Profit-sharing.—Some general system of preventing antipathy between profit-makers and wage-earners seems desirable. Certain interests are known to be mutual, and both employers and employed welcome any system by which those mutual interests can further the success of the business. Among the methods proposed, and sometimes successfully employed, the most prominent is profit-sharing. This implies on the part of employers after payment of current wages a distribution, at stated times, far enough apart to secure a fair average in the profit and loss account, of some portion of net profits among all the wage-earners. The per cent of net profits to be thus distributed is matter of agreement, and the basis of distribution is naturally the scale of wages accepted by the employés in their contract [pg 270] for employment. The particular methods of applying these principles vary with circumstances, but in all cases depend upon the actual confidence of employés in their employers. The effects seem to be good, bad or indifferent, in proportion to the general intelligence and stability of the employés. With really skilled workmen, established in homes and feeling responsibility as citizens, profit-sharing stimulates to the highest energy. With weak and irresponsible wage-earners it is likely to bring waste and sometimes false notions in regard to wealth production.
The weakness of the whole system is the lack of provision for fairly sharing burdens in the constantly recurring periods of loss. If the employé's share of the profits is consumed upon comfort or luxury, he is even less prepared than without such profits to meet the loss of not only profits, but his wages, in times of depression. If these additional earnings shared as profits become an insurance to the wage-earner, a sort of reserve for sustenance and safety in the necessary times of weakness in any industry, they stimulate the best characteristics of saving and character-building, and cultivate a disposition to meet all emergencies in patience. It is quite customary, therefore, in any system of profit-sharing to provide also an investment for the employés in a reserve fund, from which the necessities of the business and the needs of the whole community of workers may be met. Such a method, if wisely managed, makes the interests of the employés coincide with those of the employer. If added to this there is ample opportunity for suggestions as to enlargement and improvement [pg 271] of the business in all minutiæ, the best abilities of the workmen are called out and the heartiest sympathy is possible. There still remains against such a system the objections, that losses are not shared as truly as profits, and that employés are liable to require too intimate an acquaintance with the condition of their employer's business to foster the success of the enterprise. Its successful application is so far confined to lines of business easily comprehended and direct in their methods.
Sliding scales of wages.—Another device for connecting directly with the fluctuations of business any compensation of wage-earners is called the sliding scale of wages. This is an attempt to make each sharer in production depend directly upon the price of products in the market for rate of wages. The wages of different workers are adjusted to each other by contract upon some ratio established by experience, and then the wages of each are made to vary from month to month with the average price of the finished product in the general market. This subjects all parties directly to the fluctuations of the business in both profit and loss. Its success is dependent upon the confidence placed by employés in the fairness of the adjustment. It stimulates to highest productiveness when prices are high, and checks production slightly when prices are low. But it provides no direct method for readjusting business under the pressure of great changes in methods of management, nor does it save from strong antipathy against the improvement of a business by labor-saving machinery. Its successful employment depends in general [pg 272] upon the character and efficiency of employers and the general intelligence and enterprise of employés.
Coöperative industry.—Coöperative industries are sometimes advocated as a complete solution of labor difficulties. The system implies a union of independent workmen, all of whom shall be sharers in the capital employed as well as in the labor involved, including management. The management of the enterprise is entrusted to chosen members of the coöperative force, and wages or salaries are fixed according to abilities employed, essentially upon the scale of current wages outside the coöperative enterprise. All profits are then shared among all members of the association in proportion to their wages. But an investment of such profits in the growth of the business is an essential part of the plan.
This method satisfies the ideal of equity in division of wealth produced, provided the basis of adjustment between classes of wage-earners is accepted as fair. The principal difficulty in this respect arises in reference to the salary of managers and overseers. Such salaries are less clearly defined in the labor market, being usually complicated with profit-making, and are liable to be considered out of all proportion with the wages of other workers. If underestimated, the marked abilities required in management are likely to be withdrawn from the enterprise for independent management in profit-making.
The chief difficulties, however, with coöperative production grow from the want of confidence of the multitude of shareholders in their managers. Few kinds of [pg 273] business can be carried on successfully under a body of absolute rules, and fewer still will bear the delays and hesitation required for a general consultation of many authorities. The comparatively few instances of genuine success in coöperative production are due, in the first place, to the comparative simplicity of the undertaking; and, in the second place, to the genius of some organizer, who has been willing to contribute his superior abilities for the sake of the enterprise itself rather than the compensation.
A few principles may be fairly drawn from the general experience. First, all shareholders must be actual workers, in some way responsible for a part of the production. Second, the influence of each shareholder must in some way be held in direct ratio to his share in the production. Third, the system of accounts must be such as all can fairly understand. Fourth, the management must be entrusted to a chosen few, whose interests are chiefly in the business itself, whose character secures the confidence of all, and whose administrative ability is not too much hampered by rules.
The opportunity for coöperative industry is nowhere greater than in a community of farmers. Butter and cheese factories, cold storage plants and milk stations invite the coöperation of interested farmers upon the simplest possible basis of agreement. The multiplication of such enterprises is desirable, and the farmers of every community may profitably study the conditions of success. The greatest obstacle heretofore, has been the want of competent management, and the distrust aroused and maintained by the inefficiency [pg 274] and fraud of managers. It is possible, too, that farmers generally do not recognize the actual importance of executive abilities, and are unwilling to pay the salary actually earned by a thoroughly competent man.
Legal restrictions as to labor.—It is natural for those who suffer in the struggle for better wages to seek the support of law in restrictions upon contracts as to wages, hours of employment and conditions of comfort. The principle that governments must protect the weak against the strong in any community is a thoroughly established one. Yet its applications are subject to continual readjustment. Multitudes of experiments have been tried, affecting the whole range of inequalities in wages and perquisites. In many instances, wages have been fixed by law, and that for long periods of time, but without relieving in any respect the actual force of competition among wage-earners themselves. Indeed, the tendency of very explicit enactments is to weaken the individual ability of wage-earners by destroying ambition. Wages fixed by law are necessarily as low as the average would be in a free competition; otherwise production is hindered and capital is diminished. With this low average any worker of more than average ability gains nothing by exerting his ability, but does gain ease by neglect. Thus enforced uniformity reduces the energy of the producing forces and practically closes the doors of advancement from wage-earning to profit-making.
A similar effect is found in efforts to regulate the hours of labor by law, except where the law simply defines the meaning of a day's work or emphasizes the importance [pg 275] of public health and vitality rather than equality in distribution. Humanity has done much in reducing hours of toil, and may yet do more; but it will be for humanity's welfare in larger considerations than are measured by money. The eight-hour question, so constantly agitated in certain callings, concerns the entire people just so far,—and no farther,—as the general health and energy of the community depend upon it. Farming communities stand aloof from its application; and yet there is no question that the farmer's home might be even better than it is for developing physical and mental vigor, if hours of toil were more carefully restricted to meet the conditions of healthful growth and activity.