The arbitral determination of railway wages

Front matter

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PRESENT!

E ARBITRAL RMINATION OF Y WAGES

Contents

Introduction xi

I. Standardization 1

II. The Living Wage 54

Introduction

Settlements of wage disputes by means of the accepted methods of maintaining industrial peace — mediation or conciliation, voluntary and compulsory arbitration — have been effected in the past by appeal to expediency and compromise, rather than by a consideration of the merits of the arguments presented by the two parties. The frequency of strikes and lockouts, the recurrence of disputes followed by applications for government mediation or arbitration, and the general feeling of antagonism still existing between employers and employees, give ample evidence that these peaceful methods do not reach the source of the trouble. Especially is this true in the case of wage disputes. In the past, the primary object of mediation and arbitration has been the maintenance of the processes of production in continuous operation, and questions concerning wages have been approached and decisions rendered with this purpose in view. The desideratum has been a prompt, speedy settlement, and this has been attained at the sacrifice of a determination based on the merits of the respective claims and on some principle of reasonable xii INTRODUCTION

wage determination. The result has been a lessening, perhaps, in the number of strikes and lockouts and in the interruptions to production; but the underlying causes of wage disputes remain unaffected by mediation and arbitration decisions, and capable at any time of causing new disputes and of arousing still more unfriendly relations.

It may be asked whether the failure of these methods of maintaining industrial peace to offer a clue to the solution of the wage problem lies in any inherent fault in the methods themselves, or in the manner in which they are at present applied. From its very nature, mediation can never approach such a solution. The mediator's function is to placate the disputants, to harmonize the differences between employer and the employee, and, by winning concessions from both sides through force of personality and tact, to effect an agreement acceptable to the parties concerned. 1 Compromise is inevitable. Mediation is not interested in the justice of the respective claims; the elements of fairness, reasonableness, and equity do not enter into the proceedings. 2 The employees endeavor to obtain as great a wage advance as possible; the employers, to concede as little as possi-

1 Bulletin, U.S. Bureau of Labor, No. 98, p. 15.

2 Ibid., p. 15. See also Eastern Conductors and Trainmen's Arbitration (1913), Proceedings, pp. 1973-1974.

INTRODUCTION xiii

ble; and the mediators, paring down here and adding on there, finally succeed in arranging a voluntary settlement. A mediation decision is merely an adjustment of the dispute, rather than a judgment on the merits of the case; the principles underlying the questions at issue are ignored, and adjudication of them postponed for the time being. 1 Arbitration, on the other hand, implies a weighing of the arguments of the respective sides by a board containing at least one impartial member, and an award representing a judgment upon the merits of the questions involved. The arbitrator's function partakes of a judicial nature; the decision rendered must be based upon some definite, accepted principle of reason governing the disputed question. There is nothing, therefore, in the method of arbitration to prevent the attainment of a permanent solution of the wage problem — a solution, in that the underlying causes of the wage dispute are met by the application of a reasonable principle of wages; and permanent, in that this principle of wages is always applicable, although changing external conditions will necessitate some alteration in the terms of the original award.

Arbitration, as at present practiced, has

1 F. H. Dixon, "Public Regulation of Railway Wages," Proceedings of American Economic Association, 1914, Vol. xxvn, pp. 257- 259.

xiv INTRODUCTION

little or no judicial character except in the form of the proceedings. Counsel for the disputants present briefs, witnesses are sworn and evidence introduced, the board adjourns to render a decision which is binding upon the parties; but here the parallel ceases. An arbitration award, like a mediation agreement, is almost without exception a compromise decision. Investigators, employers, employees, and arbitrators themselves testify to this. The Eastern Engineers' Board (1912) reported that compromise was practically inevitable under the Erdman Act. 1 President Garretson, speaking for the Conductors and Trainmen in their concerted movement of 1913, stated that "every settlement that has ever been made by these organizations has been a compromise settlement." 2 In some cases in which the award purports to be based upon a certain principle of wage advance, there is a strong presumption, when a comparison of the original demands of the employees and of the increase granted is made, that after all the award is a simple compromise. 3

2 Eastern Conductors and Trainmen's Arbitration (1913), Proceedings, p. 531.

3 For example, the switchmen on roads entering Chicago requested a six-cent increase in 1910, and received by the arbitration award of March 22, 1910, under the Erdman Act, an advance

INTRODUCTION xv

There has been almost universal condemnation of the practice in arbitration of splitting the difference between the demands of the men and the concessions of the employers. 1 Professor Adam Shortt, who has served as chairman on numerous boards of conciliation and investigation in Canada, refers to it as a "demoralizing principle," 2 and Judge William L. Chambers, United States Commissioner of Mediation and Conciliation, when acting as chairman of the Eastern Firemen's Board in 1913, expressed the hope that the

of three cents. The increase was based on the cost of living, which the board determined had advanced twenty-five per cent, an equivalent of an eight-cent increase in switchmen's wages (Records, U.S. Board of Mediation and Conciliation, File No. 25). Again, in the dispute of the telegraphers with the Missouri Pacific in 1910 the increased cost of living was also given as the basis of the increase. There is little doubt, however, that the award was a compromise, for in a letter to Judge M. A. Knapp, dated July 27, 1910, the chairman stated that the men's representative had "... yielded finally to my persuasion for a considerable concession below the original demands of the employees ..." and that he was "... now endeavoring to get Mr. Sullivan [the road's representative] to join in the award" (Records, U.S. Board of Mediation and Conciliation, File No. 33). In the Georgia and Florida Arbitration (1914), under the Newlands Act, the employees requested a twenty-two per cent increase and received a little over ten per cent. The increase was based on the desire of the board to standardize the rates on this road with those of other roads in the vicinity, the rates of which were found to be about fifteen per cent higher than those on the Georgia and Florida (Georgia and Florida Arbitration (1914), Report of Board, pp. 5, 6, 12).

1 An important exception is Mr. M. A. Knapp, of the U.S. Board of Mediation and Conciliation, who stated, in an address before the National Association of Railway Commissioners, that compromise was the proper method in arbitration (Railway Age Gazette, Vol. xlv. No. 21, pp. 1193-1194).

2 Labour Gazette (Canada), June, 1907, p. 1410.

xvi INTRODUCTION

award would not be a compromise, but in the nature of a judgment or decree of the court. 1 The employees have registered their disapproval of compromise decisions both in the course of arbitration proceedings 2 and in minority reports appended to the awards. 3 Employers, too, have emphasized the necessity of basing wage decisions on some principle of reasonableness and fairness. 4 In 1913 the railways in the Eastern District refused for a considerable period to arbitrate their dispute with the firemen under the provisions of the Erdman Act, partly on the ground that the award would of necessity be a compromise, and thus work to their disadvantage. 5 Their attitude was probably the same as that of a recent investigator who stated, ". . . It is not absolutely certain but that in exceptional cases a strike or lockout is a more wholesome culmination of an aggravated dispute than a series of temporizing and unsatisfactory compromises." 6

* Ibid., Proceedings, p. 2375.

8 Eastern Engineers' Arbitration (1912), Report of Board, p. Ill; Eastern Conductors and Trainmen's Arbitration (1913), Report of Board, p. 58.

4 Ibid., Proceedings, p. 2056; Chicago and Western Indiana Railway and Belt Railway Co. Arbitration (1913), Proceedings, Vol. n, pp. 1341-1342.

6 Eastern Firemen's Arbitration (1913), Supplementary Report of the International President, Concerted Movement (1913), p. 38.

6 Victor S. Clark, "Canadian Industrial Disputes Investigation Act of 1907," Bulletin, U.S. Bureau of Labor, No. 86, p. 3.

INTRODUCTION xvii

The justification for these opinions becomes apparent when the effects of decisions based on compromise are considered. In the first place, employees are encouraged to make frequent demands for wage increases, since they are practically certain that at least a part of their requests will be granted. The demands made, also, are generally far in excess of what can be supported on reasonable grounds; and naturally so, because the employees, knowing in advance that their requests will be cut in half, make their demands double the amount which they really expect to receive. 1 The employers, on the other hand, knowing the usual outcome of disputes submitted to arbitration, generally agree to arbitrate only as a last resort, and then are determined to concede the minimum amounts although they may be convinced of the justice of the employees' claim to a certain increase in wages. The frequency and extravagance of the employees' demands serve to increase the danger of an open breach in the relations of the two parties with consequent interruption to the processes of production and injury to the public. Compromise decisions also render the expenditures of both sides, for the collection of data and the pay-

1 Eastern Engineers' Arbitration (1912), Report of Board, p. 101; Eastern Conductors and Trainmen's Arbitration (1913), Proceedings, p. 2056; Bulletin, U.S. Bureau of Labor, No. 98, p. 176.

xviii INTRODUCTION

ment of statistical experts for the preparation of exhibits illustrating the principles underlying their agreements, a useless extravagance and waste. If the arbitrator in order to reach a decision has simply to divide the difference between the maximum demands of the men and the minimum concessions of the employer by two, he will scarcely need thousands of pages of statistical tables, diagrams, and evidence of witnesses showing the rise in the cost of living, the increase in productive efficiency, and the effect of various mechanical appliances.

The most serious count against a compromise award, how T ever, is its unjust character. It is not based upon any adequate investigation of the facts nor upon any inquiry into the relative merits of the arguments presented by the two sides in support of their claims. No attempt is made to determine whether the employees are justified in requesting an increase or the employers in refusing to agree to an advance in wages. Such a decision effects no real settlement, for if a reason for a certain increase in wages existed in the first instance, the same reason exists after a part of the proper increase has been granted. 1 The adjustment settles nothing definitely; it

1 Eastern Conductors and Trainmen's Arbitration (1913), Proceedings, p. 531.

INTRODUCTION xix

merely postpones further action on the principle involved until after the expiration of the time limit set in the award. Both employers and employees feel that they have been unjustly dealt with, and return to work, hostile to each other and disinclined to refer further disputes to peaceful settlement. The pilingup of compromise on compromise results in a haphazard, unscientific wage system unsatisfactory to all concerned; for the employer is paying a certain wage without any knowledge of why he is paying that amount except that he is obliged to, and the employee is receiving his wage, although certain that he is worth more, but unable to force a larger amount from his employer.

In the preceding paragraphs an attempt has been made to show that the possibilities of arbitration have not been realized on account of the use of the principle of compromise in arriving at wage awards; that this principle is almost universally condemned; and that this condemnation is justified by a consideration of the evil effects of compromises in arbitration proceedings. If this attempt has been successful, it is evident that the method of adjustment by compromise must be abandoned, either by some organic change in arbitration laws or by some alteration in the method of their application.

xx INTRODUCTION

The seeming inevitableness of compromise decisions has been ascribed to various causes — the short period of time within which the arbitrators must render a decision, the heavy responsibility placed upon the single neutral arbitrator, the ignorance of the impartial member of the board concerning the details of the industry involved, and so on. The fault lies, however, not so much with the specific details of the various laws, as with the lack of some definite, fundamental principles to which arbitrators may turn as bases for their wage decisions. The first question which arises in an arbitrator's mind is : What is the fair wage for this particular kind of work, or what are the just and reasonable grounds for an increase in the wages of this class of employees? If there existed some generally accepted principle of a fair and reasonable wage and some definite basis of wage advance, the task of the arbitrator would be much lightened, for he would be able to apply these general principles to the particular facts in the dispute and arrive at an equitable decision. This urgent need has undoubtedly been brought home to every one who has had any experience in arbitration proceedings. The writer of a recent article on the Australian industrial courts stated that one could not help being impressed with

INTRODUCTION xxi

the bewildered search of the courts for guiding principles. 1 The statement of the Eastern Engineers' Board (1912) is fairly typical of the conclusions reached by all wage boards: "Possibly there should be some theoretical relation, for a given branch of industry, between the amount of the income that should go to labor and the amount that should go to capital; and if this question were decided, a scale of wages might be devised, for the different classes of employees, which would determine the amount rightly absorbed by labor. It may be that in the future some such solution will be worked out for the various industries; and if so, the income of the railroads could be so apportioned. Thus far, however, political economy is unable to furnish such a principle as suggested. There is no generally accepted theory of the division of income between capital and labor." 2

It is true that the study of economics has not resulted in an accepted solution of the wage problem; some economists have gone so far as to state that the determination of a fair and equitable wage is an impossibility. One who has had wide experience in the settlement of railway disputes in the United

1 G. A. Beeby, " Artificial Regulation of Wages in Australia," Economic Journal, Vol. xxv, No. 99, p. 323.

2 Eastern Engineers' Arbitration (1912), Report of Board, p. 47.

xxii INTRODUCTION

States is authority for the assertion that there is no right or wrong about wages. 1 In an address before the American Economic Association, Dr. F. H. Dixon said: "As a matter of fact the situation is hopeless, and will remain so, as long as we delude ourselves into thinking that we can under present economic conditions find a basis for wages in any theory of ultimate reasonableness. It may be that we are not merely chasing a will-ofthe-wisp when we are hunting for a reasonable wage, but we are at any rate seeking the unattainable." 2

The situation may be hopeless, but arbitration, without the application of some generally accepted principle of wages in the awards, will continue to be a mere compromise method, accompanied by manifold evils and incapable of effecting an equitable settlement of any wage dispute. If it be agreed that the determination of principles of fair wages and of wage advance will aid in securing better results in arbitration procedure, search for a principle of fair and reasonable wages may not be abandoned. Final solution of the wages problem may never be reached; but continuous and energetic- effort must be directed toward a nearer approach

1 Railway Age Gazette, Vol. xlv, No. 21, pp. 1193-1194.

2 Proceedings of the American Economic Association, 1914, Vol. xxvii, pp. 264-265.

INTRODUCTION xxiii

to a reasonable and just division between employer and employee.

It is the purpose of the following chapters to present a study of the principles of wage determination and of wage increase advanced by the employees and employers in the course of arbitration proceedings. The contentions of these two parties are likely to show extreme bias, but it is to be expected that their arguments, tempered by the findings and reasoning of arbitration boards, will suggest some fundamental principles which may serve as the basis of a fair and reasonable wage or of a just principle of wage increase. There is no richer field for such a study than the disputes settled by arbitration under the Erdman * and Newlands 2 Acts in the United States and by the boards of conciliation and investigation appointed under the Canadian Industrial Disputes Investigation Act. 3 Since the first-named laws apply only to railways, all those disputes involving other industries which have been settled under the Canadian statute have been omitted in this study.

Thirteen arbitrations have been conducted under the provisions of the Erdman Act dur-

1 U.S. Statutes at Large, Vol. xxx, pp. 424-428.

2 Ibid., Vol. xxxvin, Part i, pp. 103-108.

* 6-7 Edward VII, c. 20. For text and amendments see Eighth Report, Registrar of Boards of Conciliation and Investigation (Canada), 1915, pp. 321-354.

xxiv INTRODUCTION

ing the fifteen years in which it was in force; seven under the Newlands Act up to June 30, 1914; and forty-five railway disputes involving wages under the Industrial Disputes Investigation Act from March, 1907 to June, 1915. In addition to these sixty-five cases, two others, the Eastern Engineers' Arbitration of 1912 conducted by special agreement between the employees and the railways, and the Western Engineers and Firemen's Arbitration of 1915, were included in the material used. The briefs, exhibits, and evidence of witnesses of the employees and employers, so far as such material was available, have been examined with a view to ascertaining the content of each principle advanced and the grounds upon which it is supported. The findings of the arbitration boards are then discussed, and an appraisal made of the opinions of the parties to the controversy in the hope of forming a judgment as to the reasonableness and fairness of the proposed principles of wages.

In these arbitration proceedings, four broad, general principles have been advanced as bases for wage determination — Standardization, the Living Wage, Increased Cost of Living, and Increased Productive Efficiency. These constitute the subjects of four chapters. The final chapter attempts to clear

INTRODUCTION xxv

up inconsistencies and to merge the conclusions of the preceding chapters into a homogeneous system. Of necessity, the result of such an attempt must be fragmentary and inconclusive; but the justification for the endeavor lies in the manifest need of some fundamental principles of wages which may be applied in arbitration proceedings.

THE ARBITRAL DETERMINATION OF RAILWAY WAGES

Chapter I

The standardization of railway wages — the uniform application of a standard rate of pay for a given grade of employment within a certain area — has been the principle most stubbornly maintained by the railway employees and the one which has been most influential in determining the present form of railway wage bargaining. The object of the standardization movement is to secure uniformity of compensation for similar service throughc ut a given area. This principle, therefore, is most conveniently treated under three headings according to the area in which the standard rate is to apply. The following sections deal successively with (I) System Standardization, (II) District Standardization, and (III) National Standardization.

I. System Standardization System standardization implies the application of a standard rate to a single road or to a number of roads combined into one system.

The advocacy of the principle of system standardization grew out of the desire of the employees to abolish individual bargaining. Under this method, railway officials paid applicants for positions according to their estimate of the labor and skill involved in operating a train upon a certain run or division. Thus, employees received one rate for main line service, another for branch line, another for a run through particularly hilly country, and still another for a route upon which traffic was especially heavy. In course of time a wage system was built up consisting of a multitude of diverse rates. This condition the employees regarded as intolerable, for the reason that men of a certain grade of employment and in the same service found themselves in many cases receiving rates far below those obtained by fellow workmen of the same grade and in the same service who chanced to be working on a different run or division. Out of this grew the demand for a standard rate for a given grade of employment in a certain service. This insures that an employee will receive as much for his effort and skill as any other workman of the same grade performing similar service, whether the work be done in the same locality or on another part of the road or system. Under system standardization, the multiplicity of rates resulting from individual bargaining is abolished, and all employees who formerly were paid lower rates of pay receive at least the amount set as the standard.

The standard rate so set applies uniformly to all employees of a given grade in the same class of service, regardless of varying physical and traffic conditions on different parts of the same road. Thus no difference is to be made in the rate of compensation between main- and branch-line service, or between service on a single-track division with numerous curves and grade changes and a run on a level, fourtrack route. The employees claim that classification of runs on the basis of varying traffic and physical conditions does not take account in full degree of differences in efficiency required, and in the labor and responsibility involved in the various classes of service. The standardization requested by the employees by no means implies a single rate for all kinds of service; provision is made for the classification of service and the establishment of a separate rate for each, and also, in the case of certain grades of employment, for a sub-classification of service according to some criterion which will insure greater pay where greater labor and responsibility are involved.

The form of standardization proposed by the employees is well illustrated by the requests submitted in the Eastern Engineers' Arbitration of 1912. Railroad service was classified into passenger, through freight, — including mine, work, wreck, pusher or helper, milk, roustabout, and circus service, — local freight, switching, and belt line. Instead of five rates for these services, sub-classification resulted in a total of twelve rates. For instance, in through freight service, engineers operating locomotives with a cylinder diameter of twenty inches or less were to receive $5.25 per one hundred miles or less, ten hours or less; from twenty to twenty-four inches or over, excepting Mallets, $5.75; and Mallet type of engines, $7. 1 In the recent concerted movement by the engineers and firemen in the West, weight on drivers, instead of cylinder diameter, was urged as the proper criterion of sub-classification, on the ground that driver weight was a more accurate index of tractive power than cylinder diameter, and, therefore, more exactly reflected differences in efficiency, labor, and responsibility resulting from the operation of larger locomotives. 2 The conductors and trainmen make no attempt to establish a graduated standard, contenting themselves with a simple classification of service.

2 Western Engineers and Firemen's Arbitration (1915), Employees' Brief, pp. 14-15.

In the application of system standardization to the employees in a certain grade of employment, the men naturally desire the removal of low spots in the wage schedule without a corresponding decrease in the rates of those already receiving above the standard. This is accomplished by the insertion in their demands of a so-called "saving clause," an article providing that existing rates of pay that are more favorable to the employees than those proposed in the new schedule shall be retained. The men usually attempt to secure the incorporation of this clause in the agreement to arbitrate, and have come to regard it as so well established and long accepted that it should be included without question. 1 The employees base their claims for the saving clause on precedent 2 and on their restraint in not demanding the highest

1 In a preliminary meeting held prior to the Eastern Conductors and Trainmen's Arbitration in 1913, the roads attempted to secure the adoption of an article providing that the rates and rules awarded in the coming proceedings should supersede rates and rules then in effect which were in conflict therewith. This attempt to render the' saving clause inoperative was firmly and successfully resisted by the representatives of the employees. In the arbitration proceedings, when the question of the saving clause came up, the employees' arbitrators refused to vote on the ground that there had been an understanding with the government mediators that the saving clause articles were not to be submitted to arbitration. See Quarterly Journal of Economics, February, 1914, p. 365; Eastern Conductors and Trainmen's Arbitration (1913), Report of Board, pp. 32-33, 59.

2 Eastern Engineers' Arbitration (1912), Employees' Brief, p. 43.

rates in existence as the standard rate. 1 It is further maintained that the high rates should be retained, for their existence is a result of a low rate or some other concession elsewhere, and it would be manifestly unfair to remove an advantage gained in this manner. 2 The employees assert, too, that there is nothing in the saving clause incompatible with the theory of the standard rate, for a standard is a rate below which the employer must not pay any of his men, but above which he is expected to compensate those men, who, on account of greater efficiency, deserve payment above the standard. 3

In reply to the demands of the employees for the establishment of system standardization, the railways contend that the standard, being a uniform rate applicable to all the employees of a given grade, can be applied only where uniform conditions exist. 4 Physical and traffic conditions cannot possibly be made uniform, and therefore it is unfair to the men to attempt the application of a standard rate. The railways hold that the differences be-

1 Western Engineers and Firemen's Arbitration (1915), Employees' Brief, pp. 3-4.

2 Eastern Engineers' Arbitration (1912), Employees' Brief, p. 44. 8 Ibid., p. 45; Western Engineers and Firemen's Arbitration (1915),

Employees' Brief, p. 4.

4 Eastern Firemen's Arbitration (1913), Railways' Brief, p. 15; Chicago, Burlington and Quincy Arbitration (1914), Proceedings, pp. 9576-9577.

tween main and branch lines, between mountainous and level grades, routes with heavy and light traffic, etc., should be reflected in the wages received by those working under these varying conditions. 1 A single rate, applicable to all employees of one grade, regardless of the local conditions affecting their service, would clearly work to the men's disadvantage. 2

The railways assert, also, that the standard, because it is a uniform rate, is "subject to the criticism that it fails to distinguish efficiency from inefficiency, takes away from the employee the incentive to exert himself beyond the unavoidable minimum, and thus stifles competition of labor with labor, greatly increasing the cost of production." 3 The saving clause, however, which aims to retain rates higher than the standard and tends to lessen the uniformity so vehemently criticized by the railways, is strongly condemned on the ground that it is inconsistent with the

1 Eastern Engineers' Arbitration (1912), Railways' Brief, p. 25.

2 For a detailed account of the objections to standardization, see Cunningham, "Standardizing the Wages of Railroad Trainmen," Quarterly Journal of Economics, November, 1910, pp. 139-160. The railways have also objected to the standard rate on account of the difficulty of its application. Since these difficulties are peculiar to railway service, and do not affect the principle of the standard, the consideration of them is omitted in this paper. See Eastern Firemen's Arbitration (1913), Railways' Brief, pp. 13-14; Eastern Conductors and Trainmen's Arbitration (1913), Railways' Brief, pp. 11-12.

3 Eastern Engineers' Arbitration (1912), Railways' Brief, p. 13.

plea for uniformity. The roads claim that the establishment of a standard implies the "equalization of dissimilar rates"; * and therefore, if the low rates in the wage schedule are raised to the standard, then similarly the high rates should be lowered. Since the saving clause permits the raising of the low rates without a lowering of the high rate, it prohibits any equalization of dissimilar rates and defeats the uniformity desired by the employees. 2 In other words, the railways condemn a standard rate because they consider it to be a single uniform wage, and then they condemn a provision which tends to lessen uniformity by retaining certain payments above the standard. A more convincing argument against the saving clause is found in the assertion of the railways that it insures the employees against any loss in a wage dispute, and therefore, by encouraging numerous and excessive demands for increases, fosters agitation and strife. 3

American arbitration boards have been

1 Western Engineers and Firemen's Arbitration (1915), Report of Board, p. 26.