Remuneration of the Worker—Uniform National Wages—Wage-Relationships among the Workers—Wages and the Community—Are Higher Wages Practicable?—The Settlement of Wages—Systems of Remuneration—What is a Fair Wage?—Other Essentials to Industrial Contentment.
Contentment in industry depends next on a sound and equitable policy for remuneration of the workers. That implies the summary rejection of all attempts to fix wages on abstract formulae which pay no regard to the circumstances of an industry, or conditions affecting the marketing of the product. If we adopt socialistic nomenclature and call the remuneration of the workers “pay,” and assume elimination of the private employer, and each industry conducted under “democratic control,” even then the gradation of pay between different classes of workers, the rate of pay of each class, the relation between the general standard of pay in one as compared with other industries would depend entirely on the same circumstances as now, and, if the concrete results of past industrial experience are to be disregarded, would be in each case a matter for experimentation, and for practical adjustment and not for pseudo-mathematical solutions.
One of the demands of workers in many industries which, before the war, paid in different districts rates of wages varying according to local economic circumstances, is for uniform national wage rates. This is a result of the war. There was, during the war, no time to consider the wage-circumstances of individual works—the pressing need was munitions at any price—hence Government Departments responsible for production were compelled to treat wages in industries under their control, especially those in which there had been no pre-war defined district practice, on a more or less uniform national basis. Thus, substantially the same standard, as distinct from minimum, rate of wages for the same grade of workers came in time to operate generally throughout the country, in all works in a particular munitions industry. In some of the more highly organized industries the addition of the same war advance preserved district differentials of the same pre-war nominal amount, but the pre-war ratios of the district wages to one another were greatly reduced. So workmen in a particular district, where, for economic reasons, wages had been lower than in other districts, found themselves on much the same wage-level as workmen in the highest pre-war rated district. A difference of 5s. between 35s. and 30s. per week is very different from 5s. between 80s. and 75s. Naturally, the worker will not willingly surrender that position; hence the claim to-day in many industries for standard national rates. It is an impracticable demand under ordinary commercial conditions, save in exceptional cases where you have one employer running all works in an industry, as the Government did munitions during the war, or different employers each possessing balanced undertakings which comprise establishments both above and below average efficiency. The demand for standardization is illustrated in the railwayman’s wage settlement; numerous classes of men (excluding drivers and firemen) previously in railway service have been reduced to a small number of grades, and the individual in those grades receives, generally speaking, one of three descending national rates of pay according as his work is in the London area, one of the provincial towns, or in a rural part of the country. Sailors’ and stokers’ wages are also standardized, the same rates of pay for the same class of man being paid in vessels in the same trade category. It is obvious, however, that neither railways nor shipping nor docks are analogous to industries consisting of an enormous number of widely different concerns. On the other hand, it is quite practicable to have uniform national conditions of employment, overtime, night-work, Sunday-work, etc., and in many industries there is such national uniformity.
The war destroyed the delicate pre-war wage-relationship between the different classes of skilled, semi-skilled, and unskilled labour—in some cases the new relationship is a complete inversion of the old. This was partly the result of Government Departments concerned in production—the Admiralty, War Office, Ministry of Munitions—advancing wages of men under their control independently and without reference to one another, in some cases actually enticing men to their employment; partly of strong sectional Trade Union pressure, and partly of the celebrated 12½ per cent, bonus to time-workers, and 7½ per cent. bonus to piece-workers. Since the war, the want of balance has been aggravated by the action of employers and Trade Unions in industries supplying a national necessity, e.g. building, whereby wages were so raised that unskilled men were paid more than skilled men in a trade like engineering. There is no more active cause of industrial discontent. As an illustration of how it operates, at the Dockers’ Inquiry, the Transport Workers’ Federation protested against any comparison between dockers’ wages and those of other workers—they termed it a “capitalistic device” to deprive dockers of their rightful advance. The Transport Workers were members of the Triple Alliance; the railwaymen were also members. A few weeks later the railwaymen were claiming before their Central Wages Board an increase in wage because the dockers had obtained a minimum wage of 16s. per day. It is therefore vital to get back to, and as far as possible preserve, the pre-war wage relationships.
Public opinion is beginning to insist, as it ought to do, on recognition of the interests of the consuming community, which in the past have been wholly ignored. If an increase in wages in an industry is, and can be, secured by an increase in price, as when the output is a necessity, the workers in that industry benefit at the expense of the workers in other industries, and of the consumers generally. In other words, the public pays, as in the case of housing. If an all-round increase in wages in all industries is financed by a general increase in prices, then all prices are higher, and the commodity purchasing power of the increased wages is no greater than that of the wages before increase, and again the public suffers from the general rise in prices. Already a beginning has been made in recognizing the interests of the community in placing public representatives upon the Railway National Wages Board.
It is essential to realize the practical difficulties in the way of the workers getting the higher wages which all would like to see them receive. There was a Census of Production in 1907 which included all the manufacturing industries and mining, and covered half the wage-earners in the United Kingdom. It ascertained the “net output” for each industry for the year by estimating the selling value of the gross product, and subtracting therefrom expenditure on raw materials, including the product of other industries which were further worked up, and fuel and some other items. The net output thus obtained is obviously for each industry the only fund from which first, wages, salaries, interest on capital, rent, royalties and profits are, or can be, paid, and secondly, taxes, rates, depreciation, advertisement and sales expenses. Professor Bowley, in his The Division of the Product of Industry, Oxford: Clarendon Press, 1919, takes the total net output of £712,000,000 for the industries covered by the Census of 1907, and works out how much of it should be allocated against the first set of items. I set out below in tabular form his results (pp. 37 and 52):
| £. | Per cent. | |
|---|---|---|
| Wages | 344,000,000 | 58 |
| Salaries under £160 | 24,000,000 | 4 |
| Salaries over £160 | 36,000,000 | 6 |
| Interest on Capital at 4 per cent. and rent | 48,000,000 | 8 |
| Royalties | 7,000,000 | 1 |
| PROFITS | 133,000,000 | 23 |
| £592,000,000 | 100 |
Professor Bowley (p. 52) pertinently observes: “How far this 23 per cent., or £133,000,000 together with a relatively small sum (probably well under £10,000,000) for the salaries of managers of companies, is an excessive or unnecessary remuneration for the organization of industry employing 6,000,000 wage-earners and £1,200,000,000 capital, and producing £340,000,000 wages is a question that may properly be debated: it is this sum that formed the only possible source of increased earnings in this group with industries conducted as before the war and production at its then level” (the italics are mine). Supposing the absurd: that in 1907 the whole of this £133,000,000 had been taken from employers, and handed over to the wage-earners, the total average earnings of men fully employed in the industries in question, as Professor Bowley shows (p. 39), would have been only 41s. 6d. per week. Supposing half of the £133,000,000 had been handed over, the total average earnings of men fully employed (including tradesmen) would have been 35s. 2d. per week. But even to have handed over half, would, by reason of the great disparity between the profit-earning power per man employed of different firms in the same industry, have resulted in closing down many of the less profitable concerns. These figures show conclusively that in industry, as a whole, though there may be exceptions in certain particular industries, the ability to pay higher permanent wages depends upon greater and more efficient production.
Wages and conditions of employment must always be matters of collective bargaining between employers and employed and not for superimposition by Government upon either or both of them. In my view, national settlement of wages and conditions in an industry is essential to wage stability. A national settlement does not, however, involve a uniform national wage. Complete discussion and national settlement entail for each industry the organization of all the employers into one effective federation, and of all the workers, not necessarily into one Union, but into Unions which are embraced in one executive federation. Only where responsible representative and disciplined federations of employers and workers exist in an industry can there be effective national negotiation of wages questions, or in industries in which Whitley Councils exist, between the two sides of the Council. I look forward to the time when the organization in each industry for the settlement of all industrial conditions will be developed into an organization consisting of representatives of (1) employers; (2) administrative and technical and supervisory personnel; (3) Trade Unions, and (4) consumers. Questions affecting the industry as a whole would be settled by all four sections; questions, e.g. of wages, by the representatives of the employers, Trade Unions and consumers. If a wage agreement is negotiated in any industry providing for excessive wages and therefore high costs of production and high prices, is it to be unchallengeable when the industry is a public necessity? There were many such agreements made during and immediately after the war. I see no way of reviewing such agreements when once made; all attempts by Government to do so under the Munitions of War Acts were unsuccessful. The only practicable method of safeguarding the consuming public is to have, as I suggest, efficient representatives of the public present at, and entitled to take an active part in, the joint conferences of federated employers and Unions when wages are being negotiated, as on the Railway National Wages Boards.
No one can dogmatize and say what system of industrial remuneration should be adopted, whether time, piece-work—collective or individual—premium-bonus, bonus on output, profit-sharing, or co-partnership. That all depends upon the conditions of the industry, its peculiar psychology, especially its past history; it must always be a matter for negotiation. But I am the strongest believer in a fair system of payment by results, as being, under proper safeguards, the best for the worker, the employer and the consumer. A steel worker or boilermaker will swear by it; a carpenter or joiner calls it “the device of the devil.” Hence my reference to industrial psychology.
Wages are, and can only be, payment for work done and services rendered by the “wages staff.” There must always be a maximum limit to wages and a minimum. The employers’ maximum is a wage beyond which any advance, with other costs of production remaining constant, would prevent the marketing of the product at a commercial profit commensurate with the nature of the enterprise. The theoretical minimum is a “living wage,” i.e. bare cost of subsistence, but the Trade Union minimum wage, which is the practical minimum in industry, is much higher than the subsistence wage. It is a wage which in the particular industry provides for subsistence for the worker and his or her dependants, including therein food, rent, fuel, light, clothing, fares, Trade Union subscriptions, etc., and reasonable enjoyment and recreation. Trade Union minimum rates for different trades varied before the war from one another by “vocational differentials.” A skilled man’s rate exceeded that of an unskilled man by a recognized excess; the excess is the trade differential in respect of the skill required of the particular tradesman, the length of apprenticeship necessary to acquire it, the nature of the occupation and so forth. The higher rate of the skilled man is naturally reflected, as statistics show, in a higher standard of living. The whole problem in arriving at a fair wage is to determine at what point, if any, between the existing Trade Union minimum and the employers’ maximum, the wage ought to be fixed, in justice to the workers, employers and the public.
By way of preliminary I would emphasize that no fair wage can be fixed on any basis of a priori reasoning. It involves constructing a theoretical household budget, adopting an empirical standard of life, with no relation whatsoever to the normal circumstances of any section of the industrial community, ignoring economic conditions, and assuming that industry can or ought to pay a sufficient wage to maintain that standard. That is the fatal method of the doctrinaire. The usual procedure is for the Trade Unions to demand an increased wage, and swear by all the gods that the employers can easily pay it. The employers then assert with equal emphasis their inability to pay any increase. Sometimes a compromise is reached and sometimes not. There should be, and indeed is, a better method of procedure.
First, there ought to be ascertained the wages which the industry is economically able to pay at the then prevailing market prices for its product; we may conveniently call them “ability wages.” They cannot be determined by picking out and assuming as typical—a frequent stratagem of Labour—individual firms which are making substantial profits. The industry must be taken on a national, it may be sometimes on a district basis, extreme cases at both ends of the scale ruled out, and a proper estimate struck on methods of accountancy, making due allowance for the trade outlook and for all the expenses and risks present and prospective, which, from the conditions of the industry in question, fall upon the employers. Labour insists on the Trade Union rate of wages being paid by all firms, whether making large profits or none at all. To consider therefore the industry as a whole is equitable. Employers making exceptional profits cannot be taken as norms for wages; so far as their gains are contrary to public policy, they can only be dealt with by a “wise and wary Chancellor of the Exchequer.” That an “ability to pay” estimate can be prepared in respect of an industry by competent joint accountants on a basis convincing to Labour has more than once come prominently within my own practical experience. The great point is to prove to the workers that they are getting a fair share of the product of industry under its then existing conditions. It is much more important to satisfy them on that point than to pay them a high wage. If they get a higher wage than the industry can pay, and are not satisfied, they will firmly believe that a still higher wage could and ought to be paid. There is only one way to prove the equity of the wage—to put all the cards on the table, and show the Trade Union representatives at the conference what the exact conditions of the industry are, and what are the maximum wages which the industry as a whole can pay.
Secondly, an exact statement is required of the wages paid in other industries to workers comparable with the workers in the industry in question—these may be termed “comparable wages.” They are obtainable from statistics compiled by the Ministry of Labour, but not published in collated form.
There are in practice two objects to achieve. First, to ensure that each grade of worker gets a fair wage which corresponds to the “ability wage,” and secondly, to try and keep the wages of workers in one industry in proper wage-relationship with the wages of comparable workers in other industries. If the existing wages are less than the “ability wages,” and the latter are either equal to, or less than, the comparable wages, there ought to be an advance of the existing wages up to the ability level, and, in my view, a further advance beyond ability level towards, but not exceeding, the comparable wages-level, if the circumstances of the industry are such, as for example, in respect of foreign competition, that the market price of the product can be increased by the necessary amount. It is so essential for the harmony of industry that the wages of comparable workers should be generally on the same level. There is no difficulty in practice in saying who are comparable workers. Industrial experience and tradition have firmly settled that. In the case, comparatively rare in practice, where the level of ability wages is higher than the level of comparable wages, other considerations arise. Some employers contend that to pay in one industry that can afford it a higher rate of wages than in comparable industries that cannot afford it is to upset the equilibrium of wages in those latter industries, and incite the workers in them to ask for the same wages rates, thus involving a charge upon the whole or a section of the public forming the consumers of the product of those industries with the usual results. Other employers assert that comparable wages are the criterion of fair wages, and as employers have to stand the risk of paying Trade Union wages when profits are not adequate, so, therefore, employers, when profits are exceptional, should be entitled to retain what remains after comparable wages are paid. I do not see why the employer should be entitled to appropriate in such a case the difference between the ability wages and the comparable wages. In my view, if an industry is shown by a joint cost investigation to be able to pay wages which are higher than comparable wages, the amount of the proceeds of the industry beyond the sum necessary to pay wages at comparable rates should be divided equally between employers and workers and consumers—in the case of the latter by a reduction in price. The workers thus secure a share in the prosperity of the industry.
Some wage complexities due to the war urgently need adjustment. Flat additions as war bonuses on piece-work or tonnage-rates are unsettling anomalies; they should be incorporated in new piece—or tonnage—rates. Their existence hinders output. War advances and war bonuses; which, though originally different, are now in practice indistinguishable, should, so far as not withdrawn, be merged into the permanent rate or price—in one-half of industry they have already been merged—difference of treatment only causes unrest. It cannot be too strongly emphasized that high rates of wages do not necessarily mean high earnings—they frequently mean no earnings and no work. Increasing the productive efficiency of labour does increase the ability of industry to pay. Such alone is the one sure road to higher earnings.
There should be open to the workers in this country an opportunity of rising, that is, of transfer from the wages side to the salaried side of the staff as is afforded by American employers. Why there should be such reluctance among so many English employers to promote men from the wages side I have never appreciated. During the war I had a large number of workmen under me at the Admiralty, who, after the war, were appointed to responsible positions on the administrative side of industry in the establishments of some broad-minded employers, and have abundantly justified their selection.