THE RIGHT RELATIONSHIP BETWEEN EMPLOYERS AND EMPLOYED
1. CONTENTMENT IN INDUSTRY
(_c_) Remuneration of the Worker—Uniform National
Wages—Wage-Relationships among the Workers—Wages and the
Community—Are Higher Wages Practicable?—The Settlement of
Wages—Systems of Remuneration—What is a Fair Wage?—Other
Essentials to Industrial Contentment.
(_c_) Remuneration of the Worker
Contentment in industry depends next on a sound and equitable policy
for remuneration of the workers. That implies the summary rejection of
all attempts to fix wages on abstract formulae which pay no regard to
the circumstances of an industry, or conditions affecting the marketing
of the product. If we adopt socialistic nomenclature and call the
remuneration of the workers “pay,” and assume elimination of the private
employer, and each industry conducted under “democratic control,” even
then the gradation of pay between different classes of workers, the
rate of pay of each class, the relation between the general standard
of pay in one as compared with other industries would depend entirely
on the same circumstances as now, and, if the concrete results of past
industrial experience are to be disregarded, would be in each case a
matter for experimentation, and for practical adjustment and not for
pseudo-mathematical solutions.
Uniform National Wages
One of the demands of workers in many industries which, before the war,
paid in different districts rates of wages varying according to local
economic circumstances, is for uniform national wage rates. This is a
result of the war. There was, during the war, no time to consider the
wage-circumstances of individual works—the pressing need was munitions at
any price—hence Government Departments responsible for production were
compelled to treat wages in industries under their control, especially
those in which there had been no pre-war defined district practice,
on a more or less uniform national basis. Thus, substantially the same
standard, as distinct from minimum, rate of wages for the same grade of
workers came in time to operate generally throughout the country, in all
works in a particular munitions industry. In some of the more highly
organized industries the addition of the same war advance preserved
district differentials of the same pre-war nominal amount, but the
pre-war ratios of the district wages to one another were greatly reduced.
So workmen in a particular district, where, for economic reasons, wages
had been lower than in other districts, found themselves on much the
same wage-level as workmen in the highest pre-war rated district. A
difference of 5_s._ between 35_s._ and 30_s._ per week is very different
from 5_s._ between 80_s._ and 75_s._ Naturally, the worker will not
willingly surrender that position; hence the claim to-day in many
industries for standard national rates. It is an impracticable demand
under ordinary commercial conditions, save in exceptional cases where you
have one employer running all works in an industry, as the Government
did munitions during the war, or different employers each possessing
balanced undertakings which comprise establishments both above and below
average efficiency. The demand for standardization is illustrated in the
railwayman’s wage settlement; numerous classes of men (excluding drivers
and firemen) previously in railway service have been reduced to a small
number of grades, and the individual in those grades receives, generally
speaking, one of three descending national rates of pay according as his
work is in the London area, one of the provincial towns, or in a rural
part of the country. Sailors’ and stokers’ wages are also standardized,
the same rates of pay for the same class of man being paid in vessels in
the same trade category. It is obvious, however, that neither railways
nor shipping nor docks are analogous to industries consisting of an
enormous number of widely different concerns. On the other hand, it is
quite practicable to have uniform national conditions of employment,
overtime, night-work, Sunday-work, etc., and in many industries there is
such national uniformity.
Wage-Relationships among the Workers
The war destroyed the delicate pre-war wage-relationship between the
different classes of skilled, semi-skilled, and unskilled labour—in some
cases the new relationship is a complete inversion of the old. This was
partly the result of Government Departments concerned in production—the
Admiralty, War Office, Ministry of Munitions—advancing wages of men under
their control independently and without reference to one another, in
some cases actually enticing men to their employment; partly of strong
sectional Trade Union pressure, and partly of the celebrated 12½ per
cent, bonus to time-workers, and 7½ per cent. bonus to piece-workers.
Since the war, the want of balance has been aggravated by the action of
employers and Trade Unions in industries supplying a national necessity,
e.g. building, whereby wages were so raised that unskilled men were
paid more than skilled men in a trade like engineering. There is no
more active cause of industrial discontent. As an illustration of how
it operates, at the Dockers’ Inquiry, the Transport Workers’ Federation
protested against any comparison between dockers’ wages and those of
other workers—they termed it a “capitalistic device” to deprive dockers
of their rightful advance. The Transport Workers were members of the
Triple Alliance; the railwaymen were also members. A few weeks later the
railwaymen were claiming before their Central Wages Board an increase in
wage because the dockers had obtained a minimum wage of 16s. per day. It
is therefore vital to get back to, and as far as possible preserve, the
pre-war wage relationships.
Wages and the Community
Public opinion is beginning to insist, as it ought to do, on recognition
of the interests of the consuming community, which in the past have been
wholly ignored. If an increase in wages in an industry is, and can be,
secured by an increase in price, as when the output is a necessity, the
workers in that industry benefit at the expense of the workers in other
industries, and of the consumers generally. In other words, the public
pays, as in the case of housing. If an all-round increase in wages in all
industries is financed by a general increase in prices, then all prices
are higher, and the commodity purchasing power of the increased wages is
no greater than that of the wages before increase, and again the public
suffers from the general rise in prices. Already a beginning has been
made in recognizing the interests of the community in placing public
representatives upon the Railway National Wages Board.
Are Higher Wages Practicable?
It is essential to realize the practical difficulties in the way of
the workers getting the higher wages which all would like to see them
receive. There was a Census of Production in 1907 which included all the
manufacturing industries and mining, and covered half the wage-earners
in the United Kingdom. It ascertained the “net output” for each industry
for the year by estimating the selling value of the gross product, and
subtracting therefrom expenditure on raw materials, including the product
of other industries which were further worked up, and fuel and some other
items. The net output thus obtained is obviously for each industry the
only fund from which first, wages, salaries, interest on capital, rent,
royalties and profits are, or can be, paid, and secondly, taxes, rates,
depreciation, advertisement and sales expenses. Professor Bowley, in his
_The Division of the Product of Industry_, Oxford: Clarendon Press, 1919,
takes the total net output of £712,000,000 for the industries covered
by the Census of 1907, and works out how much of it should be allocated
against the first set of items. I set out below in tabular form his
results (pp. 37 and 52):
£. Per
cent.
Wages 344,000,000 58
Salaries under £160 24,000,000 4
Salaries over £160 36,000,000 6
Interest on Capital at 4 per cent. and rent 48,000,000 8
Royalties 7,000,000 1
PROFITS 133,000,000 23
------------ ---
£592,000,000 100
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Professor Bowley (p. 52) pertinently observes: “How far this 23 per
cent., or £133,000,000 together with a relatively small sum (probably
well under £10,000,000) for the salaries of managers of companies,
is an excessive or unnecessary remuneration for the organization of
industry employing 6,000,000 wage-earners and £1,200,000,000 capital,
and producing £340,000,000 wages is a question that may properly be
debated: _it is this sum that formed the only possible source of
increased earnings in this group with industries conducted as before
the war and production at its then level_” (the italics are mine).
Supposing the absurd: that in 1907 the whole of this £133,000,000 had
been taken from employers, and handed over to the wage-earners, the total
average earnings of men fully employed in the industries in question, as
Professor Bowley shows (p. 39), would have been only 41_s._ 6_d._ per
week. Supposing half of the £133,000,000 had been handed over, the total
average earnings of men fully employed (including tradesmen) would have
been 35_s._ 2_d._ per week. But even to have handed over half, would,
by reason of the great disparity between the profit-earning power per
man employed of different firms in the same industry, have resulted in
closing down many of the less profitable concerns. These figures show
conclusively that in industry, as a whole, though there may be exceptions
in certain particular industries, the ability to pay higher permanent
wages depends upon greater and more efficient production.
The Settlement of Wages
Wages and conditions of employment must always be matters of collective
bargaining between employers and employed and not for superimposition by
Government upon either or both of them. In my view, national settlement
of wages and conditions in an industry is essential to wage stability. A
national settlement does not, however, involve a uniform national wage.
Complete discussion and national settlement entail for each industry
the organization of all the employers into one effective federation,
and of all the workers, not necessarily into one Union, but into Unions
which are embraced in one executive federation. Only where responsible
representative and disciplined federations of employers and workers
exist in an industry can there be effective national negotiation of
wages questions, or in industries in which Whitley Councils exist,
between the two sides of the Council. I look forward to the time when
the organization in each industry for the settlement of all industrial
conditions will be developed into an organization consisting of
representatives of (1) employers; (2) administrative and technical and
supervisory personnel; (3) Trade Unions, and (4) consumers. Questions
affecting the industry as a whole would be settled by all four sections;
questions, e.g. of wages, by the representatives of the employers, Trade
Unions and consumers. If a wage agreement is negotiated in any industry
providing for excessive wages and therefore high costs of production and
high prices, is it to be unchallengeable when the industry is a public
necessity? There were many such agreements made during and immediately
after the war. I see no way of reviewing such agreements when once made;
all attempts by Government to do so under the Munitions of War Acts were
unsuccessful. The only practicable method of safeguarding the consuming
public is to have, as I suggest, efficient representatives of the public
present at, and entitled to take an active part in, the joint conferences
of federated employers and Unions when wages are being negotiated, as on
the Railway National Wages Boards.
Systems of Remuneration
No one can dogmatize and say what system of industrial remuneration
should be adopted, whether time, piece-work—collective or
individual—premium-bonus, bonus on output, profit-sharing, or
co-partnership. That all depends upon the conditions of the industry, its
peculiar psychology, especially its past history; it must always be a
matter for negotiation. But I am the strongest believer in a fair system
of payment by results, as being, under proper safeguards, the best for
the worker, the employer and the consumer. A steel worker or boilermaker
will swear by it; a carpenter or joiner calls it “the device of the
devil.” Hence my reference to industrial psychology.
What is a Fair Wage?
Wages are, and can only be, payment for work done and services rendered
by the “wages staff.” There must always be a maximum limit to wages and a
minimum. The employers’ maximum is a wage beyond which any advance, with
other costs of production remaining constant, would prevent the marketing
of the product at a commercial profit commensurate with the nature of the
enterprise. The theoretical minimum is a “living wage,” i.e. bare cost
of subsistence, but the Trade Union minimum wage, which is the practical
minimum in industry, is much higher than the subsistence wage. It is a
wage which in the particular industry provides for subsistence for the
worker and his or her dependants, including therein food, rent, fuel,
light, clothing, fares, Trade Union subscriptions, etc., and reasonable
enjoyment and recreation. Trade Union minimum rates for different trades
varied before the war from one another by “vocational differentials.”
A skilled man’s rate exceeded that of an unskilled man by a recognized
excess; the excess is the trade differential in respect of the skill
required of the particular tradesman, the length of apprenticeship
necessary to acquire it, the nature of the occupation and so forth. The
higher rate of the skilled man is naturally reflected, as statistics
show, in a higher standard of living. The whole problem in arriving at
a fair wage is to determine at what point, if any, between the existing
Trade Union minimum and the employers’ maximum, the wage ought to be
fixed, in justice to the workers, employers and the public.
By way of preliminary I would emphasize that no fair wage can be
fixed on any basis of a priori reasoning. It involves constructing a
theoretical household budget, adopting an empirical standard of life,
with no relation whatsoever to the normal circumstances of any section
of the industrial community, ignoring economic conditions, and assuming
that industry can or ought to pay a sufficient wage to maintain that
standard. That is the fatal method of the doctrinaire. The usual
procedure is for the Trade Unions to demand an increased wage, and swear
by all the gods that the employers can easily pay it. The employers then
assert with equal emphasis their inability to pay any increase. Sometimes
a compromise is reached and sometimes not. There should be, and indeed
is, a better method of procedure.
First, there ought to be ascertained the wages which the industry is
economically able to pay at the then prevailing market prices for its
product; we may conveniently call them “ability wages.” They cannot be
determined by picking out and assuming as typical—a frequent stratagem
of Labour—individual firms which are making substantial profits. The
industry must be taken on a national, it may be sometimes on a district
basis, extreme cases at both ends of the scale ruled out, and a proper
estimate struck on methods of accountancy, making due allowance for the
trade outlook and for all the expenses and risks present and prospective,
which, from the conditions of the industry in question, fall upon the
employers. Labour insists on the Trade Union rate of wages being paid
by all firms, whether making large profits or none at all. To consider
therefore the industry as a whole is equitable. Employers making
exceptional profits cannot be taken as norms for wages; so far as their
gains are contrary to public policy, they can only be dealt with by a
“wise and wary Chancellor of the Exchequer.” That an “ability to pay”
estimate can be prepared in respect of an industry by competent joint
accountants on a basis convincing to Labour has more than once come
prominently within my own practical experience. The great point is to
prove to the workers that they are getting a fair share of the product of
industry under its then existing conditions. It is much more important to
satisfy them on that point than to pay them a high wage. If they get a
higher wage than the industry can pay, and are not satisfied, they will
firmly believe that a still higher wage could and ought to be paid. There
is only one way to prove the equity of the wage—to put all the cards on
the table, and show the Trade Union representatives at the conference
what the exact conditions of the industry are, and what are the maximum
wages which the industry as a whole can pay.
Secondly, an exact statement is required of the wages paid in other
industries to workers comparable with the workers in the industry in
question—these may be termed “comparable wages.” They are obtainable
from statistics compiled by the Ministry of Labour, but not published in
collated form.
There are in practice two objects to achieve. First, to ensure that each
grade of worker gets a fair wage which corresponds to the “ability wage,”
and secondly, to try and keep the wages of workers in one industry in
proper wage-relationship with the wages of comparable workers in other
industries. If the existing wages are less than the “ability wages,” and
the latter are either equal to, or less than, the comparable wages, there
ought to be an advance of the existing wages up to the ability level,
and, in my view, a further advance beyond ability level towards, but
not exceeding, the comparable wages-level, if the circumstances of the
industry are such, as for example, in respect of foreign competition,
that the market price of the product can be increased by the necessary
amount. It is so essential for the harmony of industry that the wages
of comparable workers should be generally on the same level. There
is no difficulty in practice in saying who are comparable workers.
Industrial experience and tradition have firmly settled that. In the
case, comparatively rare in practice, where the level of ability wages
is higher than the level of comparable wages, other considerations
arise. Some employers contend that to pay in one industry that can
afford it a higher rate of wages than in comparable industries that
cannot afford it is to upset the equilibrium of wages in those latter
industries, and incite the workers in them to ask for the same wages
rates, thus involving a charge upon the whole or a section of the public
forming the consumers of the product of those industries with the usual
results. Other employers assert that comparable wages are the criterion
of fair wages, and as employers have to stand the risk of paying Trade
Union wages when profits are not adequate, so, therefore, employers,
when profits are exceptional, should be entitled to retain what remains
after comparable wages are paid. I do not see why the employer should be
entitled to appropriate in such a case the difference between the ability
wages and the comparable wages. In my view, if an industry is shown by a
joint cost investigation to be able to pay wages which are higher than
comparable wages, the amount of the proceeds of the industry beyond the
sum necessary to pay wages at comparable rates should be divided equally
between employers and workers and consumers—in the case of the latter by
a reduction in price. The workers thus secure a share in the prosperity
of the industry.
Some wage complexities due to the war urgently need adjustment. Flat
additions as war bonuses on piece-work or tonnage-rates are unsettling
anomalies; they should be incorporated in new piece—or tonnage—rates.
Their existence hinders output. War advances and war bonuses; which,
though originally different, are now in practice indistinguishable,
should, so far as not withdrawn, be merged into the permanent rate or
price—in one-half of industry they have already been merged—difference of
treatment only causes unrest. It cannot be too strongly emphasized that
high rates of wages do not necessarily mean high earnings—they frequently
mean no earnings and no work. Increasing the productive efficiency of
labour does increase the ability of industry to pay. Such alone is the
one sure road to higher earnings.
Other Essentials to Industrial Contentment
There should be open to the workers in this country an opportunity of
rising, that is, of transfer from the wages side to the salaried side
of the staff as is afforded by American employers. Why there should be
such reluctance among so many English employers to promote men from the
wages side I have never appreciated. During the war I had a large number
of workmen under me at the Admiralty, who, after the war, were appointed
to responsible positions on the administrative side of industry in the
establishments of some broad-minded employers, and have abundantly
justified their selection.