Why Voluntary Arbitration does more than Conciliation.—Voluntary arbitration is an advance over mere conciliation in point of effectiveness. It departs somewhat from the plan of confining the action to the family, since it introduces some other parties as arbitrators and thus invites some recognition of outside interests. Nevertheless its actual working involves little change in principle, and its results do not greatly vary from those attained by conciliation. When we speak of arbitration as voluntary, what we usually mean is that acceptance of the award is in no way enforced. Either party may accept it or refuse it, but it may be that both parties acting together cannot prevent the investigation; and the economic law of wages acts best when this is the case. How such voluntary arbitration is provided for,—whether it is established by free contract between employers and employed, or by statute,—is not in this connection of importance. The one thing that is important is that no compulsion is applied to either party to force him to accept the award.
A Moral Compulsion due to Voluntary Arbitration.—A certain moral force is, indeed, necessarily behind the award of such a tribunal. It informs the public what fair-minded men regard as a reasonable adjustment of the dispute, and forces any one who refuses to accept such a decision to go on record as claiming more than is presumably just. This tends to alienate public sympathy, and to forfeit the aid which sympathy insures. Moreover, where voluntary arbitration is established by a contract between parties,—where, for example, masters and men agree that during a term of years disputes that cannot otherwise be settled shall be referred to a tribunal constituted in some prescribed way,—the decision of the tribunal is made by the contract to be especially binding.
Why Mere Compromises lead to Fair Results.—A merely compromising policy, such as the one which has often been sharply criticised, involves an approximation to what strikes would yield; and this, as we have seen, gives results which, in a rude way, are controlled by economic law. A fact of the greatest importance is that the awards made by boards of arbitration with merely voluntary power are not compromises between mere demands of the two parties; they are between genuine ultimata. When the court is called in, the employer has offered a rate of pay and stands ready to close his mill if it is not accepted; and the men have offered to take a certain rate and are ready to strike if the rate is not given. The essential fact in the case is that neither of these rates usually varies by more than a certain amount from the natural level of wages. There is every difference between a demand put forward for strategic purposes and a real ultimatum. If workmen knew that a court would simply make an even division between their own demand and their employer's offer, then men who were getting two dollars a day might ask for four in the hope that the arbitrators might give them three. Even if no such expectations were entertained, it is certain that both parties would exaggerate their claims; workers would demand more and employers offer less than they expected in the end to agree upon. When, however, the demands are not made in this way for the sake of impressing the tribunal, but are known to be genuine ultimata, the case is quite different. The workers will actually go on a strike if their demands are not conceded, and they will certainly have to do this if they make their figures extravagant. The employer will close his mill if his offer is not accepted, and he will have to do it if his offer is absurdly low. Very much is involved in the fact that an actual severing of the relation between employers and employed impends over them as a possibility.
The Chief Advantage of Arbitration over Conciliation.—We are now in a position to measure the real difference between conciliation and voluntary arbitration. If a strike comes after nothing has been tried except conciliation, there is often nothing to prevent the strikers from resorting to all the devices which are available for guarding their tenure of place—in other words, for keeping "scabs" out of the field. The local community is in its usual position of uncertainty as to the equities of the case, and is likely to show its usual hesitancy in giving to the new laborers the complete protection which the laws enjoin. There is the customary dread of the effect of letting a strike-breaking force have full sway and the opportunity for disciplining the former workmen into submission. The chance that the resulting rate of pay may be too low to do justice to the laborers remains before the eyes of the local community, and has the effect to which we have earlier called attention—that of taking much of the vigor out of the official arm when violence occurs.
How is it when a tribunal of arbitration has studied the case and announced a decision? Though the workmen may be as free to strike as ever, such an action would put them at a fatal disadvantage. The arbitration has given to the public a basis for a judgment as to the equities of the dispute. If the tribunal is one which commands respect, a refusal to abide by its decision puts the men prima facie in the wrong. If they strike now, they reject a rate which is authoritatively pronounced just. Even this they have the privilege of doing if they so desire; but if they go farther and forcibly prevent other men from accepting the equitable rate and doing the work, they forfeit their right of tenure; and it would be a strangely constituted public which, under such circumstances, would let them use fists, missiles, or clubs in defending it.
There may be an agreement between employers and employed to submit to impartial arbitration such disputes as are not otherwise settled; and when this has been actually done and a decision has been reached, it is made by the contract to be too binding to be lightly disregarded. If it is still disregarded and if violence is resorted to, the forfeiture of public sympathy is so complete that there is little danger that violence will be winked at. The action of such a tribunal may be nearly as effective as that of one which has full coercive power.
Why Compulsory Arbitration is less Certain to give a Just Award.—Arbitration by a court that has full compulsion behind it does not theoretically need to satisfy the contending parties. If it can fine or otherwise coerce the party that refuses to accept its mandate, and thus insure a forced compliance with its orders, it is conceivable that it might announce rates of pay entirely at variance with prevailing ones. It might announce arbitrary rates or make a bold effort to discover and introduce those which should coincide with the ultimate natural standards—which would mean a relentless reducing of some rates and a raising of others. In a democratic country, however, such a court would have to satisfy the contestants and the public or forfeit its existence, and the only mode of insuring its continuance would be a more conservative policy and a respecting of the status quo. It might appeal to the probable result of violent contests somewhat less than a purely voluntary tribunal might do, since it might venture to give offense to employers or to workmen, and trust to the support of the general public; but in the main it would have to let the existing rates of wages continue with no radical change. Even though it were able by some statistical test to discover the natural rates of wages, it could not be bold enough rigorously to apply them without forfeiting its existence. Under any system, then, whether it be crude contention, conciliation, voluntary arbitration, or compulsory arbitration, the rates fixed by the present half-savage process would be allowed to rule till the process itself should be freed from the perversion that monopoly causes. Inequalities of pay would be tempered in different degrees by the various tribunals, but the existing rates in each employment would continue to furnish a basis of adjustment.
The Most Available Plan of Arbitration.—Since there is little prospect that compulsory arbitration will give rates of wages which will differ materially from those secured by arbitration of the voluntary sort, the latter kind has the preference, so long as it is able actually to prevent the strikes and lockouts which, at present, are so wasteful and disorganizing. To accomplish this, there is available a kind of arbitration which is voluntary, but has behind it enough authority to make actual strikes very rare. By this plan the state recognizes for an interim the laborers' tenure of place, on condition that they continue working during the time occupied by the adjustment. If they stop working before a decision is announced, they forfeit their tenure of positions. When the tribunal announces a decision as to the terms on which labor shall go on, the force already working has the option of retaining the positions or abandoning them; but if they elect to leave them, it must be with the understanding that their departure is definitive and their right to tenure surrendered. The state then uses its utmost power in protecting men who may occupy the vacated places. The mere prospect of this outcome will be enough, and the shifting of the force will not have actually to be made, since the right of tenure is too valuable to be forfeited. The system requires that prompt action be had whenever a strike or a lockout is impending, but it enforces decisions only by imposing on workmen who choose to be recalcitrant the penalty of forfeiting the right of ownership of positions, the claim to which they esteem so highly that they are ready literally to fight in defense of it.
A Mode of Dealing with Rebellious Employers.—An employer might refuse to accept the result of an arbitration. In view of the strong pressure that public opinion would exert after the decision should have been rendered, frequent refusals are not probable. If, however, the employer should reject an award, the logic of the case would require that he lose his tenure of place as the men do for a like offense; and the only way to accomplish this is to throw him out of his business connections. The tenure which an entrepreneur most values consists in his relation to his customers; and if the state should see to it that the goods he makes could always be had from some other source, the entrepreneur would be unlikely to close his mills. How the state shall keep the sources of supply open will become an important question if it shall appear that producers do defy the public opinion and reject the court's awards.[1]
The Practical Working of the Arbitration Proposed.—Let us see how such a system of arbitration as is here described would work in the case in which, as we have supposed, a strong trade union is dealing with a monopolistic employer. At the outset all violence on the men's side is ruled out. No assaulting, maiming, or killing of so-called "scabs" is tolerated, and, moreover, the first temptation to this is removed by the act of the state in recognizing for an interval the men's tenure of place. There are no strike breakers to be attacked. While proceedings of arbitration are pending, the obnoxious class is out of sight, and all the places are transiently reserved for their original holders. The court has submitted to it two possible rates of pay, one demanded by the men and the other offered by the employers. It may confirm either of these rates or any rate that is intermediate between them, and it is likely to pursue the latter course. In any case, it announces a rate, the one which to it appears to be fair and is more likely to be so than the one claimed by either of the parties. "This is a just rate," declares the tribunal to the men; "you may take it or leave it, but if you leave it a certain thing will happen,—workmen who refuse it will forfeit all claim upon their positions." Workmen will not often refuse the award, and the pressure of public opinion makes it improbable that the employer will do so. Coupled with arbitration and an essential part of the system is a policy which shall remove the danger of monopoly. In its perfectly secure form monopoly as yet scarcely exists, but what does exist is a great number of partial monopolies able to handle competitors roughly and extort profits from the people. Directly connected with the adjustment of wages is the disarming of such monopolies. The preventing of strikes may often be accomplished without this, but the insuring of just wages requires it. With a solution of the problem of monopoly in view, all other needs of the situation might well be met by arbitration without compulsory power.