The Settlement of Wage Disputes

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ould increases be arranged? The doctrine of the maintenance of the standard of life analyzed.-Section 2. An alternative method of adjustment proposed, based on a new index nu

ut of price movements. First, we will deal with the problems presented by upward price move

there any reason why wages should be increased during a period of advancing pric

chief aim, therefore, of any plan for the adjustment of wages to upward price movement must be the protection of the interests of the wage earners. Changes in the distributive situation that are unf

y in the United States.[58] That is the method based upon the doctrine of the maintenance of the standard of living. This doctrine aims to maintain real wages at a constant level throughout the course

nied only under unusual circumstances. It has in the past brought considerable benefits to the wa

f these investigations budgets have been drawn up which were deemed sufficiently representative of the main currents of expenditure of the mass of wage earners at a given time and place. On the basis of this data an index number of the cost of living for the mass of wage earners, at the given time and place, has been prepared by methods too familiar to require expla

as particular prices change in a different measure. This second disadvantage was noted particularly during the war, when the supplies of certain commodities were limited or rationed. Thirdly, and this difficulty is of a more serious nature, the prices of some or many of the articles which occupy an important place in all calculations of the cost of living of the wage earners may change in a different measure, or even in a different direction, from the prices of the other commodi

fact in the event of two bad harvests in succession. If wages are increased in accordance with the movement of the prices of the relatively limited collection of commodities, the result of the wage increase may be an increase in prices in general. As a result of this the wage earners may be better or worse off than before, depending upon circumstances. The second case is that in which the prices of the

to be more convulsive than general price movements. They are likely to vary more than general price movements from year to year, and,

iately hereinafter). If foodstuff prices rise because of a poor harvest, there is a preliminary presumption that the succeeding industrial period will not be one of very great activity. Therefore, an increase in wages corresponding to the rise in the prices of food products would not serve to increase very much, if at all, the command of the wage earners over foodstuffs. This possibility of a divergence in the movement in the price of provisions and of wages was pointed out, indeed, by Adam Smith. To give the explanation

n the doctrine of the maintenance of the standard of life. It may now be asked

t commodities produced within the country. Any scheme of adjustment arranged on that basis would have one distinct advantage. It would be representative of the fundamental distributive relationship-that is

urse of price changes would be wholly a matter of judgment. For due to the changes in the expenses of production and to the changes in the volume of production, it will always be impossible to reason concerning profits merely from the fa

e basis of the change in the price index number of all the important commodities produced within the country; but in the making of the index number, the prices of food, rent, and clothing could be given a heavy weight (50 per cent., for example) of the total. Such a compromise would tend to assure, on the one h

re is no way, under our wage system, by which the welfare of the lowest industrial classes can be effectively protected merely by wage a

movements. They are two in number. Firstly, is there any reason why wages should be reduced during a period

ter. The first type is that in which the decline in prices is due to some such cause as the progress of invention or the development of the means of transport. In this case the fall

e characterized by less dispersion than those which are precipitated by crises. In this case also there would seem to be no good reason why wages should be reduced. A decline of prices would be desirable, it is true. The industrial position would be improved thereby and industrial activity would be put upon a sound financial basis. Some contraction of credit is to be desired if, as is assumed in this case, the period of decline was preceded by one of considerable price increase and credit expansion. But these results may be obtained without any reduction in wage rates.

when it is brought about by an industrial crisis or when an industrial crisis is actively threatened. In this case the decline is usually preceded by a period of rapidly rising prices which brings about an over-extension

been great expansion of credit; if the banking system as a whole shows a very low reserve, and some banks suspend specie payment, a reduction in the wage level is necessarily essential to industrial recovery. This may be so especially, if buying is at a halt. The wage reduction should follow the price reduction. There would appear to be no compelling reason for the wage reduction to

eduction. It may also be argued out that the maintenance of wage levels would confer such indirect assistance to recovery as might come from the lessening of the fear that a future fall in wages will make present productio

ust be believed that at the level of prices existing at the outset of the crises, or at a position somewhat but not markedly under that level, the margin of safety in the financial system by virtue of which modern industry is carried on, is too small-the ease with which the

greatly lowered before business operations can revive and be carried on with confidence in steady markets. In the previous one it is presumed that a decided judgment can be formed to the effect that the shock to busi

ard may be looked upon as a variant of the third case. For it is obvious that if the depreciation is exten

that a situation should arise in which a policy of wage reduction is expedient because the export industries are very gravely threatened by foreign competition. In such a situation it may be argued that any genuine necessity for a reduction of wages would be manifested by the pressure of the banking system, because of the outflow of gold that would occur consequent to a great falling off of exports. But, as we

stion then presents itself-on what basis should such reductions as are advocated be arranged? On which subject the conclusions reached in the course

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tency in Great Britain. See the Minority Report of the W

acy," Doctrine of the Vested

ained spasmodic up to the present. See the article by H. S. Hanna in the October, 1919, issue of the Monthly Review of the U. S. Department of Labor. The Sumner Committee Report on the "Cos

ages 89-91

e Chapt

much more stable. They lag behind the wholesale prices both on the rise and on the fall, but more on the fall than on the rise." Mitchell, "Busines

ell, "Business C

h of Nations" (Cannan's

ges 203-7,

in any trade or industry a workman of a class to which a prescribed rate of wages as defined in the Act is applicable, shall pay wages to the workmen not less than the prescribed rate applicable to w