tion have never carried us as far as dividends and surplus. Will you join in the venture?" The statement is grotesque, yet it sets forth the financial position of the majority of American wage-earners.

One further point should be noted. After the business man has paid running expenses and fixed charges, the remainder is income"net income." The great mass of wage-earners who never receive enough to pay more than their bare running expenses have no "income" in the real sense of that word. They are getting mere up-keep, or subsistence.

As a business proposition, for a family of five, the ordinary American wage is absurdly inadequate. No business man would consider it. It violates every business standard which the practice of the modern man of affairs recognizes as legitimate. Every concept of modern business management cries "shame" at the very thought of the business proposition which the American wage-scale presents to millions of its workers.

V. The Anti-Social Nature of the American Wage

The health inadequacy and the business inadequacy of the American wage can be demonstrated statistically. The proof of the social inadequacy of wages rests upon more general considerations.

Society must develop a system of compensation which will stimulate industry and thrift among the people who do its work. A wage system or any other system of distributing the products of industry must be based on an adequate appreciation of this fundamental principle.

The first, and probably the most fundamental, social objection which may be raised against the present wage scale is that it fails very largely to stimulate the ambition of the worker. There are two reasons for this failure. On the one hand, the wage scale is so utterly rigid that the man doing good work is placed on the same footing with the man doing poor work; the enthusiastic worker is placed on the same basis with the indifferent worker. This holds true of piece-rate payment as well as of time-rate payment. The rule of most producing establishments is "anything that will pass the inspector." Furthermore, the individual may work as hard as he pleases, devoting all of his energy to the work in hand. Despite this, he is unable to raise his wage rate and very frequently is

unable to increase his wages. At the same time, industry is organized on such a large scale basis that the number of positions “at the top" is strictly limited. Among the employees of the American railways, for example, one in one hundred is an officer. The proportion is higher for manufacturing industries, although it is seldom that more than 10 per cent of the men employed in an established industry hold positions which involve even a moderate amount of responsibility and initiative.

The wage scale is fixed either by an agreement between the employer and the union, or by custom and common consent. No one even pretends that there is a definite relation between the values produced by the worker and the wage which he secures.

The worker is not paid in proportion to his product. Wages are never fixed on that basis, with this single exception-that no employer can afford to pay any more in wages than a group of men are producing in product. The law of monopoly, "all that the traffic will bear," is the law which fixes the American wage. An employer has a Scotchman working for him at $3 a day. An equally efficient Lithuanian offers to do the same work for $2. The employer is not in business for his health, and the work is given to the lowest bidder.

An employer never determines a wage by asking the question: "How much does this man produce?" Rather he asks, "What will it cost me to get another equally efficient person in his place?" It is the cost of replacement and not the values created in production which determines the wage that a man receives.

The phrase, "he gets all that he is worth," means merely this— that the employer is paying him as much as he has to pay another equally efficient person to do the same thing. Whether he is hiring bricklayers, bookkeepers, or coal heavers, the wage that he pays depends upon the supply and demand of labor. This law is excellently illustrated during a time of financial and industrial depression, when there is a surplus of labor and a dearth of opportunity for employment. Many industries at once reduce their wages because they are able to get all of the people that they want at a lower figure. The wage contract, as it is called, knows no social morality and is based on no standard of social ethics. It is subject only to the law of supply and demand, and to the law of monopoly price. The employer pays his labor as little as he can. The worker de

mands and gets as much as he can. Until recently, there has been no general idea that a minimum wage was a social necessity. The individual laborer bargaining with the employer made the best terms he could. If labor was scarce, he was successful; if it was a drug on the market, his wages were reduced to a starvation level. Another consequence follows from the ruthless bargaining of the competitive labor market. The bargain takes place between the employer and a worker irrespective of social obligations. The consequences are doubly disastrous to the man with the family depending upon him. A common occupation, quarrying, for example, may be carried on by married or by single men. The employer does not even put himself to the trouble of asking whether the prospective employee is married or single, because that makes no difference if a man is handy with his tools. The man with a family is brought into active competition with the man who has no family obligations. The native-born head of a household must accept labor terms which are satisfactory to the foreign-born single Industry does not inquire into a worker's social obligations. It simply asks whether he is able to do the work, and at what price. The competition of the labor market does the rest.

Society demands and expects that men shall support families. The future of the state hinges upon the fulfillment of this presupposition. At the same time, the modern economic organization makes no attempt to assist the man who is bringing up a family to face the competition of the man who has no family dependent upon him.

There is no relation between the social (family) needs of a man and the wage which he receives. Wages are fixed wholly independent of social relations.

The American wage is anti-social. The present system of wage payment fails to stimulate workers to industry and thrift because it has not given them a reward in proportion to their exertions and ability. There is no relation between product and wages. Rather wages are fixed by competition and monopoly. The present wage scale fails completely to provide a return in proportion to social needs. The simplest requirements of social progress call for ambition, for justice, and for the provision of health necessities. The present American wage scale offends even these primitive social standards.

VI. The Gross Inadequacy of the American Wage

The American wage is grossly inadequate. Examined from any point of view, it fails to provide a sufficient return to the wageearner who is carrying the burden of a young family.

American industry pays to the overwhelming majority of wageearners, a wage of less than $1,000 a year. Even where no allowance is made for unemployment, the wage rates of three-quarters of the men fall below $750 a year. Perhaps three wage-earners in each hundred are paid over $25 per week (a yearly rate of $1,300). Compared with the sums which are met with in the business world, the wage of the workers is small.

The wage rates paid by industry, placed side by side with the cost of family health and decency, reveal an appalling situation. In great numbers of cases, the wages paid by industry to its adult male workers are insufficient to provide for the health and decency of a moderate-sized family.

American wages, as a business proposition, are even less adequate than they are for the provision of health and decency. The ordinary principles of sound American business practice are all violated in the financing of the worker's family.

There are certain well-recognized principles of social expediency: that industry shall pay a wage that will maintain the efficiency of its workers; that wages must prevent poverty and dependence; and that families must be able to live as self-respecting units in the community. These principles underlie the sane conduct of society. Each of them is violated by the present American wage scale.

American wages are inadequate, grossly inadequate, when viewed from any point of vantage afforded by the available social facts. In a small percentage of the cases, and for individual families, this is not true. Speaking generally, however, and in terms of family living, the present American wage scale is pathetically, grotesquely, viciously inadequate.

INDUSTRIAL OUTPUT AND SOCIAL EFFICIENCY

BY CHARLES ERVIN REITZEL,

Instructor in Economics, Wharton School of Finance and Commerce, University of Pennsylvania.

Industrial efficiency has been defined as a maximum of output with a minimum of outlay and effort. To this standard the progressive employer has been so fully converted during the last decade that back-sliding into slipshod methods of production need little be feared. Industry has learned well its scientific lesson on reducing costs. Meanwhile, however, with a zeal almost religious, labor has organized and become united so as to bring into its activities stringent demands for better working conditions and higher wages. Herein, then, we see a basis of conflict. The employer in his efforts to obtain, through so-called efficiency, a lower cost per unit of production, must of necessity condemn, and combat vigorously, programs which make for higher returns to employees. In contrast, labor in order to realize its goal, must push upwards its sources of economic welfare-higher wages and steadier work. This "cuttingdown" process on one side opposed to this "pushing-up" process on the other must in the final outcome lead not to efficiency but to inefficiency, not to a maximum of output but to a minimum of output. Conflict results in a curtailing not a creating of product. But more important! The enlightened laborer is beginning to see, and see clearly, that as a member of an economic class it is to his direct advantage to handicap production. Why should he hurry through a job only to find himself jobless? When a group of workers in California a month ago saw that, with the tin binding straps cut, it required twenty times the amount of work to unload shingles than would otherwise have been necessary, behold, by some unknown mysterious power the binding straps were cut. It meant more work and more work was what they wanted. The bricklayers from their unionist standpoint are justified when they agree to lay eight hundred bricks per day in lieu of a possible two thousand. Such regulations are intended to give steady employment.

There is this conscious aversion on the part of labor to unemployment in all lines of industry. In the 1912 investigation into