A Rational Wages System

OF WAGES

The war has brought the question of efficiency and efficiency methods to the front very prominently, and there is a consensus of opinion that it will be necessary to adopt them very widely if we are to retain our present commercial and national position in the world.

The object of such methods is to obtain increased production. It is well known that the worker can produce far more than he does, but from his point of view there is no particular reason why he should attempt to do so under ordinary working conditions.

The circumstances are altered entirely if increased production results in higher wages with better conditions of work, and if the worker does not get too tired or suffer any injury to his health in the process.

The Reward System described herein satisfies these conditions, but before giving the description it will be well to examine briefly the existing methods of wage payment and point out their advantages and disadvantages.

(a) Day Work.

This is the commonest method of wage payment in the United Kingdom at the present time.

For every hour worked, the worker gets so many pence-10d., 11d., 1s. an hour, or whatever it may be. As wages are paid weekly, it is usual to reckon them at so many shillings per week.

In any factory, nearly all the men who work at the same kind and class of labour get approximately the same wage. In union shops they do all get exactly the same wage.

Before the days of the trade-unions each man was paid according to his skill, as nearly as possible; a good workman received more wages than a poor one. But the trade-unions have stopped that as far as they can. In any one trade all workers, good, bad, and indifferent, are now paid the same wages.

The day work system, although in a great many cases it cannot be avoided, is extremely unsatisfactory.

On the one hand, the employer endeavours to get all he can out of the worker while paying him the least possible wages. Speaking generally, the employer looks upon the worker as a necessary evil, and treats him accordingly. The worker must produce as much as possible and receive as low wages as possible. No consideration is given to the question of what wages will buy.

On the other hand, the worker retaliates by doing just as much work as will enable him to keep his job, and no more. Many workers spend as much energy and time in avoiding work as they do in executing it, and it is absolutely necessary for the employer to have a foreman hustling round all the time to see that a reasonable amount of work is done.

In order to equalise the conditions for all workers, the unions have fixed a standard rate of wages for all men working at any one particular trade. This means that both good and bad workers receive the same rate of pay.

Such an arrangement is quite unfair both to the good worker and to the employer, and it gives the employer a very sound reason for opposing the unions on all possible occasions.

But it is worse for the good worker than for the employer, because it affects him in several ways. When two workers are at work side by side, one a good worker and the other a slacker, it is galling for the good man to know that the slacker gets the same wages as himself. It tends to make the good man indifferent to his work, and it needs a good deal of moral courage and great force of character for a man to keep on doing his best under such circumstances, especially when one remembers the great excess of slackers over good men, and how easy it is to find a good excuse for slacking.

The extraordinary thing is that a man's union compels him to slack even if he has no desire to do so. His fellow-unionists keep a watchful eye on a good man, and if he is producing more than a certain quantity he is told to ease up. There is no possible excuse for this attitude, and it has done more to discredit the unions than any other thing. It saps the good worker's morality, and reduces the whole ethics of Labour and wage payment to the lowest possible standard.

Apart from the question of antagonism between the employer and the worker, there is one factor missing, a factor that is all-important even in the best type of day work and under the best conditions. It is that the best method of doing the work is never known.

One man has one idea, another man has another; one man has his own method, another man has a different method; one man has a certain knack of using the special tools required for a particular job, another man has only a general knowledge of their use; one man has done the job many times and knows the short-cuts, another man is new to the job and goes slowly; one man tackles the job haphazard, another spends time in considering the best way of doing it; one man believes that one form of tool is the best for certain metals, another man believes in a different form; one man thinks a job should be done in this way, another man thinks it should be done that way; one shop practice is to do a job in such a manner and on such machines, another shop will do it in a different way on a different type of machine.

And so it goes on....

All the time the foreman is hovering around, urging the men, praising one man for his speed in order to get him to work quickly all the time, but more generally bullying the slow man into working a bit faster. And he settles all matters in an arbitrary manner, which means the job must be done his way, right or wrong!

It cannot be helped. When a worker starts a job, he does not know just what speed his machine must run at for that job. True, experience is a good guide, but it means trying a speed before he can be certain. And trying a speed means a certain amount of care and watchfulness; then it probably means making adjustments of speed and tool. This means stoppages, readjustments, retrials, and an all-round loss of time and efficiency.

Now, is the man a better workman for all this? If it proved eventually that all men became of the same opinion as regards speeds, forms of tools, and methods of working, and if all men became highly efficient, one could at least say that the result justified the method, in spite of the enormous waste of time and talk and temper. But, as a matter of fact, one rarely gets two workmen of the same opinion or of the same proficiency, and a man never turns out as much work as he is capable of.

Added to all this is the deadening monotony of the daily round of toil with no variation, no release from the fixed hours, no inducement to do one's best, no chance of getting any extra pay unless by occasional overtime.

Theoretically, day work is the fairest method, because if a man does his best he ought to get the same wages as any other man, no matter what his production may be; but in practice this is impossible, hence one is driven to the conclusion that day work, as it is practised at present, stands condemned, and ought to be limited to such jobs and working conditions where it is impossible to apply other methods.

(b) Piece Work.

Piece work has one great advantage over day work-namely, the worker is paid in exact proportion to his production.

But that is the only advantage. If work could be correctly priced according to the amount which a conscientious average man could do, and that price always held good, piece work would have the additional advantages that both worker and employer would know the conditions were fair, and the worker would work diligently and be paid proportionally to his skill and production.

Under ordinary piece work conditions, however, such an arrangement is impossible, and the objections to piece work are, if anything, greater than the objections to day work, because of the necessary dishonesty on the part of both worker and employer.

The average employer will not believe what an enormous difference there is in the quantity of work which different men are capable of producing. He is under the impression that, within small limits, any man can produce the same amount of work as any other man in a given time. This is entirely wrong. Investigations have proved that some good men can produce three times as much as an average man, the quality of work being quite as good.

Applying this fact to piece work, one sees at once how serious differences may arise. A job is priced at, say, 1s. An average man whose rate is 40s. a week will earn about 50s. a week on that job by diligent work. Then a really first-class man comes along and earns 80s. What follows? "If Smith can earn 80s., it is evident that the price is too high and the other workers are slacking!" That is the natural argument of the employer, and down comes the rate.

Cutting rates is one of the most frequent sources of trouble on piece work, but it cannot be avoided. The worker knows that the rates will be cut, and therefore two methods of defence are open to him: First, he always works slowly on a job until it has been priced. In this way a good price is obtained, a price which enables the slowest worker to earn his wages-and a bit above-easily. Second, the worker takes care not to earn too much. It is arranged between the men how much each ought to take on a certain job, and the arrangement made is carried out. This is, of course, dishonest, but it is necessary.

For suppose a good worker comes on the job and does his best, the price comes down to everybody, and the average man cannot earn his wages. The good man is therefore compelled to be dishonest to his employer or unfair to his fellow-worker. And, again, in piece work all prices are arbitrary. Even if one shop gives a reasonable price, other shops in the same line of business find it out, and put on a lower price in order to reduce works costs and thereby lower prices to customers, which means snatching the trade from the good shop.

Thus, the circumstances of the old-fashioned piece work method and the dishonesty of both parties to it lead to misunderstandings and dissatisfaction.

(c) Profit Sharing.

There are various methods of increasing earnings by profit sharing. The employer, from motives which may be good or bad from the standpoint of the worker, desires to present the worker with a certain proportion of the net profit.

In some cases the motive is entirely for the worker's good; in others it is for the purpose of getting the worker to stay with the firm, and to make his interest so large that he dare not be independent in case he should lose his profit. This means that the employer is no longer troubled with strikes and labour disturbances.

However, it is the effects that concern us here, and not the motives.

Under profit sharing the profit is paid out or credited to the worker every six or twelve months, and one must be employed for a certain length of time before one comes under the scheme. So that it holds out little incentive to efficiency until the worker has been with the firm for some years; until then his interest is so small that only the naturally thrifty workers are interested in it.

All profit-sharing firms base their hopes of increased efficiency on the incentive given to the worker by an anticipation of profit; the payment of wages is by day work or piece work, and these have the defects already mentioned. There is no direct and immediate incentive. The slacker gets the same reward as the good man, and there is nothing to prevent piece rates being cut just as in an ordinary shop.

Profit sharing is undoubtedly a splendid thing in principle, but it tends to make a man drop his trade-union and takes away his independence. It also means a rigid selection of workers, only the ones who look ahead being automatically chosen. Already they must be men of thrifty disposition, men who look forward to being employed in one factory all their lives, otherwise they would not be chosen. They are not necessarily the best men; indeed, they cannot be the best men because only a wide experience of different factories and methods produces the best men. But they are essentially steady men, and this is the kind of man most employers prefer, because they are the least likely to cause trouble when rates are cut or wages reduced. It is usually pointed out that, if a rate has to be cut, the worker gets it back again in the form of profit.

This system certainly tends to get rid of the slacker-the worst form of slacker, that is-and there are circumstances under which it would prove of great value.

The fact of there being so few profit-sharing firms tends to show that profit sharing is not a method which appeals generally to both employer and worker.

The following is a profit-sharing scheme adopted by a large firm of engineers in March, 1916, and therefore embodies the most modern conditions:

"1. Before any profits are divided with the employees, the shareholders shall receive 8 per cent. per annum.

"2. When the above 8 per cent. has been paid to the shareholders in any calendar year, all cash dividends subsequently declared in that year will be divided between the shareholders on the amount of their stock interest and the employees on the amount of the salary or wages received by them during the twelve months ending June 30 of that year, as follows: (A) Employees who have been continuously in the service of the company for at least two years prior to July 1 will receive dividends at the same rate as the shareholders. (B) Employees who have been continuously in the service of the company for more than one year and less than two years prior to July 1 will get three-quarters of that rate. (C) Employees who have served continuously for less than one year will get one-half the rate of the shareholders. (D) Dividends that have accrued will be distributed to employees once a year in December.

"3. No person will be entitled to a share of these dividends unless a bona-fide employee of the company at the time of their distribution, except that employees laid off owing to lack of work or sickness will be entitled to the dividends accruing in any year on the wages earned by them during the twelve months prior to June 30 of that year.

"4. Employees voluntarily leaving the service of the company or dismissed or discharged will forfeit their right to any accrued dividends.

"5. Any employee who may receive a commission from the company or any share in profits other than the profits shared in this plan, except through dividends of stock, if a shareholder, shall thereby be rendered ineligible to receive dividends under this plan.

"6. All employees except those entered in the three preceding sections shall be eligible to share in the profits under this plan.

"7. The above plan for division of profit is absolutely voluntary on the part of the company, and is in no sense a contract. The right is therefore reserved by the directors to make at any time such changes in the plan as they may consider desirable for the best interests of the organisation. The fact that any employee is receiving the dividends in this profit-sharing plan shall not deprive the company of the right at any time to discharge the employee, and thereby terminate his participation under the plan, nor shall any employee acquire any right thereunder to any accounting by the company concerning its business or profits."

(d) Co-partnership.

This is another method of inducing the worker to become more efficient. It is frequently allied to profit sharing.

The firm allows its workers to subscribe for shares, and the workers thereby have a direct interest in the success of the firm. The idea is that the harder they work the more profit there will be, and the more dividend on the shares which they hold.

Of course, no worker, especially if he has a family, can subscribe for shares out of his wages. What usually happens is that the firm sets aside a certain portion of its profit, after paying a dividend on its shares, and allows the worker to share this profit. But he gets no money, the profit being paid in shares. For instance, if a worker's share of the profit at the end of twelve months be ￡10, he gets ￡10 worth of shares. Then, when the next dividend is declared, he gets the dividend on his ￡10 worth of shares. If there is a 5 per cent. dividend, he gets 10s. as his interest for the year or whatever the period of time may be.

He is not allowed to subscribe for shares until he has been with the firm a certain length of time, and, in some cases, if he leaves he loses his shares. If he dies, his widow gets the dividend on the shares until she dies, when the shares go back to the firm.

In other cases the shares bear a fixed rate of interest, say 4 per cent., and also an additional dividend if there is any profit after dividends on other classes of shares reach a certain percentage.

In yet other cases a worker becomes absolute owner of his shares, and can dispose of them by will or if he leaves the firm, but such cases are rare.

Of course, where shares are purchased by deducting the price of the shares from wages they are the absolute property of the worker.

The objections to profit sharing may be applied to co-partnership, together with the additional one that the worker does not get profit, but only interest on shares; and as he can never become a large shareholder, the extra benefit is not very great. He is rendered quite dependent on the firm-even more so than the profit sharer-and can exert no pressure if conditions are unsatisfactory. The fact that conditions are usually satisfactory in places where co-partnership is practised does not make the principle a good one.

Certainly, sometimes the shareholding workers have the option of electing a director, and this places some responsibility on the worker, which is a good thing and gives him a real interest in the affairs of the firm; but such cases are uncommon, and even then there are so many other directors that the workers' representative has no voice in determining the policy of the firm; he only voices the workers' interests.

(e) Co-operation.

Co-operation hardly comes into methods of wage payment, but we will just glance at it.

It means that a number of workers unite to buy in large quantities the commodities they require, and to distribute them at the least expense. By these means they buy cheaply, and there is no non-productive middle man to make a profit.

The great success of co-operative methods has resulted in the co-operative societies manufacturing certain commodities for themselves, as well as buying and selling. Having amassed a large capital, and being certain of their market, they have every opportunity of putting their workers under excellent working conditions.

As employers, however, the co-operative societies are exactly on the level of other employees-no better and no worse. They do not even adopt bonus or profit-sharing schemes except in one instance, and the same labour disadvantages occur here as in the case of any ordinary private firm.

Co-operation is strictly limited in its field of action. The buying power of the society's members enables the society to know just what goods and what quantity of goods are necessary, and they can go ahead with certainty.

But a co-operative engineering works where all the capital is subscribed by the workers is a practical impossibility. In the first place, the number of workers in proportion to the amount of capital required in an engineering works is very small, and no group of ordinary workers could subscribe to start a factory and keep it going. In the second place, even if a factory could be started, the competition of the open market would throttle it in its birth. The keen buying and selling and manufacturing need highly educated and highly skilled men. Capable men are to be found in the ranks of the workers, but men with the necessary technical and commercial knowledge to run a large competitive engineering concern are extremely rare among them. Outside men would have to be engaged for such work and for the theoretical side of the business. This means high salaries, which the worker capitalist would object to; and it also takes the management out of the hands of the worker, and thereby destroys the whole basis of co-operation.

It would be quite easy for an engineering business to grow out of a co-operative society's need of machinery of various kinds, but it is quite a different thing when one enters the open market.

In the two or three cases where co-operation, apart from the large co-operative societies, is in practice, it will be found that the business has in the first place been built up privately, and the capital has afterwards been gradually transferred to the workers. There is no instance of workers getting together and clubbing their savings, and so starting a competitive business and earning their living thereby.

(f) Bonus Systems.

There are many bonus systems, and here again the advantages depend largely on the moral principles of the employer who adopts them. It does not follow that because an employer gives a bonus on work done that the conditions of work in his factory are good. Even with the best bonus system prices may be cut and conditions may become unbearable. Indeed, the adoption of a bonus system is often an excuse for driving and tyranny.

They have one advantage over profit sharing and co-partnership: they do not interfere with the independence of the worker. I refer, of course, to those systems which have no connection with profit sharing or co-partnership, but where the bonus consists of a weekly payment for excess production above a specified minimum.

A bonus system is based on a piece price or on individual or collective output in a certain time. It is therefore an offshoot of piece work, but it has a guaranteed minimum wage attached to it. Whatever happens, the worker gets his guaranteed minimum, and if he produces more work than is allowed for in that minimum he gets a fixed bonus at the end of the week or month. It differs from profit sharing in that it depends on quantity of work done and not on profit made.

Bonus is often given to men working under a subcontractor. The subcontractor guarantees to turn out a certain job in a certain time, and in order to induce the men to accomplish this result he offers a bonus if the job is done to time.

There is no protection whatever against cutting times or rates, and conditions generally are the same as those already mentioned.

(g) The Reward System.

The Reward System (this is the name given to the system for the purpose of this description) is different to all the foregoing methods.

The worker is paid the ordinary standard rate of wages for his attendance at the factory, and this attendance implies the production of a certain minimum quantity of work. If he produces more than that quantity, he is paid additional wages in proportion to the work done. If a certain standard quantity of work be produced, the standard being considerably in excess of the minimum, the proportionate additional wages, or reward, amounts to at least 25 per cent. of the day rate-that is, of the trade-union rate. Also, an equal opportunity of reaching the standard quantity is given to all workers, inasmuch as the work is carefully studied, standardised, and recorded, and instructions are given to the worker showing him just how to produce the standard quantity. The standard quantity is within the reach of all diligent workers.

This system is described in the following pages.

* * *