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Organization Of Labor
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The Socialization Of Industry

Organization Of Labor

What an economist wishes first to know concerning the organization of
labor is whether it is a natural phenomenon which should be welcomed
and left to itself. Does it help to establish wages on the basis of
the productivity of labor, and does it do it without much reducing
that productivity? We shall find that it works both well and ill in
these particulars and needs close study and careful regulation.

What laborers themselves ask concerning the organization of men of
their class is simply what power it has to raise their own wages; and
we shall shortly find that it has a certain power when it does not
invoke the principle of monopoly and a much larger power when it does
so. We shall find that the benefit from mere organization may be
extended to the great majority of laborers, while that which depends
on monopoly is confined to relatively few and involves an injury to
the remainder.

The Static Standard of Wages of Unorganized Labor

In that static
state toward which society is always tending, and in which the normal
standard of wages is completely realized, men are supposed to get all
that they produce. The law of marginal productivity of labor works, as
it were, in vacuo, and gives an ideally perfect result. Every unit
of labor receives what a marginal unit produces.

Actual Pay of Unorganized Labor

A static assumption excludes
enforced idleness on the part of able-bodied men. The changes which
throw such men out of employment are not taking place, and there is no
reserve of efficient but idle labor. In the actual state, which is
highly dynamic, such a supply of unemployed labor is always at hand,
and it is neither possible nor normal that it should be altogether
absent. The well-being of workers requires that progress should go on,
and it cannot do so without causing some temporary displacements of
laborers. Though no individual were long out of employment,--though a
particular man were in this condition only briefly and during the
period occupied by a transit from one occupation to another,--there
would always be in the general market some unemployed men. If we throw
out of account those who are idle because of personal disabilities, it
will remain true that really efficient men can nearly always be had,
if only a few are at one time needed. The presence of even a few men
able to do good work and not able to get employment is often
sufficient to make individual bargaining work unfairly to the laborer.
When the employing of one man is in question, the employer has other
alternatives, and the man may not have them. The employer may much
more readily set men bidding against each other for a vacant place
than any of the men can set employers bidding against each other for
an idle man. This strategic inequality between the parties in the wage
contract becomes greater as the supply of unemployed men becomes
larger. At some times and places it may force the pay of many workmen
downward toward a minimum set by what the unemployed will consent to

The Effect of Local Organization

Organization means collective
bargaining and tends to equalize the strategic positions of men and
employers. Where an entire force of workers must be dealt with at a
time, the employer has not the alternative ready to his hand which he
would have if he had only to employ a single one. If his employees
strike, he cannot at once secure another force large and efficient
enough to meet his needs. If his men allow their places one by one to
be filled, the strike will be disastrous to them, indeed, but it will
also be a misfortune for the employer. His new force will be inferior
to his old one, first, because many of the new men will be personally
inferior to the old ones, and secondly, because as a body they lack
effective training and will not work together as efficiently as did
the old force. He can afford to pay for the disciplined workers the
amount that the new force will produce with two plus marks
attached--one representing the superior personal quality of the former
employees and the other representing the value of discipline. In other
words, he can afford to make two distinct additions to the amount that
unemployed men are worth to him in order to retain his old employees.
This is on the supposition that it is possible to gather from the
force of idle men enough to operate a single establishment. Without
organization and by means of individual bargaining, wages are drawn
downward toward the level set by what idle men will accept, which may
be less than they will produce after they receive employment and will
surely be less than they will produce after they have developed their
full efficiency. With organization which is local only, and with
collective bargaining that goes only to the extent of adjusting the
pay of men in one establishment, this pay comes nearer to the standard
set by the productivity of labor than it would if bargains were
individually made. The employer balances in his mind the value of a
new and raw force and the value of a selected and disciplined force,
measures the difference between these values, and will often pay a
rate that is between the two amounts and under average conditions is
likely to approach the larger of them.

Wages as adjusted by a General Organization of Labor in a

Where organization goes to the length of uniting all the
employees in a particular industry or subgroup, the situation is
unlike the foregoing in an important particular. No quick filling of
the places which the men may vacate with altogether new workers is
possible. The employers are not so situated that they can compare the
old force with a new one, measure the difference in their values, and
govern their conduct accordingly. The training of an entirely new
force is indeed a remote possibility, if the business can wait for it,
but it can seldom do this; and a strike that runs through a subgroup
presents to employers the alternative of winning the workers by
concessions or allowing their business to stop. If it stops, it
becomes a question of endurance between the employer and the
employees, in which the employer has the advantage so long as the
public does not interfere. We shall recur to this condition when we
study the effectiveness of strikes and boycotts under various
conditions. Under all three of the conditions we have just described,
the static standard of wages--the final productivity of social
labor--still exists; and the actual pay of labor tends toward it, but
differs from it by varying amounts, according as labor is unorganized,
locally organized, or organized throughout a subgroup. In the first
case the worker may get materially less than the standard amount; in
the second case he may get something closely approaching it; and in
the third case, for reasons to which we shall later give attention, he
may be able to get the full amount and somewhat more. A particular
employment which is strongly organized and which makes the utmost use
of its organization is often able to carry the pay of its employees to
a level that is distinctly above that set by the productive power of
marginal social labor. Nevertheless, the amount of this overplus
which the favored worker gets is limited, and the standard fixed by
marginal productivity is one on which the pay of these workers and of
all others depends, though it may not coincide with it.

The Power of a Universal Organization of Labor

In the days when
the wages fund theory held sway it was believed that organization
could not materially advance the interests of labor as a whole, since
it could not add anything to the fund which was destined in any case
to be divided among the laborers. Now that another theory of wages is
generally held, it is still clear that what organization can do for
the entire working class is limited. By no possibility can it insure a
rate of pay that will permanently exceed the product of labor, since
employers would then be interested in reducing the number of their
workmen and so raising their product per capita to the level of
their pay. This would result in a large force of idle laborers, whose
competition would have its depressing effect on the labor market. Up
to the natural limit set by the specific product of labor a universal
organization might successfully carry its demands. Moreover, this
result would require no use of force--no "slugging" of non-unionists,
since there would be none to be slugged. The mere fact of a universal
organization maintaining discipline and preventing breaks within its
own ranks would suffice for the end in view--the maintenance of pay
that should conform to its natural standard. The supposition of a
universal organization of labor has at present only a theoretical
interest. What society has to deal with is an organization that
includes a small minority of workers and is composed of separate
unions which are endeavoring each to promote the interests of the men
of its own craft. It is a type of organization which, instead of
uniting all workers, makes the sharpest division between those in the
unions and those outside of them, and creates a lesser opposition
between the different unions themselves.

Organized Labor and Monopoly

Actual trade unions do not always
rely upon mere collective bargaining. They sometimes aim to secure a
partial monopoly of their fields of labor; and as it is impossible to
do this if unemployed men or men from other fields of employment are
free to enter their territory, they must be kept out of it. They can
only be kept out by some use of force, and coercion applied by the
workers in a well-paid field to the men who seek to enter it during a
strike is a part of the strategy of trade unions.

The Ground on which the Use of Force is Justified

laborers claim a right of tenure of their positions; they claim to own
them much as a man, by right of prior occupation, owns a homestead.
They claim the same right to repel intruders from their field of
employment that a man has to drive interlopers from his grounds. "Thou
shalt not take another man's job" is a recognized commandment on which
they claim the right to act.

The Mode of Justifying the Use of the Force in Guarding Vacated

Coercion is a comprehensive term and does not always
involve personal assault. What it inflicts on the recalcitrant may
range all the way from social opprobrium and boycotting to literal
striking, maiming, or killing. In every case it involves some injury
and is contrary to the spirit of the law, unless the right of tenure
can be fully established. If the employer has no right to turn off his
men and take new ones, and if the new ones have no right to come at
his invitation, there is a rude analogy between the effort of the
non-union men to get the places and an effort to get away a man's
farm. It is a matter of course that the employer may rightfully
discharge men who prove worthless and fail to render the service which
is contracted for. The question is whether he has the right to dismiss
them when they will render the service only on what seem to him
exorbitant terms. On this point the verdict of his own reason is
extremely clear. To offer to render the service only on exorbitant
terms has the same effect as to offer an inferior service on the
original terms, and the right of tenure which the workingmen claim, if
it exists at all, is contingent on the rendering of effective service
on reasonable terms. On the supposition that they have owned their
places at all they seem to their employer to have forfeited them when
they have insisted on too high wages. On this point, however, the
men's reason may give an opposite verdict, though it is based on the
same principle. To them the terms they insist on may appear
reasonable, and they then think that, because they are so, their
ownership of their positions is valid and that other claimants are
usurpers. Both parties in the dispute base their contentions on the
supposed reasonableness of the terms they demand.

The Necessity for Knowing what Terms are Reasonable

A momentous
question both for society and for the working people is whether there
is any way of ascertaining what terms are reasonable and securing
conformity to them. What we shall find is that it is possible to keep
in view the natural standard of wages, as in an early chapter we have
defined it, and that it is possible, in the midst of the struggle of
massed capital with massed labor, to secure a certain degree of
conformity to this standard. It is possible so to shape the system
that a wide difference between actual pay and standard pay will not
exist, and that wages will everywhere tend toward their natural
levels, as they did under that earlier regime before either the
capital or the labor of a subgroup acted collectively.

The Attitude of the Community toward Striking Laborers

So long as
a local community sympathizes with the worker's dread of competition
and tolerates his claim of ownership of his position, it does not
utterly condemn and repress every use of force in asserting his
claim. The local public is partly composed of friends or neighbors of
the striking worker and is reluctant to interfere with the worker's
effort to defend what he considers his property--that is, his right of
employment in a business to which he is accustomed. The community
sympathizes with his fear of the hardship which may result when
employers freely utilize idle labor as a means of defeating strikes.
On the other hand, even a local community realizes that much
toleration of force means anarchy. If the violence is not resisted or
repressed, the strikers acquire a monopoly that is not dependent on
the justice of their claims. The whole question of reasonableness in
the terms demanded is forcibly set aside, and the pay that is
established becomes, not whatever a calm verdict of disinterested
persons would approve, but what workers by brute force can get. Even a
local public is unwilling to see the social order completely subverted
and mob rule substituted, and it usually interferes when violence goes
to that length; but in its unwillingness completely to repress
disorder, on the one hand, or to leave it wholly unopposed, on the
other, a local government pursues a wavering policy, now repressing
anarchy and again leaving it to gather headway. It seldom affords full
protection to the non-union men who work during a strike. Moreover, it
is the habit of state governments not to interfere with local affairs
until the public peace is endangered, and therefore not until the
coercion of free laborers has gone to great lengths. The federal
government only intervenes in great emergencies. Non-union men working
during a strike are left largely in the hands of the local community,
which often tolerates enough of violence to give to strikers a
measure of monopolistic power. The wavering policy of the local
community in regard to preserving the peace expresses a corresponding
mental wavering. The public obeys no clear principle of action in this
connection and merely allows some "slugging" when it sympathizes with
strikers, but not, as a rule, when it does not. We have to see whether
this rule has in it any germ of a legitimate policy.

The Sole Mode of Escape

The sympathy in the case depends, as we
have seen, on the off-hand impression of the people as to the
reasonableness of the strikers' demands; and for such an impression
there may or may not be an adequate ground. It is evident that no
authoritative verdict has in these cases been pronounced. The only
escape from the intolerable situation which is thus created is by
testing the equity of the laborer's demands and adjudicating his claim
to a tenure of his position. The possible method of doing this we will
presently examine. It is clear in advance that what is to be done is
to determine what pay is reasonable. The worker cannot rightfully
retain the ownership of his job if he does not work properly; and he
cannot so retain it if he works properly and claims exorbitant pay.
Fair dealing between employer and employed must be attained if his
tenure is even tacitly recognized. The worker who accepts a rate of
pay that is pronounced reasonable may safely be confirmed in his place
and protected from any persecution on the part of his employers. The
worker who refuses a rate which some competent authority has
pronounced reasonable thereby forfeits his right of tenure in a
definitive way. His place is clearly the property of whoever will take
it, and the state is bound so completely to preserve order as to make
a new worker perfectly secure from injury. This means that it must do
intelligently and thoroughly what a local community weakly tries to do
when it lets strikers guard their positions if it sympathizes with
their cause, and represses such attempts when it does not. The
sympathy needs to be crystallized into a clear verdict as to the
rightfulness or wrongfulness of the rate of pay demanded, and the
local toleration of violence in cases where the men's demands appear
just needs to become an open and frank assertion of their right to
employment on the terms demanded; while the tardy repression of the
violence in cases in which the demands seem unjust needs to become a
prompt and complete repression of it.

The Preservation of the Mobility of Labor Indispensable

Any use of
force, anything, however slight, that deprives labor of its mobility,
destroys the condition on which the law of wages is predicated. A
perfectly free flow of labor from point to point in the industrial
system is essential to a static state, and to any approximate
conformity of actual wages to the static standard in a dynamic state.
The plan which divides labor into sections and arrays one part of the
force against another makes realization of natural wages impossible.
While all differences of pay which correspond to differences of
productive power are normal, those which are based on a monopolizing
of fields of labor by some and the exclusion of others are abnormal.
They cause the rich fields to be surrounded by impassable walls and
force the bulk of the population to work on the outer and poorer

The Wide Range of Difference between the Pay of Different Classes of
Laborers under Trade Unions

The possible range of the rise of pay
which monopoly may insure for certain laborers is far greater than
that which any action can secure for labor as a whole. Mere collective
bargaining makes some difference, indeed, but where there is no
attempt to exclude from a favored field workers of the poorly paid
class, the range of difference is not great. To double the pay of
laborers of every class would require more than the entire income of
society, and yet it is possible for a few workers to make as large a
gain as this. Some organizations without monopoly may keep the actual
pay of labor somewhat near to its theoretical standard. With monopoly
they may carry it far above the standard set by the marginal
productivity of social labor.

The Differing Efficiency of Organization as used against Different
Classes of Employers

When employers are acting independently, a
trade union which deals with them one at a time may very easily bring
the pay of its members up to a certain average standard. A strike
against a single producer may be very disastrous for him, since it may
cause him to lose his customers. If the general state of business is
good, he will pay all that he can rather than see business drift away
from him, but what he can pay is somewhat strictly limited. He cannot
safely give more than what is given by most of his competitors.
Organization in such a case is a good equalizer of pay, and as its
power is used against different employers successively, it suffices to
raise general pay toward or to a standard set by the productivity of
the labor. Moreover, as a rule, it can accomplish this without any
appeal to violence. A modest and reasonable demand enforced by a
wholly peaceable strike is likely to be conceded.

The Power of a Strike against All Entrepreneurs in a Subgroup

strike against employers in an entire subgroup may gain more for the
workmen, but the more ambitious effort encounters stronger resistance.
The employers, we assume, are competing still and have not the power
which a monopoly would give them to raise the prices of their
products. Nevertheless, they can concede somewhat more when they act
together than one of them could concede separately. A concurrent
raising of prices is entirely possible without any positive
combination of the producers who follow such a course. Moreover, the
strike itself, if it continues for any length of time, creates a
scarcity of the products and a rise of prices. Though the employers in
the end may concede what their workers demand, or some part of it, the
settlement may not cost them anything, since the advance in prices may
enable them to take all that they give their men out of the pockets of
the public. The strike by a trade union against competing employers
has as one ground of early success the employers' distrust of each
other. The danger is that as soon as prices become at all firm, one or
another of the employers may quickly make terms with his men in order
to seize the opportunity for new business. For this very reason,
however, the range of possible gains from a strike running through a
whole subgroup is smaller than it would be if the employers were
organized, so that all of them could safely wait for a larger rise of
prices before making terms with their men. The possible increase of
pay without a combination on the employers' side is distinctly larger
than any which a strike against a single employer can usually secure.

The Power of a Strike against a Union of Employers

Still keeping
the supposition that there is no coercion invoked and that strikes are
quite orderly, we find that they may gain more when employers are
consolidated than when they are not so, but that they are likely to
encounter still greater resistance. The demand--"Pay us more and
charge it to the public"--may be conceded, and probably will be so if
the employers dread the hostility of their own men and the action of
the state in enforcing a resumption of business. If they have no such
dread, their power to resist a strike is much greater by reason of
consolidation. They can safely hold out long if the public will let
them do it. No one of them is in any danger of seeing others take his
customers. Their hold upon their constituency is secure, and their
power to tax the constituency and make it pay for whatever a strike
may cost is very great. A strike under such circumstances may win much
for the men or it may win nothing whatever, and the difference between
these results is mainly determined by the attitude of the people. If
the government will hold its hands and let the producers work their
will, they may (1) allow the strike to run for a time, concede
something to their men, and raise prices enough to recoup themselves
with a surplus; or else (2) they may let the strike run longer, till
the men are tired out, take them back without concessions, and still
put the same tax on the public as in the other case.

Effectiveness of Coercion as used against Non-union Men

As a
peaceful strike has different possibilities according as it is used
against a single producer, a body of competing producers, or a
consolidation of producers, so coercion employed against independent
workers has correspondingly different effects in the three cases. When
it is used in the case of a strike of the first class, it enables the
men to carry their point more quickly, but does not materially
increase the amount they can gain. If the independent producer is
unable to run his mill till he makes terms with his original workers,
he will be in greater haste to make terms, but the amount he can yield
is limited almost as closely as before by the prevailing rate of pay.

In the case of a strike of the second class which runs through a
subgroup in which producers are still without union, coercion adds
greatly to what the men may gain. It may fix and enforce a rate of pay
which all employers must give, and circumstances will compel them to
charge it to the public in whole or in part. The marginal producers
who have no net profits must charge the whole advance to the public or
go out of business, and the result may be that some of them may go
out. The advance in the rate of pay conceded by others may come partly
out of their own profits and partly out of consumers' pockets.

With employers in a great consolidation the possible advance of wages
is at its maximum. The employers are in a position to charge to the
public all that they give to the men, and more. If the state allows
them to do it, they may thrive by repeated strikes. Whether their men
thrive or not depends on their power to bar other labor from their
field and to live without work long enough to induce their employers
to yield.

The effect of coercion on the wages of non-union laborers means a
lowering of their pay. It confines them to the less productive field
which is open to them.

1. Wages of union labor which monopolizes its field
and deals with competing employers.

2. Wages obtainable by union without monopoly
approximating the natural rate.

3. ----------------- Level of pay with no unions in the field.

4. Wages of non-union labor excluded from
the more productive fields.

5. Base from which wages are measured.

The height of lines 1, 2, 3, and 4, above the base line 5, measures
wages, and the length of the lines rudely indicates the numbers of
workmen in different classes. The dotted lines above and below line 1
represent what union labor which maintains by force a monopoly of its
field may be able to get from employers who are in a combination. It
may be more than competing employers would give or it may be less.

For men in strong unions who have carte blanche to defend their
fields, the policy of leaving other labor to its fate is
overwhelmingly the more profitable. With a choice between gaining a
hundred per cent in wages for ourselves or ten per cent for working
humanity, self-interest speaks decisively in favor of the former

In connection with the actual dealings of workmen with their employers
the following are the principal facts:--

1. When labor makes its bargain with employers without organization on
its own side, the parties in the transaction are not on equal terms
and wages are unduly depressed. The individual laborer offers what he
is forced to sell, and the employer is not forced to buy. Delay may
mean privation for the one party and no great inconvenience or loss
for the other. If there are within reach a body of necessitous men out
of employment and available for filling the positions for which
individual laborers are applying, the applicants are at a fatal

2. Collective bargaining is a partial remedy for this disability and
brings the pay of labor closer to its normal standard than, under
individual bargaining, it could possibly be, but does not, of itself,
enable one class of laborers to raise themselves to a position which
is very much above that of a majority of the others. It gives to no
class of workers any monopoly of their field or any power to tax the
public or oppress men who are unorganized. It is a normal and
democratic measure.

3. Many actual trade unions do not depend upon mere collective
bargaining, but aim to secure a special gain through a partial
monopoly of their several fields of labor. Their policy is exclusive
in that it tries to limit the number of men who are admitted to the
unions and to prevent non-union men from working at the craft.

4. In the establishing of such control of fields of labor some force
is employed in order to bar from the fields men who would gladly enter
them. "Slugging" is a frequent part of the strategy used when strikes
are pending, and this elastic term covers a wide range of deterrent
arguments. Whatever goes beyond a verbal demand or insult to the man
or his family and involves any use of physical force is included in
the meaning of the term, and the action ranges from small injuries to
the clubbings which maim and kill. Moreover, social ostracism is to
be rated as tantamount to force as a means of preventing a free
movement of labor.

5. When the resort to force is defended, it is on the ground that the
organized laborers have a right of tenure of their positions and that
they may vacate them and still hold them as quasi-property. One man
should not "take another man's job" even after the other man has left
it. Acting on this claim, union laborers treat men who attempt to
occupy the vacated places much as a man would treat intruders on his
land or in his house. It is, as is claimed, a case in which a man must
be his own policeman and protect his property.

6. The public sympathizes with the worker's dread of the competition
which he encounters when unemployed men are gathered from near and far
and set working in strikers' positions. It even tolerates, in a way,
his claim of quasi-ownership of his position, and though it condemns
the violence with which he enforces the claim, it does not summarily
repress the violence. It is without a well-defined policy and often
weakly permits disorders to grow into anarchy which only troops can
quell. Local governments are often reluctant to lay vigorous hands on
"sluggers," even when to do so would forestall the necessity for
severer measures. This is due to an instinctive feeling that hardship
and injustice may result from allowing employers to utilize a reserve
of idle labor as a means of depressing their employees' wages and
defeating strikes.

7. It is realized, on the other hand, that giving to violence a free
rein means an amount of anarchy which no state can tolerate, that
non-union laborers have, under the law, a claim to protection, and
that allowing strikers to drive them from the field is permitting a
monopoly to be established by crime.

8. The reluctance promptly to repress violence, on the one hand, or to
leave it unopposed, on the other, expresses a mental wavering, since
the state perceives and follows no clear principle in this connection.
It has neither defined the nature and extent of laborers' rights nor
provided for any orderly process for securing them.

9. The only escape from this situation is by arbitration. It is
necessary to adjudicate the laborer's demand for wages and to legalize
his tenure of place on condition that he shall accept a just rate of
pay. The state is bound to ascertain and declare what rate is just, to
confirm the workers in their positions when they accept it, and to
cause them to forfeit their right of tenure if they refuse it. If the
workers thus forfeit their claim, their positions are clearly open to
whoever will take them, and the state is bound to protect the men who
do this. Such appears to be the present situation, and an essential
feature of it is the need of ascertaining on what principle a court of
arbitration should proceed in determining what rate of pay is just.

Next: The Basis Of Wages As Fixed By Arbitration

Previous: The Foregoing Principles Applied To The Railroad Problem

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