To the Editor:
In his letter to The Survey on the subject of fixing wages by law, James Deegan says: “The report of the United States Bureau of Commerce and Labor for 1910 states how labor received only 20 per cent of the value of the product which it served to create.”
Considering carefully this rather surprising statement, I came to the conclusion that the writer referred to the report of the Census Bureau in the Department of Commerce and Labor, presenting the results of the manufacturers census of 1910. To be sure, this report does not make any such statement as that which Mr. Deegan attributes to it nor could the statement be properly based upon the statistics which it publishes. On the contrary, the census figures conclusively disprove this statement, showing it to be a gross perversion of the facts.
It is true that the total value of products reported by the census of manufacturing industries was a little over $20,000,000,000, while the amount paid out for wages and salaries was a trifle over $4,000,000,000, so that the latter amount was about 20 per cent of the former.
If Mr. Deegan had stated that the amount paid to labor employed in manufacturing industries represented 20 per cent of the total value of the products turned out by these industries, the statement would have been formally accurate, although it probably would be misleading even then. The statement is, however, that labor received only 20 per cent of the value of the product which it served to create.
Even with a superficial knowledge of economics and industrial processes one ought to perceive that the laborers employed in manufacturing industries by no means create the full value of the products which these industries place upon the market. The laborer in the factory does not create the raw material which the factory uses; labor on the farm, in the mine or in the forest entered into that.
Now the report of the census shows that while the value of the product produced by the manufacturing industries of the United States was $20,700,000,000, the cost of the materials consumed in the manufacture of these products was $12,200,000,000 and that the value of the products, less cost of materials, was therefore about $8,500,000,000. The value created by the laborers employed in these industries could not possibly exceed this sum and would be considerably less than this if any allowance were made for wear and tear or depreciation of plant and machinery or fuel consumed or for other expenses which enter into the value of the final product.
If, however, we credit laborers with having produced the full value represented by the difference between the cost of materials and the final value of products it follows that the $4,000,000,000 which they received represented not 20 per cent but about 50 per cent of the value which they created.
If we deduct from the final value not only the materials purchased but also the miscellaneous expenses reported by the census, none of which represent values created in these industries, the proportion received by the laborers advances to about 65 per cent. And still no allowance is made for replacement of capital.
Mr. Deegan’s proposition for regulating wages proposes to award the laborers a minimum of 33⅓ per cent. It is evident that they are much better off than this under the present regime and without any state regulation of wages.