Turning now to the claims of the labourers as against the capitalists, or interest receivers, we perceive that the right to any interest at all is morally inferior to the right of all the workers to the "equitable minimum." As heretofore pointed out more than once, the former right is only presumptive and hypothetical, and interest is ordinarily utilised to meet less important needs than those supplied by wages. Through his labour power the interest receiver can supply all those fundamental needs which are satisfied by wages in the case of the labourer. Therefore, it seems clear that the capitalist has no right to interest until all labourers have received the "equitable minimum." It must be borne in mind, however, that any claim of thelabourer against interest falls upon the owners of the productive capital in a business, upon the undertaker-capitalist, not upon the loan-capitalist.
When all the labourers in an industry are receiving the "equitable minimum," have they a right to exact anything more at the expense of interest? By interest we mean, of course, the prevailing or competitive rate that is received on productive capital—five or six per cent. Any return to the owners of capital in excess of this rate is properly called profits rather than interest, and its relation to the claims of the labourers has received consideration in the immediately preceding section of this chapter. The question, then, is whether the labourers who are already getting the "equitable minimum" would act justly in demanding and using their economic power to obtain a part or all of the pure interest. No conclusive reason is available to justify a negative answer. The title of the capitalist is only presumptive and hypothetical, not certain and unconditional. It is, indeed, sufficient to justify him in retaining interest that comes to him through the ordinary processes of competition and bargaining; but it is not of such definite and compelling moral efficacy as to render the labourers guilty of injustice when they employ their economic power to divert further interest from the coffers of the capitalist to their own pockets. The interest-share of the product is morally debatable as to its ownership. It is a sort of no-man's property (like the rent of land antecedently to its legal assignment through the institution of private landownership) which properly goes to the first occupant as determined by the processes of bargaining between employers and employés. If the capitalists get the interest-share through these processes it rightfully belongs to them; if the labourers who are already in possession of the "equitable minimum" develop sufficient economic strength to get this debatable share they may justly retain it as their own.
The foregoing conclusion may seem to be a very unsatisfactory solution of a problem of justice. However, it is the only one that is practically defensible. If the capitalist's claim to interest were as definite and certain as the labourer's right to a living wage, or as the creditor's right to the money that he has loaned, the solution would be very simple: the labourers that we are discussing would have no right to strive for any of the interest. But the claim of the capitalists is not of this clear and conclusive nature. It is sufficient when combined with actual possession; it is not sufficient when the question is of future possession. The title of first occupancy as regards land is not valid until the land has been actually occupied; and similarly the claim of the capitalist to interest is not valid until the interest has been received. If the economic forces which determine actual possession operate in such a way as to divert the interest-share to the labourers, they, not the capitalists, will have the valid moral title, just as Brown with his automobile rather than Jones with his spavined nag will enjoy the valid title of first occupancy to a piece of ownerless land which both have coveted.
This conclusion is confirmed by reference to the rationally and morally impossible situation that would follow from its rejection. If we deny to the labourers the moral freedom to strive for higher wages at the expense of the capitalist, we must also forbid them to follow this course at the expense of the consumer. For the great majority of consumers would stand to lose advantages to which they have as good a moral claim as the capitalists have to interest. Practically this would mean that the labourers have no right to seek remuneration in excess of the "equitable minimum"; for such excess must in substantially all cases come from either the consumer or the capitalist. On what principle can we defend the proposition that the great majority of labourers are forever restrained by the moral law from seeking more than bareliving wages, and the specialised minority from demanding more than that extra compensation which corresponds to unusual efforts, sacrifices, productivity, and scarcity? Who has authorised us to shut against these classes the doors of a more liberal standard of living, and a more ample measure of self development?
The right of the labourers to the "equitable minimum" implies obviously the right to impose adequate prices upon the consumers of the labourer's products. This is the ultimate source of the rewards of all the agents of production. Suppose that the labourers are already receiving the "equitable minimum." Are they justified in seeking any more at the cost of the consumer? If all the consumers were also labourers the answer would be simple, at least in principle: rises in wages and prices ought to be so adjusted as to bring equal gains to all individuals. The "equitable minimum" is adjusted to the varying moral claims of the different classes of labourers; therefore, any rise in remuneration must be equally distributed in order to leave this adjustment undisturbed. It is a fact, however, that a large part of the consumers are not labourers; consequently they cannot look to rises in wages as an offset to their losses through rises in prices. Can they be justly required to undergo this inconvenience for the benefit of labourers who are already getting the "equitable minimum"?
Let us consider first the case of higher wages versus lower prices. A few progressive and efficient manufacturers of shoes find themselves receiving large surplus profits which are likely to continue. So far as the presumptions of strict justice are concerned, they may, owing to their superior productivity, retain these profits for themselves. Seized, however, with a feeling of benevolence, or a scruple of conscience, they determine to divide futureprofits of this class among either the labourers or the consumers. If they reduce prices the labourers will gain something as users of shoes, but the other wearers of shoes will also be beneficiaries. If the surplus profits are all diverted to the labourers in the form of higher wages the other consumers of shoes will gain nothing. Now there does not seem to be any compelling reason, any certain moral basis, for requiring the shoe manufacturers to take one course rather than the other. Either will be correct morally. Possibly the most perfect plan would be to effect a compromise by lowering prices somewhat and giving some rise in wages; but there is no strict obligation to follow this course. To be sure, since the manufacturers have a right to retain the surplus profits, they have also a right to distribute them as they prefer. Let us get rid of this complication by assuming that the manufacturers are indifferent concerning the disposition of the surplus, leaving the matter to be determined by the comparative economic strength of labourers and consumers. In such a situation it is still clear that either of the two classes would be justified in striving to secure any or all of the surplus. No definite moral principle can be adduced to the contrary. To put the case in more general terms: there exists no sufficient reason for maintaining that the gains of cheaper production should go to the consumer rather than to the labourer, or to the labourer rather than to the consumer, so long as the labourer is already in receipt of the "equitable minimum."
Turning now to the question of higher wages at the cost of higher prices, we note that this would result in at least temporary hardship to four classes of persons: the weaker groups of wage earners; all self employing persons, such as farmers, merchants, and manufacturers; the professional classes; and persons whose principal income was derived from rent or interest. All these groups would have to pay more for the necessaries, comforts, andluxuries of living, without being immediately able to raise their own incomes correspondingly.
Nevertheless, the first three classes could in the course of time force an increase in their revenues sufficient to offset at least the more serious inconveniences of the increase in prices. So far as the wage earners are concerned, it is understood that all these would have a right to whatever advance in the money measure of the "equitable minimum" was necessary to neutralise the higher cost of living resulting from the success of the more powerful groups in obtaining higher wages. The right of a group to the "equitable minimum" of remuneration is obviously superior to the right of another group to more than that amount. And a supreme wage-determining authority would act on this principle. It cannot be shown, however, that in the absence of any such authority empowered to protect the "equitable minimum" of the weaker labourers, the more powerful groups are obliged to refrain from demanding extra remuneration. The reason of this we shall see presently. In the meantime we call attention to the fact that, owing to the greater economic opportunity resulting from the universal prevalence of the "equitable minimum" and of industrial education, even the weaker groups of wage earners would be able to obtain some increases in wages. In the long run the more powerful groups would enjoy only those advantages which arise out of superior productivity and exceptional scarcity. These two factors are fundamental, and could not in any system of industry be prevented from conferring advantages upon their possessors.
As regards the self employing classes, the remedy for any undue hardship suffered through the higher prices of commodities would be found in a discontinuance of their present functions until a corresponding rise had occurred in the prices of their own products. They could do this partly by organisation, and partly by entering into competitionwith the wage earners. Substantially the same recourse would be open to the professional classes. In due course of time, therefore, the remuneration of all workers, whether employés or self employed or professional, would tend to be in harmony with the canons of efforts, sacrifices, productivity, scarcity, and human welfare.
Since the level of rent is fixed by forces outside the control of labourers, employers, or landowners, the receivers thereof would be unable to offset its decreased purchasing power by increasing its amount. However, this situation would not be inherently unjust, nor even inequitable. Like interest, rent is a "workless" income, and has only a presumptive and hypothetical justification. Therefore, the moral claim of the rent receiver to be protected against a decrease in the purchasing power of his income, is inferior to the moral claim of the labourer to use his economic power for the purpose of improving his condition beyond the limits of welfare fixed by the "equitable minimum." What is true of the rent receiver in this respect applies likewise to the case of the capitalist. As we saw a few pages back, the wage earners are morally free to take this course at the expense of interest. Evidently they may do the same thing when the consequence is merely a diminution in its purchasing power. To be sure, if capital owners should regard their sacrifices in saving as not sufficiently rewarded, owing either to the low rate or the low purchasing power of interest, they would be free to diminish or discontinue saving until the reduced supply of capital had brought about a rise in the rate of interest. Should they refrain from this course they would show that they were satisfied with the existing situation. Hence they would suffer no wrong at the hands of the labourers who forced up wages at the expense of prices.
Two objections come readily to mind against the foregoing paragraphs. The more skilled labour groups might organise themselves into a monopoly, and raise their wagesso high as to inflict the same degree of extortion upon consumers as that accomplished by a monopoly of capitalists. This is, indeed, possible. The remedy would be intervention by the State to fix maximum wages. Just where the maximum limit ought to be placed is a problem that could be solved only through study of the circumstances of the case, on the basis of the canons of efforts, sacrifices, productivity, scarcity, and human welfare. The second objection calls attention to the fact that we have already declared that the more powerful labour groups would not be justified in exacting more than the "equitable minimum" out of a common wage fund, so long as any weaker group was below that level; yet this is virtually what would happen when the former caused prices to rise to such an extent that the weaker workers would be forced below the "equitable minimum" through the increased cost of living. While this contingency is likewise possible, it is not a sufficient reason for preventing any group of labourers from raising their remuneration at the expense of prices. Not every rise in prices would effect the expenditures of the weaker sections of the wage earners. In some cases the burden would be substantially all borne by the better paid workers and the self employing, professional, and propertied classes. When it did fall to any extent upon the weaker labourers, causing their real wages to fall below the "equitable minimum," it could be removed within a reasonable time by organisation or by legislation. Even if these measures were found ineffective, if some of the weaker groups of workers should suffer through the establishment of the higher prices, this arrangement would be preferable on the whole to one in which no class of labourers was permitted to raise its remuneration above the "equitable minimum" at the expense of prices. A restriction of this sort, whether by the moral law or by civil regulation, would tend to make wage labour a status with no hope of pecuniary progress.
It is true that a universal and indefinite increase of wages at the expense of prices might at length leave the great majority of the labourers no better off than they were when they had merely the "equitable minimum." Such would certainly be the result if the national product were only sufficient to provide the "equitable minimum" for all workers, and that volume of incomes for the other agents of production which was required to evoke from them a fair degree of productive efficiency. In that case the higher wages would be an illusion. The gain in the amount of money would be offset by the loss in its purchasing power. Even so, this condition would be greatly superior to a régime in which the labourers were universally prevented from making any effort to raise their wages above a fixed maximum.
All the principles and conclusions defended in this chapter have been stated with reference to the present distributive system, with its free competition and its lack of legal regulation. Were all incomes and rewards fixed by some supreme authority, the same canons of justice would be applicable, and the application would have to be made in substantially the same way, if the authority were desirous of establishing the greatest possible measure of distributive justice. The main exception to this statement would occur in relation to the problem of raising wages above the "equitable minimum" at the expense of prices. In making any such increase, the wage-fixing authority would be obliged to take into account the effects upon the other classes of labourers, and upon all the non-wage-earning classes. Substantially the same difficulties would confront the government in a collectivist organisation of industry. The effect that a rise in the remuneration of any class would produce, through a rise in the prices of commodities, upon the purchasing power of the incomes ofother classes, would have to be considered and as nearly as possible ascertained. This would be no simple task. Simple or not, it would have to be faced; and the guiding ethical principles would always remain efforts, sacrifices, productivity, scarcity, and human welfare.
The greater part of the discussion carried on in this chapter has a highly theoretical aspect. From the nature of the subject matter this was inevitable. Nevertheless the principles that have been enunciated and applied seem to be incontestable. In so far as they are enforcible in actual life, they seem capable of bringing about a wider measure of justice than any other ethical rules that are available.
Possibly the applications and conclusions have been laid down with too much definiteness and dogmatism, and the whole matter has been made too simple. On the other hand, neither honesty nor expediency is furthered by an attitude of intellectual helplessness, academic hyper-modesty, or practical agnosticism. If there exist moral rules and rational principles applicable to the problem of wage justice, it is our duty to state and apply them as fully as we can. Obviously we shall make mistakes in the process; but until the attempt is made, and a certain (and very large) number of mistakes are made, there will be no progress. We have no right to expect that ready-made applications of the principles will drop from Heaven.
For a long time to come, however, many of the questions discussed in this chapter will be devoid of large practical interest. The problem immediately confronting society is that of raising the remuneration and strengthening generally the economic position of those labourers who are now below the level, not merely of the "equitable minimum," but of a decent livelihood. This problem will be the subject of the next chapter.
Proposals for the reform of social conditions are important in proportion to the magnitude of the evils which they are designed to remove, and are desirable in proportion to their probable efficacy. Applying these principles to the labour situation, we find that among the remedies proposed the primacy must be accorded to a minimum wage. It is the most important project for improving the condition of labour because it would increase the compensation of some two-thirds of the wage earners, and because the needs of this group are greater and more urgent than the needs of the better-paid one-third. The former are below the level of reasonable living, while the latter are merely deprived of the opportunities of a more ample and liberal scale of living. Hence the degree of injustice suffered by the former is much greater than in the case of the latter. A legal minimum wage is the most desirable single measure of industrial reform because it promises a more rapid and comprehensive increase in the wages of the underpaid than any alternative device that is now available. The superior importance of a legally established minimum wage is obvious; its superior desirability will form the subject of the pages that are immediately to follow.
Happily the advocate of this measure is no longer required to meet the objection that it is novel and utterly uncertain. For more than twenty years it has been inoperation in Australasia. It was implicit in the compulsory arbitration act of New Zealand, passed in 1894; for the wages which the arbitration boards enforce are necessarily the lowest that the affected employers are permitted to pay; besides, the district conciliation boards are empowered by the law to fix minimum wages on complaint of any group of underpaid workers. The first formal and explicit minimum wage law of modern times was enacted by the state of Victoria in 1896. In the beginning it applied to only six trades, but it has been extended at various legislative sessions, so that to-day it protects substantially all the labourers of the state, except those employed in agriculture. Since the year 1900 all the other states of Australia have made provision for the establishment of minimum wages. At present, therefore, the legal minimum wage in some form prevails throughout the whole of Australasia.
In 1909 the Trade Boards Act authorised the application of this device to four trades in Great Britain. In 1913 the provisions of the Act were made applicable to four other trades, and in 1914 to a third group of four industries. A special minimum wage law was in 1912 enacted to govern the entire coal mining industry of the country.
The first minimum wage law in the United States was passed in 1912 by Massachusetts. It has been followed by similar legislation in ten other states; namely, Arkansas, California, Colorado, Kansas, Minnesota, Nebraska, Oregon, Utah, Washington, and Wisconsin. California has adopted a constitutional amendment which specifically authorises minimum wage legislation for women and minors, and Ohio added a similar provision to her constitution which applies to men as well.
The minimum wage statutes of Australasia and Great Britain cover all classes of workers, but those of the United States are restricted to minors and women. Withthe exception of the Utah act, all the important laws on this subject in all three regions establish minimum wages indirectly, by authorising commissions and wage boards to determine the actual rates. In Australasia and Great Britain the statutes do not attempt to specify any standard to which the wage determinations of the boards must conform, but the tendency in the former country in recent years has been to enforce a living wage as the minimum; that is, wage rates sufficiently high to provide a decent family livelihood for men, and a reasonable personal livelihood for women and minors. All the laws in America but one require the commissions to establish living wages. In Utah no commission is provided for, as the law itself specifies in terms of money the minimum rates of remuneration that the employers of women are permitted to pay.
The effectiveness of the laws that have been put into operation is at least as great as their friends had dared to hope. According to Professor M. B. Hammond of Ohio, who investigated the situation on the spot in the winter of 1911-1912, the people of Australasia have accepted the minimum wage "as a permanent policy in the industrial legislation of that part of the world." Professor Hammond's observations, and the replies of the Chief Factory Inspector of Melbourne to the New York Factory Investigating Commission, show the main effects of minimum wage legislation to be as follows: sweating and strikes have all but disappeared; the efficiency of the workers has on the whole increased; the number of workers unable to earn the legal minimum has not been as great as most persons had feared, and almost all of them have obtained employment at lower remuneration through special permits; the legal minimum has not only not become the actual maximum, but is exceeded in the case of the majority of workers; no evidence exists to show that any industry has been crippled, or forced to move out ofthe country; with the exception of a very few instances, the prices of commodities have not been raised by the law.[251]
In the four trades of Great Britain which were first brought under the operation of the Trade Boards Act, and which presented some of the worst examples of economic oppression, the beneficial effects of the minimum wage have been even more striking than in Australasia. Wages have been considerably raised, in some cases as high as one hundred per cent.; dispirited and helpless workers have gained courage, power, and self-respect to such an extent as to increase considerably their membership in trade unions, and to obtain in several instances further increases in remuneration beyond the legal minimum; the compensation of the better paid labourers has not been reduced to the level fixed by the trade boards; the efficiency of both employés and productive processes has been on the whole increased; the number of persons forced out of employment by the law is negligible; no important rise of prices is traceable to the law; and the number of business concerns unable to pay the increase in wages is too small to deserve serious consideration. All these results had been established before the outbreak of the war.[252]
The legal minimum wage has been carried into effect in only four states of our own country. It covers practically all the industries employing women and minors in Oregon and Washington, all the working women and girls of Utah, and the women and minors of a few trades in Massachusetts.The rates established for experienced women vary from $7.50 per week in Utah to ten dollars a week for some classes in Washington. As the first wage determinations were put into effect only in 1913, American experience has been too short as well as too narrow to warrant certain conclusions. So far as it has been applied, however, the legal minimum wage has been as successful in the United States as in Australasia or Great Britain. All competent witnesses agree that it has brought a considerable increase in wages to a considerable proportion of the women and minors in the industries in which it is operative, and that it has neither thrown any important number of workers out of employment nor forced any important concern out of business. Speaking of the three leading industries in which minimum wages were first established in Washington, the Industrial Welfare Commission of that state testifies: "Seldom has any piece of legislation, in prospect, engendered so much discussion and so much criticism, as did the minimum wage law, with the intricacies of its ramifications touching almost every industry in the state, large or small, and the family of nearly every wage earner; seldom, too, has any law, in actuality, been so well received, its application been accomplished with so little open opposition, and, for a law of this character, has been attended with so little industrial disturbance as that same minimum wage law. None of the dire predictions made prior to the passage of the law have come about to an extent that questions the general efficiency of the law. There has been no wholesale discharge of women employés, no wholesale levelling of wages, no wholesale replacing of higher paid workers by cheaper help, no tendency to make the minimum the maximum, while the employers of the state in general have been following the letter and spirit of the law, and aiding greatly in its application.... The law, in other words, has advanced the wages of practically sixty per cent. of theworkers in these industries, and has done it without serious opposition at a time when business conditions were none too good."[253]The Bureau of Labour Statistics of the United States investigated the operation of the minimum wage in the mercantile establishments of Oregon at the end of the first year. The conclusions of the investigators were in brief that both the number and the proportion of women getting the legal minimum ($9.25 per week) for adults had increased, that the proportion obtaining more than this rate had likewise increased, that those who had received a rise in remuneration did not show any decline in efficiency, that women had not been displaced by men, and that the average increase in the labour cost resulting from the advance in wages was only three mills on each dollar of sales.[254]The effects of the Utah law during the first year of its operation were summarised by the Labour Commissioner, Mr. H. T. Haines, as follows: a rise in the wages of a "number of women and girls who most needed the additional sums of money"; increased efficiency of female workers admitted by most employers; but few cases of women or girls utterly deprived of employment by the law; none of the higher paid women suffered a reduction in wages; and ninety per cent. of the employers are satisfied with the minimum wage statute.[255]So far as the law has been applied in Massachusetts, it seems to be relatively as successful as in the other three states.[256]
The principal reason why the minimum wage laws on the statute books of the other seven states have not beencarried into effect, is the uncertainty of the validity of minimum wage legislation in our constitutional system. In November, 1914, a district judge granted a writ of injunction, restraining the Minimum Wage Commission of Minnesota from enforcing their wage determinations, on the ground that the law attempted to delegate legislative power, and that its provisions violated that section of the fourteenth amendment to the United States Constitution which forbids any state to deprive a person of life, liberty, or property without due process of law. One of the courts of Arkansas has taken substantially the same position. The second objection urged by the Minnesota judge is probably much the more serious of the two, and is the one upon which chief emphasis has been laid in the briefs filed in various courts by the opponents of minimum wage legislation. As regards labour legislation, "due process of law" may be practically translated, "reasonable and necessary exercise of the State's police power." And the police power means that indefinite power of the State to legislate for the health, safety, morals, and welfare of the community.[257]Now it is obvious that a minimum wage law deprives both employer and employé of some liberty of contract, and also that it virtually deprives the former of some property, inasmuch as it generally increases his outlay for wages. On the other hand, this restriction of liberty and equivalent diminution of property seem to be carried out in harmony with due process of law, since they constitute an exercise of the police power of the State on behalf of the general welfare. Some months before the Minnesota judge granted the writ of injunction against the enforcement of the minimum wage law of that state, a lower court and the Supreme Court of Oregon had pronounced the Oregon statute constitutional,as a legitimate exercise of the police power. An appeal from this judgment was argued in the Supreme Court of the United States, Dec. 17, 1914, but no decision has yet (October, 1916) been rendered. Until the highest court has spoken on the question of constitutionality, no state is likely to take any further step toward establishing minimum wages. Should the decision of the Supreme Court be unfavourable valid minimum wage legislation will be impossible without an amendment of the United States Constitution.[258]
Whether it be considered from the viewpoint of ethics, politics, or economics, the principle of the legal minimum wage is impregnable. The State has not only the moral right but the moral duty to enact legislation of this sort, whenever any important group of labourers are receiving less than living wages. One of the elementary functions and obligations of the State is to protect citizens in the enjoyment of their natural rights; and the claim to a living wage is, as we have seen, one of the natural rights of the person whose wages are his only means of livelihood. Therefore, the establishment of minimum living wages is not among the so-called "optional functions" of the State in our present industrial society. Whenever it can be successfully performed, it is a primary and necessary function. So far as political propriety is concerned, the State may as reasonably be expected to protect the citizen against the physical, mental, and moral injury resulting from an unjust wage contract, as to safeguard his money against the thief, his body against the bully, or his life against theassassin. In all four cases the essential welfare of the individual is injured or threatened through the abuse of superior force and cunning. Inasmuch as the legal minimum wage is ethically legitimate, the question of its enactment is, politically speaking, entirely a question of expediency.
Now the question of expediency is mainly economic. A great deal of nonsense has been written and spoken about the alleged conflict between the legal minimum wage and "economic law." Economists have used no such language, indeed; for they know that economic laws are merely the expected uniformities of social action in given circumstances. The economists know that economic laws are no more opposed to a legal minimum wage than to a legal eight hour day, or legal regulations of safety and sanitation in work places. All three of these measures tend to increase the cost of production, and sometimes carry the tendency into reality. A minimum wage law is difficult to enforce, but not much more so than most other labour regulations. At any rate, the practical consideration is whether even a partial enforcement of it will not result in a marked benefit to great numbers of underpaid workers. It may throw some persons, the slower workers, out of employment; but here, again, the important question relates to the balance of good over evil for the majority of those who are below the level of decent living. At every point, therefore, the problem is one of concrete expediency, not of agreement or disagreement with a real or imaginary economic law.
Some of those who oppose the device on the ground of expediency set up an argument which runs about as follows: the increase in wages caused by a minimum wage law will be shifted to the consumer in the form of higher prices; this result will in turn lead to a falling off in thedemand for products; a lessened demand for goods means a reduced demand for labour; and this implies a diminished volume of employment, so that the last state of the workers becomes worse than the first. Not only is this conception too simple, but it proves too much. If it were correct every rise in wages, howsoever brought about, would be ill advised; for every rise would set in motion the same fatal chain of events. Voluntary increases of remuneration by employers would be quite as futile as the efforts of a labour union. This is little more than the old wages fund theory in a new dress. And it is no less contrary to experience.
The argument is too simple because it is based upon an insufficient analysis of the facts. There are no less than four sources from which the increased wages required by a minimum wage law might in whole or in part be obtained. In the first place, higher wages will often give the workers both the physical capacity and the spirit that make possible a larger output. Thus, they could themselves equivalently provide a part at least of their additional remuneration. When, secondly, the employer finds that labour is no longer so cheap that it can be profitably used as a substitute for intelligent management, better methods of production, and up to date machinery, he will be compelled to introduce one or more of these improvements, and to offset increased labour cost by increased managerial and mechanical efficiency. This is what seems to have happened in the tailoring industry of England. According to Mr. Tawney, "the increased costs of production have, on the whole, been met by better organisation of work and by better machinery."[259]In the third place, a part of the increased wage cost can be defrayed out of profits, in two ways: through a reduction in the profits of the majority of business concerns in an industry; but more frequently through the elimination of the lessefficient, and the consequent increase in the volume of business done by the more efficient. In the latter establishments the additional outlay for wages might be fully neutralised by the diminished managerial expenses and fixed charges per unit of product. This elimination of unfit undertakers would not only be in the direction of greater social efficiency, but in the interest of better employment conditions generally; for it is the less competent employers who are mainly responsible for the evil of "sweating," when they strive to reduce the cost of production by the only method that they know; that is, the oppression of labour. Should the three foregoing factors fall short of providing or neutralising the increased wages, the recourse would necessarily be to the fourth source; namely, a rise in the price of products. However, there is no definite reason for assuming that the rise will in any case be sufficient to cause a net decrease of demand. In Oregon the increased labour cost due to the minimum wage law amounted, as we have seen, to only three mills per dollar of sales in mercantile establishments. Even if this were all shifted to the consumer—something that is practically impossible—it would be equivalent to an increase of only three cents on each ten dollars' worth of purchases, and thirty cents on each hundred. The reduction in sales on account of such a slight rise in prices would be infinitesimal. In the case of possibly the majority of products, the lessened demand on the part of the other classes might be entirely counterbalanced by the increased demand at the hands of the workers whose purchasing power had been raised through the minimum wage law. The effect upon sales, and hence upon business and production, which follows from an increase in the effective consuming power of the labouring classes is frequently ignored or underestimated. So far as consumers' goods are concerned, it seems certain that a given addition to the income of the wage-earning classes will lead to a greaterincrease in the demand for products than an equal addition to the income of any other section of the people.
Nevertheless, the possibility must be admitted of some diminution of employment, owing to higher prices and decreased demand. And it is certain that some workers would not be worth the legal minimum to their employers. A part, but probably not all, of these could find employment at a lower wage, through a system of permits for "slow workers." Whatever the amount of unemployment resulting from both these causes, it would undoubtedly be an evil of lesser magnitude than that which at present follows from the under-payment of a majority of the labouring population. And it could be remedied by two measures which are in any case necessary for social welfare, and which would be hastened by the establishment of a legal minimum wage. These are adequate and scientific laws and institutions to deal with the general problem of unemployment, and a comprehensive system of industrial and vocational training.
These conclusions, then, seem to be justified: the economic objections to a legal minimum wage are not essentially different from those that may be urged against any other beneficial labour legislation; and they have been sufficiently refuted by experience to throw the burden of proof upon the objectors. Expediency suggests, however, that in the United States the device should be applied gradually in two respects: for a few years it ought to be confined to women and minors; and when it is extended to men, the rates should approach the level of a complete family living wage by stages, covering, say, three or four years. The former restriction would enable the law to be carried through its experimental stages with a minimum disturbance to industry as a whole, and with a minimum of opposition, and the latter would greatly reduce the danger of male unemployment.[260]
When the present writer made an argument for the legal minimum wage something more than ten years ago, he was able to find only one American economist who had touched the subject, and the verdict of that one was unfavourable.[261]A little over a year ago, Dr. John O'Grady sent an inquiry to one hundred and sixty economists of the United States to ascertain their opinions on the same subject. Of the ninety-four who replied seventy were in favour of a minimum wage law for women and minors, thirteen were opposed, and eleven were non-committal; fifty-five favoured such legislation for men, twenty were against it, and nineteen were disinclined to give a categorical answer. About three-fourths of those who responded expressed the opinion that the measure would tend to increase the efficiency both of the workers and of methods of production.[262]
It is worthy of note that the nine members of the late Federal Commission on Industrial Relations, although disagreeing widely and variously on most other important questions and proposals, were all favourable to a minimum wage law for women and minors.[263]
The most comprehensive and most searching criticism of the legal minimum wage from the viewpoint of economic theory has been made by Professor F. W. Taussig.[264]While he does not commit himself definitely to the assertionthat a universal minimum wage of, say, eight dollars per week, would cause a notable amount of unemployment among women, he regards this consequence as sufficiently probable to indicate the "need of going slow in the regulation of women's wages." Specifically, he would have public wage boards refrain from fixing the minimum rates high enough to maintain women living away from home. His final and only serious argument for this position relates to the marginal effectiveness of women workers. He assumes that all "the fitful, untrained, indifferent women are got rid of; that all who offer themselves for work at the age of (say) eighteen years have had an industrially helpful education,—" and then raises the question whether all of them will be "able to get distinctly higher wages than are now current."[265]Obviously the question is not serious unless it contemplates the probability of unemployment for aconsiderable proportion. If only one per cent. or less of the women should be unable to find employment at the higher wages, the net social advantage of the minimum wage device would be so obvious as to render Professor Taussig's opposition quite unreasonable. Making the assumptions quoted above from his pages, let us try to see whether his apprehensions are economically justifiable.
If they are reasonable or probable they must rest on one of two fundamental conditions: the occupations available to women are too few to absorb all that would seek to become wage earners at eight dollars per week; or a considerable section of them would be unable to produce such a high wage. Possibly the first of these assumptions is true, but neither Professor Taussig nor any other authority has presented evidence to support it, and it is on the face of things not sufficiently probable to justify hesitation in the advocacy of a minimum living wage. If the second assumption be correct, if the product of a considerable section of women (all adequately trained) wouldbe insufficient to yield them eight dollars per week, in addition to the other costs of production, the conclusion is inevitable that the same result would follow the attempt to pay all male adults (likewise adequately trained) a family living wage of, say, fifteen dollars per week. For the product of the average man does not exceed that of the average woman by even as great a ratio as fifteen to eight. If the average woman is not worth eight dollars a week to an employer in any kind of woman's occupation, the average man is not worth fifteen dollars. Therefore, we cannot hope, even with the aid of a thorough system of industrial and vocational training, to provide all adult males of average capacity with a family living wage and the minimum means of living a reasonable life.
This is a veritable counsel of despair. It implies either that the law of diminishing returns is already operating in this country in such a way as to prevent the national product from being sufficiently large to provide a minimum wage of fifteen dollars a week for men, and eight dollars a week for women; or that the product, though ample for this purpose, and for all the other necessary payments to the higher priced workers and to the other agents of production, cannot under our present industrial system be so distributed as to attain the desired end. For the first of these hypotheses there is no evidence worthy of the name. If Professor King is right in his estimate of an average family income of 1494 dollars annually[266]the difficulty before us does not lie in the field of production. Professor Taussig seems to rest his fears on the second hypothesis, on the assumed impossibility of bringing about the required distribution; for he points out that increased efficiency of the workers may, like increased efficiency of the material instrumentalities of production, in the long run redound mainly to the benefit of the consumers, whilewages may be little if any above the old level. If these fears are justified, if the difficulty is entirely one of the mechanism of distribution, and if it cannot be overcome by legal enactment, then is our competitive organisation of industry bankrupt, and the sooner we find out that fact definitely the better. If the legal minimum wage will help to expose such a situation, will show that, no matter how much the productivity of the workers may be increased, a large proportion of them must by the very nature of the competitive system be forever condemned to live below the level of decent existence, then the minimum wage is worth having merely as an instrument of economic enlightenment.
Professor Taussig's argument and illustrations[267]seem to contemplate a condition in which the number of women who become fitted for a certain trade is excessive relatively to the demand for its products, and to the supply of women in other industries. Were industrial training thus misdirected, and were the trained persons unable or unwilling to distribute themselves over other occupations, they would, indeed, face precisely the same dilemma as do the unskilled workers to-day. That is; a majority would be condemned to insufficient wages, or a minority to unemployment. But we have been assuming anadequatesystem of industrial and vocational training, a well-balanced system, one that would enable the workers to adjust their supply to the demand throughout the various occupations. In these conditions the economic axiom that a supply of goods is a demand for goods should become beneficently effective: the workers should all be able to find employment, and to obtain the greater part of their increased product. Surely Professor Taussig does not mean to commit himself to the view that every increase in the productive power of the workers will in the long run help them only inasmuch as they are consumers, the lion's share of the additional product being taken by otherclasses. Probably such is the usual result in a régime of unregulated competition, and unlimited freedom as regards the wage contract. But this is precisely what we expect a minimum wage law to correct and prevent. We rely upon this device to enable the workers to retain for themselves that share of the product which under free competition would automatically go to the non-labouring consumers. We hope that blind and destructive economic force can be held in check by deliberate and beneficent social control.
The fact of the matter seems to be that Professor Taussig's argument is too hypothetical and conjectural to justify his pessimistic conclusions. It is unpleasantly suggestive of the reasoning by which the classical economists tried to show the English labourers the folly and futility of trade unionism.
The ideal standard of a minimum wage law is a scale of remuneration adequate not only to the present needs of individuals and families, but to savings for the contingencies of the future. Until such time as the compensation of all labourers has been brought up to this level, the State should make provision for cheap housing, and for insurance against accidents, sickness, invalidity, old age, and unemployment. The theory underlying such measures is that they would merely supplement insufficient remuneration, and indirectly contribute to the establishment of genuine living wages. In Europe, housing and insurance legislation is so common that no reasonable and intelligent person any longer questions the competency or propriety of such action by the State.
If an adequate legal minimum wage, in the sense just defined, were universally established, the State would not be required to do anything further to effectuate wage justice, except in the matter of vocational and industrial education. This would qualify practically all persons toearn at least a living wage, and would enable those who underwent unusual sacrifices either before or during their employment to command something over and above. In other words, all workers would then be able to obtain what we have called "the equitable minimum." And the labouring class as a whole would possess sufficient economic power to secure substantially all that was due by any of the canons of distributive justice.
The general benefits and achievements of labour organisations in the United States down to the beginning of the present century, cannot be more succinctly nor more authoritatively stated than in the words of the United States Industrial Commission: "An overwhelming preponderance of testimony before the Industrial Commission indicates that the organisation of labour has resulted in a marked improvement in the economic condition of the workers."[268]Some of the most conspicuous and unquestionable proofs of rises in wages effected by the unions are afforded by the building trades, the printing trades, the coal mining industry, and the more skilled occupations on the railroads. Between 1890 and 1907 wages increased considerably more in the organised than in the unorganised trades.[269]
Nevertheless, when all due credit is given to the unions for their part in augmenting the share of the product received by labour, there remain two important obstacles which seriously lessen their efficacy as a means of raising the wages of the underpaid.
The first is the fact that the unions still embrace only a small portion of the total number of wage earners. According to Professor Leo Wolman, a little more thantwenty-seven million of the thirty-eight million persons engaged in "gainful occupations" in the United States in 1910 were wage earners in the ordinary sense of that phrase, and of these twenty-seven million only 2,116,317, or 7.7 per cent., were members of labour organisations.[270]The membership to-day is about two and three quarter millions. If the total number of wage earners increased between 1910 and 1916 at the same rate as during the preceding decade, the organised portion is now somewhat less than 7.7 per cent. of the whole. Evidently the labour unions have not grown with sufficient rapidity, nor are they sufficiently powerful to warrant the hope that they will be soon able to lift even a majority of the underpaid workers to the level of living wage conditions.
The second obstacle is the fact that only a small minority of the members of labour unions are drawn from the unskilled and underpaid classes, who stand most in need of organisation. The per cent. of those getting less than living wages that is in the unions is almost negligible. With the exception of a few industries, the unskilled and the underpaid show very little tendency to increase notably their organised proportion. The fundamental reason of this condition has been well stated by John A. Hobson: "The great problem of poverty ... resides in the conditions of the low-skilled workman. To live industrially under the new order he must organise. He cannot organise because he is so poor, so ignorant, so weak. Because he is not organised he continues to be poor, ignorant, weak. Here is a great dilemma, of which whoever shall have found the key will have done much to solve the problem of poverty."[271]
The most effective and expeditious method of raising the wages of the underpaid through organisation is by means of the "industrial," as distinguished from the"trade," or "craft," union. In the former all the trades of a given industry are united in one compact organisation, while the latter includes only those who work at a certain trade or occupation. For example: the United Mine Workers embrace all persons employed in coal mines, from the most highly skilled to the lowest grade of unspecialised labour; while the craft union is exemplified in the engineers, firemen, conductors, switchmen, and other groups having their separate organisations in the railroad industry. The industrial union is as much concerned with the welfare of its unskilled as of its skilled members, and exerts the whole of its organised force on behalf of each and every group of workers throughout the industry which it covers. The superior suitability of the industrial type of union to the needs of the unskilled labourers is seen in the fact that more of them are organised in the coal mining than in any other industry, and have received greater benefits from organisation than their unskilled fellow workers in any other industry. Were the various classes of railway employés combined in one union, instead of being organised along the lines of their separate crafts, it is quite improbable that the unskilled majority would be getting, as they now are getting, less than living wages. While it is true that the various craft unions in an industry are often federated into a comprehensive association, the bond uniting them is not nearly so close, nor so helpful to the weaker groups of workers as in the case of the industrial unions.
Human nature being what it is, however, the members of the skilled crafts cannot all be induced or compelled to adopt the industrial type of organisation. The Knights of Labour attempted to accomplish this, and for a time enjoyed a considerable measure of success, but in the end the organisation was unable to withstand those fundamental inclinations which impel men to prefer the more narrow, homogeneous, and exclusive type of association.The skilled workers refused to merge their local and craft interests in the wider interests of men with whom they had no strong nor immediate bonds of sympathy. Among labourers, as well as among other persons, the capacity for altruism is limited by distance in space and occupational condition. The passion for distinction likewise affects the wage earner, impelling the higher groups consciously or unconsciously to oppose association that tends to break down the barrier of superiority. Owing to their greater resources and greater scarcity, the skilled members of an industrial union are less dependent upon the assistance of the unskilled than the latter are dependent upon the former; yet the skilled membership is always in a minority, and therefore in danger of being subordinated to the interests of the unskilled majority.
For these and many other reasons it is quite improbable that the majority of union labourers can be amalgamated into industrial unions in the near future. The most that can be expected is that the various occupational unions within each industry should become federated in a more compact and effective way than now prevails, thus conserving the main advantages of the local and craft association, while assuring to the unskilled workers some of the benefits of the industrial union.
In the opinion of some labour leaders, the underpaid workers should place their entire reliance upon organisation. The arguments for this position are mainly based upon three contentions: it is better that men should do things for themselves than to call in the intervention of the State; if the workers secure living wages by law they will be less likely to organise, or to remain efficiently organised; and if the State fixes a minimum wage it may some day decide to fix a maximum.
Within certain limits the first of these propositions isincontestable. The self education, self reliance, and other experiences obtained by the workers through an organised struggle for improvements of any kind, are too valuable to be lightly passed over for the sake of the easier method of State assistance. Indeed, it would be better to accept somewhat less, or to wait somewhat longer, in order that the advantages might be secured through organisation. However, these hypotheses are not verified as regards the minimum wage problem. The legal method promises with a high degree of probability to bring about universal living wages within ten or fifteen years. The champions of organisation can point to no solid reasons for indulging the hope that their method would achieve the same result within a half a century. Therefore, the advantages of the device of organisation are much more than neutralised by its disadvantages.
The fear that the devotion of the workers to the union would decline as soon as living wages had been secured by law, seems to have no adequate basis either in experience or in probability. Speaking of the establishment of minimum wages in the tailoring industry of Great Britain, Mr. Tawney declares that it "has given an impetus to trade unionism among both men and women. The membership of the societies connected with the tailoring trade has increased, and in several districts the trade unions have secured agreements fixing the standard rate considerably above the minimum contained in the Trade Board's determination."[272]Similar testimony comes from Australasia. Indeed, this is precisely what we should be inclined to expect; for the workers whose wages had been raised would for the first time possess the money and the courage to support unions; and would have sufficient incentives thereto in the natural desire to obtain something more than the legal minimum, and in the realisation that organisation was necessary to give them a voice in thedetermination of the minimum, and to enable them to co-operate in compelling its enforcement. Indeed, general experience shows that organisation becomes normally efficient and produces its best results only among workers who have already approximated the level of living wages.
To be sure, the State could set up maximum instead of minimum wages,—if the employing classes were sufficiently powerful. But all indications point to a decline rather than an increase in their political influence, and to a corresponding expansion in the governmental influence of the labouring classes and their sympathisers. Moreover, the labour leaders who urge this objection are inconsistent, inasmuch as they advocate other beneficial labour legislation. The distinction which they profess to find between laws that merely remove unfair legal and judicial disabilities and laws that reduce the length of the working day or fix minimum wages, has no importance in practical politics or in the mind of the average legislature. If the political influence of labour should ever become so weak and that of capital so strong as to make restrictive labour legislation generally feasible, legislators would not confine their unfriendly action to the field of positive measures. They would be quite as ready to pass a law prohibiting strikes as to enact a statute fixing maximum wages. The formal legalisation of strikes, picketing, and the primary boycott which is contained in the Clayton Act, and for which the labour unions worked long and patiently, could conceivably be seized upon by some future unfriendly Congress as a precedent and provocation for legislation which would not only repeal all the favourable provisions of the Clayton Act, but subject labour to entirely new and far more odious restraints and interferences. The fact that governments passed maximum wage laws in the past is utterly irrelevant to the question of wage legislation to-day. A legal minimum wage, and a multitude of other protective labour laws are desirable and wise in the twentiethcentury for the simple reason that labour and the friends of labour are sufficiently powerful to utilise this method, and because their influence seems destined to increase rather than decrease. The contrary hypothesis is too improbable for serious consideration.
The conclusions that seem justified by a comprehensive and critical view of all the facts of the situation, are that organisation is not of itself an adequate means of bringing about living wages for the underpaid, but that it ought nevertheless to be promoted and extended among these classes, not only for its direct effect upon wages, but for its bearing upon legislation. The method of organisation and the method of legislation are not only not mutually opposed, but are in a very natural and practical manner complementary.
While those workers whose remuneration is below the level of decent maintenance are not ordinarily in a position to become owners of any kind of capital, many of them, especially among the unmarried men, can accumulate savings by making large sacrifices. As a matter of fact, hundreds of thousands of the underpaid have become interest receivers through the medium of savings banks, real estate possessions, and insurance policies. Every effort in this direction is distinctly worth while, and deserving of encouragement. Labourers who are above the minimum wage level can, of course, save much larger amounts, and with less sacrifices than the underpaid classes. In all cases the main desideratum is that the workers should derive some income from capital; but it is almost equally important that their capital ownership should wherever possible take the form of shares in the industry in which they are employed, or the store at which they buy their goods. This means co-operative production and co-operative distribution. The general benefitsof the co-operative enterprise have already been described in chapter xiv. For the wage earner proprietorship in a co-operative concern is preferable to any other kind of capital ownership because of the training that it affords in business management and responsibility, in industrial democracy, and in the capacity to subordinate his immediate and selfish interests to his more remote and larger welfare.
Co-operative ownership of the tools with which men work has advantages of its own over co-operative ownership of the stores from which they made their purchases, inasmuch as it increases their control over the conditions of employment, and gives them incentives to efficiency which results in a larger social product and a larger share thereof for themselves. As already pointed out in chapter xiv, the ideal type of productive co-operation is that known as the "perfect" form, in which the workers are the exclusive owners of the concern where they exercise their labour. Nevertheless, the "federal" type, in which the productive concern is directly owned by a wholesale co-operative, indirectly by the retail co-operative store, and ultimately by the co-operative consumers,—presents one important advantage. It could be so modified as to enable the employés of the productive enterprise to share the ownership of the latter with the wholesale establishment. Such an arrangement would at once give the workers the benefits of productive co-operation mentioned above, and render probable a satisfactory adjustment of the conflicting claims of producers and consumers. As intimated in chapter xxiv, such a conflict is inherent in every system of industrial organisation, and will become more evident and more acute in proportion to the strengthening of the position of labour.
A final reason for ownership of capital by labour deserves mention here, even though it has no immediate bearing upon the question of remuneration. Were all labourersreceiving the full measure of wages to which they are entitled by the canons of distributive justice, it would still be highly desirable that the majority if not all of them should possess some capital, preferably in the productive and distributive concerns in which they were immediately interested. It does not seem probable that our economic system as now constituted, with the capital owners and the capital operators for the most part in two distinct classes, will be the final form of industrial organisation. Particularly does this arrangement seem undesirable, incongruous, and unstable in a society whose political form is that of democracy. Ultimately the workers must become not merely wage earners but capitalists. Any other system will always contain and develop the seeds of social discontent and social disorder.
REFERENCES ON SECTION IV
Adams and Sumner: Labour Problems. Macmillan; 1905.Commons and Andrews: Principles of Labour Legislation. Harpers; 1916.Walker: The Wages Question. New York; 1876.Ryan: A Living Wage. Macmillan; 1906.Snowden: The Living Wage. London; Hodder & Stoughton.O'Grady: A Legal Minimum Wage. Washington; 1915.Broda:La Fixation Légale des Salaires. Paris; 1912.N. Y. Factory Investigating Commission.Appendix to Vol. III.Tawney: Minimum Rates in the Chain-Making Industry. London; 1914.Minimum Rates in the Tailoring Industry. London; 1915.Turman:Le Catholicisme Social. Paris; 1900.Pottier:De Jure et Justitia. Liege; 1900.Polier:L'Idée du Juste Salaire. Paris; 1903.Menger: The Right to the Whole Produce of Labour. London; 1899.Garriguet:Régime du Travail. Paris; 1908.Nearing: Reducing the Cost of Living. Philadelphia; 1914.Chapin: The Standard of Living in New York City. New York; 1909.Also the works on co-operation cited in connection with Section II, and those of Hobson, Carver, Nearing and Streightoff.
Adams and Sumner: Labour Problems. Macmillan; 1905.
Commons and Andrews: Principles of Labour Legislation. Harpers; 1916.
Walker: The Wages Question. New York; 1876.
Ryan: A Living Wage. Macmillan; 1906.
Snowden: The Living Wage. London; Hodder & Stoughton.
O'Grady: A Legal Minimum Wage. Washington; 1915.
Broda:La Fixation Légale des Salaires. Paris; 1912.
N. Y. Factory Investigating Commission.Appendix to Vol. III.
Tawney: Minimum Rates in the Chain-Making Industry. London; 1914.
Minimum Rates in the Tailoring Industry. London; 1915.
Turman:Le Catholicisme Social. Paris; 1900.
Pottier:De Jure et Justitia. Liege; 1900.
Polier:L'Idée du Juste Salaire. Paris; 1903.
Menger: The Right to the Whole Produce of Labour. London; 1899.
Garriguet:Régime du Travail. Paris; 1908.
Nearing: Reducing the Cost of Living. Philadelphia; 1914.
Chapin: The Standard of Living in New York City. New York; 1909.
Also the works on co-operation cited in connection with Section II, and those of Hobson, Carver, Nearing and Streightoff.