The Settlement of Wage Disputes

by Herbert Feis

6.—We can now pass on the final question which confronts us. How are the differences between the level of earnings of the relatively separate groups of wage earners determined?

The factors which determine the relative levels of earnings of each of the different groups may be put into two sets. First, those factors in regard to which each group stands alone and separate. Second, those which arise out of the dealings between the several groups.

"The relative plenty or scarcity of the different kinds of labor" falls in the first set. It will be remembered that this was among the three forces which, earlier in the book, were stated to be among the most constant and important in the determination of wages. The processes by and through which the facts of relative plenty or scarcity work out their effect in the distributive result have already been examined. If the numbers in any group of wage earners are high relative to the uses in which the employment of the members of that group results in a considerable addition to the product of market values, the wages of that group will be low, and vice versa. The need of the productive system for any kind of labor, relative to the supply available to fill that need is an important factor in determining the reward paid for that labor.

Furthermore, the statements in regard to the interactions to which the action of the factor of relative plenty or scarcity was subject, apply with equal force to the problem under discussion. Every human quality plays its part in the actual processes and negotiations by which the wages of the various groups of wage earners are settled. The outcome depends on many forces, some stable, some shifting and difficult to trace. Among those forces labor unionism, as the assertion of group economic power, holds a significant place.

In one respect, indeed, the previous analysis does not apply accurately to the question of different, though closely related wage levels. It is probable that the opportunities for the substitution of one type or group of labor for another type or group are more extensive and numerous than the opportunities for the substitution of one agent of production for another. And this fact limits the differences of wage levels that may arise between different kinds or groups of labor. For substitution of one type or group of labor for another is one of the ways in which changes in the relative plenty or scarcity of the different types or groups are brought about.

So much for the first set of forces—those in regard to which each group stands alone. The second set—those which arise out of the relationships between the various groups—remains for consideration.

Among these is the influence of customary wage relationships upon the course of wage movements within an industry, and to a lesser extent throughout industry. Because of the existence of vague customary relationships, wage movements affecting some groups or classes of labor are likely to stimulate similar movements among other groups; though it is plain that the efforts of different groups may not meet with equal success. This is well exemplified in the case of railway labor, of which Mr. Stockett has written, "Indeed there is every likelihood that the existence of a powerfully organized and highly paid group of labor in any industry—such as the engineers and conductors in railway transportation—far from being detrimental, may in the long run, be beneficial to the interests of the unorganized and low paid workmen. There is a tendency among the employees to keep a close watch on the wages paid to other groups of their fellow workmen, and the differential between their wage and that of some other grade of employment is jealously guarded. Thus on the railways, wage increases usually advance in cycles, an advance to engineers being followed at a close interval by an equivalent advance to firemen, conductors and trainmen. Existing differentials are more jealously maintained among the train service employees than among other railway workers, but that the latter do aim to maintain their relative level below the skilled groups is evidenced by the reference in arbitration proceedings to the advances made by the train service employees and by their claims to proportionate advances. Thus an increase in the wages of a highly paid group of employees, on account of this tendency to maintain existing differentials tends to put in motion a cycle of wage advances extending to all grades of labor."[36] Public opinion and public agencies of wage settlement have in the past been inclined to give support to the idea of the maintenance of customary relationships, even when the justification was flimsy.

Far more important is the factor of mutual aid between groups. For example, in pursuance of some general object skilled groups of labor have given support to minimum wage legislation for unskilled female labor; or again, such instances as the occurrence after the panic of 1907, when various organized groups of wage earners made common cause to resist wage reductions even for unskilled and unorganized labor. Such mutual aid plays its part in determining the wage levels of the different groups of wage earners.

This concludes the explanation of the forces which govern the relative wage levels of the separate groups or classes of labor. The actually existing differences of earnings between different groups of labor can only be explained by the combined influence of all the forces discussed.

7.—Differences in the levels of earnings of various groups of wage earners have been called "differentials." An effort has been made to explain their causes. Several practical conclusions, in regard to them, may be deduced from the preceding discussion.