National Conference on Industrial Conciliation (19.

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man's wages and you add to his self-respect; system-
atically make presents to him and you cultivate the
spirit of the waiter, dependent on his tips.

I believe we must base our solution of the labor
problem on human nature. However well or ill we
may think of human nature, one thing at least we
know that of all the things that come within human
ken, this is one of the few that with latitude, longi-
tude, nationality or lapse of time does not change,
and hence, whatever is based upon human nature is.


at least, founded upon a rock. Instead, therefore, of
building upon the shifting sands of altruism or of
brotherly love, I believe we must build upon the rock
of human nature. The personal pecuniary interest
of employer and employee these are the warp and
the woof from which the fabric must be woven, these
are the needle and the shuttle with which the seam
must be sewn.

The system of premium payment is in a sense in-
tended to split the difference between day's work and
the piece-work systems. By that I mean that it is
at bottom a rate of payment per day, just like day's
work, but above that is placed an additional payment
dependent upon the amount of output, the net result
being that the employee's wages increase with the
output, but not so rapidly as the output. In that
respect it differs from piece-work alone. With piece-
work and between cuts in the piece prices, the pay
is in proportion to the output. With the prem-
ium method of payment the pay increases
with the output, but not so rapidly. Since
an increase of output is followed by a less than
proportionate increase of wages, it 'follows that an
increase of output results in an increase of wages
per day, but a reduction of wages per piece of product,
and the system is, therefore, in a sense, co-operative.

This is an appropriate place to say regarding Mr.
Mosely's remarks of yesterday on piece-work, that I
am quite sure it does not work as well in this country
as he seems to think. That the American employer
does not cut the piece rates as freely as is done in
Europe is, I am sure, a thesis that cannot be success-



fully defended. At the same time Mr. Mosely's con-
clusions may have been the result of a loose use of

We have in this country a system known as the
New England Contract Plan, which is often confused
with piece-work, and, in fact, often goes by that
name. It undoubtedly works more smoothly than
straight piece-work, and because of the confusion of
names piece-work at times receives credit which does
not belong to it.

The result of the division of the gain due to in-
creased production between the employer and the
employee is at first sight paradoxical, i. e., the wages
go up and the cost goes down at the same time, and
the one because of the other. It may be objected
and it has been objected that this is not equitable to
the workman; that it is only proper and right that
he should be paid in proportion to his output, that
is, by straight piece-work. To explain in general
terms why I do not think this is the case is a long
story, but a concrete illustration will explain it as
well as a long dissertation would do. Not long ago
I was at the works of the Lodge & Shipley Machine
Tool Co., of Cincinnati. Mr. Lodge was showing me
about, and he pointed to an old lathe that had come
down to him from the early days of his business life,
and remarked that that lathe had cost him $625, but
that to-day he would be glad to sell a lathe, better
made in every respect, containing much more iron
and of a better design, for $300. Now, it seems to
me as plain as anything in the world can be that
piece-work rates, based upon a price of $625, could


not possibly be maintained when the price had fallen
to $300. In other words, as I look upon it, cuts in
the piece rates are the necessity and the result of
falling prices. If an employer does not cut them
from choice, he will eventually do it from necessity.
These cuts are inherent in the piece-work system, and
it is largely to get over the necessity of cutting the
rates that the premium plan was devised.

Had that lathe been made by piece-work when sold
at the old price, cuts in the piece prices would have
been inevitable before the present price was reached.
This condition of falling prices when considerable
periods of time are considered, is universal, and it
necessitates repeated cuts in the piece prices paid to
the workman. In other words, payment of wages in
proportion to the output that is, by a price per
piece is, when considerable periods of time are con-
sidered, impossible, and it was to remedy this con-
dition that the premium plan was devised. By
giving the workman a portion only of the gain due
to increased output and giving the remainder to the
employer, the workman is rewarded for increased
effort, while a reduction of cost is provided to accom-
pany future reduced prices, and the necessity for re-
peated changes in the rates under which the em-
ployee works is obviated. The premium plan, in
short, looks into the future, whereas the piece-work
plan shuts its eyes to it.

The plan recognizes further the difference between
the points of view of the employer and the employee
as regards wages. The employer, naturally, meas-
ures wages in units of output, whereas the employee


as naturally measures them in units of time. No
man who earns his own living has any way of esti-
mating the value of his labor except by the income
it gives him per day, per month or per year. That
is true of all grades of labor; from the man who
carries a hod to the President of the United
States Steel Corporation. It is true of all trades,
professions and occupations. The ignoring of this
difference in the point of view of the employer and
the employee leads to an apparent antagonism be-
tween them which does not, in fact, exist. We say
that their relations are essentially those of buyer and
seller, and just as the interests of the buyer are with
low, and those of the seller with high prices, so, we
say, the interests of the employers are with low, and
of the employee with high wages. That statement
of the case is one of those half-truths that is as pretty
nearly as good as a whole falsehood, and it is a half
truth because we ignore the difference between these
points of view. Stated fully, the statement becomes,
The interests of the employer are with low wages per
unit of product, while those of the employee are with
high wages per unit of time, and when we recognize
the full statement of the case there is no resulting
antagonism whatever. The premium plan brings
about just this condition of high wages per unit of
time with low wages per unit of product, and it would
seem that if there is any possible basis of united and
co-operative action it is found in this system.

I hold in my hand a collection of letters from a
number of employers who use the premium plan,
Of these the first is from Mr. James Rowan of Glas-


gow, Scotland, in which he says: "You will see from
the newspapers that our federation has come to an
agreement wth the Amalgamated Society of En-
gineers. This has given a tremendous lift to the
premium system and everybody is anxious to get
it into their workshops." This agreement between
the association of machine shop proprietors of Great
Britain and the chief union with which they have to
deal, is the most important event in the history of
the premium plan. It shows what I have
often remarked, that this system has been taken
up a great deal more intelligently and energetically
in England and Scotland than here. Of course here
I have an excellent opportunity to direct attention
to it which I have improved. In Great Britain, while
Mr. Rowan has been quite active, he has had no such
opportunity as mine, and the plan has grown in use
there because of its merits and because the people are
alive. I am quite sure that those of us who imagine
that England has gone to sleep will wake up some
day and find that it is we who have been dreaming.
In such accounts of the workings of the plan as I
have heretofore made, the aim has been to em-
phasize the employer's side of it, because, in the
nature of things, it is the employer who must take
the initiative. The workman's side has not been
ignored, but at the same time the emphasis has been
on the employer's side. These letters have been
brought out by correspondence, in which I asked
for the results which have been obtained by the
workmen, by which I mean the actual increase of
wages that have resulted from the workings of the



plan. It so happens, however, that this informa-
tion is not easy to get from the usual set of cost books.
Any respectable set of cost books will enable one
to compare the total premium earnings of a de-
partment with the total wages of the department,
but as some or many in the department may not
have premium work, such an exhibit may give the
premiums of a few as a percentage of the wages of
many. To compare the premiums with the daily
wages of those engaged on premium work is another
matter, and this, while the comparison needed, I shall
not in all cases be able to give. Under many sys-
tems of cost keeping it can only be obtained by
laboriously summing up the individual time tickets,
and no one can be criticised for declining to do this.
In these letters are various expressions of opinion
of the employees' views of the system. Of course
these views come through the employers' spectacles,
for which allowance must be made, taking the state-
ments for what they are worth.

My first letter giving figures is from a shop in
which the system has been in use for ten or eleven
years, it having been one of the first to take it up.
In this letter I find: "We find our men ask for prem-
iums whenever a job is given them where the num-
ber of pieces and the time of operation is sufficient
to warrant it. We find that the premium plan gives
stimulus to many otherwise monotonous repetitive
jobs, which in our case, where most of our employees
are young men, is a great factor in keeping them
with us." The difficulty of obtaining the average
results for a period of time to which I have referred



has caused this correspondent to send some repre-
sentative jobs from different departments, which,
while not so satisfactory as a general average, are
nevertheless worth giving. In one department the
average increase of wages in doing thirteen pieces
of work was twenty-six per cent. ; in another depart-
ment the average increase in doing fifteen pieces of
work was thirty per cent. All of the earnings of one
man who has been pretty steadily engaged on prem-
ium work for an entire year show an increase for
the year of fifteen per cent.

The second letter reads: "I send herewith a list
showing the wages before we started the premium
system and afterward." Then follows the list, which
includes the eight operations of one department, the
average increase in wages for the whole department
being fourteen per cent.

The third letter is from Scotland, and you will ob-
serve that the results are not affected by geography
nor nationality. The letter reads: "We have had
this system in our works for about four or five years.
We are very well pleased with the results, and as far
as we are able to learn our men are also well pleased.
We have selected at random the following twelve
men, and we give you their rate of weekly wages and
we also give you the money they have earned per
week on an average over three months." The
figures show average increased wages of eighteen per

The fourth letter is signed by a British name that
stands so high upon the roll of great and honorable
achievement that it is a genuine hardship not to be


permitted to give it. The premium earnings of
those earning premiums in a department are com-
pared with the daily wages of all in the department,
but as the percentage of those earning premiums is
given allowance may be made for this. The exhibit
is in tabular form thus :



Percentage of Employees
Earning Premiums

A verage Percentage of
Increase in Wages to
Entire Department due
to the Premiums Earned

July 9



" 16

6 3 o


" 23



" 30



August 6



" 13




February 12
March 5
August 13




August 6
" 13




The total amount of work from which this table was made up exceeds
36,000 hours.

A western machine tool building company reports :
"We are running our entire productive force on it,
and the premium earnings average about eight per
cent, of our pay roll, but increasing daily. We have


heard of nothing but expressions of satisfaction from
our men, and venture the opinion that should we
discontinue using the system the cream of our em-
ployees would hunt up a premium shop."

I have next a table which was published in the
American Machinist about three years ago. It is
quite comprehensive and is free from any possible
suspicion of bias in its compilation, because it in-
cludes all the work that had been done in this man-
ner up to that time. It includes 20,000 hours of
work, and shows an average increase of wages of
twenty-nine per cent. The next letter gives twenty-
four representative cases, in which the average in-
crease of wages was twenty-eight per cent. A
second letter from the same party gives the average
increase for all who worked on premium work during
the then last pay period. The total number of hours
of work included is 15,430, and the average increase
was seventeen per cent.

The next letter is from Scotland and reads: "We
beg to say that we have only had the premium sys-
tem in operation in our works for a few months and
it is not yet sufficiently developed for us to give you
any detailed information about it. We can only say
generally that we consider it to have been a great ad-
vantage, both to ourselves and to the men who have
worked under it. Roughly speaking, we think the
premiums earned have been about twenty-five per
cent, over time wages."

The next exhibit is the most comprehensive of
all, as it gives 'the average gains for a period of thir-
teen months. During this time the total amount


paid out in premiums alone was over $22,000, while
during the last six months the amount thus paid out
was over $15,000. During the whole period covered
by the table the average increase in wages was
8.3 cents, and during the last six months of the
period nine cents per hour.

The next letter is from Scotland and reads: "We
have taken three sample fortnightly pays, one each
in 1900, 1901 and 1902, and we give you the results,
but the figures for 1901 are slightly abnormal, owing
to an unusual amount of overtime at that date.
The effect of overtime is to reduce the percentage
of premium to ordinary wage, because the premium
rate is calculated only on the normal wage rate,
whereas the payment is made with an extra for
overtime. This is the reason for the apparent re-
duction in percentage of premiums in this case.

Following are the increases for the three pay periods :

1900 16%

i9 01 i3-4%

1902 17-6%

Another letter from Scotland pleads lack of time
and includes no figures, but says: "Generally, how-
ever, we may say the premium system has been
with us a great success. The men like it and we
like it, and the men are continually asking that jobs
which are at present not made on the premium sys-
tem may be placed on the system."

A manufacturer of electrical machinery gives the
increases on general classes of work, which run thus:


Class of work. Premium per hour,


Lathe 5.7

Boring mill 8.7

Shaper 2.0

Commutator building . . . . 5.5

Punch press 7.3

Armature winding 6.9

Still another letter from Scotland says: "In 1899
the average earnings per hour of all our men at
machines were increased by 20 per cent. In 1900
they were increased by 23 per cent., and in 1901
1901 by 31 per cent."

Practically all of the above letters are from machine
shops, for which the system was devised and in which
it has been most largely used. The next, however,
is from a firm of manufacturing chemists, who say:
"In talking the subject over with the men I find
them well satisfied, and in most cases they have
averaged twelve dollars a month in premiums."

A firm of steam engine builders gives figures for
the average increase during the first six months of
the present year (1902) to all who have worked
under the system. These figures show the increased
wages due to the operation of the system to have been
1 8. 2 per cent. The system has been in use in these
works for about three years, and the above figures
thus represent a fairly matured state of the system's

A firm of brick and clay working machinery makers
say: "The average increase in wages to our men


when working on premium work is at least twenty
per cent, over the amount paid them when working
day work."

Another exhibit includes over 86,000 hours of
work, and is especially interesting because the work
is that of feeding automatic machines, which is done
by boys. In this class of work there is apparently
small opportunity for gain, but, nevertheless, the
boys increased their average earnings by nine per cent.

My next and last letter outlines so clearly the
differences between the workings of the piece-work
and the premium plans that, coming from one who
has both plans before him in the same works, it
seems worthy of a more extended extract than has
been given from previous letters. The letter says:

' ' The first three months under the premium plan
the workmen averaged 6.2 Cents per hour over their
day ratings. After it was introduced we had no
trouble whatever with the system. The men seem
to like it, and much prefer to work under this system
than by contract. We have occasionally had to
transfer a man from this department (the premium
plan is used in but one department of the works,
F. A. H.) to others a short time, in which the regu-
lar force would have contract work. In a short
time the men thus transferred, if not returned to
their old job or department, would ask to go back,
or, failing in getting back, would leave our employ-
ment rather than work under the contract system.

"I know other systems will perhaps reduce the
cost of the labor just as effectively as the premium
system, but they do it with much more friction and


the management soon loses the confidence of the
workmen. The greatest evil of the other systems
is the continuous slashing of the piece prices. We
have tried to handle this with tact, but we find a man
will stand it until he believes he cannot endure it
longer and then leave. His price may have been
perfectly proper, and still the idea of continually
cutting him has caused him to lose his confidence
in the company and he leaves."

A GENTLEMAN: Some gentleman here desires that
you give a definition of premium system.

MR. HALSEY: The premium system is that system,
or any system, by which the gains due to increased
effort by workmen are divided between the workman
and his employer. It is, in a sense, profit-sharing
applied to the individual workman. Profit-sharing
makes a division of profits from whatever source
they may come. The premium plan divides the
gains made by the individual workman.

A GENTLEMAN: How is the division made?

MR. HALSEY: By making a payment in money for
all time saved in producing a piece of work.

A GENTLEMAN: But how is it divided?

MR. HALSEY: From one-third to one-half of the
whole gain is given to the workmen. In the majority
of cases the workman gets one-half and the employer
the other half of the gain.

ARCHBISHOP IRELAND: I would ask, How do the
labor unions generally look upon the premium sys-

MR. HALSEY: The union leaders are here and can
speak for themselves. As I have already stated,


the unions in Great Britain have agreed, through
their leaders, to give the system a trial. In this
country, so far as I know, no union has officially
withdrawn its opposition to it, though many union
men are working under it.

ARCHBISHOP IRELAND: The system, if adopted,
would do entirely away with the objection that the
man is kept down, would it not? It encourages indi-
vidual skill.

MR. HALSEY: I think the criticisms of British em-
ployees relate to initiative as regards suggestions,
rather than initiative in increasing the output. Ac-
cording to my observations, the chief opposition
among the unions, at least a large element of the
opposition, is due to the fact that they confound the
system with piece-work. Their opposition to piece-
work has my entire approval not, of course, that I
approve of all their reasons for this opposition, but
some of these reasons cannot be gainsaid and are
sufficient. In so far as they think this is the same
thing in disguise, I cannot criticise them very strongly
for waiting a while. At the same time, I do not know
of any case in which the plan has been used for any
considerable period in which the opposition has not
disappeared. The object of the system is to en-
courage individual skill by paying increased wages
for increased product.

A GENTLEMAN: How does it work in this country?

MR. HALSEY: I have made a list of those users of
the plan that have come to me. It is very incom-
plete, and in fact, I found that I was missing so many
names that, six months ago, I gave up trying to


extend it, especially as I had accumulated enough
names to serve as references to those who ask for
references. The list includes from forty-five to fifty
names, although Mr. Rowan informed me six months
ago that there were that number using it in Great
Britain alone.

A GENTLEMAN: What are the objections to the
piece system?

MR. HALSEY: The perpetual cuts in the piece rates.

MR. GOMPERS: Will you please state again how
many hours the calculation was based upon? I
understood you to say 86,000 hours.

MR. HALSEY: That referred to a single exhibit.
There was one exhibit in which boys were feeding
automatic machines. The number of hours included
in that statement is 86,000.

MR. GOMPERS: That is in the aggregate.

MR. HALSEY: Yes. Of course you realize that in
feeding automatic machines there is not the oppor-
tunity for gain there is in other classes of work.

MR. GOMPERS : Has any calculation been made be-
tween the earnings in the form of wages and the
premium, as compared to the wages earned in other
establishments in the same industry?

MR. HALSEY: Not to my knowledge. These com-
parisons all show the increase that has been obtained
in the same establishment.

MR. GOMPERS: But it does not show whether the
wages and premiums equal or exceed or are lower
than the wages earned in other establishments of the
same industry?

MR. HALSEY: No. It is difficult enough to get


such comparisons as those given. Your question is
very pertinent, but I do not think such a comparison
as you name can be had.

MR. GOMPERS: That is very true.

A GENTLEMAN: I should like to ask what happens
when improved methods are introduced?

MR. HALSEY: That depends upon the locality, and
to answer it fully would involve going into the matter
quite deeply. Mr. Rowan, whose letter I read, has
a modification which he works in Scotland and which
he thinks is an important improvement by which
no change whatever is made. My own idea is
that when improved machinery is brought in, then
the gains due to that machine do not by right belong
to the men but to the employer, and there should be
a new adjustment of rates. I have always insisted
there should be no change of the rates except in
cases of that kind. So long as the method of pro-
duction is not changed there should be no change in
the rates.

A GENTLEMAN : Have you any reason for supposing
that the rate of wages paid in these establishments
of which you have given us reports is less than the
rate of union wages?

MR. HALSEY: I am quite sure it is not so far. I
understand your idea to be the guarding of the work-

Online LibraryNational Conference on Industrial Conciliation (19Industrial conference → online text (page 8 of 25)