Joseph Noble Stockett.

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Published September IQ18



This series of books owes its existence to the gen-
erosity of Messrs. Hart, Schaffner & Marx, of Chicago,
who have shown a special interest in trying to draw
the attention of American youth to the study of eco-
nomic and commercial subjects. For this purpose they
have delegated to the undersigned committee the task
of selecting or approving of topics, making announce-
ments, and awarding prizes annually for those who
wish to compete.

For the year ending June 1, 1916, there were of-
fered: —

In Class A, which included any American without
restriction, a first prize of $1000, and a second prize of

In Class B, which included any who were at the time
undergraduates of an American college, a first prize
of $300, and a second prize of $200.

Any essay submitted in Class B, if deemed of suf-
ficient merit, could receive a prize in Class A.

The present volume, submitted in Class A, was
awarded second prize in that class.

J. Laurence Laughlin, Chairman,
University of Chicago.
J. B. Clark,

Columbia University.
Henry C. Adams,

University of Michigan.
Edwin F. Gay,

Harvard University.
Theodore E. Burton,

New York City.



An obituary note must, sadly enough, take
the place of the foreword which should have
prefaced this essay. The author's life, rich in
scientific promise, was snuffed out at the very
threshold of a scholar's career, and this bril-
liant essay remains as the melancholy exhibit
of what larger things might hereafter have
been achieved.

J. Noble Stockett, Jr., was born in Balti-
more, on February 27, 1889. He received his
elementary education in the public schools of
Baltimore, graduating from the Baltimore
City College in 1907. He entered the Johns
Hopkins University in 1907 receiving the
degree of Bachelor of Arts in 1911. After
teaching two years at the Kent School, Kent,
Connecticut, he returned to the Johns Hop-
kins University and pursued graduate studies
in Political Economy for three years. He re-
ceived the degree of Doctor of Philosophy in
June, 1916, and immediately thereafter was
appointed Instructor in Political Economy
in Dartmouth College. He died at Hanover,
New Hampshire, on September 28, 1916.


Introduction xi

I. Standardization 1

II. The Living Wage 54

III, The Increased Cost of Living ... 77

IV. Increased Productive Efficiency . . 129

V. Principles governing the Arbitral De-
termination OF Wages . . . .168

Index 195


Settlements of wage disputes by means of
the accepted methods of maintaining indus-
trial peace — mediation or conciUation, vol-
untary and compulsory arbitration — have
been effected in the past by appeal to ex-
pediency and compromise, rather than by a
consideration of the merits of the arguments
presented by the two parties. The frequency
of strikes and lockouts, the recurrence of
disputes followed by applications for gov-
ernment mediation or arbitration, and the
general feeling of antagonism still existing be-
tween employers and employees, give ample
evidence that these peaceful methods do not
reach the source of the trouble. Especially is
this true in the case of wage disputes. In the
past, the primary object of mediation and
arbitration has been the maintenance of the
processes of production in continuous opera-
tion, and questions concerning wages have
been approached and decisions rendered with
this purpose in view. The desideratum has
been a prompt, speedy settlement, and this
has been attained at the sacrifice of a deter-
mination based on the merits of the respective
claims and on some principle of reasonable


wage determination. The result has been a
lessening, perhaps, in the number of strikes
and lockouts and in the interruptions to pro-
duction; but the underlying causes of wage
disputes remain unaffected by mediation and
arbitration decisions, and capable at any time
of causing new disputes and of arousing still
more unfriendly relations.

It may be asked whether the failure of these
methods of maintaining industrial peace to
offer a clue to the solution of the wage prob-
lem lies in any inherent fault in the methods
themselves, or in the manner in which they
are at present applied. From its very nature,
mediation can never approach such a solu-
tion. The mediator's function is to pla-
cate the disputants, to harmonize the differ-
ences between employer and the employee,
and, by winning concessions from both sides
through force of personality and tact, to
effect an agreement acceptable to the parties
concerned.^ Compromise is inevitable. Medi-
ation is not interested in the justice of the
respective claims; the elements of fairness,
reasonableness, and equity do not enter into
the proceedings.^ The employees endeavor to
obtain as great a wage advance as possible;
the employers, to concede as little as possi-

1 Bulletin, U.S. Bureau of Labor, No. 98, p. 15.
^ Ibid., p. 15. See also Eastern Conductors and Trainmen's Ar-
bitration (1913), Proceedings, pp. 1973-1974,


ble; and the mediators, paring down here and
adding on there, finally succeed in arranging
a voluntary settlement. A mediation decision
is merely an adjustment of the dispute,
rather than a judgment on the merits of the
case; the principles underlying the questions
at issue are ignored, and adjudication of them
postponed for the time being. ^ Arbitration,
on the other hand, implies a weighing of the
arguments of the respective sides by a board
containing at least one impartial member, and
an award representing a judgment upon the
merits of the questions involved. The arbi-
trator's function partakes of a judicial na-
ture; the decision rendered must be based
upon some definite, accepted principle of rea-
son governing the disputed question. There
is nothing, therefore, in the method of arbi-
tration to prevent the attainment of a perma-
nent solution of the wage problem — a solu-
tion, in that the underlying causes of the
wage dispute are met by the application of a
reasonable principle of wages; and perma-
nent, in that this principle of wages is al-
ways applicable, although changing external
conditions will necessitate some alteration in
the terms of the original award.

Arbitration, as at present practiced, has

' F. H. Dixon, "Public Regulation of Railway Wages," Proceed-
ings of American Economic Association, 1914, Vol. xxvii, pp. 257-


little or no judicial character except in the
form of the proceedings. Counsel for the dis-
putants present briefs, witnesses are sworn
and evidence introduced, the board adjourns
to render a decision which is binding upon
the parties; but here the parallel ceases. An
arbitration award, like a mediation agree-
ment, is almost without exception a compro-
mise decision. Investigators, employers, em-
ployees, and arbitrators themselves testify to
this. The Eastern Engineers' Board (1912)
reported that compromise was practically
inevitable under the Erdman Act.^ Presi-
dent Garretson, speaking for the Conductors
and Trainmen in their concerted movement of
1913, stated that "every settlement that has
ever been made by these organizations has
been a compromise settlement." ^ In some
cases in which the award purports to be based
upon a certain principle of wage advance,
there is a strong presumption, when a com-
parison of the original demands of the em-
ployees and of the increase granted is made,
that after all the award is a simple compro-

* Eastern Engineers' Arbitration (1912), Report of Board, pp.

2 Eastern Conductors and Trainmen's Arbitration (1913), Pro-
ceedings, p. 531.

^ For example, the switchmen on roads entering Chicago re-
quested a six-cent increase in 1910, and received by the arbitra-
tion award of March 22, 1910, under tbtt Erdman Act, an advance


There has been almost universal condem-
nation of the practice in arbitration of split-
ting the difference between the demands of
the men and the concessions of the employ-
ers.^ Professor Adam Shortt, who has served
as chairman on numerous boards of concilia-
tion and investigation in Canada, refers to it
as a "demoralizing principle," ^ and Judge
William L. Chambers, United States Com-
missioner of Mediation and Conciliation, when
acting as chairman of the Eastern Firemen's
Board in 1913, expressed the hope that the

of three cents. The increase was based on the cost of living, which
the board determined had advanced twenty-five per cent, an equiva-
lent of an eight-cent increase in switchmen's wages (Records, U.S.
Board of Mediation and Conciliation, File No. 25). Again, in the
dispute of the telegraphers with the Missouri Pacific in 1910 the
increased cost of living was also given as the basis of the increase.
There is little doubt, however, that the award was a compromise,
for in a letter to Judge M. A. Knapp, dated July 27, 1910, the chair-
man stated that the men's representative had "... yielded finally
to my persuasion for a considerable concession below the original
demands of the employees ..." and that he was "... now en-
deavoring to get Mr. Sullivan [the road's representative] to join
in the award" (Records, U.S. Board of Mediation and Concilia-
tion, File No. 33). In the Georgia and Florida Arbitration (1914),
under the Newlands Act, the employees requested a twenty-two
per cent increase and received a little over ten per cent. The in-
crease was based on the desire of the board to standardize the rates
on this road with those of other roads in the vicinity, the rates of
which were foimd to be about fifteen per cent higher than those on
the Georgia and Florida (Georgia and Florida Arbitration (1914),
Report of Board, pp. 5, 6, 12).

1 An important exception is Mr. M. A. Knapp, of the U.S. Board
of Mediation and Conciliation, who stated, in an address before the
National Association of Railway Commissioners, that compromise
was the proper method in arbitration {Railway Age Gazette, Vol. xlv.
No. 21, pp. 1193-1194).

2 Labour Gazette (Canada), June, 1907, p. 1410.


award would not be a compromise, but in the
nature of a judgment or decree of the court.^
The employees have registered their disap-
proval of compromise decisions both in the
course of arbitration proceedings ^ and in
minority reports appended to the awards.'
Employers, too, have emphasized the neces-
sity of basing wage decisions on some prin-
ciple of reasonableness and fairness.* In 1913
the railways in the Eastern District refused
for a considerable period to arbitrate their
dispute with the firemen under the provi-
sions of the Erdman Act, partly on the ground
that the award would of necessity be a com-
promise, and thus work to their disadvantage.^
Their attitude was probably the same as that
of a recent investigator who stated, ". . . It
is not absolutely certain but that in excep-
tional cases a strike or lockout is a more
wholesome culmination of an aggravated dis-
pute than a series of temporizing and un-
satisfactory compromises." ^

^ Eastern Firemen's Arbitration (1913), Proceedings, p. 2492.

* Ibid., Proceedings, p. 2375.

' Eastern Engineers' Arbitration (1912), Report of Board, p.
Ill; Eastern Conductors and Trainmen's Arbitration (1913), Re-
port of Board, p. 58.

* Ibid., Proceedings, p. 2056; Chicago and Western Indiana Rail-
way and Belt Railway Co. Arbitration (1913), Proceedings, Vol.
n, pp. 1341-1342.

* Eastern Firemen's Arbitration (1913), Supplementary Report
of the International President, Concerted Movement (1913), p. 38.

* Victor S. Clark, "Canadian Industrial Disputes Investigation
Act of 1907," Bulletin, U.S. Bureau of Labor, No. 86, p. 3.


The justification for these opinions be-
comes apparent when the effects of decisions
based on compromise are considered. In the
first place, employees are encouraged to make
frequent demands for wage increases, since
they are practically certain that at least a
part of their requests will be granted. The
demands made, also, are generally far in ex-
cess of what can be supported on reasonable
grounds; and naturally so, because the em-
ployees, knowing in advance that their re-
quests will be cut in half, make their demands
double the amount which they really expect
to receive.^ The employers, on the other
hand, knowing the usual outcome of disputes
submitted to arbitration, generally agree to
arbitrate only as a last resort, and then are
determined to concede the minimum amounts
although they may be convinced of the jus-
tice of the employees' claim to a certain in-
crease in wages. The frequency and extrav-
agance of the employees' demands serve to
increase the danger of an open breach in the
relations of the two parties with consequent
interruption to the processes of production
and injury to the public. Compromise deci-
sions also render the expenditures of both
sides, for the collection of data and the pay-

^ Eastern Engineers' Arbitration (1912), Report of Board, p.
101; Eastern Conductors and Trainmen's Arbitration (1913), Pro-
ceedings, p. 2056; Bulletin, U.S. Bureau of Labor, No. 98, p. 176.


ment of statistical experts for the prepara-
tion of exhibits illustrating the principles
underlying their agreements, a useless extrav-
agance and waste. If the arbitrator in order
to reach a decision has simply to divide the
difference between the maximum demands of
the men and the minimum concessions of the
employer by two, he will scarcely need thou-
sands of pages of statistical tables, diagrams,
and evidence of witnesses showing the rise in
the cost of living, the increase in productive
efficiency, and the effect of various mechanical

The most serious count against a compro-
mise award, however, is its unjust character.
It is not based upon any adequate investiga-
tion of the facts nor upon any inquiry into the
relative merits of the arguments presented
by the two sides in support of their claims.
No attempt is made to determine whether
the employees are justified in requesting an
increase or the employers in refusing to agree
to an advance in wages. Such a decision
effects no real settlement, for if a reason for
a certain increase in wages existed in the
first instance, the same reason exists after a
part of the proper increase has been granted.^
The adjustment settles nothing definitely; it

1 Eastern Conductors and Trainmen's Arbitration (1913), Pro-
ceedings, p. 531.


merely postpones further action on the prin-
ciple involved until after the expiration of the
time limit set in the award. Both employers
and employees feel that they have been un-
justly dealt with, and return to work, hostile
to each other and disinclined to refer further
disputes to peaceful settlement. The piling-
up of compromise on compromise results
in a haphazard, unscientific wage system un-
satisfactory to all concerned; for the em-
ployer is paying a certain wage without any
knowledge of why he is paying that amount
except that he is obliged to, and the employee
is receiving his wage, although certain that he
is worth more, but unable to force a larger
amount from his employer.

In the preceding paragraphs an attempt
has been made to show that the possibilities
of arbitration have not been realized on ac-
count of the use of the principle of compromise
in arriving at wage awards; that this prin-
ciple is almost universally condemned; and
that this condemnation is justified by a con-
sideration of the evil effects of compromises
in arbitration proceedings. If this attempt
has been successful, it is evident that the
method of adjustment by compromise must
be abandoned, either by some organic change
in arbitration laws or by some alteration in
the method of their application.


The seeming inevitableness of compromise
decisions has been ascribed to various causes
— the short period of time within which the
arbitrators must render a decision, the heavy
responsibihty placed upon the single neutral
arbitrator, the ignorance of the impartial
member of the board concerning the details
of the industry involved, and so on. The
fault lies, however, not so much with the
specific details of the various laws, as with
the lack of some definite, fundamental prin-
ciples to which arbitrators may turn as bases
for their wage decisions. The first question
which arises in an arbitrator's mind is : What
is the fair wage for this particular kind of
work, or what are the just and reasonable
grounds for an increase in the wages of this
class of employees? If there existed some
generally accepted principle of a fair and
reasonable wage and some definite basis of
wage advance, the task of the arbitrator
would be much lightened, for he would be
able to apply these general principles to the
particular facts in the dispute and arrive at
an equitable decision. This urgent need has
undoubtedly been brought home to every
one who has had any experience in arbitra-
tion proceedings. The writer of a recent arti-
cle on the Australian industrial courts stated
that one could not help being impressed with


the bewildered search of the courts for guid-
ing principles.^ The statement of the Eastern
Engineers' Board (1912) is fairly, typical of
the conclusions reached by all wage boards:
"Possibly there should be some theoretical
relation, for a given branch of industry, be-
tween the amount of the income that should
go to labor and the amount that should go to
capital; and if this question were decided, a
scale of wages might be devised, for the dif-
ferent classes of employees, which would de-
termine the amount rightly absorbed by la-
bor. It may be that in the future some such
solution will be worked out for the various
industries; and if so, the income of the rail-
roads could be so apportioned. Thus far, how-
ever, political economy is unable to furnish
such a principle as suggested. There is no
generally accepted theory of the division of
income between capital and labor." ^

It is true that the study of economics has
not resulted in an accepted solution of the
wage problem; some economists have gone
so far as to state that the determination of
a fair and equitable wage is an impossibility.
One who has had wide experience in the set-
tlement of railway disputes in the United

^ G. A. Beeby, " Artificial Regulation of Wages in Australia,"
Economic Journal, Vol. xxv. No. 99, p. 323.

2 Eastern Engineers' Arbitration (1912), Report of Board, p.


States is authority for the assertion that
there is no right or wrong about wages. ^ In
an address before the American Economic
Association, Dr. F. H. Dixon said: "As a
matter of fact the situation is hopeless, and
will remain so, as long as we delude ourselves
into thinking that we can under present eco-
nomic conditions find a basis for wages in any
theory of ultimate reasonableness. It may
be that we are not merely chasing a will-of-
the-wisp when we are hunting for a reason-
able wage, but we are at any rate seeking the
unattainable." ^

The situation may be hopeless, but arbi-
tration, without the application of some gen-
erally accepted principle of wages in the
awards, will continue to be a mere com-
promise method, accompanied by manifold
evils and incapable of effecting an equitable
settlement of any wage dispute. If it be
agreed that the determination of principles
of fair wages and of wage advance will aid
in securing better results in arbitration pro-
cedure, search for a principle of fair and rea-
sonable wages may not be abandoned. Final
solution of the wages problem may never be
reached; but continuous and energetic effort
must be directed toward a nearer approach

* Railway Age Gazette, Vol. xlv, No. 21, pp. 1193-1194.

* Proceedings of the AmericaD Economic Association, 1914, Vol.
xxvu, pp. 264-265.


to a reasonable and just division between em-
ployer and employee.

It is the purpose of the following chapters
to present a study of the principles of wage
determination and of wage increase advanced
by the employees and employers in the course
of arbitration proceedings. The contentions
of these two parties are likely to show ex-
treme bias, but it is to be expected that their
arguments, tempered by the findings and
reasoning of arbitration boards, will suggest
some fundamental principles which may serve
as the basis of a fair and reasonable wage or of
a just principle of wage increase. There is
no richer field for such a study than the dis-
putes settled by arbitration under the Erd-
man ^ and Newlands ^ Acts in the United
States and by the boards of conciliation and
investigation appointed under the Canadian
Industrial Disputes Investigation Act.^ Since
the first-named laws apply only to railways,
all those disputes involving other industries
which have been settled under the Canadian
statute have been omitted in this study.

Thirteen arbitrations have been conducted
under the provisions of the Erdman Act dur-

» U.S. Statutes at Large, Vol. xxx, pp. 424-428.

* Ibid., Vol. XXXVIII, Part i, pp. 103-108.

* 6-7 Edward VII, c. 20. For text and amendments see Eighth
Report, Registrar of Boards of Conciliation and Investigation
^Canada), 1915, pp. 321-354.


ing the fifteen years in which it was in force;
seven under the Newlands Act up to June 30,
1914; and forty-five railway disputes in-
volving wages under the Industrial Disputes
Investigation Act from March, 1907 to June,
1915. In addition to these sixty-five cases,
two others, the Eastern Engineers' Arbitra-
tion of 1912 conducted by special agreement
between the employees and the railways, and
the Western Engineers and Firemen's Arbi-
tration of 1915, were included in the material
used. The briefs, exhibits, and evidence of
witnesses of the employees and employers,
so far as such material was available, have
been examined with a view to ascertaining the
content of each principle advanced and the
grounds upon which it is supported. The
findings of the arbitration boards are then
discussed, and an appraisal made of the opin-
ions of the parties to the controversy in the
hope of forming a judgment as to the rea-
sonableness and fairness of the proposed
principles of wages.

In these arbitration proceedings, four
broad, general principles have been advanced
as bases for wage determination — Stand-
ardization, the Living Wage, Increased Cost
of Living, and Increased Productive Effi-
ciency. These constitute the subjects of four
chapters. The final chapter attempts to clear


up inconsistencies and to merge the conclu-
sions of the preceding chapters into a homo-
geneous system. Of necessity, the result of
such an attempt must be fragmentary and
inconclusive; but the justification for the
endeavor lies in the manifest need of some
fundamental principles of wages which may
be applied in arbitration proceedings.




The standardization of railway wages —
the uniform application of a standard rate of
pay for a given grade of employment within
a certain area — has been the principle most
stubbornly maintained by the railway em-
ployees and the one which has been most in-
fluential in determining the present form of
railway wage bargaining. The object of the
standardization movement is to secure uni-
formity of compensation for similar service
throughout a given area. This principle,
therefore, is most conveniently treated under
three headings according to the area in which
the standard rate is to apply. The following
sections deal successively with (I) System
Standardization, (II) District Standardiza-
tion, and (III) National Standardization.

I. System Standardization

System standardization implies the applica-
tion of a standard rate to a single road or to
a number of roads combined into one system.


The advocacy of the principle of system

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Online LibraryJoseph Noble StockettThe arbitral determination of railway wages → online text (page 1 of 13)