The Settlement of Wage Disputes

by Herbert Feis

In spite, however, of the existence of such extensive ground for differences of opinion, it seems to me that an agreement may be expected which will be fair and sound enough to be accepted as a serviceable criterion of the distributive consequences of the policy of wage settlement.

3.—What grounds, if any, are there for the belief that the principles of wage settlement so far proposed would bring about a division of the product between wages and profits that would meet the test of just and sound distribution suggested above?

The principles, so far proposed, leave the determination of the profits return predominantly to the action of industrial competition, reënforced by the action of public opinion in the direction of preventing the return from mounting to an obviously excessive point. They offer no safeguard against the reduction of the profit return below that point set as the mark of just and sound distribution, save the public will to continue the present system and a general knowledge of the motives and conditions upon which it rests. Nor could they very well.

It is true that the enactment of the principles suggested up to this point would mean the imposition of certain genuine restrictions upon the actions of those who direct industry, as for example, in connection with the living wage program. It would give all wage earners the benefits of organization. It would make for rapid and certain compensation for price movements. It would prevent wage reductions merely because of the poverty of any group. Nevertheless, if the analysis of distribution made earlier in the book is substantially correct, the answer to the question at the head of this section must be that there would be no very compelling tendency for distribution to result justly, under the enforcement of the wage principles so far proposed. The distributive result would still depend largely upon the reality and intensity of industrial competition, upon the strength, activity, and foresightedness of the wage earners' organizations, upon the will and spirit of the directors of industry, and upon the quality and liveness of public opinion. That admission can be made, even though it is believed that under the suggested principles the outcome of distribution would be nearer the desired outcome than it is at present; and that there would be a clearer perception of the public interest in the outcome of distribution than at present.

4.—If a measure could be devised which would help to bring about the desired distributive outcome, without greatly weakening in some other direction the policy as already conceived, such a measure would be a most worth-while addition to the policy. It is possible to discern clearly what the scope and form of such a measure must be.

Firstly: Such a measure should not single out the profits of particular enterprises for division or transfer to the wage earners, if the profits of these particular enterprises are in excess of what is conceived to be a just profit level for industry as a whole. For, in the first place, if the principle of standardization is enforced throughout industry, the excess profits of particular enterprises may frequently be the result of superior business ability, and to take them away would be to discourage the development and use of that ability. And, in the second place, even if it is acknowledged that this is not the true explanation of the great profits of very many enterprises, but that these are accounted for rather by the possession of special privileges or the weakness of competition, nevertheless, to adopt a policy under which these profits are transferred to the wage earners would lead to wastefulness and extravagance in business operation. And lastly, there is the fact that to make wages in any enterprise contingent upon the profit returns of that enterprise is contrary to the ordinary trade union policy.

Nothing in this conclusion is meant to imply that the wage earners should not be free to enter into wage agreements calling for more than the standard wage. Or that profit sharing arrangements should not be permitted—on the contrary, such arrangements should be encouraged, provided the standard wage and the right of the wage earners' organization to be fully represented in such arrangements are not brought into question.

The conclusion just reached is meant to apply also in the opposite case—that is, in the case of the profits of particular enterprises falling below the level defined as just and sound industry as a whole. The wages of the workers engaged in these enterprises should not, for that reason, be reduced. This conclusion, it is believed, is amply explained by what has been written in various other connections.

Secondly: Even if almost all or all of the enterprises engaged in a particular industry should be in receipt of profits considerably in excess of what is conceived to be a fair profit return for industry as a whole, no attempt should be made to transfer the extra profits to the wage earners engaged in it by increasing their wages. Or to state the matter so as to include both this case and its opposite, the wages in any particular industry should not be adjusted by reference to the profits in that industry. It is clear that here we are upon difficult and very hotly disputed ground.

At present, wages in different industries or occupations are not settled in accordance with any principle which includes them all and which is the basis of an ordered scheme of wage relationship. The existence of a very high profits return throughout a particular industry is an almost prima facie justification for a wage demand on the part of the wage earners employed in it. So too in the opposite case. And as long as wages are settled, as at present, it must be so; for the wage earners in each industry or occupation are dependent upon their own activity to make good their claims as against the other participants in distribution.