This case is to be distinguished from the previous one really only by the decided seriousness of the situation it reveals. In this case it is presumed that a decided judgment may be made that the price level must be greatly lowered before business operations can revive and be carried on with confidence in steady markets. In the previous one it is presumed that a decided judgment can be formed to the effect that the shock to business will be satisfactorily gotten over with just that reduction of prices that liquidation and a more careful conducting of business operations will bring about. The difference is, in the last analysis, one of degree.

A price decline that is in reality a movement from a state of depreciated paper money back to a gold standard may be looked upon as a variant of the third case. For it is obvious that if the depreciation is extensive, the decline in the price level necessary to the attainment of the gold basis must also be extensive.

There is a fourth possible case which will be described, but will not be followed up, since it is not applicable to the United States at the present time. It is the case of a country whose chief industries are export industries—the prices of the products of which are determined by world competition. This case is complex and not to be analyzed by a general rule. A few observations may be made. It is conceivable that a situation should arise in which a policy of wage reduction is expedient because the export industries are very gravely threatened by foreign competition. In such a situation it may be argued that any genuine necessity for a reduction of wages would be manifested by the pressure of the banking system, because of the outflow of gold that would occur consequent to a great falling off of exports. But, as we have seen during the war, such a banking situation may be avoided for a number of years by such devices as foreign loans, and the industries in question would decline in the meantime. On the other hand, any policy of general wage reduction could only be undertaken with caution. Situations of the sort described tend to call out the reserve energies of a country. They are always present to a greater or less extent.

So much then in answer to the first question—as to whether there was any reason for wage reduction during periods of declining prices. The second question then presents itself—on what basis should such reductions as are advocated be arranged? On which subject the conclusions reached in the course of discussion of wage adjustment to upward price movement are applicable. These conclusions will be recalled at various points further on in the book.

FOOTNOTES:

[58] Nor has it for that matter been applied with consistency in Great Britain. See the Minority Report of the War Cabinet Committee on "Women's Wages," 1918, page 262.

[59] Webb, "Industrial Democracy," Doctrine of the Vested Interests, pages 562-572, 595.

[60] The data published in the monthly U. S. Labor Bulletin covers most of the articles which are at all important in the wage earners' budget. The collection of such data, however, has remained spasmodic up to the present. See the article by H. S. Hanna in the October, 1919, issue of the Monthly Review of the U. S. Department of Labor. The Sumner Committee Report on the "Cost of Living in Great Britain" 1917 (CD 8980), covered food, rent, clothing, fares, fuel and light, insurance, and sundries. Data was collected for skilled, semi-skilled, and unskilled labor.

[61] See pages 89-91, Chapter V.

[62] See Chapter XII.

[63] "While these two series (i.e., of wholesale and retail food prices) agree closely in the general trend of fluctuations, the retail prices are much more stable. They lag behind the wholesale prices both on the rise and on the fall, but more on the fall than on the rise." Mitchell, "Business Cycles," page 39. The tables given apply to the 1890-1910 period in the United States. They do not show fluctuations for periods less than a year.

[64] W. C. Mitchell, "Business Cycles," page 39.

[65] Adam Smith, "Wealth of Nations" (Cannan's Ed.), Vol. I, page 87.

[66] See pages 203-7, Chapter IX.

[67] These in general were the motives for the passing of the Temporary Regulation of Wages Act in England (1918). "During the period of six months from the passing of this act, any person who employs in any trade or industry a workman of a class to which a prescribed rate of wages as defined in the Act is applicable, shall pay wages to the workmen not less than the prescribed rate applicable to workmen of that class, or such other rate as may be substituted for the prescribed rate by the Interim Court of Arbitration ... and if he fails to do so, he will be guilty of an offense under this Act."



CHAPTER VII—THE STANDARD WAGE

Section 1. The remainder of the book will consist of an attempt to mark out principles of wage settlement that could be applied with relative peace and satisfaction in the settlement of wage disputes.—Section 2. Some preliminary notes on the subsequent exposition. The question of the political machinery required to put any policy of wage settlement into effect, avoided on the whole.—Section 3. The principle of wage standardization defined and explained.—Section 4. The characteristics of the standard wage examined.—Section 5. The effect of the standard wage on individual independence and initiative.—Section 6. The effect of the standard wage on the distribution of employment within the group.—Section 7. Its effect upon industrial organization, prices, and managerial ability.—Section 8. Its effect upon the output of the wage earners. This question cannot be satisfactorily discussed apart from the larger one—that of the effect of unionism upon production.—Section 9. Wage standardization and the "rate of turnover" of labor.

1.—In the first two chapters the aims towards which any policy of wage settlement for industrial peace should be directed were discussed. In the following four chapters an effort was made to throw into clear light the forces and relationships which determine wages at the present time. The way has thus been prepared for an attempt to work out principles for use in the settlement of industrial disputes. Past experience in industrial arbitration or adjudication is a fertile source of suggestion in this endeavor; although much of it has been rather like a search in the dark for objects not too well described beforehand. The definition of aims was an attempt to find out the objects of our search. The analysis of the present economic situation and of wage principles was an attempt to get acquainted with the area in which the search must go on.

The remainder of this book will consist of an attempt to work out principles of wage settlement which could be applied in wage disputes with relative peace and satisfaction. If adopted, they would serve as a substitute for a resort to open force in such disputes. Their acceptance would mean that when ordinary collective bargaining fails as a means of settling wages, the dispute would be referred to some constituted authority, who would use these principles to reach a decision.

2.—The plan pursued in the subsequent exposition requires a few brief preliminary notes.

First, in regard to the order of exposition. What follows is simply the direct statement of a series of principles (embodied in measures, as all principles must be). These principles, separately taken, cover most of the problems presented by wage disputes. Taken together they might be composed into a policy of wage settlement. Indeed, at the end of the book, an attempt is made to combine them into such a policy. Not that it is believed that any policy of wage settlement can really be wrought in a piece this way. But because it is believed that ultimately it will be recognized that wage disputes cannot be settled as isolated events. There will have to be recourse to thought out principles, systematically applied. It will be found that no single principle will suffice; that many principles will have to be combined and used with reference to each other. There will be, in short, a call for a unified policy of wage settlement.

Secondly, in regard to the range of the exposition. The question of the political machinery that would have to be created in order to administer the proposed principles is on the whole avoided. To have attempted to discuss that question systematically would have greatly complicated this inquiry. In places, indeed, it will be found impossible to gauge the operation of some proposed principle without an understanding of the machinery by which it is applied. At such points an attempt is made to indicate the arrangements that would best serve the purposes in view.

Thirdly, in the formulation of the principles suggested, past and present experiments in the application of such principles are liberally drawn upon for suggestion. No attempt will be made, however, to enumerate systematically the principles that have been applied in the pursuance of the aim of industrial peace. No effort will be made to classify the various theories or principles which have been put forward somewhere or sometime in the past, and then to submit each theory or principle to criticism.[68] Or, in other words, no attempt will be made to give a primer of opinions either as to the difficulties to be encountered in any attempt to formulate a policy of wage settlement, or of the suggested means of overcoming such difficulties.

3.—The first of the principles or measures which is put forward, is known as the principle of wage standardization. This principle has been well interpreted by Mr. Stockett: "The principle of standardization is designed to abolish within a given area the multiplicity of rates paid for similar service by the application of one standard rate for each occupation, minor differences in the nature of the work due to varying physical and other conditions being disregarded."[69] It represents the desire to do away with the great variety of wage rates for the same work which frequently exists, and the substitution therefor of a minimum wage rate. Good examples of its application are the wage agreements entered into by organized bodies of wage earners and employers. In these the standard rates agreed upon for the various occupations are the minimum to be paid for these occupations, regardless of the particular individuals employed, and of minor differences in the nature of the work performed.

Trade union activity is undoubtedly responsible for the introduction into industry of the principle of standardization. By the device of the "common rule," so called, the possible influence upon the wage bargain of the economic position of the individual wage earner, or of the inefficiency or policy of the individual employer, is greatly curtailed. The common rule is a suitable instrument of expression for the group unity; by its use the competition for employment between the various members of the group is prevented from taking the form of underbidding.[70]

The enforcement of standard rates throughout a large area hinders industries from locating in places because of the opportunities for the hire of labor at cheaper rates, notwithstanding the fact that other places may possess greater natural advantages. It puts all competing enterprises and localities comprised within the area of standardization upon the same plane. This is well brought out by a resolution brought forward in the 1920 Convention of the Cigar Makers which reads "Whereas, the cigar makers in local unions are working on prices in some instances ten to twenty dollars cheaper per thousand lower than the cigar makers and unions of different localities, and, Whereas cigar manufacturers are taking advantage of the situation, moving their factories or establishing branches of them in cheaper districts ... and, Whereas this is detrimental to the welfare of the cigar makers and detrimental to the principles of the Cigar Makers International Union be it resolved by this convention that the Cigar Makers International Union adopt as one of its aims the securing of a uniform bill of prices, taking into consideration all the local conditions and necessities of the trade and local interests of the cigar makers, etc...."[71] And finally the enforcement of standard rates tends to add to the competitive importance of able management. Shrewdness in bargaining with the labor force becomes a less important factor in economical production; ability to use the labor force, at the standard rate, to the best advantage becomes a more important factor. The tone of competition undergoes a change.

The principle of wage standardization is already accepted in many branches of American industry. Even in those branches, however, there remain many open questions as to the limits of its applicability. It has in the main the approval of public opinion, as shown by its acceptance in all projects of wage regulation undertaken by the government in time of war, and by the report of the President's Second Industrial Conference.

4.—It is necessary to study the characteristics of standard wage rates in some detail, in order to be able to measure the effect of the introduction of the principle into industry, and in order, also, to mark out the limits of its applicability.

The first characteristic of the standard wage to be noted is that it is only a minimum wage for the occupation for which it is enforced. Standard wage rates are not of necessity the actual wage rates received, by all or even a majority of the wage earners employed upon the tasks to which they apply. They do sometimes become the actual rates received by most of the wage earners concerned; they become the wage, ordinarily, of those workers who fall around the average in skill and experience. This fact is liable to misinterpretation. It may be taken to mean that the more efficient workmen do not receive recognition for their greater efficiency. What it usually would signify is that the wages of the less efficient members of the group are increased.

As a matter of fact variations from the standard wage are commonly found. Mr. Collier, after an analysis of Australasian experience, concludes on this point "... But this is not saying that the minimum wage is necessarily the maximum. Although statistics as to wage distribution are largely lacking, the weight of opinion is contrary to this supposition. In some industries, such as the building trades, where contracts are made upon the basis of a legally fixed rate, this rate is frequently the maximum. Yet such instances are in the minority. Employers do not reduce the pay of their most competent workers because they are compelled to pay those less qualified at a minimum rate."[72] It will be found usually that the abler, the more skilled or more experienced workers in particular occupations receive higher wages than the standard, because of the special value of their services.[73] Occasionally also agreements are entered into for the employment of a small number of workers, who are acknowledged to be well below the ordinary level of efficiency in their trade or occupation, because of physical disability, old age or analogous causes. As Prof. McCabe has said, "Nearly all unions permit members who have become unable to command the minimum rate because of old age or physical infirmity to work for what they can get."[74]

A second characteristic of standard wage rates is that they may take the form of time-rates, or payment by results, or any combination of the two. Trade union agreements in the United States include all these varieties. It is true that a system of standard time rates is likely to be more in accord with the sentiment underlying the standardization movement. For under a system of payment by results individual differences in capacity are apt to be more readily reflected in the actual wage payments. And the sentiment underlying the principle of standardization is nearer the idea of equal payment for equal effort or equal sacrifice within the group, than the idea of equal payment for equal product. This is illustrated in the report signed by the Labor Members of the Committee on Industrial Relations (1912-16) in reference to the wage payment systems of scientific management which reads, "... All of these systems of (i.e., of scientific management) payment tend to center the attention of the worker on his individual interest and gain and to repress the development of group consciousness and interest. Where the work of one man is independent of another, the individual has no motive to consider his fellow, since his work and pay in no wise depend on the other man. What either does will not affect the other's task or rates."[75] Furthermore, in some industries it is difficult under a system of payment by result to arrange that the actual wages received by the average members of the group for average effort, will be approximately equal. Those are the industries in which there are a great variety of jobs with different rates, which can only be more or less accurately estimated in the "price list"; or industries in which the working conditions vary greatly, either within the same factory or mine, or between different factories or mines engaged in similar work.

Where the philosophy of unionism is firmly entrenched these two systems of wage payment tend to be so governed by the actions of the wage earners and employers as to lead to approximately the same results. The standard wage under a time-rate system tends to become the wage for an average or customary output. Employers tend to demand at least that output for the standard time wage, and strive to increase the customary output whenever the standard time-wage is increased. And, on the other hand, under a system of payment by results, there is frequently a tendency for the workers to keep their output around a certain general level; which level, indeed, is determined only by all the circumstances governing the group attitude in the particular shop or industry. The "Report on Collective Agreements in the United Kingdom" (1910) has stated this as follows: "Although the main distinction between time wages and piece wages is of the nature described above, it is of importance to note that, whether the method of remuneration adopted be expressed as payment by results or as payment by time, the amount of work performed and the time taken in performing the work are factors, both of which are, to a greater or less extent, taken into account in every agreement for the payment of wages. Thus, on the one hand, the employee who is working on time wages is expected by his employer to turn out in a given time not less than a more or less specifically agreed upon quantity of work—"to do a fair day's work"—while, on the other hand, a list of piece-wage rates usually has an implied, and in some cases has an explicit, reference to the amount of money which can be earned by a man working under the list in a given time."[76]

The principle of standardization can and does find expression under either method of wage payment; its adoption does not exclude the system of payment by results. The terms of all such systems, however, should be made the subject of collective agreement. In that way the group interest in a defined minimum standard wage is protected, and the principle of standardization realized. As Prof. Pigou has written, "In order that the piece-wage system, and the benefit to production which it carries with it, may win further ground, what is required is to develop in these more difficult industries an adequate machinery for subordinating piece-wages, ... to the full control of collective bargaining."[77]

5.—Such then, being the leading characteristics of the standard wage, what results can be predicted for an attempt to introduce it throughout industry?

During the decades which witnessed the introduction of wage standardization into industry in the United States, the most loudly expressed anxiety was in regard to its conceived effect upon individual independence and initiative. This question cannot be satisfactorily discussed apart from the larger one of which it is a part—that is the question of the influence of labor organization upon individual behavior. A few observations may be ventured with the explicit admission that they leave many sides of the question untouched.

The "common rule" has come into operation only where the ground has been prepared for it, where there has been a growth of group consciousness and unity. Under such conditions its use and observance mould individual ambitions and actions in some measure. It is a device which attaches the individual to the group, and interests the individual in the group advancement more than he otherwise would be. On the other hand, it indirectly guards for the individual an independence and vigor of spirit often lost in modern industry. When the underlying philosophy of the "common rule" is deeply ingrained the problems of industrial direction are completely changed; they become more difficult. Production becomes a task involving the power to win men to their work. Where the ethics of the common rule are accepted, effective work on the part of wage earners depends upon interesting them as a group in their work. The usefulness of wage systems which aim to increase individual production through individual reward is not necessarily at an end. But all such systems are compelled to accommodate themselves to the widespread desire for a standard group minimum.

6.—Another question to which the introduction of the standard wage gives rise is that of its effect upon the distribution of the available employment among the members of the group to which the wage applies. This question should be distinguished from that of its possible effect on the total amount of employment. It has often been contended that the multiplicity of wage rates for approximately the same work in industries in which wages are not settled by collective bargaining, is to be accounted for, above all, by the varying efficiency of individual wage earners. And, therefore, it is argued, that any attempt to standardize wages must lead to a concentration of employment upon those members of the group who are the more efficient, and must deprive the relatively less efficient of their employment.

It is almost impossible to say, except for concrete situations, to what extent irregularity of wage rates is due to differences in individual efficiency and to what extent to other causes. Such factors as differences in bargaining power, differences in the policy or efficiency of the employers, slight differences in the character of the work performed, local differences in the supply and demand situation for the type of labor in question, and the like, certainly account for a great many of the irregularities. Prof. Marshall has expressed one view of the matter well. He writes, "Cliffe Leslie and some other writers have naively laid stress on local variations of wages as tending to prove that there is little mobility among the working classes, and that competition among them for employment is ineffective. But most of the facts they quote ... are only half facts and when the missing halves are supplied, they generally support the opposite inference to that on behalf of which they are quoted."[78] In R. H. Tawney's study of "Minimum Rates in the Tailoring Industry" (Great Britain) a vigorous statement of the opposite view is given. He writes, "The wages paid to a group of workers in a given industry and a given area depend, in fact, very often not on the conditions obtaining in that industry in other areas, but on the conditions obtaining in that area in other industries."[79]

It can be affirmed that the irregularity of wages is due to a considerable extent to other causes than differences in the efficiency of individuals. As D. A. McCabe writes, "Very little seems to be known as to differences of efficiency among men engaged in the same kind of work." But as he adds, "It is safe to assume, however, that they are not reflected in time-working trades with any exactness by the wages paid, even where there is no trade union minimum."[80]

More to the point, it can be affirmed that the percentage of individuals in any occupation whose efficiency is decidedly below the average efficiency of the group is small. For, as a matter of fact, what really comes into question upon the introduction of wage standardization, is the employment of that small percentage of individuals whose efficiency is decidedly below that of group average. The employment of this small percentage in each group will be decisively affected by the general demand and supply situation of that group at the time when standardization is introduced. If the need for the services of a group is relatively great, employment at the standard rate will be given even to those members of the group who are decidedly below the average efficiency of the group. Such is the case during periods of industrial expansion. When the demand for the services of the group falls, however, it is probable that these men will be discharged first—more promptly than if wage standardization had not been introduced. There is probably some connection between the progress of the standard wage movement and the tendency to limit overtime in the industries in which the standard wage is enforced. Lastly, the effect of the enforcement of wage standardization upon the employment of the least efficient members of the group can be modified by special arrangements, whereby a wage lower than the standard is set for such individuals as are mutually acknowledged to be decidedly below the average of the group.

In this regard Mr. Collier's report on the Australasian experience is a useful guide. He writes: "That workers may be displaced following the application of wage regulation to an industry is a fact sustained by the experience of Australasia. In New Zealand, many bona fide workers were thrown out of employment during the early years of the arbitration law. There was also considerable distress among the boot and clothing workers of Victoria. Many of the old, inefficient, and slow workers were discharged. But in each case other factors than labor legislation figured in the situation. We have seen that in the board trades of Victoria there has frequently been a decrease in the number of employees immediately after a determination became effective, but that in almost every instance this decline was temporary. After the period of adjustment, industry pursued its normal course. This seems to have been the general experience in this and other states."[81] It may be concluded that some redistribution of available employment will sometimes follow upon the introduction of the standard wage into industries in which wages were hitherto unstandardized, resulting in the partial or complete unemployment of the least efficient members of the group. As was said above, the extent of such redistribution will depend somewhat upon the demand and supply situation at the time when the standard wage is introduced. Those whose employment is reduced or taken away will either go into some work on which they compare more favorably with the other workers engaged, (leading to a further redistribution of employment perhaps), or will remain unemployed. The other members of the group will have increased employment.

7.—Still another possible effect of the introduction of the standard wage deserving of attention, is that which it may have upon industrial organization, and upon the level of managerial ability. As will be made clearer elsewhere, the enforcement of standard wage rates in an industry is usually equivalent in practice to the enforcement of those rates that are already being paid by the better organized units of that industry.[82] This leveling process may have any or all of several consequences. It may cause enterprises which had succeeded in competing partly because they paid lower wages than more efficient enterprises for the same grade of labor either to improve their productive methods, or gradually to cease production. It may result in a reduction of profit for certain enterprises. It may occasion an increase in the price of the commodities produced. It may result in an increase in the productive efforts of the wage earners.

In the abstract, it is impossible to balance these various possibilities with complete assurance. The only inductive studies of value which give any indication of the probable result are those which have been made upon the results of living wage legislation. These, almost without exception, make the price increase resulting from standardization, inconsiderable.[83] They are witness to the fact that improvements in the level of industrial management and a gradual elimination of the less competent employers have frequently taken place. The opinion seems warranted that unless standardization is introduced under very unfavorable circumstances or in the form of an extremely violent upward movement, it will not cause a considerable or permanent rise of prices, but will rather bring improvement in industrial organization and lead to a more intelligent use of labor in industry. Along with this, there is reason to hope that it will have a favorable reaction on the efforts of the wage earners.

8.—The whole subject of the effect of wage standardization upon the output of the wage earners remains to be considered, however. It is an aspect of the subject which has been in the forefront of discussion. It also is a topic which cannot be satisfactorily discussed apart from a larger one—that of the effect of unionism upon production.

The most bitter opposition to trade unionism has been connected with allegations made in this regard. These have taken different forms, but they almost always express one contention. That is that if a standard wage is set for work of a given kind, and if all men engaged upon that work receive that wage irrespective of small differences in ability, there will remain no stimulus for the abler workmen to exert themselves. Or in other words, that the standard wage makes slackers of all men. Sometimes this criticism is leveled only against the standard time wage; at other times against the standard guaranteed minimum wage, such as there used to be in the English coal fields; and, at still other times, against any method of wage payment which takes full power out of the hands of the employers to make an individual wage bargain with each worker.

These contentions have some basis on occasion. More often they arise from a misconception of the place of the wage earner in industry, or from a general hostility to labor unionism. Wage standardization does not mean that all wage earners receive the same wage irrespective of differences in ability. It simply sets a minimum standard for all workers of the group who are about the average in ability. It is designed to end all differences in remuneration, save those which arise out of differences in ability. It may be worked out in systems of payment by results, as well as in systems of time payment.

In reality a deeper conflict lies behind the antagonism to the standard wage—a conflict of social philosophy. Most unionists, it will be observed, are inclined to wave away all criticisms of the standard wage which rest upon its alleged effect upon output, no matter what the situation to which it may be addressed. In their opinion, these criticisms of the standard wage are based on a misconception of the place of the wage earner in industry. Or, as it is frequently put, they regard the worker in the same way as they do a machine, since they would have each worker paid solely according to his individual value to the industrial system. There exists a conflict between two views of the nature of industrial society, and of the way of industrial progress. In one the social importance of a high level of production predominates, and the wage earner is argued about merely as part of a productive organization. In the other, the wage earner is viewed primarily as a member of an occupational group or class, whose wages should be regulated by the standard of life of his group or class, rather than by strict measurement of his own individual capacity. This conflict is revealed, as R. F. Hoxie pointed out, in the antagonism between unionism and scientific management. To quote "much of the misunderstanding and controversy between scientific management and unionism ... results from the fact, that scientific management argues in terms of the individual worker or society as a whole, while the unions argue primarily in terms of group welfare." It is well to recognize these different philosophies. Is it possible to find common ground under the principle of standardization? Can the desire of the wage earners to be viewed primarily as members of occupational groups or classes be satisfied by the enforcement of standardization, without ignoring the need for a high level of production.

It is usual to seek the common ground in the development of some variation of a system of differential time wages, or of a system of payment by results on the basis of a standardized price list. And certainly such ways of enforcing standardization, while at the same time giving special reward to individuals, deserve encouragement, provided they safeguard the group interest in a defined minimum standard wage. Still it is not likely that the solution for the problems of output that may arise as a consequence of the enforcement of the principle of standardization, and of the acceptance of the philosophy to which it corresponds, is to be found in the evolution of such methods of wage payment as these.

For, as was observed above, if the philosophy of unionism is deeply implanted in the minds of the workers, the productive results under all methods of wage payment tend to be controlled in the end by the same influences. The views and motives of the wage earners and of the employers are likely to remain constant under different systems of wage payment—and thus the outcome is not likely to differ greatly. No matter what the method of wage payment, the question of output will be largely one of mutual confidence, of tact, and of fair dealing. It must be so in any arrangement, by which two or more groups mutually regulate their claims and desires.

The conclusion that may be drawn as to the effect upon production of the enforcement of wage standardization is as follows. That its results may depend to some extent upon the success with which the principle can be adopted to those methods of wage payment under which wages are varied in accordance with small differences in in-unionism, and act accordingly, the system of wage earners believe heartily in the ideals and aims of unionism, and act accordingly, the system of wage payment adopted will be a factor of secondary importance in determining the effectiveness with which the wage earners perform their work. The motives and sentiments of the various organized groups will govern the action of the wage earners, and produce almost the same result under any system of wage payment. The state of industrial relations, the satisfaction the workers feel in their position, the reasonableness shown by the different groups, the intelligence or ignorance of labor leadership—these and similar other factors will, at bottom, govern the effort put forth by the wage earners. These are the matters to which all who realize the need for steady and willing effort in production will have to attend.

The problem of maintaining a high level of production will be primarily one of developing the practice of open-handed and thoroughly understood negotiation between the directors of industry and the workmen. Barring the development of the practice of successful negotiation either industrial chaos or a return to individual bargaining must result.

9.—There is one other possible result of the enforcement of wage standardization which requires brief notice, because it was displayed prominently during the war. The demand during the war for certain essentials of warfare was abnormally great, and the result was a steady bidding up of wages for the supply of labor which could assist in the production of these essentials. This led to a constant shifting about of the wage earners from plant to plant. This movement not only hindered the effective organization of production, but also caused a considerable loss of working time, and fostered a continuous pre-occupation with the question of wages and related questions. In view of these facts, the various governmental agencies of wage settlement undertook to introduce into all wage contracts the principle of standardization throughout large areas. Witness, for example, the conclusion of the Shipbuilding Adjustment Board on the matter. "One of the most serious influences retarding the progress of the shipbuilding industry according to the unanimous testimony of the yard owners, and of the district officers of the Fleet Corporation who have come before us, is the shifting of men from yard to yard.... The only effective way to stop it is to remove its inciting cause, the variable wage rates paid by different yards in the same competitive region. With this purpose in view, we have sought in all our hearings to determine with accuracy the limits of each competitive region, so that we might extend over it a uniform wage scale for shipyard employees...."[84]

The enforcement of wage standardization may serve to prevent wasteful shifting of the labor supply even in normal times. Theoretically, it should serve to limit the shifting of the labor supply to movement between different industries and occupations, and to cases which represent movement of unemployed wage earners to points where work exists. There would be, of course, innumerable cases of change based upon personal motives.

FOOTNOTES:

[68] An attempt to classify systematically and analyze the various theories of wages that have been used in attempts to settle wage controversies in accordance with defined principle has been made by Mr. Wilson Comption in an article entitled "Wage Theories in Industrial Arbitration." In its enumeration and discussion of the difficulties to be met in the application of principles, and of the attitude of most agencies of wage settlement it is particularly interesting. American Economic Review, June, 1916.

[69] J. N. Stockett, "Arbitral Determination of Railway Wages," page 75.

[70] See Webb's "Industrial Democracy," Chapter 5, Part II.

[71] Resolution No. 18 offered to 1920 Convention, Cigar Makers Official Journal, May 15, 1920.

[72] P. S. Collier, "Minimum Wage Legislation in Australasia," Appendix VIII, Fourth Report of the Factory Investigating Commission, New York State (1915). See also R. H. Tawney's investigations of Retail Tailoring and Chainmaking Trades (Great Britain).

[73] D. A. McCabe in his book, "The Standard Rate in American Trade Unions," calls attention to two aspects of the subject that are frequently overlooked. Firstly, that "in any attempt to estimate the extent to which men receive wages above the minimum on account of superior efficiency, it is important to bear in mind that the minimum in different scales may stand in very different relation to the modal or predominant wage. The proportion of men receiving more than the union minimum is frequently large because the competitive wage has increased since the minimum was established" (page 116); and secondly, that "the extent to which differential wages are paid above the union minimum, when that rate is the rate actually paid to the men whose efficiency is about the average, varies widely in different trades.... Standardization of workmen and of work and the practice of dealing with large bodies of men as classes tend to standardize the wages paid in the railway service more than in trades calling for similar grades of skill in other industries" (page 117); so, too, "the tendency towards uniform rates for men engaged in the same kind of work is stronger in large establishments than in small establishments for the same reason" (page 117 ff.).

Prominent among the factors which tend to make standard time rates actual rates he mentions: firstly, that the variations in efficiency within the membership of a time working union are not as likely to be as wide as among the men outside the union in the same trade, because the mere insistence on a standard rate tends to exclude some men much below the standard of competency. Secondly, practically all of the skilled trades unions require candidates for membership to prove their competency or be vouched for as competent by members who have worked with them. And thirdly, because the standard rate is the center of attention in negotiations and thus is made the presumptive rate (page 114-119).

[74] D. A. McCabe, "The Standard Rate in American Trade Unions," page 105.

[75] Report signed by Commissioners Manly, Walsh, Lennon, O'Connell, and Garrettson. Vol. I, "Final Report of the Commission on Industrial Relations" (1912-16), page 132.

[76] Report on Collective Agreements in the United Kingdom (1910) (CD 5366), page xiv.

[77] A. C. Pigou, "Economics of Welfare," page 441.

[78] A. Marshall, "Principles of Economics" (7th Ed.), page 548.

[79] R. H. Tawney, "Minimum Rates in the Tailoring Industry" (Great Britain), pages 110-111. See for similar view, 4th Report of N. Y. State Factory Investigating Commission, Vol. V (1915), testimony of Miss Van Kleeck.

[80] D. A. McCabe, "The Standard Rate in American Trade Unions," page 14.

[81] P. S. Collier, "Minimum Wage Legislation in Australasia," Fourth Report of the Factory Investigation Commission, N. Y. State, 1915, page 8243.

[82] See pages 172-5, Chapter VIII.

[83] See for examples, the reports of the Minimum Wage Commissions of The District of Columbia, Massachusetts and Oregon. Also the studies by R. H. Tawney and M. E. Bulkely on the English experience. Those of P. S. Collier and M. B. Hammond, on the Australasian experience.

[84] Decision as to wages, etc., in North Atlantic & Hudson River Shipyards, Shipbuilding Adjustment Board, reported in U. S. Monthly Labor Review, May, 1918, page 136. See in same issue of the review, "Decision for Shipyards of San Francisco Bay and Columbia River, and Puget Sound Districts," pages 68-78. Also report of Benjamin M. Squires in the Monthly Labor Review, 1918, Sept., on the "New York Harbor Wage Adjustments."



CHAPTER VIII—THE STANDARD WAGE (Continued)

Section 1. What variations or limitations should be introduced into the principle of standardization in view of the great area and economic diversity of the United States?—Section 2. Differences in natural or acquired advantage between different enterprises as a reason for modification and limitation of the principle.—Section 3. Differences in the character of the work performed by any large group of wage earners as a reason.—Section 4. Differences in the cost of living at different points within the area of standardization as a reason.—Section 5. The grounds for "nominal variations" in standard wage rates. The policy to be pursued in regard to payment for irregular employment.—Section 6. The possibility of maintaining standard wage rates over a large and diversified area considered.—Section 7. Up to the present, the progress of standardization has not proceeded in accordance with reasoned conclusions as to the results produced.—Section 8. Where should level of standardization be set? The doctrine of "standardization upward."—Section 9. The importance of the principle of standardization in wage settlement.

1.—We have now completed our analysis of the general effects to be expected from the enforcement of wage standardization throughout industry. That analysis was carried out on the underlying assumption that the general economic position of the industrial enterprises which would be included within any area of standardization was substantially alike. That assumption must now be given up. A further question must be faced. That is whether the principle of standardization, as put forward up to this point, should be limited or varied in any way because it would have to apply, as a matter of fact, to an area so great and so diversified in economic character as the United States, and to an industrial situation which is the product of a great number of separate impulses, and which is made up of a vast number of separate interests.

2.—We will consider in order the grounds upon which limitation or variation of the principle of standardization has been argued for in the past—limiting ourselves, as we must, to the most important. The first that may be taken up has arisen almost every time that wage standardization has been introduced into a craft or industry. It is the contention that, due to differences in natural or acquired advantage possessed by different enterprises in the same industry, certain going enterprises will be forced to cease production, if all are compelled to pay the same wage rates for the same work.[85]

The weight of this contention must be decided in each case by the facts which support it. In some instances it may be clear that the vigorous and summary application of wage standardization would cause men to be thrown out of work, who could not easily find work elsewhere, and would make a considerable amount of fixed capital valueless or almost so. In those instances there would be reason for considering the extent to which the standardization should be carried out, and also what variations should be introduced into its application. That such cases are not infrequent is borne out by the Australasian experience of which Mr. Collier writes, "In regard to the practicability of the common rule, opinion differs. In some staple industries such as coal mining, it has been said to operate fairly. But its application to small industries and retail stores, where conditions vary more widely, is fraught with considerable risk and is proceeded with slowly.... While the power to enforce industrial conditions throughout a state or given territory is of unquestionable value, experience shows it must be exercised with caution."[86]

The test to be applied in each instance should be the balance of interest involved, including a strong public interest in standardization as one of the elements in a policy of wage settlement. When weighing the facts for or against the limitation or variation for the reason under discussion, several distinctions should be made. Firstly, in regard to the nature of the difference in advantage possessed by the various units of the industry in question. Secondly, in regard to the way in which the differences in advantage are distributed among the various units of the industry.

The case for limitation or variation is apt to be stronger when the difference in advantage is a natural difference than when it is an acquired difference. In either case, the decision must rest upon the balance of good and harm to be anticipated from a straightforward and unmodified application of the principle. But when the difference in advantage is a natural difference, such as exists between different mining areas, there is greater reason for deliberate procedure than otherwise. For the possibility that an abrupt suspension of certain enterprises be caused without compensating extension of other enterprises, is the more genuine. Such a situation was recognized, for example, in the case of the living wage legislation for agriculture in England; and thus instead of applying one standard wage throughout all districts, standardization was carried out by districts.[87] Even in this case, however, the various district advisory boards are under a strong and constant pressure (under the terms of the act) to bring the rates in the various districts to the same level. Such, also, to take another example was the situation recognized in the course of the attempt during the war to standardize the wages of the stevedores and longshoremen employed in the South Atlantic ports. Here straightforward and unmodified standardization would have caused, it was judged, the diversion of certain freight carrying steamship lines from ports in which they now operate.

If the differences in advantage are in the nature of acquired differences, only convincing evidence of the permanent harm likely to result from general standardization would justify limitation or variation. For in this case, the necessity of paying standard wage rates is itself a powerful force towards overcoming conditions that have been declared a definite competitive disadvantage. Probably no extension of wage standardization in industry has ever taken place without injuring some individuals. It is the net balance of gain or loss that is significant. In most past instances when standardization has been enforced in an industry, marked by an unequal distribution of acquired advantages, the consequences have not verified the predictions of those who believed it would cause great disturbance and unemployment. On the contrary, it has frequently resulted in the development of better organization within the industry.

Again, the case for the limitation or variation is apt to be the stronger, when the difference in advantage is between concentrated but widely separated areas, such as might exist between two ports, for example, than when the differences are between different units in the same industrial area or field. For in the second case, the possibility of causing lasting unemployment would be less. The distinction, however, is entirely one of degree.

Whatever limitations or variations are admitted should not be settled arbitrarily; they should correspond to the facts which make them advisable. The union attitude in respect to the extension of wage standardization is sometimes as cautious as that of the employers. That is because those workers employed at the points which are supposed to possess the smaller advantages, natural or acquired, are not likely to support an unmodified application of the principle of standardization, unless they believe the consequent industrial changes will be beneficial, or at least not harmful, to themselves. The advice, if not the concurrence, of all interested parties is of the greatest value in arriving at a satisfactory determination. A good example of such an arrangement is to be found in the agricultural living wage legislation in Great Britain. It is provided therein that "When a district committee has been established for any area, it shall be the duty of the Committee to recommend to the Agricultural Wages Board, minimum rates of wages fixed under this act, and no variation or cancellation of such a rate shall have effect within that area unless ... recommended by the district wages committee."[88]

3.—Another possible ground for limitation or variation of the principle of standardization is set forth often in the contention that the character of the work performed by any large group of wage earners is not the same throughout the field of its employment. Such, for example, was the argument of the directors of the American railways, as summarized by Mr. Stockett: "... The railways oppose district standardization on the ground that rates cannot be disassociated from conditions and since conditions vary widely on different roads in such extensive territories as the railway districts they maintain that rates cannot be made uniformly applicable on all the roads. The amount of compensation, the roads hold, is governed by the labor performed, the skill and efficiency required, the responsibility and hazard involved, the discipline necessary, the rapidity of promotion, and the cost of living."[89]

It is plain that the point of view which inspires the above argument is at variance with the beliefs that are behind the movement for wage standardization. The argument accords no validity to the belief that group unity and group aims deserve recognition in the settlement of wages. The doctrine of standardization on the contrary represents this belief, and sets groups standards above the existence of minor difference in the work performed by the group. The practical consequences of any wage policy which gave full recognition to these minor differences must also be weighed. These have been vigorously stated, for the case of railway labor, by Mr. Stockett. "... The employees maintain that the varying physical and traffic conditions in the different roads should not constitute a basis for the payment of various rates. It may be true, they hold, that physical conditions and traffic peculiarities differ as between different roads, but it would be impossible to determine a separate rate of pay for each special condition. In the course of development of the railways conditions are always changing. Grades may be leveled, additional tracks laid, curves straightened, passenger and freight densities may differ from year to year and from day to day. The attempt to determine the proper rates for each different condition and to change them as conditions change, the employees assert, is obviously absurd. The plan of fixing a standard rate governing an entire district may be illogical and its basis arbitrary, but it is deemed the best devised and does substantial justice in a broader sense than any other system."[90]

Cases may arise, indeed, where the difference in the character of the work performed really means that the same name covers two relatively distinct occupations, and two or more quite different classes of wage earners. Such cases are probably rare. In circumstances where the constant differences between the character of the work performed by workers is relatively great, it will usually be found that they are distinguished into different groups.[91] It is a question of degree, of course. And if the existing distinctions do not fit the facts, those distinctions should be changed.[92]

In unorganized industries, it will sometimes be found that the classification of occupations is very defective. If wage standardization were to be introduced into those industries, it would be found necessary to standardize occupations first. Such was the task undertaken, for example, by the War Labor Board in the Worthington Pump and Machinery case.[93]

4.—A third possible ground for limitation or variation of the principle of standardization is the existence of differences in the cost of living in the various main centers or regions to which a standard rate might be applied. Such variation would be represented, for example, by a collective agreement in accordance with which the wage scale at different points was varied in accordance with the relative cost of living at these points. Up to the present there has been a tendency to disregard differences in the cost of living when wage standardization has been extended. No constant tendency, for example, can be found in the agreements made by different local branches of the same national trade union to build up a wage scale in accordance with differences in the cost of living at different points.[94]

The most complete body of material on the subject is contained in the report of the Investigating Commission of the Board of Trade (Great Britain) on Working Class Rents, etc., in the United States (1911). This commission studied the wage schedules of skilled men in the building, engineering and printing trades in twenty-eight of the large cities of the United States and compared these wage schedules with the calculated cost of food and rent in these towns—weighing food three times as heavily as rent. The results are presented by single cities, by geographical groups, and by population groups—i.e., cities grouped in accordance with size of population. Real wages tended to be more equal as between population groups than between geographical groups. The range of the index number between geographical groups is from 85 to 104 (New York is taken as 100); between population groups from 89 to 100 (New York, 100). They reveal a tendency for money wages and living costs to be high in the largest cities, and for both money wages and living costs to decline in the cities making up the smaller population groups. No correlation can be found between living costs and money wages as between individual cities, however.

The argument for variation or limitation because of differences in the cost of living is a two-fold one. Firstly, it may be argued that such a policy is calculated to maintain industrial activity in the smaller centers, where the cost of living is usually lower, in the face of the competition of the larger centers, in which the cost of living is usually higher. Secondly, it may be argued, that variations in the cost of living at different places are indications of the fact that at some places the economic essentials can be procured with a smaller expenditure of human labor and capital than at other places (since labor and capital can move between them) and, therefore, it is to the general interest to encourage industrial development at the points where the cost of living is relatively low.

As to the first argument, it seems to me that there is considerable wisdom in the wish to encourage a diffusion of industrial development, rather than concentration at a few points. The strain on the social and political structure of the nation would be less, to-day, if our industrial population were more widely distributed; and our problems of civic and economic life would be simpler. That I believe to be true, although it is probable that the wage earners in New York City are better governed, have more freedom, and enjoy a healthier and more stimulating environment than the wage earners in the smaller industrial towns of Massachusetts or Pennsylvania, for example.

As to the second argument, it is true that differences in the cost of living do indicate that the essentials of economic life can be procured with a smaller expenditure of human labor and capital at some places than at others. There is a further question, however. Does not the ability of the enterprises established at the places where the cost of living is relatively high, to compete with the others, denote a compensating advantage in another stage of production? The answer depends on two conditions. Are the enterprises in genuine competition with each other? And secondly, do wages at the several places differ in correspondence with the differences in the cost of living? To the extent that these conditions hold true, any shift of industry away from the points where the cost of living is low, as a result of wage standardization, would not be uneconomical—in the sense of this argument. For then, the ability of the enterprises established at the points where the cost of living was relatively high to compete with the others would indicate that they benefited by some compensating advantage in their location.

Still another matter to be noted is that if differences in the cost of living are recognized in the enforcement of standardization, there will be some tendency for the abler and more energetic workmen to drift to the points where money wages are higher. This movement is likely to occur even though real wages are the same at the different places.

In addition to these theoretical considerations, one practical matter should be called to mind. The relative scale of the cost of living at the different points to which a standard wage might be applied does not usually remain fixed over a considerable period. Small changes and shifts in the relative scale occur constantly, and even large changes may take place within a short time. Experience has shown that wage differences which rest upon a fluctuating basis are apt to give rise to misunderstanding, and to be provocative of unrest. At best, only the relatively permanent and great differences in the cost of living between different points could be taken into consideration. Even then a great deal of arbitrary calculation might be involved.

In view of the variety of considerations that bear upon the problem, only a tentative conclusion will be ventured. Namely, that when in any industry the wage scales prior to standardization do reflect the differences in the cost of living at the different centers in which the industry is carried on, such differences should be maintained. As has been remarked, only the relatively large and permanent differences could be taken into account. When, however, no such differences in wage scales is found prior to standardization, it will probably be inadvisable to introduce them, in order to encourage a wider geographical diffusion of industry.[95]

5.—There is yet another ground for limitation or variation of the principle of standardization. It is of a somewhat different character than those already considered. It is that in order to carry out the underlying idea of standardization—equal remuneration for the same type of work despite minor differences in conditions under which it is performed—it is necessary to introduce variations into the hourly or daily time rates (or equivalent piece-work schedules) paid in various sections of the industry. Such variations have been designated as "nominal variations" in the Australian courts.

Distinctions may be drawn between different types of these so-called "nominal variations" according to the cause by which they are occasioned. The first type is that which rests on the fact that in certain trades or industries, it is extremely difficult or impossible to make the conditions of work even approximately uniform throughout the trade or industry. Agricultural work and coal mining may be cited as examples. In such trades or industries it is usually found that the principle of standardization can only be carried out satisfactorily under a system of time payment. For under a piece-work system a uniform scale of rates yields widely different earnings for labor of approximately the same type and quality. It may be, however, that a time-work system is ill suited to the trades or industries in question. In which case, the only alternative is to draw up different piece-work scales for different conditions of work. Different scales of this sort are to be found in the American coal mines for example. Such "nominal variations" between piece-work scales would appear to be justified when the differences of conditions upon which they rest are judged to be not subject to standardization. To be really practicable the differences of conditions should also be relatively great, fixed and measureable.[96]

The second type is that which rests upon some difference in the "net advantages" of the same work carried on in different sections of the industry or occupation. For the purpose in hand, three sorts of difference in net advantage may be noted. The first sort would be represented by a claim for a higher rate than that stipulated in the general scale, because the work in question was carried on under conditions involving an unusual degree of disagreeableness or risk. In my opinion, "nominal variations" based on such differences as these can safely be left to voluntary bargaining rather than enforced as a matter of policy. The conduct of almost any occupation involves differences in the conditions under which it is performed. Nobody entrusted with the duty of enforcing a policy of wage settlement would find it easy to define the conditions which warranted an addition to the standard rate. It would run the risk of being involved in a process of refined definition which would probably be futile. Justice Higgins stated this view aptly in a claim for "dirt" money. "My view," he writes, "is that the minimum rate of wages is not to be made to depend upon the degree of dirtiness of the work. A man must accept the conditions of the work to which he has devoted himself; and the court cannot be expected to define degrees of dirt or to express them in terms of money wages. If the employer puts the employee to work which is unnecessarily dirty, the remedy is in prohibition or in regulation—not in increase of wages. My decision in no way prevents the employer and employee from making a voluntary stipulation for dirt money in any particular case."[97]

A second sort of difference in net advantage would be represented by a request on the part of an employer that certain payments in kind should be considered as part of the wage. An example of this would be the provision of meals. Such variations would seem to be permissible when the acceptance of the payment in kind is left optional with the workmen.

A third sort of difference in net advantage, and possibly the most important, is that represented by differences in the regularity of employment in different sections of a trade or industry. This type of difference is exemplified in the work of longshoremen and lumbermen; some men being engaged on one type of work are employed regularly, while men engaged on other jobs are employed irregularly or casually. It is frequently claimed that irregular or casual work should be paid at higher rates than regular work. The justice of this claim seems apparent. Irregularity of work is undoubtedly a great handicap to the workman who seeks to maintain a well ordered life. Extra payment for irregularity of employment is a burden which can fairly be put upon an industry, or section of an industry—even if the irregularity is unavoidable. Yet the consequences of such a policy of "nominal variation" may be undesirable. It has been revealed by experience that there are some workmen who prefer irregular or casual work to regular work. And if higher wage rates are paid for irregular work this preference—an undesirable one, from the point of view of the community—is apt to be strengthened. On the other hand, it is usually true that only a small percentage of workmen prefer casual work to regular work. Most men engage in casual work because they cannot secure regular work.

As was well established in the Court of Enquiry on the work and wages of transport workers (Great Britain) held early in 1920, the only real solution of the difficulty is the reorganization of the occupation so that the irregular and casual work is reduced to a minimum. Until that is accomplished, it is probable that the most advisable policy is to grant "nominal variations" for casual and irregular employment. These variations should not be so great as to influence the run of workmen to prefer casual work. The total earnings from regular work should be higher. Another policy that may be practicable, in many cases, is to define a minimum period of employment for all workmen engaged.[98] Such a policy puts strong pressure upon the industry to cut down irregularity of employment. Against such a policy stand the practical difficulties involved in determining the basis of any scheme of "nominal variations."

The whole question is well surveyed in a decision of the Commonwealth Court of Australia which reads in part as follows: "The casual hand, I propose to define as an employee who is not employed for a fortnight continuously and who is not entitled to a week's notice before his employment is determined. A new light was thrown by the evidence in this case on the growing tendency of some men to depend on the high rates for casual work only, to enable them to work when they thought fit, and idle when they felt inclined.... The yearly return of so many seasonal hands for the wool and grain season, year after year, who look for casual work elsewhere in the meantime in shearing sheds—on the wharfs—in other industries and even in the Government temporary service—and prefer casual work is not an encouraging sign. The higher rates paid for casual work do, and will, encourage many men to rely on that class of labor. I do not think that is good for the community or for the employee. I have been asked not to encourage the tendency to prefer casual labor by granting high rates for casual labor.

"Although the rates for casual labor ought not be so high as to induce men to become casual laborers, a higher rate must in fairness be allowed, where as in this industry, men, however anxious they may be to get permanent work, are not employed for the whole season without a break, and many of them are only employed a short broken part of the season, and some are employed for a day or a few days only."[99]

6.—In the examination of the reasons for and against limitation or variation of the principle of standardization, note must be taken of still one other argument of a somewhat different nature than those already dealt with. That argument is that it will prove impossible to maintain uniform standard wage rates throughout an industry in which the various enterprises are distributed over a wide area; in the several parts of which area the cost of living, the general conditions of labor, and the demand and supply situation for labor differ considerably.

This contention is supported by two different lines of reasoning. The first is that, because of these differences, there will tend to be a flow of labor away from the less favorable points of employment within the area of standardization towards the more favorable. This flow, it is said, will cause a reappearance of the differentials which existed before standardization. The first comment to be made on this line of reasoning is explanatory, rather than contradictory. It is true that there may be some tendency for labor to flow from the less favorable points to the more favorable. But it must be remembered that the standard wage is intended only as a minimum. If differentials over the standard wage did arise in enterprises where the conditions of labor were worse than the average, or in regions where the cost of living was higher than the average, such differentials would not be incompatible with the ends sought, when standardization is enforced. Secondly, it may be commented that the experience of the past does not, in general, support the contention. In many industries the same standard wage scale applies over an area in which there are real differences of the kind set forth above, and no differentials as between the different points within the area have arisen—as, for example, on the railroads. This is to be accounted for, firstly, by the influence of the idea of standardization over trade union activity and policy; secondly, by the fact that relative money wages tend to govern, in a great measure, the calculations and movements of the wage earners; thirdly, by the fact that the application of the principle of standardization is in itself a strong force toward bringing about a leveling in the conditions of employment throughout an industry.

The second line of reasoning with which this contention is supported is that the trade unions themselves will not long support any policy of standardization which does not make explicit allowances for such differences as are in question. It is said that the organization of the workers at the points where the cost of living was relatively high would insist upon a differential over other places for that reason.

Such, for example, was the argument of the employers' counsel before the Court of Inquiry on the wages of transport workers (Great Britain), "... He submitted that one of the foundations of his argument was that in fixing wages they must have regard to the class of work. Having regard to the very great diversity of conditions and of methods in the different ports, and to the class of work done, he submitted that they could not standardize. They must do in the case of the ports as they did in the case of the coal mines."[100]

There is but one pertinent comment to be made upon this opinion. If the wage earners' organizations, themselves, demand that variation be introduced into the policy of standardization, that demand should be granted. But it must be observed that these organizations must not give lip service to the application of the principle of standardization without variation, and once having secured it, make such a course impossible by demands for differentials over the uniform standard wage. In the face of such tactics, it will be impossible to maintain any definite policy of wage standardization. If the labor organizations desire the application of the principle of wage standardization without qualifications, they must be loyal to that desire, and they must not be swayed by small temporary advantages or by sectional interests. And, on the other hand, if they desire that the principle of standardization be applied with qualifications, they must not attempt to disguise demands for general wage increases as standardization movements. Such a policy is calculated to perpetuate industrial conflict. Such is the bearing of the pledge given by the representatives of the transport workers (Great Britain) incidental to their claim for a 16 shilling national minimum daily wage. "I am conscious that whatever your decision may be, if the principle of the minimum be established, some people in some ports are going to get more on the first settlement than others. We have faced that, and we have discussed it with the whole of our men. It was assumed by the chairman of the employers at the previous meeting, to take a striking illustration, that if Liverpool received 12 shillings per day and Glasgow 14 shillings, if you decided on 16 shilling a day, Glasgow would say 18 shilling, 'because I was above Liverpool before.' That is not so, my Lord. That is clearly understood by every member of the federation in every port in the country."[101]

7.—It may be hardly necessary to say, that up to the present, the various questions involved in the application of the principle of standardization in industry have not been settled by a careful study of the results produced. At the present time the manner in which the principle is applied is governed in the first instance, by the economic characteristics of the industry in question, and in the second instance by the area of influence of the various labor organizations, and by the degree of centralized control within each of them.[102]

One of the circumstances which has played a part in determining the area of standardization in any industry is that success in the enforcement of collective agreements has depended largely upon whether all or most of the enterprises in competition with each other have been included in the same agreement. This circumstance has been sometimes decisive of the degree of centralized authority in the various trade unions. It has also tended to govern the attitude of particular trade unions towards the application of the principle of standardization without variation or modification.[103] The history of trade unionism is full of instances of organizations which have striven in vain to maintain uniform standardized wage rates throughout imperfectly organized areas.[104] Even when wage disputes have been settled by public agency, the usual procedure in the past has been to make the area covered by the agreement entirely dependent upon the area of dispute.[105]

For all of that there has been in recent years a steady drift towards an extension of the area of standardization. In various industries careful thought has been given to the possibility of standardization on a national scale, though at present very few unions enforce such a scale.[106] On the railroads there are at present nation-wide wage scales. In Great Britain, to-day this is one of the most vexed of questions. Indeed Great Britain just has gone through a great coal strike in which it was one of the two great issues. The miners asked that "a levy be made upon each colliery company on every ton of coal raised to the surface to be used for ensuring the payment of wages agreed upon in a national wages settlement." The miners argue, and correctly, that district settlements would give unequal reward to men doing precisely the same work, and called upon for the same service.[107]

8.—The introduction of standardization into crafts or industries in which a variety of wage rates for substantially the same tasks exist gives rise to one other difficult problem. That is the determination of the level of standardization for each occupation.

It will be argued, at a later point, that under any economic system in which labor organization is an accepted part of the economic structure, the wage levels established in different industries or occupations will have to be brought into relation with each other.[108] If that is so, the level of standardization of any industry or occupation would be determined in accordance with these principles, after they had been in operation for some time. As a matter of fact, however, under any policy of wage settlement, the enforcement of standardization will be something of an independent and prior process—prior, that is, to the application of any other principles intended to keep the wage levels in different industries or occupations in relation to each other. Standardization will be, so to speak, an initial stage of policy to be gone through before any other stages are entered upon. In this initial stage, the principal data that should be taken into consideration when fixing the level of standardization for any occupation is the actually existing variety of wage rates for that occupation. Where in the scale of actually existing rates the level of standardization is set must be a matter of judgment and compromise. That level of standardization should be chosen, which it is believed will produce more good and less harm than any other level that might be chosen. Or in other words, the level of standardization should be determined by a balance of the interests involved—that point being chosen at which, it is judged, the most favorable balance is established.

There is current, indeed, one doctrine of standardization which holds that there is but one satisfactory level of standardization for an occupation in which wages have been hitherto unstandardized. That doctrine, crudely stated, is that the standard wage for the work in question should be the highest of the unstandardized wages.[109] That doctrine is called "standardization upward."

If the suggested test is sound, it cannot be admitted that the doctrine of standardization upward is always valid. For there is no reason to believe that the level of the highest of the hitherto unstandardized rates is, of necessity, the one at which the most favorable balance of interests is established. In many cases there may be a presumption to that effect—if the doctrine is reasonably interpreted. That is to say, if it is taken to mean the higher range of wages, rather than the highest single wage. That presumption arises from the fact that, unless there is evidence to the contrary, the higher range of unstandardized wages indicates what wages may be enforced throughout the occupation without causing great disturbance and unemployment. The circumstances which would govern the correctness of this presumption are many and have already been discussed.[110] The actual range of difference between the various wage rates being paid for the same occupation in different enterprises should be given importance in the judgment as to whether standardization should take place at the level of the higher range of wages.

Furthermore, in many cases where wages are standardized at a level lower than some of the wage rates already paid for the work in question, it would usually be sound to provide that these higher-wage rates should not be reduced at once. This ruling was adopted in the decisions of the War Labor Board and it has also been embodied in the so-called "saving clauses" in the American railway wage decisions.[111]

9.—The principle of standardization may be considered basic in any wage policy for industrial peace. This is not because the existence of various wage rates for the same work is the greatest source of industrial conflict. But because the establishment of clearly known wage rates for each type of labor, extending over the field of its employment (with whatever limitations or variations are admitted to the principle) is often essential to the operation of any other principles of wage settlement. The establishment of standard wage rates makes possible a clear knowledge of the economic position of the various classes of wage earners. Likewise, it makes possible the accurate measurement of wage change; and also makes for simplicity and uniformity in the application of changes. Lastly, it tends to produce a careful classification of the different kinds of work, in which the minor and local differences in the nature of the work are gradually eliminated. These are the reasons for the "strong public interest in standardization" which was spoken of above.[112]

FOOTNOTES:

[85] Thus, take the cautionary warning in the Report of Commission of Enquiry into Industrial Agreements (Great Britain) upon the proposal to make collective agreements entered into by joint industrial councils compulsory upon all enterprises engaged in the industry providing a certain majority (75 per cent. was the suggestion) of work people and employers in the industry or craft in question were represented in the council. "51—Attention has been drawn to the fact that, in the establishment of a scheme for dealing with proposals for extension of agreements, it would be necessary to provide for exceptions to be made in regard to individual firms or work people whose conditions of trade or employment were such as to differentiate them from the remainder of the trade to such an extent as to make the application of the agreement to them an inequitable proceeding." CD 6953, 1913, page 14.

A bill embodying a clause providing for such a scheme for extension was proposed by the government in 1919 in return for certain concessions from the trade unions, but was withdrawn when the parliamentary labor leaders would not agree to the concessions.

[86] P. S. Collier, Appendix VIII, 4th Report New York State Factory Investigating Commission, 1915, page 2113.

[87] Much interesting material bearing on the question of district vs. national standardization is to be found in the report of the Commission on "Wages and Conditions of Employment in Agriculture" (Great Britain), 1919. An interesting bit of evidence was given by a farmer from Devonshire who was of the opinion "that the sticky nature of the ground in Essex induced a slow habit of moving, and he thought the Essex workmen did as much as could be expected in view of the labor involved in walking on wet land, during a large part of the year." Page 73. There is also much interesting material on the subject in the report of the Court of Inquiry into the "Wages and Conditions of Employment of Dock Labor" (Great Britain), 1920. The same problem has arisen, of course, many times in the course of trade union negotiations—for example, in the coal mines and railroads of the United States.

[88] Section 12 (4), Trades Board Act, 1909, Restated in the Corn Production Act, 1917.

[89] J. N. Stockett, Jr., "Arbitral Determination of Railway Wages," page 23.

[90] J. N. Stockett, Jr., "The Arbitral Determination of Railway Wages," page 21.

[91] See D. A. McCabe, "The Standard Rate in American Trade Unions," pages 82-91.

[92] For example, see the recommendations of the Interstate Commission regarding classification of railroad employees. U. S. Monthly Bulletin of Labor, Nov., 1915.

[93] Decision in Re Employees vs. Worthington Pump and Machinery Corp., Docket No. 163, National War Labor Board; see also decision in the Corn Products Case.

[94] For a recent statistical study of the subject see an article by Ogburn and Kelley in the Journal of the American Statistical Ass'n. for September, 1916.

[95] The Commonwealth Court of Australia, while setting up as an ideal "uniform rates all around Australia" (see The Case of the Federated Storemen and Packers' Union, page 150, Vol. X, Commonwealth Arbitration Reports), has frequently awarded a different basic minimum wage for different cities within the commonwealth.

[96] See D. A. McCabe, page 54, and 162-3 for a review of trade union policy in this matter, "The Standard Rate in American Trade Unions."

[97] Case of the Broken Hill Proprietary Company vs. Federated Engine Drivers' and Foremen's Association of Australia. Pages 196-7 (Vol. X, Commonwealth Arbitration Reports).

[98] Thus in one of its opinions the Kansas Court of Industrial Relations recommended that the flour mills in the state should pay their skilled men a monthly wage whether the mill is running or not, Docket 3803, Opinion regarding "continuity of production in the flour-milling industry," 1920. In another case, however, the Court refused to order the packing industries to guarantee a minimum amount of employment each week to its employees. Docket 3926, Wolff Packing Co., Case 1921.

[99] Case of "Federated Storemen and Packers' Union of Australia vs. Skin & Hide Merchants' Association of Brisbane," page 651, Vol. X, Commonwealth Arbitration Reports. For an example of difficulties to be expected, see the attempt made to set up such a scheme of nominal variations in the Salt Case, No. 1, "South Australian Industrial Reports," Vol. I, page 16.

[100] London Times, Feb. 12, 1920.

[101] Court of Inquiry into Wages of Dock Labour, etc., as reported in the Monthly Labor Review, U. S. Dept. of Labor, May, 1920, page 57.