Labour policy—false and true

by Lynden Livingston Macassey

The Settlement of Wages

Wages and conditions of employment must always be matters of collective bargaining between employers and employed and not for superimposition by Government upon either or both of them. In my view, national settlement of wages and conditions in an industry is essential to wage stability. A national settlement does not, however, involve a uniform national wage. Complete discussion and national settlement entail for each industry the organization of all the employers into one effective federation, and of all the workers, not necessarily into one Union, but into Unions which are embraced in one executive federation. Only where responsible representative and disciplined federations of employers and workers exist in an industry can there be effective national negotiation of wages questions, or in industries in which Whitley Councils exist, between the two sides of the Council. I look forward to the time when the organization in each industry for the settlement of all industrial conditions will be developed into an organization consisting of representatives of (1) employers; (2) administrative and technical and supervisory personnel; (3) Trade Unions, and (4) consumers. Questions affecting the industry as a whole would be settled by all four sections; questions, e.g. of wages, by the representatives of the employers, Trade Unions and consumers. If a wage agreement is negotiated in any industry providing for excessive wages and therefore high costs of production and high prices, is it to be unchallengeable when the industry is a public necessity? There were many such agreements made during and immediately after the war. I see no way of reviewing such agreements when once made; all attempts by Government to do so under the Munitions of War Acts were unsuccessful. The only practicable method of safeguarding the consuming public is to have, as I suggest, efficient representatives of the public present at, and entitled to take an active part in, the joint conferences of federated employers and Unions when wages are being negotiated, as on the Railway National Wages Boards.

Systems of Remuneration

No one can dogmatize and say what system of industrial remuneration should be adopted, whether time, piece-work—collective or individual—premium-bonus, bonus on output, profit-sharing, or co-partnership. That all depends upon the conditions of the industry, its peculiar psychology, especially its past history; it must always be a matter for negotiation. But I am the strongest believer in a fair system of payment by results, as being, under proper safeguards, the best for the worker, the employer and the consumer. A steel worker or boilermaker will swear by it; a carpenter or joiner calls it “the device of the devil.” Hence my reference to industrial psychology.

What is a Fair Wage?

Wages are, and can only be, payment for work done and services rendered by the “wages staff.” There must always be a maximum limit to wages and a minimum. The employers’ maximum is a wage beyond which any advance, with other costs of production remaining constant, would prevent the marketing of the product at a commercial profit commensurate with the nature of the enterprise. The theoretical minimum is a “living wage,” i.e. bare cost of subsistence, but the Trade Union minimum wage, which is the practical minimum in industry, is much higher than the subsistence wage. It is a wage which in the particular industry provides for subsistence for the worker and his or her dependants, including therein food, rent, fuel, light, clothing, fares, Trade Union subscriptions, etc., and reasonable enjoyment and recreation. Trade Union minimum rates for different trades varied before the war from one another by “vocational differentials.” A skilled man’s rate exceeded that of an unskilled man by a recognized excess; the excess is the trade differential in respect of the skill required of the particular tradesman, the length of apprenticeship necessary to acquire it, the nature of the occupation and so forth. The higher rate of the skilled man is naturally reflected, as statistics show, in a higher standard of living. The whole problem in arriving at a fair wage is to determine at what point, if any, between the existing Trade Union minimum and the employers’ maximum, the wage ought to be fixed, in justice to the workers, employers and the public.

By way of preliminary I would emphasize that no fair wage can be fixed on any basis of a priori reasoning. It involves constructing a theoretical household budget, adopting an empirical standard of life, with no relation whatsoever to the normal circumstances of any section of the industrial community, ignoring economic conditions, and assuming that industry can or ought to pay a sufficient wage to maintain that standard. That is the fatal method of the doctrinaire. The usual procedure is for the Trade Unions to demand an increased wage, and swear by all the gods that the employers can easily pay it. The employers then assert with equal emphasis their inability to pay any increase. Sometimes a compromise is reached and sometimes not. There should be, and indeed is, a better method of procedure.

First, there ought to be ascertained the wages which the industry is economically able to pay at the then prevailing market prices for its product; we may conveniently call them “ability wages.” They cannot be determined by picking out and assuming as typical—a frequent stratagem of Labour—individual firms which are making substantial profits. The industry must be taken on a national, it may be sometimes on a district basis, extreme cases at both ends of the scale ruled out, and a proper estimate struck on methods of accountancy, making due allowance for the trade outlook and for all the expenses and risks present and prospective, which, from the conditions of the industry in question, fall upon the employers. Labour insists on the Trade Union rate of wages being paid by all firms, whether making large profits or none at all. To consider therefore the industry as a whole is equitable. Employers making exceptional profits cannot be taken as norms for wages; so far as their gains are contrary to public policy, they can only be dealt with by a “wise and wary Chancellor of the Exchequer.” That an “ability to pay” estimate can be prepared in respect of an industry by competent joint accountants on a basis convincing to Labour has more than once come prominently within my own practical experience. The great point is to prove to the workers that they are getting a fair share of the product of industry under its then existing conditions. It is much more important to satisfy them on that point than to pay them a high wage. If they get a higher wage than the industry can pay, and are not satisfied, they will firmly believe that a still higher wage could and ought to be paid. There is only one way to prove the equity of the wage—to put all the cards on the table, and show the Trade Union representatives at the conference what the exact conditions of the industry are, and what are the maximum wages which the industry as a whole can pay.

Secondly, an exact statement is required of the wages paid in other industries to workers comparable with the workers in the industry in question—these may be termed “comparable wages.” They are obtainable from statistics compiled by the Ministry of Labour, but not published in collated form.