CHAPTER XXVI
THE BASIS OF WAGES AS FIXED BY ARBITRATION
The state needs an authoritative mode of determining what rate of pay is "reasonable." This duty is often imposed on boards of arbitration, for whose guidance no definite principle of justice has as yet been prescribed. Such a board has to depend on its own intuitions. It approaches its difficult work, having no legal rule for reaching a decision, and yet compelled, if possible, to reach one which will actually settle the dispute referred to it and enable production to go on. It must try, in the verdict it pronounces, to satisfy its own sense of equity. What such a tribunal has, in most cases, actually done has been to make compromises, and this has measurably accomplished both of these ends. A verdict that "splits the difference" between the men's demand and their employers' is most likely to cause work to be resumed; and on the ground that each party is probably claiming too much, and that justice lies between the claims, it insures a rude approach to fairness. This action has caused unfavorable criticism of the whole system of arbitration, on the ground that it abandons the effort to reach absolute justice and tries chiefly to end the quarrel on any terms, and also that by giving strikers a part of what they demand, it encourages them to strike again and secure more. We have to see whether a court can do better than this and whether such a crude procedure has tended at all toward putting wages on a normal basis.
Why a Court cannot reduce Wages in Favored Fields to the Rate prevailing at the Margin of Employment.—A tribunal of arbitration, which has to deal with consolidated capital and organized labor, acts in a field where both profits and wages are higher than they are in most departments of industry. Should a court then take as its standard of just wages what unorganized labor gets when it works for independent employers? That would usually level the pay of the class of laborers it is dealing with to the standard set by a much more poorly paid class.
Should the court, on the other hand, take as the just rate the one that generally prevails where employers are organized in trusts and workmen in exclusive unions? That would be legalizing the result of monopoly. The court, in such a case, knows that the profits of the business are increased by the employers' monopoly and wages by the workmen's; and yet it will not pull down the rate of pay to the level prevailing where no combinations exist. On the other hand, to legalize any high rate of wages, which is made possible only by a double monopoly, would seem to be equally unjust.
The Power of Monopolistic Trade Unions under Different Conditions.—Arbitrators have to deal with trade unions which appeal to some kind of force in defending their right of possession of a field of labor. They make their own demands, strike, and compel rivals to stay out of the positions they vacate. When this policy is tolerated, they secure an exceptionally high rate of pay.
We may represent the product of labor and its pay in the different occupations by the accompanying diagram.
