[Footnote 1: See above, ch.17, sec. 3, note, and sec. 5, on this distinction. The poll tax also is personal: see ch. 16, sec. 9.]

[Footnote 2: In Utah the tax is 5 per cent on all estates over $10,000.]

[Footnote 3. Exception, Utah.]

[Footnote 4: Exceptions are Missouri, New Hampshire, Vermont, Virginia.]

[Footnote 5: It would be more consistent with the purpose of equalizing fortunes to vary the rate not according to the size of the legacy but according to the size of the fortune which the legatee has, or would have, after receiving the legacy.]

[Footnote 6: See Vol. I, p. 26.]

[Footnote 7: In addition, certain items of receipts of companies or incomes of individuals are arbitrarily defined as property for purposes of taxation in a few cases in about fifteen other states. See Wealth, Debt, and Taxation, Report of the Bureau of the Census, 1907, p. 622.]

[Footnote 8: Article XVI. The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census enumeration.]

[Footnote 9: It constitutes sec. 2 of the tariff act of 1913 entitled "An act to reduce tariff duties and to provide revenue for the government and for other purposes."]

[Footnote 10: This may be seen in the following table: Normal Rate on excess Total tax on in next class tax on lower Nor- Addi- upper Total rate limit mal tional limit per cent Under $3,000 0 0 0 0 0.00 to 0.00 $3,000-$20,000 0 1 0 170 0.00 to 0.85 $20,000-$50,000 170 1 1 770 0.85 to 1.54 $50,000-$75,000 770 1 2 1,520 1.54 to 2.02 $75,000-$100,000 1,520 1 3 2,520 2.02 to 2.52 $100,000-$250,000 2,520 1 4 10,020 2.52 to 4.00 $250,000-$500,000 10,020 1 5 25,020 4.00 to 5.00 In excess of $500,00 25,020 1 6 upwards 5.00 to 7.00

By legislation in the summer of 1916, after the foregoing was in type, the "normal" rate was doubled and the additional rates were raised.]

[Footnote 11: The exemption is $3000 for each if they are not living together. Thus the law offers a reward of $20 to make marriage a failure.]

[Footnote 12: See above, ch. 17, sec. 5.]

[Footnote 13: See above, ch. 17, secs. 15, 16.]

[Footnote 14: See above, ch. 15, sec. 14, first paragraph.]



PART V

PROBLEMS OF THE WAGE SYSTEM



CHAPTER 19

METHODS OF INDUSTRIAL REMUNERATION

Sec. 1. Workers subordinate in early societies. Sec. 2. Workers in the Middle Ages. Sec. 3. Growth of the wage system. Sec. 4. Practicability of the wage system. Sec. 5. Time work. Sec. 6. Task work. Sec. 7. Piece work. Sec. 8. Premium plans. Sec. 9. Aim of profit-sharing. Sec. 10. Examples of profit-sharing. Sec. 11. Difficulties in profit-sharing. Sec. 12. Defective theory of profit-sharing. Sec. 13. Purpose of producers' cooeperation. Sec. 14. Limited success of the plan. Sec. 15. Its main difficulty.

Sec. 1. Workers subordinate in early societies. As far back as the history of settled and populous communities can be traced, the masses of workers have been subordinate. Civilization began with direction, with obedience to superiors on the part of the mass of men. Even in the rudest tribes, the women and children were subject to the will of the stronger, the head of the family. Among the Aryan races the family system was widened, and the patriarch of the tribe secured personal obedience and economic services from all members of the community. Chattel slavery, the typical form of industrial organization in early tropical civilization, seems to have been one of the necessary steps to progress from rude conditions; students to-day incline to view it as an essential stage in the history of the race. But as conditions changed with industrial development, chattel slavery became an inefficient form of industrial organization and a hindrance to progress.

Sec. 2. Workers in the Middle Ages. Serfdom for rural labor and many limitations on the workman's freedom in the towns were the prevailing conditions in medieval Europe. Serfdom was both a political and an economic relation. The self was bound to the soil; the lord could command and control him; but the serf's obligations were pretty well defined. He had to give services, but in return for them he got something definite in the form of protection and the use of land. Between the lord and the serf there continued an implied contract, which passed by inheritance from father to son, in the case both of the master and of the serf. In the towns conditions were better for the free master class of the artisans who owned their tools and often a little shop where they both made and sold their products. But the mass of the workers, shut out from special privileges, bore a heavy burden. There were strict rules of apprenticeship; gild regulations forbidding the free choice of a trade or a residence; laws against migration into the town; settlement laws making it impossible for poor men to remove from one place to another; arbitrary regulation of wages, either by the gilds in the towns or by national councils and parliaments, forbidding the workmen to take the competitive wages that economic conditions would have forced the employers to pay; combination laws forbidding laborers to combine in their own interest. These conditions prevailed even in the periods and in the countries often referred to as particularly favorable for the working classes (such as England in the fifteenth century).

Sec. 3. Growth of the wage system. Throughout the Middle Ages these conditions were gradually changing, and the changes were hastened by the discovery of America, by the social unrest accompanying the Reformation, and by other forces. Servile dues in the rural districts were, by the sixteenth century, commuted for cash payments in England and had begun to disappear in the other Western countries of Europe. The agricultural work was done partly by the peasant landowners, partly by yeomen farmers on their own land, and partly by laborers hired by landowners or by tenant farmers (enterprisers with some capital for equipment). The growth of commerce and of the mechanical trades in the towns required larger ships, factories, and shops, and increasing investments. This required in the towns an increasing proportion of hired laborers having little or no capital invested in industry, and living on wages. This change went on more and more rapidly with the introduction of machinery in the eighteenth and nineteenth centuries, and "the wage system" grew steadily to be a more and more important part of the whole economic structure.[1]

Sec. 4. Practicability of the wage system. This change has brought with it grave problems of social organization and social welfare, which it is not the place here to discuss. But whatever be the difficulties of the wage system it has certain practical merits of workableness which account for its progress and dominance.[2] The larger the market and the longer the waiting period in industry, the greater the element of uncertainty and financial risk. Under the wage contract the employer, as the one best prepared to do it, takes the risk as to the future selling price of the product; the worker gets in a definite sum at once the market value of his services. Wage payment, therefore, is a form of insurance to the workingman; he gets something definite instead of taking chances he is ill prepared to take. Wage payment is a form of credit to the laborer whose labor is applied to producing the goods for customers distant in time and in place. The employer advances to the workman the present value of the future sale, discounting it at the prevailing rate of interest.

Wage payment implies a contract by which the employee on his part agrees to render service and the employer on his part agrees to pay for it. The methods of determining and measuring the amount of service of the employee are called "methods of industrial remuneration." The many varieties may be grouped in two classes: time payment and piece payment, corresponding with the two modes of measuring labor, time work and piece work.

Sec. 5. Time work. Time work came first and was long almost the only method. In time work the employee is paid by the hour, day, week, month, or year, as the case may be. This is very satisfactory for small enterprises, where the master works with his own hands alongside of the employee, overseeing him, teaching him, and stimulating him by his own presence and example of industry. This method prevails still in nearly all farming work, in many kinds of manufacturing, in most transportation, in clerical positions in trade, and in general where the employee must perform a variety of tasks.

Considering a brief period, it might seem that in time work the worker is paid by time regardless of his effort or performance. However, in every industry there is a recognized, fairly definite standard of accomplishment for those getting the regular market rates of wages, so that the time-standard implies some performance- or piece-standard also. But this is judged by the employer only in a general way, and very commonly men of different degrees of efficiency continue for some time to receive the same money wage. Still, where any differences become noticeable to the employer in quantity of work, quality of work, or personal qualities of honesty, reliability, and good temper, the better workman is likely to obtain a better position, higher pay, more regular employment, or some other form of reward. The employer is more likely at the end of any period of employment, to discharge the man who falls short either in quantity or quality of work, and to retain and advance the better worker. The method of time-payment does not directly tempt the workman to slight the quality of his work by haste. It does not keep constantly before the worker the thought of his own interest in rapid work, often with an accompanying nervous and mental strain. In most occupations, therefore, the workers prefer time work. It does not take exclusive account of the quantity of material product, but leaves place for estimating various personal qualities of the employee which are of value in a business.

Sec. 6. Task work. There are thus both advantages and disadvantages in time work, and their relative importance varies in different industries and industrial conditions. Especially is the difficulty of supervising workers and of ensuring the performance of a certain standard, or minimum, amount and quality of work great in larger enterprises. Various methods of measuring the performance of the worker directly by some other than the time-standards have been developed. All of these, in a general way, involve the piece work principle.

Task work is nominally time work, with a penalty if a certain amount of product is not turned out within a given period. The agreement may be that if the specified task is not done within the regular time, it must be completed in overtime without additional pay. This is also called "doing a stint." This method has been extensively used in the ready-made clothing business in America, and is to some extent involved in many cases of wage payment in manufacturing.

Sec. 7. Piece work. Piece work of the simpler, or ordinary kind, is that where the payment varies just according to the amount of the product, by some physical measurement, as yards of cloth woven, number of pieces turned on a lathe, or amount of type set by a printer. Usually careful inspection by some agent of the employer serves to keep the quality up to a certain standard. The rejected pieces are not paid for, and sometimes also the workmen are required to pay for the materials wasted by their poor work. Piece payment is convenient for home work, such as that of rural peasants weaving cloth for commission merchants or as that of tenement workers in cities. It is also employed very widely in the larger factories in textile and mechanical industries. Selling on commission is a form of piece work.

In piece work the motive to activity is ever present to the worker, and almost always the worker turns out a larger product when paid by the piece than when paid by time. The employer benefits by the more efficient use of his machinery and equipment even when the price per piece is not reduced with the larger output per worker. The worker's earnings may increase rapidly under this plan, but as the manual dexterity acquired is usually of a very special kind which can be used only on one particular machine, the worker has little opportunity to resist a cut in his wages. For this reason and because of the undue strain upon the worker that often occurs, piece work is in many trades not favored by the workers.[3]

Sec. 8. Premium plans. Various modifications of piece work have been developed of late, all involving the features of a minimum task and of a premium for performance beyond that point. These plans are called "premium plans," "progressive wage systems," and "gain sharing." One of the first of these, Halsey's premium plan, fixes a standard time for a job and if the worker falls short of, or merely attains to, that standard he gets the regular pay; but if he takes less than the standard time he receives a fixed premium per hour for the time saved. For example, if the standard time is 10 hours for a $3.00 job and the premium for speed is ten cents per hour, the worker would receive 20 cents premium if he did the work in 8 hours ($2.40 +.20, total $2.60), and 50 cents premium if he did it in 5 hours ($1.50 + 50, total $2.00). His average wage per hour thus rises as his speed increases; it becomes 32.5 cents per hour when the job is done in 8 hours, and 40 cents per hour when the job is done in 5 hours. The reduction of cost per job to the employer evidently would be 40 cents in the first case, and $1.00 in the second. This is Halsey's plan, by which the worker gets one-third and the employer two-thirds of the time saved.

The same plan has been applied (Weir's method) with a premium that equally divides between the workman and the employer the time saved. By Rowan's method the premium is not a fixed sum but a percentage of the standard rate per hour equal to the percentage of reduction in time consumed. For example, if in the foregoing example the time were reduced 20 per cent (to 8 hours) the premium would be 20 per cent of 30 cents, and the workman would receive 36 cents per hour. By this plan the premium becomes less for the later reductions than in either of the other plans. The utmost possible wages would be double the standard rate.

A number of other variations have been worked out by the promoters of recent scientific management, and are known as Taylor's, Gantt's, and Emerson's plans. The authors of all these plans agree as to the importance of fixing the standard rate so that it will leave a possibility of considerable improvement with unusual effort, and of leaving the standard rate and premium unchanged as long as no new process or new machinery is introduced into the business. If this is not done the employees lose faith in the plan and refuse to make the necessary effort to earn the premium. Most of these plans of payment recently have been connected with experiments and studies in scientific management to reduce the time and increase the ease of the operations.

In a variety of ways a bonus or a premium may be paid for quality, or for economy in the use of materials (as to a fireman for using less coal), or for various other results. Every business has its peculiar conditions, which make certain results especially desirable, and certain methods of reward practicable. In some industries, for example, the various plans of piece work and of premium payment are applied to groups of workers (as in collective piece work), the total payment being then divided among the members of the group in some agreed proportion.

Sec. 9. Aim of profit-sharing. Profit-sharing is rewarding the laborer with a share of the profits in addition to his usual contract wages. Payments by the piece and premiums for output are solely dependent on the efforts of the particular workman (or collective group), but in the plan of profit-sharing a premium is given in addition to the regular wage if, at the end of the year, the business as a whole has yielded a profit above a certain amount. Profit-sharing is not merely a gift; it is done usually in accordance with a definite promise in advance. The employer adopting the plan does not intend to lose by it. His purpose is to stimulate the industry of the workers, thus reducing waste and cost of labor and supervision, and thereby increasing profits. He offers to divide with the workman the additional profits which are expected to result from their efforts. There is, in every factory, greater or less waste of materials, destruction of tools, and loss of time, that no rules or penalties can prevent. If the worker can be made to take a strong enough personal interest he will use care when the eye of the foreman is not upon him. The product also can be slightly increased in many ways by the workman's exertions or suggestions. In some cases the quality of the work cannot be insured by the closest inspection as well as it can be by a small degree of personal interest. Either responsibility for the fault cannot be fixed, or the defect is one not measurable by any easily applied standard. Strikes may be averted, good feeling promoted, and contentment furthered if the interest of the worker can be made to approach, and in large measure to become in harmony with, that of the employer. The economic result of the plan, if it can be made to work, should be to reduce the costs of these establishments below what they are. The crucial question is whether profit-sharing alone in any particular case will insure that the costs will be less than those of competitors, thus giving a source out of which an increased amount, really a wage, can be paid to the laborer. For the amount of profits is affected not only by the amount of output, but also by a number of other things that are quite outside the control of the workmen.

Sec. 10. Examples of profit-sharing. The profit-sharing plan seems first to have been successfully tried in Paris, in 1842, by Leclaire, a house-painter. In house-painting there is often a great waste of materials and time by men working singly or in small groups in different parts of the city. By this new method Leclaire enlisted the aid of the workmen, reduced the costs, and increased the profits. It is a remarkable fact that the plan has been continued successfully by the same firm to the present time. It has been tried in many hundreds, possibly thousands, of cases, and is operating in some form or another in more than a hundred firms in Europe and America. The most notable examples of profit-sharing in the United States are the Pillsbury Mills in Minneapolis, Procter and Gamble's soap-factories, in Ivorydale, Ohio, the Nelson Mfg. Co., in Leclaire, Ill., and the Ford Automobile Works, in Detroit. In some cases both manufacturer and workmen value the system highly. It probably has its greatest success when applied in prosperous establishments where profits are regular and large, and where a steady working force is especially desired. The proportion of business done in this way is not large. One hundred firms is a very small fraction of 1 per cent of the total number of firms in Germany, France, England, and America. A still more important fact is that true profit-sharing has spread little since 1890, tho various practices have developed under that name. The most noteworthy of these is the selling of stock, usually at a somewhat lower price, to the employees of a corporation so that, as stockholders, they may have a motive to work for the success of the company (e.g., the United States Steel Corporation). This method as applied to a select few of the employees, who are advanced to official positions in a corporation, is very widely adopted.

Sec. 11. Difficulties in profit-sharing. It seems at first difficult to explain this comparative failure of a plan that looks so attractive in spirit and of which so much was hoped. Yet objections come from the side both of the workman and of the employer. The workman lacks knowledge of the business and is suspicious of the bookkeeping. If at the end of the year the books show no profits, the workman loses confidence, considers the plan to be mere deception, and rejects it. The working of the plan remains in the employer's hands, and the workman really is not a partner in the business. Moreover, the plan puts a limitation upon the workman's freedom to compete for better wages by changing his place of work. It is indispensable to make length of service in some degree a condition to the sharing of profits. Workmen, coming and going, cannot be allowed to share; the percentage given to the others increases with length of employment. Whenever men are thus practically subject to a fine (equal to the amount of shared profits) if they accept a better position, there is danger of a covert lowering of wages. The plan tends to break up the trade-unions, which is one of the reasons that the employers like it, and is the main reason that organized labor opposes it.

The employer on his part objects to the interference with his management, the troublesome inspection of the books, and the constant complaints of the workmen. He dislikes to have the profits known; if they are large, the advertisement of success invites competition; if they are small, publicity may injure credit and depress the value of the enterprise. In view of all these difficulties it is not surprising that while the plan often starts promisingly, it usually fails after a short trial. Business methods are severely subject to the principle of the survival of the fittest. Through competition and the survival of the firms that adopt improvements, better methods must eventually supplant poorer ones. If a method fails to spread when it has been tried for seventy-five years and all are free to adopt it, the strong probability is that it has serious defects inherent in it.

Sec. 12. Defective theory of profit-sharing. It is usually better to make wages depend on the worker's efficiency rather than on the profits of the whole business. The strongest motive to efficiency is present when reward is connected immediately and directly with effort, not with some result only slightly under the worker's control. Any change in the amount of profits is only partially and indirectly related to increased effort of the worker. The "profits" may be nothing, tho all the manual workers may be exerting themselves to the utmost. The wage bill is but one of the groups of costs. Profits are the net result of many influences. Chief among these is the skill in planning and conducting the business. This function of management is either performed by the same person that is carrying the financial risk, or by some salaried employee selected by him. It is this management function the reward of which should, in theory, be made to vary with the amount of profits; and in fact such an arrangement (managerial profit-sharing, so to speak) is undoubtedly in operation in thousands of cases, but is not included in the usual conception of profit-sharing. Many salaried managers are in receipt of a share of profits and are gradually acquiring an interest in partnerships or a larger share of ownership in the enterprise for which they work. But ordinary profit-sharing is not in accord with the general trend toward the centralization of responsibility in the hands of competent managers, ensuring to the worker a definite amount in advance, as high as conditions make possible. The system of premiums, or bonus payments, for output, where it can be safeguarded against abuses, gives in most cases better results and is rapidly spreading. It is sounder in conception and works better in practice as a method of remuneration for most of the workers.

Sec. 13. Purpose of producers' cooeperation. Since the early part of the nineteenth century many well-wishers of humanity have cherished high hopes that the whole wage system might gradually be replaced by the plan of producers' cooeperation among workingmen. Producers' cooeperation is the union of workers in a self-employing group, performing for themselves the enterpriser's function. The workers hope to get what seems to them to be a needless drain of profits into the pockets of the employer and unnecessarily high salaries to managers. To do this they must perform the enterpriser's function as to investment and risk. Collectively or through their representatives they must undertake to furnish capital and management as well as hand-work. The capital may be supplied either by the members, individually or collectively, or may be borrowed from outsiders, who are thus merely passive investors. Usually the return to capital invested by members is limited to 5 or 6 per cent, so that this part of the capital likewise is treated as a passive investment, and all the real variable profits are distributed to the members as wages. The hope has been as in profit-sharing to increase the amount of profits through the stimulus the plan might give to the workers and by saving in friction, disputes, and strikes.

Sec. 14. Limited success of the plan. Practically the plan has been made to work in a comparatively few simple industries. The most notable example of successful cooeperation in America was in the cooper-shops in Minneapolis. There were few and uniform materials, patterns, and qualities of product, few machines and much hand-labor, simple well-known processes, a simple problem of costs, a sure local market. After more than thirty years the main shop was still in operation, but with a membership of the older men and with no growth, A number of the less skilled workers receive ordinary wages. In America a few of the productive cooeperative companies are found operating small factories. In England, there have been numerous successful societies, but all in small enterprises, mostly connected with agriculture. Within the whole field of industry, this method of organization makes little if any progress. Most experiments have failed and the successful ones have become or are tending to become ordinary stock companies with most of the stock in the hands of a few men. Therefore, whether losing or making money, they nearly all cease to exist as cooeperative enterprises. This result has disappointed the hopes and prophecies of many well-wishers of the working classes.

Sec. 15. Its main difficulty. The main difficulty in producers' cooeperation is to get and retain managerial ability of a high order. Failure to do this results in inability to maintain and keep in repair the equipment and to pay the ordinary returns to the passive investment, and financial failure follows. There is no touchstone for business talent, no way of selecting it with any certainty in advance of trial. This selection is made hard in cooeperative shops by jealousies and rivalries, and by politics among the workmen. A man selected by his fellows finds it difficult to enforce discipline. In cooeperation there is occasionally developed good business ability that might have remained dormant under the wage system; some work-men showing unusual capacity cease to be handicraftsmen. But the unwillingness on the part of the workers to pay high salaries results in the loss of able managers. Having demonstrated their ability, the leaders go to competing establishments where their function is not in such bad repute, and where they are given higher salaries, or they go into business independently, being able easily to get the needed backing from passive capitalists.

Cooeperative schemes thus suffer from the workers' inability to appreciate the functions of enterprise and management. Most men make a very imperfect analysis of the productive process. They see that a large part of the product does not go to the workmen; they see the gross amount going to the enterpriser, and they ignore the fact that this contains the cost of materials, interest on capital, and incidental expenses. Further, they fail to see that the investment function is an essential one. The theory of exploitation, as explaining profits, is very commonly held in a more or less vague way by work-men. With a body of intelligent and thoroughly honest work-men, keenly alive to the truth, the dangers, and the risks of the enterprise, cooeperation would be possible in many industries where now it is not. Producers' cooeperative schemes usually stumble into unsuspected pitfalls. When a heedless and over-confident army ventures into an enemy's country without a knowledge of its geography, without a map, and without leaders that have been tested on the field of battle, the result can easily be foreseen.

The cooeperative principle has been embodied much more successfully and on a larger scale in America in the form of producers' selling organizations or of consumers' cooeperative stores. As, however, both of these forms of organization have been developed in America more largely by farmers than by wageworkers, the discussion of them may better be undertaken in connection with problems of rural organization rather than with those of labor.

[Footnote 1: See Vol. 1, pp. 227, 318, 322; also above, ch. 2, sec. 14.]

[Footnote 2: See e.g., Vol. 1, p. 329, on selection of managed and of managers.]

[Footnote 3: See below, ch. 20, sec. 6.]



CHAPTER 20

ORGANIZED LABOR

Sec. 1. Changing relations between employers and wage-workers. Sec. 2. Need of common action among wage-workers. Sec. 3. Functions of labor organizations. Sec. 4. Types of labor organizations. Sec. 5. Statistics of labor organizations. Sec. 6. Collective bargaining. Sec. 7. Limitation of competition among workers. Sec. 8. Strikes in labor disputes. Sec. 9. Frequency and causes of strikes. Sec. 10. Picketing and the boycott. Sec. 11. Effects of organization upon general wages. Sec. 12. Competitive aspect of organization and particular wages. Sec. 13. Monopolistic aspect of organization and particular wages. Sec. 14. Open vs. closed shop. Sec.15. Political and economic considerations. Sec.16. The public's view of unions. Sec. 17. Future role of organization.

Sec. 1. Changing relations between employers and wage-workers. The "organization of labor," or the "labor movement," so striking a feature of the world to-day, is of comparatively recent origin. It did not begin and advance pari passu with the beginning and early growth of the wage-system as above briefly described.[1] In anything like its modern form the labor movement dates from the early years of the eighteenth century. Much of the largest part of its history in all countries, excepting England, is after 1860. Why was organization among the workers so long delayed after wage-payment became common, and why when it once appeared did it spread so rapidly in some directions, and why is it still limited in the main to certain fields of industry? These three questions are but one question in three forms and to answer one fully would be to answer all.

The modern trade union appeared in England shortly before the industrial revolution,[2] and has extended as fast and as far as the same stage of industrial development has been attained in other countries. The effort of wage workers to organize themselves appears everywhere to result from the separation of the economic and personal interests of employers and workmen. As the control of industry became more concentrated in larger units with the advent of power machinery, the feeling of economic unity among the different ranks of industry was further weakened. The average workman had less opportunity of becoming a master, an employer. In the days of the old hand industry, master, journeyman, and apprentice worked side by side at the same bench. Almost every apprentice might hope to become some time a master, and many a one did so. To-day most wage-workers in large establishments have no hope of rising out of their positions. The mere largeness of an establishment forbids also the personal acquaintance of employer and workman. As a result of these changes, the workmen become more "class-conscious" of their position as wage-workers and the employers in many establishments take the attitude of buyers of labor as a mere ware. When the employer then feels the pressure of competition he is more likely to force the lowest wage that is possible and to compel the workers to accept less favorable conditions than if he were in more personal relations with them. Where the immediate direction of an establishment is intrusted to paid managers who are responsible to stockholders, the managers' success is judged almost exclusively by the dividends they succeed in earning. Hence they are under stronger and more persistent temptation than are active owners to drive hard bargains with their employees. Many examples might be found where managers and resident directors have wished to pursue a more liberal policy than absentee shareholders would permit.

Sec. 2. Need of common action among wage-workers. These same industrial changes caused employers, even earlier than it did employees, to have something of a "class-conscious" feeling, which tempered the spirit of their mutual competition, especially in bidding for the services of workers. The smaller the number of employers the easier it is by an understanding to suppress competition on their side. If there is only one factory of a kind in a town the employer is able at times to drive a harder bargain with his employees. Especially in times of industrial depression is a change of employment difficult for the laborer, involving for him much trouble and loss of time and money in moving. But it is possible to exaggerate the degree to which competition among employers of labor is weakened to-day. In the long run and at many points competition must be felt in all such cases. The notoriously unfair employer will find his workmen drifting away, his working-force reduced in number and quality at times of greatest need, and his evil reputation going abroad among workmen. A better realization of this fact has led many employers to pursue a farther-sighted policy that fosters a better understanding and a kindlier feeling on both sides of the labor-contract.

Another effect of the growing size of business units is to give the workers less personal acquaintance with each other. When they are unorganized they have less unity, common opinion, and power than the workers in the old-fashioned shop with its close personal acquaintance and ready interchange of views. In the wilderness of a great modern factory a worker may be unknown in name and interests to the man touching elbows with him. Moreover, in America, differences in nationality and in speech among immigrant workers often effectively prevent a common feeling of their interests and assertion of them. There is an analogy between these conditions and the political conditions that early led simple democracies to give way to representative governments. So long as a community is small and men know each other personally, popular government may exist without complex machinery, but when numbers become larger, public opinion can be concentrated and made effective only by delegating the functions to elected representatives.

Sec. 3. Functions of labor organizations. Out of these conditions have grown the various kinds of labor organizations. Their first object is to maintain and increase wages. Closely connected with this is the remedying of various abuses in respect to methods of payment, measurement of the output, and conditions of work. Almost cooerdinate with the aim of higher wages of recent years has been that of the shorter work day. Labor leaders have frequently asserted when the two demands have been made together, that a reduction of hours is the more desirable. Better conditions of safety and sanitation in their work were not the first thought of laborers when they organized. As a result of habit and ignorance (widely prevalent at that time) they were remarkably unconcerned about this matter. Reforms in this direction at the outset had to come largely from sympathetic observers, the "philanthropists," often described as sentimentalists. But the modern, more enlightened, labor movement has better ideals and policies in respect to the safety, sanitation, and decency of the working places.

Labor organizations have also secondary objects of very great importance. They are nearly always in some measure mutual-benefit associations, and provide in varying degrees insurance against accident, sickness, death, or lack of employment. All unions in a measure serve their members as employment bureaus, and some make this am important feature. Through trade-papers, correspondence, traveling members, and in meetings, information is exchanged regarding conditions of employment in various parts of the country. Labor organizations by means of their discussions and through their special periodicals are a strong educational force in matters political and economic. The local labor organizations often come to be the center of the social activities and interests of many of their members, and even of all the members of their families. The organizations thus serve the functions of social clubs, of literary societies, and of civic centers for their members.

Sec. 4. Types of labor organizations. Among the many organizations of wage-earners three main types may be distinguished: the labor union, the trade union, and the industrial union, tho often they are all spoken of as trade unions without distinction. A labor union admits all classes of wage-earners and even business and professional men into the same local chapter. The "Knights of Labor" is the most notable example that America has seen of this type. The national organization was composed of local chapters, to membership in which every one was eligible excepting bankers, lawyers, gamblers, and saloon keepers. Organized as a single local chapter in 1869 it grew very rapidly until it attained its maximum membership of 600,000 in 1886. From this point it rapidly declined in membership, and since 1900, altho its organization is still maintained, has been of very little influence.

A trade union is an organization of wage-earners in the same handicraft or occupation. Unions exist among workers in all the old distinctive handicrafts, such as the printers, stone cutters, cigar makers, carpenters and in many other groups such as musicians and retail clerks. The local chapters in many cases have been long united in national unions (often international, including the United States and Canada).

An industrial union is one that seeks to unite all workers employed in the same class of establishments regardless of their craft or the kind of work they do. The most notable examples are the United Mine Workers, the Brewery Workers, and the Industrial Workers of the World.

In 1881 a number of national trade unions united for certain purposes, to form the American Federation of Labor with a membership of about a quarter million workers, which has steadily increased since that date. The American Federation of Labor now includes also some important unions of the industrial type. Several strong national trade unions (the most important being the brotherhoods of railroad employees) are not affiliated with the American Federation of Labor.

Sec. 5. Statistics of labor organization. The ratio of organized workers to the population is estimated (figures for 1910) to be highest in the United Kingdom, being nearly 7 per cent; it is next highest in the German Empire, being nearly 6 per cent; whereas, in the United States, it is but 2.3 per cent. This difference is largely due to the much greater relative importance of agriculture in the United States.

The total membership of trade unions in the United States and Canada is estimated to have been in 1910 about 2,200,000, of which only about 100,000 were in Canada. This was 5.5 per cent of all persons (38,130,000) gainfully employed, or 6.8 per cent of male employees, and 9 per cent of female employees. Organization was very weak (less than 1 per cent) among the workers in a group of industries occupying nearly one-half of all workers, including agriculture, the hand trades, oil and natural gas, salt, and rubber factories. Organization was not of large extent (1 to 10 per cent) in other groups of industries occupying more than one fourth of all workers, including those engaged in producing quarried stone, food stuffs, iron and steel, metal, paper and pulp, stationary engineers, in public, professional, and domestic service, and in clerical work. Organization was of much greater strength, including 10 per cent or more of the workers, in the remaining industries and occupations.

If deduction be made of the employing and salaried classes, about 7.7 per cent of all persons occupied were organized. If, further, deduction be made of agricultural, clerical, publicly employed, commercial and domestic workers, about 16 per cent of the remaining 13,760,000 persons are organized (of women 3.7 per cent). Among the occupations most highly organized are those of railway conductors (87 per cent) and engineers (74 per cent). In the building trades about 16 per cent are organized, of granite cutters 69 per cent, masons 39 per cent, plasterers 32 per cent, carpenters 21 per cent, and painters 17 per cent. Similar striking differences appear among the occupations in the printing industry; of stereotypers 90 per cent are organized and of compositors only 35 per cent. These figures point to inherent differences in the conditions favoring organization. Even in the same craft a high degree of organization may be found in the cities and little or none in the smaller towns (e.g., in the case of the printing and building trades in general).[3]

Sec. 6. Collective bargaining. The fundamental policy of trade unions is the substitution, for the individual wage bargain, of collective bargaining between the delegated representatives of the working men and the employer, or group of employers, or their representatives. The wage-earners bargaining collectively may be those of a single establishment, or of a group of establishments in the same locality, or of a wider territory even national in extent. Accordingly, they are represented in the negotiations by trade-union officials with narrower or wider jurisdiction. Employers in some cases had tacit understandings with each other before laborers were organized. But in many cases the individual employer was at a marked disadvantage after the organization of his employees. The result has been the rapid spread of employers' organizations, so that in industries where laborers are highly organized, two-sided collective bargaining has become more and more usual.

A large part of the effort of trade unions is directed toward ensuring the use of collective bargaining. This is the purpose of many of their demands, even of some that hardly appear to have any such consideration. Collective bargaining practically necessitates the use of "the standard rate," since only with reference to some standard rate, a market price for labor, is it possible for a wage contract to be made by labor officials for a group of men. The standard rate may be a piece price or a time price, and in many cases the unions strive to secure the latter as more convenient for their purposes. The standard time rate usually is but a minimum and many of the more skilful workers receive wages above the minimum. But the standard minimum tends to become also the maximum in many cases, the more so when the union has succeeded in enforcing a pretty high standard rate.

Sec. 7. Limitation of competition among workers. In order that the representatives of organized laborers may act effectively in collective bargaining the first condition necessary is that a large proportion, if not all, of the workers of the trade in the establishments concerned shall be organized. A common sense of wrong is one of the strongest motives to bring workers together, and has prompted the origin of many a local chapter. Then constant and strenuous efforts are made to bring workers into the organized ranks. Experienced organizers knowing all the arts of persuasion devote their whole time to this task, being paid regular salaries. When friendly argument fails, threats may be used and sometimes personal violence. The public opinion and class feeling fostered among members of an organization in times of difficulties are analogous to the sense of patriotism in the nation at large and at times may displace it in the hearts of organized laborers as is seen in opposition to the militia and to the maintenance of order in times of strikes. The most effective of all peaceful methods if petty persecution rising at times to social ostracism. The individual who declines to enter the union is denounced as a traitor to his fellow workers and is made to feel their scorn. The use of the union card to be carried by every member to show whether he is in good standing is an effective way of enforcing these measures. Finally, where all these measures fail, pressure may be brought upon the employer to get him to force unwilling workers into the union.[4]

Further to give control over those working in a trade and to reduce competition among workers, unions often limit the number of apprentices and determine who shall have the privilege of learning the trade. By a variety of regulations they limit the output and in many cases (tho less frequently now) have opposed the use of labor-saving machinery. Further to enforce these policies they seek to have each special kind of work controlled by a special union. This gives rise to disputes between rival unions and causes annoyance and loss to the workers themselves, to the employers, and to the general public.

Sec. 8. Strikes in labor disputes. A strike is a concerted stopping of work by a group of employees to enforce a demand upon the employer. A lockout is an employer's closing of his shop because of a disagreement with his employees. The strike is, in its direct and indirect, immediate and ultimate, effects the most important weapon of the organized wage-earners in their relations with their employers. To newly organized laborers the union appeals mainly as an instrument for striking, for threatening the employer, or for making him suffer to compel him to accede to their demands. The effectiveness of a strike lies in the loss it threatens or occasions in the stopping of machinery, the ruin of materials, the loss of custom, and the failure to complete contracts that have been undertaken.

The employers will often, to break a strike, pay to others for a time more than the current rate of wages. The success of the strikers being dependent on their ability to keep the employer from filling their places, their energies are bent upon that end. The losses that strikes cause to workers in stoppage of wages, to employers and investors in destruction of plant and in suspension of profits, and to the public in the interruption of business, aggregate an enormous sum. The direct losses to employers and strikers in the 20 years between 1881 and 1900 have been estimated to have been nearly $500,000,000, a large sum, but amounting to less than 1 per cent of the wage-earners' incomes. It is, however, impossible to estimate at all exactly losses that in many cases are indirect and intangible. The strikers are concerned in each case not with the balance of total losses and total gains to society as a whole, but with the net gain that they expect to accrue in the long run to themselves. Viewed in this way it is true that there are various indirect benefits in strikes that are not easily calculable, particularly the advances of wages made by employers to avoid strikes which they know will otherwise occur. In regard to the wisdom of any contemplated strike, opinion is always somewhat divided, as it is in regard to the value of strikes in general.

Sec. 9. Frequency and causes of strikes. Strikes were relatively decreasing in number from 1880 to 1900, but from 1901 to 1905 the annual average was more than twice as large as in the preceding decade. On the whole, strikes have been more numerous in periods of business prosperity when there was a better chance to get concessions from the employers. But they occur also in the periods following crises, when the workers seek to minimize cuts in wages and to prevent the depression of working conditions. More broadly viewed, strikes appear to accompany readjustments to dynamic conditions. As wages as a rule rise more slowly than general prices,[5] it was to be expected that the period since 1900, in which the general price level was rising at the rate of about 3 per cent a year, should have been marked by increasing resort to strikes.

The immediate causes of strikes have been changing in relative importance. In 1881, at the time of the very rapid organization of unions, over 71 per cent of all strikes were directly connected with wage demands (61 per cent for increase and 10 per cent against reduction). But in 1905 the total for these causes was only 37 per cent, whereas the proportion of strikes for reduction of hours nearly doubled (from 3 to 5 per cent) and the proportion of those concerning recognition of unions and union rules increased fivefold (from 6 to 31 per cent). Ultimately nearly every demand of the laborers is related to the question of wages; but these figures show that when organization is new this relationship is more immediate, whereas later more effort is directed toward securing the stronger strategic position that comes with recognition of the union.

Sec. 10. Picketing and the boycott. Picketing by strikers or their friends is intercepting and accosting all persons approaching or leaving the place of work, to inform them of conditions and to dissuade them from working there. When peaceable means fail, often there is recourse to violence both against the employer and his property and against nonstriking workers. Indeed, many persons declare that peaceable picketing is impossible, and it surely is difficult to attain in view of the temptations of human nature under the circumstances.

Almost always connected with a strike is the practice of the boycott, which is a combination of wage-earners to cut off an employer (or group of employers) from business dealings. The boycott is found in varying forms and degrees, broadly distinguished as simple and compound-boycott. In simple boycott only persons directly interested in the trade dispute refuse to deal with the boycotted person. The question arises as to who are to be deemed directly interested, whether it includes only the actual strikers in a particular establishment, or whether it includes organized workers in sympathy with them. The latter case is presented when an "unfair" list is published in labor journals. It seems that only the former case is a really simple boycott. The use of the simple boycott, the refusal of a person, or even of a conspiring group of persons, to deal with a person with whom they have an industrial dispute, appears to be a part of the elementary rights of personal liberty. Beyond that point the boycott is compound in varying degrees.[6] It is the compound form which is usually referred to in discussion and in court decisions on the subject. It is the compound boycott that has been described as "a combination to harm one person by coercing others to harm him." The compound boycott, as experience shows, has moral limits as well as legal limits. It is doubtful whether the boycott can be extended at all beyond the first degree of personal relations without becoming antisocial, whether it is the weapon of organized workers or of organized wealth. The endless-chain boycott, a measure of excommunication without limit, pronounced against an offending employer, non-union workers, and every one in any way befriending them, is an effort to drag every one else into a dispute that is primarily a private matter.

Sec. 11. Effects of organization upon general wages. The crucial economic problem in connection with trade unions is not as to their methods (that being rather a political problem) but as to their effect upon wages. There must be distinguished two questions: first, as to their effect upon the general level of wages; and next, as to their effect in raising the wages of the organized laborers alone. As to the first, the thought has sometimes been expressed by sympathetic social students outside of trade-union circles that but for the organization of labor wages in America would be no higher than they were in 1850. This seems to be assumed in much of the argument of labor leaders, for they speak as if all wages, but for trade unions, would be at the starvation level; and they credit everything above that level to the work of the union.[7] This claim is peculiarly effective in America, where wages are and always have been relatively high. But proof of the claim is lacking. As we have seen, even now fewer than 1 in 16 of all gainfully employed, and fewer than 1 in 12 of those working for contractual wages are organized. On no principle of value could the mere organization of one-twelfth of the wage-earners, without permanently withdrawing them from the labor market, explain the relatively high wages of the other eleven-twelfths. In many lines where labor is not organized, as in teaching, clerical, professional, domestic, and agricultural services, wages have risen as much or even more than in most of the organized trades. The underlying economic forces determining the general level of labor-incomes in a country are much more fundamental in nature than labor unions or protective tariffs.[8] The trade-union authority already cited seems in another passage to admit a view not essentially unlike that just expressed when he says: "Capital is increasing faster than population.... It seems therefore merely in obedience to natural laws that wages should rise."

The only reasons ever suggested for thinking that the organization of one-twelfth (or any larger proportion of the wage-earners) could in any general way raise the labor-incomes of those remaining unorganized are: first, that organized labor sometimes leads the way in securing favorable legislation; and, secondly, that if organized workers get higher wages this sets a standard which it is easier for the unorganized then to attain. Both of these suggestions may have some little validity in special cases, affecting slightly a small proportion of the unorganized workers, but neither touches fundamental causes of general high wages. Whereas, it is clear that when the unorganized laborers constitute the main body of consumers for the products of organized labor (and this unquestionably is in large measure the case) any increase in wages that can be secured through organization by a portion of the workers must, in part, be subtracted from the "real" incomes of the unorganized workers. The employer is middleman, not to a great degree the ultimate consumer of labor.[9] Some part, it is true, of the higher wage might be taken from profits or from wealth-incomes, but this would still leave the unorganized workers the losers.

Sec. 12. Competitive aspect of organization and particular wages. A different question is presented as regards the influence of organization upon particular wages, and primarily upon the wages of organized labor. The trade-union authority before cited says, "Where there are no unions wages should be lower. This is exactly the case." And he quotes: "Wherever we find union principles ignored, a low rate of wages prevails and the reverse where organization is perfect." But he later explains in part this difference: "The union men are the best workmen and often employers pay a man more than union wages. This is not surprising as no man can be a union carpenter unless he be in good health, have worked a certain number of years at his trade, be a good workman, of steady habits and good moral character." If this be true, as doubtless it is to some degree in many trades and places, it is in accordance with competitive principles that, as the elite of the trade, the organized laborers should get higher wages than those outside the unions. Moreover, the unions exist mainly in the more populous places where costs of living as well as wages range higher than in the small towns and in the rural districts. A comparison merely of wages in money in such cases is misleading as to the conditions of real income. Further, a higher standard of output prevails in the cities where organization is greatest, and older men and the less efficient that are unable to "keep up the pace" drift away into unorganized shops or to villages where no standard union rate is in force. So far as unions help to develop the intelligence and promote the sobriety and efficiency of their members, they are a positive economic force making for higher wages. The book before quoted expresses, somewhat vaguely, an opinion in accord with these facts when it says: "It is an error to think that the trade union seeks to determine the rate of wages. It cannot do that. It can do no more than affect them." And so, with organization as well as without, the wages of individuals and of classes of laborers are determined by the general principles of price as applied to their services. Where neither the employer has a monopoly in his business nor the organized laborers have a monopoly of the labor supply, there is two-sided competition in the labor bargain, and organization may help to raise particular wages inasmuch as it acts in the competitive ways above mentioned and as it helps to restore to the laborers a truer equality of competition.

Sec. 13. Monopolistic aspect of organization and particular wages. The action of organized labor is not, however, limited to the competitive field, above discussed. Wages in particular industries may, by the action of trade unions be raised and maintained above a true competitive rate. This of course can be done only in accordance with the principles of the service-value to the consumer and of service-price in the employment-market. The supply of labor is in a variety of ways artificially limited by the efforts of the unions. It may be done temporarily by striking when a failure to fill orders will cause the employer exceptional loss. Violence in strikes and boycotts is often the desperate attempt to create and assert a measure of monopoly power where of itself it does not exist, i.e., where other workers stand ready to take the jobs at the prevailing rates of wages. Monopoly is created if apprentices are limited to fewer than in the long run would be attracted into the trade by the prevailing wages. It is created if the unions artificially limit output to less than is consistent with the health of the worker. Monopoly is created if unions strong enough to keep "scabs" from getting work, fix their dues high or put other obstacles in the way of increasing the membership. Probably the most striking cases of high wages for organized labor are of this kind. The element of labor-monopoly evidently is mingled in all degrees from the slightest to a very great amount, in particular economic situations.

Sec. 14. Open vs. closed shop. The question of labor monopoly is involved in the very crucial question of the closed vs. the open shop. A closed shop (or union shop) is a shop in which no non-union men may be employed, even at union wages. Its existence is evidence that the union is strong enough to compel the employer to act on this principle and thus virtually to force all his employees into the union. The refusal of a demand for the closed shop is often the ground for a strike. Where this is so unions usually assert that the closed shop is essential to the existence of the union. If union and non-union men work side by side there are many ways in which the employer is able to discriminate so as gradually to break down the union. If business slackens, the union man may be the first to be discharged; if any preference is given it is to the non-union man. While this may be true, it would seem, on the other hand, that an unmodified closed shop, with the conditions of membership in the control of the union, creates a distinct monopoly of labor leaving the employer helpless in any wage dispute and enabling the union to enforce its every demand regardless of the competitive conditions of the labor-market for that class of services.

Sec. 15. Political and economic considerations. The question here takes on a broad aspect, Is the closed shop, and are the other policies of trade unions, morally right; and ought they to be legally sanctioned? The answer to such questions is not for the economist alone to give. The questions involve other than economic considerations. They involve moral and political considerations—not merely existing formal law, but the fundamental issue of personal liberty and of interference with the liberty of some citizens by another group acting without political authority. For example, if a workman is unable to earn the standard rate[10] and is not permitted to take less, he is forced to move to a place where there is no union, or is forced out of the trade entirely. In the latter case he probably is compelled to take a lower wage than he could get in his regular occupation. Likewise, this change artificially increases the pressure of competition and reduces the wages of others in the occupation to which he turns. So in the case of persons prevented from becoming apprentices in a trade, or kept from taking work by threats, or by the dread of boycott, or by the fear of violence, in any degree however slight, there is present an element of personal coercion by the organized laborers. This is the price others are made to pay for a favorable effect on the wages of the organized laborers. Now the strictly economic question concerns merely the part as to the effects upon wages, and the economist (as such) is going outside of his special field when he pronounces on the moral rectitude (and the desirability in law) of such acts and policies. One who fully shares the feelings of the organized workers will believe that the winning of a strike or the general improvement of the strikers' condition is so important that it outweighs the evils to other individuals and to society as a whole. Indeed, to one in that state of mind the evils appear very small or nonexistent. The economist can only issue the warning that the commonest illusion he encounters is the belief of each class—commercial, banking, manufacturing, wage-earning—that what is for its particular interest is, in a peculiar manner, for the general interest, so much as to justify favoring legislation or special exemption from the general law, or even sheer lawlessness.

Sec. 16. The public's view of unions. We may, however, observe the view of the onlooker striving to be impartial. The attitude of the public in labor disputes, and particularly in regard to the closed shop, is a vacillating one. The general public sympathizes in large measure with the unions in their efforts up to a more or less uncertain point; but the public does not like to see organized labor with the power to dictate terms absolutely to the employers any more than it likes to see employers crush the union. The unions are effective in varying degrees in strengthening the bargaining power of the workers, and accordingly the results vary not merely in degree but in kind. The public wishes to see "fair play," and up to a certain point the union is a device to get fair play. In truth, what is in the public's thought, somewhat vaguely, is approval of unions so far as they go to establish a real equality in competitive bargaining with the employers, but disapproval where the power of the union gets greater and becomes monopolistic. It is at this point that organized labor loses the sympathy of most of "the general public" outside of unions. When the union tries to force a higher wage than the market will warrant, when it strives not to establish but to defeat competition, the public condemns. It sees, tho not quite clearly, that such action makes an unstable equilibrium of wages which tempts to constant friction and discord with employers and with unorganized laborers. It sees also that if the unions force a wage higher than a fair and open market affords, this is rarely done at the expense of the employer; that in the long run it is at the expense of the purchasing public itself, including the unprivileged workmen.[11]

In accordance with these facts and opinions there has developed, at least in one respect, a pretty definite conviction on the part of the public regarding the closed shop, namely: the closed shop should go only with the open union. A union under the closed shop policy is exercising a quasi-public function, that of controlling the industrial action of private citizens against their will. The union therefore, in this view, must cease to be a purely private, voluntary organization, and become in some respects subject to public regulations as to its internal rules and administration. This view, however, is very unacceptable to the leaders of organized labor in America, and there the question now stands.

Sec. 17. Future role of organization. In the light of the principles of wages it appears that organization most easily gains results, and the most stable results, when wages are below or near the competitive rate. An earnest effort on the part of the workers is necessary for them to get the share that true competition would accord them, but the attempt to force wages beyond that point must be the occasion of increasing friction. With so modest an ideal however, as the true competitive wage, organized laborers and their leaders cannot be expected always to be content.

Aside from its effects upon the wage-bargain, unionism finds its greatest justification is in its unspectacular fraternal, mutual-benefit, and educational functions. The chief forces favorable in the long run to wages that can be affected by organization are domestic peace, order, and security to wealth; honesty and good faith between man and master, in law-maker and in judge; efficiency and intelligence of the workers; and far-sighted social legislation. Some of these contribute to greater productiveness, others to a fairer distribution. In all these ways organized laborers have made valuable contributions, unfortunately neutralized in many cases by a narrow class outlook. Organized labor is here to stay for a long time to come, and as the elite of the wage-earning class it should, and probably will, be an increasing force for political betterment and for social welfare in the republic.

[Footnote 1: See ch. 19, secs. 1-3.]

[Footnote 2: See Vol. I, p. 459.]

[Footnote 3: See Quarterly Journal of Economics, May, 1916, article by L. Wolman.]

[Footnote 4: See below, sec. 14, on the closed shop.]

[Footnote 5: See Vol I, pp. 223-224, and above, ch. 6, sec. 12 and ch. 10, sec. 7.]

[Footnote 6: The "unfair list" is usually given as a form distinct from either the simple or compound forms. The "fair list" published either by labor journals or by a consumer's league is not declared to be a boycott.]

[Footnote 7: In a book by an English trade-unionist, Trant, reprinted and circulated by the American Federation of Labor as representing its theory and claims, all the advances that have been made in wages are said to be due to the trade-unions.]

[Footnote 8: See Vol. I, pp. 227, 439, 466, 467, 504-507; and above, ch. 14, sec. 8.]

[Footnote 9: See Vol. I, pp. 217, 222-223, 352, 356.]

[Footnote 10: See above, sec 12.]

[Footnote 11: We are expressing here the general opinion, not pronouncing a final justification of competition as a rule of conduct. On this something will be said later, in ch. 31.]



CHAPTER 21

PUBLIC REGULATION OF HOURS AND WAGES

Sec. 1. Spread of the shorter working day. Sec. 2. The shorter day and the lump of labor notion. Sec. 3. Fewer hours and greater efficiency. Sec. 4. Child-labor. Sec. 5. Child-labor legislation. Sec. 6. Limitation of the working day for women. Sec. 7. Limitation of the working day for men. Sec. 8. Broader aspects of tins legislation. Sec. 9. Plan of the minimum wage. Sec. 10. Some problems of the minimum wage. Sec. 11. Mediation and voluntary arbitration. Sec. 12. Compulsory arbitration. Sec. 13. Organized labor's attitude, toward labor legislation. Sec. 14. Organized labor's opposition to compulsory arbitration. Sec. 15. The public and labor legislation. Sec.16. The public and compulsory arbitration.

Sec. 1. Spread of the shorter working day. Since about 1880 a shorter working day has been one of the prime objects of organized labor in America. Notable progress was early made in some trades, reducing hours from 11 to 10, or from 10 to 9, and in a few cases from 9 to 8. In the building trades in the cities, especially, the eight-hour day has come to be well nigh the rule. In 1912 it was estimated[1] that 1,847,000 wage earners were working in the United States on the eight-hour basis; of these 475,000 were public employees. A large proportion of the remainder were women and children whose hours were limited by law, or were men working in the same establishments with them. Since that date the eight-hour day has been more widely adopted both through private action in many establishments and by legislation. The year 1915 witnessed an especially rapid spread of the eight-hour day.

Sec. 2. The shorter day and the lump of labor notion. The shorter working day is advocated by most workers in the belief that it will result not in less pay per day, but in even greater pay than the longer day, even if the output should be decreased. This view is connected with the lump of labor notion.[2] It assumes that men will work no faster in a shorter day, and that there is so much work to be done regardless of the rate of wages; and concludes that the shorter day will reduce the amount of labor for sale and cause wages to rise. To the extent, however, that laborers, as consumers, mutually buy each other's labor, evidently this loss due to curtailing production must fall upon the laborers as a class. The workers nearly always call for the same daily pay for a shorter day, which means a higher wage per hour. If wages per hour increase less than enough to make up for the fewer hours,[3] the purchasing power of the workers must be reduced. If the output per hour is increased proportionally to the pay per hour, the existing wages equilibrium would not be disturbed. But if the output increases not at all or in less than the proportion of the increase in pay, there is an inevitable disturbance of the wage equilibrium. In a competitive industry this would compel a speedy readjustment of wages downward. If a certain group, or large number, of workers were to begin turning out only 80 per cent as large a product as they did before while getting the same money wage, the costs per unit would be thereby increased. Prices must rise or many of the establishments must close, and then prices would rise as a result. This must throw some of the workmen out of employment and create a new bargaining situation for wages. If the general eight-hour day were applied to every industry and to all wage workers at once, then all workers and all employers in the industry would be in a like situation. But at once there must occur changes of consumers' choices in a great number of ways. If there are one fifth fewer goods evidently at least one fifth of the consumers must go without. This would largely be the wage workers. The things of which wage labor makes up a large part of the costs will rise in price relative to the things of which self-employed labor and of which materials and machinery make up a relatively larger part. This must compel a reduction of the demand for the products of wage labor relative to other things, and be reflected to labor in a lower wage. This reduction would not necessarily be just in proportion to the reduced output (that is, say, 20 per cent if from 10 to 8 hours, or 11 per cent, if from 9 to 8 hours). It might even be more, but probably would be somewhat less. In any case, both the money wages and the real wages of laborers, either in the particular trade or generally, must be reduced by a general reduction of hours that results in a decreased output. In such cases, even when the workmen by a strike or general movement secured the same wage scale for a day of fewer hours (a higher wage per hour), they would be unable to hold it excepting where they had monopolistic control of the trade.

In a period of rising prices due to an increasing supply of gold, the readjustment of wages (per hour) away from an artificially high level down to a competitive rate goes steadily on. Even when money wages remain the same their purchasing power declines at such times, and this serves soon to bring the high money wages into accord with the lower value of the services.[4]

Sec. 3. Fewer hours and greater efficiency. Quite contrary to the foregoing view is the claim that in the shorter day the rate of work is so increased that the output is at least as large as in the longer day, or even larger. A faster working pace is possible with a shorter day, particularly in those operations calling for physical or mental dexterity. This view is less attractive to the workers than the preceding one, but is more acceptable to the employers and to the public. The change undoubtedly has resulted in many cases in the manner indicated, and could be made to result so in many other cases by applying the methods of scientific management. But it is a change which cannot be repeated indefinitely and under all conditions with like favorable results. Whether in any particular case it can be, depends in part on the length of the working day at the start. Such an increase in output might occur in a change from exhausting hours, as from 12 to 10, and again from 10 to 9, and yet not be possible in a change from 9 to 8. Moreover, the speeding up of the workers beyond a certain point may have had physiological effects outweighing the benefit from shorter hours. It is now said that with the increase of automatic machinery there are more and more workmen who much of the time have merely to watch the machine-tool run, and occasionally adjust the material. There has, however, been collected a notable body of evidence to show that, in many industries and in different establishments using much machinery, a reduction of hours to a number as few as eight has been followed by the increase of the output per worker, or by improvement in the quality of work, or by improvement in the management, resulting in a reduction of the cost of production. This is often sufficient, or more than sufficient, to compensate for the shorter time. Wages have remained as high as, or higher than, before, and employment has been more regular. So far as this result is due to the individual worker, it is explained by the same evidence referred to below[5] as bearing upon the health of the worker. This evidence tends to prove that with longer periods of rest and recreation the worker lives in a physical and mental condition fitting him far better for his work, and for continuing his working life.

Sec. 5. Child-labor. All the foregoing arguments are weighed in terms of private incomes and of the value of the products, whereas the main considerations that have of late been influencing legislation and judicial decision in favor of shorter hours have been those of public welfare. The legal limitation of working hours is being treated primarily as a health measure, into the judgment of which is more and more entering a broader conception of the happiness, morality, and opportunities for good citizenship for the worker and his family.

In agricultural conditions, such as have prevailed generally in America, there is little need of limiting the hours of work and the age at which children may begin to work. The barefoot boy trudging over clover fields to carry water to the harvesters may be the happier, healthier, and better for his work. Child-labor in agriculture has never become a social "problem" so long as the children work with their own parents at their own homes; but the labor of children for wages, especially in gangs on large farms (as in beet cultivation and cranberry picking) or in canning factories, has exhibited evils as pronounced as any in urban manufacturing conditions.

The evil of forcing children into factories was early recognized. The most obvious evils of child-labor are neglect of the child's schooling; destruction of home life; overwork, overstrain, and loss of sleep, with resulting injury to health; unusual danger of industrial accidents; and exposure to demoralizing conditions. The usual assumption that the worker is able to contract regarding the conditions of labor on terms of equality with the employer is most palpably false in the case of children. The child, subject to the commands of his parents and guardians, is not a free agent. Lazy fathers are tempted to support themselves in idleness on the wages of their young children. Often poverty leads the parents to rob their children of health, of schooling, and of the joys of childhood. The competition of child-labor also depresses the wages of adults, and thus the evil grows.

Sec. 5. Child-labor legislation. The limitation of hours was first applied to children working in English factories early in the nineteenth century and thence has extended throughout the world, tardily following the spread of the factory system. The first American law of the kind was in Massachusetts, in 1842, limiting to 10 hours the labor of children under twelve years of age in manufacturing establishments. All the earlier state laws established low minimums of age and high maximums of hours, and were poorly enforced for lack of adequate administrative machinery, this in turn being the result of lack of active public interest. In all these respects many states gradually improved their child-labor laws in the latter part of the last century, and much more rapidly since 1903. Now the maximum working day for children in about one half of the states is 8 hours, in one quarter is 9 hours, and in one quarter is 10 hours (and in a few southern states, 11 hours). Night work by children is very generally forbidden (in about forty states). During the same time the minimum age has been pretty generally raised to fourteen years for factory work, with higher ages (sixteen, eighteen, or even twenty-one) in some states for certain occupations dangerous to health or morals. In addition to these general limitations, special provision is made for individual examinations to determine whether the child is mentally and physically fit to work and has met the requirements of the compulsory education laws of the state.

The most important child-labor legislation in recent years was the enactment of the long debated national child-labor law (passed in August, 1916). This prohibits the interstate shipment of goods produced in factories wherein any child has, within thirty days, been employed under unfavorable conditions as to hours and time of work as specified in the act. The passage of this act was the culmination of years of efforts in and out of Congress.

Child-labor legislation viewed as a merely negative policy is not of great moment. Its real significance is to be judged only in connection with the broader social policy of protecting and developing all of the children of the nation to be healthy, intelligent, moral, and efficient citizens. Children growing into blighted and ignorant manhood and womanhood are threats to society.

Sec. 6. Limitations of the working day for women. But little later than the limitation of child-labor usually comes some legislation to limit the hours and conditions of employment of women. The grounds of this policy are that women likewise are less able than men to protect themselves in the labor contract, that they are physically weak and are peculiarly exposed to certain dangers to health, that as future mothers they need protection for their own and the public welfare, and that in the period of maternity the dangers are especially great. The work of women in factories operates in some ways to depress the wages of men, and it is harmful in its effects upon the home and family life. At present five states limit the hours of women to 8 a day, twelve to 9 a day, fifteen to 19 a day, four to 11 or less a day. A number of states forbid the work of women in designated places of work such as saloons, mines, or where constant standing is required. Only as late as 1911, in America, has legislation, now in four states, given maternity protection, as is now more fully provided in European countries in connection with systems of health insurance.

In all of the great industrial countries of Europe night work by women is restricted (prohibited between 10 P.M. and 5 A.M. or yet more narrowly limited); but legislation along this line is found in only eight American states.

Sec. 7. Limitations of the working day for men. The general assumption made in law has been that the adult male worker is competent to judge of the working conditions, hours of labor, and wages, and is capable of protecting his own interests sufficiently by his power of refusal to accept employment. The legislatures have, much more tardily than in their legislation for children and for women, acted contrary to this assumption, but, when this has been done, the courts in America have vigorously asserted the general doctrine and denied the constitutionality of the laws. However, some exceptions were made in legislation, and, after much apparent hesitation and vacillation, were allowed by, the courts to stand, and these have now grown in number until they form an impressive total.

These exceptions have come in various ways. There is first, the eight-hour limitation in public employment, required in federal employment in 1868, really effective since 1892, and now in force likewise in about two thirds of the states. In almost the same jurisdictions—national, state and municipal—eight hours is the legal day on work done in private business for the governments. Work on railroads and street railways, particularly in the direct operation of trains, such as the work of dispatchers, signal men, and trainmen, is subjected to a large variety of regulative measures, hours being limited in some cases to 8, in others to 9, 10, 12, or 16, and in a number of cases a specified minimum number of hours of rest is required after the maximum hours of labor. These laws are primarily for the protection of the public, but they afford a protection to the employee much needed, as many well-authenticated cases of excessive and exhausting hours demonstrate.

The limitation of hours has very recently been extended to many private businesses in which exceptional conditions exist affecting the health of the workers or the safety of the public. This development has occurred almost entirely since the United States Supreme Court in 1898 (Holden vs. Hardy) sustained a Utah statute limiting to eight the hours of labor in underground mines. Now 8 hour laws in certain specified cases are found applying to mines, smelters, tunnels, and a variety of other kinds of work, and in a few cases the limit is 9, 10, or 11 hours.

Sec. 8. Broader aspects of this legislation. The subject took on a new aspect when the legislature of Oregon, in 1913, declared broadly that "no person shall be hired, nor permitted to work for wages, under any conditions or terms, for longer hours or days of service than is consistent with his health and physical well-being and ability to promote the general welfare by his increasing usefulness as a healthy and intelligent citizen," and fixed ten hours as the limit of work consistent with such a measure of health and welfare, in work in any mill, factory, or manufacturing establishment. This law was sustained by the Supreme Court of that state and was carried on appeal to the United States Supreme Court.[6] In support of the law there was presented a voluminous brief giving a most impressive body of evidence from scientific and from practical business sources, to show the many evils, popularly unsuspected or underestimated, that result from long hours even in industries of no exceptional hazards.[7] Physiological and psychological tests demonstrate that the fatigue following more than a moderate working period not only reduces immediate efficiency, but so poisons the system that greater liability to accident, disease, intemperance, immorality, and premature decay, results.

Two main purposes appear somewhat intermingled in this legislation in limitation of hours. The first purpose is to protect the public directly where the safety of others is dependent on the health and efficiency of the worker. The second purpose is to protect directly the worker's health and welfare, that policy being recognized to be in the long run the best likewise for the public welfare. In legal reasoning it is being recognized that the individual wage-worker, even the adult male, is not in a position to judge the number of hours he ought, for his own good, to work, and is unable to fix the length of his own working day. As a matter of economic theory, the usance of a child, a woman, or a man, is merely that kind and amount of service that can be given out by each without repressing the normal possibilities of growth, reducing the normal health and vigor, or shortening the normal period of healthy productive human existence.[8] It is becoming a general social policy to prevent the abnormal strains of industry that cause the unnatural deterioration of the human factor in industry. A wage-worker may be permitted to sell his daily net fund of working power—his usance—but not his life.

Sec. 9. Plan of the minimum wage. Even more recent than the legislative regulation of hours downward is the attempt to regulate wages upward in the case of certain low-paid wage-workers. The modern[9] movement for the minimum wage began in Victoria in 1896, and it soon extended to nearly all the other Australasian states. Great Britain applied the plan in 1910 to industries in which wages were exceptionally low. The plan was first adopted in the United States by Massachusetts in the year 1912, tho in an emasculated form, and spread so rapidly that at the end of 1915 it was found in at least 11 states. Minimum wage laws usually lay down "a living wage" as the standard to be used, and either prescribe a flat rate of wages, or, more often, leave the decision in each case to the wage commission established to administer the law.

Generous sympathies have guided this movement of which much has been hoped and which, on the other hand, has always had its adverse critics. The most that can be claimed for it by its friends after more than twenty years of experience, is that the "dire predictions" have not been verified. In truth it would seem that the plan as yet has not been tried on a scale that could yield very large fruits either for good or for evil. The persons whom it is sought to aid are only selected groups of the lowest paid workers, generally limited to minors and young women, who in many cases are those of immigrant families in urban districts. A large volume of discussion on this subject has developed, mostly of an a priori nature, of which we may here touch only a few of the salient points.

At first glance the principles involved in the legislation limiting hours and those in minimum wage legislation may seem to be the same. But an important difference soon appears. In the former case the evil is that of a too long working period, injurious to health, and this can be reached directly and stopped by an efficiently administered law. But in the latter case the real evil is industrial weakness and incapacity such that the workers are unable to command "a living wage" in a competitive market. A minimum wage law, by itself, neither cures the industrial incapacity nor ensures employment to the industrially weak at any wage. The law does not attempt to compel employers to employ at the legal minimum wage every one who wishes to work; it merely declares that the employer shall not employ any one whom, in his employ, he finds to be not worth that high a wage.

Sec. 10. Some problems of the minimum wage. Unless the demand for a particular kind of service is absolutely inelastic (a rare if not impossible situation in a large market), there must be fewer jobs for the less capable workers at high than at low wages, other prices remaining the same. Further, some of the less capable workers must be crowded out of such jobs as remain; for an artificially higher wage attracts into an occupation some from other occupations before paid more highly. It seems to be admitted by the friends of minimum wage legislation that this result is logically to be expected and that to some degree it appears. Of course it is never possible to tell to just what extent workers have been and are being excluded in this way from any particular establishment or occupation. Forbidden to earn what they can, the poorer workers must become dependent on charity. It may be said, and perhaps truly: better this than underpaid labor destructive to the health of the workers and evil in its competitive effects upon other wage workers.

In most discussions of the wages of women there is a ready confusion of sympathetic ideals of what one would like to see with the cold facts as they are. Women's services (especially those of young women) have increasingly of late been coming upon the labor market in such a way as to cause abnormal congestion in a few occupations. Employers have not caused low wages in these cases. Partly these occupations are the clean, light, and agreeable ones, partly they have a relative social glamour, largely they can be followed for a few years near the home of the worker, nearly always they may be undertaken with brief training and little skill. Investigation has shown that at least eighty per cent of this group of girl workers live at home. A wage that is amply a "living wage" when used as a pro-rata contribution to an American family income is frequently insufficient for the girl living "independently." Such a girl is, under the conditions, unable to earn a living in her chosen occupation, and it may be better to recognize that fact and to deal with such individual cases as appear among the one fifth of all girls employed.

The one unquestioned service of the minimum wage law is that of diagnosing the evil of low wages rather than in remedying it. The minimum wage law brings to light the industrial incapacity of particular individuals to earn a living wage. The direct remedy is to abolish the incapable workers or their incapacity by such methods as regulating foreign or cityward immigration, custodial care of the physically, mentally, and morally weak, vocational guidance, and more effective measures of industrial education. Alongside of the abnormally low paid occupations or elsewhere in the industrial organization are other occupations in which with, or often even without, special training, the sweated workers could get, competitively, more than the minimum wage, if they could, or would, qualify for the work.

Sec. 11. Mediation and voluntary arbitration. The labor controversies in which the public has the largest interest as a third party[10] are those which result or may result in strikes. The public interest becomes acute when a strike results in interference with the individual freedom of other workers and of nonparticipants, when it causes a blocking of the highways and disturbance of the peace, and when it prevents the regular production and transportation of the commodities which the public consumes. The public, therefore, has steadily become more interested in all methods and agencies designed to conserve better relations between employers and wageworkers, and to diminish or, if possible, to do away with strikes when individual and collective bargaining between the two parties fail.

Mediation, or conciliation, is the effort of a third party to get the two parties to a trade dispute to come together to agree peaceably upon a settlement. Mediation may be voluntarily undertaken in a particular case by any citizen or by a public official, usually the executive (mayor, governor, or President); or it may be by a regular public state or national commission charged with this duty (as in some 17 states).

Arbitration is the decision, by a disinterested person (or commission) to whom it is submitted, of the exact terms, after a provisional settlement of a dispute. It is voluntary when the parties agree in advance to accept the verdict, and compulsory when they are compelled by law to submit to arbitration and abide by the verdict.

Some provision either of voluntary private or of public agencies to mediate between the parties in labor disputes and to facilitate voluntary arbitration has been made of late in most communities of the civilized world, including 32 of our states, and the nation as a whole particularly in respect to disputes between railroads and train operatives engaged in interstate commerce.[11] No one objects to them, and they accomplish much good, but fail oftenest in the greater emergencies because of the unwillingness of one or the other party to submit the case, or because of lack of any power to enforce the decisions.

Sec. 12. Compulsory arbitration. The serious question in the subject of arbitration concerns the introduction of the principle of coercion by government, in compulsory arbitration. This, in principle, is pretty radically different from voluntary arbitration, for as it denies to the parties the right to settle their dispute by private agreement, it becomes in effect the legal regulation of rates of wages and conditions of work. In principle this was involved in the legal regulation of wages in England from the fourteenth to the nineteenth centuries. The plan is closely approached in the industrial courts that are now provided in a number of European countries for a cheap and expeditious settlement of small disputes regarding trade matters, arising in the relations between employer and employees. The new modern development began when New Zealand passed a compulsory arbitration act in 1894, followed to some extent since by all the other Australian states, largely through the action of the Labor party. Through the operation of its act New Zealand came to be called the "land without strikes," tho the description was inaccurate, especially after 1907. The Canadian Industrial Disputes Act of 1907 is an example that has had influence upon public opinion everywhere, and has been followed to some extent in recent legislation in New Zealand, America, and elsewhere. It involves the compulsory principle in a limited degree, making it unlawful in public utilities and mines to change the terms of employment without thirty days' notice, or to strike or lock-out until after investigation and hearing before a board to be nominated for the purpose. The Colorado Act of 1915 goes even beyond the Canadian act in its scope. The plan seems destined to have wider applications and a larger development in the not distant future. Let us note the general attitude of the various interests concerned.

Sec. 13. Organized labor's attitude toward labor legislation. Labor organizations hitherto have been in their legal nature almost entirely private and voluntary. They are seldom incorporated and are rarely even recognized in any way by legislatures and by courts, which deal merely with the members as individuals.[12] Their private character, combined with their limited membership as compared with the total population, leaves them without the power to accomplish legally by themselves the results which they desire in their own interest. Hence they are tempted at times to usurp public authority over the field of private rights in industry.[13] In other cases, when they have come to the end of their unaided powers, they invoke the aid of the law to accomplish their objects. But the appeal of organized labor to the law is special and qualified, being confined to cases where the actions of others are controlled to the advantage of the union, such as regulating the work of women and children, controlling the acts of employers in respect to construction of factories, and limiting the length of trains. This does not imply a peculiarly selfish attitude on the part of organized labor. Action together in any social group always develops in men their loyalty and spirit of cooeperation without always making them more considerate to those outside of their group. Indeed, often men acting through their chosen officials, private or public, are more selfish collectively than they are individually. The leaders of any group of men, whether of wage workers, merchants, manufacturers, or political constituents, find it necessary to show that the interest of their supporters rather than a broader "sentimentality" is uppermost in their thought. And further, the jealousy of any limitation of their power is as powerful a motive in one group of men as in another. All are made of the same human clay. But the stronger and more successful a labor organization is, the more vigorously do its leaders resist any legislation that limits the functions and field of action of the labor leaders, or that settles labor troubles in a way that makes the voluntary labor organization less necessary to the individual worker. Of course self-help, as a spirit and as a policy, is a virtue, if it does not sacrifice the rights of others. But if the facts above suggested are borne in mind they will help to explain the otherwise often puzzling attitudes of organized labor toward different measures of social legislation.

Sec. 14. Organized labor's opposition to compulsory arbitration. Organized labor in America has attained to a highly influential position. On the whole it constitutes an "aristocracy of labor," consisting largely of skilled workers that obtain a wage exceeding that of unskilled workers to a degree not seen anywhere else in the world. In this they have been favored by a combination of conditions which it is not possible to describe briefly; suffice it here to say that organization is itself not the whole explanation, but only a small part of it. That organized labor, officially, is strongly opposed to compulsory arbitration in America, is thus perhaps sufficiently to be understood on the principle of "Let well enough alone." When in August, 1916, a strike on the entire railroad system was threatened by the four railroad brotherhoods, and some action was proposed in the form of the Canadian act, the trade-union officials issued a statement containing these words: "Since the abolition of slavery no more effectual means has been devised for insuring the bondage of the workingman than the passage of compulsory investigation acts of the character of the Canadian Industrial Disputes Act." Within less than a week the brotherhoods called off the strike after Congress had passed an act giving the men immediately the eight-hour day—a substantial part of what they had asked—and providing for investigation, by a commission, of the effects of the rule. This is compulsory upon the railroads but it is not compulsory upon the men to accept these terms.