successful examples are scattered here and there in differ-
ent industries throughout the United States.

Aim of Cooperation.

The object of the cooperative society is to interest the
laborer directly in his work; to encourage him in the
hope of reaping the share of the profits over and above
the fixed charges; and to make him an independent busi-
ness man who shall have a right to determine the direction
of his own labor-power. As soon as his interest in the
business is established he takes stock and becomes a share-
holder, and thus receives the right to vote in the manage-
ment of the affairs of the society. He now becomes care-
ful of tools and material; is saving of time and prevents



ECONOMICS.



205



waste; and he seeks to make a genuine, finished product.
There is no need of strikes and lockouts ; the war between
capital and labor is over, because the capitalist and laborer
are the same. Their common interests have been demon-
strated.

Whenever productive cooperation can be successfully
carried on, it has a good influence on society at large.
Perhaps the labor problem can be solved in no other way
except in giving the wage-earner a voice in shaping his
own course, in managing his own business, in employing
himself instead of being hired as a machine and thrust
aside at the will of the employer. The idea of copartner-
ship in business is elevating in its very thought. But if
productive cooperation should succeed until a large number
of workers should be employed in cooperative enterprises 2
these enterprises would begin to compete w T ith each other,
and there would be competition by groups instead of indi-
viduals. What then would happen to those who have not
yet joined a cooperative association? They must of ne-
cessity suffer the results of grinding competition, which
harms not their more fortunate cooperative brethren. But
the time may come when these also will be forced to be-
come cooperative. The great difficulty is that it takes
a long time to make good cooperative workers. It is a
process of education a slow process. And one of the
chief reasons of the failure of cooperation in so many
instances is that those who enter it are not cooperative
men by nature and by training. Its success has finally
been demonstrated in England, and it helps toward the
solution of the labor problem; but its judgment is not
final or conclusive.



206



ECONOMICS.



Profit-Sharing.

This method of associated work differs from both pro-
ductive and distributive cooperation in the fact that the
business management is still in the hands of the capitalist
employer. The laborers share in the profits of the concern,
but have nothing to say in the management of the business.
However, in recent years the progress of all successful
profit-sharing institutions is due to cooperation in which
the laborers own shares of stock in the business and also
have a voice in the management of the affairs.

The method by which profit-sharing is carried on is best
illustrated by two well-known examples in America: the
Proctor & Gamble Manufactory, located at Ivorydale, a
small town in the suburbs of Cincinnati, and the N. O.
Nelson Manufacturing Company, at Laclair, Illinois.
The former employs about 500 laborers at the factory,
besides another hundred in the Cincinnati office and on
the road. The average wages of men is $10 per week;
of women, $4.75; of boys, $3.50 to $7. The wages are
considered only fair, yet the method the company has
adopted of dealing with its employees has been such as to
prevent any discontent, strike, or revolution. The firm
was established in 1837, but the plan of profit-sharing
was adopted in 1887. It provided for the distribution
of the profits among the employees after allowing a reason-
able salary of $4,000 to each member of the firm who was
actually engaged in conducting the business. The laborers
were to receive the same proportion of the profits as the
total wages bore to the total cost of manufacturing and
marketing the product. For example, if the total amount
of business done was $100,000, the amount of wages paid
$20,000, the amount of profit made $10,000, then the



ECONOMICS.



207



total cost of making and marketing goods was $100,000
less the profit of $10,000, or $90,000. The amount of
wages paid was $20,000. The amount of profits given to
employees would then be in the ratio of 20,000 to 90,000,
or two-ninths, and the proportion to the firm would be
as 70,000 to 90,000, or .seven-ninths of the profits. The
laborers 7 proportion of the profits was distributed among
them in accordance with the amount of wages earned by
each. This plan was in force three years, during which
the dividend or share of the profits averaged 12^ per cent,
of the wages.

In 1890 the firm of Proctor & Gamble was reorganized
on the basis of the payment of 12 per cent, on the common
stock, if this amount should be earned. This being prac-
tically the same rate earned by the employees under the
old plan, it was an easy and advantageous arrangement
to adopt a plan of paying employees as their share of
profits the same rate of dividend upon their wages as was
paid upon the common stock of the company. This method
was adopted, and under it profit-sharing is now carried
on. The dividends are paid semi-annually. To illustrate
this: suppose a man earns $500 a year in wages; he
receives in addition a dividend of 12 per cent, on this
amount, or $60. The man that has $500 worth of stock
in the company also receives 12 per cent., or $60. Thus
the laborers and the stockholders are upon an equitable
basis. All employees are entitled to begin to share in
tKe dividends after being in the employ of the company
for three months ; but if one quits work or is discharged
before three months' labor in the service of the company
he receives no dividend. At first the laborers were divided



208



ECONOMICS.



into full participants and half participants in profits.
This was not found to be desirable, and all employees
were placed on the same basis. Now, fully 98 per cent,
of the laborers participate in the profits. The company
reserves the right to deny the dividend to the employee
for cause, but the amount of this unpaid dividend must
be paid to other laborers, and does not go to the stock-
holders of the company.

The company not only allows sharing in the profits, but
also encourages employees to acquire a part of the capital
stock. Any employee may obtain a share of the common
stock upon the following terms: $10 at the time of appli-
cation, the balance in installments of not less than $5 each.
Upon this balance he must pay interest at the rate of 4 per
cent, per annum. In the meantime all dividends declared
upon the stock accrue to the purchaser. But the certifi-
cate of stock is held by the secretary of the company as
trustee for the subscriber until the final payment is made.
There have been up to date about seventy or eighty shares
taken by the employees, nearly all of which were purchased
at prices varying from $100 to $128. The company has
under consideration a plan to go one step farther, and
guarantee the employees who hold stock against loss upon
their investment. They find a good many difficulties in
the way of the practical working of such a guaranty, but
hope to make it a permanent part of their system.

Another important feature of the Ivory dale system is
the pension fund, inaugurated for the benefit of the em-
ployees. This fund is created by setting aside the sum
of $500 semi-annually, half of which amount is taken from
each profit-sharing dividend and one-half is paid by the



ECONOMICS. 209

Proctor & Gamble Company. The management of the
fund is in charge of a board of trustees composed of em-
ployees and members of the company. A pension is
granted to any employee who has been in the continuous
employment of the company for not less than seven years
when partial or total disability to work has been caused by
sickness, accident, or old age ; and it is the company's in-
tention so far as possible to provide those who are entitled
to pensions with such work as they can readily perform,
at such wages as the work is worth. The introduction
of the pension fund is of recent date, but on January J ,
1895, there was $2,000 in the fund, with one pensioner
upon the rolls.

One other economic condition is found in the building
and loan associations, which have enabled a few to build
their own homes, and this is encouraged by the company.

The attempt to improve the social life of the employees
has met with less success. Although library, reading-
room and card-room have been provided free, they have
not met with the success anticipated when inaugurated.
This is doubtless owing to the many mutual-aid clubs,
which furnish greater attractions than the reading-room
and the library. In seeking enjoyment laborers have a
tendency to scatter into other groups, rather than to asso-
ciate among themselves in a single group ; also, the widely
separated position of the homes renders compact grouping
almost impossible, as about one-half live near Ivorydale
and the rest live in the city of Cincinnati.

When an employee is injured or sick, the physician
employed by the company cares for idm. The company
also continues the wages of the injured employee through
14



210 ECONOMICS.

the period of his disability, and seeks to emphasize the
fact that employer and employee are associated for a com-
mon interest. Many methods are taken by the managers
to show their interest in the employees. Thus, on Christ-
mas day, 1893, three hundred turkeys were distributed
among the heads of families. And after each semi-annual
pay-day, in January and July, a day is set apart for a gen-
eral celebration, in which employers and employees engage.
The day is taken up with games, sports, and general jollifi-
cation.

The entire profit-sharing enterprise is established on
a business basis. Although altruistic motives may have
been at the foundation of this scheme, it was originated
for the improvement of the business with the belief that
the benefit of the employee was in the end to be for the
benefit of the employers. Most of the laborers being un-
skilled at this time and below the average intelligence of
skilled workmen, it was difficult to persuade them it was
not a scheme to get more work out of them for a corre-
sponding equivalent. Also, they were disposed to take
the dividend as a matter of course and spend it freely
and sometimes foolishly. But time and experience have
dispelled this idea. The success of profit-sharing there,
as elsewhere, is a matter of education, and many ef-
forts of profit-sharing have failed elsewhere simply be-
cause the employers failed to remember that the em-
ployees must be educated up to it. Patience as well as
justice is required for success. During the first two
years the profit-sharing was not a success as a money-
making investment, but as the men became more and more
convinced that they were treated with justice they became
more and more careful and more intelligent in the work,



ECONOMICS.



211



until it is plainly demonstrated and freely admitted that
the saving is much in excess of the sums paid to wage-
earners as profits.

The success of the plan has exceeded the expectations
of the company. The gain is in the saving of time, in
the diminishing of material, in making a better quality
of wares, in keeping men of experience, and finally, a
saving of oversight. These are the principles which have
been maintained by the advocates of profit-sharing, and
it is gratifying to find that they agree with the experience
of those who have carried it out. There have been no
strikes or labor troubles of any kind at these works since
this plan has been in force. Employees remain longer
in the service of the company, and it is very seldom that
a man is discharged on account of lack of work. It
demonstrates that the interests of the employer and em-
ployee are the same, and any warfare between the two
classes is an unnatural warfare and works against the
interests of both parties engaged in it.

Another very important example of profit-sharing is
furnished by the E". O. Nelson Manufacturing Company,,
a corporation for the manufacture and sale of plumbing
goods, steam goods, and machinery. The firm was first
established in 187 Y, incorporated in 1883, and began
profit-sharing in 1886. Its factories are in St. Louis,
Missouri, Mound City, Illinois, and Laclair, Illinois. The
number of employees varies from 400 to 500, and the
wages range from $1.25 to $1.50 per day for common
labor, and from $2 to $2.50 per day for skilled mechanics.
The company runs full time, with the possible reduction
to three-fourths time for perhaps a month in midwinter.



212 ECONOMICS.

About one-half of the company's works are located at
Laclair. Here the factories are well built, heated with
steam and lighted with electricity. The company owns
125 acres of land, 15 of which are reserved for factory
uses and 110 for residence purposes. There is no attempt
to build a model town, as there are no models for houses
or modes of action for people. It was held that in every
respect life should be as free from restraint as on a farm.
But the streets are well laid out. They are paved with
cinders and sprinkled in dry weather. Plank sidewalks
prevail where needed, and shade trees have been planted
on all the streets. Water and street lights extend wher-
ever there are dwellings.

The company has made it possible for employees to
purchase land at a very low rate and build their own
homes, paying for them in monthly payments. Should
a person desire to move from the town, the company
takes the property from him without his loss.

The plan of profit-sharing adopted varies somewhat
from that of the example just given. It sets aside one-
tenth of the profits for a reserve fund, one-tenth for a
provident fund, and one-twentieth for an educational
fund ; the remainder is divided equally between em-
ployers and employees. The reserve fund was set apart
to meet the loss of a bad year, and to equalize dividends
when profits were small. The provident fund was created
to take care of the sick and disabled and the families of
deceased laborers. This latter fund is in the hands of a
committee of five of the employees, elected by the em-
ployees themselves. Special rules are made for the con-
trol of the expenditure of this fund, so as to meet all



ECONOMICS.



213



the requirements of the capitalist. There are no conditions
attached to employment and profit-sharing except a man's
capacity for work. There are no agreements respecting
unions, time of service, nor the manner of quitting.
Finally, the manner of division was modified so as to
yield 2 per cent, on wages to every one per cent, on capital,
and the earlier practice of setting aside 10 per cent, for
provident fund and 5 per cent, for educational fund was
displaced by paying out whatever was necessary for these
funds and charging the same to gross profits.

The results of the first year's business after profit-
sharing was adopted gave a dividend of 5 per cent, on
wages ; second year, 10 per cent. ; third year, 10 per cent. ;
fourth year, 8 per cent. ; fifth year, 10 per cent. ; sixth
year, 8 per cent. ; seventh year, 4 per cent. ; and in the
eighth year, which was 1893, no dividend was declared.
The total dividends paid to wage-earners as their share
of divided profits has been $65,000, or an average of 9
per cent, on wages paid. In the beginning, dividends
were payable in cash or the stock of the company; but
in recent years, in order to make a solidarity between
capital and labor, the company insists that all dividends
shall be paid in the stock of the company. Perhaps
there is no other feature that binds the employees and
employers so closely together as a participation in divi-
dends and sharing in the profits of the concern.

One other economic condition here is worthy of especial
attention: this is the cooperative store, which was opened
in May, 1892, and incorporated under the laws of Illinois
for the purpose of furnishing consumers with goods nt
moderate rates. The laws under which it is incorporated



214 ECONOMICS.

provide, among other things, that no one shall hold more
than one share or cast more than one vote, and that all
profits above interest shall be divided among members.
The capital stock is two thousand shares of $50 each.
The business consists in buying and selling any class of
goods required by members, and manufacturing. It is
under the control of a board of directors, elected annually
by the members. All business is conducted on a cash basis.
All goods are retailed to members or non-members at the
ruling prices as indicated by the actual prices prevail-
ing in stores in the vicinity. At the end of each quarter
the books are balanced and dividends declared according
to the recommendation of the directors and the approval
of the stockholders, in proportion to the amount of the
purchases of each individual during the quarter. Only
half-rate dividends are given to non-members. The divi-
dends have varied from 10 per cent, to 20 per cent., except
in one quarter when there was no profit at all. The
business is carried on entirely upon an economic basis.

Some attempts Iiavc been made to improve the social
condition of the laborers. There are free billiard-rooms
and bowling-alleys, a small grove where swings and
benches are provided, and a baseball ground. The com-
pany maintains a landscape gardener, and keeps a green-
house from which residents are supplied free of charge
with as many flowers as they wish to set out and care for.
A well-organized literary society is in existence, where
occasional lectures by distinguished men are given. There
is a well-trained band which gives open-air concerts during
the week on the grounds adjoining the club-house. A
library containing about 600 carefully selected books is



ECONOMICS. 21

free to all. A large number of the readers reside outside
of Laclair. There are provided also a kindergarten and
public schools. In the school, students are admitted on
part time and allowed to work in the shops or on the farm
during a portion of the day, for which they receive com-
pensation.

As to the results of the entire system as practiced by
the !N". O. Nelson Company, it is the opinion of the man-
agers that the waste of time and material has been greatly
reduced; that there has been a better attention to busi-
ness; and that there has been established a solidarity
of employer and employee in a common business in which
they are mutually interested, from which they draw mutual
profits.

The brief statistical presentation of these examples of
attempts to solve the labor problem reveals to us the funda-
mental proposition in the process of its solution, namely,
that as interests of capital and labor, of employer and
employee, are common and all warfare between them is
unnatural, any system which will tend to establish this
fact will have within itself the basis of success, and any
system which fails to establish this certainly will not
succeed. There must be established a solidarity of in-
terests of employer and employee upon an economic basis.
There must be established a feeling that their interests
are common. Having established this, and acting upon
it on the basis of absolute justice, any rational plan has
the probability of success. If this be continued further
in the social life, so that the employer and employees
mingle together on a common basis, the barriers now exist-
ing between the classes will be broken down and there



216



ECONOMICS.



will be a common sympathy and trust between them.
From the foregoing examples we may infer that a success-
ful solution of the problem rests upon the observance of
the following principles :

1. The laborer must have an economic interest in the
product of his own industry to insure care of tools, saving
of time, saving of material, and the creation of a better
quality of goods.

2. He should be received into total or partial partner-
ship in the management of the business through stock
ownership or some similar means.

3. Both employees and employers should cooperate in
furnishing means of social improvement.

4. While working together the utmost sympathy should
prevail between the employer and the employee, and at
the same time due respect should be given to the respective
position and rights of each class.

5. In order to bring about the above conditions the
employers must cease to combine against the interests
of laborers and the latter must cease to combine against
the former.

6. To gain the confidence of the public in all efforts
to their own improvement, laborers must cease to militate
against members of their own class, and recognize the
rights of all men to work for wages according to their
own choice.

7. And finally, it may be said, to accomplish the above
there must be a constant education of both employers and
employees concerning the rights, duties and limitations of
each class and the mutual interests of each class as if
no class distinction existed either on an economic or social



ECONOMICS. 217

basis. And this leads to consideration of individual char-
acter as causation in social improvement.

References: Oilman, N. P., Profit-Sharing; Shaw, Albert,
Cooperation of a Western City ; Warner, Amos G., Three Phases
of Cooperation in the West.



218 ECONOMICS.



CHAPTEK VII.

LABOR ORGANIZATIONS.

Origin of Labor Organizations.

A reference to the origin and history of labor organi-
zations will show that they have had a natural and essen-
tial development. Just as we have the development of
government itself or the natural process of the evolu-
tion of corporations or of other social or economic organi-
zations, so we find in the present existence of labor organi-
zations the natural outcome of the economic conditions of
the world during the past two centuries.

The American Trade Union has a representative, in
idea at least, in the ancient guild. The citizens of the
towns in the Middle Ages formed themselves into guilds
in order to defend themselves against the attacks of law-
less barons of the country. The whole body of citizens
were united against the robber outlaws who sought to
exact from them all the taxes and fines which they could
take by means of persuasion or coercion. But as soon
as the town guild had obtained its independence, it was
ruled by a body of noblemen, who in turn concluded that
they were the town, and opposed all of the common trades-
men and craftsmen by their arbitrary and high-handed
procedure. Then history repeated itself in the picture of
the man who struggled to free himself from his oppress-
ors, as these oppressed craftsmen now formed themselves



ECONOMICS.



219



into guilds and governed the towns themselves for many
generations.

These craft guilds represented the union of all trades-
men of a single craft in one organization. Each guild
included masters, apprentices, and laborers. There was
no division here between masters and workmen; they
were all of one body and their interests were common. In
this early time, very little capital was necessary for pro-
duction, and the distinction between the capitalistic em-
ployer and hired labor scarcely existed. Each craftsman,
with what little capital he commanded, worked with his
own hands alongside of his apprentices and laborers. The
servants were generally hired by the year, and the appren-
tices were bound by the year; so it was to the master's
interest to keep everybody at work whether there was a
demand for goods or not. So he did not wait for orders
to come in, but kept manufacturing and placing the goods
upon shelves as a stock in trade. The apprentices, after
having learned the trade, frequently left their master and
started up a new manufactory for themselves. Living
this quiet, unassuming, peaceful life, the craft guilds were
united in an association which tended to establish honesty
of work and brotherly kindness; to defend the oppressed
and to relieve the distress of the less fortunate.

As time went on, complexity of trade increased, more
capital was required in production, and the craftsman now
became the capitalistic master; for besides his servants
and apprentices and members of his own family, he hired
laborers or journeymen who worked for wages. In this
situation, it became a question to be settled partly by the
state and partly by the craft guild as to how many ap-