Part 7 (1/2)

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

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

[67] These in general were the motives for the pa.s.sing of the Temporary Regulation of Wages Act in England (1918).

”During the period of six months from the pa.s.sing of this act, any person who employs in any trade or industry a workman of a cla.s.s to which a prescribed rate of wages as defined in the Act is applicable, shall pay wages to the workmen not less than the prescribed rate applicable to workmen of that cla.s.s, or such other rate as may be subst.i.tuted for the prescribed rate by the Interim Court of Arbitration ... and if he fails to do so, he will be guilty of an offense under this Act.”

CHAPTER VII--THE STANDARD WAGE

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

1.--In the first two chapters the aims towards which any policy of wage settlement for industrial peace should be directed were discussed. In the following four chapters an effort was made to throw into clear light the forces and relations.h.i.+ps which determine wages at the present time.

The way has thus been prepared for an attempt to work out principles for use in the settlement of industrial disputes. Past experience in industrial arbitration or adjudication is a fertile source of suggestion in this endeavor; although much of it has been rather like a search in the dark for objects not too well described beforehand. The definition of aims was an attempt to find out the objects of our search.

The a.n.a.lysis of the present economic situation and of wage principles was an attempt to get acquainted with the area in which the search must go on.

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

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

First, in regard to the order of exposition. What follows is simply the direct statement of a series of principles (embodied in measures, as all principles must be). These principles, separately taken, cover most of the problems presented by wage disputes. Taken together they might be composed into a policy of wage settlement. Indeed, at the end of the book, an attempt is made to combine them into such a policy. Not that it is believed that any policy of wage settlement can really be wrought in a piece this way. But because it is believed that ultimately it will be recognized that wage disputes cannot be settled as isolated events.

There will have to be recourse to thought out principles, systematically applied. It will be found that no single principle will suffice; that many principles will have to be combined and used with reference to each other. There will be, in short, a call for a unified policy of wage settlement.

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

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

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

Trade union activity is undoubtedly responsible for the introduction into industry of the principle of standardization. By the device of the ”common rule,” so called, the possible influence upon the wage bargain of the economic position of the individual wage earner, or of the inefficiency or policy of the individual employer, is greatly curtailed.

The common rule is a suitable instrument of expression for the group unity; by its use the compet.i.tion for employment between the various members of the group is prevented from taking the form of underbidding.[70]

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

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

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

The first characteristic of the standard wage to be noted is that it is only a minimum wage for the occupation for which it is enforced.

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

As a matter of fact variations from the standard wage are commonly found. Mr. Collier, after an a.n.a.lysis of Australasian experience, concludes on this point ”... But this is not saying that the minimum wage is necessarily the maximum. Although statistics as to wage distribution are largely lacking, the weight of opinion is contrary to this supposition. In some industries, such as the building trades, where contracts are made upon the basis of a legally fixed rate, this rate is frequently the maximum. Yet such instances are in the minority.

Employers do not reduce the pay of their most competent workers because they are compelled to pay those less qualified at a minimum rate.”[72]

It will be found usually that the abler, the more skilled or more experienced workers in particular occupations receive higher wages than the standard, because of the special value of their services.[73]

Occasionally also agreements are entered into for the employment of a small number of workers, who are acknowledged to be well below the ordinary level of efficiency in their trade or occupation, because of physical disability, old age or a.n.a.logous causes. As Prof. McCabe has said, ”Nearly all unions permit members who have become unable to command the minimum rate because of old age or physical infirmity to work for what they can get.”[74]