The Settlement of Wage Disputes

by Herbert Feis

6.—We may now pass from the possible objections to the scope of these proposals, to those which may be fairly leveled against their substance. Although the living wage principle has been used in wage settlement throughout the Australian Dominions, in many English industries, and in a limited number of industries in some of the American states, the controversy which arose over it, when first it was introduced, is far from quieted. This is explained, in part, by the extreme difficulty of getting evidence as to its results which is beyond the shadow of doubt. That is due, in part, to the great variety of conditions under which it has operated. Its results are always complicated by circumstances which differ from place to place. Again, there is the fact that such experiments as that of the living wage are apt to be judged from a rapidly changing viewpoint.

The very conscientious efforts which have been made, however, to measure the effect of the various experiments with living wage legislation furnish us with much valuable material on most of the debated matters. No attempt can be made here to reproduce the various sides of the controversy, or to summarize the evidence which has been collected upon the disputed aspects of the subject.[126] Much of it covers the same matters which were treated in our analysis of the principle of wage standardization. In my opinion, the existing evidence warrants the advocacy of an extension of the living wage policy in the United States. It furnishes us also with valuable instruction as to the form in which the policy is likely to work out most satisfactorily.

The value of the living wage principle as an instrument for bringing about an improvement in the economic condition of the lowest grades of industrial workers, without producing equivalent harm in any other direction, is also supported by general theoretical reasoning; that is, by a study of the forces which govern wages in general, and the wages of these lowest groups in particular. In the study of these forces, earlier in the book, it was pointed out that the outcome of distribution may be affected by just such assertions of purpose as that represented by the living wage policy. If labor organization has been able to increase the wages of certain groups of wage earners without doing equivalent harm in any other direction, there is reason for believing that a living wage policy can accomplish something of the same result for the lowest grades of industrial labor, which have been up to the present practically without organization. And, indeed, in England, the Trades Boards, which are the machinery of the living wage policy, are ordinarily regarded as fulfilling practically the same functions as organization does for the more favorably placed groups.[127]

Furthermore, the nature of certain of the forces which account for the low wage levels of the groups that would be affected by the living wage policy, give the above argument special force. For among those forces are these: that their wages have been, at times, less than the amount necessary to enable them to do as efficient work as they were capable of doing; and so low, frequently, as to make the struggle for self-improvement and advancement, for members of these groups, a very difficult matter. Thus the numbers in these groups have been kept greater than they would have been otherwise. Furthermore, their wages have been, at times so low that efficient industrial management counted little in success. Furthermore, these groups have had practically no organization or leadership to prevent their employment under conditions most unfavorable to their health, energy, and general welfare. And lastly, that the present industrial system has a tendency to take advantage of economic weakness wherever it exists. Against these considerations must be put, perhaps, the submission shown by these groups to the course of industrial development, and the constant service they have given, in their position of dependence, in monotonous and wearisome work.

The case of the living wage policy rests upon the opinion that the introduction of living wage standards will give rise to a series of adjustments in production and distribution. And that the net sum of the results of these adjustments, perhaps only after a temporary period of dislocation in some instances, will be to increase the wages of the lowest grades of wage earners—without doing equivalent harm in any other direction. It also rests on the opinion that the permanent economic advancement of these lowest groups of wage earners is a practicable ideal—though fate seems to take a special delight in dealing harshly with this particular ideal.

7.—Among the adjustments, however, which general reasoning suggests as a possible consequence of the enforcement of a living wage policy are some which it is the part of policy to guard against. Existing evidence shows that they have not often followed upon previous enforcements of living wage policy; yet they must be borne in mind. They are firstly: the possibility that employment of the wage earners who are affected by the living wage policy may be permanently reduced. This may result either because of price increase in the commodities produced by these wage earners, or because of substitution into their occupations of other classes of labor or of machinery. And secondly: the possibility that the enforcement of the living wage policy will bring about a concentration of employment upon the more efficient members of the groups affected, and thus throw out of employment the very individuals who are most in need of help. And thirdly: the possibility that there will be an increase in the numbers of those groups which the living wage principle is designed to aid, with consequences similar to those suggested under the second heading.

I my opinion, the chances that any of these things will result from the enforcement of a living wage policy in the United States to-day are small. Yet to put the matter summarily,—these are the dangers which those entrusted with the administration of a living wage policy would have to be alive to; and if they become real, seek to overcome, by shaping their policy according to the facts that confront them. The factors which will determine whether any or all of these undesirable results will ensue are many. They cannot be balanced in the abstract. Yet general reasoning enables us to discern those which will make that likelihood greater or smaller in any occupation or industry.

We may start by enumerating those factors which enter into the likelihood that a reduction of employment will result from the enforcement of a living wage policy. They are: Firstly, the amount of wage increase undertaken; secondly, the importance of the wages received by the groups in question in the total expenses of production; thirdly, the shape of the demand curve for the products of the groups; fourthly, the chances for improvements in the methods of production; fifthly, the chances of encouraging better business management by enforcing living wage standards; sixthly, the effect of the wage increases upon the efficiency of the groups affected, and their fitness for advancement to more skilled work; seventhly, upon the opportunities for substitution of machinery; and lastly upon the ultimate effects of the introduction of machinery on the employment of these groups.

Turning now to the second possibility, that the enforcement of living wage standards will cause a concentration of employment upon the more efficient workmen, thus throwing out of employment those most in need of help, here, too, a great number of factors have to be reckoned with. They, however, have already been dealt with in the previous discussion of the effect of standardization upon the distribution of employment. There is no need of enumerating them again in this place. One point of difference should be observed, however. The differences of individual efficiency among the workers that would be affected by the living wage policy are more substantial than the differences of individual efficiency among the members of the more skilled wage earners. And, therefore, while it would be unnecessary to make any special provision for the least efficient members of the more skilled groups upon the introduction of standardization, it might at the start be decidedly good policy to make special provision for the least efficient members of the unskilled groups. Under practically all living wage legislation special provision is made for them.

It should also be remarked in this connection, that the probable greater range of individual efficiency among the unskilled as compared with the skilled is in some measure to be attributed to their present low wage levels. Inefficiency is likely to grow upon itself. Mr. Aves has remarked pertinently in this regard, "As with the 'unemployed' or the 'unfair employer' so with the 'incompetent' and the 'slow,' none of these represent well defined classes. All are elastic. Some can be created and all merge by imperceptible degrees into the classes above."[128] The enforcement of a living wage policy, it may be hoped, would in itself reduce the range of individual efficiency among the unskilled. For it would keep from the ranks of the "incompetent" and "slow" some who might have found place elsewhere had their chances been somewhat better.