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emphasizing the fact that that demand requires train-
ing and education, and that great power rests with
the people in the provision of effort to see that re-
directed demand is met. As such enlightenment
grows, capital and labour will tend more and more
to be directed into spheres which are really essential
to human progress. They will become productive
and remunerative in a much healthier sense. That

The Wages of Labour

in turn should provide an ever-widening basis on
which the genuinely constructive work of the world
can proceed.

It would be better if the change came volun-
tarily, but many thoughtful people, by no means
enamoured of bureaucratic intervention, have argued
that post-war conditions are so critical, and the im-
portance of the most beneficial use of available capital
and labour so pronounced, that the investment of
capital in certain departments of enterprise should
be prohibited at the present time. They single
out for the most part highly luxurious or semi-
luxurious trades which have apparently had little
difficulty in securing the subscription of adequate
post-war capital, and have certainly not found it
necessary to ask the public to come to their assistance.
In whatever way it may be accomplished, the re-
direction proposed has a value which is beyond

In the last resort it is clear that it is this wise
direction of capital and labour and their most produc-
tive use, not in the sense of monetary return but in
ministry to the real needs of the people, that is the
sound safeguard of wages. Such progressive im-
provement would almost certainly mean increased
nominal wages, that is, in terms of money. But even
if it did not, it could hardly fail to mean increased
real wages, that is, in terms of purchasing power.
For we are assuming throughout this argument that


The Basis of Effort

no artificial hindrance such as monopoly or combina-
tion or trust is allowed to interfere with reproductive
expenditure for the public weal.

But before that great end can be achieved, and
before we are able to say that we have either elimin-
ated the waste of misdirection of capital and labour,
or at all events reduced it to a minimum, it will be
necessary for both employers and workers to be less
mediaeval than they are to-day. An outstanding note
in the economic teaching of the Middle Ages was
emphasis of the static. More perhaps than we com-
monly realize there is even now almost the curse of
the static. It is notorious that enormous numbers of
men and women engaged in different spheres ir\
industry and commerce habitually speak in terms of
fixed markets, fixed demand, and the general
economic experience of years "business as usual ";
"back to pre-war conditions"; " normalcy," the
watchword of President Harding. The outlook would
be brighter if they could think more in terms of
the markets they have not seen and the demand they
have not even tried to satisfy, both of them very
real, and of the millions of gradually awakening
people throughout the world who are the potential
payers of the salaries and wages of the British people.
Nothing is fixed. And there is less excuse than ever
for the static when we are reaching out to new inter-
national conceptions of commerce and beginning the
international regulation of labour conditions in certain


The Wages of Labour

industries. The main concern of economics, says
Professor Marshall, is with human beings who are
impelled, for good and evil, to change and progress.
The central idea of economics, he adds, even when
its foundations alone are under discussion, must be
that of living force and movement.




THE system of remuneration in an economic-
ally advanced country like Great' Britain
is necessarily complex, but probably only
a small proportion of the people realize how
great are the ramifications of the problem. It
is perhaps an u rider-statement of the position to
suggest that capital strikes for higher wages at
least as often as labour. When capital is with-
held pending the receipt of higher interest or
larger profit it is in effect on strike for better con-
ditions. It is not suggested that it will remain long
in that attitude, but in this connexion it must be
remembered that in any event the waiting power of
capital is usually greater than that of labour. Re-
muneration is therefore very comprehensive, and
extends far beyond the payment of services which
are ordinarily measured by time or output in the
sphere more narrowly regarded as being that of
professional or manual labour.

For the purposes of this discussion we shall simply
summarize the methods of remuneration, in order
that a suitable basis for criticism of the present wages
system may be provided. It is unnecessary to


The Wages of Labour

spend much time with the people who solve every-
thing 1 by saying that it will be regulated by the law
of supply and demand. That is another example of
rigidity or of the static that is inconsistent with any
true understanding of economic issues. The so-called
economic laws are at the best only tendencies, subject
to all manner of modification, and determined by the
play of human forces which are themselves the very
embodiment of uncertainty and change. No doubt a
strong demand for a certain kind of labour will tend
to raise its price, especially if the supply for any
reason is somewhat limited, just as an excessive
supply of some form of service will probably lead to
a low general rate of payment. But in both cases
there may be powerful counteracting factors which
will either hinder or accelerate the working of the
so-called economic law, and in labour, as in every-
thing else, there is always the debatable element of
the substitute which may, for that part of it, be a
machine, or an industrial economy or device, and not
the work of a human being or group of human beings
at all.

It has been shown beyond doubt that the con-
ditions of purchase and sale are constantly chang-
ing, and that parts of the expense or risk of delivery
are in process of ever-varying allocation between
buyer and seller. Sometimes one gains; sometimes
the other; and there must often be that equilibrium
of advantage which has been the subject of much


Nature of the Wages System

of the most acute economic analysis of recent
years. And in the case of labour the difficulties are
mostly greater than they are in-, the case of material
commodities. There is a nominal price for labour,
in terms of money, or something that can be readily
appreciated, but the true price may differ widely, and
it may only be reached by routes that involve much
scientific investigation.

The most familiar classification of wages is that
which deals with time-earnings on the one hand and
piecework payment, or some system of payment by
results, on the other. The former may be payment
at such-and-such a rate per hour, day, week, month
or year, or in respect of services which are normally
regarded as occupying a certain amount of time. It
is this form of remuneration which is applied to a very
large proportion of British labour. For many occu-
pations it is probably the only form that could be
applied, since they do not lend themselves to measure-
ment of output, nor would they be readily capable of
carrying a general or overhead bonus or extra reward
based on their broad efficiency. At the moment there
is again a powerful attack on time-earnings. It is
argued that with the spread of under-production
as a device for safeguarding the worker in continued
employment time-wages have tended in many
cases to move farther away from exact or even
approximate measurement of reward for the service
actually rendered. They become, then, either a form


The Wages of Labour

of imposition upon the employer, or, what is more
likely, upon the consumer of the commodity sold. In
circumstances of free or tolerably free competition in
production the consumer might be protected either
wholly or in part, because it might be assumed that
other producers with more efficient service would
obtain the market. But much of what is ordinarily
used by the people to-day is produced under condi-
tions of combined effort, through enterprises either
actually amalgamated or operating under trade
agreements regarding the system of production or
the precise conditions of sale. In some cases
the trust organization is found in complete ver-
tical form, that is, beginning with the raw material
of the industry and continuing throughout until
it regulates also the completed and finished retail

Generally speaking, such an industrial organiza-
tion, if it depends in the main upon time services
and remunerates its labour upon a time basis, will
be able to make allowance for the kind of output
it can achieve and for any disproportion which may
exist or grow up between that aggregate output and
the aggregate wage-bill from time to time. It is
assumed that effective rivalry does not exist, and it is
certainly no exaggeration to say, especially in the
light of the investigation of the growth of the trust
movement in British industry by Mr. H. W. Macrosty
and others, that in many spheres in which this


Nature of the Wages System

problem of remuneration is now acute there is no
effective competition or rivalry at home, nor at the
moment is the foreign commodity able in many cases
to enter the field with any chance of popular adoption.
In such circumstances, therefore, it seems undeniable
that consumers, at all events for a period, must bear
the burden of the error in the form of increased prices
or an inferior article. In the absence of serviceable
substitutes this may continue, and in most cases it
will affect the workers themselves as consumers of the
commodity they are engaged in producing. The
logic of ca' canny is invincible; in the last resort it
hits with relentless force those who would dignify it
as a doctrine and suggest that it is one of the tem-
porary steps by which, to quote their own phraseo-
logy, labour can meantime get even with capital.
It is neither hopeful nor dignified to seek a supreme
"evenness" in general suicide.

It is sometimes suggested that, great as may be the
economic evils associated with time-wages, which have
never been, or have ceased to be, scientific, there
will always be a healthy movement towards a sound
system along at least two lines. In the first place, it
is urged that, notwithstanding all the suspicion and
the unrest which have been characteristic of British
economic progress within recent times, the great
majority of people have little patience with the revolu-
tionary extremist who would, with frank impartiality,
wipe out at once both the history of the ownership,
c 23

The Wages of Labour

growth and use of capital and the story of the labori-
ous development of the trade unions, the friendly
societies and the co-operative movement. For him
these things are altogether lacking in appeal to the
imagination. They are far too stubborn; they are
only the practical facts of a world which he dislikes
too intensely to accept even as a starting-point for a
better future. It is not, however, in keeping with the
traditions of the British people to lend themselves to
any cause of catastrophic change. We shall grope
our way into a better economic system as we have
painfully overcome other obstacles to progress in
the past. The very most that idealists and
educationists and others with a long view can
hope to accomplish is to reduce as far as possible the
number of blunders and to shorten as much as may
be the circuitous journey towards the dawn. On this
journey most people are happily well disposed. It is
difficult to get them to think of foreign markets and
internal economic conditions, but they sincerely desire
to do their best in the callings in which they are

Most of the critics who write so freely about a
progressive degradation in the moral fibre and general
skill of British labour read very little history, and they
obviously do not test their criticism by the impartial
records of the blue-books of the time. Whence all
that marvellous growth of exports and imports during
the past century ? Whence all that steady improve-


Nature of the Wages System

ment in mechanical appliances, even if it did fall short
of the expectations of many ? Whence all the mass-
ing of the forces of production, the sub-division of
labour, the organization of resources, and the inten-
sive cultivation of the industrial field? No doubt
much was achieved by a number of enlightened
employers and organizers. But the workers have
made a no less remarkable contribution in steady,
conscientious and intelligent service. If the charge
of sabotage by widespread or general slackness
of effort or reduction of contribution had been true,
the industry and commerce of Great Britain could
hardly have survived the foreign competition of recent
years, especially when we remember the familiar
argument that in pre-war times Continental coun-
tries, to say nothing of the United States of
America, were defeating us in technical and other

On the other hand, it is probably true that honour-
able service on the basis of time-wages has been
exploited in innumerable cases in the interests of em-
ployers, and that in point of fact the contribution of
the worker has not been adequately recognized. Busi-
ness skill and favourable markets, together with
monopoly power more or less complete, may account
for much of the profit which has attended a
large part of British enterprise, but there remains
a proportion which, under a strictly just system of
remuneration, should have gone to labour, of what-


The Wages of Labour

ever kind, but for its inferior power in striking, a

Again, it is often suggested that time-wages tend
to equity in remuneration because of the competition
for employment. If some men and women do not
work well they will be dismissed, and others who work
well will be engaged. If industrial giants appear
they will speedily be transferred to important spheres
for which their remarkable qualities fit them. In any
event they will never be numerous enough to raise
any considerable commotion in the adjustment of

In circumstances of industry and commerce where
there was not much division of labour, specialization
in processes, or labour organization based on appren-
ticeship and training, there might be some kind of
general competition for employment. But at the
present day division of labour in many industries and
callings is so complete that the numbers available
are at the best restricted. It may be that with the
detailed segregation of industrial process a particular
operation can be mastered in a short time, but it
will certainly require some training, according to
the usage of the trade. That will involve time, and
we are now discussing a position of affairs that is
immediate and even urgent rather than one which is
prolonged. Apart from that, even for the small,
narrow, specialized processes it is generally the case
that there has been apprenticeship or training to the


Nature of the Wages System

industry as a whole, which is a wise foundation. That
would limit the number of possible and effective com-
petitors. But the real point is the organization of
labour. It is not necessary to enter into the contro-
versy whether there is continuity between mediaeval
guild and modern trade union. This much, however,
may be urged. It was one of the objects of the guild
to establish a certain standard in the industry it
covered. It aimed at an all-round training, to secure
a good, working knowledge. If the trade unions had
been more zealous than they have been in the cause of
technical education they would have taken some of
the best features of the guilds and enshrined them in
present-day industrial conditions. Above all, they
would have addressed themselves continuously to the
task of seeing that their members received a complete,
sincere and thorough training in their respective

Unfortunately, largely because of the play of
economic forces beyond their control, many of the
trade unions have devoted little or no attention to the
problem of industrial training. Apprenticeship has
practically broken down. Almost any trade union
leader will confirm the statement that he can get a re-
presentative meeting of his members only when a
wages question is at stake; in the larger, statesman-
like departments of his work he finds little encourage-
ment and support. Unless an organizer can secure
good increases he is soon regarded as incompetent,


The Wages of Labour

or on the crowded road to diminished popularity and

The consequence of all this is that in practically
every department of enterprise in Great Britain there
is a comparatively small number of really able men
and women. The average ability is limited by the
absence of real statesmanship in the unions, by the
breakdown of the apprenticeship system, for which
the employers have been also to blame, and by the
resultant feeling that the possession of substantial
skill is not really necessary. Thus it happens that
the choice of skilled men and women to replace those
who do not pull their full weight is narrowly re-
stricted. The one satisfactory feature of the situation
is that large numbers of workers are becoming con-
vinced of its grave danger. Another generation of
industrial drift may be almost fatal to this country.
Most of the other countries of the world which have
any pretence to economic enlightenment are busily
engaged on all forms of scientific management,
standardization, industrial training, and technical
education. Our failure intensively to cultivate the
undeniable skill of the industrial population is the
sure road towards such losses as will eventually bring
down the whole level of remuneration, nominal and
real. Besides, broad-minded trade unionists recognize
that their greatest enemies are the indifferent members
who have almost a pride in bad workmanship and
are often the people who, in times of political or other


Nature of the Wages System

crisis, seek to commit the unions to every ridiculous
"economic " policy. It can hardly be argued, there-
fore, that over a large part of the field of British
industry time-wages will be assisted to accuracy be-
cause of available substitutes among the workers,
competing for the occupations of those who have
proved more or less unfaithful to their trust. The
truth is that something short of the full efficiency
has not of deliberate purpose, but by the
interplay of industrial conditions become stan-

It is otherwise, however, in the occupations which
are not specialized, which require little training, and
in which there is no comprehensive or indeed elemen-
tary organization of labour. Thousands of people
who act as clerks, for example, are not organized. A
great deal of clerical labour is almost mechanical ; for
the purposes of this argument we are excluding
clerical work which demands training and skill, as,
of course, much clerical work does. But in the
humbler phases of the calling there are always large
numbers of people requiring situations and willing
to work hard to keep them. Young people of both
sexes prefer the office to the workshop. The middle-
aged wish a sedentary calling. The aged argue that
they can do clerical work when they can do nothing
else. And there are all the spare-time workers, and
the home workers, and the hundreds of thousands
who find it necessary to do something either to provide


The Wages of Labour

an income at difficult periods of life or to supple-
ment an income which they find inadequate for the
satisfaction of their wants. In such circumstances
employers may have a choice. Apprenticeship
presumably does not count. Trade union regu-
lation hardly applies, although the organization
of clerical workers is proceeding rapidly. The
numbers are very large, and they are scattered, and
for the most part very little publicity is given to the
actual terms of their engagements. Here, although
the general standard of ability may not be high,
there will probably be a real competition for work,
and to that extent employers may have some

Reviewing the different classes, we reach the
general conclusion that what is usually in mind is
an average ability, to be roughly compared with
the " reasonable skill " of the medical man or profes-
sional worker to which the law has made such fre-
quent reference. In a healthy economic system, so
long as time-wages last, they should presumably im-
prove steadily with the development of skill and the
extension and establishment of industry. We are
again thinking in terms of progressive expansion.
Of course, if for any reason beyond its own control,
such as the collapse of a world-market, or the victory
of a foreign competitor despite every effort on our
part, a whole industry is depressed, the time-workers
cannot expect to be immune from some adjustment of


Nature of the Wages System

industrial remuneration, whatever compensation may
be afforded on other grounds. But in conditions
proceeding to real prosperity the broad aim should
be to see that time-wages are in accordance with
the definite and ascertainable contribution of the

The second great division of remuneration is that
which is based on output or results. In later chapters
we shall investigate separately the leading systems
of payment by results, and the attitude of employers,
workers and consumers towards them. At the moment
all that is being attempted is a summary of economic,
political and popular discussion surrounding re-
muneration in general, with particular reference to
problems to which economists especially have directed

Shortly stated, payment by results means that
the worker is paid according to the amount of
the actual product, in terms of methods of measure-
ment which vary widely in different callings. The
shortage of practically everything essential to human
progress which is the inevitable consequence of war
on the scale of the recent conflict, and the apparent
failure of production to respond, has led many people
to suggest, notably where they believe the failure to
be due to economic heresy or mischievous social
doctrine, that the only remedy is to put all industry
on a system of payment based on output. That is the
kind of sweeping statement that serves only to


The Wages of Labour

prejudice the discussion of a vital issue. In
many callings it is practically impossible to
measure output, and even if it could be measured
it could hardly be allocated for purposes of
remuneration among those engaged. A tram con-
ductor is not responsible for the fact that fewer people
travel on his tram one day than on another. He may
be a workman, but he cannot control the weather or
the tastes of the populace. In such cases there might
be an overhead bonus based on the efficiency of the
system, or its profits, but even that would depend on
factors not controllable by the majority of the workers.
Special reward in such cases there may be, but in the
main remuneration in the immediate future must re-
main on a time basis. There are other tasks in which
it would be highly dangerous to pay workers by
results; the whole essence of them is ample time,
perhaps in delicate operations involving much
technical skill, to produce an article that can be
guaranteed in every way for the purpose which it is de-
signed to serve. For the time being payment by
results must apply at the best to only a section of
the people, although that section might even now
be very large if an acceptable System could be

Let us look, then, at some of the broad considera-
tions underlying payment by results. It is often
argued that everything would then depend on the
efficiency of the workers. That would be true if the


Nature of the Wages System

conditions under which different sets of workers on
payment by results were engaged were everywhere
the same. But if conditions and appliances vary the
results will not be in proportion to the efficiency
of the workers. In British industry the conditions
and the appliances do vary considerably, even in in-
dividual factories, and certainly in different towns and
districts. Many employers are just as devoted to
obsolete methods as the most conservative worker

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Online LibraryWilliam GrahamThe wages of labour → online text (page 2 of 11)