The labor market 1923

Front matter

BUSINESS ADME STRATION READING ROOM

Ae ion

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Preface

Tus work has a very definite purpose. It aims to prove the necessity for national machinery for the control of the problem of employment and to furnish information which the author hopes will be of value to employment office managers and to students of the employment and the labor problem. The conditions of supply and demand in the labor market are analyzed in Part I; past, present, and needed labor market machinery are discussed in Part Il; while the common laborer and the farm laborer are given special consideration in Part ITT.

The writer has had three groups of readers in mind in the preparation of the work: (1) the general reader, particularly the employer and the legislator; (2) the employment official; and (3) the college or university teacher and his students. Readers who desire to make a comprehensive survey of the subject of employment, and teachers who want a concise but fairly adequate library for class use, will find that the following books supplement the present work: ‘Employment: A Problem of Industry,” W. H. Beveridge; “Industrial Good Will,” John R. Commons; “The Turnover of Factory Labor,’ Sumner Slichter; and “Hiring the Worker,” Roy W. Kelly. Beveridge’s work is the foundation upon which all subsequent writers have builded, and the writer wishes to add his tribute of appreciation of its informing and suggestive pages. The bibliographical note in Appendix I will be of assistance in directing the reader to valuable sources of current information.

The author has called attention to a large amount of supplementary material in the footnotes, chapter references, and bibliography. The references do not exhaust the material on the subject of employment. The author has simply selected a sufficient number of references to corroborate his points, to present the views of those who disagree with him, and to furnish Vii

Vili PREFACE additional reading for students of the problem. He has not cited any of the French or German references at all, although there are many studies of employment in the foreign languages.

Suggestions and criticisms of much value have been received during the preparation of this work from the author’s colleagues, Professors Richard T. Ely, John R. Commons, and Edward A. Ross. Professor B. H. Hibbard, of the University of Wisconsin College of Agriculture, kindly read and criticized Chapter XIII, on Farm Labor. The author also desires to acknowledge indebtedness to Dr. William R. Leiserson of Toledo University ; Dr. M. B. Hammond of Ohio State University; Dr. Charles B. Barnes, formerly state superintendent of the employment offices of New York State; Sanford E. H. Freund, formerly Director of the Clearance Division of the United States Employment Service; Frank E. Hoffman of the Minnesota Department of — Labor; and David C. Adie of the Minneapolis Civic and Commerce Association, for suggestions which they have contributed to the writer’s thought on employment at one time or another during the last few years. The New York State Industrial Commission, through L. W. Hatch, chief statistician, has kindly loaned the author a series of curves which appear in Chapter II, while the Texas Mechanical and Agricultural College, through Professor H. M. Eliot, has extended the same courtesy. ‘Their charts appear in Chapter XIV.

Table Of Contents

PARTE L SUPPLY AND DEMAND FACTORS IN THE LABOR MARKET CHAPTER PAGES I. THe LABoR SUPPLY 5 : : ‘ : ; . 3-20 Five characteristics of labor supply . : ; ; 3 Immigration and the labor jue ; ‘ ; : 3-9 The labor reserve . : ’ ; : * 9-13 Decentralization of the labor reserve . ‘ ; : 13-18 Labor turnover . : : ‘ ; ; ; 18-19

Unorganized labor derepucon : : : é , 19-20

II. THE DEMAND FoR LABOR . A ‘ : : : 21-67 Decentralized character of the demand for labor . : 21-22 Rise and decline of industries and occupations. : 22-24 Fluctuation of labor demand due to changes within industry . , : ; 24-29 Fluctuation due to Ehaneeet in Lolnatand orosperiiy F 29-32 Fluctuation due to seasons . : : : ; d 32-51 Prmeeeiae uctuationse i Mi edn Why ge gal epee Casual demand fluctuations . : 4 < ‘ 58-64

Chapter I The Labor Supply

THERE are five essential facts with respect to the labor supply of the United States which must be taken into account when we attempt to cope with the American labor problem: (1), the fluctuating but unceasing flow of immigrant laborers; (2), an everpresent labor reserve ; (3), the decentralized character of that reserve ; (4), excessive labor turnover ; and (5), a defective system of labor distribution. These five phenomena are closely related. Each is both a cause and a result of the others. Taken together they furnish a picture of the labor supply side of our labor market. The opposite or demand side of the picture is presented in the next chapter.

1. IMMIGRATION AND THE LABOR SUPPLY

Immigration has been in a large measure a response to an active demand for labor in America. Year by year, as the power of our industries to absorb labor has increased, the tide of immigration has mounted higher and higher. Each successive wave of immigration reached a higher point than the one which preceded it, until we attained the high-water mark of 1,285,349 entrants in 1907, a figure almost equaled again in 1914, just before the outbreak of the war cut short our sixth great immigration wave. The movement from Europe to America since 1898 has outstripped all labor migrations in human history. In almost every year the number of immigrants increased by tens or hundreds of thousands, and 1908 was the only year which did not increase our immigrant population. Six years each brought more than a million, and the only year in the last quarter century which has witnessed a decrease in our alien population (1908), produced a reduction of only 124,124 aliens, which was almost balanced by our net increase in the succeeding January and February

America has continually called for more labor.2. Her demand, transmitted across the waters in a hundred ways, has attracted Europe’s sons by the millions. The slackening movement of Germans, Scandinavians, English, Irish, and Scotch has been more than compensated by the hundreds of thousands who have each year left the hills, valleys, or plains of Italy, Greece, the Balkans, Austria-Hungary, and Russia. Penetrating ever farther into Europe and Asia, America’s invitation reached the Italian, the Slav, the Magyar, and the Jew; then the Syrian, the Arab, and the Hindoo; and the gates of Asia have opened for new races who are crossing the seas to try their fortunes in the cities and fields of America. During the war, Mexico’s peons heard the call of opportunities across the border more strongly than ever before, and they came as far north as Minnesota to find a place in our industry.

Our net increase of population by immigration between 1900 and 1917 was over ten millions. The simple facts that such multitudes have come to us and have somehow found a livelihood, that the volume of immigration has been much larger in prosperous than in dull years, and that emigration is heavier in work-slack periods, have suggested that the inflow of immigration adjusts itself to the labor demand and forms an elastic element that helps us out when we are busy and relieves us of our excess labor when business is dull.

Unfortunately, the conclusion is not entirely true. A fraction of the immigrants come to America to fill our short-time demands for labor, but a large majority of our immigrants do not leave as soon as they find that industry’s demands for labor are

1 “Tmmigration and Crises,’”’ H. P. Fairchild, American Economic Review, Vol. I, No. 4, December, tort.

2 We do not overlook the fact that many non-economic reasons cause immigration to come now as in the past.

beginning to slacken. They come to America to establish their homes here. They come to stay, not to sojourn. The ‘bird of passage,”’ about whom so much has been said and written, is the least important element inimmigration. The immigrants who come to “make a stake” and then return to Europe to live are insignificant in numbers, compared with those who come to America to become Americans.! A large proportion of those who do return to Europe come back to America again and bring others with them.

An increase in immigration during our prosperous years and a decrease in dull times is perfectly natural. If you or I were migrating to Australia and had to depend upon our hands for a living, we would try to time our arrival so that we would have the maximum chance of earning a living. If the letters of those who had gone before indicated that work was plentiful, we would go. If they told us of unemployment and low wages, we would bide our time. If we were already there, and had accumulated some money with which to go home and get our families and times became dull, we would return home at once rather than remain abroad in idleness. But when conditions picked up we would go back again. If we had gone to Australia with intention to remain there, we would ‘“‘stick it out” until prosperity returned. This is exactly what occurs among the European immigrants to America.

Consequently, immigration does not produce that accurate

1 Professor H. P. Fairchild has made this clear with respect to the unusually heavy emigration of 1908:

“Now what catches the public eye in such an epoch as this, is the large number of departures. We are accustomed to immense numbers of arrivals and we think little about that side of it. But heavy emigration is a phenomenon, and accordingly we hear much about how acceptably our alien population serves to accommodate the _ supply of labor tothe demand. But if we stop to add up the monthly figures, we find that for the entire period after the crises of 1907, when emigration exceeded immigration, the total decrease in alien population was only 124,124 — scarcely equal to the immigration of a single month during a fairly busy season. This figure is almost infinitesimal compared to the total mass of the American working people, or to the amount of unemployment at a normal time, to say nothing of a crisis. It is thus evident that the importance of our alien population as an alleviating force at the time of a crisis has been vastly exaggerated. The most that can be said for it is that it has a very trifling palliative effect.””— American Economic Review, Vol. I, No. 4, December, 1911, p. 758.

adjustment of labor supply to labor demand which some have assumed. ‘The movement of labor from Europe to America is a movement of human beings seeking new homes in a better environment. It is not controlled by any accurate knowledge of market conditions; neither is it regulated by any authority. It is due to the fact that millions of people in Europe believe that America is a better place for them to live than their homelands. They come by hundred thousands in response to letters from relatives and friends who are here. Whole villages and districts have been almost depopulated of able-bodied men when returned immigrants flaunted their American prosperity in the eyes of simple peasants and told fascinating tales of the wealth, the liberties, and the opportunities of America. Steamship advertisements and agents have played no negligible part in turning many to our shores, and employers have found a host of ways in which to send the lure of a job to peasants eking out a scanty existence. The foreman has found it easy to suggest to his laborers that their countrymen would find work at good wages if they came over, and the home-going letter carried a message backed by the words of “the boss.”’ Foreign grafters in America — padrones, immigrant bankers, and other “leaders” of foreign groups — have encouraged the immigration of fresh material for their exploitation. In times of prosperity the letters pouring across the Atlantic fascinate with high wages, plenty of work, hope, and enthusiasm. In dull times, they warn of unemployment, lowered earnings, and the hardships of the out of work. By such undirected means as these the fluctuation is produced.!

1The United States Immigration Commission says on this: ‘Through the medium of letters from those already in the United States and the visits of former emigrants, the emigrating classes of Europe are kept constantly if not always reliably informed as to labor conditions here, and these agencies are by far the most potent promoters of the present movement of population... . In fact, it is entirely safe to assert that letters of friends at home from persons who have emigrated have been the immediate cause of by far the greater part of the remarkable movement from southern and eastern Europe to the United States during the past twenty-five years. ... It was frequently stated to members of the Commission that letters from persons who have emigrated to America were passed from hand to hand until most of the emigrant’s friends and neighbors were acquainted with the contents.

When the flow gets under way immigration continues for some time after depression has begun in this country, because it takes a long time for retarding influences in America to be thoroughly felt on the other side. Similarly, when conditions improve, it requires positive assurance of better times before the immigrants will start out again. Supply adjusts itself to demand only in an inaccurate manner that produces untold suffering for thousands and leaves imprints in our social life that cannot easily be effaced. When the flow is on, too many are apt to come, producing unfortunate surpluses. When times get dull, those surpluses remain and make the unemployment situation more acute. Even during the prosperous period many go to places where they are not needed, rather than to localities where labor is in demand. In thousands of cases their destination in America is determined by the residence of relatives or friends rather than by industrial demands. When times become slack, only a fraction want to return to Europe and many who would like to go are unable.

The fact cannot be too emphatically stated that the flow of Europe’s living stream to America is in obedience to a law of life as real as the law of gravitation. It is part of a world process of social equilibration. Human population tends to flow from poorer environments into better ones and will do so as long as there are marked inequalities of welfare in different lands. A decline of immigration from northwestern Europe has occurred during the past twenty-five years because social conditions there are more nearly equivalent to those in America. Immigration from southeastern Europe, on the other hand, began during this period because knowledge then penetrated to Austria, Russia, Italy, Greece, and Asia Minor that America would be to them a Promised Land. The better wages and expanding opportunities of employment in America were dynamic forces that loosened these peoples from their custom-bound lives in

In periods of industrial activity, as a rule, the letters so circulated contain optimistic references to wages and opportunities for employment in the United States. .. . The reverse is true during seasons of industrial depression in the United States.’’? — Abstract of Reports of the United States Immigration Commission, Vol. I, pp. 187-188.

Europe and drew them to our shores. But the pull of these forces was not nicely adjusted to the actual volume of employment open to them here.

It does not necessarily follow that the accretions of population due to immigration have produced a surplus of labor in America that could not be employed. Our industries have been expanding and developing with marvelous rapidity in the last quarter century. Mr. I. A. Hourwich! cites government reports which indicate that our coal consumption, bank clearings, and railroad ton miles trebled between 1888 and 1908, our copper production quadrupled, and our steel production increased fivefold, while our population increased but 46 per cent. There can be no doubt that the important cause of the increase of immigration in the last twenty-five years has been the necessity for more crude labor to work in conjunction with our labor-saving machinery and expanding capital in the development and utilization of our natural resources. A growing country has required an increasing population. It is probably true that the multitude of cheap immigrant laborers which poured into the country between 1900 and 1907 and again between 1909 and 1914 tended to stimulate production and contributed to undue business expansion, but it is likewise beyond question that the nation had reached a stage where it was ready for more rapid development and able to use a greatly increased labor force.

It is important to note in this connection that in modern industry labor is used in combinations. The specialization of tasks and subdivision of occupations has created a situation in which skilled, partly skilled, and unskilled workers are each and all required for the performance of a single piece of work, and the absence of one of the necessary types of labor may prevent all the other workers in the group from securing employment just as surely as the absence of a demand for the product, or a lack of machinery, raw materials, or of buildings. The immigrant has in some cases competed with the American for a job;

1 Cf. “Economic Aspects of Immigration,” Isaac A. Hourwich, Political Science Quarterly, Vol. XXVI, No. 4, pp. 615 f.

in other cases he has completed the crew and enabled the American skilled worker to be employed.!

2. Tue LABOR RESERVE

And yet, in every year and month, and on every day when these millions have been coming, — 14,298,018 between July 1, 1900, and June 1, 1918, — there have been idle workmen on the streets of practically every city and town in America. Labor shortage and labor surplus have been coexistent. Abundant supplies of land, rich natural resources, and plentiful capital have needed labor for their utilization. Wages higher than those prevalent in Europe bespoke an insistent desire for men. Nevertheless almost every morning in the year found idle men at tens of thousands of factory gates, or hanging around employment offices and loafing places. The workless paced the streets of the cities and were present in nearly every country town. Labor surplus has been as ever present as labor shortage. Investigation after investigation of employment conditions has demonstrated a continuous supply of idle men. No records yet compiled (so far as I know) have ever found the unemployed reduced to zero.2, Employers have lacked men and at the very same time men have lacked work.

An explanation of this paradox is fundamental to intelligent discussion of conditions in the labor market. It is certainly

1 A typical illustration may be cited. A steam-shovel crew consists of an engineer, who controls the power-creating apparatus of the shovel and the movement of the shovel from point to point along the job; a “‘runner,”’ who operates the dipper; and three or four pitmen, who are common laborers, often recent immigrants. If the employer lacks an engineer, the whole crew must remain idle. If he lacks a “runner,” the same thing is true. If he could not find the pitmen, the engineer and runner, skilled as they are, would be unable to operate. The entire labor combination must be available or the work cannot proceed.

This condition is as characteristic of manufacturing, many phases of agriculture and merchandising, railroad work, lumbering, and many other industries as it is of shovel operation.

2 Professor M. B. Hammond of Ohio State University states that after February, 1915, the level of unemployment in Great Britain was less than one per cent, “‘a level lower than that reached at any other time since such figures began to be gathered.” — American Economic Review, Vol. VIII, No. 1, Supplement, March, Ig18, p. 147.

Io THE LABOR MARKET true that surplus and deficit cannot steadily coexist in the commodity market of the whole nation. We either have more wheat than we want, or less, or just enough. How, then, can we have deficit and surplus coexistent in the labor market ?

We omit from consideration for the moment the fact that some of the “‘unemployed” are not entitled to that designation. They are “unemployable”; either through incapacity or inclination.! They are idlers or unfits rather than “unemployed.” It is our present task to account for the presence of unemployed workers in a labor market that is calling for men.

The first fact which we must note is that the supply of labor cannot fluctuate in amount in harmony with the fluctuation of demand for it to the extent that the supply of commodities does. The supply of iron, grains, or cloth is controlled by the. acts of persons who produce or fail to produce according as they expect or do not expect that production will be profitable. Supply is quickly increased or diminished in response to calculations by producers of prospective prices. Intelligence and prudence dictate their action in the matter. If producers err and give us an oversupply, they suffer in lowered prices and we store the commodity for future use. Future output is decreased until the surplus is consumed. In normal times oversupply or undersupply is a temporary, short-time phenomenon, often local in its effects, and simply affects prices and future production.

The labor supply is entirely different. Labor is an expression of the personal energy of a human being. The productive energy which the laborer sells to his employer is inseparable in existence and in use from the personality of the laborer. In order to increase the supply of labor power in the world we must either increase the number of people or materially increase their efficiency. In order to decrease the total available supply of labor power we must decrease the world’s population. Neither increases nor decreases in population can be accomplished quickly. The labor supply has other interests than work. It is produced in response to other than economic motives.

1 See Chapter III for discussion of the unemployed.

THE LABOR SUPPLY II

It comes into existence through human reasons, not for market demands. It does not increase or decrease at man’s quick word. It takes years to bring the babe to the age of economic labors, and he must be fed whether his labor is needed or not. — Only war, famine, or pestilence can rapidly reduce the labor supply, and even the worst war in history has not produced a large diminution. Its chief effect is a disturbance of the relative density of population in different countries; a considerable destruction of adult workers, and the development of a large number of semi-skilled, highly specialized women workers to take the place of many of the skilled men who have died.

The war caused thousands of men who were habitually unemployed to go to work. Some of these were rich men, some loafers, some elderly men who had retired from active work. It brought hundreds of thousands of women who had never worked for wages into industry. It compelled boys and girls to work in much larger numbers, especially during the school vacations. But this large and rapid shifting of persons from the unemployed to the employed class was abnormal and temporary. It could not have occurred in peace times. It was in violation of the standards of life that ordinarily obtain. It was an emergency measure to relieve shortage of labor endangering the very existence of the nation. The suction which drew these persons into industry was not the need for an increased labor supply but the necessity for filling millions of jobs made vacant by men withdrawn for military and naval service. They entered industry to restore the labor supply rather than to increase it.

Hornell Hart has gathered some interesting data on the American labor reserve. He found that from one million to six million workers were idle in the United States at a// times between 1902 and 10917, exclusive of farm laborers.!

“The least unemployment,” he says, “occurred in 1906-07 and in 1916-17, while the most occurred in 1908 andin1914.and 1915. The average number unemployed has been two and a half million workers,

1 “Fluctuations in Unemployment in Cities of the United States, 1902 to 1917,” Vol. I, No. 2, of Helen S. Trounstine Foundation, Cincinnati, Ohio, pp. 51-52.

or hardly ten per cent of the active supply. It will be noted... that in 1907 and 1917, the demand for labor exceeded the normal supply, and. . . additional workers were called in, as indicated by the bumps in the supply line in these years. Even at these times, however, unemployment is shown. ‘The reason is this: Urban industries require a working labor-margin of at least four or five per cent, or a million to a million and a half workers. These are the men and women who, though normally employed, are temporarily not working because of sickness, seasonal fluctuations in their trades, changing from one position to another, strikes, shortage of material or transportation facilities, and so forth. Hence we have the paradox of a million and a quarter unemployed at the same time with an unprecedented demand for labor.”

Another valuable set of figures is found in the weekly reports - of the Ohio free labor exchanges. Ohio has had public employment offices in twenty-two cities since early in the war period. Their weekly reports show that in 1917-18, though the withdrawal of men for military service, a reduction of net immigration to about 20 per cent of what it was before the war, and the strong demands of war industries for men combined to create an acute labor shortage, there were idle men at all times. Even in the months just before the armistice, when tens of thousands of workmen were needed, there was a labor reserve.

The reports of the public employment offices in other states show the same fact. The Monthly Bulletins of the New York Department of Labor on ‘“‘The Labor Market” show requests by employers for a much larger number of men than applied at the offices for work during 1918; but they also show that the number of men sent to employers by the offices was smaller than the number of men who applied for work. In other words, after as many as possible of the applicants for work were given positions with employers, there was still left a group of workers who were not placed. The total for the year shows that the employers called for 779,972 men; that 443,782 workers applied for employment, and that 283,640 were actually placed. This leaves a surplus of 160,142 applicants who could not find work from the employment offices in spite of the fact that employers requested approximately 500,000 more men and women from the offices than they obtained. The figures for 1917 and 1916 show _a slight surplus of offers for employment over the number of applicants seeking employment. But in each year the number of persons placed in employment was considerably smaller than the number who applied for work.!

We do not wish to be misunderstood. We are pointing out that no matter how strong the demand for workers, some are nevertheless out of work. Some of these will not work; some cannot fit into the jobs that are open; some are out of touch with the opportunities of employment; some are persons who are continually passing through jobs rather than into them. The New York report just cited reveals that even when employers were calling for many more men than were seeking employment, there were more persons in some occupations seeking work than there were openings for them.

The person whose eyes were open during the summer of 1917 and of 1918 would not need statistics to prove that this was so. What city could you enter without finding men loafing around saloons, pool halls, or employment offices? The very fact that there was a strong demand for labor at high wages only made some classes of labor the more irregular. Many, on the other hand, could not fit into the actual jobs offered. Some were tied down by family responsibilities that made it impossible for them to go to the places where labor was needed.

3. DECENTRALIZATION OF THE LABOR RESERVE

One reason for persistent labor surpluses is the decentralized character of our labor reserve.? The typical character of the ~ American labor supply has been that we have not had a labor reserve but thousands of labor reserves, a decentralized labor supply. Each city has had a multitude of groups of laborers.

1 The Labor Market in December 1918, New York State Department of Labor, p. 5.

2Cf. “A Federal Labor Reserve Board,’ Wm. M. Leiserson, United States Bureau of Labor Statistics, Bulletin 220, p. 33, for an able comparison in this respect of the money market and the labor market; ‘Unemployment a Problem of Industry,’ W. H. Beveridge, Chap. 5.

Every morning saw ten men at this factory gate, a hundred at that; saw carpenters, laborers, clerks, stenographers, salesmen, factory hands, peddling their labor at one business place or another. Each town, each large establishment was the center of a permanent labor reserve, composed in part of changing individuals but always there.

The American employer has been able to assume as a matter of course that there would be idle men at his gate this morning, to-morrow morning, every morning. He has accepted orders upon the security of that expectation. If the reserve at ms place of business or in the immediate locality disappeared, he complained of a labor shortage. In his mind, consciously or unconsciously, was an idea that he was entitled to have available at all times enough labor to man his plant to maximum capacity, even though he did not run at maximum capacity thirty days in the year. He expected that those who did his hiring for him would be able to select from an assembled group the man best suited to do his work; and that laborers would compete with each other for the jobs he offered, thereby keeping his wage costs down. .