The Settlement of Wage Disputes

by Herbert Feis

It can be affirmed that the irregularity of wages is due to a considerable extent to other causes than differences in the efficiency of individuals. As D. A. McCabe writes, "Very little seems to be known as to differences of efficiency among men engaged in the same kind of work." But as he adds, "It is safe to assume, however, that they are not reflected in time-working trades with any exactness by the wages paid, even where there is no trade union minimum."[80]

More to the point, it can be affirmed that the percentage of individuals in any occupation whose efficiency is decidedly below the average efficiency of the group is small. For, as a matter of fact, what really comes into question upon the introduction of wage standardization, is the employment of that small percentage of individuals whose efficiency is decidedly below that of group average. The employment of this small percentage in each group will be decisively affected by the general demand and supply situation of that group at the time when standardization is introduced. If the need for the services of a group is relatively great, employment at the standard rate will be given even to those members of the group who are decidedly below the average efficiency of the group. Such is the case during periods of industrial expansion. When the demand for the services of the group falls, however, it is probable that these men will be discharged first—more promptly than if wage standardization had not been introduced. There is probably some connection between the progress of the standard wage movement and the tendency to limit overtime in the industries in which the standard wage is enforced. Lastly, the effect of the enforcement of wage standardization upon the employment of the least efficient members of the group can be modified by special arrangements, whereby a wage lower than the standard is set for such individuals as are mutually acknowledged to be decidedly below the average of the group.

In this regard Mr. Collier's report on the Australasian experience is a useful guide. He writes: "That workers may be displaced following the application of wage regulation to an industry is a fact sustained by the experience of Australasia. In New Zealand, many bona fide workers were thrown out of employment during the early years of the arbitration law. There was also considerable distress among the boot and clothing workers of Victoria. Many of the old, inefficient, and slow workers were discharged. But in each case other factors than labor legislation figured in the situation. We have seen that in the board trades of Victoria there has frequently been a decrease in the number of employees immediately after a determination became effective, but that in almost every instance this decline was temporary. After the period of adjustment, industry pursued its normal course. This seems to have been the general experience in this and other states."[81] It may be concluded that some redistribution of available employment will sometimes follow upon the introduction of the standard wage into industries in which wages were hitherto unstandardized, resulting in the partial or complete unemployment of the least efficient members of the group. As was said above, the extent of such redistribution will depend somewhat upon the demand and supply situation at the time when the standard wage is introduced. Those whose employment is reduced or taken away will either go into some work on which they compare more favorably with the other workers engaged, (leading to a further redistribution of employment perhaps), or will remain unemployed. The other members of the group will have increased employment.

7.—Still another possible effect of the introduction of the standard wage deserving of attention, is that which it may have upon industrial organization, and upon the level of managerial ability. As will be made clearer elsewhere, the enforcement of standard wage rates in an industry is usually equivalent in practice to the enforcement of those rates that are already being paid by the better organized units of that industry.[82] This leveling process may have any or all of several consequences. It may cause enterprises which had succeeded in competing partly because they paid lower wages than more efficient enterprises for the same grade of labor either to improve their productive methods, or gradually to cease production. It may result in a reduction of profit for certain enterprises. It may occasion an increase in the price of the commodities produced. It may result in an increase in the productive efforts of the wage earners.

In the abstract, it is impossible to balance these various possibilities with complete assurance. The only inductive studies of value which give any indication of the probable result are those which have been made upon the results of living wage legislation. These, almost without exception, make the price increase resulting from standardization, inconsiderable.[83] They are witness to the fact that improvements in the level of industrial management and a gradual elimination of the less competent employers have frequently taken place. The opinion seems warranted that unless standardization is introduced under very unfavorable circumstances or in the form of an extremely violent upward movement, it will not cause a considerable or permanent rise of prices, but will rather bring improvement in industrial organization and lead to a more intelligent use of labor in industry. Along with this, there is reason to hope that it will have a favorable reaction on the efforts of the wage earners.

8.—The whole subject of the effect of wage standardization upon the output of the wage earners remains to be considered, however. It is an aspect of the subject which has been in the forefront of discussion. It also is a topic which cannot be satisfactorily discussed apart from a larger one—that of the effect of unionism upon production.

The most bitter opposition to trade unionism has been connected with allegations made in this regard. These have taken different forms, but they almost always express one contention. That is that if a standard wage is set for work of a given kind, and if all men engaged upon that work receive that wage irrespective of small differences in ability, there will remain no stimulus for the abler workmen to exert themselves. Or in other words, that the standard wage makes slackers of all men. Sometimes this criticism is leveled only against the standard time wage; at other times against the standard guaranteed minimum wage, such as there used to be in the English coal fields; and, at still other times, against any method of wage payment which takes full power out of the hands of the employers to make an individual wage bargain with each worker.

These contentions have some basis on occasion. More often they arise from a misconception of the place of the wage earner in industry, or from a general hostility to labor unionism. Wage standardization does not mean that all wage earners receive the same wage irrespective of differences in ability. It simply sets a minimum standard for all workers of the group who are about the average in ability. It is designed to end all differences in remuneration, save those which arise out of differences in ability. It may be worked out in systems of payment by results, as well as in systems of time payment.

In reality a deeper conflict lies behind the antagonism to the standard wage—a conflict of social philosophy. Most unionists, it will be observed, are inclined to wave away all criticisms of the standard wage which rest upon its alleged effect upon output, no matter what the situation to which it may be addressed. In their opinion, these criticisms of the standard wage are based on a misconception of the place of the wage earner in industry. Or, as it is frequently put, they regard the worker in the same way as they do a machine, since they would have each worker paid solely according to his individual value to the industrial system. There exists a conflict between two views of the nature of industrial society, and of the way of industrial progress. In one the social importance of a high level of production predominates, and the wage earner is argued about merely as part of a productive organization. In the other, the wage earner is viewed primarily as a member of an occupational group or class, whose wages should be regulated by the standard of life of his group or class, rather than by strict measurement of his own individual capacity. This conflict is revealed, as R. F. Hoxie pointed out, in the antagonism between unionism and scientific management. To quote "much of the misunderstanding and controversy between scientific management and unionism ... results from the fact, that scientific management argues in terms of the individual worker or society as a whole, while the unions argue primarily in terms of group welfare." It is well to recognize these different philosophies. Is it possible to find common ground under the principle of standardization? Can the desire of the wage earners to be viewed primarily as members of occupational groups or classes be satisfied by the enforcement of standardization, without ignoring the need for a high level of production.

It is usual to seek the common ground in the development of some variation of a system of differential time wages, or of a system of payment by results on the basis of a standardized price list. And certainly such ways of enforcing standardization, while at the same time giving special reward to individuals, deserve encouragement, provided they safeguard the group interest in a defined minimum standard wage. Still it is not likely that the solution for the problems of output that may arise as a consequence of the enforcement of the principle of standardization, and of the acceptance of the philosophy to which it corresponds, is to be found in the evolution of such methods of wage payment as these.