Accepting, as will some sections of Labour, that their demands cannot be met out of employers’ profits on present output, the alternative is, they say, that the manufacturer must raise his selling price by an amount sufficient to cover the extra cost. In this it is assumed, of course, that the rate of production remains the same. It is a fixed idea that every manufacturer and the owners in every industry can raise prices without any difficulty whatsoever. In discussing this delusion, as I have frequently done, it becomes quite obvious that workmen do not appreciate the effect which an increase in the cost of production has in reducing the ambit of the market for the sale of the commodity in question, or in lessening the demand for it in a specific market, with consequential curtailment of employment, and undermining of standard rates of wages. The regulation retort is that any trade not able to pay proper wages ought not to live. That, of course, depends on what is “proper,” When the wages are starvation wages, every one will agree the industry ought not to live. When the wages, though sufficient to cover (1) subsistence, are not sufficient for (2) reasonable amenities of life, nor to allow adequately for (3) trade-skill, there may be difference of opinion, according to the circumstances of the particular industry, whether it should be maintained or not. When, however, full and adequate remuneration is paid to cover (1), (2) and (3), it is suicidal policy for Labour to insist on such advances in wages as must kill the industry.
In advancing the contention that if the employer cannot, out of his existing profits, pay the advance on wages claimed, it should be added to the sales price, workmen invariably repudiate as wholly immaterial the resultant effect on trades other than their own, and especially on the consuming community. If those claiming the advance are engaged in what is inelegantly called a “key industry,” that is to say, where their output is raw or semi-raw material for other industries, it is obvious that any rise in its cost may inflict serious damage on both employers and employed in the dependent industries. But the workman’s retort is “let them pass it on.” I have had that put to me on hundreds of occasions. The effect on the community is dismissed as quite irrelevant.
During the war, the fashion of general advances in wages to cover increased cost of living came into vogue. The consequent reaction on prices set up the “vicious circle” known to all economists where a general advance in wages raises prices, thus forcing up the cost of living, and so creating a fresh demand for a further increase in wages. Over and over again by simple illustrations I have tried to make this “vicious circle” clear to workmen. I have always been much impeded by one circumstance. In the early days of the war, in certain districts, as soon as a general advance in wages was awarded by the wages tribunals, or conceded by Government, the various lodging-house keepers put up their rents for rooms, or their charge for board. This was stigmatized by Labour as “profiteering.” Arguing by analogy, the workpeople contended that when a general rise in prices followed a general advance in wages, it was entirely due to profiteering. It was never admitted by the workmen that any part of the rise in prices was the natural, inevitable, logical result of the general advances in wages, through the increase of purchasing power operating on the same supply of commodities. War experiences have equally confused workmen’s minds with regard to the effect of high wages on the volume of employment. Whatever glimmering suspicion the workmen had before the war that an advance in wages in many industries tended directly, through increased cost of production, to bring about unemployment, has now practically been dissipated by the war. Time after time, I have been told that none of the general advances in wages during the war has ever caused unemployment. The explanation, of course, is that during the war workmen were not to any great extent producing commodities for an ordinary commercial market, but munitions of war for the Government, and all they could turn out the Government could take, so insatiable was its demand.
The Workers’ Belief in Restricted Output
We come to another dangerous and widespread fallacy, the assumed advantage of restricting output. This declares itself in many varied forms. One of the commonest is a definite limitation on the tonnage, or feet lineal or square of the day’s work. When the day’s work is completed the workman, if paid on time, will frequently remain at work, but doing nothing until the “hooter goes.” In other cases if paid on a piece-work basis, the workman will sometimes leave the shop after his day’s work or “stint” is finished. I have investigated cases where workmen coming on at 7 a.m. finished their day’s work and went home by 10.30 or 11 a.m. Other methods of reaching the same end are less open. The operative, instead of finishing his work early and then allowing his machine “to cut air” for the rest of the day, will with nice calculation slow down all day long so as to spin out the allotted day’s work more or less uniformly over the working day. Industrial experience during the war has proved the existence, to an almost inconceivable extent, of this latter method of limiting production. Perhaps I can best illustrate it from some cases within my personal knowledge. In one instance some boys straight from a board school were put on to do a simple operation from which men had been withdrawn for more arduous duty. Working at the men’s piece-prices, they averaged £4. 15s. per normal working week against the men’s £2 10s. That meant the boys turned out—nor were they any the worse for it physically—almost twice the men’s output. Women I put on to replace men at some simple machining operations made, after a short period of training, £6-£10 per week, against the men’s £4-£5. The women were paid the men’s piece-prices for the operation. In another case men who were working on piece-work, after learning of the announcement of the Minister of Munitions that under no circumstances would piece-prices be “cut,” speeded up their output by 120 per cent. These are only a few selected illustrations out of a large number.[22] They are concrete exemplifications of the appalling extent to which the false doctrine of limiting output is rampant in industry—operative as an active orthodox Trade Union principle.
By limiting output the workman genuinely believes that he is performing a moral duty to himself and to his trade. He argues first, that he is reducing unemployment by making the work go round; secondly, that he is keeping up the value of his handicraft by putting a premium on its application. Workmen have described to me the difference between possible and actual production as being “their reserve fund.” Over and over again this policy has been justified to me by reference to the action of commercial trade combinations which pool orders and limit the output of the works of certain of their members in order to ensure business for other members less fortunately situated, and also by reference to groups of manufacturers who systematically keep up prices by “keeping the bottom in the market” through restricting the quantity of their output that is offered for sale. The workmen will tell you in words to which no economist can object that value is due to utility and to limitation of supply. What he overlooks is that all that is thereby established in practice is a minimum rate of wages, and that maximum earnings depend on maximum output. There are many classical instances, well within memory, where unemployment in certain trades was in fact almost entirely abolished by restricting the output of those employed, notably by discontinuing the then existing systems of payment by results—“blood money” as it was called. These recollections live. But, as a matter of fact, these instances prove nothing. They occurred just about the commencement of a depression in trade, and, in fact, the extra cost of production subsequently caused by the limitation of output, accelerated the unemployment in those very trades. Still working men, like most men, argue from particular cases of personal experience to universals.
The only way to attack the heresy is from the concrete illustration drawn from the United States of America. There restriction of output is not merely unknown, it is definitely repudiated by the Trade Unions. Unfortunately, many labour intellectuals who have no knowledge of American conditions pervert the facts and hold up to execration the industrial organization in the United States of America. “Scientific management,” they have told the British workman, “is merely cunningly devised slavery in which the shackles of serfdom are so precisely adjusted that the workman is a mere cog, helplessly and inhumanly enmeshed in a grinding anti-social mechanism.” The average workman, however, pays little attention to rhetoric and rodomontade, from whomsoever it may emanate, and I have succeeded in satisfying bodies of workmen as to the value of production by taking an American establishment and giving the output, hours and remuneration per man per annum, or any other convenient period of time, along with the output, hours and remuneration per man for the same period in a comparable establishment in England. The output will be expressed in pounds sterling of wholesale market prices. This really does sink in. Then the moral can be driven home. The vital truth can be shown that in a well-run establishment, as output increases, the cost of the fixed charges per unit of production decreases. Consequently every percentage increase in output—assuming no “softening” of the selling price—results in a larger percentage increase in the amount available for division between workmen and employer. If that division is effected on equitable lines, there is an obvious advantage to the worker. That is why the workman in the United States of America can take home much higher real earnings than his brother in this country. It is not difficult to satisfy the hard-headed practical English worker that these higher American earnings are neither manna dropped from heaven nor doles from more compassionate employers.
If there is scepticism as to the value to Trade Unions of production, there is complete apathy as to the necessity of production for the nation’s sake. What is wanted is to secure conviction of the need by simple homely illustrations. The extent to which in any community increased production conduces to plenty, and plenty to employment, good wages, a higher standard of living, and low prices is beyond the present ken of Labour. In other words, the proposition that the prosperity of a country depends upon the production in the country obtains no credence whatsoever; it is generally treated by working men as a sheer irrelevance.
On the other side of the account some reactionary employers, and under-managers and foremen, cling to the hoary fallacy that however high the output may be, workmen are never worth high earnings. Such persons seem to think that the payment of high wages, even when accompanied by high output, is a reflection on the management of the shop. They constantly argue that high wages degenerate the workmen, and lead to lost time. In order to reduce earnings, when they are considered to be inordinately high, the piece-prices are “cut,” and time-allowances are “docked.” This is a peculiarly English folly. No American employer would dream of it. The results in England are disastrous. With the fear of having his trade-prices reduced, the workman will not “go all out,” but will limit output and maintain his earnings at such a figure as he thinks will not stimulate the employer to reduce prices or time-allowances. In commencing a piece-job the operative will deliberately go slow so as to get a high price fixed, and thereby allow for any future cutting. The employer ought to know that the more jobs that pass through or over a workman’s machine or bench in the shift or working day the greater is the number of jobs over which standing and fixed charges and the invariable portion of the working costs are apportioned, and, therefore, the smaller is the debit on each operation and the lower is the cost of production. If the employer can get high production, it is to his direct interest to allow high earnings for it. This is well accepted by American employers, and represents normal shop practice in the United States of America.