The Settlement of Wage Disputes Part 15

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, ent.i.tled "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 relations.h.i.+p 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 c.o.c.ksure 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 const.i.tution 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 const.i.tuted 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 princ.i.p.al 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 cla.s.ses 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 a.s.sessed 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 a.s.sessment 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 partic.i.p.ation 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 relations.h.i.+ps. 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 relations.h.i.+p. 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 t.i.tles 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 relations.h.i.+p 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 cla.s.ses 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 compet.i.tion, 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 a.s.sent 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 members.h.i.+p. Such a policy of open members.h.i.+p 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 partic.i.p.ation of the workers in the control of industry, whatever the scope of such partic.i.p.ation. 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 partic.i.p.ation.

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 cla.s.s, 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 compet.i.tive 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 acc.u.mulation 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 acc.u.mulation 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 cla.s.s 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 antic.i.p.ated, 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 acc.u.mulation 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 circ.u.mstances 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 establis.h.i.+ng 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.