Labour policy—false and true

Many of our industrial difficulties to-day are due to the effect that the war, and especially the measures which it was necessary for Government to take during the war, have had upon the psychology of the workers. To attempt a description of those measures in their entirety would be wholly outside the scope of this book; those who wish to study them will find a full and lucid description in Labour Supply and Regulation, by Mr. Humbert Wolfe, C.B.E., shortly to be published by the Oxford University Press. I am only concerned to deal with them so far as they provide guidance for future policy.

Co-operation between Employers and Unions at Beginning of War

The most remarkable feature of the early days of the war was the spontaneous co-operation between employers and workpeople. On August 4, 1914, the Clyde shipbuilding and engineering employers and employees unanimously agreed to recommend their respective constituents to assist in every possible way all firms employed on urgent Government work. On August 10, a similar recommendation was adopted by the shipbuilding and engineering employers and employees on the Tyne. The matter was carried still further; on August 25, at a Joint Committee of the Parliamentary Committee of the Trades Union Congress, the Management Committee of the General Federation of Trade Unions and the Executive Committee of the Labour Party, the meeting resolved that a strenuous effort should be made to terminate all existing trade disputes, and that whenever new points of difficulty should arise during the war, a determined attempt should be made by all concerned to reach an amicable settlement before resorting to a strike or lock-out. The spirit of this resolution was carried into immediate effect. In July 1914, there were in existence over 100 trade disputes, implicating 72,000 men; this number fell to twenty during August, in which only 9,000 workpeople were concerned; at the beginning of 1915 the number was reduced to ten, and in February 1915, to none at all. The number of fresh disputes which arose between August and December 1914, was very small. That showed the effect that clear appreciation of the national needs had both upon employers and employed.

The Unsettling Effect of Shortage of Labour

This happy state, unfortunately, did not long continue; and looking back the reasons are now quite clear. When the war broke out unemployment was generally feared, so much so that a Government Committee on the Prevention and Relief of Distress was appointed which invited mayors and provosts throughout the country to form local committees to deal with unemployment. The Local Government Board urged local authorities to expedite public work; even the Director of Army Contracts appended to Government contracts a memorandum advising contractors that in executing the work they should arrange for the employment of as large a number of men as possible instead of working overtime. By December 1915, not unemployment, but a grave shortage of skilled engineering workmen proved to be the national difficulty. Various attempts were made to remedy the shortage; first, by transferring skilled men from commercial work to munitions work; next, by obtaining the release of skilled men from the Colours; thirdly, by importing skilled Belgian refugees and mechanics from Canada; fourthly, in some districts, by forming “king’s squads” or mobile companies to work wherever they were most needed. All these methods proved quite inadequate and the sole remaining course left open was to make the best use of the skilled men who were actually available, that is to say, to remove them from work on which unskilled men or women could be employed and up-grade them on to the most difficult skilled work which only a tradesman could undertake, or put them as supervisors over the unskilled labour so brought in. This is what was popularly known as “dilution,” but its successful introduction involved a definite suspension of Trade Union customs.

In the late autumn of 1914, it was discussed at various conferences between the employers’ federations and the unions, but without success. In January 1915, the Government entrusted the problem to the Board of Trade, and in February the Committee on Production under the chairmanship of Lord (then Sir George) Askwith was appointed to formulate a programme for Government action. It is easy, of course, to be wise after the event, but it was an unfortunate circumstance, and deprecated by employers themselves, that it should, in the first instance, have been left to “Capital” to propose to the Trade Unions suspension of customs and practices which the Trade Unions had spent years in establishing, and which were regarded by the average workman as the bulwarks of his trade rights. All these customs, for example, the limitation of apprentices; the restriction on the working of certain machines by skilled men only; the remuneration of overtime; the limitation of output; the exclusion of women and also of men who had not served an engineering apprenticeship, were designed for the purpose of building up a system under which the Trade Union craftsman would have a monopoly of his trade, and be secured as far as possible against unemployment. It was regarded by the men as the natural instinct of every employer to break through these rules, and so, by securing the right to bring in unskilled labour, to reduce the standard of wages of skilled men. In spite of all undertakings by employers that the alterations in working conditions would be only for the period of the war, the workmen were never convinced that such measures were really necessary in the interests of the country or anything but devices of unscrupulous employers. Had Government in the first instance undertaken the negotiation of these proposals, and not left it to the employers, the history of munitions production would have been very different.

The “Treasury” Agreements of March 1915

It was the Trade Unions themselves who represented to the Government that if anything was to be done in the direction of suspending trade customs, the Government would have to take the matter into their own hands. So, in March 1915, a conference was held at the Treasury, when the Cabinet made a direct appeal to the Trade Unions of the country, and concluded a treaty known as the “Treasury” Agreement which, had it been successful, would have secured for the war period a suspension of strikes and of all restrictions upon output. The treaty, however, turned out to be completely ineffective, and the cause is illuminating. At the beginning of March the cost of living had gone up, according to the Board of Trade statistics, to 15 to 20 per cent. above the July 1914 figure. There was a general outburst throughout the country against profiteering; Labour reprinted and circulated Mr. Bonar Law’s famous statement that “well-managed ships to-day are making simply enormous profits, and those profits come from the very cause for which the people of this country are making sacrifices in every direction and even giving their lives” (Parliamentary Debates, 1915, Vol. 69,793). The result was an immediate increase in strikes. The following were the stoppages of work reported to the Board of Trade:

Number of disputes in progress at beginning of 1915, 10.

The Limitation of Employers’ Profits

The Amalgamated Society of Engineers was represented at the Treasury Conference; its representatives, however, had been instructed not to agree to any scheme until they had reported it to, and obtained upon it the instructions of, their Executive Council. On that becoming known to the Government, the Chancellor of the Exchequer convened another conference on March 25, 1915, at the Treasury with the Amalgamated Society of Engineers, and a further agreement was there signed. At the conference the Amalgamated Society of Engineers insisted that the Government should take steps to regulate employers’ profits, arguing that it was unfair to prevent the workman from using his tremendously increased economic power and at the same time leave employers free to use theirs. A supplemental agreement was then made with the Amalgamated Society of Engineers containing this clause: “That it is the intention of the Government to conclude arrangements with all important firms engaged wholly or mainly upon engineering or shipbuilding work for war purposes under which their profits will be limited with a view to securing that benefit, resulting from the relaxation of trade restrictions or practices, should accrue to the State.” The national need for limiting employers’ profits had been emphasized previously by the Committee on Production. This recommendation had the strong approval of Lord Kitchener; speaking in the House of Lords on March 15 (see Parliamentary Debates, 1915, H. of L., Vol. 18,723) he said: “Labour may very rightly ask that their patriotic work should not be used to inflate the profits of the directors and shareholders of the various great industrial and armament firms, and we are therefore arranging a system under which the important armament firms will come under Government control, and we hope that workmen who work regularly by keeping good time shall reap some of the benefits which the war automatically confers on these great companies.” Negotiations were undertaken by the Government with various armament and shipbuilding firms with a view to the Government taking possession of them, but these broke down and the Government abandoned the idea. Other negotiations to limit, first, dividends, and then, alternatively, net divisible profits, also collapsed and nothing came of them. The fact that workmen were prevented from forcing higher wages while employers were left free to make higher profits completely nullified the “Treasury” Agreements and something had to be done. On June 9, 1915, the Ministry of Munitions was constituted by Act of Parliament. Immediate steps were taken to draft the Bill which afterwards became the Munitions of War Act, 1915. The Government appreciated the importance of getting the Bill agreed to by Labour, as indeed they ultimately succeeded in doing. The first point on which Labour insisted was the limitation of profits of the employers. This was ultimately provided in Section 5. It only applied to “controlled establishments,” and until the later introduction of the Excess Profits Duty the owners of non-controlled establishments were allowed to make such profits as they thought fit. But it was shutting the stable door after the steed was stolen. Throughout the war, Labour never got rid of the notion that the profits of employers were not restricted until Labour had forced the Government to restrict them, and that even then the restriction was on a wholly inadequate scale.

Failure of Compulsory Arbitration

The substantial effect of the Munitions of War Act, 1915, was to give statutory force to the “Treasury” Agreements. The obligations which the Act imposed upon the owners of controlled establishments were substantially the safeguards for Labour contained in the “Treasury” Agreements, and upon Labour the provisions contained in those Agreements preventing stoppages of work. Part I of the Act provided for the settlement of labour differences and in certain cases for the prohibition of strikes and lock-outs, and for compulsory arbitration. It might well be thought that the circumstances of the war provided a unique occasion for the success of compulsory arbitration, but it was a failure, signal and complete. A great many Unions at first acquiesced in arbitration because as long as prices continued to rise, advances of wages were more or less automatically awarded, so as to adjust wages to cost of living. When, however, the Unions refused to go to arbitration, or, if they went, to comply with the award, it was impossible to make them. If 100,000 men cease work it is impracticable to prosecute or fine all of them; to select a certain number soon raises cries of victimization, those prosecuted are made martyrs, and funds are raised by their colleagues for payment of their fines. While the pretence of enforcing awards was maintained for a certain time, everybody concerned in the administration of the Munitions Act knew that compulsory arbitration was a broken reed. This was proved in the very month the Act was passed, namely, June 1915, in the case of the miners’ strike in South Wales, to which reference is made on p. 156. But in view of the absolute dead-lock at which collective negotiations between employers and trade unions had arrived by the end of 1914, it was essential for the Government to undertake the general regulation of labour itself, and the powers for doing so were conferred on the Minister of Munitions by the Munitions of War Act, 1915. Much adverse criticism has been levelled at the labour administration of the Ministry, but State regulation was the sole remaining remedy; if this be remembered, it must be conceded that labour was regulated as efficiently as circumstances allowed.

Effect of Relieving Employers of Responsibility for Labour Management

One unfortunate, though inevitable, effect of the Munitions of War Act, and the regulation of labour by the Ministry of Munitions, was the extent to which employers ceased to manage the labour in their own works. Though profits were limited, work was plentiful, and prices ample; they were assured of business without much effort on their part. In addition, many employers resented, and probably not unnaturally, the intervention of the Ministry of Munitions in labour disputes, and when disputes did arise, instead of endeavouring to settle them with the men, contented themselves with reporting them to the Ministry. On the other hand, Trade Unions found it an easier matter to report disputes to, and discuss them with, the Ministry rather than go to the trouble, as before the war, of discussing them with each individual firm. Whatever may have been the real cause, the effect undoubtedly was that the passing of the Munitions Act in 1915, inevitable as it was, has contributed materially to the aloofness which now exists between employers and their workers.

It was not in the normal administration of labour by the Ministry of Munitions that harm occurred—it was when, for political considerations, particular action was forced upon the Ministry by politicians, that real detriment was inflicted upon industry. An example of that is the famous 12½ per cent. bonus. It is well-known that the Ministry and the Admiralty were strongly opposed to that fatal action, but it was thought expedient for Government to try and placate Labour not merely in reference to then existing difficulties, but with a view to possible political developments, and so the bonus was given. As Director of Shipyard Labour of the Admiralty, with over a million men who would be affected by the decision, I strongly protested against it. My protest was registered on the War Cabinet minutes; I stated it would subject the country to an extra annual wages bill of 95 million sterling; I was wrong to the extent of 7 millions, it proved in the end to be 102 millions.

Increases of Wages and Prices

One important question is the position in which the war left the workmen so far as standard of living is concerned; that involves some consideration of wages and prices. It is unnecessary for me to discuss that at length; Professor Bowley in Prices and Wages in the United Kingdom, 1914-1920, Oxford University Press, has now most ably dealt with the matter, and reference should certainly be made to that book on this crucial question. In his speech on January 29, 1920, at the Annual Meeting of the London Joint City and Midland Bank, Ltd., the Right Hon. R. McKenna succinctly described how prices rose:

Relation of Wages to Cost of Living

It is customary to measure the cost of living among the working-classes according to the basis of the Ministry of Labour. The Ministry works on an average pre-war working-budget of food, rent, clothing, light and fuel, and miscellaneous items, and ascertains its cost month by month. (See Labour Gazette, February 1921.) The cost in July 1914, is taken as 100, the greater cost each month since appearing as 100 and something; this is called the “index-number.” What the Ministry does, therefore, is to measure the average increase in the cost of maintaining the pre-war standard of living of the working-classes; it does not, however, take in account any modification of the standard, which, of course, was customary; as for instance margarine used when butter was not obtainable. Lord Sumner’s Committee on the Cost of Living to the Working Classes (Parliamentary Paper, 1918, Cd. 8980), showed by actual investigation that the index-numbers of the Ministry did not then represent current conditions, but were too high. On the other hand, the Joint Committee on the Cost of Living[10] is of the opinion the figures are under-estimates. All these matters are discussed very fully in the book by Professor Bowley, who gives his own modified index-numbers. Professor Bowley sums it up in these words: “There can be no doubt that some sections, especially the worst paid of the working-classes, were better off in the summer of 1920 than before the war, and it is probable that other sections were worse off. It is not possible to decide whether the average of all wages, measured in purchasing power, had risen or fallen.” If, however, one takes the wages in certain trades, for example, railways, mining, and engineering, and compares them with the cost of living since July 1914, they appear in the following relation: