It is easy to foresee the difficulties with which a policy which planned

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.

The Settlement of Wage Disputes · 第 16 / 16 章