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.

t 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.