CHAPTER XII—THE REGULATION OF WAGE LEVELS
(Continued)—WAGES AND PROFITS
Section 1. The profits return in industry, under any policy of wage settlement, will be closely scrutinized.—Section 2. The possibility of measuring a "fair" profits return for all industry discussed. A method suggested.—Section 3. Would the principles of wage settlement worked out so far, produce a fair profits return? An open question.—Section 4. The scope and form of any measure designed to assure the desired distributive outcome can be discerned.—Section 5. The various steps in the formulation of such a measure reviewed. A measure tentatively suggested.—Section 6. The difficulties of calculating wage changes called for under the suggested measure.—Section 7. The chief practical weaknesses of the suggested measure examined.—Section 8. It would be open to theoretical criticism also. The alternatives even less satisfactory.
1.—We can now enter upon the further question of whether the principles so far formulated, if used in wage settlement, would produce such distributive results as would justify them to the wage earners and the community in general. It need hardly be said that the criterion of justice which will be applied by public opinion to any policy of wage settlement will not be a simple and clearly defined rule, but will be, rather, one joint in a loosely articulated social philosophy.
The distributive justice of any set of wage principles will be judged by the shares of the product of industry which take the form of wages and profits, respectively. It is true that general satisfaction with them will be largely governed by the course of real wages after they have been in force a while. If real wages tended to increase in the period following their adoption, they would receive far greater approval and much sturdier defense than if real wages fall during that period. Most witnesses of the Australian experiments in wage settlement make that point clear.[147] But in either case, if the organizations of the wage earners in the United States become as powerful as they are in England to-day, and if the class-consciousness of the wage earners becomes as acute, any policy of wage settlement will be severely scrutinized in regard to the profits return prevailing throughout industry also. If, with the principles in force, the general level of profits throughout the field of industry consistently and considerably exceeded what was deemed to approximate a fair return, it will be held that they give the wage earners too small a share in the product of the industry. If the general level of profits throughout the field of industry tended to approximate a return thought to be fair, the principles will recommend themselves to the wage earners and to the community in general, as just. It may be added that the opinion held in regard to the justice of the principles of wage settlement may also be influenced, in some degree, by the distribution of the profits return in industry. If a comparatively few great industrial corporations earn very great profits, it is likely to arouse greater dissatisfaction than if the same amount of profits are earned by a larger number of enterprises. It is beyond the scope of any policy of wage settlement, however, to control the distribution of profits among the enterprises engaged in an industry.
There are some groups who would argue that no division of the product of industry is fair unless it gives to the wage earners the whole of the product. Such a view, of course, amounts to a desire to revise the whole of the present economic system fundamentally. No policy of wage settlement akin to that put forward in this book could win favor in their eyes. And if their opinion should become dominant, industrial peace would have to be sought by arrangements far different from those under discussion. For those arrangements rest on the supposition that the country will continue to desire to depend, in the main, upon private accumulation for capital, and individual ambition for business leadership.
2.—It is possible by bringing into balance a numerous set of factors, to give a reasonably definite meaning to the idea of a fair profits return. That is to say, by weighing all relevant considerations, it is possible to define a general level of profits for industry as a whole, which would represent a just and sound division of the product of industry between wages and profits. The relevant considerations are those which will be likely to hold an important place in the better informed sections of public opinion during the period for which these proposals are intended; and which are admissible as sound and pertinent, on the supposition that the industrial system is to continue to depend mainly upon private initiative and private accumulation.
The most important of these considerations are, in my opinion, as follows: First: that the ethical ideas of reward according to need, or reward according to sacrifice, would call for the elimination of the greatest present inequalities of reward; and that these ethical ideas must be given rank among the factors which deserve real consideration when arrangements affecting the distribution of the product are being made. Secondly: the service of capital in effective production, the sacrifice involved in much accumulation, and the risk involved in much investment; the great need of assuring continued capital accumulation and investment. Likewise, the importance to industry of active and enterprising leadership. Thirdly: the social and economic evil effects of great inequality of wealth. Fourthly: the fact that the health, energy, spirit, and intelligence of the wage earners are factors of high importance in the creation of a stable and effective industrial régime, and that the development and display of these qualities by individuals are affected by their economic conditions and surroundings, here and now. Likewise, the importance of giving the best possible opportunity to all to develop their natural ability.
The general level of profits that would be settled upon by comparing and weighing these considerations could be defended as just and sound. The figure (which would be expressed in the form of a percentage, e.g. 12 per cent.) derived from the balance of these factors could be put forward as the mark of just distribution. The distributive goal for the policy of wage settlement would be to achieve a division of the product between wages and profits, such that the general level of profits throughout the field of industry (the basis of calculation of which will be considered at a later point) would approximate the figure defined as just.
It is plain that if the suggested method is used to define a just level of profits, differences of opinion will manifest themselves in the process. The facts and circumstances that would have to be studied cannot be subjected to exact measurement. For example, the possible bad social and economic effects which may be produced by various degrees of inequality of distribution can only be guessed at in a general way. Or, to take another example, the motives and conditions which govern the bulk of private accumulation and the sacrifices involved therein are questions about which controversy continues to range. The profits return that one man may judge ample to assure an adequate flow of accumulation and investment will not appear to be so, in another man's judgment. Indeed, even differences in the general philosophy with which all men parade through life will lead to differences of opinion. For example, one man may believe a community to be better off if every man's income is increased somewhat, though the inequality of wealth within the community be thereby increased; while another man may believe that the poorer community, with the lesser inequality of wealth is likely to be more happy, and perhaps, in the end more prosperous.