 |
[102] See D. A. McCabe, "The Standard Rate in American Trade Unions," page 143.
[103] See D. A. McCabe, "The Standard Rate in American Trade Unions," page 183.
[104] For example, see "The Standard Rate in American Trade Unions," page 159.
[105] Such now seems to be the policy of the most recent experiment in wage settlement in the United States—the Court of Industrial Relations of Kansas.
[106] For a study of the influences which have governed the area of standardization in the United States, see Chapter III, especially page 120, etc., "The Standard Rate in American Trade Unions," by D. A. McCabe; also article in the Quarterly Journal of Economics for 1912, pages 425-443.
[107] See the statement of Frank Hodges, Secretary of the Miners' Federation, in the London Observer, April 17, 1921.
[108] See Chapters X and XI.
[109] An interesting statement of the doctrine of "standardization upward" is to be found in the evidence of Mr. J. H. Thomas (then Assistant Secretary of the Amalgamated Society of Railway Servants) before the "Commission of Inquiry into Industrial Agreements" (Great Britain), CD 6953, 1910, Q 13902. Chairman: I think there are eight railways running into Manchester. You were talking about uniformity in such a case. Supposing that five out of the eight railways had a particular rate for a particular class of labor, would you apply that rate to the other three railways? A: It may be that the five should be lower than the three, and in that case, I certainly would not apply the lower to the others. I would apply the higher rate as being the uniform rate; but think that would be got over by the suggestion that I have made whereby the rate would be determined for Manchester, for example, by one authority. Q 13903—I will assume for the moment that the three are less than the five. Would you then make the rate that the five are paying a minimum rate? A: Yes, if the three were less than the five, then the rate of the five would be the rate, but if one was higher than the seven, then the other seven would come up to the one quite naturally. For another good example, see the claim of the Unions in the Engineering and Foundry Trades (Special District Cases), Committee on Production Reports (Great Britain), Vol. II, New Series (545).
[110] See pages 138-9, Chapter VII, also pages 192-5, Chapter IX.
[111] Justice Higgins of the Commonwealth Court of Australia has dissented from the saving clause idea simply on the ground that if the unions desire standardization and uniformity, they "must take the rough with the smooth," Case of the Federated Shoremen & Packers' Union, page 150, Vol. X, "Commonwealth Arbitration Reports."
[112] Compare J. N. Stockett, Jr., "Arbitral Determination of Railway Wages," pages 46-47.
CHAPTER IX—THE LIVING WAGE
Section 1. The reasons for seeking separate principles for the settlement of the wages of the lowest paid groups.—Section 2. Wage statistics of these groups a matter of familiar knowledge.—Section 3. The definition of the living wage idea. An inescapable element of indefiniteness contained in it.—Section 4. The living wage principle put in the form of applied policy.—Section 5. Should the living wage principle be applied to male labor? The arguments for and against.—Section 6. The theoretical case for the living wage principle. The verdict of past experience favorable to its extension.—Section 7. The dangers which must be guarded against in applying it.—Section 8. It should be administered through machinery which makes possible careful study of facts of each industry. This machinery discussed.—Section 9. The question of the relation to be established between living wage for men and women difficult. Alternatives considered.—Section 10. A plan for the adjustment of the living wage to price changes. The basis of adjustment.—Section 11. The policy of adjustment—already discussed.—Section 12. The hope of the living wage policy.
1.—In the brief survey earlier in this book of the present industrial situation in the United States, it was concluded that the improvement of the economic position of the lowest paid groups of wage earners was one of the chief objects to be borne in mind when striving to work out a policy of wage settlement for industrial peace. In the following chapters a study was made of the causes of the formation and existence of relatively separate groups of wage earners, and of the forces which determine the level of earnings for the various groups. It was observed that the lowest paid groups of wage earners tended to be separated from the more fortunate groups; they have relatively independent economic fortunes. Two reasons exist, therefore, for giving separate treatment to the question of the principles by which the wages of these least favorably placed groups of wage earners should be settled—as part of the policy of wage settlement for industrial peace. Firstly, because their economic position is a matter of special concern; secondly, because the wage incomes of these groups are determined, in part, by forces which do not affect equally, or in the same way, the wages of the other groups.
The living wage principle as put forth in this chapter is the principle suggested for use in the settlement of wages for these least favorably placed groups of workers. It is the second of the measures, intended to form a policy of wage settlement for industrial peace.
2.—It is not necessary to give here the wage statistics for the groups of wage earners who are lowest in the industrial scale. They form the record of the fact that a considerable percentage of all female industrial wage earners, and some groups of male wage earners who perform unskilled work, are in receipt of wages insufficient to enable them to live according to those conceptions of the minimum level of satisfactory economic existence which have been formulated by public agencies from time to time.[113]
3.—The general idea of the living wage is not a new one. It has been the subject of many definitions. A comparison of a few of the best attempts to express the idea shows, on the one hand, the definite purpose which is its inspiration and, on the other hand, an inescapable element of indefiniteness which persists in all instances where the idea has been enacted into policy.
The definition given to the living wage idea by the South Australian Industrial Court (an agency which has made searching efforts to explain its underlying assumptions) is that all wage earners should receive "a wage that will meet the reasonable and normal needs of the average citizen in a particular locality."[114] In the declaration of the war labor policy of the Dominion of Canada one can read that "all workers, including common laborers shall be entitled to a wage ample to enable them with thrift to maintain themselves and families in decency and comfort, and to make reasonable provision for old age."[115] And contained among those principles laid down for the guidance of the United States War Labor Board is the following, "In fixing wages, minimum rates of pay shall be established which will insure the subsistence of the worker and his family in health and comfort."[116]
These definitions reveal clearly the aim which inspires them. They express a determination to secure for the least favorably placed members of the industrial community wages sufficient to enable them to share with the rest of the community prospects of an active and happy life, as the run of men understand that idea at any time and place. Still all these definitions—including the one just given—assert a goal sufficiently indefinite to permit, and indeed necessitate interpretation according to the circumstances under which the idea is translated into policy. The clarity of the idea arises from a simple belief. That belief is that any body of individuals of average honesty, though they disagree in many things, can reach a large measure of agreement as to the minimum income which will enable the ordinary wage earner to live a life which satisfies, in a minimum measure, the ideals of life current in the community. The indefiniteness of the idea arises out of the fact that it is not likely that this body of men will be in complete agreement as to this minimum income; and therefore the wage finally settled upon is likely to represent a compromise between conflicting opinions. This is well brought out in a passage contained in one of the reports of the Minimum Wage Board of the District of Columbia. "... Cost of living is such an unstandardized subject that a mathematically accurate determination is impossible. In each conference there are as many different opinions as there are members. In general, the employers want a wage sufficient to maintain existing standards of living in the industry, while the employees contend that the standard of living should be improved. The wage finally agreed upon is not a scientific determination based solely on facts, but rather a compromise of opinion between the two groups, modified as it may be, by the opinion of the public."[117]
The reference contained in practically all definitions of the living wage principle to the standards of a particular time and place assists greatly in interpreting the principle into policy.[118] For this reference is tantamount to saying that the standard of economic life which shall be deemed to satisfy the principle, should be fixed primarily by comparison with the standard of life of the wage earning and middle classes in the community at the given time. This comparison tends to govern the content of the living wage idea. It brings the living wage determination into direct relation with—or makes it relative to—the productive capacity of the industrial system at the time and place in question. For a study of the standard of life of the wage earners and the middle classes of the community is of great assistance in indicating the standard of life to which it may be possible to raise even the worst paid industrial groups, by those adjustments in production and distribution which it is the object of a living wage policy to produce. This essential relativity of the living wage idea is well pointed out in a decision of Justice Brown of the South Australian Industrial Court. "... The statutory definition of the living wage is a wage adequate to meet the normal and reasonable needs of the worker. In other words, the conception is ethical rather than economic. The Court has not to determine the value of the services rendered, but to determine what is necessary to meet normal and relative needs. It should be obvious that in the interpretation of reasonable needs the court cannot be wholly indifferent to the national income. The reasonable needs of the worker in a community where national income is high are greater than the reasonable needs of the worker in a community where the national income is low."[119]
The living wage has ordinarily been assessed on different bases for men and women. The basis of assessment for each has been the subject for much controversy. The most generally upheld basis of assessment is, in the case of the male wage earner, to assess his needs on the supposition that he is the supporter of a family consisting of himself, wife, and two or three small children; and in the case of the female wage earner, to assess her needs on the supposition that she is living alone, and is dependent upon her own earnings for her support, and that she has no other obligations. These bases of assessment do not meet all of the demands of logic—applied to the living wage idea—nor, as will be seen, is the choice of different bases of assessment for men and women entirely free of difficulty.[120]
The reasoning, which has been used ordinarily in support of the suggested basis of assessment for men is well set forth in another decision of Justice Brown, "I look upon the maintenance of home life as of supreme importance to the community. I regard the wage paid to the adult male as essentially and in substance a family wage. True, so far as single men are concerned, it has long been settled that the minimum (living) wage should not be less than that of the married man. In other words, in discussing the needs of the male worker, a man with a family to support has been taken as a basis of assessment. Any other conclusion would prejudice the married man in search of employment and would tend to produce sterility of the population, and would place the industrial court in the invidious position of fixing wages at a rate which would make it difficult, if not impossible, for single men to save something for the time when they may have the felicity to become supporters of a family."[121] The argument in support of the suggested basis of assessment for women rests upon a sentiment to the effect that every worker should earn, at least, enough to enable her to support herself, even though the actual necessity does not exist in many cases, and though in many other cases the female wage earner has obligations beyond self-support.
4.—After these preliminaries, it is possible to make more definite recommendations concerning living wage policy—with a view towards the adoption of the living wage principle as part of a policy of wage settlement.
Firstly, as to scope. It should apply to all groups of workers whose average annual earnings fall below the sum settled upon by the constituted agency as the minimum necessary for the fulfillment of the living wage idea. The statistical definition of the term "average" as just used should also be left to the constituted agency. Allowance should be made in each occupation for a small percentage of sub-ordinary workers.
Secondly, as to the basis of assessment of the living wage, and the procedure by which it should be fixed. There should be an extensive and (so far as it is possible) impartial investigation of the cost of that minimum standard of economic life which it is the intention of living wage policy to secure for all industrial wage earners. In the determination of what should be included in the minimum standard, attention should be paid to the income levels of the wage earners in general, and of the middle classes. The wages now received by the lowest paid groups would also be an important consideration.
The living wage settled upon by this process of investigation should be in the form of a weekly standard wage. It should be considered as a minimum only for any occupation to which it is applied. Like other standard wage rates, it should be subject to limitation or variation in accordance with the conclusions reached on that subject in the preceding chapters.[122] The questions which arise out of the fact that it would have to be enforced in a number of different industries, and under widely different conditions will be considered at a later point.[123] The bases of assessment for men and women should be those discussed and approved in the preceding section. The living wage that is fixed should be subject to reconsideration and revision at definite periods; aside from the revisions which may be called for as the result of price movement,[124] or under the profits test which is suggested later in the book.[125]
5.—So much then for the central features of the living wage proposals. We have now to consider the probable result of their enforcement; and any criticisms to which they may be fairly subject in their proposed form. Thus we will be enabled to discover what modifications, large or small, are advisable.
Objection may be taken, first of all, against the scope of these proposals. So far living wage legislation in the United States has been applied to female industrial workers only. The argument against the extension of the principle to male wage earners is put on two grounds—the constitutional and the economic. On the constitutional argument, only the briefest comment will be attempted; and that without any intention to dogmatize upon a most complicated subject. That is that the test of the constitutionality of these proposals should be the balance of good or harm they promise. The constitution is at bottom but a very wise guide as to what public good and harm consists of. But as the conditions and facts which determine good and harm change, these changes should be reflected in the interpretation of the constitution. These living wage proposals do not, it seems to me, offend against any of the fundamental ideas which the constitution contains.
The economic argument against the extension of the living wage policy to male wage earners is usually based on the contention that it is unnecessary, or that it has a bad effect upon the spirit and character of the male wage earners concerned, or upon both these contentions. As to its necessity, the statistics of wages for the least favorably placed groups of male wage earners, and observation of their economic handicaps offer sufficient evidence. As to the belief that the extension would be destructive of the spirit or character of the male wage earners concerned, there is little or no factual support for that view, and much to refute it. A minimum level of economic existence is requisite to the growth and development of personal initiative and of a spirit of self-confidence. Vigor and independence of temper and action is not bred in a position of extreme economic dependence. One does not have to be blind to the dangers of paternalistic legislation to believe that living wage policy for male wage earners is justified, under modern industrial conditions. All the more so, since experience with living wage legislation proves that it encourages voluntary organization among the wage earners. And this fact, indeed, is also a fair answer to the tough dislike of the American labor unions for all other methods of settling the wages of male workers than that of collective bargaining.
6.—We may now pass from the possible objections to the scope of these proposals, to those which may be fairly leveled against their substance. Although the living wage principle has been used in wage settlement throughout the Australian Dominions, in many English industries, and in a limited number of industries in some of the American states, the controversy which arose over it, when first it was introduced, is far from quieted. This is explained, in part, by the extreme difficulty of getting evidence as to its results which is beyond the shadow of doubt. That is due, in part, to the great variety of conditions under which it has operated. Its results are always complicated by circumstances which differ from place to place. Again, there is the fact that such experiments as that of the living wage are apt to be judged from a rapidly changing viewpoint.
The very conscientious efforts which have been made, however, to measure the effect of the various experiments with living wage legislation furnish us with much valuable material on most of the debated matters. No attempt can be made here to reproduce the various sides of the controversy, or to summarize the evidence which has been collected upon the disputed aspects of the subject.[126] Much of it covers the same matters which were treated in our analysis of the principle of wage standardization. In my opinion, the existing evidence warrants the advocacy of an extension of the living wage policy in the United States. It furnishes us also with valuable instruction as to the form in which the policy is likely to work out most satisfactorily.
The value of the living wage principle as an instrument for bringing about an improvement in the economic condition of the lowest grades of industrial workers, without producing equivalent harm in any other direction, is also supported by general theoretical reasoning; that is, by a study of the forces which govern wages in general, and the wages of these lowest groups in particular. In the study of these forces, earlier in the book, it was pointed out that the outcome of distribution may be affected by just such assertions of purpose as that represented by the living wage policy. If labor organization has been able to increase the wages of certain groups of wage earners without doing equivalent harm in any other direction, there is reason for believing that a living wage policy can accomplish something of the same result for the lowest grades of industrial labor, which have been up to the present practically without organization. And, indeed, in England, the Trades Boards, which are the machinery of the living wage policy, are ordinarily regarded as fulfilling practically the same functions as organization does for the more favorably placed groups.[127]
Furthermore, the nature of certain of the forces which account for the low wage levels of the groups that would be affected by the living wage policy, give the above argument special force. For among those forces are these: that their wages have been, at times, less than the amount necessary to enable them to do as efficient work as they were capable of doing; and so low, frequently, as to make the struggle for self-improvement and advancement, for members of these groups, a very difficult matter. Thus the numbers in these groups have been kept greater than they would have been otherwise. Furthermore, their wages have been, at times so low that efficient industrial management counted little in success. Furthermore, these groups have had practically no organization or leadership to prevent their employment under conditions most unfavorable to their health, energy, and general welfare. And lastly, that the present industrial system has a tendency to take advantage of economic weakness wherever it exists. Against these considerations must be put, perhaps, the submission shown by these groups to the course of industrial development, and the constant service they have given, in their position of dependence, in monotonous and wearisome work.
The case of the living wage policy rests upon the opinion that the introduction of living wage standards will give rise to a series of adjustments in production and distribution. And that the net sum of the results of these adjustments, perhaps only after a temporary period of dislocation in some instances, will be to increase the wages of the lowest grades of wage earners—without doing equivalent harm in any other direction. It also rests on the opinion that the permanent economic advancement of these lowest groups of wage earners is a practicable ideal—though fate seems to take a special delight in dealing harshly with this particular ideal.
7.—Among the adjustments, however, which general reasoning suggests as a possible consequence of the enforcement of a living wage policy are some which it is the part of policy to guard against. Existing evidence shows that they have not often followed upon previous enforcements of living wage policy; yet they must be borne in mind. They are firstly: the possibility that employment of the wage earners who are affected by the living wage policy may be permanently reduced. This may result either because of price increase in the commodities produced by these wage earners, or because of substitution into their occupations of other classes of labor or of machinery. And secondly: the possibility that the enforcement of the living wage policy will bring about a concentration of employment upon the more efficient members of the groups affected, and thus throw out of employment the very individuals who are most in need of help. And thirdly: the possibility that there will be an increase in the numbers of those groups which the living wage principle is designed to aid, with consequences similar to those suggested under the second heading.
In my opinion, the chances that any of these things will result from the enforcement of a living wage policy in the United States to-day are small. Yet to put the matter summarily,—these are the dangers which those entrusted with the administration of a living wage policy would have to be alive to; and if they become real, seek to overcome, by shaping their policy according to the facts that confront them. The factors which will determine whether any or all of these undesirable results will ensue are many. They cannot be balanced in the abstract. Yet general reasoning enables us to discern those which will make that likelihood greater or smaller in any occupation or industry.
We may start by enumerating those factors which enter into the likelihood that a reduction of employment will result from the enforcement of a living wage policy. They are: Firstly, the amount of wage increase undertaken; secondly, the importance of the wages received by the groups in question in the total expenses of production; thirdly, the shape of the demand curve for the products of the groups; fourthly, the chances for improvements in the methods of production; fifthly, the chances of encouraging better business management by enforcing living wage standards; sixthly, the effect of the wage increases upon the efficiency of the groups affected, and their fitness for advancement to more skilled work; seventhly, upon the opportunities for substitution of machinery; and lastly upon the ultimate effects of the introduction of machinery on the employment of these groups.
Turning now to the second possibility, that the enforcement of living wage standards will cause a concentration of employment upon the more efficient workmen, thus throwing out of employment those most in need of help, here, too, a great number of factors have to be reckoned with. They, however, have already been dealt with in the previous discussion of the effect of standardization upon the distribution of employment. There is no need of enumerating them again in this place. One point of difference should be observed, however. The differences of individual efficiency among the workers that would be affected by the living wage policy are more substantial than the differences of individual efficiency among the members of the more skilled wage earners. And, therefore, while it would be unnecessary to make any special provision for the least efficient members of the more skilled groups upon the introduction of standardization, it might at the start be decidedly good policy to make special provision for the least efficient members of the unskilled groups. Under practically all living wage legislation special provision is made for them.
It should also be remarked in this connection, that the probable greater range of individual efficiency among the unskilled as compared with the skilled is in some measure to be attributed to their present low wage levels. Inefficiency is likely to grow upon itself. Mr. Aves has remarked pertinently in this regard, "As with the 'unemployed' or the 'unfair employer' so with the 'incompetent' and the 'slow,' none of these represent well defined classes. All are elastic. Some can be created and all merge by imperceptible degrees into the classes above."[128] The enforcement of a living wage policy, it may be hoped, would in itself reduce the range of individual efficiency among the unskilled. For it would keep from the ranks of the "incompetent" and "slow" some who might have found place elsewhere had their chances been somewhat better.
We turn to the third possibility—that as a result of enforcement of a living wage policy there will be an increase in numbers in those groups who fall within its scope. Here the pertinent factors are: Firstly, the movement out of the lowest paid groups into those more favorably placed, owing to the effect of increased wages upon individual capacity and the use of individual opportunity; secondly, upon the movement from other groups into the groups affected by the living wage policy, due to the wage increases brought about by the policy, and thirdly, upon the effect of these wage increases upon the frequency of family labor, and upon the age of entry into and retirement from industry.
8.—So much, then, for the possible undesirable consequences of the application of the living wage principle. It is evident that the policy must be put in such a form as will make possible a careful study of the facts of each industry or occupation and adaptation to these facts. The following proposals are made primarily with the view that they will permit this flexibility. They are also designed, however, to fit into the other requirements of the general policy of wage settlement for industrial peace, which is under study.
It is proposed that there should be in every industry which is included within the general scheme of wage settlement a joint council or board. There might also be occupational boards or councils. These councils or boards should consist of representatives of the workers and of the employers. Representatives of the public might act upon these boards or councils in advisory capacity. There might be both a central board or council, and various district boards or councils in each industry. These joint boards could be given other duties outside of the administration of the living wage policy. That matter will be taken up at a later point. Here, note will be taken only of the part they could play in the administration of the living wage policy.
The joint boards or councils should be advisory to the central authority which is constituted to administer the policy of wage settlement as a whole. The functions of this central authority in regard to the formulation and declaration of the living wage for men and women have already been discussed. It should be provided, however, that the central authority should make no living wage declaration or hand down any order until it has received the report of the joint boards or councils in the industries or occupations in question upon the subject of such decisions or orders. The report of the joint boards or councils should be given great weight by the central authority in arriving at decisions. The joint boards or councils should be permitted to submit both majority and minority reports to the central authority.
Among the matters arising in the course of the administration of the living wage policy, upon which the joint boards or councils should be called upon to advise the central authority, are the following: Firstly, upon the wage to be prescribed in that industry or occupation. Each joint council should be free to recommend a wage less than the wage declared to be a living wage by the central authority, giving its reasons for the same. It should also be free to recommend a wage more than the declared living wage, giving its reasons in this case also. The conclusions reached in regard to "nominal variations" as between different sections of an industry are equally valid as between industries or occupations.[129] Secondly, upon questions connected with the form of wage payment, and the arrangement of piece-work lists designed to yield the prescribed living wage. Thirdly, upon the question of sub-ordinary workers in an occupation or industry, and upon the issuance of permits for the same to work for less than the prescribed wage. Fourthly, as to whether the wage fixed for any industry or occupation should be varied or limited. Fifthly, upon any difficulties that may present themselves because of the fact that the living wages for men and women are assessed on different bases. Lastly, upon these boards or councils should rest the duty of observing how well the declarations or orders of the central authority are observed; and of studying the effect of the prescribed wages upon these classes of wage earners that the living wage policy is designed to help, and upon the industry in general; and of reporting periodically to the central authority upon the same.
It is true that the procedure of these councils would consist largely of the compromise of conflicting opinions. It will be the duty of the central authority, however, to prevent them from settling down to that regime—nor should the central authority consider itself bound to accept the advice of these joint councils or boards.
9.—The determination of the relation between the living wage for men and women is one of the difficult questions that will have to be met in the course of the enforcement of any living wage policy. The position of women, both in industry and in society is at present undergoing change. The limit and direction of this change cannot be marked out with certainty. Therefore, the presuppositions upon which present policy may be constructed may become invalid in a comparatively short time. The unsatisfactoriness of leaving the question to be settled by the decision of the market has become increasingly plain. That policy produces, on the one hand, a constant effort on the part of the employers to so modify their processes of production as to take advantage of the low range of women's wages, irrespective of the effect on men's wages and of the suitability of the occupation in question for women; and, on the other hand, a constant effort on the part of the men to keep the women out of all new employments.
The best advised foundation for present policy, in my opinion, is the two separate bases of assessment, suggested above.[130] In its favor, it may be pointed out that it corresponds to a certain extent to the existing relation between the wages of men and women in industry, and it would not, therefore, produce any violent change. Its unsatisfactoriness lies in the possibility that it may gradually lead to a displacement of men by women in many employments. On the question of whether such displacement is to be desired, there is room for the very deepest differences of opinion. It seems to me, however, that the industrial history of the nineteenth century proves the supreme importance of the wage of the head of the family to the general welfare of the family. For that reason, it is, in my opinion, wise to protect the wage of the male head of the family; and thus to provide that when men and women are employed upon the same work or when women are introduced into employments hitherto filled by men, the wage rates for men should be enforced throughout the employment. This ruling could be interpreted in some cases in terms of the relative efficiency of men and women, if there was a clear difference of efficiency. Of course, if the term "relative efficiency" is construed to include the difference in the indirect or overhead expense involved in the employment of male or female labor in any occupation, such a policy would amount to throwing open every field of employment to women.
There are a number of alternative policies that might be pursued in order to ensure that the use of different bases of assessment for the living wage for men and women should not lead to haphazard displacement of men by women. Justice Brown in the Printing Trades Case has called attention to the most important of them. "... I suggest," he writes, "that with respect to any industry or grade, where the prima facie formula above (that is, a different living wage for men and women) is challenged, evidence should be given to show that it is desirable, having in view the interests of all parties and of the community, that men should be retained in that industry or grade even though such retention might involve some departure from the formula in question. Where such evidence is satisfactory there are several alternatives open to an industrial court. (1) To fix the same wage for women as for men. (2) To fix a ratio wage where it is proved to the satisfaction of the Court that the average woman is not of equal value to the employer. (3) To exclude women. (4) To accept the prima facie mode of assessment, but to limit the proportion of women who may be employed by any particular employer in any particular industry or grade.... The task of choosing may often be one of extreme difficulty and delicacy."[131] The task of fixing the relation between men's wages and women's wages will be even more delicate when the introduction of women into a field of employment follows upon a modification of the processes of production involved.[132]
As was said above, to give advice upon the question of the relation between men's wages and women's wages, should be one of the duties of the joint boards or councils in the various industries. The course to be pursued should be decided upon by balancing all of the interests involved. It is to be desired that the same policy be pursued throughout all industries or occupations rather than divergent ones, and the central authority should strive to attain unity of policy.
10.—The complications introduced into the administration of the living wage principle by changes in the general price level have yet to be dealt with. It has been seen that changes in the general price level affect the outcome of distribution and, for that reason, any policy of wage settlement must include provision for the adjustment of wages to price changes. We have now to consider how this adjustment can best be carried out.
The central authority is obviously the most suitable body to supervise the process of adjustment. The adjustment to price change should be expressed as a percentage addition to or subtraction from the existing wage. The central authority should be charged with the collection of all necessary price data. This body should then proceed upon the advice of the joint boards or councils in the industries concerned. Unless some strong reason to the contrary exists, however, a uniform policy of adjustment should be pursued—resting upon the following principles.
11.—The conclusions reached in Chapter V in regard to the policy to be pursued in the adjustment of wages to changes in the price level fall into two groups. Firstly, those which have to do with the choice of the basis of calculation of wage adjustments. Secondly, those which have to do with the choice of the actual policy of adjustment during times of rising and falling prices. The same division and order is maintained in the following attempt to sketch out a good plan of adjustment of living wage rates.
First, then, these wage rates should be varied in accordance with the movement of a price index number. This index number should represent the prices of all the important commodities produced within the country, but so weighted as to give a defined importance (50 per cent. was suggested) to the prices of those classes of foodstuffs, clothing, housing accommodations, and other commodities upon which the wage earners tend to spend the bulk of their income. It was sufficiently emphasized in the earlier discussion of this subject that this basis of calculation was in the nature of a compromise, and was not beyond criticism. Adjustments should not be undertaken unless the index number of prices has moved at least 5 per cent. (the figure is meant to be merely a suggestion) and adjustment should not be more frequent than twice a year (again a suggestion, only).
Secondly, as to the policy of adjustment to be pursued in times of rising and falling price levels, respectively. The policy for a period of rising prices can be very briefly stated. All wage rates prescribed under the living wage policy should be increased by the same percentage as the index number of prices moves upward. There is one case in which this policy cannot be justified theoretically. That is when the increase of prices can be wholly or mainly accounted for by a falling off in the general level of industrial productivity. However, in my opinion, it will be hardly practicable to attempt to distinguish this case from other cases of price increase,—save in an entirely exceptional circumstance, such as a period of war invasion.
The policy to be pursued during a period of falling prices cannot be stated so briefly. The difficulties involved have already been discussed at length.[133] The following policy based upon that analysis is tentatively suggested. The complexities of the subject are too great to permit of dogmatism. Firstly, the occasion for the price decline may be such as was termed "natural," as for example when it is brought about by a general advance in the arts of production, or by the development of the means of transport. In this case, it will be satisfactory to keep wage rates unchanged, though prices decline. It is in these periods that chance is afforded of bringing about genuine improvement in the economic position of the least favorably placed groups of wage earners.
Secondly, the price decline may be a sign of reaction from a previous period of rapid price increase, and of a general tendency on the part of entrepreneurs to keep down production costs and to proceed with circumspection throughout. Nevertheless if little forced liquidation occurs; if there has been no serious overextension of credit during the previous period; if the maintenance of the existing price level, or of a slightly lowered one, would not impose too great a strain upon the banking system—there would be no good cause to reduce wages. This judgment rests on the supposition that the facts of the industrial situation give promise that industrial recovery will take place even if prices do not drop greatly, and drop gradually rather than sharply.
Thirdly, the price decline may be caused—at the beginning at all events—by much forced liquidation of a character that is disastrous to the enterprises compelled to liquidate. It may have been preceded by a great over-expansion of credit; and the maintenance of the existing price level might mean a steady source of danger to the banking and commercial system. Then the soundest policy is to reduce wages as prices fall. To the extent that the trouble may be due to special causes such as over-investment in particular directions, this reduction of wages may be unnecessary. But it will probably be found that the recovery from a genuine industrial crisis will be facilitated if a heavy price decline is stimulated by wage reduction.
No wage reductions should be undertaken unless conditions making the case are clearly present. The central authority could avail itself of the advice of the Federal Reserve Board. The lowering of wage rates might be put off until the price decline has reached, say, eight or ten per cent. And the percentage of the reduction of wages might be smaller than the percentage of price decline; say, a three per cent. reduction of wages for every four per cent. reduction in prices. Lastly, when it is judged that the pressure on the financial system is definitely at an end, no further reduction in wages should be ordered even though the price decline continues.[134]
In concluding this discussion one general reflection may be permitted. That is to the effect that no policy of wage settlement will, in itself, suffice to protect the standard of life of the lowest industrial classes during critical industrial times; whether such a time be one of rapidly rising prices of foodstuffs due to poor harvests, or to war, or whether it be a period of industrial panic and precipitate price decline. Much can be done to protect the standard of life of these classes by measures outside of the scope of any policy of wage settlement. The suggestion made by Professor Taussig that it may be possible to regularize the supplies of the principal agricultural products from year to year deserves careful consideration.[135] The best policy, undoubtedly, is one which would enable and encourage the lowest paid industrial classes to accumulate something for hard times.
12.—The design of the living wage policy is to procure for all members of the industrial community the economic essentials of a hopeful and active life. Ultimate success in the maintenance of any conceived standard of life, will, in the long run, depend upon those general relationships which were examined in the earlier chapters. The more productive the industrial organization as a whole is, the better are the chances for the least favored industrial groups to improve their economic condition. The less the economic waste, due to maldistribution and to other causes, the greater the product of industry will be. The greater the economic capacity of the lowest grades of wage earners, the more general their intelligence and the steadier their spirit, the more determined their organization, the better will be their chances of increasing their share of the total product. And lastly, the smaller in numbers these are compared with the need of the economic system for them, the stronger their economic position will be.
This is but to restate some of the important influences governing the wages of the lowest groups of industrial workers. But to restate them is to emphasize the fact that the living wage policy must be looked upon merely as one agency among many, directed to the same end. In economic affairs, as in political affairs, to bring about a change in one place it is necessary to bring about a change in many places.
FOOTNOTES:
[113] The best short summaries of the pre-war wage situation are—"The Standard of Living among the Industrial People of America" (1911), by F. H. Streightoff, and an article by C. E. Persons in the February, 1915, issue of The Quarterly Journal of Economics. For a more extensive study see the Report of the Commission of Enquiry of the Board of Trade (Great Britain) into working class rents, etc., which contains material of great value. A recent comprehensive survey of wages in the United States, undertaken by the Bureau of Labor Statistics for the War Industries Board was published in May, 1920. It is Bulletin No. 265, U. S. Bureau of Labor Statistics, "Industrial Survey in Selected Industries in the United States, 1919."
[114] South Australian Ind. Reports. Vol. 2-3—1919. Page 6—Submission by Employees in Cardboard Box Industry. Quoted from Printing Trades Case.
[115] Labor Gazette of the Dominion of Canada, August, 1918, page 617.
[116] As reported in the Survey, April 6, 1918.
[117] Second Annual Report of the Minimum Wage Board, District of Columbia (1919), page 18.
[118] An excellent study of the technique of measurement of the cost of living is that by W. F. Ogburn, "Measurement of the Cost of Living and Wages." No. 170, Annals of the American Academy of Political and Social Science (1919). The article helps to put much firm ground under the feet of those engaged in cost of living investigations for the United States. For a description of the methods pursued in official cost of living investigations in Great Britain, see the account by F. H. McLeod in the June, 1919, issue of the U. S. Monthly Labor Bulletin, page 119.
[119] The Plumber's Case, South Australian Industrial Reports (Volume I, 1916-18), page 122.
[120] See pages 199-202, this chapter, for further discussion of this question.
[121] The Printing Trades Case, South Australian Industrial Reports, Vol. II, 1918-19, page 35.
[122] See Chapters VII-VIII.
[123] See pages 192-6, this chapter.
[124] See pages 202-7, this chapter.
[125] See Chapter XII.
[126] A valuable collection of evidence in support of living wage legislation is contained in the briefs presented in the cases of Stettler v. O'Hara (The Oregon Minimum Wage Case) published by the National Consumers' League. This collection of evidence is brought up to date in the new brief just published in defense of the Minimum Wage Commission—District of Columbia (Children's Hospital vs. Minimum Wage Board), 1921. For a collection of theoretical opinions on various aspects of the subject, see the symposium on the Minimum Wage Problem, which is printed as Appendix III, Vol. I, 4th Report of the New York State Factory Investigating Commission (1915), pages 592-827. An excellent bibliography on the subject by Miss Irene Osgood Andrews is to be found in Appendix III, 3rd Report of the same Commission (1913). The best studies of the Australasian experience are those of M. B. Hammond (especially the articles in the Quarterly Journal of Economics for Nov., 1914, and May, 1915), and P. S. Collier, Appendix VII, 4th Report of the N. Y. State Factory Investigating Commission. The bulletins of the Massachusetts, Oregon, and Washington (D. C.), Minimum Wage Commissions are the best studies of the effects of American legislation. Upon the results of the British Trades Boards see the studies of R. H. Tawney on the Chainmaking and Tailoring Trades and that of M. E. Bulkely on the Box Making Industry. The Parliamentary Debates 5th Series (Vols. 96-97, 107-108, Hansard), cover every aspect of the English experience.
[127] The best theoretical statement of the dangers and difficulties presented is the article by F. W. Taussig, "Minimum Wages for Women," in the Quarterly Journal of Economics, June, 1916. The evidence, however, seems to me to stand against the skepticism expressed therein.
[128] Report on Wage Boards and Industrial and Condition Acts of Australia and New Zealand (1908).
[129] See pages 160-6, Chapter VIII.
[130] See pages 183-4, this chapter.
[131] The Printing Trades Case, South Australian Industrial Reports, Vol. II (1918-19), page 252.
[132] The suggestion put forward in the "Report of the War Cabinet Committee on Women and Industry" (Great Britain), 1918, is as follows: "In such cases," the report reads, "the time rates for the simplified process or simplified machine should be determined as if this was to be allocated to male labor less skilled than the male labor employed before simplification. Only where it was definitely shown by employers that the value of the woman's work on the simplified process or machine was less than the value of the unskilled man, should the woman, if her introduction is agreed to, receive less than the unskilled man's rate in proportion to the value of her work." Page 192.
[133] See pages 114-20, Chapter VI.
[134] A number of collective agreements in which the arrangements for wage adjustment to price decline are similar to those suggested here, have recently been negotiated in England. The wage scales established in 1919 for many grades of railroad workers are an example. So also, the agreement of the Wool Textile Industrial Council, in October, 1919. The following agreement made for the Yorkshire Dyeing and Finishing Industry in March, 1919, may be given as an example.
"(7) When the index figure as defined in classes 4 and 5 hereof exceeds 107 per cent. the War Wages shall be:—
"To male and female timeworkers—107.90 per cent. of the basis wage.
"To male and female pressworkers—85.672 per cent. of the basis wage.
"To hand pressers—64.254 per cent. of the basis wage, and when the index figure is 107 or less, but not less than 100, the percentage war wages of timeworkers shall be equal to the index figures; for every 1 per cent. decrease in the index figure below 100 the war wages of timeworkers shall be decreased 3/4 of 1 per cent. The ratio of percentage war wages of timeworkers, pieceworkers and pressers respectively, shall for all index figures, be the same as that shown for index figures, exceeding 107."
[135] "Cost of Living and Wages," F. W. Taussig, Collier's Weekly, Sept. 27, 1919.
CHAPTER X—THE REGULATION OF WAGE LEVELS
Section 1. Why there must be in industry an ordered scheme of wage relationship between each and every group of wage earners. The limits of collective bargaining as a factor in industrial peace.—Section 2. In the beginning, the scheme must probably be based on an acceptance of existing wage "differentials." The reasons for this are of a practical kind.—Section 3. Any policy which planned to develop a scheme of wage relationships merely by maintaining existing differentials would be bound to fall to pieces in the end. The difficulties that would arise.—Section 4. Two principles proposed as the basis of the desired scheme of wage relationship. Their meaning as applied doctrines.—Section 5. These principles open to criticism both on practical and theoretical grounds. The chief criticisms examined and taken into account.—Section 6. Some notes on the best method of administering these principles. The necessity of avoiding political interference, if possible.
1.—We have now completed that part of this inquiry which was concerned with the formulation of principles suitable for the regulation of the wages of the lowest paid industrial groups. The task remains of working out principles which could be used satisfactorily in the settlement of wages for all other groups of wage earners.
The subject may be introduced by recalling certain matters, set forth in the preceding analysis of wage principles. It was seen that while the wages of each and every group of wage earners were governed, in a great measure, by forces which acted upon them all in common, yet the wages of each group were settled somewhat independently of all the rest. Again, it was seen that one of the leading characteristics of the present distributive situation is the use of the group will and group power to serve group purposes. Wage movements in different industries or occupations begin independently of each other; yet because of the firm determination on the part of most groups of wage earners to maintain their position in the industrial scale, a wage movement in one part of the field of industry tends frequently to give rise to similar movements throughout the field.
This tendency for the actions of one group to give rise to action on the part of other groups arises from the existence of some "power of interchange or close connection" as Mr. Aves has said. Before the use of group power becomes common and the sense of group interest becomes highly developed, that interchange or interconnection tends to exist only between classes or groups of workmen who can easily move into each other's field of employment. But with the extension and encouragement of unionism, with a constantly growing volume of public discussion of wage questions, there has arisen an interconnection between wage movements in groups very far apart in the industrial scale.[136]
As long as wave movements in different industries and occupations are considered independently of each other, and the claims of each group are judged with only incidental reference to the claims of the other groups, the use of group strength will continue to be a conspicuous characteristic of distribution. The constant assertion of group power will cease only if all groups are brought within some acceptable plan of wage settlement, under which group wages are settled by principles recognized as fair. The problem is to establish an ordered scheme of wage relationship between each and every group of wage earners—which scheme of relationship will do justice between them, and which will also effect such a distribution of the product of industry between all the wage earners and the other claimants to a share in the product, as will justify it to the wage earners and to the community in general.
If the objection be raised that the establishment of such a scheme of wage relationship is not practicable, doubt must be admitted. Yet it is probably essential to industrial peace,—under our present industrial system, or under an alternative one. It would seem to be the only substitute for the continued reliance of each group upon group power. There has been a strong tendency, both in the United States and England, to believe that industrial peace could be secured by the development of joint industrial or occupational councils throughout industry—which councils would assure fair and complete consideration of all wage questions which arise. It would be a serious error to underestimate the possible value of such joint councils to the cause of industrial peace. Indeed, throughout this study of the means of industrial peace great reliance will be placed upon them. Yet I do not believe that their creation will suffice to bring industrial peace.
Such joint councils are among the most satisfactory instruments yet devised for the conduct of collective bargaining. But will collective bargaining keep such an interdependent industrial society as our own at work peacefully? Can the philosophy of compromise be developed to that extent? Joint industrial councils can produce understanding between employers and wage earners; they can foster a spirit of cooperation between all groups engaged in a productive industry; they can stand in the way of the creation of such intolerable conditions of labor as have, on occasion in the past, led to a spontaneous revolt in an industry; they can foster reasonableness and compromise. But it is difficult to see how they can work out principles of wage settlement for any industry which will have sufficient authority over the actions of those engaged in it in times of stress.
Before industrial peace can be obtained, particular groups of wage earners must forbear from pressing to the utmost the bargaining advantages they possess. This forbearance will come only from a knowledge of an interest larger than their own. There will have to be a recognition by all sides of principles which represent aims to which all subscribe, and which do justice to the interests of each.
2.—What then is required, to repeat, is a policy by which wages in various industries and occupations are brought into relation with each other. This policy should be calculated to result in such a distribution of the product of industry as would justify it to the wage earners and community in general. The scheme of wage relationship would have to rest upon expressed principles.
In the beginning any policy which has as its aim the establishment of a scheme of wage relationship must accept and protect the existing wage levels of each group of wage earners. That would mean, of course, accepting the wage relationships existing between them. The reasons for this are practical, rather than theoretical. They are: Firstly, because it will be impossible to win general consent for any policy of wage settlement which does not guarantee to all wage earners at least their existing rates of wages. Secondly, because the existing relationships between the wage levels of the different groups of workers represent, though only vaguely and roughly, customary relationships, and they therefore have, on occasion, meaning to the wage earners. Thirdly, the mere fact that they exist makes them the most convenient basis for the very careful process of comparison and calculation involved in any attempt to establish gradually a scheme of wage relationships based upon principles. It should be kept in mind, however, that the reasons for their acceptance are of a practical nature, and that no theoretical considerations compel an unquestioning acceptance of them, as is sometimes urged.
3.—Since, on practical grounds, it is held that any attempt to create an ordered scheme of wage relationship must begin by accepting existing wage levels, it may be judged by some that the scheme that is sought could be developed merely by maintaining these relationships. That would mean that existing differentials would be maintained as customary differentials. That policy, it is true, would have the advantages of simplicity and continuity. But it would be found impossible to maintain. For the scheme of wage relationship to which it would give rise would lack the authority of principle—without which no scheme of wage relationship will receive voluntary and steady support from the various groups of wage earners. The wage earners will not voluntarily accept a place in the industrial scale, unless it is felt that the scale is the result of the application of rules of acknowledged fairness. The existing scale of wage relationship, however, has not been determined either by considerations of justice or of the general interest. Nor has it, as is sometimes claimed, the authority of being altogether necessary. It is the product of a multitude of forces, some of which may be given different importance in the future than they had in the past.
It is easy to foresee the difficulties with which a policy which planned to create an ordered scheme of wage relationships by maintaining existing differentials would be confronted. Claims will constantly be presented by particular groups for some improvement in their economic position. These claims could not be disregarded merely on the score that they contravened the scheme of established differentials. The issue that would arise is clearly exemplified by statements made in the course of two of the most important industrial conflicts that occurred in England of recent years. "We claim," the Secretary of one of the Shop Committees of the Molders' Union wrote in defense of the demand of his union for differential treatment under an award made for the whole of Engineering Trades—which demand provoked the molders' strike, "we claim that our work is totally different in many ways from the other departments in the engineering industry. It is arduous, dirty, dangerous, hot, unhealthy, and highly skilled, and we claim separate treatment on these grounds. There is no other department in the engineering industry with so high a percentage of sickness or accidents.... You mention the employers' attitude towards the molders' application—a refusal to grant to molders any separate consideration because other classes of workers would also expect it. To me such an attitude is both unfair and untenable. If the molder can prove that his conditions of working are vile, dangerous and unhealthy, it is surely fair to ask for a proper recompense for such work...."[137] And consider this extract from one of the reports of the Coal Industry Commission, signed by six members of the Commission. "It will, however, be said that desirable as may be an improvement in the miners' conditions, the industry will not bear the cost of a reduction in hours, even if the aggregate output is, by an increase in numbers and, therefore, in the wages bill restored to its pre-war level, without involving a considerable advance in the price of coal, with possible adverse effects on our export trade, on manufacturing industry generally, and on the domestic consumer. We have to observe that if the improvement in the miner's standard of life is really required for the greater efficiency of the industry itself, or in the national interest, the fact that it might involve a temporary increase in the price of coal would not be conclusive against it. Moreover, if hours of labor have been reduced in other industries, and if the standard of life has been advanced among other sections of the community, it would be unsuitable to withhold a similar advance from the miners, merely because the others have got in first."[138]
In short, under any scheme of wage relationship based on the preservation of existing differentials, it could not be established in the face of any claim that the relative position of a group was determined either by consideration of justice, or by implacable necessity. Therefore, that scheme would not receive the constant and widespread support requisite to its successful operation.[139]
So far then, in this chapter, two conclusions have been reached. Firstly, that the course of wage settlement in each industry or occupation cannot be a process entirely independent from the course of wage settlement in every other industry and occupation. Secondly, that although the first step in the establishment of any scheme of wage relationship is the acceptance of existing wage levels and differentials, the policy must provide for the reconsideration of these differentials in the light of affirmed principles; with the aim of gradually evolving in industry an ordered scheme of wage relationship, upheld by common consent to the principles on which it rests.
4.—Thus we are put under the necessity of attempting to formulate principles or standards by which all claims made by groups of wage earners for reconsideration of existing wage differentials could be judged. This is not a task to be lightly undertaken. Nor is it to be expected that such clear principles of wage relationship can be elaborated as to escape the necessity of deciding many claims by an appeal to compromise and by taking refuge in a general sense of equity. All that it is hoped to do is to suggest certain lines along which a satisfactory formulation of the required principles of wage relationship may be sought.
It might be possible gradually to construct such an ordered scheme of wage relationship as has been declared essential to industrial peace by applying to successive wage controversies, as they arose, two central doctrines. These doctrines are: Firstly, the doctrine of the unity of the wage income and of the wage earners—by which is meant that the wages of all groups should be regarded as part of one general wage income, to be shared out among all wage earners in as nearly equal proportions, as is practicable, without special favor to any one. And, secondly, what may be called for a lack of a better name, the doctrine of special reward—by which is meant, that the wage differentials between the standard wage levels of different types of labor should be regarded as special rewards, given in order to make it reasonably certain that industry will be provided with at least the existing proportion of the more skilled grades of labor, and to make it reasonably certain also that the more arduous, irregular, dangerous and disagreeable work will command the service of as much labor as at present.
It should be observed, first of all, that neither of these two doctrines upholds the rights of particular groups of wage earners. They aim to bring all wage earning groups to perceive that they are part of a larger whole; they emphasize the fact that the wages of each group are what they are, more because the total wage income is what it is, than because of the special type of work performed by the group. They, however, recognize the necessity of giving extra reward for the training and skill or natural ability required for particular kinds of work, for more than common danger or disagreeableness incurred in the performance of particular kinds of work, and the like—in short, for all those factors which elevate a job above what is called common labor.
As an applied doctrine, the doctrine of the unity of wage income and of the wage earners means that the same wage should be paid throughout industry for work which requires approximately the same human qualities, and which makes approximately the same demands upon the individual. The common effort involved in production is emphasized, rather than the differences between the work performed by workers in different parts of the field of production. As an applied doctrine, the doctrine of extra reward means that certain groups of wage earners should receive higher wages than other groups, because the work they perform is deemed to require considerably higher individual qualities or talents, or to make considerably greater demands upon the individuals engaged upon it.[140] The extra reward should not be regarded primarily as an ethical right; but rather as a payment to ensure the development and exercise of those higher qualities and talents required in the performance of the more skilled industrial tasks, and to ensure also the performance of the more arduous, irregular, disagreeable, and less desirable industrial tasks. It is a recognition of the fact that the spirit of serving without direct reward is not a sufficiently strong and constant motive to persuade men to make the special efforts, or to undergo the special disadvantages required for some kinds of work. It is an incentive to the development of those abilities and talents which are relatively scarce in industry; it is also an incentive to the undertaking of those tasks which the run of men, at any given time and place, regard as unusually difficult or undesirable. The extra reward for different kinds of work which are judged to require for their performance qualities equally difficult to secure, and which subject individuals to the same hardships should be the same. The test of the special reward must be in any particular case, the amount necessary to secure the performance of the work in question.
The conscientious and consistent application of these two doctrines in settlement of wage controversies which involve the reconsideration of established differentials should result in the gradual building up of an ordered scheme of wage relationship, such as is sought. This scheme would rest upon fairly widely held ideas as to the most suitable basis for wage differences. It would not make greater call upon the human sense of fairness than must be made by any plan which hopes to secure industrial peace by getting all parties to industrial conflict to agree upon rules or principles for the settlement of the claims of each. Whether that aim, itself, is a fanciful one, need not be again debated here.
5.—Lest it appear that the above proposals have been put forward without giving due weight to their defects, it is now well to consider certain criticisms to which they may be fairly open. Two objections, in particular, are likely to be made. One is of practical nature, the other of a theoretical nature. They may be considered in that order.
The objection of a practical nature is that it will not be possible to apply the suggested principles either accurately or consistently, and this for two reasons. Firstly, it may be asserted that the application of the proposed doctrines would require a scientific comparison of the characteristics of different kinds of work, which comparison is declared to be unobtainable. Secondly, it may be said that in order to fix such wage differentials as are reasonably certain to accomplish the ends for which they are set, it will be necessary to have a precise knowledge of many facts and forces. This knowledge may be declared to be unobtainable.
No simple or very final answer can be returned to these doubts. It must be admitted that it will always remain difficult to compare occupations except in general descriptive terms. The relative training and talents required for different kinds of work, and the relative demands made upon the individual by different kinds of work will always remain, to a great extent, a matter of opinion. It is also true that only a general knowledge can be obtained of the factors governing the supply of any particular sort of labor at a given time, and the probable effect of any wage change upon that supply. The differentials which would be established from a consideration of such material could not claim to be more than a practical approximation to the differentials which would carry out the intention of the policy.
Still, scientific method could be pushed further than it has been in the comparison of occupations. The statements of the various interested parties would be a valuable guide in the estimate of occupations. Furthermore, only the major relationships between occupations would have to be taken into consideration. For example, if the question at issue was whether the wages of miners were too low as compared with wages in other industries—that is to say, whether a demand on the part of the miners for an improvement in their relative economic position was justified—only the most important of mining occupations would have to be taken into account in reaching a decision. There would be small risk of error in applying a decision, based upon a study of the work performed and of the income received in the most important mining occupations, to the less important mining occupations also. And indeed such would prove probably the only practicable policy. Furthermore, revision of the existing differentials would be undertaken only when the case for revision seemed definite and clear. As for example, it was clear in England before the war, that railroad labor was underpaid; or, as was clear to the whole of the recent President's commission on the wages of coal miners, that the wages of the miners were too low, relative to wages in other industries—though the commission differed on the amount of wage increase to be awarded.
But perhaps the most significant answer to those objections which rest on practical grounds is the fact that any wage level that might be set for any occupation under the proposed principles would be but the minimum standard wage for that occupation. And no element in the whole policy of wage settlement should stand in the way of the payment of a higher wage than that fixed by the central authority for any type of work. Thus no fear would have to be entertained that any industry would be faced with a shortage of labor due to the difficulty of getting precise knowledge on which to base wage differentials.
Here, indeed, we approach very close to that other objection which may be put forward on theoretical grounds. Which objection is that all attempts at revision of existing wage differentials would involve a risk of producing, on the one hand, a shortage of certain kinds of labor, and, on the other hand, an oversupply of other kinds. It is reasoned that in spite of every effort of careful calculation of wage differentials, some danger of over or undersupply of certain kinds of labor will always be present.
These fears would be based upon a misconception of the nature of the policy of wage settlement that is proposed. As has already been emphasized, the wage level that would be fixed for any kind of labor would be but a minimum standard wage. There is no part of the proposed policy of wage settlement which would interfere with the payment of higher wages than the standard minimum. Therefore, no industry would find itself unable to secure the labor it required merely because of the differentials established by the central authority. Each industry would still retain all its powers of bargaining for the labor it needs. Nor, on the other hand, would there be any serious danger that the wage rates set for any industry or occupation would be so high as to add to any already existing possibilities of oversupply of certain types of labor. For, after all, the central authority would consider the question of the revision of existing wage differentials only when the question is pressed upon it by the failure of the workers and employers to agree. The central authority would not be likely to declare wage rates higher than those contended for by the wage earners or lower than those contended for by the employers. And it is not too much to presume that in practically all cases neither of the two sides presses claims from which they do not expect to benefit. The employers are not likely to seek such wage rates as will not procure the needed labor supply; and only in rare cases are the wage earners likely to press for increases of wages that would bring about an increased measure of unemployment.[141] When those rare cases arise, indeed, it will be the duty of the central authority to protect the interested parties against their own bad judgment.
Thus it cannot be admitted that the application of the proposed principles would produce an intensification of the already existing possibilities that particular industries or occupations would be short of the kind of labor they need, or that they would be overcrowded. This conclusion is greatly strengthened by the thought that under our present practices, wage settlements are constantly being reached without any reward whatsoever for the disturbance of customary differentials; and serious maladjustments in the supply of labor do not often result because of that.
6.—A note upon the procedure by which it is expected that the proposed principles would be brought into operation may help to explain away remaining doubts. First of all, it may be emphasized that nothing in these proposals contemplates the discontinuance of collective bargaining throughout industry. Rather the creation of joint industrial or occupational boards or councils (those suggested in the course of the living wage discussion) is advised. Only when any wage question cannot be settled peacefully by collective bargaining is it proposed that the central authority should enter into the dispute.
It is to be expected that as the principles followed by the central authority in its decisions become known and understood—that is, as the probable result of disagreement, and of reference to the central authority become predictable—the agreements reached by collective bargaining would tend to approximate those which would result from reference to the central authority. For example, if a series of decisions expounded the doctrine that the existing relationships between the wages of the miners, railway conductors, and bricklayers are in accordance with the principles recognized by the central authority, the course of negotiation in these occupations will be governed, to some extent, by that knowledge. Such an outcome is to be expected, no matter what the principles upheld by the central authority—provided they are consistently upheld. Thus Judge Higgins records of the Australasian experience that "It is quite common now for the parties to ask the decision or guidance of the Court on a few main subjects in dispute and then to agree as to all the other items—even hundreds of items—in the light of the Court's findings; anticipating the application of the Court's principles."[142]
Since we are on the subject of the method and machinery of application of the policy of wage settlement, one other aspect of the matter may be briefly noted. That is, that if any policy of wage settlement is to succeed, the course of wage decision must be kept as free from all political interference as possible.[143] Spending departments should not be given powers of decision which clash with those of the central authority. Appeals to the higher executive officers of the state must be avoided to the utmost possible extent. Conjecture as to the measure in which these conditions can be realized in the United States at the present time may be withheld. But unless they are realized in a high degree, wage settlement will continue to be a matter of force and opportunism. Freedom from political interference can be obtained, and the elimination of the necessity for frequent appeal to the higher executive officers of the state will be possible, only if the policy of wage settlement which is adopted has the vigorous support of all groups immediately concerned in wage settlement.
FOOTNOTES:
[136] See for examination of this question, "Report of Wage Boards and Industrial and Conciliation Acts of Australia and New Zealand." E. Aves (1908), page 38. Mr. Henry Clay in a review of the wage position before the National Council of the Pottery Industry (Great Britain), made an interesting statement in this regard. He said "... the one great lesson which the war taught everybody (including Government Departments) was that it was dangerous to make a change in the wages or basis of earnings of one section of workers or of one industry unless they considered what would be the effect on all related classes and grades of workers." Printed in the Staffordshire Sentinel, Oct. 8, 1920. See also Chapter 39, Lord Askwith's "Industrial Problems and Disputes" for a narrative account of the trouble caused by sectional wage advances during the war.
[137] Letter printed in London Times, January 13, 1920.
[138] Report of the Coal Industry Commission (1919), Majority Report, pages 15-16. For another interesting case, see that of Various Toronto Firms vs. Pattern Makers under the Canadian Industrial Disputes Act, in which case the pattern makers claimed differential treatment over machinists and molders. Reported in Jan., 1919, Canadian Labor Gazette.
[139] The various courts in the Australian dominions tended on the whole to confirm existing differentials, occasionally changing the relative position of particular groups, when it has seemed clear to the court that the wages of these groups as compared to other groups is "unreasonable" considering all those factors which are considered to form the ground of "reasonableness" in the matter of differentials. Thus Justice Brown of the Industrial Court of South Australia has expressed himself on this very subject. "In the matter of such perplexity some guidance is afforded to the court by custom. It seems to me I cannot do better than proceed on this basis. I shall state the preexisting wage, consider whether it is prima facie unreasonable applied to preexisting conditions, and then if I find it not prima facie unreasonable, I shall consider whether any variations of the wage should be made in view of conditions now existing." (Hook Boys' Case—South Australia Industrial Reports, Vol. I, 1916-7, page 29.)
[140] It is in this light that the Commonwealth Court of Australia looks upon its secondary wage. "The secondary wage is remuneration for any exceptional gifts or qualifications not of the individual employee, but gifts or qualifications necessary for the performance of the functions." H. B. Higgins, "A New Province for Law and Order," Harvard Law Review, March, 1915.
[141] Mr. and Mrs. Webb have described aptly the usual trade union calculations in the formulation of their claims. "The Trade Unionist has a rough and ready barometer to guide him in this difficult navigation. It is impossible, even for the most learned economist or the most accomplished business men, to predict what will be the result of any particular advance of the Common Rule. So long, however, as a Trade Union without in any way restricting the numbers entering its occupation, finds that its members are fully employed, it can scarcely be wrong in maintaining its Common Rules at the existing level, and even, after a reasonable interval, in attempting gradually to raise them.... To put it concretely, whenever the percentage of the unemployed in any particular industry begins to rise from the 3 or 5 per cent characteristic of 'good trade' to the 10, 15 or even 25 per cent. experienced in 'bad trade' there must be a pause in the operatives' advance movement." "Industrial Democracy," pages 738-9.
[142] H. B. Higgins, "A New Province for Law and Order," Harvard Law Review, Dec., 1920, page 114.
[143] Justice Higgins, the head of the Commonwealth Court of Australia, has recently resigned because of the action of the legislature in providing that the executive may set up special and independent tribunals of appeal above the Court of Arbitration. His letter giving the reasons for his resignation (printed in the Melbourne Argus, Oct. 26, 1920), gives most convincingly the case for freedom from political interference. One passage of explanation in it is as follows:
"On the other hand, a permanent court of a judicial character tends to reduce conditions to system, to standardize them, to prevent irritating contrasts. It knows that a reckless concession made in one case will multiply future troubles. A union that knows that a certain claim is likely to be contested by the court will bring pressure to bear for a special tribunal; and the special tribunal appointed by the government will be apt to yield to demands for the sake of continuity in the one industry before it, regardless of the consequences in other industries. The objectives of the permanent court and of the temporary tribunals are, in truth, quite different—one seeks to provide a just and balanced system which will tend to continuity of work in industries generally, whereas the other seeks to prevent or to end a present strike in its own industry." See also Lord Askwith's "Industrial Problems and Disputes" for another expression of the same view.
CHAPTER XI—THE REGULATION OF WAGE LEVELS—(Continued)—
WAGES AND PRICES
Section 1. The scheme of wage relationship must recommend itself as just to the wage earners and the community in general. The ultimate distributive question to be met is the division of the product between profit and wages.—Section 2. Provision for the adjustment of wages to price movements would aid, however, towards reaching distributive goal. A policy of adjustment suggested.—Section 3. The difficulty of maintaining scheme of wage relationship of wages adjusted to price movements. The best method of adjustment a compromise.
1.—In the last chapter the reasons for seeking an ordered scheme of wage relationship in industry were discussed, and some suggestions were made in regard to such a scheme. One essential to its success was pointed out. That is, that under it the distribution of the product of industry should recommend itself as just to the wage earners and the community in general. The possibility of satisfying this requirement remains to be considered.
The ultimate distributive question to be met in any attempt to formulate a policy of wage settlement is the distribution of the product of industry between wages and profits (rent incomes, in the Ricardian sense, being left out of the question). It is entirely conceivable that a policy of wage settlement should be put into practice which would take note only of the facts of this relation. However, there are distinct advantages to be obtained by taking note of an intermediate relation. That is the relation between wages and changes in the price level.
The relation between wages and general price movements has been discussed. It has been seen that movements in the general level of prices affect the outcome of distribution. They occasion changes in the distributive situation; and these changes may be desirable or undesirable—having reference to the distributive result that is sought. Any plan by which such changes as are undesirable are prevented from taking place would contribute, therefore, to the attainment of the aims of the proposed policy; and would be a valuable adjunct to the policy. The conclusions reached in the previous discussion on this subject make up a plan suitable for the purpose. They may now be fitted into the body of these proposals. Then in the following chapter that most difficult problem of wage settlement can be considered—the problem of governing the distribution of the product between profit and wages in order that a just distribution may result.
2.—The results of the discussion in Chapter V concerning a plan for the adjustment of wages to price change may be applied at this point without further comment.
The central authority in its decisions should take note of all changes in the approved price index number since the time when the wage rates which are up for reconsideration were fixed. It should then in its awards adjust these wage rates to price changes in accordance with the following policy. It need hardly be explained that other considerations besides the fact of price change may enter into the award, as the adjustment of wages to price change is merely one part of a larger policy.
The measure of price change by which the central authority should be guided—that is, the approved index number,—should be the movements of the index number of the prices of all important commodities produced within the country; this index number to be so weighted as to give a defined importance (50 per cent. suggested) to the prices of those classes of foodstuffs, clothing, housing accommodations and other commodities, upon which the wage earners spend the larger part of their income. It will be noted that this measure of price change is the same as that used in the adjustment of wages prescribed under the living wage policy. And, as was recommended in the discussion of living wage policy, so it is recommended here, that adjustments should not be undertaken unless the index number of prices has moved at least 5 per cent., and that adjustment should not be more frequent than twice a year. |
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