Profit sharing, as defined by Mr. Carroll D. Wright, is the term that “may be applied to any arrangement whereby labor is rewarded in addition to its wages, or in lieu of wages, by participation in the profits of the business in which it is employed. Benefits of various kinds—as insurance, schools, libraries, and beautiful surroundings, so far as maintained by employers out of their profits and enjoyed by employees as an addition to what their wages would purchase—would have to be regarded, in a strict analysis, as an indirect form of profit sharing.”[311] Mr. Nicholas Payne Gilman defines it as “the method of rewarding labor by assigning it a share in the realized profits of business in addition to wages.”[312] Mr. D. F. Schloss considers it “an arrangement under which an employer agrees with his employees that they shall receive, in partial remuneration of their labor, and in addition to their ordinary wages, a share, fixed beforehand, in the profits of his business.”[313] The International Congress on Profit Sharing, held in Paris, in 1889, declared it to be “a voluntary agreement, by virtue of which an employee receives a share, fixed beforehand, in the profits of an undertaking.”
The history of profit sharing is short, and can easily be recalled. It began in 1842 with the Maison Leclaire in Paris, and has been subsequently introduced into many business houses in France and Switzerland, countries where the economic conditions lend themselves readily to its progress. Its adoption in Germany has been less extensive, while the English industrial system has hitherto seemed hostile to it, although Mr. D. F. Schloss in his recent Report claims that a larger number of experiments in profit sharing have been made in England than in any other country. Probably about one fourth of the business establishments conducted on this principle are found in the United States.
What are the advantages that have resulted from this fifty years of more or less extensive experience with the system? There is first the fact that it results in the development of what Mr. Carroll D. Wright has called “the group of industrial virtues.” This group includes diligence, zeal, caretaking, vigilance, punctuality, fidelity, continuity of effort, willingness to learn, a spirit of co-operation, and a personal interest in all business affairs. In addition to these virtues, other positive advantages have been noted by those who have tried the system. “An appreciable percentage of the occasions of worry, which all large employers experience, have disappeared,” writes Mr. T. W. Bushill, of Coventry, England.[314] M. Billon, of Geneva, states as one result of his experiment, “Superintendence became easy for us, and from that time we could, without fear of offending any one, show ourselves exacting in details to which previously we were obliged to close our eyes.”[315] The Peace Dale Manufacturing Company began profit sharing “not to make money in the positive sense, but to save waste.”[316] This saving of waste is seen in the efforts to economize time and materials and in the additional care with which machinery and all appliances for work are used. Various English firms have been most successful in attaining this end, stating that they find “increasing care to avoid spoilt work and waste both of time and material”; that “waste is guarded against”; that there is care in handling materials, and that “especially waste of raw material is avoided.”[317] Another gain is found in the identification of the interests of employer and employees and the consequent harmony between capital and labor; “the occurrence of a strike in a profit-sharing establishment is believed to have been a rare event,” says Mr. Schloss.[318] The advantage to the employer of this identification of interest is seen in the ability to obtain “a steadier and superior class of workers”; in the fact that “the knowledge that there is such a scheme brings all the best workmen” to the firm employing it; that “workers remain year after year”; and that “it tends to secure and retain the best workers.” Its good effects on the character of the work are seen when “an efficient man is very soon pricked up to greater diligence by his fellow workers”; in securing through it “the maximum of effort”; “in a steady pulling up all around”; when it “makes the men keener after business and sharper in keeping down expenses.”[319]
It would seem difficult to introduce the scheme into a business like that of tea-blending, but a London firm that has practised it thirteen years states that the effect is “to make the clerks willing to exert themselves in an especial manner, when the occasion arises, because they know that if they show themselves unable to cope with the mass of work to be done, then the staff must be increased; and they do not care to see their bonus diminished by an augmentation of the numbers entitled to participation.”[320]
The question naturally arises as to how far these gains reimburse the employer for the financial cost of profit sharing. The chairman of the South Metropolitan Gas Company of London writes, “I state unhesitatingly that the Company is recouped the whole of the amounts—some £40,000—paid as a bonus since the system was started.”[321] The managing director of the New Welsh Slate Quarry Company gives it as his personal belief “that we are recouping every penny of bonus and more;” and similar testimony comes from others.
Yet this is putting the matter on the lowest plane. The system “converts the industrial association of employer and employees into a moral organism, in which all the various talents, services, and desires of the component individuals are fused into a community of purpose and endeavor.”[322] A natural result, moreover, is a general elevation in the standards of morals. Most of all, in an individual way it is of help to the employee; “to assist a person in improving his condition by his own efforts is to make a man of him.”[323]
What can be learned from these successful experiences in profit sharing that will be of value in domestic service? The usual difficulties that beset the employer of domestic labor are lack of interest, desire for change, negligence, waste of time, extravagance in the use of materials, in a word, the absence of the industrial virtues. If these very difficulties—all of which exist elsewhere—are partially or entirely obviated by the employer of other forms of labor through the system of profit sharing, may it not reasonably be expected that they could be met in domestic service by the employment of similar means?
Domestic service, it is true, is not a wealth-producing occupation, but it is wealth-consuming probably beyond any other employment. The profit, therefore, must be negative, that is, economy in the use of time, materials, and appliances for work. It is in precisely these ways that profit sharing has been most successful, and the wage system most unsatisfactory. Under the wage system the employer of domestic labor pays for time rather than for quality of service, and employers therefore constantly complain that employees do not accomplish one half as much as they should, and employees that employers exact twice as much as can be done. Neither party to the contract under the wage system can have a true notion of the working value or the money value of time; thus it is not strange that the one requires more than can be performed, and the other does less than might be reasonably demanded. The same ignorance and carelessness prevails in the use of materials. The employer may provide the best the markets afford, but if the cook has never had brought home to her a realizing sense of the money value of these materials, she is not altogether to blame if she fries doughnuts in butter costing fifty cents a pound, and makes angel food daily when eggs are forty cents a dozen. The employer may also provide the finest of furnishings for the dining-room and china closet, but if the maid-of-all-work does not associate a money value with these furnishings, she uses table napkins for holders, and carelessly drops fine china into an iron sink. From the selfish point of view the chief interest of the employer is to keep the bills down and to get the greatest possible amount of service even at the cost of the greatest expenditure of human strength; among employees, it is to do sufficient work to retain a good place, and to use whatever materials are most convenient.
Mr. Nicholas Payne Gilman has well said, “The deficiency in the daily wage system as a motive power to procure the desirable maximum of effort and performance is extreme.” Precisely the same objections that hold in all other employments to the wage system hold as well in domestic service. In other occupations it has been seen that the almost universal testimony of those who have tried profit sharing is that the system results in economy in the use of materials, care in the handling of machinery and implements of work, and a feeling of partnership, the spur of which as a motive “is only excelled in sharpness by complete proprietorship.” Mr. Gilman sums up the advantages of the system when he says, “Profit sharing advances the prosperity of an establishment by increasing the quantity of the product, by improving the quality, by promoting care of implements and economy of materials, and by diminishing labor difficulties and the cost of superintendence.” In a word, whatever arguments can be advanced in favor of profit sharing in productive industries can be used with equal force in its favor in domestic service.
The application of the principle to the household is simple. It is possible to allow a fixed sum, as $50, $100, or $500 per month for living expenses, which shall include the purchase of all food for the table, fuel, lights, ice, breakages, and the replacement of worn-out kitchen utensils, and to allow a pro rata amount for guests during the month. If by care in the use of food materials, fuel, and kitchen and dining-room furniture, the expenses amount to $45, $90, or $450 per month, the $5, $10, or $50 saved can be divided according to a ratio previously agreed upon between the employer and the one or more employees. The cook is in the position to save the most, and therefore ought to receive the greatest percentage of the amount saved; but it is a part of the work of the waitress to be careful of glass and china, of the laundress not to waste fuel, soap, and starch, and of all, including parlor maid, seamstress, and nursery maid, not to waste gas, fuel, or food at the table, and therefore each employee is entitled to a share in the profits. Thus each keeps watch over the others to prevent undue waste, and the employees are given a personal interest in the establishment now so often lacking. In addition to this, it is possible to allow a gardener and a coachman who have taken special care in the improvement of lawns, gardens, and stables a small percentage on the annual appreciation of property. “Comprehension is wonderfully quickened by the payment of a bonus or two in cash, and there is no more efficient instructor than self-interest.”