Work, wages, and profits; their influence on the cost of living

Front matter

. Cornell University Library

Work, wages, and profits; their influen

3 1924 001 636 418

Contents

Chaptbe I. The Application of the Scientific

Method to the Labob Pboblem ' /"

Economical Utilization of Labor the Great Modern Problem for Engineers and Managers — Limitation of Output by Workers — Limitation of Worlimen's Allowable Earnings by Employers—How These Tendencies Militate against the Common Good — Permanently Successful Management Must Be Beneficial to both Employer and Employee — The Inefficiency of Ordinary Management Systems — ^The Inefficiency of Ordinary Labor — ^The Possible Betterment Obtainable through Scientific Study — The Attainable Output Generally Three Times the Present Average — Realization of This Large Possible Productivity Depends on the Manager — His Guide Is Scientific Investigation — The Three Parts of the Problem Defined — The Benefits Secured. 13

Chapter II EFFICIENT UTILIZATION OF LABOE

T T has become an axiom in the commercial -'■ world that in the long run those transactions most promote prosperity which are advantageous alike to buyer and seller. It is coming to be realized in the industrial world that the same thing is true regarding the arrangements between employers and employees, and that no arrangement is permanent that is not regarded by both as being beneficial. In other words, the only healthy industrial condition is that in which the employer has the best men obtainable for his work, and the workman feels that his labor is being sold at the highest market price.

The employer who insists on more service than he pays for, and the employee who demands excessive wages for his work, both lose in the long run. The former worries continually about how to manage dissatisfied workmen, who are continually on the verge of a strike, and in dull times the latter lives in constant dread that his employer 27

28 WOHK, WAGES, AND PROFITS

may no longer be able to continue business, and he may be out of work. In other words, unless efficient work goes with high wages, the result is apt to be disastrous to both employer and employee, and if we would have satisfactory workmen we must learn how to make their labor efficient, for it is to efficient labor only that high wages can be uniformly paid.

Again, if a plant is badly laid out, if it contains inferior or antiquated machinery, or if the management' is inefficient, it may be impossible for the best workman to do an amount of work really entitling him to good wages. Any one of these causes and others may explain why a plant, whose name for years has been a synonym for prosperity, has gradually become less prosperous, until finally it scarcely holds its own by decreasing the wages of its employees. The final stage of such a plant is to close down indefinitely, and to remain for years a monument to the short-sighted policy of its owners and the misfortune of its employees.

The time to make provision against such a fate is not when sharp competition begins to show the need of it, but when prosperous times produce a large surplus of earnings.

Out of such earnings ample provision should be made to take full advantage of all improvements in apparatus or management that are available.

Improving a plant does not necessarily mean enlarging it, but equipping it with the best and most efficient apparatus scientific investigation can suggest and ingenuity can devise.

Improving the system of management means the elimination of elements of chance or accident, and the accomplishment of all the ends desired in accordance with knowledge derived from a scientific investigation of everything down to the smallest detail of labor, for all misdirected effort is simply loss, and must be borne either by the employer or employee.

In a proper system of management practically all loss of this character is eliminated, and the saving effected by this alone will usually pay all the expenses of the system and leave a handsome profit.

Wherever any attempt is made to do work economically the compensation of the workman is based more or less accurately on the efficiency of his labor. Very fair success in doing this has been accomplished in day work by keeping an exact record of the work done each day by every man, and by fixing his compensation accordingly. This method, however, falls very far short of securing the highest efficiency, for very few workmen know the best way of doing a piece of work, and almost none have the time or ability to investigate different methods and select the best. It often happens then that a man working as hard as he can falls far short of what can be done on account of employing inferior methods, inferior tools, or both.

We can never be certain that we have devised the best and most efficient method of doing any piece of work until we have subjected our methods to the criticism of a complete scientific investigation. Many people who have been accustomed to seeing an operation performed in a certain way, or to performing it in that way for a number of years, imagine they know all about it, and resent the intimation that there may be some better way of doing it. Anybody, however, who carefully analyzes the sources of his methods will find that the mass of them are either inherited, so to speak, from his predecessor, or copied from his contemporaries. He will find that he knows but little of their real origin, and consequently has no ground on which to base an opinion of their efficiency.

Even such a simple operation as shoveling is done very uneconomically in many places. I have seen the same shovel used for coal, ashes, and shavings, and this when coke forks were available for the shavings. The foreman had apparently given the subject no study, and was content if the men were at work. The idea of working efficiently had never occurred to him. This is, of course, an extreme case, but it is a real one, and all degrees of efficiency exist between this and the case where each workman is provided with the proper implement and given a specific task, for the accomplishment of which he is awarded extra compensation.

The knowledge needed to set a task, even in such a simple case as shoveling, is much greater than is at first realized, for hardly any two substances can be treated exactly alike, and the same substance is often much harder to shovel from the top of a pile than from the bottom, which rests on a smooth, hard surface. In studying shoveling the first thing to be determined is the size of shovel, which must be gauged to hold the weight which it is most economical to handle. The second step is to find how long it takes to fill the shovel. For sand, fine coal, ashes, etc., it makes no difference in loading the shovel whether the material is taken from the top or the bottom of the pile; but in egg coal, broken stone, or lump ore, the difference is very great ; for, while it is quite easy to get a full shovel from the bottom of the pile which rests on a smooth, hard surface, it is, in some such cases, practically impossible to fill a shovel from the top of the prle without actually raking the material onto the shovel. Again, the distance or height to which the material is thrown is a factor in all cases, not only because the higher or longer throw takes slightly more time, but because it takes more energy.

This analysis shows that each such operation is composed of a number of elements, which may be studied separately. Having determined each element, they may be combined in a number of ways to show the time needed to fill and empty a shovel, with any material, under a variety of conditions. Knowing the time needed for an operation, we can add to it the percentage of time needed for rest, etc., which has been determined by a long series of tests, and calculate just how many shovelfulls a good man can average per minute without over-exerting himself. Having determined thus the amount of work that a man can do, we can usually get it done if we offer the proper wages for doing it, and furnish an instructor who will teach the workman how to do it.

Having determined the best method and taught it to a capable workman, to whom good wages are paid for its successful operation, would seem to be enough to assure that the work should be done that way permanently. Such, however, is not the fact, for while these conditions will usually produce the desired result, they will not always maintain it, but must be supplemented by another condition, namely, no increase in wages over day rate on the part of the workman unless a certain degree of efficiency is maintained.

The importance of maintaining a definite degree of eflSciency is readily understood when we consider that a properly equipped plant has only its proper complement of each kind of machine, and if the output of any one falls below a certain amount the output of the whole plant is diminished in proportion and the profits fall off in a much greater ratio. This fact does not appeal to the workman who has made good wages for several days and concludes to take it easy for a while, unless he also feels the loss his easy going causes his employer.

In order to get the best results these four conditions are necessary:

First — Complete and exact knowledge of the best way of doing the work, proper appliances and materials. This is obtainable only as the result of a complete scientific investigation of the problem.

Second — ^An instructor competent and willing to teach the workman how to make use of this information.

Third — ^Wages for efficient work high enough to make a competent man feel that they are worth striving for.

Fourth — ^No increase of wages over day rate unless a certain degree of efficiency is maintained.

When these four conditions for efficient work are appreciated their truth seems almost axiomatic. They are worthy of a very careful consideration.

SOIENTinO INVESTIGATION.

The first condition is an investigation of how to do the work and how long it should take. The fact that any operation, no matter how complicated, can be resolved into a series of simple operations, is the key to the solution of many problems. Study leads us to the conclusion that complicated operations are always composed of a number of simple operations, and that the number of elementary operations is often smaller than the number of complicated operations of which they form the parts. The natural method, then, of studying a complex operation is to study its component elementary operations. Such an investigation divides itself into three parts, as follows: An analysis of the operation into its elements; a study of these elements separately; a synthesis, or putting together the results of our study.

This is recognized at once as simply the ordinary scientific method of procedure when it is desired to make any kind of an investigation, and it is well known that until this method was adopted science made practically no progress. The ordinary man, whet|ier mechanic or laborer, if left to himself seldom performs any operation in the manner most economical either of time or labor, and it has been conclusively proven that even on ordinary day work a decided advantage can be gained by giving men instructions as to bow to perform tbe work tbey are set to do. It is perfectly well known tbat nearly every operation can be, and in actual work is, performed in a number of different ways, and it is self-evident tbat all of tbese ways are not equally eflScient. As a rule, some of tbe metbods employed are so obviously inefficient tbat tbey may be discarded at once, but it is often a problem of considerable difficulty to find out tbe very best metbod.

To analyze every job and make out instructions as to bow to perform eacb of tbe elementary operations requires a great deal of knowledge, mucb of whicb is very difficult to acquire, but tbe results obtained by tbis metbod are so great that tbe expenditure to acquire tbe knowledge is comparatively insignificant.

INSTBTJCTIONS.

As a result of our scientific investigation, we find in general tbat it is possible to do about tbree times as much as is being done; the next problem is bow to get it done. No matter how thoroughly convinced we may be of tbe proper method of doing a piece of work and of the time it should take, we cannot make a man do it unless he is convinced that in the long run it will be to his advantage. In other words, we must go about the work in such a manner that the workman will feel that the compensation offered will be permanent.

When we have established this condition of affairs, we are ready to start a workman on the task, which, when properly set according to our investigation, can be done only by a skilled workman working at his best normal speed. The average workman will seldom be able, at first, to do more than two-thirds of the task, and, as a rule, not more than one out of five will be able to perform the task at first. By constant effort, however, the best workmen soon become efficient, and even the slower ones often learn to perform tasks which for months seemed entirely beyond them. If our people have confidence in us and are willing to do as we ask, the problem of getting our task work started is easy. This, however, is frequently not the ease, and a long course of training is necessary before we can teach even one workman to perform his task regularly, for workmen are very reluctant to go through a course of training to get a reward, especially when they fear that the high price will be cut when they can earn it easily.

BtTYING LABOR.

Buying labor is one of the most important operations in modern manufacturing, yet it is one that is given the least amount of study. Most shops have expert financiers, expert designers, expert salesmen, and expert purchasing agents for everything, except labor. The buying of labor is usually left to people whose special work is something else, with the result that it is usually done in a manner that is very unsatisfactory to buyer and seller. It is admitted to be the hardest problem we have to face in manufacturing to-day, and yet it is only considered when the manager "has time," or has "to take time," on account of "labor trouble." The time to study this subject is not when labor trouble is brewing, but when employer and employee have confidence in each other.

Men, as a whole (not mechanics only), prefer to sell their time rather than their labor, and to perform in that time the amount of labor they consider proper for the pay received. In other words, they prefer to work by the day and be themselves the judges of the amount of work they shall do in that day, thus fixing absolutely the price of labor without regard to the wishes of the employer who pays the bill. While men prefer as a rule to sell their time, and themselves determine the amount of work they will do in that time, a very large number of them are willing to do any reasonable amount of work the employer may specify in that time, provided only they are shown how it can be done, and paid substantial additional amounts of money for doing it. The additional amount needed to make men do as much work as they can depends upon how hard or disagreeable the work is and varies (as previously stated) from 20 to 100 per cent, of their day rate.

If the work is light and the workman is not physically tired at the end of the day he will follow instructions and do all the work called for if he can earn from 20 to 30 per cent, in addition to his usual day's wages. If the work is severe and he is physically tired at the end of the day he requires from 40 to 60 per cent, additional to make him do his work. If in addition to being physically tired he has been obliged to work under disagreeable conditions or in intense heat, he may require 70 per cent, or even 100 per cent, additional. These facts are derived from experience and give us a key to the intelligent purchase of labor. If we wish to buy the amount of labor needed to accomplish a certain task, we must find out exactly, and in detail, the best method of doing the work, and then how many hours' labor will be needed by a man suited to the task working at his best normal rate. This is simply getting up a set of specifications for the labor we wish to buy, and is directly comparable to a set of specifications for a machine or a machine tool. The man who buys the latter without specifications is often disappointed even though the manufacturer may have tried earnestly to anticipate his wishes ; and the man who buys the former under the same conditions has in the past almost universally found that a revision of his contract price was necessary in a short time. The relative importance of buying labor and machinery according to the best knowledge we can get, and the best specifications we can devise, is best illustrated by the fact that while the purchase price of a machine may be changed whenever a new one is bought, that of the labor needed to do a piece of work should be permanent when it is once fixed.

As was said before, few men can work up to these specifications at first, if they are properly drawn, but many men will try if they are properly instructed and assured of the ultimate permanent reward. Most men will not sacrifice their present wages to earn a higher reward in the future, and even if they were willing few men could afford to. Therefore, while they are learning to perform the task, they must be able to earn their usual daily wages, and the reward for the accomplishment of the task must come in the form of a bonus above their daily wage.

Increase in efficiency makes the payment of high wages possible, and it may be added that without efficient labor, high wages cannot be paid indefinitely, for every wasteful operation, every mistake, every useless move has to be paid for by somebody, and in the long run the workman has to bear his share. Good management, in which the number of mistakes is reduced to a minimum, and useless, or wasteful operations are eliminated, is so different from poor management, in which no systematic attempt is made to do away with these troubles, that a man who has always worked under the latter finds it extremely difficult to form a conception of the former. The best type of management is that in which all the available knowledge is utilized to plan all work, and when the work is done strictly in accordance with the plans made. The best mechanical equipment of a plant that money can buy avails but little if labor is not properly utilized. On the other hand, the efficient utilization of labor will often overcome the handicap of a very poor equipment, and an engineer can have no greater asset than the ability to handle labor efficiently.

The subject of wages is then inextricably boimd up with that of management. Poor management usually means poor wages. Good management means good wages, for the high efficiency demanded by good management can only be maintained by such wages as will attract good men and induce them to work at their highest efficiency.

The manager who boasts of the low wages he is paying for his work would generally find, if he had a reliable cost system, that his costs were greater than those of his competitor who paid better wages.

THE COMPENSATION OF WOEKMEN

Chapter III THE COMPENSATION^ OP WOEKMEN

"1X7E all like to feel that we are passing away from the age of violence, and approaching an age when justice and equity will have more influence in the world than brute force. If we rely too much upon the progress already made, however, we are bound to get into trouble. Kipling sounded a world note in his lines:

"An' what 'e thought 'e might require, 'E went and took, the same as me."

As far then, as acquiring property was concerned, he put the ancient Greek and the modern Briton in the same class. The Japanese-Eussian war was caused by the fact that each of two powerful nations wanted the property of a third weak one. Neither had any right to it, but the fact that each wanted it was enough to set aside all questions of right. Eecently the seizure of the provinces of Bosnia and Herzegovina by Austria was another example of an act done 45 because the aggressor had the power to do it. The present alarm in Great Britain over Germany's armaments is not due to the fact that England thinks there is any real cause for a war, but the fear that if Germany has the power it will be used to the detriment of Britain. In other words, it is still accepted as common practice that "they should take who have the power and they should keep who can."

To come a little nearer home, we find that large corporations are not very much more squeamish, or particular, than large nations. The Standard Oil Company, the Beef Trust, the Sugar Trust, and any number of others, have absolutely no regard, apparently, for right or wrong. They get what they can by any means available. The difference between the savage and civilized communities is largely that the civilized communities have enacted laws which tend to restrain individual greed. Inasmuch, however, as it is impossible to foretell all the forms individual greed may take, it is impossible to enact in advance laws to cover all possible cases, and the best that can often be done is to make new laws to restrain new forms of greed as fast as they develop. Laws were made long

THE COMPENSATION OF WORKMEN 47

ago that restrained robbers, sneak thieves, and even the ''robber barons," but none have so far been framed that restrain the "high financier," who, without giving anything in return, taxes the community for his own benefit to an extent that makes all other forms of acquiring without giving an equitable return seem utterly insignificant. One of the foremost American patent lawyers not long ago stated that the tremendous industrial success of the United States had been largely brought about by its beneficent patent laws, and yet the greatest part of the legal talent among the patent lawyers is engaged in evading those very patent laws, which are so beneficent to the community. These statements only go to show that in general it is only in so far as the laws restrain, that men fail to take advantage of each other. Certainly there are many honorable exceptions. There are many people who are actuated by higher motives, and who are doing a great deal to advance the cause of equity and justice, and to establish proper relations between human beings, and we give them all credit. But if we consider their methods the rule, and base our plans on them, we shall find that others, not quite

SO scrupulous as we are, will get the better of us. Therefore in discussing the relations between employer and employed, we must recognize the fact that in the majority of cases, men still act on the principle that "they should take who have the power and they should keep who can."

This is true whether you are speaking of employer, or employed. Labor unions are just as insistent in their demands for things that do not belong to them, as the Sugar Trust is in its efforts to evade duties that it ought to pay. One of the best illustrations of this spirit of which I ever heard, was incident to the ending of a strike in a "Western State, where the labor union had won. Soon after the men had gone back to work, one of the employers said to a workman, "I hope you are satisfied now." "No!" said he, "we are not satisfied, and we never shall be, until we come to the works in our carriages, and you walk ! ' '

As long as the interests of the employer and employee seem antagonistic there will be conflict, and in any discussion of the subject, we must recognize that antagonism means conflict. Until we can find some means of doing away with the antagonism, the con-

THE COMPENSATION OF WORKMEN 49

flict will continue. Our search, then, must be for such means.

If the amount of wealth in the world were fixed, the struggle for the possession of that wealth would necessarily cause antagonism; but, inasmuch as the amount of wealth is not fixed, but constantly increasing, the fact that one man has become wealthy does not necessarily mean that someone else has become poorer, but may mean quite the reverse, especially if the first is a producer of wealth. The production of wealth can be so greatly facilitated by the co-operation of employer and employed that it would seem that if the new wealth were distributed in a manner that had in it even the elements of equity, neither party could afford to have the working arrangement disturbed.

As long, however, as one party — no matter which — tries to get all it can of the new wealth, regardless of the rights of the other, conflicts will continue.

On account of the disregard of law and order that unions so frequently show in their strikes, it is the fashion in many places to condemn them as utterly bad, when they are only human. As a matter of fact, they are not all bad by any means. They have done a

NEW YORK STATE SCHOOL INBUSTRIAL AND LAKR RELATIOMS

CORNELL UNIVERSITY

50 WOKE, WAGES, AND PROFITS

great deal for the cause of workmen. If it had not been for them, the working people of today would probably be in the same condition as were those of England sixty or a hundred years ago. The average workman is a good citizen, just as loyal to his country as the capitalist, and just as proud of its position in the world. He is even more interested in its prosperity, for in times of depression, when the capitalist loses his surplus, the workman loses his means of living. It is a realization, perhaps, of the small margin that they have above their absolute needs, that makes workmen so liberal to each other, for it is a well-known fact that the wage earner is far more liberal than the capitalist. He will go much further out of his way to help a friend than the rich man will, although it is much harder for him to do so. Our method of studying labor problems in detail, and studying the individual workmen, has taught us much about them and given us a high opinion of them as men. The proportion of high-minded and honest men is just as great among them as among any other class, and far greater than among those people we continually hear complaining of them. Of course there are worthless

THE COMPENSATION OF WORKMEN 51

and dishonest men among them, but the proportion is no greater than among those who have better opportunities. There are many individuals who do what they can to help their less fortunate friends, and there may be unions formed to help the poor workman ; but as a business proposition, such a union cannot long be successful. Unions are formed, as a rule, by men of energy to help each other, and the poor workman is taken in, not for the good he does in the union, but the harm he does if not in. The poor workman is thus advanced with the good, and the employer pays the bill.

It is undeniable that unions have advanced the cause of workmen in general, and we must not blame them for using force to accomplish their ends. It was the only means they had. If we wish them to use any other means we must provide them with a means that they will consider more desirable, and that will give better results, for in this country, so long as a man conforms to the laws of the State, he has a right to govern his actions in such a manner as his interests seem to dictate. Men join the union because they think they will be better off in the long run for being in the union. The idea of the

53 WOBK, WAGES, AND PROFITS

union is to get a higher rate of wages for the whole class, because in general nobody in that class can get a substantially higher rate unless the whole class gets a higher rate.

The employer usually pays but one rate of wages to one class of workmen, because, as a rule, he has no means of gauging the amount of work each man does. It is exceedingly difficult to keep an exact record of what each of a number of men does each day ; and even if he had such records, the difficulty of comparing them would be very great, unless the work done by each man was of the same nature, and done under the same conditions. The result is that he keeps no individual records, but usually treats all workmen of a class as equals, and pays them the same wage. There may be 20 per cent, who are very much more efficient than the rest, but he has no way of distinguishing them from the others with any degree of certainty; hence he declines to increase any wages, or makes the difference in wages insignificant as compared to the difference in efficiency.