The Economics of Welfare
By Arthur C. Pigou
WHEN a man sets out upon any course of inquiry, the object of his search may be either light or fruit—either knowledge for its own sake or knowledge for the sake of good things to which it leads. In various fields of study these two ideals play parts of varying importance. In the appeal made to our interest by nearly all the great modern sciences some stress is laid both upon the light-bearing and upon the fruit-bearing quality, but the proportions of the blend are different in different sciences. At one end of the scale stands the most general science of all, metaphysics, the science of reality. Of the student of that science it is, indeed, true that “he yet may bring some worthy thing for waiting souls to see”; but it must be light alone, it can hardly be fruit that he brings. Most nearly akin to the metaphysician is the student of the ultimate problems of physics. The corpuscular theory of matter is, hitherto, a bearer of light alone. Here, however, the other aspect is present in promise; for speculations about the structure of the atom may lead one day to the discovery of practical means for dissociating matter and for rendering available to human use the overwhelming resources of intra-atomic energy. In the science of biology the fruit-bearing aspect is more prominent. Recent studies upon heredity have, indeed, the highest theoretical interest; but no one can reflect upon that without at the same time reflecting upon the striking practical results to which they have already led in the culture of wheat, and upon the far-reaching, if hesitating, promise that they are beginning to offer for the better culture of mankind. In the sciences whose subject-matter is man as an individual there is the same variation of blending as in the natural sciences proper. In psychology the theoretic interest is dominant—particularly on that side of it which gives data to metaphysics; but psychology is also valued in some measure as a basis for the practical art of education. In human physiology, on the other hand, the theoretic interest, though present, is subordinate, and the science has long been valued mainly as a basis for the art of medicine. Last of all we come to those sciences that deal, not with individual men, but with groups of men; that body of infant sciences which some writers call sociology. Light on the laws that lie behind development in history, even light upon particular facts, has, in the opinion of many, high value for its own sake. But there will, I think, be general agreement that in the sciences of human society, be their appeal as bearers of light never so high, it is the promise of fruit and not of light that chiefly merits our regard. There is a celebrated, if somewhat too strenuous, passage in Macaulay’s Essay on History: “No past event has any intrinsic importance. The knowledge of it is valuable, only as it leads us to form just calculations with regard to the future. A history which does not serve this purpose, though it may be filled with battles, treaties and commotions, is as useless as the series of turnpike tickets collected by Sir Matthew Mite.” That paradox is partly true. If it were not for the hope that a scientific study of men’s social actions may lead, not necessarily directly or immediately, but at some time and in some way, to practical results in social improvement, not a few students of these actions would regard the time devoted to their study as time misspent. That is true of all social sciences, but especially true of economics. For economics “is a study of mankind in the ordinary business of life”; and it is not in the ordinary business of life that mankind is most interesting or inspiring. One who desired knowledge of man apart from the fruits of knowledge would seek it in the history of religious enthusiasm, of martyrdom, or of love; he would not seek it in the market-place. When we elect to watch the play of human motives that are ordinary—that are sometimes mean and dismal and ignoble—our impulse is not the philosopher’s impulse, knowledge for the sake of knowledge, but rather the physiologist’s, knowledge for the healing that knowledge may help to bring. Wonder, Carlyle declared, is the beginning of philosophy. It is not wonder, but rather the social enthusiasm which revolts from the sordidness of mean streets and the joylessness of withered lives, that is the beginning of economic science. Here, if in no other field, Comte’s great phrase holds good: “It is for the heart to suggest our problems; it is for the intellect to solve them…. The only position for which the intellect is primarily adapted is to be the servant of the social sympathies.”… [From the text]
First Pub. Date
London: Macmillan and Co.
The text of this edition is copyright © 1932. This book is available through Transaction Publishers, Inc. Direct all requests for permissions and copyrights to Transaction Publishers, Inc.
- Preface to the Third Edition
- Note to the Fourth Edition
- Part I, Chapter 1
- Part I, Chapter 2
- Part I, Chapter 3
- Part I, Chapter 4
- Part I, Chapter 5
- Part I, Chapter 6
- Part I, Chapter 7
- Part I, Chapter 8
- Part I, Chapter 9
- Part I, Chapter 10
- Part I, Chapter 11
- Part II, Chapter 1
- Part II, Chapter 2
- Part II, Chapter 3
- Part II, Chapter 4
- Part II, Chapter 5
- Part II, Chapter 6
- Part II, Chapter 7
- Part II, Chapter 8
- Part II, Chapter 9
- Part II, Chapter 10
- Part II, Chapter 11
- Part II, Chapter 12
- Part II, Chapter 13
- Part II, Chapter 14
- Part II, Chapter 15
- Part II, Chapter 16
- Part II, Chapter 17
- Part II, Chapter 18
- Part II, Chapter 19
- Part II, Chapter 20
- Part II, Chapter 21
- Part II, Chapter 22
- Part III, Chapter 1
- Part III, Chapter 2
- Part III, Chapter 3
- Part III, Chapter 4
- Part III, Chapter 5
- Part III, Chapter 6
- Part III, Chapter 7
- Part III, Chapter 8
- Part III, Chapter 9
- Part III, Chapter 10
- Part III, Chapter 11
- Part III, Chapter 12
- Part III, Chapter 13
- Part III, Chapter 14
- Part III, Chapter 15
- Part III, Chapter 16
- Part III, Chapter 17
- Part III, Chapter 18
- Part III, Chapter 19
- Part III, Chapter 20
- Part IV, Chapter 1
- Part IV, Chapter 2
- Part IV, Chapter 3
- Part IV, Chapter 4
- Part IV, Chapter 5
- Part IV, Chapter 6
- Part IV, Chapter 7
- Part IV, Chapter 8
- Part IV, Chapter 9
- Part IV, Chapter 10
- Part IV, Chapter 11
- Part IV, Chapter 12
- Part IV, Chapter 13
- Appendix I
- Appendix II
- Appendix III
§ 1. AN influence, less important, indeed, than the hours of labour, but still very important, is exercised upon the national dividend and, through it, upon economic welfare, by the methods of industrial remuneration. Whatever methods are adopted in any industry, the general tendency of economic forces will be to cause the wages offered for each class of workpeople to approximate, subject to qualifications which are not here relevant, to the value of the marginal social net product of that class. At first sight it might seem that, if this be so, things must work out in the same way whatever method of remuneration is in vogue. But the truth is otherwise. For, though under all systems a man will be paid over a year the worth of his work during the year, under some systems it will be to his interest to do more work, and so to have a larger worth, than under others. Thus payment may be made independently of the results achieved by the worker at any moment, being adjusted only to what experience shows he may be expected, under that method of remuneration, to achieve on the average; or it may be adjusted to results, not merely on the average, but continuously and in detail; or some compromise between these plans may be adopted. Broadly speaking, the worker’s output will be larger, the more nearly the method of remuneration in vogue adjusts payments to individual results. This, no doubt, is not true invariably. There are certain sorts of work where interest in the work itself, or interest in the use to which it will be put, induces people to work as hard as they can without reference to the mode in which payment for their
services is made. This is probably true of most work of original artistic creation, of the higher administrative work of the civil service and even of some kinds of private business. In these occupations the national dividend will be none the worse if a fixed salary by the year, or a fixed wage by the hour, is paid without any reference to what the worker actually accomplishes in any particular period. There is even an opening, if the jobs are sufficiently stable to make a high degree of mobility unnecessary, for payment by a life salary with yearly increments, adjusted not so much to presumed changes in the value of the employee’s work as to presumed changes in his domestic status, and, therefore, in his needs. Most of the tasks, however, that ordinary manual workers have to perform, are routine tasks, and—owing to the division of labour—are so remotely connected with any finished product that interest in them sufficient to evoke continuous, spontaneous and disinterested effort can hardly be expected. Even here, no doubt, some men will be found, whom an ardour for excellence for its own sake or a stern sense of public duty will cause to exert themselves to the utmost without reference to expectations of reward; and the prospect that this will happen is specially favourable where systems of Labour Copartnership have succeeded in evoking in the workpeople a feeling of proprietorship in, and patriotism towards, the concern in which they are employed. From the main body of ordinary work-people engaged in manual occupations this, however, is not at present to be looked for. The amount of work they will do in any hour, week or year will be greater if the payment made to them does, than it will be if it does not, vary as this amount varies. The national dividend will be larger the more nearly each increment of effort on the part of any individual worker is rewarded by a payment equal to the value of the difference which that increment of effort makes to the total product; and any enlargement of the dividend brought about by improved adjustment in this matter will,
prima facie, carry with it an increase in economic welfare.
*80 This does not, of course, imply that the pay should
be equal to the value of a man’s output as ordinarily understood; for this output is in part due to machinery and equipment, which, if not engaged in assisting him, would have helped to increase the output of other workpeople. Nor does it even mean that the pay should be
exactly proportioned to the value of a man’s output so understood. In a factory—though not, of course, among home-workers—when a man works slowly he “occupies” the employer’s machine or work-space for a longer period in producing a given quantity of output than he does when working fast; and so estops the machinery or work-space from being used by others. Hence, for a complete adjustment between wages and the value of marginal net product, we should need a payment that varied, not proportionately, but progressively, with the quantity of a man’s output; and this point becomes more important the greater is the value of the plant in a factory relatively to the wages bill.
*81 This, however, is a secondary matter. Subject to it, it is plain, from the present point of view, that pay should be
proportioned (in a ratio calculable, and different in different occupations) to output as ordinarily understood. In other words, it should
correspond for any worker, with the results, conditions remaining constant, actually achieved by him.
§ 2. In order to construct a wage system of this kind, under which a man’s pay is based directly and immediately on his output, we must have some means of ascertaining, with greater or less accuracy, how large that output from time to time actually is. In the way of this there are a number of obstacles, the importance of which varies in different occupations. The first, though not the principal, of these is that a workman’s output, when strictly interpreted, may include other elements in addition to the physical product that his labour, in conjunction with the machinery entrusted to him,
brings to birth. For, as Jevons long ago observed: “In every works there are a thousand opportunities where the workman can either benefit or injure the establishment, and, could he really be made to feel his interests identical with those of his employers, there can be no doubt that the profits of the trade could be greatly increased in many cases.”
*82 Among these additional elements perhaps the most important are the suggestions which a workman may be able to offer for more effective or more economical methods of work, and the contribution which he may make by his influence towards a spirit of harmony and good-fellowship in the shop. These elements can, indeed, be taken account of in a rough general way, and money rewards designed to induce workpeople to provide them can be offered; but anything in the nature of approximate measurement of their value is obviously impossible.
§ 3. The second difficulty is that the physical output for which an individual workman is responsible is liable to vary, not only in quantity, but also in quality. Ability to measure its quantity is, therefore, not sufficient, unless workmen can be prevented from making output larger at the expense of making it worse. In some circumstances this can be done by means of carefully thought-out schemes of inspection and supervision. Mechanical gauges can also be made use of in certain types of work. It has been said that “in the munition industry, where accuracy is of such vital importance, quite as many employees are engaged in gauging the output as will be actually producing it, and every single unit of output—not merely samples—will be subjected to the process.”
*84 These devices, however, cannot be effectively
applied either to work that has to be done by workmen acting in scattered places or to work the results of which—as in plumbing and sewer-making—are speedily covered up. In these types of work, since defects of quality threaten serious injury to health, it is generally thought better to refrain from any attempt at making the wage-payment depend on the quantity of output.
§ 4. Even where a proper standard of quality can be enforced and the danger of injurious reactions on quality eliminated, to measure the quantity of output by itself is often difficult. It is especially so when the work consists of general surveillance and attention, rather than of specific mechanical operations. The work done by seamen, telegraph and telephone operators, carmen and railway signalmen is of this kind. So also is much agricultural work. Thus M. Besse writes: “The essence of measurable things is their homogeneity, their identity with themselves. Harvesting and the weeding of roots, for example, allow of piece-wages, because the work remains the same for days and weeks, and, in order to measure its efficiency, all that is needed is to count the sheaves amassed or to calculate the surface weeded. The greater part of the work of cultivation is similar. But, on the other hand, the task of men who look after and manage animals varies from hour to hour of the day and begins again every morning in such wise that no summary or addition of it is possible. It consists of watching the pasture lands, grooming the animals, cleaning the stables, and so on, all operations complex in themselves, admitting of no common measure, needing to be done in a limited time and at a fixed hour, and often of such a kind that nothing would be gained by any extra stimulus to exertion. This is why piece-wages, very widespread in arable districts like the east and south-east of England, are so rare in the districts devoted to stock-raising.”
*85 In mechanical work the total product of
a body of men is, in general, fairly definite and measurable. But even here it is sometimes very difficult to distinguish and measure separately the contribution that is made to it by separate individuals. This difficulty is
prominent in the work done by gangs of harvesters or navvies. It is also of some slight importance in that of shop-assistants, for it is the business of these people, not merely to serve customers, but also, when they are themselves engaged, to hand them over tactfully to some other assistant.
§ 5. Let us now suppose that we have to deal with occupations in which this difficulty has been, in some degree, overcome, so that a rough measure, or estimate, of the individual worker’s contribution, as he works from day to day or week to week, can be made. It is required so to arrange things that pay is adjusted to this measure. To some extent—a more considerable extent than is often supposed—this can be, and is, done under ordinary systems of time-wages. Though it is not practicable to vary a man’s time-wage from day to day or week to week with variations in his accomplishment, nevertheless, it is often possible so to arrange things that a man may reasonably expect higher rates on the whole as a reward for better work. Moreover, when there is no chance of this, he is almost certain to improve his prospects of being kept at work in bad times and of promotion to a better-paid post.
§ 6. Plainly, however, a very much closer adjustment can be made by resort to the method of piece-wages. Under this plan workmen, working in given conditions and with given machinery, are paid exactly in proportion to their physical output. Of course it is recognised “that, if a manufacturer contributes anything directly toward reduction in the time by supplying an improved machine, or improved jigs or fixtures, or high-speed steel cutting tools, where previously carbon steel tools had been used at the original setting of the time, that then it would be perfectly proper and fair to lower the time set,”—which means, in effect, to lower the piece-rate. If this were not done, the benefit of improvements made in any industry would be seized by the particular workers engaged there—and they, in order to keep it, would have to form themselves into a close ring and exclude new-comers—instead of being spread, as normally it should be, over the general body of the purchasing public. In given conditions, however, under simple piece-wages
a workman is paid,
from the standpoint of the moment, in direct proportion to his output, the actual amount of the pay per unit of service being approximately equal to the (marginal) value of his services in assisting the machinery to make this output.
*87 It is true, as was indicated at the end of § 1, that the adjustment is not exact. Even under piece-wages greater efforts are not rewarded directly in full proportion to their worth. Nevertheless, when account is taken of the fact that, on this system as well as on the time-wage system, the better a man works the more secure he is of regular employment, it may fairly be said that adjustment is
nearly exact. Consequently, it would seem at first sight that this is the system under which, apart from possible overstrain to the workpeople, to be referred to presently, and provided that the level of the rate is properly adjusted, the largest practicable output is bound to be obtained.
*88 The system has been for a long time established and has operated with great success in this country in coal-mining, the textile industries, the boot and shoe industry and a number of others.
§ 7. Experience has shown, however, that over a wide range of industries piece-wages have been a failure. When a piece-rate has been introduced, and, under its influence, the workers have increased their output, employers, thinking that some men were now earning too much money, have sometimes “cut” or “nibbled” the rate. The workers, perceiving this, realise that extra effort on their part is likely to involve, not only an immediate increase of earnings, but also a subsequent
reduction of the piece-rate, the effect of which will be to make it impossible for them to earn their original wage without working harder than before. To prevent this they tend, whether by formal agreement or otherwise, deliberately to limit their output, so that very little, if any, advantage is secured for the national dividend as against the output under time-wages.
§ 8. The apparently obvious solution of this difficulty, namely, that employers should rigidly abstain from rate-cutting in any circumstances, has occasionally been adopted. Thus, in the United States, “in the spring of 1902, the Moulders officially agreed with the Employers’ Defence Association that no limit (of output) should be observed in the stone-moulding branch, in view of the agreement that the earnings of the individual moulders should not be considered in adjusting prices of work.”
*89 Apart, however, from the fear of indirect cutting by slight alterations in the nature of a job and large accompanying alterations in the rate, which would enable unscrupulous employers to get round this kind of guarantee in a dishonourable way, the extreme difficulty of ensuring that rates are fixed reasonably in the first instance will make even the best employers hesitate to give such a guarantee. For, as a result of it, they might find themselves bound for a long time to pay four or five times as much for a piece of work as they could get the work done for in a free market. Some of them have, therefore, taken the line that, if there is to be an effective guarantee against “nibbling,” they must be insured against the guarantee costing them too much. This is the origin of the various methods of remuneration embraced under the general title of
premium plans. The essential characteristic of these is that the increases of wage, which correspond to increases of output above the standard, are proportionately smaller than these increases of output, but that, in compensation for this, the workpeople—in theory at least—are guaranteed against any cutting or nibbling of the rate, so long as the existing methods of production are maintained. The precise relation between the amount of the premium and the amount of increases of output above the standard varies
with different systems. Under the plan known as the Halsey plan, for every 1 per cent increase of output above the standard output the wage rises above the standard wage by a
constant fraction of 1 per cent: under the equally well-known Rowan plan, it rises by a
constantly diminishing fraction of 1 per cent.
*90 The advocates of these plans maintain that the low rate of the premium, as compared with that ruling under simple piece-wages, which is offered under them, and the consequent limitation of the employers’ liability, make it possible for a really effective guarantee to be given against any nibbling of the rate, and that, therefore, on the whole, the adjustment of remuneration to output is closer than it would be under simple piece-wages. There is, indeed, considerable difficulty in the employment of premium plans except in workshops where all the workpeople are of more or less similar capacity. For, if their capacities are widely different, a strong man, who produces half as much again as a weak man, is paid much less than half as much again in wages; and, in these circumstances, friction can hardly fail to result. But, when, for technical reasons, the differences of output between individuals cannot be great, this difficulty does not arise, and it is claimed that premium plans should prove an effective means of stimulating production.
§ 9. Now, it is quite possible that, if workpeople can be got to regard them as fair, and to trust the guarantee against cutting, these plans will be more effective than piece-wages under which cuts are feared. As a matter of fact, however, they are not fair. When a workman, other things being equal, doubles his output, he contributes, owing to his shorter occupation of machinery for a given product, rather more than twice as much as before to his employer’s service. For the employer to give him, as under all premium plans he will do, considerably less than twice his former pay, is, and, when the position is realised, is felt to be, exploitation. Nor is it an adequate reply that the prospect of retaining a part of the resulting gain stimulates the employer to provide a number of conveniences and aids—”additional facilities, small tools, more power, improved lighting, better organisation, etc.”
*92—which are themselves partly responsible for the worker’s extra output. These things may or may not be provided. If they are provided, the rate should be adjusted to allow for them. But premium plans do not give any pledge that this will be done; they ensure that, even when conditions are absolutely unchanged and the whole additional output is due to the worker’s effort, a doubled output shall mean much less than a doubled wage. This unfairness is bound sooner or later to be perceived, and, when it is perceived, the resentment which the worker will naturally feel at it is likely to drive down the output and nullify any good effect the plan may at first have had upon the national dividend. In any event, the only advantage that premium plans can claim over piece-wages is that they make possible effective guarantees against cuts. Clearly, therefore, they must be inferior to a piece-rate system so organised that the cut difficulty is overcome. The real problem is, not to evade the task of devising such a system, as premium plans substantially do, but to confront that task in those industries in which it is still formidable, and to overcome it there, as it has already been overcome in the textile industries and in coal-mining.
§ 10. The cutting or nibbling of rates may be attempted by an employer either quite honestly, when experience has shown that a particular rate was fixed too high relatively
to rates generally, or dishonestly in pure exploitation,
i.e. in an attempt to pay the workpeople less than their marginal worth. It is plain that the first sort of cutting ought, in any satisfactory system, to be provided for, just as provision should also be made for raising rates which have accidentally been set too low. Elaborate precautions should be taken to ensure that both these sorts of error occur very rarely, but, when they do occur, machinery for correcting them should be available. If the machinery is regarded with confidence by the workpeople, the fear of this class of cut will do little harm. Exploitation cuts, on the other hand, must be absolutely prevented. With piece-wages settled by individual bargaining between separate wage-earners and their employers, neither of these things can be done. Furthermore, when a bad employer, under this arrangement, succeeds in “nibbling” the rate, his success makes it difficult for his competitors to refrain from following his example, and is apt, therefore, to start a cumulative movement. But it is not necessary that piece-rates should be fixed by individual bargaining. In this fact the solution of the problem may be found. For collective bargaining furnishes a guarantee against the kind of nibbling which is really exploitation, and also makes it easy to provide machinery—whether joint-committees or jointly appointed rate-fixers—to adjust particular rates, in the original fixing of which a mistake has been made. In this connection it is interesting to note that the rapid extension of piece-work in the engineering trade, which took place during the war—it was, no doubt, facilitated by the greater uniformity of products which was required—”led to a great variety of forms of collective bargaining. In some establishments a new piece-price is submitted to the Works Committee before it is discussed with the individual workman. In others an Appeals Committee has been instituted to consider and bring forward complaints against piece-prices or premium bonus times fixed by the management. In others again…prices have been discussed, not with the individual workman, but with the workman and two or three of his mates on similar work.”
*93 These collective bargains within particular
works are, of course, not made in the air. They aim at such an adjustment of rates to the peculiar conditions of the works as will bring them into line with the standard conditions established for the industry as a whole by collective bargaining between representative associations of employers and employed.
*94 In industries, such as textiles, coal-mining and the boot and shoe industry, where piece-wages have been successful and willingly accepted by the workpeople, they have always been associated with collective bargaining. Where there has been difficulty and opposition, as in engineering, woodworking and building, the real reason has been that subtle differences of quality and detail and great differences in the amount and kind of machinery in use in different shops have made anything like uniform piece-rates unsuitable, and so have stood in the way of successful collective bargaining. In these circumstances the supersession of time-wages by piece-wages would often have meant the surrender of collective bargaining in favour of rates really fixed by the arbitrary decision of employers or their representatives dealing with isolated workmen. In order that the piece-wage system, and the benefit to production which it carries with it, may win further ground, what is required is to develop in these more difficult industries an adequate machinery for subordinating piece-wages, as they are subordinated in the textile industry, to the full control of collective bargaining.
§ 11. A word must here be said about a method of wage payment, different from both time-wages and piece-wages, which has been associated with some developments “of scientific management” under the name of task-wages. The essence of this method, of which there are several different forms, is as follows. Experiments are set on foot to ascertain how large an output a first-class workman, working under given conditions and exerting himself to his full capacity without overstrain, can produce in a given time. The output thus ascertained then becomes the standard task. The workpeople are so selected and trained that all those employed in establishments operating the system are first-class workmen—it would serve equally well if they were of any other class, provided all were similar—from the standpoint of the operations to be performed there; and the wage system is adjusted in such a way that they earn very much better pay if they succeed in accomplishing the standard task than if they fail to do this.
*96 The method has been described thus: “Under this system each man has his work assigned to him in the form of a task to be done by a prescribed method, with definite appliances, and to be completed within a certain time. The task is based on a detailed investigation by a trained expert of the best method of doing the work; and the task setter, or his assistant, acts as an instructor to teach the workmen to do the work in the manner and time specified. If the work is done within the time allowed by the expert and is up to the standard for quality, the workman receives extra compensation (usually 20 to 50 per cent of the time allowed) in addition to his day’s pay. If it is not done in the time set, or is not up to the standard for quality, the workman receives his day’s pay only.”
*97 Under the Gannt
variety of the method ordinary time-wages are paid
plus a large bonus to those who perform the standard task: under the Taylor variety ordinary piece-wages are paid, but the rate of piece-wages is abruptly raised by a large amount when the standard task is attained.
§ 12. Hitherto, when this plan has been employed in the United States, the standard has been fixed by the employers without resort to collective bargaining. When workpeople are prepared to allow this, and when employers are reasonable and liberal, there may, no doubt, be good results. But there is an obvious danger that unscrupulous employers may use their power to fix the standard as a means of exploitation;
*98 and it is certain that in Great Britain, where trade unions are strong, the workpeople would never consent to place this power in their hands. If the standard was fixed by collective bargaining, so that the workpeople were prepared to accept it,
and was fixed right, the best result possible would be only equal to that given by a smoothly-working piece-wage system; and, for a result as good as that to be achieved, it would be necessary that all the workpeople to whom any standard was applied should be
exactly equal in capacity and temperament. Unless this impossible condition is fulfilled, adjustment under the task-wage system is bound to be less perfect than under a properly arranged piece-wage plan. On the whole, therefore,
since it is difficult to imagine circumstances in which it would be practicable to set tasks rightly but not practicable to arrange simple piece-wages, there is little to be said for introducing the task-wage system into this country.
§ 13. The practical conclusion, to which the reasoning of this chapter has tended, is that the interest of the national dividend, and, through that, of economic welfare, will be best promoted when immediate reward is adjusted as closely as possible to immediate results, and that this can, in general, be done most effectively by piece-wage scales controlled by collective bargaining. It is possible to urge against this conclusion that the large immediate output, which work-people produce under the piece-wage system, is obtained at the cost of exertions which wear them out prematurely and so damage their efficiency and output in the long run. If these charges were true, the advantage I have claimed for piece-wages would be proved to be, in part at least, illusory. It must be admitted that, when a piece-wage system is first introduced among workpeople not hitherto accustomed to it, it sometimes leads to a spurt of energy that could not be maintained for long without bad results. But experience does not show that it promotes overstrain, when once the men who have been brought under it have become, as it were, acclimatised to the new conditions. Moreover, it has to be remembered that greater intensity of work often means more thought, care and interest—which do not imply extra wear and tear—rather than greater muscular or nervous effort.
*99 Little weight, therefore, need be assigned to this objection, and the conclusions set out above may be taken to hold good.
post, § 13.
Report of the War Cabinet Committee on Women in Industry, p. 84). Plainly; however, reasoning of this type points to a lower piece-rate for all slow workers, whether male or female, than for fast workers, not to a lower piece-rate for women as such than to men as such.
Methods of Social Reform, p. 123.
A Dividend to Labour, p. 230; Rowntree,
Industrial Betterment, p. 31, and Meakin,
Model Factories and Villages, p. 322.) In Van Marken’s establishment a premium is given for “evidences of good-fellowship and co-operation, thus encouraging those whose behaviour conduces to the smooth working of the concern” (Meakin,
Model Factories and Villages, p. 315).
Use of Factory Statistics in the Investigation of Industrial Fatigue, p. 72.
post, Chapter XV. § 2.
The Standard Rate in American Trade Unions, pp. 224-5.
Journal of the Royal Economic Association for December 1915.
Let W be the standard wage, P the standard output,
w the actual wage earned by a workman, and
p the actual output of that workman:
Then the general formula for the Halsey plan is
n is any integer. In the particular variety of this plan employed in Mr. Halsey’s works,
n has the numerical value 2. The general formula of the Rowan plan is
p) is negative.
In the particular variety of this plan employed in the Rowan works
p) is given the value P/
p: and the maximum value to which
w can attain is, therefore, 2W. In England, but not in Germany, plans of this type are usually associated with the guarantee of a minimum time-wage irrespective of output; that is to say, when
p is < P, the formula is not applied, but the standard wage W is paid.
Work and Wages, vol. ii. pp. 184-5.
The Rowan Premium Bonus System, p. 12.
Report on Works Committees, 1918, pp. 37-8.
The Works Manager To-day, chap. vi.; also D. H. Cole,
The Payment of Wages, passim. There is some evidence that “in Germany the strong antagonism to piece-work shown by organised labour in the early days of the German Republic is being displaced by a tendency to welcome its introduction, even in industries such as stone-cutting and the metal trades, in which it was formerly either quite excluded or bitterly opposed. According to the
Reichs-Arbeitsblatt, this change of attitude is to be attributed, in the main, to the fact that the workers (under Article 165 of the German Federal Constitution) co-operate, on equal terms with the employers, in the regulation of wages conditions; and that Section 78 of the Works Council Act of 1920 specifically grants to the Workers’ Council (or the Works Council, as the case may be) the right to supervise the application of collective agreements, or, where these do not exist, to co-operate with the employer in the fixing of piece-rates or the bases thereof. Similar provisions have been inserted in a large number of collective agreements. Thus the workers have both a statutory and, in many cases, a contractual guarantee that a piece-work system accepted by them shall not be applied in a one-sided fashion in favour of the employer, but that the proceeds of any increased output shall be shared by them also” (
Labour Gazette, November 1922, p. 440).
Principles of Industrial Engineering, p. 135.
Quarterly Journal of Economics, 1914, p. 549). But Mr. Hoxie (
Scientific Management and Labour, pp. 44
et seq.) is less optimistic upon this point. He writes: “As a matter of fact, time study for task setting is found in scientific management shops in all its possible variations, both with reference to methods and results. In some the highest standards are maintained in regard to all the factors enumerated—all or a large proportion of the workers are timed, the largest practicable number of readings is made, cordial relations are established between the time study man and the workers, and the latter are cautioned against speeding up when being timed, and, if doubt remains, the allowances are purposely made large to cover all possible errors. Liberality of the task is the keynote. In other shops the maximum task is just as surely sought, and the method is warped to this end. The swiftest men are selected for timing, they work under special inducements or fear, two or three readings suffice, allowances are disregarded or cut to a minimum. The task of 100 per cent efficiency is to all intents and purposes arbitrarily fixed, sometimes practically before the time study, at what it is judged the workers can be forced to do. The main use of the time study is to prove to the workers that the task can be done in the time allowed” (
loc. cit. p. 53).
Experiments in Industrial Organisation, p. 142).
Part III, Chapter IX