Economics Volume II: Modern Economic Problems

by Frank A. Fetter

[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

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

§ 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.

§ 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]