In actual practice, then, it is necessary, from the standpoint of the employer, to employ overseers to drive all workmen to a maximum rate of production, which, theoretically, means the elimination of all workers who are unable to attain the maximum. Again an injustice results, this time to the weaker man.
4. Piece Rate. The first plan evolved, in the search for a plan that would remedy the inequalities of the day-wage plan, was the piece-rate plan. The piece-rate plan contemplates the payment of a stated wage per unit of production, without consideration of the rate of production.
The argument was advanced that a uniform rate per unit of production would result in an equitable wage, because based on the productive skill of the individual. But the plan has failed in many cases to produce the desired results, for the reason that it does not take into consideration the factor of time.
In the establishment of a wage rate, the factor of time must be considered, or the rate will not be equitable as between employer and employe. The employer must furnish the shop, the tools, the power, the heat and light. The cost of these items does not necessarily vary in direct ratio with the increase or decrease in production. These expenses must be absorbed by the finished product, therefore, even under a piece-rate plan, the rate of production (the factor of time) has an actual bearing on the rate per unit.
From the standpoint of the employer, the rate per unit should be based on the productiveness of the individual, and should insure to the most skillful, a wage as high as, or slightly higher than, he would receive under the day-wage plan. This would, in theory, give to the less skillful man a wage exactly commensurate with his skill. But as workers become more and more skillful, and increase at the same time their productiveness and their earning capacity above normal, there is a tendency on the part of the employer to reduce the rate per unit to bring the aggregate wage back to normal. The result is that the worker, fearing a reduction in the rate, limits his production to the number of units that will insure an average wage.
Thus the system fails in its object. It does not reduce the cost of production to the lowest point. However, when piece rates are intelligently applied they are found very satisfactory in certain lines. But in all cases, the piece rate tends toward a uniform rate of production, and, while reducing the cost of superintendence, involves the expense of inspection. The latter, however, is not necessarily an added expense, for, as a rule, inspection is required regardless of the wage system in use.
5. Premium Systems. To obviate the difficulties found in both the day-wage and piece-rate plans, the premium or bonus system was evolved. This improved system of wages is intended to fulfill the following conditions:
1. A guaranteed rate per hour for each grade of work for a contract period.
2. An average earning power continuously higher than usual.