As to the first possibility, it is entirely conceivable. A wage movement based upon the profits return from all industries and applied equally to all groups of wage earners might cause price increases in particular industries and possibly temporary dislocation and even some unemployment. Such price changes and dislocations, however, are constantly occurring in industry in the absence of any policy of wage settlement, due to the effect of wage increases in one industry on wage movements in other industries. There is little reason to believe that the measure advocated will add considerably to the frequency of their occurrence. It might in one respect serve to lessen the extent of such disturbances. It might make less frequent the recurrence of wage demands, originating in particular industries because of high profits in these industries, and spreading over a large part of the field of industry. For, as has been emphasized, organized groups of wage earners will not accept passively a change for the worse in their position in the economic scale. Finally, there is a safeguard in the fact that no wage increase need occur in any industry except upon the demand of the wage earners in that industry. Joint discussion might make it clear that wage increases could not be well afforded in particular industries, and joint agreement reached upon that fact. The self-interest of the wage earners, here as elsewhere, would prove to be some sort of a check upon unwise wage increases.
As to the second possibility—that wage increases undertaken on the showing of data derived from all industries may be considerably less than the increases required in particular industries to bring down the profits return in those industries to the approved level—that, too, is entirely conceivable. But against this disadvantage must be weighed those which would be attendant upon any measure by which wages in particular industries are adjusted by reference to the profits return in those industries, which subject has already been considered. The fact must be accepted. In any plan such as the one proposed, faith would have to be put in the power of indirect influences to keep the profits return in particular industries from greatly and consistently exceeding the approved level.
By way of conclusion, it may be made clear that any such plan as the proposed would call for the assent of the wage earners to the doctrine that, when the profits return in particular industries is greatly in excess of the approved level for industry as a whole, the community in general have the leading claim to those profits. It is plain that union assent to that doctrine would be forthcoming only if the community made effective its claims. The attainment of a just distributive outcome—one based upon considerations of the general interest—will be essential to the success of any policy of wage settlement for industrial peace.
FOOTNOTES:
[147] M. B. Hammond, "Wage Boards in Australia," Quarterly Journal of Economics, November, 1914, February, March, 1915. E. Aves, "Report on Wage Boards and Industrial and Conciliation Acts of Australia and New Zealand" (1908).
[148] Letter dated March 16, 1920.
[149] See pages 256-60, this chapter, for a further consideration of this question.
[150] W. J. Ashley, in an article in the Economic Journal, December, 1910, entitled "The Statistical Measurement of Profit," reveals the many serious problems involved in the measurement of profit—when no prior preparation (such as the compulsory standardization of methods of accountancy) has been undertaken. The question of profit measurement he aptly states as that of finding out "what the suppliers of capital to business concerns get in the long run over and above the capital they actually put in them" (page 549). Unless prior preparation is undertaken for the purpose in hand, it is probable that his conclusion does not overstate the difficulties much, if at all. He writes, "Modern 'trust finance'—the finance of great new industrial combinations, creates difficulties in the way of gain statistics that will tax the highest skill of the economist and accountant—if, indeed, they are not insuperable" (page 549). There would appear to be no good reason, however, why prior preparation, such as is suggested, could not be undertaken; nor would that task be one of extreme difficulty.