Some problems of wages and their regulation in Great Britain since 1918

Front matter

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SAN FRANCISCO PUBLIC LIBRARY

Contents

CHAP. PAGE

Preface ........ vii

Introduction . ix

Preface

This study aims at an historical presentation of some of the more important wage problems that have arisen since the War, with special reference to their interactions with the opinions of the several parties to wage negotiations, and to the principles which have been applied in each case. As both the form and the content of post-war wage problems have been intimately affected by the history of the War, a sketch of wage regulation during the War is included. The following episodes are examined in some detail : the Interim Court of Arbitration, the National Industrial Conference, the Washington Labour Conference, the Industrial Court, the Dockers’ Court of, Inquiry, the Trade Boards, Railway wage regulation, and the Mining Agreement of 1921.

In addition to questions of method, which include com¬ pulsory arbitration, the machinery of the Industrial Court and the Railway conciliation machinery, the following wage problems are also discussed : relation of wages to cost of living and cost-of-living sliding scales, limitation of hours, recognition of union organization, foreign competition, labour as a commodity, wages in a trade which finds employ¬ ment in several independent industries, relation between wages in different industries and different grades, a fair wage, a “ living ” wage, the position of industries unable to pay a “ living^” wage, the influence of legal wage regu¬ lation on managerial efficiency, family endowment, the distribution of labour supply as a result of wage differentials and profit-sharing by industries.

vu

Few historians have been able to avoid describing the period with which they are dealing as one of transition, and in this respect at least the post-war years resemble every other period of similar length in English history. For some time after the Armistice of n November, 1918, the extraordinary measures of Government control which had regulated wage movements in all the more important British industries were maintained with varying degrees of thoroughness. After a short period of fearful hesitation the country entered with enthusiasm into a trade boom in which the confidence of the business world, artificially stimulated by the monetary policy of the Government, soared to unusual heights ; the boom was inevitably followed by a prolonged depression of unexampled suddenness and severity. But though the effects of the War are clearly operative throughout the period, and the Order in Council terminating the War was postponed until most people had forgotten that such a for¬ mality was necessary, the view that the post-War period began at the moment of the signature of the Armistice has in the consideration of problems of wage regulation at least the justification that that date marked a sharp change in the mental outlook of all the parties concerned in the wage contract. As kfte as April, 1920, it is true, the Industrial Court in granting ificreases of wages still used the phrase which had constantly appeared in wage awards during the War — “ the amounts here granted are to be regarded as war advances, due to and dependent on the existence of the abnormal conditions prevailing in consequence of the War ” 1 — but in the atmosphere in which such remarks

1 Awards Nos. 265, 266, 267. Smithfield Butchers and Northampton Brewers.

IX

X were uttered the points of contrast with war conditions were far more obvious than the points of similarity. The patriotic tension which demanded and gave a continually increasing output of military supplies was at once eased. There was no longer any obvious reason for delaying far-reaching demands for industrial reconstruction. The time had appar¬ ently come to take the Prime Minister’s advice “ to cut away from the past,” and for the working class in applying his slogan, “ Audacity is the thing for you,” to proceed to “ get a really new world.” Expectations, condemned later as “ foolish,” 1 had been nurtured by the working classes of getting among the results of the War a higher standard of living, and on the whole these “ foolish expectations ” had been encouraged both by the Government and by captains of industry. As Lord Hugh Cecil has put it in another connection, everybody in 1919 was a little mad. Mr. Henderson and Mr. Cole could justly point out at that time that

“ not only social theorists, but also the most prominent spokes¬ men of the Government, and not a few employers, have con¬ stantly told the workers that we should never revert to the old conditions of industry, and that an altogether higher standard of life and an altogether superior status for the worker in industry would be secured as soon as the immediate burden of hostilities was removed.” 2

On the other hand, wage scales could no longer be regarded as entirely without relation to production costs in the ordinary sense. This had frequently been the case during the War, when contractors were guaranteed against loss on account of increased wages ; in some trades efficient employers, working under conditions adapted to their less efficient competitors’ needs, would have found it impossible, even had they tried, to avoid the accumulation of large fortunes. These changes in outlook mark a definite break from the period of the War, and it is therefore convenient to begin a consideration of post-War problems immediately

* Sir Lynden Macassey, Labour Policy — False and True, p. 245.

Report of Provisional Joint Committee of National Industrial Con¬ ference. Memorandum of Trade Union Representatives. Cd. 501/1919, xi after the cessation of hostilities. “ Psychologically, the War was over on n November, 1918, and the marked effect of the Armistice upon industry and business in general fully warrants the dating of the post-War period there¬ from.” 1

Discussions of wages and wage regulation turn mainly on two central problems : (i) the problem of determining the rates to be paid ; and (ii) the problem of establishing efficient machinery to make and enforce such determinations, whatever their basis. The same machinery is often used for settling disputes about the interpretation of agreements ; in a study of methods of industrial peace or of general industrial policy, these points, which often have important psychological reactions, require careful attention, but they may be neglected s© long as our attention is confined to general wage problems. And in addition to considering the machinery of wage regulation, it is of even greater interest to examine the opinions which guide the individuals im¬ mediately concerned in wage negotiations.

In the general deyelopment of economics, theories of wages have, of course, attracted much attention, but they have sometimes appeared to suffer from a certain air of remoteness and detachment from the conciete problems of industry. If a purely theoretical consideration of the problem can lead to nothing more definite than the affirma¬ tion that “ the wage of each person that suits advanced division of labour is to be regarded as an inexpressible function of numerous variables, many of which are inex¬ pressible,” how is this to be applied to the determination of the proper rates to be paid to plasterers in London, or to agricultural labourers in Norfolk ? What principles, if any, guide the negotiators who have to answer such questions as these ? How far does any reference, implicit or avowed, to economic law enter into their thoughts ? 2

The whole question of the interaction of practice and theory in the social sciences is well worthy of study, and in

1 W T. Lauck and C. S. Watts, The Industrial Code, p. 2. t s. J. Chapman, Introduction to D. Knoop’s Industrial Conciliation

and Arbitration, p. xv.

xii

the history of economic theory we can find many parallels to the close relation that existed, for instance, between Locke’s theory of government ‘and the practical demand for a reasoned defence of the Revolution settlement. It is as true of wage theories as of any of the other historic doctrines of economics, that none of them can be under¬ stood apart from the practical controversies of the period in which they were expounded. But in their turn the theories have had some influence on the further development of policy, and the attitude of public opinion towards wage regulation provides some evidence of this. Each of the three great theories which during the last century and a half have been held to explain the amount of wages payable per head to workers, the Subsistence theory, the Supply and Demand theory, and the Produce theory,1 has helped to determine the way in which practical wage questions have been approached. In one frequently quoted case the idea of a wage fund, which was the basis of the Supply and Demand theory, was specifically referred to by an arbi¬ trator as the ground of his award. In 1875 a reduction of wages was imposed on the Northumberland coal-miners, not because of the general condition of the industry or of any decrease in the price of coal, which was regarded as a prime factor in the regulation of miners’ wages, but because the number of men employed in the industry had increased.2 And while it would be fantastic to look for the basis of the tendency of privileged organizations to restriction of num¬ bers in the careful attention given by their members to economic theory, it is not unreasonable to find some con¬ nection between this tendency and the emphasis placed by

1 Cf. E. Cannan, Theories of Production and Distribution, Chap. VII,

5 <

1 " The umpire thought that the chief reason why wages should be reduced lay in the fact that the number of men in the industry had in¬ creased, and he gives us an interesting sidelight on the influence of the wages fund doctrine. Where there had been formerly ten men there were in 1875 fourteen men, and therefore from ‘ the total wages fund ' each man could only expect one-fourteenth instead of one-tenth, and he concludes ' that the restoration of economy in production cannot be brought about by abating the rate of wages only, or indeed mainly, but must be accomplished by reducing the number of men.’ ” A. E. Suffera, Conciliation and Arbitration in the Coal Industry of America, 1913, p. 278.

the wage fund theory on the direct dependence of wages upon the number of workmen.1 The theories which, con¬ sciously or unconsciously, have guided the decisions of arbitrators and others who have had to determine wagescales have, it is true, often lagged behind the development of theory by professional economists, or have unduly exaggerated certain features of their work, omitting some of the qualifications required to complete the theory. By 1875 the wage fund theory — which even to-day seems to lie at the back of some types of confused thought on wages — was no longer an unquestioned part of orthodox doctrine. The subsistence theory of wages, especially through the influence of the modifications which its exponents were forced to admit, if the theory was to be even a rough ap¬ proximation to the. facts, is still influential in the minds of people who believe that wage rates are determined by the standard of life of the workers. The questions which have been put to professional economists in connection with wages have often, as Professor Cannan observed in submit¬ ting evidence to the Committee on Women in Industry in 1919, implied “ many assumptions which ” they “ cannot accept.” 2

But though it is doubtless no less dangerous in wage theory than in other departments of economics to suggest that “ there is nothing good or bad but thinking makes it so,” the opinions and general outlook of the interested parties are of the utmost importance in any attempt to ascer¬ tain the effects of any system of wage regulation. No one now believes with Kettle that

“it is too much the fashion to regard the rules [of political economy] as mer6 theories ; they are, in fact, as easy of practical and familiar application as a spirit-level and a pair of compasses, and an arbitrator, undisturbed by the emotions of the conflict.

1 The prima facie advantages of restriction of numbers are indeed so obvious that it may be thought unnecessary to associate this widespread tendency with any sort of economic theory. As Jevons observed, all classes of society are trade unionists at heart, and differ chiefly in the boldness, ability and secrecy with which they push their respective interests.” The State in Relation to Labour, p. vi.

XIV would apply them to the facts before him almost as easily as an artisan uses these simple instruments.” 1

As Pigou says of regulation of hours, “ if men conceive a particular number of hours to be ‘ just,’ this fact alone may cause the concession of it to increase their efficiency by preventing listless work due to a sense of irritation.” 2 The unfortunate ambiguity in the meaning of the word " law ” has been responsible for much confusion in popular economic discussion, and is partly responsible for the horror with which so-called interference with “ natural ” wage rates has been regarded — almost as if it were an impious defiance of the moral law. An economic law, as Marshall puts it, is a state¬ ment that a certain course of action may be expected under certain conditions from the members of a social group, “ and is often only applicable to a very narrow range of cir¬ cumstances which may exist together at one particular place and time, but which quickly pass away ” 3 ; among the conditions which limit the application of economic laws must certainly be included the beliefs and prejudices of the social group that is under consideration. The “ practical politician ” usually realizes that it is not sufficient to have an irrefutable case in order to secure the success of a reform ; it must also enjoy the more or less active co-opera¬ tion of those who will be directly affected by it, while abuses that are quite indefensible often do much less harm than one would expect, simply because people have not yet realized that they are abuses.4 The success of a capital levy, as some of its supporters have pointed out, depends no less on the proportion of the people concerned who believe that its results would be good or bad, than on its abstract validity as tested by the principles of economic theory.

1 ' Strikes and Arbitrations,” cit. Pigou, Principles and Methods of Industrial Peace, p. 35.

* Principles and Methods of Industrial Peace, p. 51 n;

* Economics of Industry, pp. 26, 398.

4 Cf. Barbara Wootton, “ Classical Principles and Modern Views of Labour,” Economic Journal, March, 1920: "It is the ideas of the profanum vulgus, odious though these may be to the economic mind, which direct economic forces.” Cf. also E. Aves. Cd. 4167/1908, p. 46: "To a, large extent industrial legislation is what it is thought to be, so impor¬ tant, through its effects upon conduct, is the attitude from which this legislation is regarded.”

xv

In dealing with wage problems we cannot regard Capital and Labour as impersonal abstractions. Capital is not driven out of the country unless some one takes thought in directing the course of its investment. Labour does not passively flow from one employment to another unless some particular labourer decides that it is worth while to learn a new type of work or transfer his home to some unknown town or place his sons in an unfamiliar tmde. The strength of the forces lying behind the demand for and the supply of labour is not mechanically determined, but depends in part at least on the feelings and ideas which determine how any given wage settlement will be regarded by employers and employees. To achieve ideal justice in wage settle¬ ment may be difficult or impossible, but one cannot ignore the importance of the conflicting ideals of justice which help to determine how smoothly any settlement will work. In Marshall’s view

“ if the employers in any trade act together and so do the em¬ ployed, the solution of the problem of wages becomes inde¬ terminate ; and there is nothing but bargaining to decide the exact shares in which the excess of its incomings over its out¬ goings for the time shall be divided between employers and employed.”

Economic considerations set an upper and a lower limit, but “ what point between these limits should be taken at any time can be decided only by higgling and bargaining, which are, however, likely to be tempered somewhat by ethicoprudential considerations.” 1 In any case, it is inadvisable to push a purely abstract treatment of the wage problem far without constant reference to the facts of concrete cases. As Mr. Tawney aptly remarks, “ the ingenuity of employers and workpeople so greatly exceeds that of economists that discussions of what ‘ must ’ happen, unsupported by evidence of what has happened, or is happening, are usually quite worthless.” 2

1 Principles of Economics, 8 ed., pp. 627-8. Cf. Appendix J, p. 825. *• The theory of wages, whether in its older or newer form, has no direct bearing on the issue of any particular struggle in the labour -market, that depends on the relative strength of the competing parties.

2 Establishment of Minimum Rates in the Chainmaking Industry, p. 105.

XVI

“ The plain simple thing which is called human nature," 1 and to which appeal is so frequently made in discussions of industrial problems, is in fact fhr too complex and varied to permit us the comfortable belief that if difficulties of wage regulation were removed, " industrial unrest ” would simultaneously disappear. Though wage disputes attract much attention, the history of labour relations during the War showed clearly — as indeed might easily have been deduced from other evidence — that there were many other important potential causes of conflict. It is still true, as was pointed out by the trade union representatives on the National Industrial Council Committee in February, 1919, that “ wage grievances are not, at the present time, respon¬ sible for more than a fraction of ” the industrial unrest.2 As the Whitley Report puts it, “ a permanent improvement in the relations between employers and employed must be founded upon something other than a cash basis.” 8 The intensity of industrial unrest is often in inverse and not in direct proportion to the wages received by the workers. Those who are anxiously looking for a radical reorganization of the bases of society are often inclined therefore to be impatient with such discussions as we propose to undertake, which appear to them to leave the main issues untouched. But it is also true, whatever type of economic organization is ultimately found to satisfy best the needs of men, that some method of regulating remuneration will be necessary, and an examination of the principles which have influenced thought and action in recent years should be relevant to the determination of this method, whatever it may be. “ Whatever theories the workers may favour,” writes Mr. Justice Higgins, the late President of the Australian Federal Arbitration Court, “ for the ultimate solution of the indus¬ trial riddle, they know that in the meantime men and families must be fed and clothed and housed. ... The morrow’s breakfast is of more immediate concern than the millen¬ nium.” 4

• Lord Stuart of Wortley, House of Lords, 25 February, 1919.

A Hew Province for Law and Order, p. 148.

xvii

On the other hand, there is always present the danger of hasty generalization from the more or less peculiar cir¬ cumstances of our own brief experience.

" Any analysis of distribution is but a description of a particular industrial society at a particular time. To mistake a description of a particular society for a study of the action of physical laws has the effect of leading men to believe that the present must for ever reappear in the future.” 1

People who fall into such errors are indeed often ready enough to discount the value of conclusions drawn from the experience of other countries. The special circumstances of America or Australia or France which make their insti¬ tutions ill-suited to English conditions have frequently been pointed out. The fact, of course, is that history never offers us a series of events without its special circumstances, and if we refuse to learn from every experience which differs in some striking respect from the conditions to which we have been accustomed, the scope of our study will be limited indeed. We are confronted with special circumstances at every stage of the story of post-War industrial relations ; the impossibility of selecting any period which we can des¬ cribe as normal constitutes one of the most serious difficulties in the way of systematic wage regulation, but the rapidity with which conditions have changed should increase rather than diminish the value of an examination of the conflicting principles which have been brought to light.

1 The Settlement of Wage Disputes, p. 37.

SOME PROBLEMS OF WAGES AND THEIR REGULATION IN GREAT BRITAIN SINCE 1918

Chapter I

Though the primary objective of war-time wage regulation was the control of labour supply, and the adjustment of wage rates was a matter of only secondary importance, it extended very far and.its effects were felt long after the War was over. It is not easy to classify exactly the machinery by which wage increases were awarded ; the method of wage negotiation through trade agreements, which was characteristic of English industry, and which a few years before the War covered about 2\ million workers, was not entirely abandoned during the War. In some cases volun¬ tary agreements were made the basis for the awards of the State tribunals, but the procedure of the Conciliation Boards which in some industries had long been in existence was generally found to be too slow in the rapidly changing conditions of the^War, and the field covered by the various methods of Government regulation was so extensive and important that for all practical purposes no serious error is committed in assuming that wages throughout the country were under Government control of some kind or other. Though it is easy to exaggerate the speed with which wages in non-regulated industries adapted themselves to the' levels established by official arbitrators, the rules thus laid down had to be followed sooner or later and with more or less

l exactness over the whole field of industry. In some cases, e.g. the railways, the form of collective bargaining which had existed before the War was ‘preserved, but the Railway Executive Committee with which the Unions now had to deal was a Committee of the Board of Trade, though its members were railway company managers, and in the event of disagreement the final decision lay with the Board of Trade, or sometimes with the War Cabinet. Coal-miners were also virtually State employees. The wages of agri¬ cultural workers were regulated by District Wages Com¬ mittees, set up under the Corn Production Act of September, 1917, while the Trade Boards continued to control wages in a number of trades where the standard of payment had been unduly low. For munition workers — a term which it was found necessary to interpret very broadly — there was a great variety of wage-regulating machinery, but by 1918 a reasonable degree of co-ordination had been achieved, and apart from unpredictable interferences through the issue of direct orders from the Ministry of Munitions, the wage levels established by the chief arbitration tribunal, the Committee on Production, were generally followed.

Government regulation of wages perhaps had one un¬ foreseen effect, which has increased the difficulty of negotia¬ tion since the War. It inevitably weakened the motives for the maintenance of that close contact between trade union officials and employers which before the War had tended to diminish the gaps between the claims of either side. Each party knew fairly well what the other was likely to concede, and the prospects of a conflict were accordingly diminished. During the War this contact was lost, and when the time came to resume direct negotiations, it was much more difficult than before to estimate the rates of pay that were appropriate.

The Committee on Production had been appointed in the first place on 4 February, 1915,

" to inquire into and report forthwith, after consultation with the representatives of employers and workmen, as to the best steps to be taken to ensure that the productive powers of the employees in the Engineering and Shipbuilding Establishments working for

Government purposes shall be made fully available so as to meet the needs of the nation in the present emergency,” 1

and it was incidental to this more general duty that it became the most important piece of wage-regulating machinery in the kingdom. Its First Interim Report, on irregular time¬ keeping,2 was issued on 16 February; in the Second, on production of shells and fuses, avoidance of stoppage of work and guarantee to workpeople, the Committee, on 20 February, reported its strong opinion that

“ during the present crisis employers and workmen should under no circumstances allow their differences to result in a stoppage of work. ... In the event of differences arising which fail to be settled by the parties directly concerned, or by their representa¬ tives, or under any existing agreements, the matter shall be referred to an impartial tribunal nominated by His Majesty’s Government for immediate investigation and report to the Government with a view to settlement.” 3

The Government at once adopted the recommendation of this report, and appointed the members of the Committee as the “ impartial tribunal ” to which differences should be referred. A Third Report was published on demarcation of work and the utilization of semi-skilled or unskilled labour,4 but with the exception of a fourth and confidential unpub¬ lished report the Committee then devoted itself entirely to the work of an arbitration tribunal, and in July, 1915, its other functions were absorbed by the newly-created Ministry of Munitions. Despite several changes in personnel and organization, the name, Committee on Production, was not changed, and the maintenance of a steady supply of warlike material remained the ultimate and most important object of its work. It sat for the first time as an Arbitration Tribunal on 21 February, and the first Award was issued eight days later.

Towards the end of March most of the trade unions con¬ nected with munition work agreed to abstain from strikes, and in cases where direct negotiations had failed, to submit disputes either to the Committee on Production or to some other arbitration tribunal. The whole arrangement at that time was quite voluntary and informal, and until July, when it became a statutory arbitration tribunal under the Muni¬ tions of War Act, the Committee had no power to enforce its awards. During the voluntary period thirty-nine awards were issued, and in every case the award was accepted. After July, the Committee’s awards were binding on both parties, and although some important industries, e.g. mining, transport, and cotton, did not fall within the scope of the Act, the field to which compulsory arbitration could be applied was very wide. By an amending act of January, 1916, new tribunals were set up to deal with the wages of women and of semi-skilled and unskilled men in munition establishments, and though difficulties of co-ordination were thus created, they were not so serious as those which arose from the power conferred on the Minister of Munitions to settle rates of wages in some cases directly without the inter¬ vention of any of the arbitration tribunals. For the most part the minor tribunals adopted the standards laid down by the Committee on Production, and where disputants had alternative methods of settlement open to them, the Committee on Production was usually selected. The Com¬ mittee established a general reputation for impartiality, and thus acquired an influence which extended far beyond the limits of the particular cases that came before it. Under a clause of the Amending Act of 1917 its awards could be made applicable to firms who were not parties to the original reference, and during the last quarter of 1917 thirty awards were extended in this way ; the payment of wages through¬ out the country generally followed the lines suggested by the work of the Committee.

The first chairman of the Committee was Sir George Askwith (now Lord Askwith), who since 1911 had filled the office of Chief Industrial Commissioner ; he had had a long and successful experience as conciliator in industrial disputes, whereby he had gained a more extensive public reputation than is commonly the lot of Civil Servants. With him were associated Admiralty and War Office representatives, both of whom had had some experience of industrial negotiations.

As the work of the Committee increased, it became necessary to reorganize its membership, and in May, 1917, several trade unionists and employers were added. The number was later increased to thirteen, a trade unionist and an employer with an impartial chairman sitting to hear each case.

The Committee on Production dealt with more than half of the disputes submitted to arbitration during the period 1914—18. A detailed analysis of the figures is not very illuminating, because the disputes varied widely in scope and importance. Though there were some important in¬ dustries, the general regulation of whose wages was not undertaken by the Committee, minor disputes even in these were submitted to it, while some cases over which the Committee had ho statutory authority were voluntarily referred. At first the Committee dealt piecemeal with each case that came before it, and though advances of wages in one part of the country were necessarily followed sooner or later by similar advances elsewhere, there was no attempt at national regulation. In February, 1917, however, on the suggestion of Sir George Askwith, it was agreed by the engineering trade that wage adjustments on a national basis should be made four-monthly, in February, June, and October, and similar agreements were later made in other industries, including shipbuilding. The right of either side to ask for local adjustments on account of special circum¬ stances was reserved, but the number of separate awards that it was necessary to make was much diminished by these agreements. The first award under the engineering agree¬ ment was issued on 1 March, 1917. 1