Part 11

As we have seen, sickness and old age are still more usual causes of poverty and unemployment than accident. All the arguments for compulsory insurance therefore apply with redoubled force to these evils. Germany was again the pioneer in the establishment of these forms of insurance. In 1883 sickness insurance was organized, being made compulsory for all persons with incomes under $500; the expense is borne one-third by the workers and two-thirds by employers, the main purpose being to secure a sufficient relief--amounting to one-half the wage--for a period of thirteen weeks. In 1889 invalidity and old-age insurance was introduced for the same class; contributions are made in equal proportion by employe and employer, the state contributing about $12 a year to each annuity. Pensions are granted after thirty years of payment or to those over seventy. In 1908 Great Britain passed a still more comprehensive measure, providing for pensioning all citizens of seventy years or over, who have been residents for twenty years, in accordance with a sliding scale based upon private income, the pensions ranging from five shillings weekly down to one shilling. The pensions were expected to cost $35,000,000 the first year, but will probably entail double that amount. Finally, insurance against unemployment was tried in Switzerland in 1893 to 1897, but was finally abolished, owing to abuses and difficulty of administration.

There are probably no more important practical economic problems than those connected with unemployment and workingmen’s insurance. Slowly the conviction has spread that under present conditions of industry workingmen cannot fairly be held responsible for industrial accidents, and that with prevailing wages they cannot be expected to save enough to maintain themselves in sickness and old age. It therefore becomes the duty of society so to organize industry and legislation that the 101 terrors of accidents, sickness, and old age, shall be reduced to a minimum.

XI. MACHINERY AND INDUSTRIAL EFFICIENCY.

So far in the discussion of modern capitalistic production and of the various labor problems to which it has given rise we have not treated in detail the question of machinery and its effects on labor. We cannot, however, leave this subject without taking up this phase of it with considerable care. The advantages of machinery have been more often emphasized than the evils, so that we may profitably begin with the darker side of the picture. President Hadley[28] enumerates three evils which are charged against machinery, as now managed and operated: “1. That it displaces a large amount of human labor, thus taking income away from employes and giving it to employers. 2. That when it does not actually drive human labor out of use, it employs it in circumstances unfavorable to efficiency, health, and morals. 3. That under the best conditions it deprives the workman of independence, making him a specialized machine instead of a broad-minded man.” We cannot do better than take up these points one by one.

In answer to the first charge President Hadley flatly denies that machinery has displaced labor, but insists that “there has been a most conspicuous increase of employment in those lines where improvements in machinery have been greatest,” giving the expansion of railroads as an illustration. But it is not possible to generalize from this case without further analysis. The immediate effect of improved machinery, especially if suddenly introduced, is practically always to throw men out of employment. The extent to which this will occur depends on the suddenness and extensiveness of the change, but fortunately, as Professor Nicholson points out, new inventions seldom come suddenly or are introduced all at once on an extensive scale. It took almost a generation, for example, for American machine methods to displace 102 Swiss hand labor in the making of watches. But when such a change does occur it hits hardest the least efficient and older men, those just on the margin of employment, for a man past middle life can rarely learn a new trade. The effect of displacement in causing suffering will also depend somewhat upon the mobility of labor, both the knowledge of new opportunities and the capital to make possible a change of location or industry, and improvements in the means of transportation. It can easily be shown that as a general principle the lump-of-labor theory is erroneous, namely, that there is just so much work to be done and that if machinery is introduced there will be less work for men to do. But there is this element of truth in it, that the question whether men will be reabsorbed in the same industry depends upon the fact as to whether the market for the goods produced by the new machine can be expanded. If the demand is elastic, that is, can be largely extended because of the fall in price brought about by the cheaper production, as in the case of cotton goods, then the displaced laborers will probably be re-employed to produce an enlarged supply. If, however, the demand is inelastic, that is, will not be expanded by reason of a fall in price, as in the case of salt or coffins, then the displaced labor will not be reabsorbed in the same industry but must look elsewhere for employment.

The elaborate investigation of the Department of Labor in 1898 regarding the relative merits of hand and machine labor shows clearly the effect on the displacement of labor by the introduction of machinery. A few cases will serve as illustrations (see table on next page).

These cases, chosen at random, all show an increase in the number of different men employed, and an immense saving in time and in labor cost. Nothing is indicated however as to the total amount of employment. Optimistic writers like Carroll D. Wright claim that if

Hand and Machine Methods Compared. 103

===========+======================+============+===========+ Year | | Different | Different | of | Article produced | operations | workmen + production | | performed | employed | -----------+----------------------+------------+-----------+ 1829-30 | Wheat (hand) | 8 | 4 | 1895-96 | Wheat (machine) | 5 | 6 | | | | | 1859 | Boots (hand) | 83 | 2 | 1895 | Boots (machine) | 122 | 113 | | | | | 1850 | Carpet (hand) | 15 | 18 | 1895 | Carpet (machine) | 41 | 81 | | | | | 1891 |Loading ore (hand) | 1 | 1 | 1896 |Loading ore (machine) | 3 | 10 | -----------+----------------------+------------+-----------+ ===========+======================+================+======== Year | | Time worked. | of | Article produced +-------+--------+ Labor production | | Hours | Minutes| Cost -----------+----------------------+-------+--------+-------- 1829-30 | Wheat (hand) | 61 | 5 | $3.55 1895-96 | Wheat (machine) | 3 | 19 | .66 | | | | 1859 | Boots (hand) | 1436 | 40 | 408.50 1895 | Boots (machine) | 154 | 5 | 35.40 | | | | 1850 | Carpet (hand) | 4047 | 30 | 20.24 1895 | Carpet (machine) | 509 | 1 | .29 | | | | 1891 |Loading ore (hand) | 200 | 0 | 40.00 1896 |Loading ore (machine) | 2 | 51 | .55 -----------+----------------------+-------+--------+--------

machinery has displaced labor in one direction it has created more employment for them in others. He shows for instance[29] that the per capita consumption of cotton in this country in 1830 was 5.9 lbs., while in 1890 it was 19 lbs., and gives similar figures for iron and steel, and railroad traffic. It will be noticed that all of his examples are chosen from industries in which the demand is elastic. Mr. J. A. Hobson, a more careful and conservative writer, draws less optimistic conclusions from a study of Great Britain. He says: “First, so far as the aggregate of manufactures is concerned, the net result of the increased use of machinery has not been to offer an increased demand for labor in those industries commensurate with the growth of the working population. Second, an increased proportion of the manufacturing population is employed either in those branches of the large industries where machinery is least used, or in the smaller manufactures which are either subsidiary to the large industries, or are engaged in providing miscellaneous comforts and luxuries.”[30] It must be said, however, in modification of Mr. Hobson’s inferences, that it may be accounted as a social gain if the demand for manufactured commodities can be met by the labor of a smaller 104 proportion of the population, since the energies of the rest are then set free for professional or artistic or similar pursuits. A study of the census reports of Great Britain seems to show that this is what has happened in that country.

The amount of labor is not the only factor to be considered; the regularity of employment, as we saw in the last section, is of hardly less importance. “Another danger of an entirely opposite kind,” says Professor Nicholson[31], “lurks in this immense power of machinery, which is continually showing its reality and remedies for which will, it is to be feared, be the fruit of long years of tentative adaptation to the new environment. What all sensible workingmen desire, what the advocates of the trade unions say is their chief object, is to get a “steady sufficient wage,” but it has been proved inductively that great fluctuations in price occur in those commodities which require for their production a large proportion of fixed capital. These fluctuations in price are accompanied by corresponding fluctuations in wages and irregularity of employment. But fluctuations in wages and discontinuities in employment are two of the greatest evils which can befall the laboring classes.” We have already seen how modern capitalistic methods of production may lead to over-production and to a crisis. We now see how machine methods may cause unemployment or irregular employment. The men displaced directly by new machinery, those thrown out of work by industrial depression resulting from over-production in machine industries, and finally those irregularly employed in the new occupations supplying luxuries--all of these may fairly attribute their suffering in large measure to machine methods.

“The second great charge made against the factory system is that it displaces a higher grade of labor by a lower grade; sometimes 105 substituting the work of women and children for that of men; sometimes substituting work under conditions physically or morally unhealthful, for work under healthful conditions; sometimes substituting specialized and mechanical work for diversified occupation which contributes to general intelligence.” The point as to the labor of women and children has already been discussed. The charge that factory labor is physically unhealthful may in general be denied. Mr. Wright, in an elaborate defense of the factory system in the Tenth Census, concluded that the conditions of work in the modern factory are much more conducive to good health than those under the preceding domestic system, while morally they are far superior. The qualities demanded by the machine production of the modern factory are punctuality, steadiness, reliability, and sobriety, and it therefore makes against intemperance and immorality. So far as these exist in factory towns, they are the result of town life rather than of manufacturing. It must, however, be said that while the factory system is not inherently unhealthful, the high pressure at which operatives of steam-driven machinery are compelled to work, particularly in this country, may and often does wear him out prematurely. This again is partially offset by a shortening of the hours of labor.

The final charge against the factory system is monotony of work. Many writers, from Adam Smith down, take the view that it is more stupefying to make a small part of an article, say the sixty-fourth part of a shoe, than to make the whole article. Professor Marshall, who has considered the subject carefully[32], concludes that while it takes away manual skill, it substitutes higher or more intellectual forms of skill. “The more delicate the machine’s power the greater is the judgment and carefulness which is called for from those who see after it.” But after all there is less danger from monotony of work 106 than from monotony of life, and the cure for this would seem to be in an increase of machinery rather than in its abolition.

Let us now try to summarize our conclusions on this intricate question. The first effects of the introduction of labor-saving machinery is to displace particular laborers; these suffer real injury, though they are often reabsorbed in the industrial organism. The social gain is undoubted, for the improved methods lead to lower prices and thus to an increase in the real wages of labor. To the improvement and wider use of machinery we must indeed look for the ultimate relief of the human race from exhausting toil. Says a socialist writer: “On mechanical slavery, on the slavery of the machine, the future of the world depends…. All unintellectual labor, all monotonous, dull labor, all labor that deals with dreadful things, and involves unpleasant conditions, must be done by machinery. Machinery must work for us in coal mines, and do all sanitary services, and be the stoker of steamers, and clean the streets, and run messages on wet days, and do anything that is tedious or distressing.” If labor today has a complaint to make against the use of machinery, it is that labor has not shared sufficiently in the improvements thus far effected. But the evil here is connected with the inequitable distribution of wealth, not with the methods of its production. In justice labor should share in the technical improvements which characterized the nineteenth century and will revolutionize to a still greater extent the industries of the twentieth. The practical question in this connection is as to the best method for labor to secure its claim to a share in the increased production. One answer, to which we will turn next, is by increasing its efficiency through better industrial education and training.

The subject of industrial education has recently been receiving considerable attention in the United States and the needs and shortcomings of our country in this regard have been described. Under 107 modern methods of production, with their extreme specialization of labor and extended use of machinery, it is practically impossible for a worker to secure an adequate knowledge of a trade in the actual practice of it. In former days boys acquired training in their trades by the system of apprenticeship under the immediate charge of a master of the craft. The system of apprenticeship has today almost disappeared; boys are taken into shops as helpers, not as apprentices, and receive practically no systematic instruction in their trade, especially in a modern large establishment. In consequence of these facts it is insisted that school instruction should be given to make good the absence of shop practice; that a general system of industrial education should be developed to give our workingmen systematic training in the various trades. The superiority of the opportunities for industrial education on the continent of Europe, especially in Germany, have been frequently emphasized, and their industrial advance has been credited in large measure to this fact. We can probably not approach the subject better than by explaining the systems in these other countries and then comparing them with that of the United States.

Beginning with Germany as the country in which industrial education has received the greatest attention, we find there three different kinds of schools, which we may call the lower, middle, and higher. The lower group includes artisan and specialized trade schools, and is intended to be a substitute for the apprenticeship system. While they have an important influence on the general industrial efficiency of the nation, they concern chiefly the small handicrafts. The middle group comprises the trade schools (gewerbeschulen), of which the most famous are the weaving and dyeing schools at Chemnitz; other branches taught are soap-boiling, milling, building, pottery, etc. These are the schools that provide technical instruction for the large 108 manufacturing industries, and are consequently of great importance; they train the foremen, superintendents, managers, and heads of establishments rather than the workingmen. The higher group is formed of the technical high schools or technological institutes, where are trained the scientific experts. The importance of the German system lies in the development of the last two groups rather than in provision for the training of the workmen. Germany’s recent industrial advance must be credited to the training of the officers, not the rank and file, in the industrial army, to the development of managerial ability rather than of manual skill.

In England the last twenty years have seen a marvelous development in industrial education, brought about in part by the “made in Germany” agitation. The English system differs from the German in educating working-class boys, while at work in the mill or at the forge, into foremen, managers, etc., mainly by means of evening classes in trade or technical schools. The German system, on the other hand, trained men who already had a superior general education. These schools are regarded as stepping stones for the more ambitious and intelligent young workingmen. They give a practical grasp of the subjects, but do not teach actual processes of manufacture, owing to trade union objections. They thus come between the lower and middle schools in Germany. The higher technical schools also exist and have recently been greatly expanded.

The system of industrial education in the United States may be said to resemble that of Germany more than England in that it supplies industries from above rather than from below, but it is in a very chaotic state as yet. The most important schools are institutes of technology and the technical departments of the universities, but these train men only for the highest positions. Provision for the industrial training of the workingman is almost lacking except in a 109 few manufacturing centers. Thus there are a few trade schools resembling somewhat those in the Middle German group, as the textile schools at Philadelphia, Lowell, and a few other cities. Lower trade schools are found in New York City, but hardly anywhere else. That there is a distinct need of and demand for instruction of this character is shown by the enormous expansion of correspondence schools, a peculiarly American institution, which endeavor to give the training afforded by the English schools to the more ambitious young artisans.

So far in their industrial development the people of the United States have been immensely aided by two factors: the rich natural resources of the country, and the high quality of the labor. But as we have already seen, the natural resources are being either rapidly exhausted or monopolized. As to the character of the second factor, we may quote from the testimony of a recent careful observer, Dr. A. Shadwell[33]: “The American method of work in the industrial sphere is distinguished by the following features: enterprise, audacity, push, restlessness, eagerness for novelty, inventiveness, emulation, and cupidity. Employers and employed have exhibited the same qualities in their degree.”… But they suffer “from the national defect of want of thoroughness, which arises from the craving for short cuts.” Now that American industries are entering the markets of the world in international competition, it becomes important to correct any faults that will cause us to fall behind. So far the movement for better industrial education through the establishment of trade schools has met two obstacles in this country. The first is the hostility of the trade unions, which fear to see their control of the labor market disturbed by the annual turning out of hundreds or thousands of workers from the trade schools without any especial sympathy with trade union methods or policies. The other difficulty lies in the 110 satisfaction with prevailing methods, the belief that the American workman without training possesses skill superior to that of his European competitors, and a naïve national self-conceit in all things American. Now that we are for almost the first time in a hundred years measuring our industrial efficiency in foreign markets against our European competitors, we shall be compelled to take stock of all the items that make for industrial supremacy. There seems to be little doubt that when once this is fairly done, the need of a better system of industrial education will be recognized and met.

XII. PROFIT-SHARING AND CO-OPERATION.

Among the reforms suggested for remedying some of the evils incident to the modern wage system those of profit-sharing and co-operation occupy a prominent place. The separation of the community into capitalists and laborers, classes different in conditions and ideals, constitutes a menace to the peace and progress of industrial society. The wage system moreover is thought by many to have broken down the former intimate relation of employer and worker, and some scheme is needed to correlate their interests again and to bind them together. To secure this result profit-sharing is advocated. As defined by the International Co-operative Congress in 1897 this is “the agreement, freely entered into, by which the employe receives a share, fixed in advance, of the profits.” It is not a change from the present wage system, but simply a modification of that system according to which the laborer receives a share in the profits in addition to his wages. The purpose is to identify the interests of the employes with those of their employer and thus to give him some of the same motives for energy, care, and thrift in the conduct of the business. Three principal methods of profit-sharing may be mentioned, though the variations are manifold. The favorite method in England and the United States is the payment of a cash bonus at the end of a fixed period, 111 as a year. A second plan, which is the rule in France, is a deferred participation by means of a savings bank deposit, provident fund, or annuity, for the purpose of providing for old age and disability. The third plan, which has recently grown in favor in this country, is the payment in shares of stock of the company.