The Settlement of Wage Disputes.

by Herbert Feis.

PREFACE

"The Settlement of Wage Disputes" falls naturally into two almost equal parts: the first an account of the present industrial situation in the United States, and of the factors which govern American wage levels at the present time; the second an attempt to formulate principles which might serve as the basis of a policy of wage settlement for the country.

The proposals made in the second part are based on the theoretical a.n.a.lysis of the first part.

Certain chapters in the first part (III and IV) may prove difficult for the ordinary reader. They are intended to be merely an a.n.a.lysis of a particular set of facts and tendencies--those which affect the present wage situation in the United States, or may affect it in the near future. Such an a.n.a.lysis of a particular set of facts is all that economic theory can successfully accomplish.

This book was first projected in the summer of 1914. The Dress and Waist Industry of New York City had set up a Board of Protocol Standards to settle wage disputes. The late Robert C. Valentine was then engaged in finding a basis of wage settlement for the industry that would be of more than pa.s.sing value--and as his a.s.sistant, I first became convinced that there could be no permanent peace under the wages system, once different interests became organized, unless a clear body of fundamentals principles applicable to all industries are supported and enforced.

In the course of the work I have incurred many obligations both in the United States and Great Britain. I can only acknowledge a very few here.

To my teachers, Prof. F. W. Taussig and W. Z. Ripley, I owe much, both for their instruction, direct help and example. In Great Britain, Mr.

John A. Hobson, Mr. Henry Clay and Mr. and Mrs. Sidney Webb aided me greatly to understand British experience. My debt to the work of Judge Jethro W. Brown of the South Australia Industrial Court is heavy as the book shows. Above all I have to thank my friend Dr. Walter B. Kahn for his share in the work.

H. F.

_University of Kansas._

THE SETTLEMENT OF WAGE DISPUTES

CHAPTER I--INTRODUCTORY

Section 1. In any attempt to formulate principles for use in the settlement of wage disputes, past experience furnishes much guidance. What this experience consists of.--Section 2. Such principles as have been used in the settlement of wage disputes have usually resulted from compromise; reason and economic a.n.a.lysis have usually been secondary factors. However, industrial peace cannot be secured by a recurrent use of expedients.--Section 3. The att.i.tude most favorable to industrial peace.

1.--The industrial life of the United States is marked by an almost continuous series of open struggles between the employers and wage earners of its highly organized industries. No one defends these struggles for their own sake. There is a general inclination, however, to regard them as a necessary accompaniment of industrial activity and change. It must not be supposed that all labor troubles are merely wage controversies--that is to say, that they are all incidental to the settlement of the wage incomes of the laborers. Many of them arise in whole or part from a shifting and conflict of ideas about various other aspects of the industrial order. It is possible, however, to concentrate attention upon those conflicts which center around the settlement of wages.

There is a quick and somewhat tumultuous stream of investigation directed to the invention and formulation of principles which could be used as a basis of settlement of wage controversies. In various countries such principles have been formally set forth and used. The awards of the War Labor Board are an example of their imperfect application. In the Industrial Court of the Commonwealth of Australia we have an example of the consistent use of one set of wage principles. The material that has arisen out of this process of discussion and experimentation is of the utmost value to any one endeavoring to work out a wage policy for industrial peace in the United States. It forms a body of doctrines. It gives evidence both as to the chief subjects of wage controversy, and indicates the suitability or the shortcomings of many of the principles or doctrines that might be proposed. Thus in any investigation of principles of wage settlement--with a view to industrial peace--we are not without the guidance of experience.

This experience consists, firstly, of the principles worked out and applied in the decisions and orders of the courts or boards which have served as agents of wage settlement in the United States, England, Canada and the Australian dominions. Of almost equal value is the material growing out of those great industrial conflicts of recent years, in which claims have been put forward and agreement has been sought on the basis of some definite theory of wages. Such, for example, is the material prepared and presented in the course of the railway wage arbitrations in the United States and England. Such also is the evidence and material presented in the course of the inquiry recently held in Great Britain upon the wages of transport workers.

2.--It should be understood that the principles which have been used in wage settlements in the past were not ideal solutions. That is to say they were not arrived at solely by the use of reason, directed to the discovery of what is just and what is for the general good. The situation has been rather that described by Mr. Squires, when he writes: "Too often in the past arbitration has followed the line of least resistance. With much unction, the lion's share has been awarded to the lion. Decisions proposing another settlement were speedily forgotten because not enforced. Those submitting to arbitration frequently did so with the mental reservation that the decision to be acceptable must at least approximate the conditions they felt they would be able to establish by a show of strength. From this position to one of complacent acceptance of arbitrary decisions, applied not to an isolated group but seeking to comprehend all labor or a given cla.s.s, is a long step for both employers and employees." And again: "In arbitrary wage adjustments the absence of well defined and acceptable standards to be used in wage determination as well as the difficulty in enforcing awards that did not conform closely to the law of supply and demand has forced arbitration to resort to the expediency of splitting the difference.

Cost of living, proportionate expense of labor, and net profits, when taken into account have been more often evoked in defense of claims made than as a means of determining what claims were just under the circ.u.mstances."[1]

So, also, with any attempt to devise principles which might serve as the basis of a policy of wage settlement in the United States. They would represent the effort to develop standards by which conflicting claims could be resolved. It is not desired to signify agreement by this admission with those who believe that all principles of wage settlement must be purely pa.s.sive, with those who argue that wage settlement must perforce be nothing more than a recurrent use of expedients produced on the spur of the occasion out of the magical hat of the arbitrator. All that is meant is that no policy of wage settlement will succeed if its results diverge too greatly from the interests which it, in turn, would guide and restrain. Any policy of wage settlement must take into consideration the moral and social circ.u.mstances pertinent to the dispute as well as the economic. It must express active social and ethical claims as well as recognize economic facts. It must be supported by the sense that it is at least moderately just.

Most attempts, furthermore, to settle wage disputes by the use of defined principles have resulted in an incoherence of policy due to the necessity of bowing to the facts of force. This interference of force and the consequent disturbance of policy is likewise to be expected in all future attempts. For, in all human affairs private interest will, on favorable occasions, revolt against laws or rules which restrain it.

Again, in the United States all past attempts to settle wage disputes by reference to principles have been isolated and sporadic. They have, therefore, been virtually foredoomed to failure. For as will be made clearer as we progress, any successful attempt to base wage settlements upon principles will demand the consistent and courageous application of these principles for a not inconsiderable period, and to all important industries alike. Otherwise compromise and a search for any way out of the immediate crisis is the only possible principle of settlement. Any well-conceived policy of wage settlement must have regard for a far wider set of forces and facts than are presented by any single controversy. The objects of any policy could only be attained through a long series of decisions ranging throughout the field of industry, and related to each other. This, it is trusted, will become plain as the difficulties of formulating policy are discussed.

3.--Prof. Marshall in his great book has an arresting pa.s.sage on the importance of the tendency to organization which characterizes the whole field of industry. He writes: "This is not a fitting place for a study of the causes and effects of trade combinations and of alliances and counter alliances among the employers and employed, as well as among traders and manufacturers. They present a succession of picturesque incidents and romantic transformations which arrest public attention and seem to indicate a coming change of our social arrangements now in one direction and now in another; and their importance is certainly great and grows rapidly. But it is apt to be exaggerated; for indeed many of them are little more than eddies such as have always flitted over the surface of progress. And though they are on a larger and more imposing scale in this modern age than before; yet now, as ever, the main body of the movement depends on the deep, silent, strong stream of the tendencies of normal distribution and exchange which 'are not seen' but which control the course of those episodes which 'are seen.' For even in conciliation and arbitration the central difficulty is to discover what is the normal level from which the decisions of the court must not depart far under penalty of destroying their own authority."[2]

Writing in England in 1920, it seems to me as if the events of change in England were more than the surface movements he speaks of, and that slowly but definitely industrial arrangements are undergoing modification so as to give scope to new energies and ideas which will modify the "normal" distribution and exchange as he conceived it. The future in the United States is even less clearly marked. There too new purposes and claims are arising and will seek adjustment with established arrangements.

The att.i.tude of all those who really desire industrial peace must be that of readiness to judge such forces of change as may become active, by the balance of good or harm they seem to promise. For that is the att.i.tude which alone can make possible a fusion of the conservatism of experience and of established interest, and the radicalism of hope and desire--by which fusion society can experience peaceful development.

FOOTNOTES:

[1] "New York Harbor Wage Adjustment," B. M. Squires, _Monthly Review of the U. S. Department of Labor_, Sept., 1918, page 19.

[2] A. Marshall, "Principles of Economics," 7th Edition, page 628.

CHAPTER II--SOME PERTINENT ASPECTS OF THE PRESENT INDUSTRIAL SITUATION

Section 1. The chief aims of any policy of wage settlement for industrial peace defined--the chief tests to be pa.s.sed. A knowledge of present industrial facts essential to the formulation of sound policy.--Section 2. The present economic position of the wage earners.--Section 3. Their relations to the other groups in industry. The acceptance of the practice of collective bargaining essential to any policy of wage settlement in the United States to-day. Trade unionism must prove itself fit for this responsibility, however.--Section 4. The economic position of capital in the present industrial order. Its service to production.

The problems to which the acc.u.mulation of capital has given rise.--Section 5. The economic position of the directors of industry. Industrial control an attribute of ownership. Two important suppositions used in this book, concerning: a. The forms of industrial income; b. The possible spread of public ownership, and its consequences for a policy of wage settlement.

1.--The problem of wage settlement may be regarded as the task of elucidation or invention of methods and principles in accordance with which the product of industry might be shared among the wage earners and the other partic.i.p.ants in the product with relative peace and satisfaction. It is necessary and permissible, as has been remarked, to separate this problem from other closely related problems. However, any policy of wage settlement that might be adopted would be also an important influence in other industrial issues outside of those it settles directly. It would affect in numberless ways the relations between the groups concerned in production. It follows that no policy of wage settlement will work successfully unless it accomplishes two ends.

First, it must represent convincingly the effort to divide the product of industry so as to satisfy the most widely held conceptions of justice in the industrial system. Second, it must contribute, wherever it is a factor, to such an adjustment of industrial relations as will command the voluntary support of all groups whose cooperation is necessary for the maintenance of industrial peace.

For the accomplishment of these two objects, any policy must be based upon a knowledge of the present economic position of the various groups engaged in industry, and of the present state of industrial relations between them. It is obviously impossible to review these matters adequately in this book. The most that can be attempted is a brief survey of those aspects of these questions with which the problem of wage settlement must definitely concern itself. Such a survey will occupy this chapter. If it serves no other purpose, it will serve the important one of making clear the source of certain general presuppositions with which the problem of formulating a policy of wage settlement for industrial peace is approached.

2.--It is convenient to deal with the general field under survey by considering in the order stated, the present economic position, firstly, of the wage earners; secondly, of those who own invested capital; and thirdly, of those who direct industrial activity. Questions of industrial relationship between these groups can then be presented at the point at which they arise most pertinently. Such a loose order as this is dictated by the desire to avoid all questions except those which inevitably arise when studying the problem of wage settlement.

To begin with the wage earners. The task of giving exact scope to the term "wage earners" may be shirked. The term may be taken to include, at least, all those grades of workers whose incomes would be governed directly by any scheme of wage settlement. When using the term in the course of theoretical discussion, as in the ordinary a.n.a.lysis of distribution, it may be taken to include also other grades of workers, whose incomes probably would not be so governed, as for example, a.s.sistant or department managers of large businesses.

The recent past has witnessed important changes both in the economic position of the wage earners, and in the relations between them and the other groups engaged in industry. A close connection may be traced between the two lines of change. Up to the beginning of the present century, at any rate, it may be a.s.serted that the wage earners of the country were not separated from the rest of the industrial community, either socially or economically; although at all times throughout the last century, there was to be found a section of recent immigrant labor which had not yet found its way into the main channels of economic society. The farms, the shops and private businesses of the small and semi-rural towns; these were the common origins and discipline of our industrial leaders and of the more skilled groups of wage earners. There was no great difference either of educational or of industrial opportunity between the ma.s.s of men. The few great financial centers of the East may have been the home of an established and separate economic cla.s.s, but this cla.s.s was not one of the most important industrial forces. The standard of life as well as the economic prospects of all wage earners who had been thoroughly absorbed into the community encouraged a feeling of equality and independence. The tradition of our period of industrial expansion was that most men should seek to operate their own farm or business (and be their own master). This tradition could flourish as long as a great variety of industrial opportunity existed for the ordinary individual. The first stages in the development of our natural resources, the course of mechanical invention and improvement, the rapid growth of our population--all these changes stimulated independent enterprise, and offered great hopes of success in enterprise to men possessed of common sense, energy, and character. No family felt itself placed in a fixed position in the industrial scale except by reason of its own inferior powers of utilizing opportunity.

The wage earners were those workers who worked for some one else, but they did not form a separate cla.s.s different in experience and outlook from their employers. The possession of wealth, under such circ.u.mstances indicated individual capacity, temperament, and ambition.

That phase of American industry is certainly not entirely past, although it has not persisted to the extent that some of the industrial leaders whose rise was contemporaneous with the earlier stages of industrial expansion, are wont to argue. At the present time able and determined individuals, who in youth are manual workers frequently succeed in discovering openings to the higher industrial positions. The need for business ability is still too great to be supplied by any one level of society; all are drawn upon. The thought that each man can attain to the possession of a business of his own, or to a position of importance in some big business, is even now a common conviction and inspiration among the more skilled groups of wage earners. Yet the economic position of the wage earners in industry has undergone genuine change.

The chief characteristics of the present situation are familiar knowledge. First of all, the percentage of employers to wage earners in industry has decreased.[3] Again most new undertakings in the important branches of productive industry require a large amount of capital, a specialized and rather rare capacity for organization and a considerable knowledge of a wide sphere of industry. Indeed, the undertaking of new business enterprises has itself become to no small extent the function of organizations rather than of individuals. Further the personal cooperation between employer and the best men among his wage earners which was in the past the ordinary method of business education is not often practised now. Industry is not a good education for the skilled and able wage earners. Industrial management has usually taken the view that there is no need or profit in educating the wage earners beyond the requirements of their specialized task. The gap between ordinary wage work and managerial work and ownership is in most industries great--the path upward hard to discover.

The jobs which carry the easiest opportunities for advancement in many important industries are now the subordinate positions in the various executive, administrative or sales branches. These jobs tend to be given to young men from that section of society which has affiliations, direct or indirect, with the management of industry. The growth in importance of these branches has led to the development of a specialized form of education for industrial leadership which the wage earner does not receive. Indeed, with the ever increasing complexity of the problems of business enterprise, prolonged education, itself, has become of more importance in determining individual chances of success. All these developments have greatly lessened the chances of the ordinary wage earner for any position of ownership or control. They have tended to separate the wage earners from the groups controlling industry; they have taken away in a large measure the inspiration which work receives from hopes of steady advancement. When that hope is gone only the hope for high wages is left, and that is not a sufficiently potent common aim to insure the cooperation required for so complex an activity as modern industry.

Simultaneously with the revolution in industrial structure and interacting with it in many ways, there has occurred a great change in the composition and character of the wage-earning body. The change that occurred between 1870 and 1910 in the sources of the immigration which has furnished the United States with the bulk of its supply of unskilled and semi-skilled labor, is a commonplace of American industrial history.

The effects of this change have been largely governed by other industrial events, chief among which may be put the increased concentration of industry in and around a relatively small number of cities or regions. For as Mr. Chapin in his study of the sources of urban increase has stated: "Immigration has been the chief source of urban increase in the United States during the past quarter of a century."[4]

There has a.s.sembled in each of our great cities a ma.s.s of workers, many of whom are of recent alien origin, quickly habituated to the routine of existence in crowded city streets and busy factories. The interchange of opinion and of sympathy between these lowest grades of industrial workers and the rest of the community is very imperfect. Their industrial position and outlook tends to be that of a separate cla.s.s. As a rule, they are unorganized. It is of these grades of labor that Prof.

Marshall has written "Some of these indeed rise; for instance, particular departments of some steel works are so fully manned by Slavs, that they are beginning efficiently to take the place of Irish and others who have hitherto acted as foremen: while large numbers of them are to be found in relatively light, but monotonous work in large cities. They may lack the resolute will which put many British, German and Scandinavian immigrants on terms of equality with native Americans.

But they are quick withal, versatile; and as a rule, easily molded; they take readily to the use of machinery; and they have no tradition that could prevent them from doing their best in using semi-automatic machines, which are simple of handling, while doing complex work. Thus America has obtained a plentiful supply of people who are able and willing to do the routine work of a factory for relatively low wages, and whose apt.i.tudes supplement those of the stronger races that const.i.tute the great bulk of the white population."[5] They have sought chiefly such improvement in their position as might come from increased wages. They have remained in the regions of the will and of thought subject to those who controlled industry; for they themselves have been in a strange environment, and so have not been able to display, to any considerable extent, the qualities requisite to industrial leadership.

The difference of viewpoint and even of economic interest between the groups of skilled craftsmen in industry and the unskilled grades is being gradually reduced. Industrial developments have tended to emphasize the measure of common interest between all grades of wage earners. The steady trend to standardization in production and to simplification of the machine processes has lessened somewhat the difference between the character of the work of the upper and lower grades of labor. Modern industrial developments have led to an increased emphasis upon "general ability" and a lessened emphasis upon "special ability." To quote Marshall again, "Manual skill that is so specialized that it is quite incapable of being transferred from one occupation to another is becoming steadily a less and less important factor in production. Putting aside for the present the faculties of artistic perception and artistic creation, we may say that what makes one occupation higher than another, what makes the workers of one town or country more efficient than those of another, is chiefly a superiority in general sagacity and energy which are not specialized to any one occupation."[6] As labor organization tends to become recognized as a regular part of the framework of industry, as the duties put upon trade union leadership are broadened in order that industry may give the wage earners collective representation, it is to be expected that stronger bonds will arise between the skilled and unskilled grades of wage earners than those which unite them at present.[7]