to create an ordered scheme of wage relationships by maintaining
existing differentials would be confronted. Claims will constantly be
presented by particular groups for some improvement in their economic
position. These claims could not be disregarded merely on the score that
they contravened the scheme of established differentials. The issue that
would arise is clearly exemplified by statements made in the course of
two of the most important industrial conflicts that occurred in England
of recent years. "We claim," the Secretary of one of the Shop
Committees of the Molders' Union wrote in defense of the demand of his
union for differential treatment under an award made for the whole of
Engineering Trades--which demand provoked the molders' strike, "we claim
that our work is totally different in many ways from the other
departments in the engineering industry. It is arduous, dirty,
dangerous, hot, unhealthy, and highly skilled, and we claim separate
treatment on these grounds. There is no other department in the
engineering industry with so high a percentage of sickness or
accidents.... You mention the employers' attitude towards the molders'
application--a refusal to grant to molders any separate consideration
because other classes of workers would also expect it. To me such an
attitude is both unfair and untenable. If the molder can prove that his
conditions of working are vile, dangerous and unhealthy, it is surely
fair to ask for a proper recompense for such work...."[137] And consider
this extract from one of the reports of the Coal Industry Commission,
signed by six members of the Commission. "It will, however, be said that
desirable as may be an improvement in the miners' conditions, the
industry will not bear the cost of a reduction in hours, even if the
aggregate output is, by an increase in numbers and, therefore, in the
wages bill restored to its pre-war level, without involving a
considerable advance in the price of coal, with possible adverse
effects on our export trade, on manufacturing industry generally, and on
the domestic consumer. We have to observe that if the improvement in the
miner's standard of life is really required for the greater efficiency
of the industry itself, or in the national interest, the fact that it
might involve a temporary increase in the price of coal would not be
conclusive against it. Moreover, if hours of labor have been reduced in
other industries, and if the standard of life has been advanced among
other sections of the community, it would be unsuitable to withhold a
similar advance from the miners, merely because the others have got in
first."[138]
In short, under any scheme of wage relationship based on the
preservation of existing differentials, it could not be established in
the face of any claim that the relative position of a group was
determined either by consideration of justice, or by implacable
necessity. Therefore, that scheme would not receive the constant and
widespread support requisite to its successful operation.[139]
So far then, in this chapter, two conclusions have been reached.
Firstly, that the course of wage settlement in each industry or
occupation cannot be a process entirely independent from the course of
wage settlement in every other industry and occupation. Secondly, that
although the first step in the establishment of any scheme of wage
relationship is the acceptance of existing wage levels and
differentials, the policy must provide for the reconsideration of these
differentials in the light of affirmed principles; with the aim of
gradually evolving in industry an ordered scheme of wage relationship,
upheld by common consent to the principles on which it rests.
4.--Thus we are put under the necessity of attempting to formulate
principles or standards by which all claims made by groups of wage
earners for reconsideration of existing wage differentials could be
judged. This is not a task to be lightly undertaken. Nor is it to be
expected that such clear principles of wage relationship can be
elaborated as to escape the necessity of deciding many claims by an
appeal to compromise and by taking refuge in a general sense of equity.
All that it is hoped to do is to suggest certain lines along which a
satisfactory formulation of the required principles of wage relationship
may be sought.
It might be possible gradually to construct such an ordered scheme of
wage relationship as has been declared essential to industrial peace by
applying to successive wage controversies, as they arose, two central
doctrines. These doctrines are: Firstly, the doctrine of the unity of
the wage income and of the wage earners--by which is meant that the
wages of all groups should be regarded as part of one general wage
income, to be shared out among all wage earners in as nearly equal
proportions, as is practicable, without special favor to any one. And,
secondly, what may be called for a lack of a better name, the doctrine
of special reward--by which is meant, that the wage differentials
between the standard wage levels of different types of labor should be
regarded as special rewards, given in order to make it reasonably
certain that industry will be provided with at least the existing
proportion of the more skilled grades of labor, and to make it
reasonably certain also that the more arduous, irregular, dangerous and
disagreeable work will command the service of as much labor as at
present.
It should be observed, first of all, that neither of these two
doctrines upholds the rights of particular groups of wage earners. They
aim to bring all wage earning groups to perceive that they are part of a
larger whole; they emphasize the fact that the wages of each group are
what they are, more because the total wage income is what it is, than
because of the special type of work performed by the group. They,
however, recognize the necessity of giving extra reward for the training
and skill or natural ability required for particular kinds of work, for
more than common danger or disagreeableness incurred in the performance
of particular kinds of work, and the like--in short, for all those
factors which elevate a job above what is called common labor.
As an applied doctrine, the doctrine of the unity of wage income and of
the wage earners means that the same wage should be paid throughout
industry for work which requires approximately the same human qualities,
and which makes approximately the same demands upon the individual. The
common effort involved in production is emphasized, rather than the
differences between the work performed by workers in different parts of
the field of production. As an applied doctrine, the doctrine of extra
reward means that certain groups of wage earners should receive higher
wages than other groups, because the work they perform is deemed to
require considerably higher individual qualities or talents, or to make
considerably greater demands upon the individuals engaged upon it.[140]
The extra reward should not be regarded primarily as an ethical right;
but rather as a payment to ensure the development and exercise of those
higher qualities and talents required in the performance of the more
skilled industrial tasks, and to ensure also the performance of the more
arduous, irregular, disagreeable, and less desirable industrial tasks.
It is a recognition of the fact that the spirit of serving without
direct reward is not a sufficiently strong and constant motive to
persuade men to make the special efforts, or to undergo the special
disadvantages required for some kinds of work. It is an incentive to the
development of those abilities and talents which are relatively scarce
in industry; it is also an incentive to the undertaking of those tasks
which the run of men, at any given time and place, regard as unusually
difficult or undesirable. The extra reward for different kinds of work
which are judged to require for their performance qualities equally
difficult to secure, and which subject individuals to the same hardships
should be the same. The test of the special reward must be in any
particular case, the amount necessary to secure the performance of the
work in question.
The conscientious and consistent application of these two doctrines in
settlement of wage controversies which involve the reconsideration of
established differentials should result in the gradual building up of an
ordered scheme of wage relationship, such as is sought. This scheme
would rest upon fairly widely held ideas as to the most suitable basis
for wage differences. It would not make greater call upon the human
sense of fairness than must be made by any plan which hopes to secure
industrial peace by getting all parties to industrial conflict to agree
upon rules or principles for the settlement of the claims of each.
Whether that aim, itself, is a fanciful one, need not be again debated
here.
5.--Lest it appear that the above proposals have been put forward
without giving due weight to their defects, it is now well to consider
certain criticisms to which they may be fairly open. Two objections, in
particular, are likely to be made. One is of practical nature, the other
of a theoretical nature. They may be considered in that order.
The objection of a practical nature is that it will not be possible to
apply the suggested principles either accurately or consistently, and
this for two reasons. Firstly, it may be asserted that the application
of the proposed doctrines would require a scientific comparison of the
characteristics of different kinds of work, which comparison is declared
to be unobtainable. Secondly, it may be said that in order to fix such
wage differentials as are reasonably certain to accomplish the ends for
which they are set, it will be necessary to have a precise knowledge of
many facts and forces. This knowledge may be declared to be
unobtainable.
No simple or very final answer can be returned to these doubts. It must
be admitted that it will always remain difficult to compare occupations
except in general descriptive terms. The relative training and talents
required for different kinds of work, and the relative demands made upon
the individual by different kinds of work will always remain, to a great
extent, a matter of opinion. It is also true that only a general
knowledge can be obtained of the factors governing the supply of any
particular sort of labor at a given time, and the probable effect of any
wage change upon that supply. The differentials which would be
established from a consideration of such material could not claim to be
more than a practical approximation to the differentials which would
carry out the intention of the policy.
Still, scientific method could be pushed further than it has been in the
comparison of occupations. The statements of the various interested
parties would be a valuable guide in the estimate of occupations.
Furthermore, only the major relationships between occupations would have
to be taken into consideration. For example, if the question at issue
was whether the wages of miners were too low as compared with wages in
other industries--that is to say, whether a demand on the part of the
miners for an improvement in their relative economic position was
justified--only the most important of mining occupations would have to
be taken into account in reaching a decision. There would be small risk
of error in applying a decision, based upon a study of the work
performed and of the income received in the most important mining
occupations, to the less important mining occupations also. And indeed
such would prove probably the only practicable policy. Furthermore,
revision of the existing differentials would be undertaken only when the
case for revision seemed definite and clear. As for example, it was
clear in England before the war, that railroad labor was underpaid; or,
as was clear to the whole of the recent President's commission on the
wages of coal miners, that the wages of the miners were too low,
relative to wages in other industries--though the commission differed on
the amount of wage increase to be awarded.
But perhaps the most significant answer to those objections which rest
on practical grounds is the fact that any wage level that might be set
for any occupation under the proposed principles would be but the
minimum standard wage for that occupation. And no element in the whole
policy of wage settlement should stand in the way of the payment of a
higher wage than that fixed by the central authority for any type of
work. Thus no fear would have to be entertained that any industry would
be faced with a shortage of labor due to the difficulty of getting
precise knowledge on which to base wage differentials.
Here, indeed, we approach very close to that other objection which may
be put forward on theoretical grounds. Which objection is that all
attempts at revision of existing wage differentials would involve a risk
of producing, on the one hand, a shortage of certain kinds of labor,
and, on the other hand, an oversupply of other kinds. It is reasoned
that in spite of every effort of careful calculation of wage
differentials, some danger of over or undersupply of certain kinds of
labor will always be present.
These fears would be based upon a misconception of the nature of the
policy of wage settlement that is proposed. As has already been
emphasized, the wage level that would be fixed for any kind of labor
would be but a minimum standard wage. There is no part of the proposed
policy of wage settlement which would interfere with the payment of
higher wages than the standard minimum. Therefore, no industry would
find itself unable to secure the labor it required merely because of the
differentials established by the central authority. Each industry would
still retain all its powers of bargaining for the labor it needs. Nor,
on the other hand, would there be any serious danger that the wage rates
set for any industry or occupation would be so high as to add to any
already existing possibilities of oversupply of certain types of labor.
For, after all, the central authority would consider the question of the
revision of existing wage differentials only when the question is
pressed upon it by the failure of the workers and employers to agree.
The central authority would not be likely to declare wage rates higher
than those contended for by the wage earners or lower than those
contended for by the employers. And it is not too much to presume that
in practically all cases neither of the two sides presses claims from
which they do not expect to benefit. The employers are not likely to
seek such wage rates as will not procure the needed labor supply; and
only in rare cases are the wage earners likely to press for increases of
wages that would bring about an increased measure of unemployment.[141]
When those rare cases arise, indeed, it will be the duty of the central
authority to protect the interested parties against their own bad
judgment.
Thus it cannot be admitted that the application of the proposed
principles would produce an intensification of the already existing
possibilities that particular industries or occupations would be short
of the kind of labor they need, or that they would be overcrowded. This
conclusion is greatly strengthened by the thought that under our present
practices, wage settlements are constantly being reached without any
reward whatsoever for the disturbance of customary differentials; and
serious maladjustments in the supply of labor do not often result
because of that.
6.--A note upon the procedure by which it is expected that the proposed
principles would be brought into operation may help to explain away
remaining doubts. First of all, it may be emphasized that nothing in
these proposals contemplates the discontinuance of collective bargaining
throughout industry. Rather the creation of joint industrial or
occupational boards or councils (those suggested in the course of the
living wage discussion) is advised. Only when any wage question cannot
be settled peacefully by collective bargaining is it proposed that the
central authority should enter into the dispute.
It is to be expected that as the principles followed by the central
authority in its decisions become known and understood--that is, as the
probable result of disagreement, and of reference to the central
authority become predictable--the agreements reached by collective
bargaining would tend to approximate those which would result from
reference to the central authority. For example, if a series of
decisions expounded the doctrine that the existing relationships between
the wages of the miners, railway conductors, and bricklayers are in
accordance with the principles recognized by the central authority, the
course of negotiation in these occupations will be governed, to some
extent, by that knowledge. Such an outcome is to be expected, no matter
what the principles upheld by the central authority--provided they are
consistently upheld. Thus Judge Higgins records of the Australasian
experience that "It is quite common now for the parties to ask the
decision or guidance of the Court on a few main subjects in dispute and
then to agree as to all the other items--even hundreds of items--in the
light of the Court's findings; anticipating the application of the
Court's principles."[142]
Since we are on the subject of the method and machinery of application
of the policy of wage settlement, one other aspect of the matter may be
briefly noted. That is, that if any policy of wage settlement is to
succeed, the course of wage decision must be kept as free from all
political interference as possible.[143] Spending departments should not
be given powers of decision which clash with those of the central
authority. Appeals to the higher executive officers of the state must be
avoided to the utmost possible extent. Conjecture as to the measure in
which these conditions can be realized in the United States at the
present time may be withheld. But unless they are realized in a high
degree, wage settlement will continue to be a matter of force and
opportunism. Freedom from political interference can be obtained, and
the elimination of the necessity for frequent appeal to the higher
executive officers of the state will be possible, only if the policy of
wage settlement which is adopted has the vigorous support of all groups
immediately concerned in wage settlement.
FOOTNOTES:
[136] See for examination of this question, "Report of Wage
Boards and Industrial and Conciliation Acts of Australia and
New Zealand." E. Aves (1908), page 38. Mr. Henry Clay in a
review of the wage position before the National Council of
the Pottery Industry (Great Britain), made an interesting
statement in this regard. He said "... the one great lesson
which the war taught everybody (including Government
Departments) was that it was dangerous to make a change in
the wages or basis of earnings of one section of workers or
of one industry unless they considered what would be the
effect on all related classes and grades of workers."
Printed in the Staffordshire _Sentinel_, Oct. 8, 1920. See
also Chapter 39, Lord Askwith's "Industrial Problems and
Disputes" for a narrative account of the trouble caused by
sectional wage advances during the war.
[137] Letter printed in London _Times_, January 13, 1920.
[138] Report of the Coal Industry Commission (1919),
Majority Report, pages 15-16. For another interesting case,
see that of Various Toronto Firms vs. Pattern Makers under
the Canadian Industrial Disputes Act, in which case the
pattern makers claimed differential treatment over
machinists and molders. Reported in Jan., 1919, _Canadian
Labor Gazette_.
[139] The various courts in the Australian dominions tended
on the whole to confirm existing differentials, occasionally
changing the relative position of particular groups, when it
has seemed clear to the court that the wages of these groups
as compared to other groups is "unreasonable" considering
all those factors which are considered to form the ground of
"reasonableness" in the matter of differentials. Thus
Justice Brown of the Industrial Court of South Australia has
expressed himself on this very subject. "In the matter of
such perplexity some guidance is afforded to the court by
custom. It seems to me I cannot do better than proceed on
this basis. I shall state the preexisting wage, consider
whether it is prima facie unreasonable applied to
preexisting conditions, and then if I find it not prima
facie unreasonable, I shall consider whether any variations
of the wage should be made in view of conditions now
existing." (Hook Boys' Case--South Australia Industrial
Reports, Vol. I, 1916-7, page 29.)
[140] It is in this light that the Commonwealth Court of
Australia looks upon its secondary wage. "The secondary wage
is remuneration for any exceptional gifts or qualifications
not of the individual employee, but gifts or qualifications
necessary for the performance of the functions." H. B.
Higgins, "A New Province for Law and Order," _Harvard Law
Review_, March, 1915.
[141] Mr. and Mrs. Webb have described aptly the usual trade
union calculations in the formulation of their claims. "The
Trade Unionist has a rough and ready barometer to guide him
in this difficult navigation. It is impossible, even for the
most learned economist or the most accomplished business
men, to predict what will be the result of any particular
advance of the Common Rule. So long, however, as a Trade
Union without in any way restricting the numbers entering
its occupation, finds that its members are fully employed,
it can scarcely be wrong in maintaining its Common Rules at
the existing level, and even, after a reasonable interval,
in attempting gradually to raise them.... To put it
concretely, whenever the percentage of the unemployed in any
particular industry begins to rise from the 3 or 5 per cent
characteristic of 'good trade' to the 10, 15 or even 25 per
cent. experienced in 'bad trade' there must be a pause in
the operatives' advance movement." "Industrial Democracy,"
pages 738-9.
[142] H. B. Higgins, "A New Province for Law and Order,"
_Harvard Law Review_, Dec., 1920, page 114.
[143] Justice Higgins, the head of the Commonwealth Court of
Australia, has recently resigned because of the action of
the legislature in providing that the executive may set up
special and independent tribunals of appeal above the Court
of Arbitration. His letter giving the reasons for his
resignation (printed in the Melbourne _Argus_, Oct. 26,
1920), gives most convincingly the case for freedom from
political interference. One passage of explanation in it is
as follows:
"On the other hand, a permanent court of a judicial
character tends to reduce conditions to system, to
standardize them, to prevent irritating contrasts. It knows
that a reckless concession made in one case will multiply
future troubles. A union that knows that a certain claim is
likely to be contested by the court will bring pressure to
bear for a special tribunal; and the special tribunal
appointed by the government will be apt to yield to demands
for the sake of continuity in the one industry before it,
regardless of the consequences in other industries. The
objectives of the permanent court and of the temporary
tribunals are, in truth, quite different--one seeks to
provide a just and balanced system which will tend to
continuity of work in industries generally, whereas the
other seeks to prevent or to end a present strike in its own
industry." See also Lord Askwith's "Industrial Problems and
Disputes" for another expression of the same view.
CHAPTER XI--THE REGULATION OF WAGE LEVELS--(_Continued_)--
WAGES AND PRICES
Section 1. The scheme of wage relationship must recommend itself as
just to the wage earners and the community in general. The ultimate
distributive question to be met is the division of the product
between profit and wages.--Section 2. Provision for the adjustment
of wages to price movements would aid, however, towards reaching
distributive goal. A policy of adjustment suggested.--Section 3.
The difficulty of maintaining scheme of wage relationship of wages
adjusted to price movements. The best method of adjustment a
compromise.
1.--In the last chapter the reasons for seeking an ordered scheme of
wage relationship in industry were discussed, and some suggestions were
made in regard to such a scheme. One essential to its success was
pointed out. That is, that under it the distribution of the product of
industry should recommend itself as just to the wage earners and the
community in general. The possibility of satisfying this requirement
remains to be considered.
The ultimate distributive question to be met in any attempt to formulate
a policy of wage settlement is the distribution of the product of
industry between wages and profits (rent incomes, in the Ricardian
sense, being left out of the question). It is entirely conceivable that
a policy of wage settlement should be put into practice which would take
note only of the facts of this relation. However, there are distinct
advantages to be obtained by taking note of an intermediate relation.
That is the relation between wages and changes in the price level.
The relation between wages and general price movements has been
discussed. It has been seen that movements in the general level of
prices affect the outcome of distribution. They occasion changes in the
distributive situation; and these changes may be desirable or
undesirable--having reference to the distributive result that is sought.
Any plan by which such changes as are undesirable are prevented from
taking place would contribute, therefore, to the attainment of the aims
of the proposed policy; and would be a valuable adjunct to the policy.
The conclusions reached in the previous discussion on this subject make
up a plan suitable for the purpose. They may now be fitted into the body
of these proposals. Then in the following chapter that most difficult
problem of wage settlement can be considered--the problem of governing
the distribution of the product between profit and wages in order that a
just distribution may result.
2.--The results of the discussion in Chapter V concerning a plan for
the adjustment of wages to price change may be applied at this point
without further comment.
The central authority in its decisions should take note of all changes
in the approved price index number since the time when the wage rates
which are up for reconsideration were fixed. It should then in its
awards adjust these wage rates to price changes in accordance with the
following policy. It need hardly be explained that other considerations
besides the fact of price change may enter into the award, as the
adjustment of wages to price change is merely one part of a larger
policy.
The measure of price change by which the central authority should be
guided--that is, the approved index number,--should be the movements of
the index number of the prices of all important commodities produced
within the country; this index number to be so weighted as to give a
defined importance (50 per cent. suggested) to the prices of those
classes of foodstuffs, clothing, housing accommodations and other
commodities, upon which the wage earners spend the larger part of their
income. It will be noted that this measure of price change is the same
as that used in the adjustment of wages prescribed under the living wage
policy. And, as was recommended in the discussion of living wage policy,
so it is recommended here, that adjustments should not be undertaken
unless the index number of prices has moved at least 5 per cent., and
that adjustment should not be more frequent than twice a year.
In regard to the actual policy of adjustment to be pursued in periods of
rising and falling prices, here also, save in one important respect, the
same policy that was sketched out for living wage adjustments should be
followed.
3.--The one point in which it may be advisable to depart from the policy
laid down for living wage adjustments is in regard to the _amount_ of
wage change that should be undertaken for movements in the price level.
In the earlier discussion it was suggested that wherever wages were
adjusted to price changes, the adjustments should be on the basis of
equal percentages. If this basis were to be used in adjusting the wages
of all other groups of workers it is evident that during periods of
changing prices there would be a different set of wage differentials for
every position of the price level. And, furthermore, during periods of
rising prices, the lowest paid classes of workers--those who could do
least to meet the rise in the cost of living by changing their
consumption habits--would receive the smallest wage increases.
A great diversity of practice characterized the attempts at adjustment
which were made during the period of rapid price increase inaugurated by
the war. No two agencies of adjustment used the same basis. Possibly the
most widespread practice has been to increase all wage levels by the
same _absolute_ amount--which amount has been ordinarily calculated as a
percentage of some basic wage (frequently the living wage). The
advantages of that method are firstly, its simplicity, and secondly, the
fact that if it favors any groups, it favors those whose needs are
greatest. Justice Higgins has justified it as follows: "When the Court
has increased the basic wage because of abnormal increase of prices due
to the war it has not usually increased the secondary wage. It has
merely added the old secondary wage, the old margin, to the new basic
wage. It is true that the extra commodities which the skilled man
usually purchases with his extra wages become almost as indispensable in
his social habits, as the commodities purchased by the unskilled man,
and have no less increased in price; but the Court has not seen fit to
push its principles to the extreme in the abnormal circumstances of the
war, and the moderate course taken has been accepted without
demur."[144]
Still as a permanent policy, the suitability of this method is not
beyond question. The problem to be faced in the choice of method is,
after all, this. Given a scheme of wage differentials, which are in
accord with certain defined principles, at a given position of the price
level, what method of adjustment is best calculated to produce such
differentials as will be in accord with these principles, at all
positions of the price levels? That sounds like a problem in astronomy.
But it is not. It can be more understandably, but less accurately, put
by asking, what system of adjustment is best calculated to maintain the
same _relative_ position of the various groups of wage earners
throughout all price movements?
Under either of the two methods touched upon--that of change by equal
percentages, and that of change by the same absolute amount for all
groups--the differentials cannot be held in close accord with any such
original principles of wage relationship as have been suggested. It
cannot be helped. We have come to another point at which the aims of
policy can only be imperfectly realized.
It seems to me that the best method would be some sort of compromise
between the two alternatives that have been presented. A compromise
would make allowance, firstly; for the fact that in times of rising
prices, those groups whose wages are lowest cannot meet the rise in the
cost of living by changing their consumption habits as easily as can the
more fortunately placed groups, and secondly; in times of rising
prices, the movements of the wage earners from industry, or from
occupation to occupation are governed, within limits, by calculations of
the absolute change in the wages paid for different kinds of labor,
rather than by calculations of relative change. It nevertheless would
prevent the relative position of different grades of labor from changing
so radically as to lead to great discontent and possibly to derangements
in the distribution of the labor supply.
It can be claimed, in addition, for this compromise method that its
results would be in accord with the general trend of changes in the
differentials that have occurred in the past in periods of rapid price
movement. An inspection of the available material seems to show that in
times of rapidly rising prices the _relative_ differentials between the
lower grades of wage earners and the upper grades decrease, while the
_absolute_ differentials increase--and the reverse in times of rapidly
declining prices. They are in accord, for example, with the results
obtained by analyzing the course of differentials during the war
(1914-1919) in the industries for which wage data was gathered by the
National Industrial Conference Board--"Report Wartime Changes in Wages."
The data extends over the Metal, Cotton, Wool, Silk, Boot and Shoe,
Paper, Rubber and Chemical Manufacturing Industries. If the wage earners
are classified into five groups according to their pre-war wages, it is
found that the relative wages of the least paid groups (pre-war
standards) increased most, and so on in order to the best paid groups,
the relative wages of which increased least; the absolute increases,
however, are in exactly the opposite order.[145] They are borne out also
by Mitchell's studies of price movements in the United States.[146]
In conclusion, it may be said, that no matter which of the above methods
is adopted, it should be applied with as much consistency as can be
attained. The process of wage adjustment to movements of the price level
cannot be left in the field of guess work, where it now rests, without
giving rise to much quarreling and discontent.
FOOTNOTES:
[144] H. B. Higgins, "A New Province for Law and Order,"
_Harvard Law Review_, Jan., 1919. The Commission acting
under the Canadian Industrial Disputes Act, carried this
line of reasoning to its further logical consequences by
awarding in some cases higher _absolute_ increases to the
lowest paid men, and so on up the scale to the highest paid
men who received the smallest increase. The large increases
granted to the lowest paid men were justified by the
Commission as necessary to bring their wages up to a living
wage level. See, for example, the Report of the Commission
on Disputes in Coal Mining and Other Industries in Nova
Scotia. _Canadian Labor Gazette_, July, 1918. For a similar
policy based on the same grounds, see the "Arbitration Award
in Certain Packing Industries in the United States." _U. S.
Monthly Labor Review_, May, 1918.
[145]
The figures are:
-----------------------------------------------------------
(Wage groups) (Group average)
1914, wages Relative increase Absolute increase,
earnings per hour of wages earnings per hour
-----------------------------------------------------------
.15-.20 208% .193
.20-.25 187% .188
.25-.30 185% .230
.30-.35 184% .266
.35-.40 174% .268
-----------------------------------------------------------
Such figures as these are not, of course, sufficient ground
for confident generalization, but they support an imputation
that the compromise method does furnish the best solution of
the difficulties the problem presents.
[146] See W. C. Mitchell, "Business Cycles," page 134. Also
W. C. Mitchell, "History of the Greenbacks," pages 33-37,
123-145.
CHAPTER XII--THE REGULATION OF WAGE LEVELS--(_Continued_)
WAGES AND PROFITS
Section 1. The profits return in industry, under any policy of wage
settlement, will be closely scrutinized.--Section 2. The
possibility of measuring a "fair" profits return for all industry
discussed. A method suggested.--Section 3. Would the principles of
wage settlement worked out so far, produce a fair profits return?
An open question.--Section 4. The scope and form of any measure
designed to assure the desired distributive outcome can be
discerned.--Section 5. The various steps in the formulation of such
a measure reviewed. A measure tentatively suggested.--Section 6.
The difficulties of calculating wage changes called for under the
suggested measure.--Section 7. The chief practical weaknesses of
the suggested measure examined.--Section 8. It would be open to
theoretical criticism also. The alternatives even less
satisfactory.
1.--We can now enter upon the further question of whether the principles
so far formulated, if used in wage settlement, would produce such
distributive results as would justify them to the wage earners and the
community in general. It need hardly be said that the criterion of
justice which will be applied by public opinion to any policy of wage
settlement will not be a simple and clearly defined rule, but will be,
rather, one joint in a loosely articulated social philosophy.
The distributive justice of any set of wage principles will be judged by
the shares of the product of industry which take the form of wages and
profits, respectively. It is true that general satisfaction with them
will be largely governed by the course of real wages after they have
been in force a while. If real wages tended to increase in the period
following their adoption, they would receive far greater approval and
much sturdier defense than if real wages fall during that period. Most
witnesses of the Australian experiments in wage settlement make that
point clear.[147] But in either case, if the organizations of the wage
earners in the United States become as powerful as they are in England
to-day, and if the class-consciousness of the wage earners becomes as
acute, any policy of wage settlement will be severely scrutinized in
regard to the profits return prevailing throughout industry also. If,
with the principles in force, the general level of profits throughout
the field of industry consistently and considerably exceeded what was
deemed to approximate a fair return, it will be held that they give the
wage earners too small a share in the product of the industry. If the
general level of profits throughout the field of industry tended to
approximate a return thought to be fair, the principles will recommend
themselves to the wage earners and to the community in general, as just.
It may be added that the opinion held in regard to the justice of the
principles of wage settlement may also be influenced, in some degree, by
the distribution of the profits return in industry. If a comparatively
few great industrial corporations earn very great profits, it is likely
to arouse greater dissatisfaction than if the same amount of profits are
earned by a larger number of enterprises. It is beyond the scope of any
policy of wage settlement, however, to control the distribution of
profits among the enterprises engaged in an industry.
There are some groups who would argue that no division of the product of
industry is fair unless it gives to the wage earners the whole of the
product. Such a view, of course, amounts to a desire to revise the whole
of the present economic system fundamentally. No policy of wage
settlement akin to that put forward in this book could win favor in
their eyes. And if their opinion should become dominant, industrial
peace would have to be sought by arrangements far different from those
under discussion. For those arrangements rest on the supposition that
the country will continue to desire to depend, in the main, upon private
accumulation for capital, and individual ambition for business
leadership.
2.--It is possible by bringing into balance a numerous set of factors,
to give a reasonably definite meaning to the idea of a fair profits
return. That is to say, by weighing all relevant considerations, it is
possible to define a general level of profits for industry as a whole,
which would represent a just and sound division of the product of
industry between wages and profits. The relevant considerations are
those which will be likely to hold an important place in the better
informed sections of public opinion during the period for which these
proposals are intended; and which are admissible as sound and pertinent,
on the supposition that the industrial system is to continue to depend
mainly upon private initiative and private accumulation.
The most important of these considerations are, in my opinion, as
follows: First: that the ethical ideas of reward according to need, or
reward according to sacrifice, would call for the elimination of the
greatest present inequalities of reward; and that these ethical ideas
must be given rank among the factors which deserve real consideration
when arrangements affecting the distribution of the product are being
made. Secondly: the service of capital in effective production, the
sacrifice involved in much accumulation, and the risk involved in much
investment; the great need of assuring continued capital accumulation
and investment. Likewise, the importance to industry of active and
enterprising leadership. Thirdly: the social and economic evil effects
of great inequality of wealth. Fourthly: the fact that the health,
energy, spirit, and intelligence of the wage earners are factors of
high importance in the creation of a stable and effective industrial
regime, and that the development and display of these qualities by
individuals are affected by their economic conditions and surroundings,
here and now. Likewise, the importance of giving the best possible
opportunity to all to develop their natural ability.
The general level of profits that would be settled upon by comparing and
weighing these considerations could be defended as just and sound. The
figure (which would be expressed in the form of a percentage, e.g. 12
per cent.) derived from the balance of these factors could be put
forward as the mark of just distribution. The distributive goal for the
policy of wage settlement would be to achieve a division of the product
between wages and profits, such that the general level of profits
throughout the field of industry (the basis of calculation of which will
be considered at a later point) would approximate the figure defined as
just.
It is plain that if the suggested method is used to define a just level
of profits, differences of opinion will manifest themselves in the
process. The facts and circumstances that would have to be studied
cannot be subjected to exact measurement. For example, the possible bad
social and economic effects which may be produced by various degrees of
inequality of distribution can only be guessed at in a general way. Or,
to take another example, the motives and conditions which govern the
bulk of private accumulation and the sacrifices involved therein are
questions about which controversy continues to range. The profits return
that one man may judge ample to assure an adequate flow of accumulation
and investment will not appear to be so, in another man's judgment.
Indeed, even differences in the general philosophy with which all men
parade through life will lead to differences of opinion. For example,
one man may believe a community to be better off if every man's income
is increased somewhat, though the inequality of wealth within the
community be thereby increased; while another man may believe that the
poorer community, with the lesser inequality of wealth is likely to be
more happy, and perhaps, in the end more prosperous.
In spite, however, of the existence of such extensive ground for
differences of opinion, it seems to me that an agreement may be expected
which will be fair and sound enough to be accepted as a serviceable
criterion of the distributive consequences of the policy of wage
settlement.
3.--What grounds, if any, are there for the belief that the principles
of wage settlement so far proposed would bring about a division of the
product between wages and profits that would meet the test of just and
sound distribution suggested above?
The principles, so far proposed, leave the determination of the profits
return predominantly to the action of industrial competition, reenforced
by the action of public opinion in the direction of preventing the
return from mounting to an obviously excessive point. They offer no
safeguard against the reduction of the profit return below that point
set as the mark of just and sound distribution, save the public will to
continue the present system and a general knowledge of the motives and
conditions upon which it rests. Nor could they very well.
It is true that the enactment of the principles suggested up to this
point would mean the imposition of certain genuine restrictions upon the
actions of those who direct industry, as for example, in connection with
the living wage program. It would give all wage earners the benefits of
organization. It would make for rapid and certain compensation for price
movements. It would prevent wage reductions merely because of the
poverty of any group. Nevertheless, if the analysis of distribution made
earlier in the book is substantially correct, the answer to the question
at the head of this section must be that there would be no very
compelling tendency for distribution to result justly, under the
enforcement of the wage principles so far proposed. The distributive
result would still depend largely upon the reality and intensity of
industrial competition, upon the strength, activity, and foresightedness
of the wage earners' organizations, upon the will and spirit of the
directors of industry, and upon the quality and liveness of public
opinion. That admission can be made, even though it is believed that
under the suggested principles the outcome of distribution would be
nearer the desired outcome than it is at present; and that there would
be a clearer perception of the public interest in the outcome of
distribution than at present.
4.--If a measure could be devised which would help to bring about the
desired distributive outcome, without greatly weakening in some other
direction the policy as already conceived, such a measure would be a
most worth-while addition to the policy. It is possible to discern
clearly what the scope and form of such a measure must be.
Firstly: Such a measure should not single out the profits of particular
enterprises for division or transfer to the wage earners, if the profits
of these particular enterprises are in excess of what is conceived to be
a just profit level for industry as a whole. For, in the first place, if
the principle of standardization is enforced throughout industry, the
excess profits of particular enterprises may frequently be the result of
superior business ability, and to take them away would be to discourage
the development and use of that ability. And, in the second place, even
if it is acknowledged that this is not the true explanation of the great
profits of very many enterprises, but that these are accounted for
rather by the possession of special privileges or the weakness of
competition, nevertheless, to adopt a policy under which these profits
are transferred to the wage earners would lead to wastefulness and
extravagance in business operation. And lastly, there is the fact that
to make wages in any enterprise contingent upon the profit returns of
that enterprise is contrary to the ordinary trade union policy.
Nothing in this conclusion is meant to imply that the wage earners
should not be free to enter into wage agreements calling for more than
the standard wage. Or that profit sharing arrangements should not be
permitted--on the contrary, such arrangements should be encouraged,
provided the standard wage and the right of the wage earners'
organization to be fully represented in such arrangements are not
brought into question.
The conclusion just reached is meant to apply also in the opposite
case--that is, in the case of the profits of particular enterprises
falling below the level defined as just and sound industry as a whole.
The wages of the workers engaged in these enterprises should not, for
that reason, be reduced. This conclusion, it is believed, is amply
explained by what has been written in various other connections.
Secondly: Even if almost all or all of the enterprises engaged in a
particular industry should be in receipt of profits considerably in
excess of what is conceived to be a fair profit return for industry as
a whole, no attempt should be made to transfer the extra profits to the
wage earners engaged in it by increasing their wages. Or to state the
matter so as to include both this case and its opposite, the wages in
any particular industry should not be adjusted by reference to the
profits in that industry. It is clear that here we are upon difficult
and very hotly disputed ground.
At present, wages in different industries or occupations are not settled
in accordance with any principle which includes them all and which is
the basis of an ordered scheme of wage relationship. The existence of a
very high profits return throughout a particular industry is an almost
prima facie justification for a wage demand on the part of the wage
earners employed in it. So too in the opposite case. And as long as
wages are settled, as at present, it must be so; for the wage earners in
each industry or occupation are dependent upon their own activity to
make good their claims as against the other participants in
distribution.
It is this very state of affairs, however, that it is sought to
supersede. In an earlier chapter it was argued that in order to maintain
industrial peace, wages in different industries and occupations will
have to be brought into relation with each other, which relation should
rest upon defined principle. It is plain that, if any other principle
were also to be adopted, under which wages in particular industries
were adjusted by reference to the profits return in these industries,
that scheme of relationship would be constantly disturbed. If wages in
particular industries were adjusted with reference to the profits return
in those industries, the result would be a series of uncoordinated wage
movements in different parts of the industrial field, and the
re-creation of a state of affairs not much different from the present.
Then, too, if wages were to be adjusted with reference to the profits
return in particular industries, the method that has been advocated of
settling upon a criterion of just profits would not be suitable. A
separate mark of fair profits would have to be set up for each industry;
for different industries involve different degrees of risk and have
different initial periods of little or no profits. What might correctly
be considered an excessive profit for one industry might be but a fair
profit for another. The task of setting up different criteria for the
different industries would be extremely delicate, if it were possible at
all.
The same conclusion holds true in the opposite case wherein the profits
in most all or all of the enterprises engaged in a particular industry
are considerably below what is conceived as a fair profits return for
industry as a whole. Cases will arise in which it may be to the interest
of the wage earners in particular industries to accept wage reductions,
because the industry is doing poorly. In such cases, however, the wage
earners may be expected to agree--perhaps, only after a while--to wage
reduction, in the course of wage bargaining. If, however, the wage
earners will not agree that their interests are served by reduction, it
will probably be sound policy to back them up.
It must be admitted that this conclusion as to the inadvisability of
adjusting wages by reference to the profits return of particular
industries is not set down without hesitation. It is plain that if that
idea is to be rejected, the policy of wage settlement as a whole must
give some other guarantee of distributive justice to the wage earners.
And, indeed, if after a certain period of operation and education it was
found that very large profits were accruing steadily in certain
industries, and if it did not seem likely that these profits would be
reduced to what is conceived to be a fair level either by the forces of
competition or public opinion, it might be found wiser to pursue the
opposite course--that is, grant wage increases in those industries even
at the risk of breaking down the scheme of wage relationship. Much will
depend upon the way in which the employers respond to the purposes
embodied in the policy of wage settlement. And upon the success of the
wage earners and employers in reaching, by collective bargaining,
agreements satisfactory to both.
Justice W. Jethro Brown of the Industrial Court of South Australia has
stated the problem with great clearness. He writes, "With respect to
such an issue, one is on the horns of a dilemma. (1) If unusually high
profits are being made in an industry, ought not the employees to have
a right to share therein? (2) If one does award high rates of wages, is
not one inviting discontent amongst other classes of workers in allied
industries or industries generally? Employees are so apt to judge
themselves well or ill treated by a comparison of nominal wages without
any reference to conditions of industry. In various judgments I have
held that it would be quite permissible, if not appropriate, for the
Court to take into consideration the fact that an industry is
prosperous. On the other hand, as a matter of practice I have tried to
work towards an ordered scheme of wages throughout the industry of the
community as a whole."[148]
If the above conclusions are accepted, it must be agreed that the scope
of any measure designed to help in the attainment of the desired
distributive outcome must be the whole field of industrial enterprise to
which the policy of wage settlement applies. The question that remains
is, whether it is possible to devise a principle of wage settlement by
which wages as a whole can be adjusted by reference to the profit
situation in industry as a whole. That is to say, whether any measure
can be elaborated by which all wages could be adjusted, according as
profits in industry as a whole exceeded, approximated, or fell below the
profits level that is taken to mark just and sound distribution of the
product of industry.
5.--It is plain that if the measure is of such a character that no great
harm can result from the possible error involved in the process of
calculation, it can be adopted with less hesitation than if the opposite
were the case. That is one of the considerations prompting the following
proposals.
Let us presume, in order that the proposals may be put in definite form,
that the profits return for industry as a whole which is agreed upon as
just is a 12 per cent. return. The next step would be the invention of
some method by which the profits return of industry as a whole at any
given time can be measured. This would be a matter of considerable
difficulty; yet it is, in my opinion, not beyond the range of practical
attainment.[149] The following method, for example, might not be too
unsatisfactory. Let a certain number of enterprises be selected in each
industry which comes within the field of wage regulation. The selections
should be representative of the industry. If there is a variety of types
of enterprises within the industry viewed from the standpoint of
productive efficiency, the selected enterprises should tend to represent
the more efficient sections of the industry. Then a valuation of these
enterprises should be made. A standardized method should then be devised
for keeping account of the profits of these selected enterprises. That
might necessitate the inauguration of standard methods of accounting
throughout all industry--which is a result to be favored. The profits
return from the selected enterprises in all industries should be
combined into an index number of profits. Possibly, in making up the
index number, the figures for each industry should be weighted according
to the number of wage earners employed in the industry. The resulting
weighted average would be a reliable record of the profits return
throughout industry at the particular time. The statistical method just
described, however, is meant rather in the nature of a suggestion than
as a declaration that it is the best method.
Suppose the index number of profits so calculated for a given period of
time proves to be, for example, 18 per cent.--6 per cent. higher than
the approved level of profits. On the basis of this profit showing, the
wages of all classes of wage earners could be increased for the
subsequent period, with some hope of effecting a transfer to the wage
earners of at least part of the product of industry represented by the 6
per cent. extra profit. That is to say, that whenever the index of
profits showed a profits return in excess of this conceived just return,
wages throughout industry should be increased to such an extent as is
calculated to bring the profits return down to the approved level.
Whenever the index of profits showed a profits return approximately
equal to or less than the approved level, no wage change should be
undertaken. For if the profits return was approximately equal to the
approved level, it can be concluded that the distributive result is
approximately that which is desired. And if the profits return is under
the approved level, it would probably be both impracticable and
inadvisable to reduce wages throughout the industry. For since no direct
control is exercised over profits, the falling of the profits return to
a point below the appointed mark of just and sound distribution, would
be but the outcome of industrial competition. While it is conceivable,
in particular cases, that the community would be better off if the
profits return was greater than the return thereby produced, the
contrary presumption is more likely to be correct under present
conditions. For it is both desirable and likely that the figure that
would be set as the mark of just and sound distribution will err on the
side of being higher than the profits return required to assure adequate
accumulation and investment.
6.--So much for the basis of the proposed measure. It is desirable to
examine briefly its chief advantages and disadvantages. But first note
must be taken of another problem that would arise in the attempt to
enforce it. If the wages of all classes or groups of wage earners are to
be increased when the profits return in industry as a whole is above the
approved level, the question arises as to the best way to calculate the
wage increases, and the most satisfactory basis for distributing them
among the different groups of wage earners. If both of these
calculations can be kept simple, it will be a distinct advantage.
Possibly the most simple and satisfactory way is to determine the
absolute amount of the extra profits, and of the total wages bill for
the representative enterprises--putting one in terms of a percentage of
the other. For example, if it be calculated that the profits of these
enterprises in excess of the approved level be one hundred million
dollars, and the total wages bill of the same enterprises two billion
dollars, the amount of wage increase to be awarded should be stated as 5
per cent. That is, the wage increase to be awarded should total 5 per
cent. of the total wages bill.
And here the second problem arises. How should this wage increase be
distributed among the various groups or classes of labor? It is probable
that the most satisfactory method would be to raise the wages of all
groups or classes of labor, including those groups whose wages were
determined under the living wage policy, by the same absolute amount.
This method does not meet all the demands of our previous reasoning
regarding wage differentials. It would, however, be the only way to
avoid too much complication in the determination of wages for different
groups or classes of labor.
7.--What would be the chief difficulties and disadvantages attendant
upon the application of the measure just sketched out? And what are the
chief advantages which it gives promise of? These are the questions
which now present themselves. First of all, certain difficulties of a
practical nature must be faced. For example, there would be difficulty
of settling upon a satisfactory method of calculating the profits return
of industry. The most satisfactory method of calculation would probably
be in the form of a percentage earned upon capital. If that basis of
calculation is chosen, however, some method must be decided upon for the
measurement of the capital value of all those enterprises, the profits
return of which is combined to form the index number of profits.
Probably the best way of meeting the difficulties would be to have such
a capital valuation of these enterprises as has just been completed for
the United States railways. And thereafter standard methods of recording
new capital investment should be enforced.
Such an evaluation would appear to be an unwelcome but inevitable
preliminary to any attempt to measure and record business earnings.
Experience has shown the vast labor and large margin of error involved
in formal evaluations. Under the proposals made in this chapter,
however, errors made in the evaluation of particular enterprises would
be of no great consequence to these enterprises. Only the combined or
general profits figure would be used in the course of wage adjustment.
Second among the difficulties of a practical nature is that which comes
from the necessity of defining clearly what is to be considered
profits.[150] Clearly the earnings put back into the depreciation
account should not be counted as profits. Loss or gain from the change
in the value of the stock held should not be taken into account. Nor
should taxes paid before the distribution of dividends be so counted.
Bonus stock dividends, representing reinvestment out of current earnings
should be counted as profits, as well as being recorded as additions to
invested capital. Capital borrowed from banks should not be considered
as capital--and the interest paid on such borrowings should be
considered as a business expense. The question of the treatment to be
accorded salaries of direction could be settled by reference to
arbitrary rules drawn up upon the subject--some allowance being made in
the case of partnerships or of businesses operating under private
direction to compensate for the salaries of direction that are paid in
large incorporated enterprises.
Thirdly, provision would have to be made for the reconsideration, at
stated intervals, of the profits return that is set as the mark of just
and sound distribution. Thus heed could be taken of any significant
changes in the price level, in the conditions of supply and demand for
capital, or in any of the other relevant considerations. Likewise,
provision would have to be made for the periodical revision of the list
of enterprises and industries used in the computation of the profits
return for industry as a whole. These matters, though vital, must be
left without detailed consideration.
Nevertheless, it is idle to overlook the amount of labor that would be
involved in any attempt to keep a record of the profits return in
industry. It would be dreary, and of a type demanding specialized
knowledge and disinterestedness. Furthermore, any such plan would
probably have to be put through in the face of the resentment of most
business men. That resentment, however, is likely to flash out against
any proposals that look forward to securing industrial peace by giving
the wage earners a more assured position in industry, and ready access
to the facts of business operation. The standpat temper of those
business men who argue that their business is entirely their own
private concern would make impossible any policy of wage settlement
that did not throw the balance of industrial power in their hands.
Unless they visualize their position in different terms than these,
little hope can be entertained that any proposals calling for a record
of profits will be supported by them. But then it is the normal role of
the peace-maker to seek concessions that contestants are not ready to
make; to plead general necessity where contestants see only their own;
to represent each side to the other in its best light.
8.--Besides these difficulties of a precise and practical kind, certain
weaknesses of a more theoretical nature may be urged against the
measure. First, it may be argued that since the policy exerts no direct
control over profits, there is little reason to believe that profits
will be kept down to an approved level. This criticism would or would
not be justified by the event, according as industrial competition were
effective; according as employers acted up to the purposes and spirit of
the policy of wage settlement, and gave the general interest a place
alongside of their particular interests; according as government
regulation of industry was competently carried out; and lastly,
according to the measure in which public opinion made itself felt on the
subject. Any such plan as the proposed, by clarifying ideas on the
subject, would do much in the way of making public opinion more decisive
than at present. It would serve to inform the community that wages can
be increased without equivalent price increase, whenever the possibility
exists. It would provide employers with a code of honor in industrial
relations. And lastly, it must be remembered that the alternative to
some such policy of wage increase is a system of direct profits control
(leaving out of consideration the possibility of more general and
fundamental change).
It is conceivable that a policy of direct profits control for all
industry can be worked out, which would not penalize and discourage
productive capacity. But it would be an extraordinarily hard job and
would necessitate a detailed study of the facts of each particular
industry. No doubt a policy of direct profits control is to be strongly
advised in particular cases. As, for example, on the American railways
at present, where the rate-making power is in the hands of a public
body; or in the case of the English coal mines, where the question of
control is comparatively simple, and the occasion for control plain. But
as a policy for all industries it would involve, in my opinion, an
entirely impracticable amount of regulation, and it would be likely to
lessen the effectiveness of production and to lead to the wasteful
conduct of industry. Therefore, it must be concluded that some such
attempt to control profits indirectly as has been proposed--depending
upon the forces of competition, trade union activity, public opinion and
government regulation--is to be preferred.
There is another possible criticism of a theoretical sort. It may be
pointed out that it is proposed to increase wages on the basis of data
derived from the whole field of industry. And it may be argued,
therefore, that the increases undertaken by the reason of the showing of
that data may be considerably greater than particular industries could
stand, without an increase in the price of their products. On the other
hand, they may be considerably less than the increase required in other
industries to reduce the profits return to approximately the approved
level.
As to the first possibility, it is entirely conceivable. A wage movement
based upon the profits return from all industries and applied equally to
all groups of wage earners might cause price increases in particular
industries and possibly temporary dislocation and even some
unemployment. Such price changes and dislocations, however, are
constantly occurring in industry in the absence of any policy of wage
settlement, due to the effect of wage increases in one industry on wage
movements in other industries. There is little reason to believe that
the measure advocated will add considerably to the frequency of their
occurrence. It might in one respect serve to lessen the extent of such
disturbances. It might make less frequent the recurrence of wage
demands, originating in particular industries because of high profits in
these industries, and spreading over a large part of the field of
industry. For, as has been emphasized, organized groups of wage earners
will not accept passively a change for the worse in their position in
the economic scale. Finally, there is a safeguard in the fact that no
wage increase need occur in any industry except upon the demand of the
wage earners in that industry. Joint discussion might make it clear that
wage increases could not be well afforded in particular industries, and
joint agreement reached upon that fact. The self-interest of the wage
earners, here as elsewhere, would prove to be some sort of a check upon
unwise wage increases.
As to the second possibility--that wage increases undertaken on the
showing of data derived from all industries may be considerably less
than the increases required in particular industries to bring down the
profits return in those industries to the approved level--that, too, is
entirely conceivable. But against this disadvantage must be weighed
those which would be attendant upon any measure by which wages in
particular industries are adjusted by reference to the profits return in
those industries, which subject has already been considered. The fact
must be accepted. In any plan such as the one proposed, faith would have
to be put in the power of indirect influences to keep the profits return
in particular industries from greatly and consistently exceeding the
approved level.
By way of conclusion, it may be made clear that any such plan as the
proposed would call for the assent of the wage earners to the doctrine
that, when the profits return in particular industries is greatly in
excess of the approved level for industry as a whole, the community in
general have the leading claim to those profits. It is plain that union
assent to that doctrine would be forthcoming only if the community made
effective its claims. The attainment of a just distributive outcome--one
based upon considerations of the general interest--will be essential to
the success of any policy of wage settlement for industrial peace.
FOOTNOTES:
[147] M. B. Hammond, "Wage Boards in Australia," _Quarterly
Journal of Economics_, November, 1914, February, March,
1915. E. Aves, "Report on Wage Boards and Industrial and
Conciliation Acts of Australia and New Zealand" (1908).
[148] Letter dated March 16, 1920.
[149] See pages 256-60, this chapter, for a further
consideration of this question.
[150] W. J. Ashley, in an article in the _Economic Journal_,
December, 1910, entitled "The Statistical Measurement of
Profit," reveals the many serious problems involved in the
measurement of profit--when no prior preparation (such as
the compulsory standardization of methods of accountancy)
has been undertaken. The question of profit measurement he
aptly states as that of finding out "what the suppliers of
capital to business concerns get in the long run over and
above the capital they actually put in them" (page 549).
Unless prior preparation is undertaken for the purpose in
hand, it is probable that his conclusion does not overstate
the difficulties much, if at all. He writes, "Modern 'trust
finance'--the finance of great new industrial combinations,
creates difficulties in the way of gain statistics that will
tax the highest skill of the economist and accountant--if,
indeed, they are not insuperable" (page 549). There would
appear to be no good reason, however, why prior preparation,
such as is suggested, could not be undertaken; nor would
that task be one of extreme difficulty.
CHAPTER XIII--A CONCEPT OF INDUSTRIAL PEACE
Section 1. The hope for industrial peace in the United
States.--Section 2. A policy of wage settlement composed out of the
principles already set forth.--Section 3. What results might be
expected from the adoption of these principles as a
policy?--Section 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.--Section 5. Certain new ideas
concerning industrial relationship have come to stay. They indicate
the probable current of future change.
1.--The hope that a policy of wage settlement for industrial peace may
be adopted by consent, rests upon the supposition that there exists in
the United States to-day a considerable measure of agreement upon a
practicable ideal of industrial society. To put the matter more
expressly, if half of the community sincerely believed in a policy of
the greatest possible freedom of individual enterprise, and the other
half were ardent believers in the desirability of a socialist state, the
hope of the adoption of a policy of wage settlement would be fatuous.
It may seem to many that this necessary measure of agreement upon a
practicable ideal of industrial society does not exist in the United
States to-day. And, therefore, that the process of debate and conflict
in industrial affairs,--as we know it to-day--must continue for a much
longer time before the country will be ready to agree upon any policy of
wage settlement for industrial peace. In short, that more heads must be
broken in order that reasonableness and light may enter into them.
Still, various reflections should encourage us to go ahead in the search
for some policy of wage adjustment for which the necessary general
consent can be won. First of all, there is the fact that there is urgent
need for industrial peace; that great suffering, and the constant
disruption of industry, will be an accompaniment of a continuation of
industrial conflict. And it is essential to the settlement of most
economic issues, as well as political, that the members of a society do
take heed of the needs of the society. It is the origin and
justification of the habit of political compromise.
Secondly, it is not easy after all to be cocksure as to what men will or
will not agree to until they are directly faced with the task of
decision. It is not easy to tell at what point in the conflict of
"opposite convictions" an end may be made of the conflict.[151] It is
usual that doubt be present in many men's minds when a grave decision
is made by society. The constitution of the United States was adopted in
the midst of a struggle of ideas, so violent that all agreement seemed
to be precluded. The chances of agreement can rarely be certainly known
until all possible grounds of agreement are explored.
Thirdly, the belief that the continued battle of ideas will ultimately
lead to agreement, and eventuate into policy is an optimistic belief
which is not always supported by the facts. Sometimes, indeed, it does,
as in the case of woman suffrage. Sometimes, however, it ends in the
resort to force. And frequently not even the resort to force produces a
solution of the difficulty. The conflict goes on even after the use of
open force is surrendered.
Lastly, it is possible, and indeed necessary so to frame policy, that
even while it maintains peace and produces cooperation between
conflicting interests and ideas, it does not stereotype forever the
terms of peace and cooperation. Agreement is often obtained for an
economic or political policy in the knowledge that it can be changed if
different ideas come to prevail. A policy of wage adjustment, like any
other measure, would have to be always subject to reconsideration and
amendment. Indeed, it might carry provision in itself for such
reconsideration; it might be adopted as an experiment for a definite
period of years.
2.--In the preceding chapters the main problems that must arise in the
course of any attempt to settle wages by official authority have been
discussed. These problems were considered with reference to the possible
formulation of a satisfactory policy of wage settlement for industrial
peace. That policy may now be presented as a whole. Only in that way,
indeed, can the significance of any particular principle of settlement
be understood.
It is presumed that whatever policy is put into force will be
administered by a government agency, with and by the consent and support
of both the wage earners and the employers. It is also presumed that the
method of collective bargaining is accepted throughout industry. Indeed,
the existence of organized joint boards or councils of wage earners and
employers would be almost essential to the success of any policy.
The central constituted agency for the administration of the policy
should be a commission or court. The policy should then provide that
whenever a dispute arises incidental to the settlement of wages in any
industry included within the scope of the policy, which dispute is not
settled by the ordinary course of collective bargaining, it should be
referred to this commission or court. All sides should be permitted to
submit evidence bearing upon the case. The court or commission should
have its own expert staff, and its own record and statistical office;
and it should be its duty to know the wage situation throughout
industry.[152] Every possible effort should be made by the commission or
court to render judgment without litigation. The commission or court
should give in full the principles and the data upon which it bases its
decisions.
The wage policy of the commission or court should rest upon the
following principles:
_First_--The principle of standardization should be applied throughout
industry. Wages should be standardized by occupations, despite minor
differences in the character of the work performed by the same
occupational group, or in the conditions under which the work is
performed. Standard rates should be understood to be merely minimum
rates; and the principle of standardization should be construed so as to
permit of all methods of wage payment.
When the introduction of standardization into a hitherto unstandardized
industry or occupation is deemed to involve the possibility of doing
more injury to certain sections of the wage earners and employers
affected than it promises definite good, the application of the
principle should be limited or varied so as to avoid producing such
injury. Differences in the natural advantages possessed by various
enterprises in the same industry, and relatively great and permanent
differences in the cost of living in different localities--these are
likely to be the chief grounds for limitation or variation in the
application of the principle. The exceptions or variations admitted on
these grounds would vary greatly in character and extent no doubt. It is
to be expected that they would be numerous. Under certain conditions it
might also prove advisable to grant "nominal variations" of the standard
wage. Such "nominal variations" would ordinarily be established to
compensate for differences of conditions of work governing output in
piece-working trades, when such differences of conditions must be
accepted as permanent, as in coal mining; or to cover payment in kind or
to make up for irregularity of employment.
The process of wage standardization should be regarded as an independent
process, as a process logically prior to the other principles of wage
settlement (though they may all be applied at the same time). That is to
say, the determination of the level of standardization should be fixed
upon independently of all other principles of wage settlement. The
principal data to be taken into consideration when fixing the level of
standardization should be the actual variety of wage rates in the
industry or occupation in question. Wherein the scale of actually
existing wage rates, the level of standardization is set will be a
matter of judgment and compromise. Usually the correct level will be at
the higher range of the wage rates already being paid. If any of the
existing wage rates in an industry or occupation are higher than the
level of standardization which is fixed, the higher rates should
ordinarily not be lowered to the level of standardization.
_Secondly_--The wages of those groups of wage earners who are at the
bottom of the industrial scale should be regulated upon the living wage
principle. That is to say, the policy of wage settlement for these
groups should represent a consistent effort to secure to them a wage at
least sufficient to permit them to satisfy their "normal and reasonable
needs." These needs must be interpreted in the light of and by direct
comparison with the standard of life of the wage earners in general, and
of the middle classes in the community. In the determination of the
living wage, the existing level of wages for the groups in question will
also be an important consideration. The declared living wage--that wage
which it is sought to secure for all industrial workers--should be
assessed upon a different basis for male and female workers; but if, in
particular cases, it is deemed best to safeguard the interests of male
workers, or to keep women out of particular industries, this rule could
be departed from in any one of a number of suggested ways. The most
important of these possible departures from the ordinary basis of
assessment is the enforcement of the same wage rates for men and women
when they are employed upon the same work. The living wage in any
industry should be a standard wage, subject to all the qualifications
and limitations of other standard wage rates.
The success of the living wage policy will depend in a great degree upon
the good judgment with which it is adapted to the conditions obtaining
in each individual industry or occupation in which it is enforced.
Therefore, the court or commission should proceed upon the advice of the
joint boards or councils concerned. It should be the function of each
joint council to give definite advice to the central authority upon
every feature of the policy to be pursued in its field--particularly
upon the subject of the wages to be prescribed. The central authority
should give no ruling in any industry until after the report of the
joint council of that industry. Each joint council should have the
further duty of observing and reporting upon the effect of the living
wage policy in its industry or occupation.
The living wage policy should be administered in such a way as to spread
among the wage earners, the employers, and the public an understanding
of the hope and purpose it embodies and a clear knowledge of the factors
which will govern its success. Not the least of which factors will be
the determination of all grades of wage earners to make good use of
whatever new measure of participation in industry they may secure; and
the recognition by the employers that the standard of life of their
workers is one of their important concerns.
_Thirdly_--The wages of all groups of wage earners not included in the
scope of the living wage policy should be settled by reference to
principles which apply equally to them all. The wage decisions, at the
inauguration of the policy, must rest upon the acceptance and protection
of existing wage levels, and of existing wage relationships. However, as
cases arise, which bring up the question of the relative positions on
the wage scale of the workers engaged in different industries and
occupations (and such cases will arise constantly), they should be
settled as part of a general process of building up in industry an
ordered scheme of wage relationship. This scheme should rest upon
defined principles.
These principles should be two in number. They were set forth, both as
theoretical and applied doctrines under the titles of the "principle of
the unity of the wage income and of the wage earners," and the
"principle of extra reward." Wage awards for different industries and
occupations should be constantly related to each other. The underlying
emphasis in the whole series of awards for different industries and
occupations should be that the wages of each group are what they are,
more because the total wage income is what it is than because of the
special type of work performed by any group. The same wage should be
paid throughout industry for different kinds of work which require
approximately the same human qualities and which make approximately the
same demands upon the individual. The wage differentials that are
established should be such as will make it reasonably certain that
industry will be provided with at least the existing proportion of the
more skilled grades of labor, and to make it reasonably certain also
that the more arduous, dangerous, irregular, and disagreeable work will
command the service of as much labor as at present. The hopes for the
establishment of any scheme of wage relationship will be realized or
not, according as particular groups of wage earners are willing to
accept a wage that may be less than that which they might secure by the
continued use of their own group strength. This last remark applies in
particular to those groups of wage earners, whose economic position, as
organized groups, is very strong by virtue of the fact that the work
they perform is essential to the economic existence of the whole
community--such, for example, as the railway men, the bank clerks, the
printers, and the miners.
_Fourthly_--With a view to preventing those changes in the distributive
situation which may result from price movements, and which are
undesirable--judged by reference to the distributive outcome that is
sought--all wages including those prescribed under the living wage
policy should be promptly adjusted to movements in the general price
level. The measure of price change should be the movement of the index
number of prices of all the important commodities produced within the
country--the index number to be so weighted as to give a defined
importance (50 per cent. was suggested) to the prices of those classes
of foodstuffs, clothing, housing accommodation, and other commodities
upon which the wage earners spend a very great part of their income. The
policy of adjustment to be pursued in times of rising and falling prices
and the amount of wage adjustment to be undertaken in response to price
movements of different degrees and character--in short, all the rules by
which the adjustment of wages to price movements should be carried
out--were considered, at some length, in several of the earlier
chapters, and can hardly be produced satisfactorily in summary form.
Special care should be taken to protect the standard of life of the
least favorably placed groups of wage earners during periods of a rising
price level.
_Fifthly_--In order to bring about such a distributive outcome as will
recommend the policy of wage settlement to the wage earners and to the
community in general, some profits test should be devised. This profits
test should be used to mark and measure the distributive situation in
industry as a whole, indicating, as it will, the share in the product of
industry that is taking the form of profits. Whenever the general range
of profits in industry exceeds that profits return which is conceived to
be just and sound, the wages of all groups of workers should be
increased in an attempt to transfer the extra profits to the wage
earners. The calculation of the wage increase to be awarded, when the
profits test shows that the profits return in industry as a whole is
greater than that conceived to be a fair return, and the basis of
distribution of this wage increase among the various groups of wage
earners, were dealt with at some length and cannot be described more
summarily. In order to apply any profits test, such as the suggested
one, it would probably be necessary to enforce standardized accounting
methods throughout industry.
The most satisfactory policy would not attempt any direct control of
profits. Nor would it make provision for the transfer of the extra
profits that may be earned by particular enterprises or industries to
the wage earners of those particular enterprises or industries. The
forces of industrial competition, trade union activity, public opinion,
and government regulation would have to be depended upon to keep the
profits return of industry at approximately the level which may be set
as the mark of just and sound distribution. A policy of direct control
of profits may, however, be advisable in particular industries or on
special occasions. The continued assent of the wage earners to any
policy of wage settlement will be largely governed by the success of the
community in making good its claim to a large part of the extra profits
which may accrue to particular enterprises or industries.
_Sixthly_--Any policy of wage settlement of the type considered above
should give encouragement to the organization of labor throughout
industry. It would have to make use of joint councils or boards in many
ways (there may be some craft joint councils also). The English and
Australian experience seems to prove that. To quote Justice Higgins of
the Commonwealth Court of Australia, "The system of arbitrations adopted
by the act is based on unionism. Indeed, without unions, it is hard to
conceive how arbitration could be worked."[153] Still, once a dispute
has come up before the central authority, the final power to render
decisions should rest intact in its hands.
All organizations of wage earners or employers should be compelled (if
necessary) to agree to a policy of open membership. Such a policy of
open membership should suffice to prevent monopolistic action on the
part of the union in any industry or trade.[154] It would also be well
if shop rules could be brought within the field of public supervision,
but that may prove impracticable. Finally, it may be said that no part
of the policy should interfere with the development of profit-sharing
plans--provided such plans are the product of joint agreement between
the employers and the workers engaging in them; and if the workers
immediately concerned so desire, the labor organizations should be
given full representation in the arrangements. Nor, indeed, should it
discourage any movement towards the participation of the workers in the
control of industry, whatever the scope of such participation. On the
contrary, by creating mutual confidence between the wage earners and the
directors of industry, and by giving both the wage earners and the
employers training in the art of mutual agreement, it should prepare the
way for the growth of such participation.
These principles of wage settlement would, it is believed, form a sound
and forward looking policy of wage settlement for industrial peace.
Nevertheless, they are not put forward with the idea that they, or any
similar set of principles for the settlement of wages, would be workable
in practice without many hitches, and without the need for constant
adaptation to the facts encountered. Nor without a suspicion of the hard
blows and unexpected eventualities which fate usually has in store for
fine proposals.
3.--Ultimately, of course, behind any proposals for industrial peace
there is a striving to catch sight of a future industrial society more
content, more generous and creative than that of the present time. To
the ordinary observer no such ultimate question appears to be involved
in an ordinary wages dispute. Yet it is there. The trade union leader
fighting for a wage increase does not always see his demand as a plain
group claim for greater reward; it frequently appears as an act of
justice to his class, a step towards improving their position and power
in industrial society. To the employer more often the struggle is merely
to protect his profits. But beyond that in many cases there is a fear
lest industrial growth and extension be obstructed. Any policy of wage
settlement that is more than a weakly supported truce must throw some
rays of hope into the future. What type of future industrial society may
be envisaged if any principles of wage settlement similar in substance
to those discussed in this book should be adopted? What suggestions for
the future are contained in them? It is not easy to see. Only a few
features of the future can be discerned and those sketchily.
Industry would still be carried on in the main by private enterprise and
competitive activity. Particular industries, as for example, the
railroads, may become government owned or government operated
enterprises. But even so, wages in those industries would be, in all
probability, determined by the same principle as wages in other
industries, and by the same agency. The function of capital accumulation
would still be a private function. The tasks of industrial direction
would still be carried out by the will of those who owned industry;
although, in many industries the power and duty of deciding some of the
important questions of direction, especially those which affect the
wage earners most directly, might be in the hands of a council or board
on which the wage earners are strongly represented.
It may be hoped that all wage earners, except those judged sub-ordinary,
would be in receipt of a wage at least sufficient to enable them to
maintain themselves (and in the case of men, their family) at a standard
of life which did not compare too unfavorably with the standard of life
of the rest of the community. By virtue of this, the way would be opened
for even the lowest grades of the wage earners to take advantage of the
opportunities that are provided for physical and mental life and
education. The ideal would be to ensure that the whole of the industrial
population had that original grant of health, security, and hope which
is required to give reality to the idea of equality of opportunity.
It is vain, perhaps, to attempt to predict whether the level of
production throughout industry would rise or fall; for that will be
affected in a decisive measure by influences over which the policy of
wage settlement will have little or no control. The proposals made would
give adequate encouragement to the accumulation of capital, and to the
carrying out of business ventures. It would succeed also, it may be
hoped, in securing the active interest of the wage earners in a high
level of production, by bringing about such a distributive outcome as
appears just to the wage earners, and by giving adequate expression to
the aspirations of the wage earners. In an industrial system, largely
dominated by the single motive of personal gain, it is not likely that
any one group or class will respond to a general need for high
production unless its interests are thereby directly served. If the
policy adopted brought about a broadening of the motives on which the
system rests and operates, there is much ground for the belief that the
level of production would be favorably affected. However, as was said
above, the possibility of such a result will be largely governed by
influences outside of the present field of study.
There remain the questions of the distribution of wealth and of
opportunity. Here, also, any conclusions that are ventured must rest
upon an insufficient knowledge of the events which will govern the
future. One of the chief requirements that proposals made were designed
to satisfy is the attainment of such a distributive outcome as may be
judged to be both just and sound--weighing all relevant considerations.
Yet it would probably be over-optimistic to believe that the result
would satisfy the intention. For all that, the general desire for a high
level of production will largely depend upon the fulfillment of that
intention. The wage earners will only continue to subscribe to a
doctrine of high production if they trust to the action of the
distributive mechanism to bring them a fair share of the resulting
product. Here we are at the very storm center of socialist economics.
The question is, to what extent, as a matter of fact, do the wage
earners share in the result of increased productive efficiency? To that
question, the policy of wage settlement must furnish a satisfactory
answer--though, of course, no answer will be satisfactory to all men.
The question of the prospective distribution of wealth, however, can
hardly be considered apart from the question of the future course of
growth in population. Even if the wage earners do receive that share of
the product of industry which represents a just and sound distributive
outcome, will that mean a gradual evolution of higher permanent
standards of living among the poor, and give them a fair start in the
struggle for opportunity? Or will it mean but a greater rate of increase
in population, such as will more than keep pace with the ability of our
natural resources and the advances in production and invention to
provide the basis of a rising standard of life for all the population?
In the latter case, groups will remain at the bottom of the industrial
scale whose economic position will be so unfavorable under any social
arrangements as to prevent the individual members of these groups to
fairly develop and test their natural ability. In which case the
handicap of inequality would be very real. The nineteenth century has
left us with a hopeful outlook in regard to the possibility of
maintaining a progressive standard of living throughout the community;
but the events, purposes, and habits which will determine the outcome
are too many, and their relative influence is too indeterminate to
warrant any certain predictions.
However, even if the menace of population is avoided, even if the
general level of production is raised, and if, besides, the distributive
outcome laid down as a goal for the policy of wage settlement is
attained, nevertheless, there would remain a considerable measure of
inequality of wealth. For, it is to be anticipated, that in the course
of the development of our industrial organization, the amount of
invested capital relative to the number of wage earners will grow. This
means that the absolute amount of the product of industry which takes
the form of profits will increase, even if the relative share does not.
As Professor Taussig has written, "In general, the very forces which
make the total income of society high and the general rate of wages high
cause the proportion of income which forms return on capital to be
large."[155] And any continued increase in the absolute amount of the
product of industry taking the form of profits will be likely to lead to
a considerable measure of inequality of wealth; unless the amount of
accumulation and investment on the part of the wage earners is largely
increased.
So much for the question of the distribution of wealth. Is it possible
to venture any definite conclusions, at all, regarding the distribution
of opportunity? The idea of equality of opportunity is not an easy one
to define in terms of facts. It can be said that it would be realized,
in the economic sphere, if such economic conditions prevail, as gave all
individuals an approximately equal chance to follow their inclinations,
and to make whatever use of their natural abilities they desire. If that
definition is near the heart of the matter, it is evident that in a
society in which there is considerable inequality of wealth it will not
be possible to secure equality of opportunity. As Mr. Tawney has
remarked, "Talent and energy can create opportunity. But property need
only wait for it." Under almost all circumstances there is a tendency
for the distribution of opportunity to conform to the distribution of
wealth. Still it is not to be concluded that this tendency is
unconditional. If it proves possible to secure to every industrial
family (except perhaps the most incapable) such a minimum standard of
economic life, and such a degree of economic security as will bring it
about that these families are not gravely handicapped in their efforts
to utilize the existing opportunities for education and for economic
advancement, an important step towards equality of opportunity will have
been accomplished. It is true that a small section of the population
will be strongly favored from the start. But, in an environment which
encourages individual effort, the most important step in the process of
securing equality of opportunity is to get rid of the serious obstacles
to the development and active use of the natural ability of those born
low in the industrial order.
4.--One important factor in industrial peace, which might well be given
consideration in the formulation of a policy of wage settlement for
industrial peace, has received but scant mention in this effort to
formulate the terms of policy. It is the question of economic security
for the wage earners. It is argued by some students of our industrial
troubles that the fundamental desire of most workers is not for
advancement, or even for high wages, but rather for secure and steady
employment at customary rates. That this desire is often uppermost in
the struggles of individuals and organizations is undoubtedly true;
though the relative ease with which work was to be found in normal times
in the United States has prevented the question of insecurity from being
as acute a problem as in Great Britain, for example.
The principles of wage settlement that have been put forward contain but
one measure which might prove useful in an attempt to modify the
insecurity of the wage earner in a modern industrial community. They
provide for the establishment of joint boards or councils in each
industry which are intended to have those phases of industrial activity
which effect the welfare of the wage earners under constant observation.
These councils might conceivably work out plans in different industries
intended to steady the employment of the wage earners, and methods of
insurance against the worst vicissitudes of their employment. In the
pottery trade of England, for example, the industrial council has been
giving consideration to the question of an Unemployment Insurance Fund
for the industry. The possibilities of cooperation between employers and
employed in that direction are genuine. The realization of any such
plans will depend, of course, upon the growth of mutual trust, and upon
the ability of all parties to work for a common end. They require that
every important business man and labor leader be a statesman in the
sphere of business.
In the act establishing the Kansas Court of Industrial Relations, and
governing its operations, there is a provision which gives the Court a
power which might enable it to deal with the question of irregularity of
industrial activity. It is new in the history of industrial regulation
in this country. It provides that the establishments covered by the act
"shall be operated with reasonable continuity and efficiency in order
that the people of this state may live in peace and security and be
supplied with the necessaries of life"; it makes it unlawful for any
establishment "wilfully to limit or cease operations for the purpose of
limiting production or transportation or to affect prices for the
purpose of avoiding any of the provisions of the act."[156] It further
provides that such industries as are affected by changes in seasons,
market conditions or other conditions inherent in the business may apply
to the Court for an order fixing rules and practices to govern its
operations.
This provision may mean a great deal or very little, according as the
Court and the higher courts interpret the idea of "reasonable
continuity." If it is taken to mean simply that the enterprises covered
by the act should not limit production in accordance with some agreement
with each other in order to increase profits, or to fight the unions, it
will have little or no importance as regards the question of security of
employment. And that is probably the interpretation that will be given
to it. It will be hardly possible to work out a plan for regularity of
operation by mandate of a court, and under penalty. Such rules and
practices as the Court may lay down will probably take cognizance of the
laws of the market which ordinarily govern business operations. To rule
otherwise would mean embarking upon a comprehensive reform of business
operations; it would necessitate the development of some other gauge of
business operation than business profits.
Only one case which has come before the Court has brought up this
question of continuity of operation. The Court investigated a complaint
that the flour mills at Topeka were reducing production. It found that
the mills were running at sixty per cent. capacity; and that the cause
of this reduced operation was a falling off in the flour market, due to
world-wide economic changes beyond the control of the industry and the
Court. The Court found this limitation of production not unreasonable.
It gave no sign of making any radical use of its powers to control the
regularity of production, nor of interfering with the ordinary processes
of business operation. This policy it tempered with concern for the
workers--suggesting to the millers that they put their "skilled and
faithful" employees on a monthly pay system. It appointed a committee to
draw up rules and regulations to be observed in the operation of the
industry, and to keep it informed.
5.--In the coming years there will take place in the United States much
controversy and a great variety of experiments in wage settlement. To
the realists of all parties, this course of controversy and
experimentation will appear to be only a struggle for power. To the
rest, it may appear that there are ideas at work; ideas springing partly
from the example of political change, and partly from the fact that the
industrial world has undergone such a rapid revolution. It is impossible
to predict the ideas which will have the most abiding force. It is
impossible even to assert that society will make a satisfactory choice
among them.
In the present confusion of counsel, two relatively new ideas, in
particular, appear to me to be likely to endure and be accepted by
society. The first is the idea that the welfare of the wage earners in
each particular industry is one of the major questions in the conduct of
that industry; and that the wage earners should participate effectively
in those activities of direction by which the conditions of labor are
determined. The second idea is that the whole body of wage earners in
industry should possess the means of checking the action of private
enterprise, when they can prove clearly that the methods of production
that are being pursued are wasteful either of human or of material
resources. An example of such a protest is that of the English coal
miners against the organization of their industry--which was one of the
grounds for the appointment of the Coal Commission. It would not appear
to be impossible to reconcile the action of private investment and
private enterprise with this concept of the right of the wage earners to
exert control over the policy of production, in so far as they can
establish the fact that human or material resources are not being well
applied--the general interest being the test.
The main current of industrial change will be, in my opinion, in the
direction indicated by these two ideas. And change in that general
direction is, it seems to me, essential to the peaceful conduct of
industry, for only in some such way will a sense of common interest be
established--which sense alone can hold together an undertaking so
dependent upon a division of function as is modern industry. Through all
changes, it will remain true that effective production depends upon the
willingness to work hard for the sake of working well, and upon the
existence of strong habits of self-dependence.
FOOTNOTES:
[151] "As law embodies beliefs that have triumphed in the
battle of ideas, and have then translated themselves into
action, while there is still doubt, while opposite
convictions still keep a battle front against each other,
the time for law has not yet come; the notion destined to
prevail is not yet entitled to the field," "Law and the
Court," address by Justice Oliver Wendell Holmes, Jr.,
before the Harvard Law School Association.
[152] In this matter the Kansas Industrial Court law sets a
good example by authorizing the Court to build up a staff of
accountants, engineers and such other experts as it may need
for the proper conduct of its operations.
[153] H. B. Higgins, "A New Province for Law and Order,"
_Harvard Law Review_, March, 1915, page 23.
[154] "Where the union admits all qualified workers to
membership, under reasonable conditions, such a rule cannot
become the basis of monopoly." U. S. Ind. Comm'n. Report
(1915), Vol. I, page 116. Report signed by Commissioners
Manly, Walsh, Lennon O'Connell and Garretson.
[155] F. W. Taussig, "Principles of Economics," Vol. II,
page 205. Revised Ed.
[156] Sections 6 and 16 Act Creating Court of Industrial
Relations, Kansas, 1920.