labor."[18] (Italics mine). That the scientific
management doctrine of wages consists of nothing more than a method of
wage payment is clearly established by its failure to substantiate in
practice its claims of furnishing a scientific and equitable method of
fixing wage rates. On that point the same Industrial Commission reports
that "In analyzing the wage fixing problem in connection with scientific
management two matters are considered; one--the "base-rate" sometimes
called the day wage, which constitutes for any group of wage earners the
minimum earnings or indicates the general wage level for that group, and
two--added "efficiency payments" which are supposed to represent special
additional rewards for special adjustments. The investigators sought in
vain for any scientific methods devised or employed by scientific
management for the determination of the base-rate, either as a matter of
justice between the conflicting claims of capital and labor, or between
the relative claims of individual and occupational groups."[19] As a
method of wage payment, of course, the method of scientific management
must be judged by its good and bad effects like other methods of wage
payment. That, however, is not a task which need detain us.
5.--The other group of wage theories that is based upon a similar
misconception of the relation between the productive contribution of
labor and wages cannot be so briefly dealt with. This is the group of
theories which has been named "the fixed group demand theory" and it has
figured prominently in most discussions concerning restriction of
output. This group of theories also rests upon the assumption that there
is a fixed relation between the productive contribution of a group of
workmen and the wages received by these workmen.
The fixed group demand theory has been summarized as follows: "The
demand for the labor of the group is determined by the demand for the
commodity output of the group. The community--wealth and distribution
remaining the same--has a fairly fixed money demand for the commodities
of a group. It will devote about a given proportion of its purchasing
power to these commodities, that is, if the prices of the group
commodity are higher, it will buy less units and vice versa, but expend
about the same purchasing power. Therefore, the demand for the labor of
the group; profits remaining the same, is practically fixed, and
increasing the group commodity output means simply conferring a benefit
on the members of other groups as consumers without gain to the group
itself. Therefore, to increase the efficiency and output of the group
will not increase the group labor demand, and group wages. Decreasing
the efficiency and output of the group will not decrease the group labor
demand and the group wage."[20] Or in simpler terms, that the community
will want a relatively fixed amount of the product which the group
helps to produce. And thus if the group reduces the time needed to make
that product, it will not benefit and may even be harmed, because the
services of some of its members will be no longer needed. And, on the
other hand, that the members of the group will not be harmed by keeping
the products of its labor scarce and high.
This line of reasoning, as held by some trade unionists, is valid on
occasion, from the point of view of particular groups of
workmen--especially during short periods. It is a fact that in many
cases workmen employed in particular industries or occupations, may not
be benefited and may even be injured by a display of extra effort or by
the adoption of a new and more efficient method of production. The
benefit of that extra effort or new method may not go _directly_ and
_immediately_ to the group which makes the effort or utilizes the new
method--it may not go to that group at all except in so far as they may
be consumers of their own product.
The question of an adequate supply of new houses is at present a vexed
one and is likely to remain so for some years. Therefore it makes a good
illustration of the difficulties involved in the question under
discussion. Suppose it were possible for all the labor employed in the
construction of houses to increase their effort and accomplish, let us
say, a third again as much as at present. Would that increase of effort
repay these workmen--would they receive higher wages? It is not a
matter that can be argued with certainty. The expense of construction
would fall rapidly, unless combination among the firms supplying
building materials or among building contractors prevented such a fall.
In the event that the cost of construction fell, there can be little
doubt that more construction would be undertaken. Would the increased
demand for construction lead immediately to an increase in demand for
building labor sufficiently great to give employment to workmen who
would not be needed on the old construction because of the increase in
individual output? Would it be so great as to mean a more than
proportionate increase in demand for building labor and a consequent
rise in wages? Would its effect be felt immediately or only after the
passage of some months, during which a number of the building laborers
would be without employment? What will be the effect on employment two
years hence?
Looked at in this light, the skepticism of trade union groups in regard
to appeals for an increase of effort is easy to understand. It arises
from the simple desire of the group to protect their position in
industry by the only means they possess. It is an attitude strengthened
in many cases by the memory of weeks without work and efforts ignored.
It is a bitterness, like to others, which men inherit from experience.
Yet it can be stated with emphasis, that from the point of view of the
wage earners as a whole, and of all of society, that any consistent
adherence to this group demand theory of wages would be mistaken and
unsound. The use of improved methods of production by any group, the
more efficient performance of their work, may not result in a quick fall
in the price of the product they are engaged upon, though sooner or
later it usually does. The fall in price may or may not lead to rapid
increase in the demand for the product of the group sufficiently great
to give employment to all its members, or increased employment; although
that result has usually appeared in the long run also.
The fundamental fact is that the demand for the product of labor is
ordinarily subject to indefinite increase. If labor is economized in one
direction, the power dispensed with will be utilized in another
direction. The community income of economic goods is a flow. Under our
present system of division of labor each individual uses his share of
the product (which he measures in terms of money) to buy the particular
commodities, or to make the particular investments he desires. If he
gets some commodities cheaper than formerly, he will buy more, or buy
commodities he had not been able to buy hitherto or increase his
investments. The demand of the community for the product of labor in
general will ultimately keep pace with the supply of the product.
Economies in production throughout the whole industrial field mean that
there will be more commodities to be shared out.
Thus, in spite of the fact that there may be, and often are, serious
breaches of interest between particular groups of wage earners and
society as a whole on the matter of increased production, there can be
but one sound policy for labor as a whole. That is to strive to increase
production up to a point where further effort would entail a sacrifice
of welfare more important than that which the extra product might
represent.
Such general theoretical propositions as the above, however, will never
be sufficient to persuade particular groups of wage earners to take a
different view of the interests involved. It is easy to understand
Carlyle's contempt for the smug complacency with which such propositions
have often been put forward, when he wrote, "New Poor Law: Laissez
faire, laissez passer! The master of horses, when the summer labor is
done, has to feed his horses through the winter. If he said to his
horses: 'Quadrupeds, I have no longer work for you; but work exists
abundantly over the world: you are ignorant (or must I read you
Political Economy pictures) that the steam engine always in the long-run
creates additional work? Railways are forming in one quarter of this
earth, canals in another, much cartage is wanted; somewhere in Europe,
Asia, Africa and America, doubt it not, ye will find cartage, and good
go with you!' They with protrusive upper lip snort dubiously;
signifying that Europe, Asia, Africa and America be somewhat out of
their beat: that what cartage may be wanted there is not too well known
to them. _They_ can find no cartage. They gallop distracted along
highways, all fenced in to the right and to the left. Finally under
pains of hunger, they take to leaping fences; eating foreign property,
and--we know the rest."
The reasons are plain. First, because the fixed group demand theory is,
after all, only one variation of the art of monopoly--though a variation
in regard to which special conclusions may be drawn. Therefore, as long
as monopoly is widely practised particular groups of wage earners will
be likely to take advantage of whatever opportunities for monopoly may
present themselves; even if it can be proved that the policy pursued
injures the wage earners as a whole more than any other industrial
group. Short-sighted selfishness will always arise in an atmosphere of
distrust. If the wage earners, for example, believe that the product of
their increased effort will serve but to add to the profits of rings or
combinations controlling prices, they will not make that effort. They
must be able to see that conscientious work really does contribute to
the general good. And second, because at times, the general interest in
effective production can only be served at the direct and serious
expense of particular groups of wage earners. Such a situation arises,
for example, when a skilled craft is faced with a revision of its
processes that eliminates the need for skill, and results in the
lowering of the wages of the group. This is a common event.
Up to the present, such conflicts between particular interests and the
general interest in effective production have been solved by a trial of
economic strength, and by time. The viewpoint of the wage earners is
clearly put in a statement by the National Organizer of The Transport
Workers Federation (Great Britain) before the Court of Inquiry held upon
the subject of the wages of the transport workers. He maintained "that
the industry ought to carry to a greater extent than it had done
hitherto the responsibility for the unemployment that was peculiar to
it. He had always been quite frank with the employers. If they wanted a
ship speedily dispatched he would not do it, if that meant that his men
would be thrown out of work."[21] That, however, is a method which
results ordinarily either in a sacrifice of welfare or production, or of
both. The worst results incident to these conflicts could often be
avoided by making them the subject of joint discussion by all those
whose interests are directly involved. Discussion might lead to working
compromise which would protect the wage earners against too great or too
sudden loss. Even under the best arrangements, however, such conflicts
of interest will be far from easy to resolve satisfactorily; they will
remain in the words of Mr. Cole "a question, not of machinery, but of
tact and temper."[22]
6.--We may now turn to the main question in hand. What forces do govern
the sharing out of the product of industry in the United States to-day?
What determines wage incomes? So far we have only examined the general
proposition that the larger the product, the higher wages are likely to
be, other things remaining unchanged.
The relative plenty or scarcity of the different groups or agents of
production is a constant and important force in the distribution of the
product of industry. From the perception of its significance, spring
many of the loose statements of the action of "supply and demand," which
are ventured as complete explanations of the wage situation. It is not
possible to give a simple explanation of the part which relative plenty
or scarcity does play in the determination of wages. For other forces
which affect distribution act simultaneously with it, and all
intermingle their results.
The influence of relative plenty or scarcity (to use an elliptic phrase)
upon the outcome of distribution is easily understood if it is kept in
mind that the distributive process is one of repeated negotiation and
bargain. In this process each group or agent strives to get a high
return for its services in production. There is a steady, though
imperfect competition between the various units of each and every group
or agent for employment; there is likewise a steady, though imperfect,
competition for the use of the various units of each and every group or
agent. These conditions require no elaboration.
It is in this process of competition for employment, and competition to
employ, that the return to labor--wages--is decided, simultaneously with
the return to each and every group or agent. The return to labor will be
high if the employment of the ordinary worker, _as part of a productive
organization_, adds considerably to the total of market values produced.
For if the ordinary wage earner, by his work, makes possible a
considerable addition to the market values produced, competition among
employers for men will lead to the payment of high wages, and vice
versa.
Now this last result will be largely determined by the relative plenty
or scarcity of the various agents of production. If the productive
organization has at its command a plentiful supply of capital; if in the
community there are many men possessed of a high order of business
ability; if then, labor for the commoner tasks of production is
relatively scarce, the work of the ordinary wage earner will be a means
of adding considerably to the total of market values produced. Or, as it
is sometimes put, each use of labor will be an important use. Labor will
be in great demand, and wages will be high. If the opposite conditions
exist, the outcome will be reversed. In other words, there is a tendency
for work to be highly valued when the number of men available for doing
it is small and when the work is performed with the aid of highly
perfected machinery, in a community in which able business men are
plentiful. Each laborer will find his services easily sold for good
wages; for his labor will be an important aid to production.
A word of warning should be added to this summary conclusion.
It does not follow that because the wage incomes of the individual
laborers are high, the total relative share of the product which takes
the form of wages will be high. The wages received by individual wage
earners are no indication of the share of the product received by all
wage earners. That depends not only on the return to each wage earner,
but also on the total number of wage earners, and upon the number and
return to each of the other agents of production. In China, for example,
where most work is done by simple hand labor, wage incomes are low. But
because the number of wage earners is great, and the amount of capital
used is very small, the total share of the product that takes the form
of wages is high. The opposite is true in the United States and England.
There individual wage incomes are relatively high. But because of the
great amount of capital employed, and the great call for business
direction, it is doubtful whether much more than half the total product
is received by wage earners.[23]
7.--Moreover, any statement as to the influence of the relative scarcity
or plenty of the various groups or agents of production, as unqualified
as that just made must be incorrect. It gives no clew to the importance
of interacting factors. Here, as elsewhere in economics, many separate
causes meet to produce a result. The disentanglement of their effects is
frequently so difficult as to make more than an approach to the truth
possible. The part each cause plays often remains somewhat obscure. Yet
without reckoning with these interactions not even an approach to the
truth is possible. So it is necessary to proceed now to a brief study of
the other influences which play a part in distribution; and which lead
to results somewhat different from those just described.
First, account must be taken of the fact that the various groups or
agents of production are not entirely complementary, as has been assumed
up to this point. Their outstanding relation--that of cooperation in the
production of a joint product--has already been studied. But there is
also a measure of genuine competition between them for the field of
employment. An unusually clear and detailed example of the nature of
this competition is to be found in the report of the commission on "The
Decline of the Agricultural Population in Great Britain." To quote "Many
expedients, other than actually stopping the plow, were adopted to
reduce the labor bill. But while manual labor has no doubt been
economized to some extent by curtailing some of the operations which
require it, the main cause of reduction is undoubtedly the extended use
of labor saving machinery. This is referred to by the large majority of
correspondents in all parts of the country. With the exception of the
self-binding harvester, which was introduced into this country in the
eighties, few machines for the performance of a specific manual
operation have perhaps been invented since 1891 (unless milking
machines, shearing machines, and perhaps potato diggers come within that
category), but whereas twenty years ago labor saving machinery was fully
employed by comparatively few, it has now become almost universal on all
holdings of sufficient size to make its use practicable. The
substitution of mechanical for horse or hand power, for mixed machinery,
e.g., threshing machines, chaff cutters, pumps, etc., has taken place
largely, although it has made comparatively little progress for tractive
purposes. It may indeed, be questioned if steam is so largely employed
in the cultivation of land as it was twenty years ago. But the
displacement of manual labor arising from the greatly extended use of
drills, horse hoes, mowers, binders, manure distributors and the like
must have been in the aggregate very great and probably to this more
than to any other single cause the reduced demand for farm laborers may
be attributed."[24] As Professor Marshall has remarked of such cases of
competition for employment between labor and capital as this, the
competition is in reality between one kind of labor aided by much
waiting, and another kind of labor aided by little waiting.
Nevertheless, the fact of competition between the various groups or
agents is a fact of no mean importance in distribution. As has already
been suggested, the efficiency of the wage earners plays a part in
determining their field of employment in this competition for
employment.
Secondly, the simpler statements of the action of the factor of relative
plenty and scarcity, such as are represented by the marginal
diagrammatic expositions familiar in economics, obscure the fact that
distribution is a process in which human wills are actively engaged. The
constant assertion of will is a real force in the working out of
distribution. Each group with a claim to a share of the product, by
organization, agitation, and other tricks of the market place strives to
forward its interest. It explores, by pressure upon the price mechanism
and otherwise, the full extent of the dependence of the industrial
system upon it or its product, as when monopolists control prices, or a
trade union strikes to enforce a wage demand. Each group or agent tends
to favor or resist changes in laws, industrial methods, and institutions
according as it expects to be benefited or otherwise by the change. This
may be seen in the discussions surrounding the introduction of the eight
hour day, or concerning the limitation of immigration. However, it is a
careless exaggeration to state, as is frequently stated, that the
attitude of groups to economic legislation must inevitably be determined
by their economic interest.
Every part of the industrial system yields at some time and occasion to
the impact of the human will. Even changes in the arts of production may
result therefrom, as is well exemplified in Mr. Clay's analysis of the
way in which the standard of life of the wage earners may exert an
influence over wage rates.... This conception of a standard of life,
though fluctuating, is a relatively fixed thing in the flux of forces
determining distribution. The workman, by combination tacit or explicit,
fixes it and his employer adjusts production to it. The employer will do
all in his power, usually with success, to secure an increase in output
in return for every increase of wages, and where the local standard
compels him to pay higher wages than his competitor in other districts
to extract an amount of work correspondingly greater.[25] Or, take the
hope entertained by the advocates of the living wage, that its
enforcement would produce a better type of management in those
industries to which the legislation is applicable.
It is characteristic of the present industrial situation that no group
should rest quietly under the dictation of what it is told is economic
law or necessity. Given its way, each group tests anew the habits and
arrangements by which it is constrained. Every time an industrial method
is modified, the agents which share in distribution strike a slightly
new balance. The direction of the stream of product changes with every
modification of its banks. Some of these modifications occur so
unexpectedly that they are not to be found upon the maps. The pilot, as
Mark Twain said of the Mississippi, must carry the conformation in his
head.
Thirdly (this is usually stated as a limitation of the precision of
economic analysis), such a simple analysis of the action of the factor
of relative plenty or scarcity as has been given, takes no account of
the existence of certain human traits and qualities. As a matter of fact
each group or agent of production receives, not what it must receive,
but rather what it manages to secure in the higgling of the market.
Ignorance of the state of the market plays a part in distribution. A
sense of fairness plays a part, as when an employer pays wages higher
than are current because his business is prosperous. Anxiety plays a
part, as when the fear of unemployment leads a man to accept a wage
below that which he might have asked and secured if he had some money to
fall back upon.
Lastly, changes in distribution resulting from a change in the relative
plenty or scarcity of the various groups or agents of production may, in
turn, cause further changes in the actual state of plenty or scarcity;
or may bring about changes in any of the other forces which affect
distribution. For example, it is conceivable that an increase in men's
wages in certain industries (due, let us say, to an improvement in
productive methods) should be the cause of a withdrawal of a certain
amount of juvenile labor from employment in these industries. This
withdrawal might in turn lead to an increased demand in those industries
for adult labor, and so in turn affect the distributive situation. The
process of distribution is a process in which few changes can occur in
any direction, without these changes in their turn giving rise to
further changes.
8.--The foregoing exposition of the forces determining the share of the
product of industry that goes to the wage earners can be briefly
summarized. The process of distribution is carried out mainly by the
action of competition; it is marked by active and stubborn
self-assertion on the part of all groups which share in the product. One
of the most important and constant factors in the determination of the
outcome as regards wages is the relative plenty or scarcity of the
various groups or agents of production. For the contribution made by the
ordinary worker, _as a part of a productive organization_, to the total
of market values produced, is largely settled thereby. However, other
human qualities besides those which are ordinarily considered as to be
active in the competitive process figure in the distributive outcome.
Furthermore, changes in distribution, brought about by any other cause
may in turn modify the relative plenty or scarcity of the various groups
or agents of production, and thus result in further changes. And lastly,
since the distributive situation at any given time, is dependent upon
human arrangements, the idea that underlying all distributive action,
there is a tendency to approach a point of "normal equilibrium" must be
rejected. For human behavior is frequently directed to produce change,
not repetition. The better informed that human beings and communities
are of the consequences of their actions, the stronger the tendency
mutually to control and adjust them for defined purposes. Therefore, the
idea that the distributive situation at any given time is directed to a
point of rest or equilibrium is incorrect. Many diverse tendencies, some
of long standing, some of newer birth, act to produce future results
different from those of the present or past. The concept of normal
equilibrium is inadequate to account for the distributive situation at
any given time; it is misleading with regard to prospective policy.
9.--The preceding sections were devoted to an explanation of the manner
in which the relative plenty or scarcity of the various groups or agents
of production influenced the sharing out of the product of industry, and
of the interactions to which this factor was subject. It may now be
asked what governs the actual state of relative plenty or scarcity of
the various groups or agents of production. No answer could be returned
to that question, however, without undertaking a far-reaching
investigation of a great number of separate conditions and tendencies.
The task is far beyond our present opportunity. It is worth while,
however, for present purposes, to delimit the task sharply, and to
attempt a brief enumeration of the most important of the conditions
which determine, on the one hand, the need of the productive system for
labor, and, on the other hand, the supply of labor--that is, of the
relative plenty or scarcity of labor.
The conditions which govern the need of the productive system for labor
may be summarized as follows: Firstly, the consumption habits of the
community, by which is decided the direction in which the productive
powers are employed; secondly, the state of the productive arts, which
governs the manner in which the various agents of production are
combined for purposes of production; thirdly, the available supply of
the agents of production, other than labor. Each of these are in return
governed by a complex set of forces.
The conditions determining the supply of labor may be summed up under
two headings: Firstly, "the state of knowledge, and of ethical, social
and domestic habits."[26] Secondly, the tide of immigration and
emigration. The conditions which are summarized under the first heading
govern the supply of labor in many different ways. They govern the
length of the working day; they settle the regularity of work. They
determine the number of the members of the family that seek work. They
regulate the ages of entrance into industry and retirement from
industry. They tend to govern the rate of growth of the population--both
through the birth and the death rate. It should be clearly understood,
however, that many of these habits or conditions are themselves, in a
measure, a function of the level of production and of earnings. For
example, the state of knowledge within a community is to-day very
considerably affected by the financial support of education--by the
amount the community can (as well as does) spend upon it.
The importance of immigration and emigration is firstly, the addition or
subtraction thereby made to or from the supply of labor, and, secondly,
the influence of the immigrants upon those habits of the community,
which in turn affect the supply of labor.
10.--The third of the forces quoted earlier in the chapter, as among
those which play a constant and important part in the determination of
wages, is the relative plenty or scarcity of different kinds of labor.
The statement of this force acknowledges the existence of facts which up
to this point have been barely recognized. It calls attention to the
existence of considerable differences in the levels of earnings of
different groups or kinds of labor. It suggests also that the relative
plenty or scarcity of the different kinds of labor is the chief
explanation of these wage differences. We shall investigate at some
length the causes of these differences in the next chapter. Before going
on to that subject, however, it is well to trace out the connection
between the idea of "a general rate of wages" as it has been held, and
the existence of different wage levels.
The idea of a general rate of wages, as it appears in economic theory,
rests upon certain broad assumptions. One of the most important of
these is that there are no "differences of inborn gifts," which would
lead to a limitation of the flow of labor into the upper grades, and
thus lead to a separation of grades. A second important assumption is
that of complete mobility of labor--no obstacles of habit, expense or
ignorance to retard the flow of labor from place to place, or from
industry to industry. A third assumption is the absence of combination
among the workers. A fourth is that of equality of opportunity among the
wage earners; and the absence of barriers of race, religion or sex.
Granted these assumptions, the tendency to equality of earnings for
labor demanding equal skill and effort and performed with equal
efficiency is established. Competition among the workers for employment
and among the employers for workmen would bring this about. Such
differences of wages as would exist would arise from differences in the
nature of the work performed. Thus Adam Smith wrote that "in a society
where things were left to follow their natural course, where there was
perfect liberty, and where every man was perfectly free both to choose
what occupation he thought proper, and to change it as often as he
thought proper" five circumstances would explain "a small pecuniary gain
in some employments, and counter balance a great one in others." These
in his words were: "First, the agreeableness or disagreeableness of the
employments themselves; secondly, the easiness and cheapness, or the
difficulty and expense of learning them; thirdly, the constancy or
inconstancy of employment in them; fourthly, the small or great trust
which must be reposed in those who exercise them; and, fifthly, the
probability or improbability of success in them."[27] All such
differences would be such as "equalize the attractiveness of
occupations" and would be "equalizing differences."[28]
If these assumptions were realized in fact, it would be correct to view
the problem of wages as the study of one set of relationships that
governed a basic level of wages--called the general rate of wages--with
purely supplementary studies of the circumstances governing equalizing
differences. The problem of wages would be a study of forces which were
uniformly influential in relation to the wages of all labor. For all
wages bargains would be governed by them.
In truth, however, practically none of the assumptions underlying the
theory of a general rate of wages are perfectly realized in the United
States to-day, and some of them stand in almost direct opposition to the
fact. It has come about, therefore, that different kinds of labor have
relatively independent economic fortunes. The forces which govern
distribution do not effect them equally. Facts and circumstances which
enter into the determination of the level of earnings of one kind of
labor may not affect the level of earnings in other groups. The
differences between the level of earnings of the various groups cannot
be explained entirely as "equalizing differences." The "perfect liberty"
of choice of Adam Smith does not exist.
Therefore, an investigation of wage principles requires study of two
sets of forces and relationships. Firstly, of the forces which govern
the outcome of distribution as between each and all of the labor groups
and the other agents of production.[29] And secondly, of the causes of
the formation of relatively separate groups of wage earners, and of the
forces which govern the differences of wages between them. The first set
of these distributive relationships has been the principal subject of
this chapter. The other set will be the principal subject of the
following chapter. Any policy of wage settlement must be based upon a
knowledge of both sets.
FOOTNOTES:
[12] H. Clay, "Economics for the General Reader" (English
edition), page 333.
[13] See A. C. Pigou, "Wealth and Welfare," page 20.
[14] A. Marshall, "Principles of Economics" (7th edition),
page 138.
[15] See pages 56-8, this chapter.
[16] Address of Mr. Harrington Emerson at the National
Conference of the "Society of Industrial Engineers and
Western Efficiency Society" on labor problems.
[17] G. D. H. Cole, "The Payment of Wages," page 67.
[18] Final Report of the Committee on Industrial Relations
(1912-16). Report signed by Commissioners Manly, Walsh,
Lennon, O'Connell, and Garrettson--the section on scientific
management stated to be based on an investigation conducted
by Frey, Valentine, and Hoxie, page 128, Vol. I.
[19] _Ibid._, Vol. I, pages 131-2.
[20] R. F. Hoxie, "Trade Unionism in the United States,"
page 162.
[21] London _Times_, Feb. 7, 1920.
[22] G. D. H. Cole, "Payment of Wages," page 30. Discussion
of the speeding up question. The best analysis of the
problem created by the introduction of new and simplifying
machine processes in skilled trades is to be found in a
volume called "Labor, Finance, and the War," Report of the
Committee of Investigation (1917), The Econ. Section,
British Assn. Advancement of Science. In the same volume
there is a careful analysis of the whole question of
limitation of output. See also the chapter called
"Unemployment" in Lord Askwith's "Industrial Problems and
Disputes."
[23] See A. L. Bowley, "Distribution of Income in the United
Kingdom Before the War."
[24] Report of the Commission on the "Decline of
Agricultural Population" (Great Britain), 1906, page 14, CD
3273.
[25] H. Clay, "Economics for the General Reader," pages
237-38. See also Essay by the same author entitled, "The War
and the Status of the Wage Earner" in a volume entitled,
"The Industrial Outlook" for a more extensive analysis of
the part played by the standard of life in fixing wages.
[26] A. Marshall, "Principles of Economics" (7th edition),
page 642.
[27] Adam Smith, "Wealth of Nations" (Cannan's Ed.), Book I,
pages 101-2.
[28] F. W. Taussig, "Principles of Economics" (Revised
Edition), Vol. II, page 124.
[29] The phrase "each and all of the labor groups" is used
to indicate that the level of earnings of all the labor
groups is determined largely by forces which affect them
greatly (those examined in this chapter), and yet that the
determination of the level of earnings of each group is
something of a separate process--due to the fact that the
suppositions underlying the idea of a general rate of wages
are not fulfilled.
CHAPTER IV--PRINCIPLES OF WAGES
(_Continued_)
Section 1. We have next to examine the causes of formation of
relatively separate groups of wage earners.--Section 2. What is
meant by a "relatively separate group"?--Section 3. The causes of
the existence of these groups in the United States to-day.
Inequality of natural ability; inequality of opportunity;
artificial barriers. All these contradictory to assumptions behind
theory of general rate of wages.--Section 4. Trade unions another
factor in the formation of relatively separate groups. Indirect
effects in opposite direction.--Section 5. Each of these groups has
a relatively independent economic career. There are a series of
wage levels, all of which are governed to a considerable extent by
the same forces.--Section 6. The way in which the relative plenty
or scarcity of each kind or group of labor affects its wages. Other
forces play a part also.--Section 7. The nature of wage
"differentials."
1.--We have next, therefore, to look at the causes which lead to the
maintenance of relatively separate groups of wage earners, and then at
the forces which govern their relative levels of earnings.
2.--First of all let us make clear some of the characteristics of the
relatively separate groups of wage earners in the United States to-day.
They vary greatly both in size and in kind. They are apt, however, to
be conceived as similar because of the force of logic. It is not
entirely satisfactory to classify them either as horizontal groups
(having reference to their position in the scale of skill, or of
society) or as vertical groups (having reference to their separation by
industries). For the position of certain groups may be due both to the
influence of those forces which bring about horizontal divisions, and of
those which bring about vertical divisions. Such, for example, is the
position of a craft which requires a measure of education and training
which those who are placed by circumstances at the bottom of the
industrial scale cannot easily get, and which besides it is difficult to
enter because of trade union regulations.
Marshall has described the situation in England in terms that roughly
fit the facts in the United States also. He suggests that the different
occupations may be thought of "as resembling a long flight of steps of
unequal breadth, some of them being so broad as to act as landing
stages." "Or even better still," he writes, "we may picture to ourselves
two flights of stairs, one representing the 'hard-handed industries' and
the other 'the soft-handed industries'; because the vertical division
between the two is in fact as broad and as clearly marked as the
horizontal between any two grades."[30]
The position of any relatively separate group is usually to be accounted
for only as the result of many forces, each of which has some effect
upon the rest. For example, barriers of custom or on vested right may
limit the field of employment for women. This would tend to establish
one level of earnings for women, and a different one for men. As a
result women might find it harder to get the training necessary to
enable them to compete with men. And so the interaction of causes would
proceed.
So much in the way of preliminary remark upon the characteristics of the
relatively separate groups of wage earners in the United States to-day.
3.--Among the causes which account for the existence of these groups
there are some which if they stood alone would merely modify the
applicability of the idea of a general rate of wages.
Such, for example, is the fact that the wage earner's knowledge of
existing opportunities for employment is limited. Considerable
discrepancies of wages for the same work may arise; although the
facilities for the spread of information regarding wages has greatly
improved, especially in the more skilled trades. Then there are, also,
various expenses of removal, both material and psychological, such as
are involved in the shifting of a family from the city in which it has
long been established.[31] There are, also, the handicaps and hazards
attached to the learning of a new job or trade even though the new job
holds out hopes of considerably better wages than the old one. All such
facts as these--for but a few examples have been chosen from among
many--however, are reconcilable with the theory of a general rate of
wages. They are but minor qualifications of a broad general principle.
Other facts challenge that theory more seriously. They really do point
to the existence of relatively separate groups of wage earners, each
with an economic career somewhat independently determined.