The Settlement of Wage Disputes

by Herbert Feis

First, the service of capital in production, the sacrifice involved in much accumulation, and the need of assuring capital accumulation, as discussed above.

Secondly, the evil effects of inequality of wealth as discussed above.

Thirdly, the fact that the health, energy, and intelligence of those that carry out the work of production are no less important factors in effective production than capital itself. And that the possession and use of these qualities by individuals is to a considerable measure dependent upon their economic position here and now.

These various considerations, it need hardly be said, cannot be weighed mechanically, but only by the use of the informed judgment.

The policy of wage settlement must, in addition, give indirect encouragement to the growth of such industrial beliefs and institutions as will enable the wage earners to participate in the control over the conditions of production. Only then will the effect of industrial methods on the welfare of the wage earner receive constant attention, and the desire of the wage earners for self-improvement be given encouragement. In these directions, then, the policy of wage settlement can and should safeguard and direct the course of capital accumulation.

5.—The preceding discussion bears directly upon the next question to be considered, namely, the present economic position of those who perform the work of direction in industry. Only one or two aspects of this subject require attention in this investigation.

It may be remarked, to begin with, that those who own the capital invested in industrial enterprises thereby possess the most general powers of control and direction over them. These powers they may exercise personally or through their agents—but in either case, the fact of ownership is the decisive influence in the settlement of these questions in which the wage earners are most interested. The fact that some of the capital invested in particular enterprises may not carry with it any rights of control or direction—as for example, the capital invested in railway bonds, or the temporary borrowings from the banks contracted by most industrial concerns—does not affect this truth. It is entirely conceivable that enterprises might be carried on wholly with the use of such capital as gave no title to control over the conduct of the enterprise; but at present, the opposite, generally speaking, is the fact. And as is to be expected the work of direction is dominated normally by the necessity of earning profit for the owners of the enterprise—though many other sentiments and motives may and do mingle with the motive of profit-making. These facts form the basis of two suppositions, by the aid of which the argument of this book is carried out.

The first one is to this effect: that if rent incomes (in the sense of Ricardian rent) are left out of consideration, since they will not be directly affected by the policy of wage settlement, the product of industry is distributed in two major forms. These are to wit: that which is received by workmen in direct return for their labor, which is called wages; and that which goes to those who own, and therefore govern, directly or indirectly, the operation of industrial enterprises, which is called profits. It is hardly necessary to remark that the same individual may be in receipt of both forms of income. The second form of income "profits" is a mixed form of income which may be analyzed in different instances, into very different quantities of the elements which make it up. This mixed form of income, which goes to the owners of industry by virtue of their dual connection with industrial enterprise—the connection of ownership and direction—contains in some forms of enterprise a large element of what has been called "the wages of management"; in other forms this element may be almost entirely absent. So too with the element of "interest" and with the other elements which may enter into it. Throughout this inquiry the term "profits" will be used to indicate this mixed form of income.

The second supposition supplies an answer to a question that must be faced in any attempt to formulate a policy of wage settlement for industrial peace in the United States. That question is whether it shall be taken for granted that the desire for private profit will continue to govern the performance of the tasks of industrial direction. The wage policy that is developed in the course of this book is based on the assumption that the large majority, if not all, of the industries which would be included in it, were it adopted, will remain privately owned and operated. At the same time, it is by no means outside of current possibilities that certain of our greatest industries may change over into some form of public ownership; and that this ownership would be accompanied either by direct public operation, or very considerable public regulation of their operation. Therefore, we are led to ask whether a wage policy conceived on the assumption of private ownership and control would be applicable to industries under public ownership.

The answer will be different according to circumstances. If the régime of public ownership should become general, as is contemplated in the orthodox socialist theory, it is likely that, then, an attempt would be made to rest wage policy on principles fundamentally different than any that would be practicable under a régime of private enterprise. On the other hand, if public ownership should be extended only to a very few though important industries such as the railroads and coal mines, it is almost certain that the principles underlying the settlement of wages in the publicly owned industries would have to be the same as those applied in the privately owned. The general policy of operation might differ, however, in other respects. Thus, a policy of wage settlement formulated on the assumption of private ownership would not become unsuitable in the event that some industries became publicly owned.