Essentials of Economic Theory / As Applied to Modern Problems of Industry and Public Policy

by John Bates Clark

How Potential Competition affects Organized Labor.—We have seen that potential competition keeps within limits the prices of goods made by trusts. If they become too high, new mills are built. In a like way potential competition puts a check on the wages a strong union can secure; for if these are too far above the level of non-union men's pay, such men will find their way into the business. Open shops will be established, either by the present employers or by new ones. There will be much to be gained by an independent shop manned by non-union labor, and the danger of this makes a trade union more conservative than it would otherwise be. The chief potentiality in the case is that of the new and independent shop, and if the way is open for this to appear, the range of difference between the pay of favored laborers and that of others is greatly reduced. The trade union may be able to carry its point and keep free labor from its field, so long as it has only its own employers to deal with; but if new employers will appear whenever there is an inducement to do so, the case is quite otherwise. The new mills make the greater gains if they are manned by non-union men.

With the field open for all producers, the danger of free shops with free men will impend always over the union that demands too much for its members. This is now true even where consolidated companies exist, and it would be doubly true if there were no such companies. The rivalries which would then appear would keep wages, as well as prices, near to their natural standards.

In the absence of monopolies on the part of employers, and of "slugging" on the part of workmen, arbitrators may accept as standards what the actual dealings of employers and employed yield. In most cases they will ratify no wrong by doing so. The court may act as it now does and announce a rate based on a mere compromise or on the probable result of a strike. If the men accept the award, let them keep their places; but if not, let the positions be open to whoever will take them, and let the state repress every form of violence that would interfere with their doing so. The sentiment of even a local community will sustain such a maintenance of order.

The Case of Trades not affected by the Potential Competition of Non-union Men with New Employers.—Building trades are peculiarly situated in that their products have to be made in the locality where they will stay, and no competition from labor living at a distance is to be feared. If the local unions can protect their field by force, they can establish a high rate of pay, even though the employers have no unions. Arbitration that merely gives what a strike will yield will here deviate greatly from the natural standard of wages.

Labor in mining is somewhat similarly situated, and so is labor in transportation. In these, and in some other fields, new men do not weaken the position of strikers unless they are brought to the places where the strikers have been working; and that exposes them to assault. It is in the making of portable goods for a general market that the new and independent shop manned by non-union laborers is an important factor.

It is easy to answer the question whether, in such fields, the board of arbitration should confirm the workmen's tenure of place while his pay is sustained by force. All slugging is inherently criminal and should be always and everywhere repressed. In the cases that we first examined, a safe course would be to hold it in repression, announce a rate of pay based on what a strike would then yield, and trust to other measures for destroying monopoly on the capitalist's side. The chief danger of violence begins when the men reject the award and others take their places, and at this point the fact of arbitration will make the duty of the state easier though hardly clearer.

The case of such trades as building and mining differs from the others only in the fact that there is not present the check that is elsewhere afforded by the danger of new mills, and the pay secured by crude force is high. To announce a rate based on the result of a strike, if slugging is to be permitted during the strike, is to accept, for the moment, what violence will secure; and nothing will remove this feature of the adjudication but a manful assertion of sovereignty by the state and a complete ending of the tolerance now accorded to anarchy. By no means, however, does this deprive union men of the advantage that organization gives them. They may be secured in the possession of every advantage which collective bargaining, without violence, can secure. Great numbers enlisted in a union will give to it a prospect of success in enforcing any reasonable demand. Voluntary arbitration, that aims to preclude a strike, will have to respect this fact of organization and give the men about what a legitimate strike would yield. As a rule, this will result in compromises of opposing claims, and if violence is not in sight as a resource, the compromises will fall near to the natural standard of wages.

Why Conciliation is preferred to Arbitration.—Both among organized laborers and corporate employers there is a dread of state action for the positive adjustment of wages. There is a preference for conciliation over any kind of arbitration, and there is a preference for voluntary arbitration over that which has any trace of authority behind it. For tribunals which have full coercive power, most employers and strongly organized laborers have an insurmountable repugnance. If such tribunals were introduced, it would be against their strongest opposition, which is saying that a measure designed to secure industrial peace would have to be put into operation while the parties directly interested in it opposed it with might and main.

The reasons for this attitude are not difficult to discover. Conciliation aims solely to secure internal peace in a department of industry. To avert strikes or reduce their duration is all that it can do and all that the parties directly interested wish to have it do. From the point of view of employers and employed in a highly profitable industry, the averting of strikes is enough to aim at, and even the public sometimes accepts this easy-going view and thinks that everything desirable is gained merely by averting strife or ending it when it occurs. Uninterrupted production—the saving of the great wastes that strikes entail—does, indeed, promote the public welfare. When conciliation does this, it indirectly does something for the public. The essential thing about conciliation, then, is that it does not consciously try to do anything but to make the two parties in the dispute over wages contented enough to go on producing. A board which aims only to do this is careful not to introduce any one who represents an outside interest. The procedure must be kept "within the family." As is often said, "those who understand the business" must settle disputes within it. What is really desired is that only those who are interested in the business should have anything to say about it, and there is a dread of giving representation, either to the general public or to independent labor. Moreover, when the defects of conciliation are spoken of, what is mentioned is the uncertainty as to its working, the probability that in many cases it will not bring the disputants to an agreement and cause production to go on. There is no dread of the rates of pay that it yields. There is practically no dread on any one's part of what happens when employers and employed are contented because they jointly thrive at the expense of the public. Rather than have production stopped, the public is often willing to let a dispute be settled on almost any terms, though the result may be to let some men thrive at the expense of consumers and of other laborers. There is a monopolistic grab the sharing of which makes both parties better off than are men of their class elsewhere. Singular as it may seem, even this attitude of the public is justifiable. It is entirely right not only to welcome conciliation where it can be made to work, but to try it as often as possible before resorting to arbitration.

Rates resulting from Conciliation not Unlike those resulting from Strikes.—The results of collective bargaining, with conciliation in cases of dispute, come within a certain distance of those which would be gained by a perfectly natural adjustment of wages. All that we have said about the relation of wages adjusted by strikes to their natural standards applies here; potential competition generally keeps the actual rate within a certain distance of the natural one, though a monopoly may make the distance unduly great. If potential competition works feebly on the employers' side,—if independent producers are slow to appear even when the price of a product is very high,—there is a large profit in the industry for some one; and if potential competition works feebly on the side of labor,—if workmen can safely strike with little fear that independent laborers will dare to take their places,—the men can secure a fair-sized share of this profit. A strong trade union working for a strong monopoly gets wages that exceed the standard rate by the largest obtainable margin; and yet, as we have said, even this excess has limits, and adjusting disputes by conciliation does not alter those limits. The rates agreed upon are still governed by the standard rate to the same extent as under the régime of strikes. The strike and the lockout become potential, but they impend as possibilities and do their work. The board of conciliation knows that they will occur unless their probable results are anticipated and forestalled by the decision. The board cannot do otherwise, therefore, than to restrict the actual strikes. Wages then become the natural rate with a plus mark, and may be said to be adjusted in a way that at the bottom is natural, though it works under vitiating influences.