In his letter to THE SURVEY on the subject of fixing wages by law,
James Deegan says: “The report of the United States Bureau of
Commerce and Labor for 1910 states how labor received only 20 per
cent of the value of the product which it served to create.”
Considering carefully this rather surprising statement, I came to
the conclusion that the writer referred to the report of the Census
Bureau in the Department of Commerce and Labor, presenting the
results of the manufacturers census of 1910. To be sure, this report
does not make any such statement as that which Mr. Deegan attributes
to it nor could the statement be properly based upon the statistics
which it publishes. On the contrary, the census figures conclusively
disprove this statement, showing it to be a gross perversion of the
facts.
It is true that the total value of products reported by the census
of manufacturing industries was a little over $20,000,000,000,
while the amount paid out for wages and salaries was a trifle over
$4,000,000,000, so that the latter amount was about 20 per cent of
the former.
If Mr. Deegan had stated that the amount paid to labor employed in
manufacturing industries represented 20 per cent of the total value
of the products turned out by these industries, the statement would
have been formally accurate, although it probably would be misleading
even then. The statement is, however, that labor received only 20 per
cent of the value of the product which it served to create.
Even with a superficial knowledge of economics and industrial
processes one ought to perceive that the laborers employed in
manufacturing industries by no means create the full value of the
products which these industries place upon the market. The laborer in
the factory does not create the raw material which the factory uses;
labor on the farm, in the mine or in the forest entered into that.
Now the report of the census shows that while the value of the
product produced by the manufacturing industries of the United
States was $20,700,000,000, the cost of the materials consumed in
the manufacture of these products was $12,200,000,000 and that
the value of the products, less cost of materials, was therefore
about $8,500,000,000. The value created by the laborers employed in
these industries could not possibly exceed this sum and would be
considerably less than this if any allowance were made for wear and
tear or depreciation of plant and machinery or fuel consumed or for
other expenses which enter into the value of the final product.
If, however, we credit laborers with having produced the full value
represented by the difference between the cost of materials and the
final value of products it follows that the $4,000,000,000 which they
received represented not 20 per cent but about 50 per cent of the
value which they created.
If we deduct from the final value not only the materials purchased
but also the miscellaneous expenses reported by the census, none of
which represent values created in these industries, the proportion
received by the laborers advances to about 65 per cent. And still no
allowance is made for replacement of capital.
Mr. Deegan’s proposition for regulating wages proposes to award the
laborers a minimum of 33⅓ per cent. It is evident that they are much
better off than this under the present regime and without any state
regulation of wages.
Mr. Deegan further states that the report referred to “also shows
that after all expenses and charges are levied, there still remains
over $2,000,000,000 surplus to be divided as profits among the
employers.” It is true that after deducting from the value of the
products reported by the census, the aggregate of all reported
expenses, the remainder is a little over $2,000,000,000; but the
census report is careful to point out that this difference can not
be regarded as representing profits for the simple reason that the
expenses reported by the census did not include all the expenses
incidental to the process of manufacture. Among the expenses left out
of account is the important item of depreciation.
If Mr. Deegan had consulted the census report itself, such statements
as he made would be reprehensible as well as inexcusable; but
I presume that he got his information at second hand from some
newspaper paragraph or article originating no one knows how or where.
But THE SURVEY, however, ought not to be made the agency for the
further promulgation of such misinformation. It might be said,
perhaps, that such gross misstatements do not deceive thinking and
well-informed people; but even well-informed people do not always
know the facts which refute such statements; and thinking people do
not have time to think about everything.
More than that it seems to me that some consideration should be shown
for the unthinking people that they may not be deceived or misled.
Some of them have a vote.