The Settlement of Wage Disputes Part 13

FOOTNOTES:

[136] See for examination of this question, "Report of Wage Boards and Industrial and Conciliation Acts of Australia and New Zealand." E. Aves (1908), page 38. Mr. Henry Clay in a review of the wage position before the National Council of the Pottery Industry (Great Britain), made an interesting statement in this regard. He said "... the one great lesson which the war taught everybody (including Government Departments) was that it was dangerous to make a change in the wages or basis of earnings of one section of workers or of one industry unless they considered what would be the effect on all related cla.s.ses and grades of workers."

Printed in the Staffordshire _Sentinel_, Oct. 8, 1920. See also Chapter 39, Lord Askwith's "Industrial Problems and Disputes" for a narrative account of the trouble caused by sectional wage advances during the war.

[137] Letter printed in London _Times_, January 13, 1920.

[138] Report of the Coal Industry Commission (1919), Majority Report, pages 15-16. For another interesting case, see that of Various Toronto Firms vs. Pattern Makers under the Canadian Industrial Disputes Act, in which case the pattern makers claimed differential treatment over machinists and molders. Reported in Jan., 1919, _Canadian Labor Gazette_.

[139] The various courts in the Australian dominions tended on the whole to confirm existing differentials, occasionally changing the relative position of particular groups, when it has seemed clear to the court that the wages of these groups as compared to other groups is "unreasonable" considering all those factors which are considered to form the ground of "reasonableness" in the matter of differentials. Thus Justice Brown of the Industrial Court of South Australia has expressed himself on this very subject. "In the matter of such perplexity some guidance is afforded to the court by custom. It seems to me I cannot do better than proceed on this basis. I shall state the preexisting wage, consider whether it is prima facie unreasonable applied to preexisting conditions, and then if I find it not prima facie unreasonable, I shall consider whether any variations of the wage should be made in view of conditions now existing." (Hook Boys' Case--South Australia Industrial Reports, Vol. I, 1916-7, page 29.)

[140] It is in this light that the Commonwealth Court of Australia looks upon its secondary wage. "The secondary wage is remuneration for any exceptional gifts or qualifications not of the individual employee, but gifts or qualifications necessary for the performance of the functions." H. B.

Higgins, "A New Province for Law and Order," _Harvard Law Review_, March, 1915.

[141] Mr. and Mrs. Webb have described aptly the usual trade union calculations in the formulation of their claims. "The Trade Unionist has a rough and ready barometer to guide him in this difficult navigation. It is impossible, even for the most learned economist or the most accomplished business men, to predict what will be the result of any particular advance of the Common Rule. So long, however, as a Trade Union without in any way restricting the numbers entering its occupation, finds that its members are fully employed, it can scarcely be wrong in maintaining its Common Rules at the existing level, and even, after a reasonable interval, in attempting gradually to raise them.... To put it concretely, whenever the percentage of the unemployed in any particular industry begins to rise from the 3 or 5 per cent characteristic of 'good trade' to the 10, 15 or even 25 per cent. experienced in 'bad trade' there must be a pause in the operatives' advance movement." "Industrial Democracy,"

pages 738-9.

[142] H. B. Higgins, "A New Province for Law and Order,"

_Harvard Law Review_, Dec., 1920, page 114.

[143] Justice Higgins, the head of the Commonwealth Court of Australia, has recently resigned because of the action of the legislature in providing that the executive may set up special and independent tribunals of appeal above the Court of Arbitration. His letter giving the reasons for his resignation (printed in the Melbourne _Argus_, Oct. 26, 1920), gives most convincingly the case for freedom from political interference. One pa.s.sage of explanation in it is as follows:

"On the other hand, a permanent court of a judicial character tends to reduce conditions to system, to standardize them, to prevent irritating contrasts. It knows that a reckless concession made in one case will multiply future troubles. A union that knows that a certain claim is likely to be contested by the court will bring pressure to bear for a special tribunal; and the special tribunal appointed by the government will be apt to yield to demands for the sake of continuity in the one industry before it, regardless of the consequences in other industries. The objectives of the permanent court and of the temporary tribunals are, in truth, quite different--one seeks to provide a just and balanced system which will tend to continuity of work in industries generally, whereas the other seeks to prevent or to end a present strike in its own industry." See also Lord Askwith's "Industrial Problems and Disputes" for another expression of the same view.

CHAPTER XI--THE REGULATION OF WAGE LEVELS--(_Continued_)--

WAGES AND PRICES

Section 1. The scheme of wage relationship must recommend itself as just to the wage earners and the community in general. The ultimate distributive question to be met is the division of the product between profit and wages.--Section 2. Provision for the adjustment of wages to price movements would aid, however, towards reaching distributive goal. A policy of adjustment suggested.--Section 3.

The difficulty of maintaining scheme of wage relationship of wages adjusted to price movements. The best method of adjustment a compromise.

1.--In the last chapter the reasons for seeking an ordered scheme of wage relationship in industry were discussed, and some suggestions were made in regard to such a scheme. One essential to its success was pointed out. That is, that under it the distribution of the product of industry should recommend itself as just to the wage earners and the community in general. The possibility of satisfying this requirement remains to be considered.

The ultimate distributive question to be met in any attempt to formulate a policy of wage settlement is the distribution of the product of industry between wages and profits (rent incomes, in the Ricardian sense, being left out of the question). It is entirely conceivable that a policy of wage settlement should be put into practice which would take note only of the facts of this relation. However, there are distinct advantages to be obtained by taking note of an intermediate relation.

That is the relation between wages and changes in the price level.

The relation between wages and general price movements has been discussed. It has been seen that movements in the general level of prices affect the outcome of distribution. They occasion changes in the distributive situation; and these changes may be desirable or undesirable--having reference to the distributive result that is sought.

Any plan by which such changes as are undesirable are prevented from taking place would contribute, therefore, to the attainment of the aims of the proposed policy; and would be a valuable adjunct to the policy.

The conclusions reached in the previous discussion on this subject make up a plan suitable for the purpose. They may now be fitted into the body of these proposals. Then in the following chapter that most difficult problem of wage settlement can be considered--the problem of governing the distribution of the product between profit and wages in order that a just distribution may result.

2.--The results of the discussion in Chapter V concerning a plan for the adjustment of wages to price change may be applied at this point without further comment.

The central authority in its decisions should take note of all changes in the approved price index number since the time when the wage rates which are up for reconsideration were fixed. It should then in its awards adjust these wage rates to price changes in accordance with the following policy. It need hardly be explained that other considerations besides the fact of price change may enter into the award, as the adjustment of wages to price change is merely one part of a larger policy.

The measure of price change by which the central authority should be guided--that is, the approved index number,--should be the movements of the index number of the prices of all important commodities produced within the country; this index number to be so weighted as to give a defined importance (50 per cent. suggested) to the prices of those cla.s.ses of foodstuffs, clothing, housing accommodations and other commodities, upon which the wage earners spend the larger part of their income. It will be noted that this measure of price change is the same as that used in the adjustment of wages prescribed under the living wage policy. And, as was recommended in the discussion of living wage policy, so it is recommended here, that adjustments should not be undertaken unless the index number of prices has moved at least 5 per cent., and that adjustment should not be more frequent than twice a year.

In regard to the actual policy of adjustment to be pursued in periods of rising and falling prices, here also, save in one important respect, the same policy that was sketched out for living wage adjustments should be followed.

3.--The one point in which it may be advisable to depart from the policy laid down for living wage adjustments is in regard to the _amount_ of wage change that should be undertaken for movements in the price level.

In the earlier discussion it was suggested that wherever wages were adjusted to price changes, the adjustments should be on the basis of equal percentages. If this basis were to be used in adjusting the wages of all other groups of workers it is evident that during periods of changing prices there would be a different set of wage differentials for every position of the price level. And, furthermore, during periods of rising prices, the lowest paid cla.s.ses of workers--those who could do least to meet the rise in the cost of living by changing their consumption habits--would receive the smallest wage increases.

A great diversity of practice characterized the attempts at adjustment which were made during the period of rapid price increase inaugurated by the war. No two agencies of adjustment used the same basis. Possibly the most widespread practice has been to increase all wage levels by the same _absolute_ amount--which amount has been ordinarily calculated as a percentage of some basic wage (frequently the living wage). The advantages of that method are firstly, its simplicity, and secondly, the fact that if it favors any groups, it favors those whose needs are greatest. Justice Higgins has justified it as follows: "When the Court has increased the basic wage because of abnormal increase of prices due to the war it has not usually increased the secondary wage. It has merely added the old secondary wage, the old margin, to the new basic wage. It is true that the extra commodities which the skilled man usually purchases with his extra wages become almost as indispensable in his social habits, as the commodities purchased by the unskilled man, and have no less increased in price; but the Court has not seen fit to push its principles to the extreme in the abnormal circ.u.mstances of the war, and the moderate course taken has been accepted without demur."[144]

Still as a permanent policy, the suitability of this method is not beyond question. The problem to be faced in the choice of method is, after all, this. Given a scheme of wage differentials, which are in accord with certain defined principles, at a given position of the price level, what method of adjustment is best calculated to produce such differentials as will be in accord with these principles, at all positions of the price levels? That sounds like a problem in astronomy.

But it is not. It can be more understandably, but less accurately, put by asking, what system of adjustment is best calculated to maintain the same _relative_ position of the various groups of wage earners throughout all price movements?

Under either of the two methods touched upon--that of change by equal percentages, and that of change by the same absolute amount for all groups--the differentials cannot be held in close accord with any such original principles of wage relationship as have been suggested. It cannot be helped. We have come to another point at which the aims of policy can only be imperfectly realized.

It seems to me that the best method would be some sort of compromise between the two alternatives that have been presented. A compromise would make allowance, firstly; for the fact that in times of rising prices, those groups whose wages are lowest cannot meet the rise in the cost of living by changing their consumption habits as easily as can the more fortunately placed groups, and secondly; in times of rising prices, the movements of the wage earners from industry, or from occupation to occupation are governed, within limits, by calculations of the absolute change in the wages paid for different kinds of labor, rather than by calculations of relative change. It nevertheless would prevent the relative position of different grades of labor from changing so radically as to lead to great discontent and possibly to derangements in the distribution of the labor supply.

It can be claimed, in addition, for this compromise method that its results would be in accord with the general trend of changes in the differentials that have occurred in the past in periods of rapid price movement. An inspection of the available material seems to show that in times of rapidly rising prices the _relative_ differentials between the lower grades of wage earners and the upper grades decrease, while the _absolute_ differentials increase--and the reverse in times of rapidly declining prices. They are in accord, for example, with the results obtained by a.n.a.lyzing the course of differentials during the war (1914-1919) in the industries for which wage data was gathered by the National Industrial Conference Board--"Report Wartime Changes in Wages."

The data extends over the Metal, Cotton, Wool, Silk, Boot and Shoe, Paper, Rubber and Chemical Manufacturing Industries. If the wage earners are cla.s.sified into five groups according to their pre-war wages, it is found that the relative wages of the least paid groups (pre-war standards) increased most, and so on in order to the best paid groups, the relative wages of which increased least; the absolute increases, however, are in exactly the opposite order.[145] They are borne out also by Mitch.e.l.l's studies of price movements in the United States.[146]

In conclusion, it may be said, that no matter which of the above methods is adopted, it should be applied with as much consistency as can be attained. The process of wage adjustment to movements of the price level cannot be left in the field of guess work, where it now rests, without giving rise to much quarreling and discontent.

FOOTNOTES:

[144] H. B. Higgins, "A New Province for Law and Order,"

_Harvard Law Review_, Jan., 1919. The Commission acting under the Canadian Industrial Disputes Act, carried this line of reasoning to its further logical consequences by awarding in some cases higher _absolute_ increases to the lowest paid men, and so on up the scale to the highest paid men who received the smallest increase. The large increases granted to the lowest paid men were justified by the Commission as necessary to bring their wages up to a living wage level. See, for example, the Report of the Commission on Disputes in Coal Mining and Other Industries in Nova Scotia. _Canadian Labor Gazette_, July, 1918. For a similar policy based on the same grounds, see the "Arbitration Award in Certain Packing Industries in the United States." _U. S.

Monthly Labor Review_, May, 1918.

[145]

The figures are:

----------------------------------------------------------- (Wage groups) (Group average) 1914, wages Relative increase Absolute increase, earnings per hour of wages earnings per hour ----------------------------------------------------------- .15-.20 208% .193 .20-.25 187% .188 .25-.30 185% .230 .30-.35 184% .266 .35-.40 174% .268 -----------------------------------------------------------

Such figures as these are not, of course, sufficient ground for confident generalization, but they support an imputation that the compromise method does furnish the best solution of the difficulties the problem presents.

[146] See W. C. Mitch.e.l.l, "Business Cycles," page 134. Also W. C. Mitch.e.l.l, "History of the Greenbacks," pages 33-37, 123-145.

CHAPTER XII--THE REGULATION OF WAGE LEVELS--(_Continued_)

WAGES AND PROFITS

Section 1. The profits return in industry, under any policy of wage settlement, will be closely scrutinized.--Section 2. The possibility of measuring a "fair" profits return for all industry discussed. A method suggested.--Section 3. Would the principles of wage settlement worked out so far, produce a fair profits return?

An open question.--Section 4. The scope and form of any measure designed to a.s.sure the desired distributive outcome can be discerned.--Section 5. The various steps in the formulation of such a measure reviewed. A measure tentatively suggested.--Section 6.

The difficulties of calculating wage changes called for under the suggested measure.--Section 7. The chief practical weaknesses of the suggested measure examined.--Section 8. It would be open to theoretical criticism also. The alternatives even less satisfactory.