Labor and capital co÷perate actively in production, while the other factors remain somewhat in the background. As we have seen, both labor and capital are essential to industry, and fundamentally their interests are reciprocal. But in spite of this basic harmony, there are many points of difference and antagonism between labor and capital. This chapter discusses the more important of these disagreements, and outlines some suggested methods of reducing or eliminating them.
182. THE FACTORY SYSTEM AND THE LABORER.—Wherever it has penetrated, the Industrial Revolution has concentrated large numbers of landless laborers in industrial establishments controlled by relatively few employers. Very early in the development of the factory system, the laborer saw that he was at a relative disadvantage in bargaining with employers. Not only does the average laborer lack funds to tide him over a long period of unemployment, but the fact that his labor is generally his sole reliance obliges him to secure work at all hazards. The anxiety and discontent of laborers have been increased by the realization that the factory system affords little opportunity for the average workman to rise to the position of an employer. Most laborers are unable to secure either the training or the capital necessary to set themselves up as independent business men.
183. RISE OF LABOR ORGANIZATIONS.—The risks and limitations which the factory system imposes upon the laboring classes have encouraged workmen to organize for the purpose of promoting their mutual interests. The individual gains, it has been found, when his interests are supported by a group of workmen acting as a unit, and bringing their united pressure to bear upon the employer. The labor organization has been the result of this discovery. A labor organization may be defined as a more or less permanent and continuous association of wage earners, entered into for the purpose of improving the conditions of their employment.
The first labor organizations in the United States were formed early in the nineteenth century, but it was not until about 1850 that the trade union assumed national importance. After 1850, however, and particularly after the Civil War, the trade union grew rapidly. In 1881 a number of national trade unions combined to form the American Federation of Labor. This body, while exercising no real authority over the trade unions comprising it, is nevertheless an important agency in co÷rdinating trade union policies throughout the country. It is important, also, as a means of formulating and expressing the aims and ideals of the working classes. The Federation had a membership of 2,604,701 in 1914, and in 1920 included more than 4,500,000 members. With the exception of the railroad brotherhoods, nearly all of the important trade unions in the country are affiliated with the American Federation of Labor.
184. RISE OF EMPLOYERS' ASSOCIATIONS.—The growing power of the trade union after 1850 stimulated the growth of employers' associations. In 1886 the first national employers' association was organized under the name of the Stove Founders' National Defence Association. Later there was formed a number of other important associations, including the National Association of Manufacturers, the National Council for Industrial Defence, and the American Anti-Boycott Association.
The primary purpose of the employers' association is the protection of the employers' interests against trade union aggression. Some of the associations are frankly hostile to the trade union movement, while others take the stand that the organization of laborers is undesirable only if the power of the trade union is abused. The promotion of friendly relations between labor and capital is increasingly an important concern of the employers' association.
185. WHAT THE TRADE UNION WANTS.—One of the basic aims of the trade union is either to raise wages or to prevent their reduction. Because of the constant shiftings of supply and demand, the prices of commodities are rarely stationary for very long. Over any extended period of time prices are either rising or falling. During a period of rising prices the workmen are at a relative disadvantage, [Footnote: Rising prices affect all who purchase commodities, of course, but here we are intent upon the position of the laborer only.] because they have to pay for commodities higher prices than they had anticipated when they contracted to work for a definite wage. In such a case, the union attempts to secure higher wages for its members. When, on the other hand, prices are falling, the workmen gain, because they do not have to pay as high prices as they had anticipated. In this latter case, the laborers attempt to maintain their advantage by opposing any reduction in wages.
The desire of the trade unions to improve the general condition of the working classes has steadily widened the program of organized labor. Shorter hours and better conditions of work are important trade union demands. Unions quite generally approve the principle of a minimum wage, [Footnote: The principle of the minimum wage is discussed in the next chapter, Sections 205-207.] at least for women and child workers. Formerly, and to some extent even now, the unions have opposed the introduction of labor-saving machinery on the grounds that it displaces workmen and hence causes unemployment. Union members generally prefer to be paid by the hour or by the day, rather than so much per unit of product. The reason given for the preference is that strain and undue fatigue often result from piece-work, as the system of pay on the basis of units of product is called. Trade unions universally demand that employers recognize the principle of collective bargaining, by which is meant the privilege of workmen dealing with the employer collectively or through the union. Very often, also, the unions demand the closed shop, that is to say, a shop from which all non-union employees are excluded.
186. WHAT THE EMPLOYER WANTS.—Price movements likewise affect the employer. But whereas the laborer is at a relative disadvantage when prices are rising, the employer tends to gain, for the reason that he secures for his product higher prices than he had expected. [Footnote: In a period of rising prices, the employer's costs also tend to rise, but generally not so rapidly as do prices.] Suppose, for example that a shoe manufacturer can make a profit if a pair of shoes sells for $4.00. If later the price rises to $5.00 and his expenses remain stationary or very nearly so, he reaps an unusually large profit. And whereas in a period of falling prices the laborer tends to gain, the employer often loses heavily, for the reason that he must sell at a relatively low price goods produced at a relatively high cost. If, in the case given above, the price of the pair of shoes falls from $4.00 to $3.00, while the expenses of the manufacturer remain stationary, or very nearly so, he may make little or no profit. Thus while prices are rising the employer attempts to maintain his advantage by resisting an increase in wages, while in a period of falling prices he seeks to cut down his expenses by reducing wages. In either case the immediate interests of workmen and employer are antagonistic.
Just as the growing complexity of the industrial situation has enlarged the trade union program, so the aims of employers have steadily increased in number and in importance. On the grounds that it restricts the fullest utilization of his plant, the employer very often objects to a shortening of the working day, even where there is a corresponding decrease in the day-wage. Some employers are unwilling to provide sanitary workshops for their employees, or otherwise to improve the conditions of employment. The employer generally objects to the minimum wage, as constituting an interference with his "right" to offer workmen what wages he chooses. Collective bargaining is accepted by many employers, but many others insist upon the right to hire and discharge men as they see fit, without being forced to consider the wishes of the union. Employers often oppose the closed shop, and insist upon the open shop, an open shop being defined as one in which workmen are employed without regard to whether or not they are members of a union.