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methods of manufacturing, the same tools were used in both methods and
the work was generally carried on in the home, though there were a few

W. Sombart, Der moderne Kapitalismus, 1:405.


Production was for the sake of relatively local and immediate con-
sumption, markets were small and frequently intermittent, and there was,
therefore, no profitable disposal of large outputs. In fact, a system which
made it possible for the workers to own the products of their labor was
better adapted to those conditions than a system of wages for making prod-
ucts for an employer. In so far as a wage-earning class had developed, it
retained a close contact with the soil, so that it was not deprived of all
means of livelihood even if the employment ceased. They were further
safe-guarded against unemployment by customs and by such legislation as
the requirements that employes should be engaged for not less than a year,

Cunningham, Growth of English Industry, Modern, Part I, p. 29.
and that employers should bear the risks of loss when trade was cut off
rather than throw their employes into enforced idleness,

Cunningham, op. cit^ p. 295.

and by the official opposition to and restriction of the introduction of ma-

In 1623 James prohibited the use of machines for making needles,
and Charles would not permit the use of brass buckles because "those
who cast the brass buckles can make more in one day than ten of
those who make the iron buckles can do." Ibid.

Under modern conditions unemployment has become inherent in the
industrial system as a result of the machine process and, consequent to that,
the factory system and large-scale production. The mechanical inventions
of the last quarter of the eighteenth century and the substitution of large
power-driven machinery for tools and human labor made the former domestic
methods of manufacture unprofitable. Consequently, the independent labor
used previously in domestic production necessarily became dependent on
employers for the means and opportunities of employment, Substantially
the same thing occurred in transportation, while in agriculture the machinery
enabled a smaller proportion of the population to produce the necessary
food supplies and thus released a larger number of workers for manufactur-
ing and transportation, thus increasing still more the proportion of wage-
earners to the entire population. Not only was this class which was subject
to the modern form of unemployment greatly increased in number, but be-
cause of the changed industrial conditions the unemployment became a
necessary result of the industrial system at its present stage of development.
The machinery made possible and necessary an extensive division of labor
and specialization of processes, so that one individual could no longer hav
at hand in his own home several alternate occupations. The factories neces-
sary for the use of the machinery were located with reference to power,
raw material and markets; around these the employes gathered. This differ-
entiation of town and country removed the wage-earners from contact with
the soil, and when employment for wages ceased, there was ordinarily no
other source of income. At the same time the factory system made per-
sonal relations between employers and employes increasingly difficult. The
large scale production made it necessary to prevent all unprofitable expendi-
tures; the pecuniary gains of the business men became the motivating forces
in the new industry. Therefore, whenever the labor became unprofitable
either temporarily or permanently because of changes in demand or in the
conditions of production, it was necessary to dispense with it, and this could
be done the more readily because the employer had no capital invested in
labor. Moreover, in the large market, when production continued to be
individualistic, the producer could not be intimately in touch with the de-
mand; but the demand in this new industry has not retained its former
stability and comparatively unvarying character, but has become subject
to sudden and unexpected fluctuations. This difficulty of estimating the
demand, together with the increased dependence on money and credit, make
possible the somewhat periodical depressions which inevitably involve a great
amount of unemployment.

Along with these industrial changes have gone changes in social policy.
The personal restrictions of the seventeenth century became exceedingly


galling and entirely inadequate to control the situation. Therefore, the
policy of laissez faire was adopted, the enlightened self-interest of the in-
dividual was considered sufficient to enable him to provide for himself,
and the resulting good of each was considered to be the good of all. As
a result of this attitude unemployment was permitted to develop in the
modern industrial system.

Since it has become clear that unemployment is inherent in the industrial
system as at present organized, and that the laissez faire policy is no more
adequate in the control of this situation than the old personal restrictions
were, social control has become necessary, with the purpose of a constructive
modification of the industrial organization which will prevent and alleviate
unemployment. Out of this situation there has developed a constructive
social program relating to unemployment, and there has been an increasing
consensus of opinion that some or all of its items are required.

This program is stated essentially as here by Webb, Public Or-
ganization of the Labour Market; Beveridge, Unemployment; Rown-
tree and Lasker, Unemployment; Baab, Zur Frage der Arbeitslosen-
versicherung, der Arbeitsvermittlung, und der Arbeitsbeschaffung; Ad-
ler, article "Arbeitslosigkeit" in Conrad's Handworterbuch der Staats-
wissenschaften; and in general in the bulletins and general reports of
the Association international pour la lutte contre le chomage.
It is proposed that unemployment during depressions could be prevented by
postponing some of the public works and government contracts until such depres-
sions begin.

Dr. Bowley has estimated that in England for this purpose it
would be necessary to postpone yearly about 3 or 4 per cent of the
government contracts. Webb, Prevention of Destitution, p. 113.
It would be possible, for instance, to postpone some of the work on
public buildings, ships, roads, materials for the army and navy, printing of
government documents and afforestation. It is affirmed that this method
would differ essentially from the relief works which were formerly preva-
lent in paying not less than the ordinary rates of wages, in hiring help
because it was efficient rather than because it was unemployed, and in stimu-
lating those occupations which would cause employment to ramify through
the entire industrial system. But since it is maintained that even in years
of ordinary prosperity there is a surplus labor supply, it is proposed further
that this be absorbed by prohibiting any gainful work by children under
fifteen years of age, by requiring children in industry between the ages of
fifteen and nineteen to devote half time to labor and half time to indus-
trial training, by furnishing widowed mothers of young children sufficient
public aid to support them on condition that they devote their entire time
to the training of the children, by reducing the hours of labor in certain occupa-
tions, and by decentralizing town populations.

Rowntree, especially, has urged the decentralization of town popu-
lation; this would involve provisions for facilitating the removal of
. families from the city and their settlement in agriculture, and also
an alteration in transportation rates or the transportation system,
so that it would be possible for industrial workers to live in the
country near the cities, whereby they could make a part of their living
from the soil. For the success of this policy in Belgium, see C. Pone,
Les abonnements d'ouvriers sur les chemins de fer et leur action sur
le marche du travail, Bulletin .de 1'association internationale pour la
lutte contre le chomage, 2:443-50, July-Sept., '12; Rowntree and Lasker,
op. cit., pp. 262-89.

For the unemployment that remains, it is proposed that there be a
system of benefits or insurance against unemployment, either conducted,
subsidized or encouraged in some other way by the government. The un-
employables who are capable of forming or reforming habits of work should,
it is affirmed, be maintained under training. Finally it is proposed that the
public employment agencies or exchanges play a very important part in this


The terms "agency," "office," "bureau," and more recently "ex-
change," have been used in designating this institution. There is no
essential difference in the terms, though it has been urged that "ex-
change," which is the prevalent usage in England, be adopted more
generally in the United States, because of the imputed similarity of
this institution to exchanges for commodities such as grain and lum-
ber. The term "agency" will be used in the present study, however,
because that is the most prevalent usage, and in order to avoid the
impersonal connotation of "exchange." It may be noted, also, that
the term "labor exchange" is used occasionally in the United States
to refer to the co-operative institution in which commodities are ex-
changed for a standard labor-check. See, for instance, Missouri, 20th
Annual Report of Bureau of Labor Statistics, 1898, pp. 198-212.
The public employment agency is an institution managed or supported
by a public body for the purpose of enabling employers desiring help to meet
employes desiring work, and thus of equating so far as possible the demand
for and the supply of labor within its area of operation. Its problem is,
thus, the organization of the labor market.

Without assuming the validity of this general program or attempting to, the purpose of this study is to inquire more specifically into
that part of the program relating to public employment agencies, especially
in the United States. In this inquiry the following points will be considered:
(1) the function which is assigned to the public employment agency by its
advocates; (2) the extent to which this assigned function is now being per-
formed by employment agencies, both public and private, in the United
States; (3) the possibility of performing this assigned function in the United
States in view of the situation in which such agencies would operate; (4)
the relation of employment agencies, operating according to this assigned
function, to social problems other than unemployment. The underlying
purpose of this study is, first, to raise the question of the extent to which
there is a scientifically determined policy which will justify the United States,
or a state or city within the United States, in establishing public employ-
ment agencies, and of the extent to which this policy is merely a clue, not
scientifically determined, which may be used in experimentation:

This difference between a policy as scientifically determined and
a policy as a clue for experimentation is not posited as absolute, but
merely as a difference in degree of certainty in regard to the policy.
Any scientifically determined policy is necessarily hypothetical and sub-
ject to modification on actual application; but it is assumed to have
greater validity because of the more elaborate and complete investi-
gation of the policy in its relation to the general social situation. This
does not mean that a policy which has not been scientifically determined
should not, on that account, be advocated under certain conditions.
Secondly, to point out some factors which should be taken into consid-
eration in the formation of policies and in the actual operations of public
employment agencies, whether they are established on a scientific basis or
merely as experiments; thirdly, to attempt to determine whether there is
any fundamental reason for the previous failure to organize the labor market,
which might render further development impracticable.



The function assigned to the public employment agency by its advocates

The advocates to whom reference is here made have expressed

their attitudes in such reports as that of the New York Commission

on Unemployment, the section on Unemployment of the American

Association of Labor Legislation, the Wisconsin Industrial Commis-


sicm, the Conference of State Immigration, Land and Labor Officials,
and in some of the reports of the free public employment agencies
in the United States. The policy is stated much more explicitly, but
with essentially the same content, though with differences in points of
emphasis, by such European authorities as Webb, Beveridge, Rowntree
and Lasker, and by various writers in the bulletins and general re-
ports of the Association internationale pour la lutte contre le chomage.

A more particular function than that here indicated has been
assigned to the public employment agency by the Massachusetts Com-
mission to Investigate Employment Offices, 1911, which urges both
that the public employment agency should not attempt to compete
with the non-public agencies or to duplicate their efforts, and also that
the "true function" of the public employment agency is to assist in
securing employment for "those who are unskilled or not yet skilled;
those who are engaged in interstate, seasonal or casual employment;
the immigrant, the youth or the aged." Massachusetts, Report of
Commission to Investigate Employment Offices, 1911, p. 97. Evidently,
however, if the public employment agency performed this "true func-
tion" it would thereby be competing with the non-public agencies
and duplicating their efforts. This assigned function, moreover, ap-
pears to have been determined not with a view to the solution of
the problem of unemployment, but rather with a view to the pro-
tection of the most helpless classes of the unemployed, and thus
would make the employment agency an eleemosynary institution. Con-
sequently, no account is taken of this type of advocates in the present
study, though it is not assumed that this function is, therefore, in-
is the organization of the labor market.

The phrase "organization of the labor market" has been used by
Webb to designate the objective of the entire program for dealing
with unemployment. See Webb, Public Organization of the Labour
Market. It has been used by others, however, to refer to the work
to be done by the public employment agencies, and it is in this latter
sense that it is used here. See Beveridge, op. cit., p. 198.

To organize the labor market is to bring together into one center or
system of co-operating centers all demands for and supplies of labor; this
means the centralization and unification of the means of securing employ-
ment; it means an institutional facilitation of controlled mobility of labor
on the basis of complete and continuous information for the present aim-
less wandering in search of work, either within a locality or from one locality
to another. This implies the elimination of the distinct, disparate, com-
peting and non-communicating centers in which demands and supplies are
now represented. This institutional organization of the labor market would
not only assist a workman to secure employment in his regular occupation,
but would enable him to meet for bargaining purposes the employers in
other industries; thus it would mean an inter-industrial organization with
reference to the continuous employment of labor which would be compara-
ble with the concatenation of processes which has developed between dif-
ferent establishments with reference to the profitable production of com-

T. Veblen, Theory of Business Enterprise, pp. 20-65.

This inter-industrial organization of the employment of labor would
thus supplement the industrial organization, in which the employment of
labor is merely a means to pecuniary gain for individual establishments, and
would be made by the state, since the industrial establishment has no suf-
ficiently direct and vital interest in the continuous employment of labor
to lead it to make such adjustments. Thus it is expected that the public
employment agency will do for the labor market what has been done for
the fruit market by the fruit exchange, which receives the fruit from the
growers and distributes it to the market in such a way as to prevent a glut


in one community and an inadequate supply in another. The public em-
ployment agency has frequently been compared with the grain exchange,
also, and it is pointed out that definite indications of the supply of grain
are secured for the United States Department of Agriculture by correspond-
ents in 35,000 counties and townships, though similar information in regard
to labor is generally lacking.

For an example of such a comparison see United States, Annual
Report of Commissioner of Immigration, 1910, pp. 239-40.

For the individual workman this organization of the labor market means
the possibility of reduction of the period between engagements, a con-
catenation of engagements, or a dove-tailing of his employments, so that
he can pass immediately from one engagement to another, if there is an-
other position which he can fill within the area of operations of the public
employment agency or the system of which it is a part, for the center in
one locality is, in an organized market, merely a unit in a system of co-
operating centers which covers the entire state, district or nation.

It is not expected that the public employment agency would immediately,
or perhaps even at any time in the future, perform this function completely;
but nevertheless it is desirable to consider the requirements of the perfect
performance of this assigned function by the public employment agency.
In order to perform this function of organizing the labor market perfectly,
it would be necessary for the public employment agency to secure informa-
tion in regard to every available position and every available worker within
its area of operations. In order to secure complete information in regard to
demand and supply, it would be necessary that no position which might
be filled should fail to be listed in the public employment agency. Con-
sequently the practice of hiring workers on their personal application would
have to be entirely discontinued, and employers would have to agree or
be compelled to secure workers only through the employment agencies, for
there would appear to be no other method of making wandering in search
of work unnecessary and unprofitable than to make it impossible to secure
employment in that way.

The suggestion that employers discontinue hiring workers on per-
sonal application has been made most explicitly by Baab, op. cit., pp.
257, 293-94; Webb has suggested the necessity of making the use of
public agencies compulsory in hiring casual labor, and the obvious
implication of his claim that wandering in search of work would be
rendered unnecessary by the establishment of public agencies is that
he would generalize this compulsion for all kinds of labor. Webb,
Public Organization of the Labour Market, pp. 254-55, 265.

Moreover, the complete organization of the labor market would require
the attainment of information, whenever possible, far enough in advance of
the actual demand for labor or for employment to enable the worker to pass
from one occupation to another without loss of time. Thus the worker
would register at the public employment agency, not after he became un-
employed, but before he was dismissed from the previous engagement.

This is done somewhat extensively in some of the German agen-
cies, as is evident from the fact that of 22,468 persons who registered
in the Freiburg agency in 1906, 34.3 per cent were employed at the
time of registration. Beveridge, op. cit., p. 245.

and the employer would make his application for help in advance of the
time when it was needed, so that neither employer nor worker would suffer
loss because of the lack of adjustment, and so that the agency might be
given time in which to make the adjustment. In order that this advance
information could be given, it would be necessary, further, that the employer
inform the employes before they were dismissed, and that the employes in-
form the employer before they stopped work.

This requirement is already in force for a restricted class in South
Carolina. American Labor Legislation Review, p. 2:490, Oct., '12.


The complete performance of this function would require, also, a change
in the relationship of public and non-public employment agencies. There is
a large class of philanthropic employment agencies which would gladly
cease operations if any adequate substitute were established. The advocates
of public employment agencies have attempted to secure the co-operation
of trade unions and employers' associations, and in many cities, especially
in Germany, these organizations have incorporated their agencies in the public
agencies and have assisted in the management of the combined agency.
But in order that there be one recognized center in the labor market, in
which all demands and supplies be represented, it would be necessary that
the other non-public agencies, which neither discontinue operations nor become
incorporated in the public employment agency, either co-operate with the
public agency so that they would thus be eliminated as distinct centers, or
else be completely abolished. These non-public agencies might be eliminated
as distinct centers by reporting to the public agencies the demands and
supplies of which they secure information, though it would not be neces-
sary to make these reports so specific as to invalidate their own operations
entirely. For instance, the Wisconsin Industrial Commission contemplates
a bulletin which will give information in regard to the entire labor market
of the states this information to be secured from all possible sources, in-
cluding the non-public employment agencies.

Bulletin of Wisconsin Industrial Commission, 1:220-21, Aug. 20, '12.
But it has been urged, also, that the non-public employment agencies,
especially the private agencies, should be completely abolished in the entire
labor market, and the public agencies given a monopoly.

Baab, op. cit., 257, 293-94; Loi du 14 mars 1904 relative au place-
ment des employes et ouvriers des deux sexes et de toutes professions,
Bulletin de 1'office du travail, France, 11:253-54, March, '04.
that they be restricted to those communities in which public agencies are not

A. Schiavi, Rapport general No. 2 sur la question du placement,
Compte Rendu de la conference internationale du chomage, 1910. Vol.
Ill, p. 10.
and that they be completely eliminated from the casual occupations.

Webb, Public Organization of the Labour Market, p. 341.
In general the advocates of public employment agencies look to the final
abolition of the private agencies, except some agencies which have been
established for particular classes, such as nurses or teachers.

Schiavi, ibid.

Moreover the perfect performance of this assigned function would
make it necessary for the public employment agency to be a part of a system
of public agencies, which in the United States would preferably be a na-
tional system. Through these agencies the unemployed in any locality would
have access to information in regard to available positions in all other local-
ities in the United States, and particularly the unemployed in the city would
have information in regard to positions which they might secure in the
smaller towns and open country. Thus the first prerequisite of increased
mobility of labor would be adequate and definite information in regard to
where to apply for employment.

But it would be necessary, also, for the successful operation of this pro-
posed policy that the workers be assisted in going to other localities in which
work was reported to be accessible, either by securing reduced rates on the
railways, advance payment of wages or loans from the state.

The breaking up of the distinct centers in the labor markets is expected
to facilitate the passage of workers from one occupation or one trade to

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