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THE WAGES
OF



WILLIAM
GRAHAM



CASSELL'S SOCIAL ECONOMICS SERIES



THE WAGES OF LABOUR



CASSELL'S
SOCIAL ECONOMICS SERIES

Labour and the New World
PHILIP SNOWDEN

The Wages of Labour

WILLIAM GRAHAM. M.P.,
M.A. LL.B.

The Future of Local Government
G. D. H. COLE

The Social and Industrial Problem
ALFRED HOOK

Socialism : Critical and Constructive
J. RAMSAY MACDONALD

Other Works on Social Economics

The Triumph of Nationalization
SIR LEO CHIOZZA MONEY

The Red Light on the Railways
Rt. Hon. J. H. THOMAS, M.P.



THE

WAGES OF LABOUR



By

WILLIAM GRAHAM

M.P., M.A. (Rons.), LL.B.



CASSELL AND COMPANY, LTD
London, New York, Toronto and Melbourne
1921



i



Go

E. M. G. and J. N. G



02



PREFACE

THE standard economists have discussed at
length the economic and other considerations
which underlie the wages of labour, and
there are, of course, innumerable books deal-
ing with particular aspects of the problem. Written
in the midst of great pressure of Parliamentary
and public work, this volume makes no claim
either to literary excellence or to elaborate analysis
of the fundamental difficulties of remuneration.
All that it attempts to do is to summarize briefly
some of the immediate issues, especially in the light
of post-war economic conditions, and to suggest a
wages programme for employers and workers.

To the main sources of information the author
has acknowledged his indebtedness in a brief biblio-
graphy. He desires, however, to pay tribute to the
valuable suggestions of his friend Mr. James Munro,
M.A., formerly Beit Lecturer in the University of
Oxford, and also to those of his constituents in the
Central Division of Edinburgh who have from time to
time placed many interesting facts regarding wages
systems and rates at his disposal.

W. G.

105, Sunny Gardens,

Hendon, London, N.
March, 1921.



BIBLIOGRAPHY

" Principles of Economics." Professor Alfred Marshall.

" Australia : Problems and Prospects." Hon. Sir Charles G. Wade,

K.C.

' ' What Syndicalism Means." Sidney and Beatrice Webb.
" Labour Overseas." Ministry of Labour.
'' Industrial Democracy." Sidney and Beatrice Webb.
" History of Trade Unionism." Sidney and Beatrice Webb.
" Profit-sharing and Labour Co-partnership." Ministry of Labour.
" Capital and Labour." W. T. Lay ton.
" English Economic History Select Documents." A. E. Bland,

P. H. Brown and R. H. Tawney.
" Wealth of Nations." Adam Smith.

" Minimum Rates in the Chainmaking Industry." R. H. Tawney.
" Principles of Economics." Professor E. R. A. Seligman.
" National Guilds." A. R. Orage and others.
" Industry and Trade." Professor Alfred Marshall.
" British Incomes and Property." Sir Josiah C. Stamp.



CONTENTS

CHAPTER PACK

1. THE BASIS OF EFFORT i

2. NATURE OF THE WAGES SYSTEM ... 19

3. NATURE OF THE WAGES SYSTEM, contd. . . 43

4. CRITICISM OF THE WAGES SYSTEM ... 57

5. MINIMUM RATE AND STANDARD WAGE . . 74

6. MINIMUM RATE AND STANDARD WAGE, contd. . 90

7. SCIENTIFIC MANAGEMENT .... 109

8. SCIENTIFIC MANAGEMENT, contd. . . . 124

9. A WAGES POLICY 143



THE WAGES OF LABOUR



CHAPTER I

THE BASIS OF EFFORT

FOR the purposes of this discussion no idle
distinction will be drawn between the wages
of labour, usually regarded as the hourly,
daily or weekly payment for so much manual
or kindred toil, and salaries, paid monthly or
quarterly, and in the public mind regarded for
the most part as some form of reward for profes-
sional service. Except for a certain clarity in
analysis the distinction is unreal and even mis-
chievous. It is associated with the fallacy that it is
possible to establish some fundamental and abiding
difference between work by hand and work by brain.
That there is in reality no such fundamental differ-
ence is now recognized even in popular debate. It is
one of the objects and functions of a healthy economic
system to secure the adequate use of both mental
and physical power, and to see that they are com-
bined in that all-round and comprehensive life and
experience without which no really intelligent and



The Wages of Labour



truly respectable system of society can possibly
emerge.

The fallacies of such distinctions, which are just
as popular among the poor as they are in a growing
suburbia recruited from a greatly extended bureau-
cracy and among the nouveaux riches, are much
greater than is commonly imagined. They have
helped to give us such strange divisions as the prole-
tariat, the salariat, the new poor, the middle classes,
the lower middle classes, the now heavily diluted aris-
tocracy and other mysterious gradations which are no
doubt interesting and even amusing in a present-day
novel, but are of very little service in the merciless
logic of economic science. The fallacies are great
because they are false to much of the best teaching of
the economists. Very properly they have directed
attention to income. They have described it as the
incomings of the people which may and should be
very much greater than their actual monetary reward.
These incomings may include all manner of services
or opportunities or advantages not to be measured in
cash. To some their value will be much greater than
to others, but in degree they fall to be added to the
narrower monetary reward of every member of the
community. Salaries and wages are therefore only
a department of income. That at once throws us back
upon the general incomings of Great Britain. What
place does it occupy in the enterprise of the world?
What security does it enjoy? What international

2



The Basis of Effort



credit can it command? If British remuneration de-
pends in the main on the reply to such questions it
is plain that contribution to that end is made by all
manner of people who are working with tolerable
honesty and conviction in all kinds of spheres,
directive and administrative and manual and all
other forms of toil being inextricably intermingled.
By the wages of labour, therefore, we mean the
remuneration of all the people who are doing
something useful.

The general outline of centuries of evolution in the
remuneration of labour is tolerably familiar. As Mr.
W. T. Layton has reminded us in a recent summary,
each man in a primitive society owning his own tools
and implements would be remunerated or paid by
what he could produce. Almost everything would
then depend on the differences of country and natural
resources. If Nature was generous, livelihood would
be easy; if natural conditions were hard and trying,
only considerable effort would produce a living. Thus
early are the fundamental and abiding problems of
wages introduced. The conditions of nations change.
Greece and Rome rose in early splendour, only to
fade into subjects of the benevolent or acrimonious
controversy of historical research. The rigid but com-
prehensive structure of Continental feudalism, with its
retainers whose reward was food and maintenance
and whose duty was military and agricultural service,
gave way to the doctrines of self-sufficiency, mercan-

3



The Wages of Labour



tilism and the static conditions characteristic of the
Middle Ages, to be replaced in turn by agricultural
revolution and industrial change involving the intro-
duction of large-scale production, the growth of the
factory system, the establishment of huge overseas
commerce, and great rival amalgamations of capital
and labour. But underlying all this transforma-
tion there is the continuous struggle of the people,
and much of that struggle is summed up in the
history of wages and prices. In essence the
principles at stake, and the economic theories con-
sciously or unconsciously considered, have been
constant.

It is unnecessary to review at length the distinc-
tions of the economists in the discussion of the factors
of wealth production. We shall summarize an
almost interminable controversy in the bald but
familiar phrase that wealth is produced by the appli-
cation of capital and labour to natural resources, and
under labour we shall include the skill in management
or direction which Professor Marshall regarded as
of sufficient importance to entitle it to separate and
special place. But in the discussion of capital this
country has suffered much because we have thought
and debated excessively in terms of money or credit
or plant or buildings or machinery, and we have in-
sufficiently emphasized the supreme importance of
that personal capital resident in the breasts of the
people, the initiative, skill, enterprise, genius which

4



The Basis of Effort



to some extent is capital held by every member of the
community, but in innumerable cases is either starved
or dwarfed or misdirected or miserably recognized.
It is this distinction which is either at or very
near the root of many of the problems of modern
remuneration. Most critics would agree that an
economic system which was really healthy and
genuinely progressive would minister continuously to
the growth and recognition of personal capital. In
turn that progress should be represented in bene-
ficent improvement in the methods of industry and
commerce. It should be a liberalizing and human-
izing factor. When, however, we review the history
of the nineteenth century it is clear that, while it was
a period of extraordinary material gain and prosperity,
it can hardly be suggested that the advance of per-
sonal capital kept pace, even when all allowance is
made for the little we were able to do in technical and
other education. In point of fact, personal capital of
pronounced power is scarce to-day, or at all events
difficult to locate, and it may be that no real improve-
ment will take place until a remedy is found in the
sphere of remuneration. It need not be a recognition
in cash; in many cases it might be a recognition in
responsibility. But, in whatever way it is encouraged,
it will be conceded that if Great Britain is to have
an effective place in world economic reconstruction
it must without delay face the problem of perhaps
giving less return to ordinary forms of capital, many

5



The Wages of Labour



of them almost automatic in their character, and more
to the nighest type of all.

The distinction between the wages of labour and
what may be called the wages of capital is, of course,
of long standing. Primarily the accumulation of
almost any form of wealth, to be set aside for the
production of more wealth, would involve some
sacrifice. Not merely did it represent the use of
what has been called the telescopic faculty, but it
indicated an appreciation of the manner in which
material capital is recruited. As practically all the
economists have argued, the early toiler was soon
confronted with the choice of consuming all he had
produced in a limited riot of immediate satisfaction,
or denying or postponing the satisfaction of his
desires in the interests of accumulation, in the first
instance probably against the rainy day and later
probably for the purpose of increasing his productive
power and general wealth. It is true that in the
hands of Nassau Senior and others the abstinence
theory was pushed to an extreme which made it the
easy prey of those who are fond of ridicule even in
economic science. As industry and commerce grew,
many people accumulated wealth automatically,
especially in undertakings of a monopoly character.
Others accumulated because, having liberally satisfied
most if not all of their desires, they had still a sur-
plus. Still others accumulated because they were
providentially assisted by competent trustees. Self-

6






The Basis of Effort



denial in such cases, and certainly abstinence, were
almost irrelevant arguments. But such considera-
tions do not substantially weaken the central
truth of the doctrine. And it is important to
recall it because, after all, the fully-satisfied-but-
nevertheless-accumulating-wealthy are in the main a
small and restricted proportion of the population.
Much accumulation is done by workers of all descrip-
tions, in small sums, covering millions of people in
the cooperative and friendly societies, the minor
professional organizations, and the trade unions and
kindred bodies.

This aggregate capital is invested directly and
indirectly in practically all the enterprises in the
State. In return, the millions of people to whom the
capital belongs are drawing interest, or some form of
return, and hence it is true that the members of the
community who receive interest on invested capital
are not a small and special body, as is often sug-
gested in popular debate, or an exclusive and parasitic
class, another phrase commonly employed, but in
reality probably most of that section of the people
which is in the last resort the mainstay of any sound
and healthy country. These facts are not summarized
for the purpose of defending the existing economic
order. The object is rather to show that much
current argument about the masses of the people
being in process of progressive degradation for the

aggrandisement and enrichment of the few is not in
B 7



The Wages of Labour



accordance with the facts. Besides, if extremist
critics could only see it, it is in no way necessary to
prove such a state of affairs in order to convince the
people of the value and importance of economic re-
organization. A depressed community is not likely
to reorganize anything. It is much more likely to
be satisfied with any form of strictly temporary ex-
citement or satisfaction, or in the last resort to have
recourse to an indiscriminate destruction from which
it is the first to suffer. Permanent and thoroughly
scientific economic and political change will be built
upon the measure of popular prosperity or security
already won, and the aim should be to increase the
holding of capital among the whole of the people
until its reorganization for unselfish use and diffused
progress becomes a comparatively simple proposition.
The great intermediate section of the British people
does not like the extremes of either wealth or poverty.
It believes that both extremes should shade as rapidly
as possible into the general, industrious effort, with
its reasonable comfort and security, of the inter-
mediate section. But the important point is that now
there are millions in this intermediate force that are
receiving salaries and wages and, in varying amounts,
interest on the capital they have invested. They are
therefore proprietors of capital as of labour, and their
existence is the sharpest possible reminder that no
catastrophic revolution is ever likely to find favour
here. The evolutionary programme of the great bulk

8



The Basis of Effort



of British labour is sound. Workers of all descrip-
tions derive interest on their investments. Almost
everywhere there is evidence of return on some post-
poned satisfaction. And that consideration perhaps
more than any other emphasizes the real mutuality
of interest on the part of capital and labour, and
indicates that in due course reorganization of owner-
ship and use of capital will be a kind of domestic
concern, growing gradually out of the more just and
more humane distribution of national wealth and
remuneration of labour which the people themselves
systematically evolve.

But while fundamentally the so-called war of
capital and labour is unreal, the existing system does
involve strenuous competition in the division of the
annual yield of industry and commerce. Belief in
the radical divergence of interest was fostered by
several fallacies regarding wages which were
current in the early part of last century. There
was, of course, the suggestion that wages would
depend in the main on the proportion between
population and capital. Adam Smith, Ricardo and
- Malthus all alluded to the possible reduction of wages
if the population increased very rapidly; and there
was the equally familiar theory that if wages rose and
the standard of life among the masses improved,
population would increase to such an extent that the
gain achieved would be speedily lost. The history
of last century has exploded this doctrine. Material

9



The Wages of Labour



conditions undeniably improved, but no one suggests
that there has been a counterbalancing increase in
population, especially within recent times. Indeed, it
is not unfair to suggest that the greater the degree of
comfort the smaller are the numbers present to enjoy
it. Nevertheless, there are still many people who
would willingly give Malthus a fresh lease of life, and
they almost invariably suggest that there would be
better remuneration if only the population were
smaller.

More important is the survival in many minds of
some form of the wages-fund theory. A century ago
both Britain and the Continent of Europe were com-
paratively poor. It was not unnatural that in such cir-
cumstances innumerable writers should point to the
scarcity of capital and to the apparent dependence of
labour on the proprietor of capital. The spirit of much
of the teaching was to place labour economically some-
what in the position of an applicant for poor law relief,
depending entirely on the bounty of more fortunate
fellows. The older economists spoke loosely of the
amount of wages being limited by the amount of
capital, described by Professor Marshall as the vulgar
form of the wages-fund theory. Even John Stuart
Mill, although he afterwards made correction, spoke of
the "aggregate of what may be called the wages-fund
which consists of that part of circulating capital . . .
which is expended in the direct hire of labour." It
was regarded as something fixed in amount, and

10



The Basis of Effort



labour was the needy individual who was supplied
from it. The argument gained colour from the cir-
cumstances of the time, for at a period of revolutionary
development in industry there was a relative scarcity
of capital.

About the same time both French and British
writers were engaged in discussion of the theory of
value, many of them suggesting that value was
governed almost wholly by cost of production, with
demand in a secondary place. On the other hand,
Professor Marshall has indicated that the extreme
forms of the wages-fund theory represented wages as
governed entirely by demand, though, he added, the
demand was represented crudely as dependent on the
stock of capital. Most of this reasoning has disap-
peared, and the position now generally accepted is
that all resources are parts of the national divi-
dend, which have been directed into forms suit-
able for deferred instead of immediate use; and
if any of them are now applied to any purpose
other than immediate consumption it is in the
expectation that their place will be taken (with in-
crement or profit) by the incoming flow of the
national dividend.

Nevertheless, when many employers and workmen
speak to-day of the distribution of the annual dividend
they speak in terms of the wages-fund theory, and not
in terms of a continuous flow from which the various
sections of the community will be remunerated for the

ii



The Wages of Labour



services which they render. There has probably
never been a time when it was more important that
this country should think in terms of an expanding
industry and commerce, and of a progressive return
to all earnest people willing to do their best. Recent
surveys of the economic conditions of Europe make
it plain that if we can surmount the artificial barriers
which to-day separate producers and consumers, and
if we can devise some bold scheme of international
credits which will be thoroughly comprehensive, there
is ample enterprise in store for all the nations of the
world in the satisfaction of human needs which may
with accuracy be described as real, legitimate, and
concerned with the necessaries of civilized life.
Indeed, from many points of view, the trying circum-
stances which have succeeded the world-conflict have
thrown a new light on demand.

The first thing to be noted is that demand is
practically unlimited. Many of the best economists
have contemplated a kind of reasonable life for the
people which would include the generous satisfaction
of immediate and pressing needs; that is, they would
have ample food and clothing and shelter. But there
should be added to that not extravagant luxuries,
which are not recommended for any class, but at least
the minor or conventional comforts and amenities of
life a controversial field, but generally described as
including certain forms of beverage, tobacco, some
recreation, as well as possibilities of aesthetic or

12



The Basis of Effort



cultural development. The minor or conventional
comforts shade into the necessaries, and they are
very important as rounding off the necessaries and
imparting a humble happiness to existence without
which much healthy human enterprise would fall off
or disappear in elementary discouragement, if not
despair. It will not be pretended for the masses of
workers in the world that demand, limited to such
necessaries and minor comforts, has been reasonably
satisfied. Even if we did nothing more than attempt
to meet a demand so rigidly restricted, we have years
of all manner of industrial and commercial expansion
before us.

Secondly, it is tolerably plain that a large part of ,
human demand is uneducated, often misguided, and
sometimes, in certain circumstances, almost criminal.
In the midst of economic crisis the infallible message
is first things first. The world requires primarily
food and raw materials. If that is so, every effort
should first be made to raise the food and provide
the raw materials. Instead of that, while starvation
stalks some countries, almost completely paralysing
demand, and incidentally throwing the industry of
other lands into gloom, large numbers of workmen
are busily engaged in luxury pursuits. While imme-
diate needs can hardly be met, millions of pounds are
employed in trade in jewels, furs and feathers.
The masses themselves are not without blame. It
is not suggested that they should forthwith abandon



The Wages of Labour



reasonable recreation or minor comfort, but it is im-
portant to point out that even with the diminished
purchasing power of inflated post-war conditions they
direct a large part of their demand into spheres which,
in proportion to the amount of capital sunk in them,
employ relatively few workers. That is true of the
trade in liquor. Again, millions are sunk either in
excessive pleasure or in the wrong kind of recreation.
The direction of even a tenth of the amount thus
wasted annually to really constructive schemes, say,
to housing, development of local and other trans-
port, support of the urgent and necessary enterprise
of the local authorities, and kindred effort would be
invaluable. The redirection of that demand would
in effect, and probably within a comparatively short
space of time, be reflected in an increase in the real
income of the workers themselves. Under existing
conditions they are heavily penalized by the absence
of good housing. They suffer in health. The
mobility of labour has practically vanished in many
parts of the country, and that means denial of oppor-
tunity and progress to those who are worthy of both.
Industrial efficiency and earning power are impaired,
and that involves less remuneration to-day and re-
duced savings for the future.

To suggest in reply that capital must come
from other sources is beside the mark. No
doubt much of it comes now from the effort of
the large combines and amalgamations. But the

14



The Basis of Effort



record of the trade unions, with over eight million
members affiliated to the Trades Union Congress, the
co-operative movement with more than four millions,
and the friendly societies with at least seven millions
proves beyond the shadow of a doubt that the accumu-
lation and provision of capital by enormous numbers
of plain and ordinary people is a great possibility
which we are only beginning properly to under-
stand. It is the familiar truth that the people have
even now remarkable economic power if they would
only organize it, and see that it was used to demand
the things which are most essential, and not, as
is often the case, the things for which, without
the least danger of human suffering, the demand
might very well be deferred if not indeed definitely
abandoned.

We are therefore confronted with the duty of
proclaiming to the world that there is unlimited
human need of a healthy and essential character
which is not satisfied, or is only inadequately satis-
fied to-day. Further, there is the importance of


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