The Settlement of Wage Disputes

by Herbert Feis

These have been cogently summarized as follows: "... the volume of the flow of wealth in the country of the worker; the relative plenty or scarcity of different agents of production; the relative plenty or scarcity of different kinds of labor."[12] They may be taken up in the order stated, at the same time noting the way their action is modified and complicated by other factors.

One preliminary comment may be admissible. It is to the effect that there has been in the past a tendency to view the problem of distribution (and so, of wages) as if it consisted of making clear by analysis the balance or equilibrium of a few given and unchanging tendencies—which were deduced from human and physical nature. These forces furthermore, were frequently held to be universal; the conclusions based on them have often been likened to physical laws. Such a view obscures the fact that any analysis of distribution is but a description of the working of a particular industrial society at a particular time. To mistake what is a description of a particular society for a study of the action of physical laws has the effect of leading men to believe that the present must forever reappear in the future.

3.—The first factor, "the volume of the flow of wealth in the country of the worker," was never more under discussion than to-day, when from all sides demands are heard for the material means necessary to the realization of desires. As the matter is ordinarily put, the greater the product of industry is, the more there is for distribution among all. The truth of this statement seems obvious. Yet in interpreting it into policy more than usual care must be taken lest it be forgotten that other things may make a larger contribution to satisfactory living than an increase in these possessions which make up the flow of wealth. Instances are by no means lacking of increases of production obtained at the sacrifice of something more important to human life than the additional product secured. There is a "mean" here also between labor and leisure.

All this, however, reads like a lawyer's brief about a simple matter. The greater the volume of goods and services resulting from the labor of society, the more there is to share out; and the greater in amount will the share of the wage earners be, even if their relative share is not increased.[13]

The volume of production depends upon the quantity and quality of each and every agent that assists in production, and upon the organization of the separate powers, and above all upon the progress of invention and of the industrial arts. It depends directly upon: first, the natural resources of the country—which are ordinarily summarized in economic discussion under the term "land"—"by land is meant the material and the forces which nature gives freely for man's aid, in land and water, in air and light and heat;"[14] second, the "accumulated provision for the production of material goods"—capital—which was discussed in the preceding chapter; thirdly, on the labor of men and women—on the degree of spirit, skill, energy and intelligence which characterizes that labor; fourthly, on the quality of leadership which manifests itself in industrial affairs, and the success with which the elements of production are brought into well directed coöperation; fifthly, on the progress of invention and the industrial arts.

The relationship between the volume of production and wages is indirect. Though it is true that the larger the product, the higher wages will be, all other forces remaining the same, the connection between them is by no means simple or direct. That is because the wage earners share in a product to the making of which other agents contribute. In our present industrial system work is done under direction, and by the aid of tools and machinery; it is highly subdivided. It is impossible to determine the contribution to total production of any group of workmen, or of all workmen. The product is a joint result in which the part played by any one group, instrument, or factor of production cannot be traced. Who, for example, is able to say how much productive activities have been aided by the invention of the telephone and the growth of the telephone system? The problem of the distribution of the product of modern industry is so difficult and so much to the fore because so many different people contribute in some way or other to the product and have a claim upon it.

Wage incomes may be affected by changes in the volume of the product, no matter what the cause or nature of the change. If suddenly some new chemical fuel were discovered in the laboratory, or some business efficiency expert were to discover some formula which made motors go round, the labor now spent in coal mining could be turned to other tasks. The volume of economic goods produced would be increased. The product to be distributed would be greater, and wage incomes would rise. A similar result would ensue if the magic formula of the expert endowed all workingmen with greater skill and energy. Any addition to or subtraction from the capacity of any agent of production tends to affect not only its own income, but that of all claimants. The reward of any one agent of production, for example, labor, depends not only on its own part in production, but upon the contribution of all other factors. A craftsman in the United States may be no abler than his fellow workman in France, but may receive twice his wage.

This line of reasoning must be qualified in one respect. There is some competition for employment between the several agents of production. Their relative efficiency will affect the demand for them, and so will also affect the share of the product each receives most directly. That is a phase of the subject that will be considered at greater length at another point.[15]

4.—Given an industrial society at work like the United States, producing each year a varied flow of commodities and services, the question arises as to what determines the share of that flow that goes to the wage earners. We have already seen that the larger the product is, the higher wages are likely to be. But what determines the sharing out? That is the next matter to be considered. First, however, let us examine briefly two theories of wages which are more or less current in certain quarters, and which are built upon partial or complete misunderstanding of the connection between wages and the work actually performed by the wage earners.

The first theory, or rather group of theories, is that to which some of the leaders of the scientific management movement have given their sanction. The central idea of this group of theories is that in the output of the wage earners, considered either as individual output or as the output of a small group engaged on a common task, is to be found the final and just measure of wages. It is frequently assumed in the course of the reasoning used in support of these theories, that wages can and should measure a separate contribution which the individual wage earner makes to production. The positive, although hazy, belief which ordinarily underlies the scientific management theories of wages can be perceived in the following quotation from a speech of one of the leading advocates of the movement. "There are two ways in which wages can be advanced. One is the natural method, the proper method, the beneficial method, the one that tends to the uplift of the world. That is to make the advance depend absolutely on the effort of the worker. When the worker delivers more, it is perfectly proper that the returns should go up. In other words as unit costs go down wages can very properly rise, and they should rise. Under these circumstances, the worker is tremendously interested in seeing that the unit costs go down. There is a regular mathematical law here. Only to a certain extent can the unit cost go down and only to a certain extent can the wages go up.... On the other hand, when you raise wages without any connection whatever with the unit cost you inevitably find that the worker takes his bonus in the form of more leisure...."[16]