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SNCILIATI

_ AND

B'^BITRATf




DOUGS.,\S K \OOI




THE LIBRARY

OF

THE UNIVERSITY

OF CALIFORNIA

LOS ANGELES



vn.



INDUSTRIAL

CONCILIATION

AND

ARBITRATION



BY

DOUGLAS KNOOP

SHUTTLEWORTH SCHOLAR AND COBDEN
PRIZEMAN OF THE UNIVERSITY OF

MANCHESTER



WITH AN INTRODUCTION BY

SYDNEY J. CHAPMAN

STANLEY JEVONS PROFESSOR OF POLI-
TICAL ECONOMY, AND DEAN OF THE
FACULTY OF COMMERCE IN THE
UNIVERSITY OF MANCHESTER



LONDON

P. S. KING & SON

ORCHARD HOUSE

WESTMINSTER

1905



HO

CONTENTS. K'7SU



PAGE

/5 INTRODUCTION. By Professor Chapman v

'^ PREFACE x\ai

C CHAPTER

c

2 I. INDUSTRIAL DISPUTES : THEIR CAUSES AND

THEIR SETTLEMENT . . . . . . 1

r II. CONCILIATION VERSUS ARBITRATION . . . . 25

^ III. PRIVATE VERSUS GOVERNMENT CONCILIATION

_j AND ARBITRATION . . . . . . . . 37

U

■^ IV. PRIVATE CONCILIATION AND ARBITRATION . . 45

j3 V. VOLUNTARY VERSUS COMPULSORY STATE CON-

~ CILIATION AND ARBITRATION . . . . 82

S VI. VOLUNTARY STATE CONCILIATION AND ARBI-
TRATION . . , . 99

VII. COMPULSORY ARBITRATION .. .. . . H4

VIII. CONCLUSION 178



APPENDIX I :—

NOTE TO SECTION 6 OF THE INDUSTRIAL CON-
CILIATION AND ARBITRATION AMENDMENT
ACT, 1903 189



412720



iv CONTENTS.

PAGE

APPENDIX II :—

WAGES AND PRICES IN NEW ZEALAND, 1892

AND 1902 190

APPENDIX III :—

LETTER OF MR. F. G. EWINGTON OF AUCKLAND

TO THE " AUCKLAND STAR " . . . . . . 193

APPENDIX IV :—

NOTE TO BIBLIOGRAPHY . . . . . . 195

BIBLIOGKAPHY 197

INDEX 235



INTRODUCTION.



-O —



Studies of the sort made by Mr. Knoop
in this essay are more urgently needed at
the present time than they have been in
most periods of our history. In saying
this I am aware that the man who tries
to judge relatively the magnitude of the
problems of his own times is liable to become
the victim of illusion. His interest in the
social questions just before him imparts to
them a vividness and impressiveness in com-
parison with which the past is dull, and he is
led to feel, as hundreds of others have felt
before, that he stands on the threshold of a new
era. But, these considerations notwithstanding,
it does seem as if the present age would be
distinguished in history by the economic
changes that took place in it and the attempts
that were made to deal with social difficulties.
In the field of industry we are faced by the
' trust ' which, if not new, is at least more



vi INTKODUCTION.

predominating in industry than it was a
generation ago. Among the activities of
buying and selling we find again old forces
so transformed as to constitute new facts.
Many markets, through grading, organisa-
tion, and the telegraph, are broadening into
world-markets and stretching into the future,
and the large dealer, who is aided by im-
proved financiering, is being provided, there-
fore, with a wider field for his operations.
It is not England alone that is agitated by
the question of speculation on produce ex-
changes. But of all the matters that are
troubling advanced communities none is more
serious than the labour question in its
diverse aspects. Moreover, there is at the
present time an undoubted disposition on
the part of municipal and central govern-
ments to act in relation to the labour question.
The last few years have seen a Workmen's
Compensation Act adopted in this country,
which deals with the risks of accident on a
principle that is entirely novel to us ; an
immense system of workmen's insurance
undertaken by the State in Germany ; the com-
pulsory fixing of wages by legally authorised
boards in certain of our Colonies ; attempts in
many countries to render more peaceable
the settlement of wages ; and a new activity



INTRODUCTION. vii

among States, local authorities, and private
persons to minimise the evils of unemploy-
ment by insurance, labour bureaux, labour
colonies, and other means.

Never perhaps was there greater need for
close studies of the social question ; for there
are many problems to be solved, and in an
age of social effort experiments will be made,
which, if not preceded by scientific investi-
gation, will be full of risk. " The present
age," writes Professor Marshall in his Plea for
the Creation of a Curriculum in Economics and
Associated branches of Political Science, " is
indeed a very critical one, full of hope but also
of anxiety. Economic and social forces
capable of being turned to good account were
never so strong as now ; but they have seldom
been so uncertain in their operation. Especially
is this true of the rapid growth of the power and
inclination of the working classes to use
political and semi-political machinery for the
regulation of industry. That may be a great
good if well guided. But it may work great
injury to them, as well as to the rest of the
nation, if guided by unscrupulous and ambi-
tious men, or even by unselfish enthusiasts with
narrow range of vision. Such persons have
the field too much to themselves. There is
need for a larger number of sympathetic



viii INTRODUCTION.

students, who have studied working-class
problems in a scientific spirit, and who, in later
years, when their knowledge of life is deeper,
and their sense of proportion is more discip-
lined, will be qualified to go to the root of the
urgent social issues of their day, and to lay
bare the ultimate as well as the immediate
results of plausible proposals for social reform.
For instance, partly under English influence,
some Australasian colonies are making bold
ventures, which hold out specious promise of
greater immediate comfort and ease to the
workers. But very little study of these
schemes has been made of the same kind, or
even by the same order of minds as are applied
to judging a new design for a battleship with
reference to her stability in bad weather :
and yet the risks taken are much graver."
Some experiments more or less blind must
be tried, but it is folly not to provide for
the best possible preliminary analyses of the
situation being made, and equally folly for each
country to act without regard to the plans
being tested in other countries.

Not the least important of the labour ques-
tions that are pressing upon our attention at
the present moment is the method of settling
changes in wages. The satisfactory solution
of this problem lies at the very root of social



INTRODUCTION. ix

efficiency and social peace. To determine a
wage authoritatively and compel its acceptance
is no solution, for it is essential that the
* right ' settlement should be reached, to insure
the functioning of society according to its
needs, and further that the various parties to
it should feel it to be right. Indeed, it might
be that the ' wrong ' solution would be best
for a time under some circumstances, were it
generally regarded as just.

The reader who is inclined to think that an
exaggerated weight is being attached to the
settlement of wages, because there were long
periods in the past when people lived their
lives comfortably enough, as a rule, without
thinking much of ' social problems,' would do
well to remember that the wages question,
in the complicated form in which it confronts
us now, is of comparatively recent origin.
Without overstating the simplicity of eco-
nomic arrangements in the ages gone by,
we may say with truth that every year
increasing division of labour, by rendering
it more and more impossible to assign a
product to each person's labour, and by
rendering the connection between what a
person does in the producing system and
what he gets as his share more and more
remote, has added to the difficulty of reaching



X INTRODUCTION.

the scheme of distribution which both con-
duces most to social advantage and satisfies
each factor in production that it is receiving
fair treatment. Widely diffused education
in social economics is needed for this reason
alone, namely, to help people to understand
why they receive such and such incomes
and to see principles where facts seem to
lend support to the crudest notions of the
exploitation of labour.

I should like now to say a few words upon
the broad question of the settlement of
wages. There are two fundamental questions
at least to be decided. The one relates to
making the wage move in detail as the effi-
ciency of the individual worker and to basing
wages upon a system which will encourage
efficiency. Under this head falls the dis-
cussion of the advantages and disadvantages
of piece-rates, time-rates, premium schemes,
and profit-sharing, and the conditions under
which each in its varieties is suitable. Con-
tinual experiment, based on analysis and
close criticism of results, is required for a
satisfactory progressive settlement of these
questions. Many plans are now being given
trial, especially in the United States, but it is
doubtful whether the intelligent attention
which the subject demands is being devoted



INTRODUCTION. xi

to it and whether it is being approached as a
rule in the right spirit. The problem is more
intricate than it at first appears, for trade-
union sentiment has to be taken into account,
prejudices have to be removed, and the
over-stimulation of labour, it is said, has
to be guarded against. The other funda-
mental question referred to above relates
to the means by which the movements of
wages, whatever their basis, with changed
conditions of trade, methods of production
and efficiencies of factors in production,
are to be rendered rapid, peaceable, and
appropriate. This is the question with
which Mr. Knoop deals more especially,
and of the two questions distinguished above
it is the more momentous, since more actual
conflicts break out over movements of wages
in this sense than over the methods of calcu-
lating them.

In entering upon the investigation of this
question certain dangers must be guarded
against. There is the danger of supposing
that society is much simpler than it is, and
that a group of intelligent practical men could,
given full evidence from interested parties, hit
upon the solution as easily as the mathema-
tician can find the value of certain expressions
given the requisite number of equations. This

A 2



xii INTRODUCTION.

is a grave danger because, although on a
cursory examination a particular question of
wages appears to be comparatively simple, its
correct determination may involve a know-
ledge of innumerable data, much of which ia
not known to have an appreciable bearing upon
the question and most of which cannot be given
a quantitative form. Moreover, since a period
of the future is tied up by a wages settlement,
future forces require to be estimated. Again,
the data are a troubled sea of inconstant ele-
ments. To use an analogy, the problem is to
deduce from a person's constitution how much
food he should take each week for the next six
months. Who shall say ? for who shall
deduce from the parts of the organism their
joint needs now and for the next few months ?
Fortunately, nature solves the riddle by giving
to such organisms appetite.

Again, in every endeavour to decide upon the
best method of rearranging distribution, there
is the danger of proceeding too deductively.
There is a disposition on the part of those
who know something of social functioning to
say, ' society is of such and such a nature and
therefore this and that method of dealing
with social matters are unsuitable.' The truth
is that we know little about society, and
that the most we can establish by deduction



INTRODUCTION. xiii

is a high probability. By the aid of deduction
we may start with certain reasonable predilec-
tions, but experiment may show us to be
wrong. There is too strong a tendency among
certain classes to lay it down dogmatically that
certain schemes will never work and perhaps
to exaggerate the dangers of failure. Society
may be delicately organised, but society never-
theless seems to be endowed with marvellous
powers of recovery. Surgery is a most flagrant
interference with the order of nature, but
people recover from radical operations and
are the better for them. The reader will
observe as he peruses the pages of this work,
how the danger that we are now noticing has
been avoided by a judicious interweaving of
induction and deduction.

Then there are the errors that arise from
arguing from one set of conditions to another
without introducing qualifications, from for-
getting the future in the present, or vice versa,
and from thinking of the distribution of wealth
merely as a question of equitable sharing. As to
the first of these mistakes nothing disparaging
to comparative studies is intended. On the
contrary, it is evident that Political Economy
will approximately complete itself only when
all economic uniformities have been observed
closely as they operate in different countries,



xiv INTRODUCTION.

climes, and stages of social development.
The comparative investigation is always of
scientific value and frequently it is also of
direct practical value, but in basing action
upon it we must bear in mind that local
conditions are dissimilar and that empirical
laws must be viewed with suspicion until
they can be explained.

The third error enumerated at the be-
ginning of the preceding paragraph has en-
trapped many an untrained thinker. The
arbitrator who settles a question of distribution
is not determining only how so much wealth
shall be shared, but also, in some degree, what
wealth shall be produced. For relative wages
and profits are magnets attracting labour and
capital to the several businesses. It is because
they are magnets, and just so far as they are
effective magnets, and in proportion to the
range of classes over which each magnet
exercises an influence, that the settlement of
fundamental questions of distribution by
market forces is satisfactory. Unfortunately
the natural machinery of society works
stiffly, and the operations of the market
generate friction: hence the case for the
organisations that jerk the social machine
occasionally in order to set it working again
or hasten its movements, and hence the value



INTRODUCTION. xv

of conciliation which keeps passions in check
while forces are working through bargaining
to the right position of equilibrium.

Lastly, I think we must be on our guard
against the seductions of simplicity and
mechanicalism. Ours is not a simple society
— it is so efficient because it is not — and
therefore a simple system of distribution
would seem to be impossible. Mechanical
the system of distribution cannot be — by
mechanical I mean such that the wage of a
man can be worked out by a few calculations
— because the wage of each person that suits
advanced division of labour is to be regarded
as an inexpressible function of numerous
variables, many of which are inexpressible.
Besides mechanical substitutes for natural
processes may easily atrophy organs that
society cannot safely dispense with.

In performing the grateful task of contribut-
ing an Introduction to Mr. Knoop's able and
valuable essay, it has been my object to show
how important the subject of the essay is, and
to prepare the reader's mind for the sort of
considerations that must be weighed before
judgment can be passed on the matters dealt
with. It has not been my purpose to show
how far I agree with the author's views and
how far I dissent from them, if I disagree at all



xvi INTRODUCTION.

on any momentous point. There are many
no doubt who will not be prepared to accept
all Mr. Knoop's conclusions, but most readers I
think would subscribe to the statement that
the books of most value to us are not necess-
arily those with which we wholly agree. The
thoroughness with which Mr. Knoop has
sought out his material and the impartiality
with which he has sifted his evidence, the
reader will soon discover for himself.

S. J. Chapman.



PREFACE.



The full title of this essay is " The Place
of Conciliation and Arbitration in Industrial
Disputes," but for short I have called it
" Industrial Conciliation and Arbitration."

The subject is exceedingly large, and
it is necessary to state, at the outset,
what method has been followed in writing
the essay, so that the reader may under-
stand why certain things, which may seem
trivial, have been included and why others of
undoubted importance have been omitted.
The whole of this essay turns upon what
seem to me to be the four leading principles
of industrial conciliation and arbitration :
{a) the difference between two classes of labour
disputes, the one arising out of the inter-
pretation of existing contracts, and the other
out of the terms of future contracts ; (6) the
distinction which clearly exists between con-
ciliation and arbitration ; (c) the contrast which



xviii PREFACE.

must be made between private and State
conciliation and arbitration ; and lastly, (d) the
opposition between voluntary and com-
pulsory arbitration. The essay comprises
the theoretical discussion of these four points,
and copious illustrations drawn from the
practical working of conciliation and arbitra-
tion in different countries. In choosing my
illustrations I have first drawn as fully as
possible upon the material offered by the
United Kingdom. This I have supplemented
by foreign examples, which will be found to
be much more numerous, where legislation is
concerned, than in the case of private con-
ciliation and arbitration, where reference to
the United Kingdom and the United States
has sufficed. Indications are given in foot-
notes, however, as to where information con-
cerning other countries can be obtained.
My chief illustrations of compulsory arbitra-
tion have been taken from New Zealand,
but reference has also been made to the
New South Wales Act, in so far as it helps
to throw new light upon the subject.

Consideration of length has made it neces-
sary to omit copies of any laws or industrial
agreements, which might otherwise have been
profitably included. There is no one very
satisfactory collection of such documents,



PREFACE. xix

the Reports of the American Industrial Com-
mission being perhaps the best. The indus-
trial agreements contained in it are all
American and the volume on foreign labour
legislation makes one or two important
omissions,* and the Reports consequently
require supplementing from other sources.
Whenever possible an attempt has been made
to indicate where such information can be
obtained, either in a footnote at the place
where the subject is dealt with in the text,
or in short notes attached to some of the
works mentioned in the bibliography.

The whole subject of the material is
exceedingly complicated. Two excellent
works deal with the period which ends about
1892. The Reports of the Royal Commis-
sion on Labour offer a large collection of
material, not only for the United Kingdom,
but also for the principal foreign countries.

* The French laws deahng with the Gonseils des Prud'
homines, the Itahan law of 1893 estabhshing the GoUegi di
Probi Viri and the Danish arbitration law of April 3rd, 1900,
were among those in existence at the time when the reports
were pubhshed. Amongst the laws passed since the pubUca-
tion of the reports are the following : the German law of
September 29th, 1901, amending the law of July 29th, 1890 ;
the New South Wales Industrial Arbitration Act, 1901 ;
the New Zealand Industrial GonciUation and Arbitration
Amendment Act, 1903, and the Western AustraHa Industrial
Conciliation and Arbitration Act, 1902 (which is almost
identical with the New Zealand Act).



XX PREFACE.

The French Report, published by the Office
du Travail : " De la conciliation et de I'arbi-
trage dans les conflits collectifs entre patrons
et ouvriers en France et a I'etranger. Im-
primerie Nationale, Paris, 1893, 1 vol. in
8° de 616 pages, 6 fr.," has the advantage
over the other work of being less bulky
and less expensive.* The two reports
must be considered as complements
rather than as substitutes for one another,
for the information contained in both is by
no means identical. There are many other
works, besides these two reports, which deal
with this period, to which reference will be
found at different parts of the essay.

Since 1892 a large development of volun-
tary State conciliation and arbitration has
taken place, and some new features in private
systems and the whole question of compul-
sory arbitration have come to the front.
The natural consequence of this enormous
growth of industrial conciliation and arbitra-
tion has been a corresponding increase in the
literature dealing with the subject.

One general report ; t two reports of Royal

* As late as June, 1904, this report was not out of print.
If it is at the present time, it could probably be obtained
second-hand through MM. Miizard et Ebin, 26, Place Dauphine,
Paris ; or George Roustan, 5 and 17, Quai Voltaire, Paris;

t The Reports of the American Industrial Oommisaion.



PREFACE. xxi

Commissions on compulsory arbitration ; *four
private reports dealing with the same
subject ; "j" five or six annual Government
publications upon the work of the year,:}: and
some more published at odd times ; § not
a few annual reports of State Boards of
conciliation and arbitration ; j| several official
monthly labour publications ;^ a certain
number of books on the subject ; numerous

* Report of the New South Wales Royal Gommission of
Inquiry into the Working of the New Zealand Compulsory
ConciUation and Arbitration Law, and the Report of the Vic-
torian Royal Gommission appointed to investigate and report
on the operation of the Factories and Shops Law of Victoria.

t V. S, Glark, Labour Gonditions in New Zealand ; the
Special Gommissioner of the Adelaide (S.A.) Advertiser, In-
dustrial Legislation in New Zealand : the Gonciliation and
Arbitration Act ; A. Metin, Legislation ouvi'iere et sociale
en Australie et Nouvelle-Zelande ; and H. D. Lloyd, A
Govmtry Without Strikes : A Visit to the Gompulsory
Arbitration Court of New Zealand.

X e.gi Reports on Strikes and Lockouts ; Reports on
Changes in Wages and Hours ; Statistique des Graves et
des Recours a la Gonciliation et a 1' Arbitrage ; Reports of the
New Zealand Department of Labour.

§ c.y. Reports on Standard Piece Rates, 1893 and 1900 ;
Reports on Standard Time Rates, 1893 and 1900 ; Infor-
mation relating to Courts of Arbitration and Boards of
Conciliation in the United Kingdom and in certain British
Oolonies and Foreign Countries. Pietermaritzburg, 1904.

II e.g. Reports on the Conciliation Act, 1896 (biennial) ;
Reports of the New York State Board of Mediation and
Arbitration ; Reports of the Massachusetts State Board
of Arbitration ; the New South Wales Industrial Arbitration
Reports and Records.

^ e.g. Labour Gazette ; Journal of the New Zealand
Department of Labour ; Bulletin de 1' Office du Travail
(France) ; Revue du Travail (Belgium);



xxii PREFACE.

articles in magazines and journals, and a
vast number of reports of particular arbitra-
tions during the past twelve years, consti-
tute the principal sources of information for
the period subsequent to 1892.

In attempting to deal with all this litera-
ture two chief difficu^' 'es have confronted
me : in the first place, I have not always
found it possible to obtain access to all the
documents I should have liked to do, and
in the second place, there was great diffi-
culty in selecting from those I have seen :
some were evidently unimportant or far
too detailed for an essay like this one, others
were very contradictory, and from what re-
mained over it was by no means easy to
make a satisfactory choice of material.
A very similar difficulty was experienced
to that just mentioned, when trying to
decide exactly what should be included under
the head of industrial conciliation and arbi-
tration. After considering the matter care-
fully, I decided that some mention of strikes
and lockouts, collective bargaining, sliding
scales and other similar matters relating to the
subject of the essay must be made, though
such mention should be as short as possible.

Throughout this essay, whenever dealing
with practical conciliation and arbitration, I



PEEFACE. xxiii

have attempted to indicate in footnotes all
the sources used in writing any particular
section, so that anyone wishing for further
details on the subject will know where
to find them. As already mentioned, dur-
ing the course of my reading I have come


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