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 GIFT OF 
 

 The Manufacturer's 
 Wage Problem 
 
 By 
 
 Herbert F. Perkins 
 
 / f 
 
 of the 
 International Harvester Co. 
 
 THE UNION LEAGUE CLUB 
 OF CHICAGO 
 
 1919 
 
 After you have read this pamphlet please pass it on in order that the message it 
 carries may reach the largest number of persons. 
 
Mr. Herbert F. Perkins has been ac- 
 tively engaged in manufacturing in- 
 dustries since his college days first 
 with the National Malleable Castings 
 Co., and subsequently, since 1899, with 
 the McCormick Co. and the Interna- 
 tional Harvester Co., in which latter 
 company he holds the position of Divi- 
 sion Manager, in charge of manufac- 
 turing. 
 
 From the latter part of May to the 
 end of December, 1918, Mr. Perkins 
 was attached to the War Policies Board 
 in Washington, D. C., under the De- 
 partment of Labor, as Business Ad- 
 viser to the Chairman, Mr. Frankfurter. 
 In this position Mr. Perkins had ex- 
 ceptional opportunity to see the whole 
 situation in its true perspective. 
 
 Copies may be obtained of the 
 
 War Committee of the Union League Club of Chicago 
 at the following prices, delivery prepaid: 
 
 Single copies .___$ 0.05 
 
 One hundred copies ------ 2.00 
 
 One thousand copies ------ 10.00 
 
The Manufacturer's Wage 
 Problem 
 
 THE manufacturer of the United States is emerging from 
 a period of intensive effort, accompanied by a con- 
 stantly increasing cost of production, due to mounting 
 material prices and labor rates. Higher cost of production, 
 translated into commodity prices, has immediately been re- 
 flected in the living cost of the wage-earning classes. 
 
 It is evident that, in proportion as living costs have ad- 
 vanced without a corresponding advance in the standard of 
 living, increased wages have been purely an increase in 
 dollar wages, but not in actual prosperity. 
 
 Owing to the tremendous demands for food abroad, that 
 part of the working man's cost of living which is made up of 
 his food supplies, has advanced perhaps more rapidly than 
 other items which directly affect him. Investigation has 
 shown that for the working man's family, food constitutes 
 from forty to fifty per cent of the family budget and that for 
 the lower paid workman, the proportion borne by food has 
 been higher than for the highly paid. 
 
 With the advancing cost of conducting business, the 
 manufacturer has suffered an increasing strain upon his cap- 
 ital resources and has been compelled to increase his selling 
 price to protect his advancing capital requirements. 
 
 The burden of government income tax and in less degree 
 other taxes has developed through the exigency of war to 
 undreamed of figures. In order to provide the annual cash 
 outlay to meet these taxes and at the same time maintain 
 normal net earnings, selling prices have had to be still further 
 increased. 
 
 Employer and Employe Alike Loyal. 
 
 During this period the patriotic enthusiasm of the citi- 
 zenship of the country, both employer and employe, has run 
 high. Resources of capital and labor have been freely placed 
 at the command of the government to prosecute a successful 
 
 393925 
 
war and to maintain at the highest standard the world has 
 known the conditions to be thrown around our armies in the 
 field and in training in the cantonments at home. 
 
 This is no time to dissect the various degrees of self- 
 interest or national loyalty which have influenced either the 
 employer or the employe. There has been profiteering in 
 both classes to the everlasting disgrace of the individuals 
 justly so charged, but it would be unjust to the spirit of the 
 whole population that has been shown during the war to 
 indulge in implications against either the employer or the 
 employe. 
 
 Period of Uncertainty Ahead. 
 
 Today the manufacturer of the United States faces a 
 serious and uncertain future. He knows that for a year and 
 a half to come the price of wheat has been guaranteed at the 
 highest war price. He understands that his country, owing 
 to the demoralized condition in other great food producing 
 nations, is expected to protect food shortage in Europe and 
 he therefore has reason to expect that foodstuffs generally 
 will be in unprecedented demand, so that although the food 
 requirements of armies is materially greater than the food 
 requirements of the same population when returned to civil 
 life, the cost of food in the workman's budget will continue 
 at a high level for an extended period. 
 
 The still incomplete lists of our own losses in the war 
 from death by battle and sickness and from crippling wounds 
 evidence the dreadful disaster to the young manhood of our 
 country that the fight for world-wide democracy has cost. 
 Yet we know how small is our own disaster compared with 
 the appalling loss to the fighting forces of our allies and of 
 the enemy. The depletion of able-bodied men in those 
 countries, the lower birth rate incident to the strain of the 
 contest and the consequent decline in conditions of living are 
 bound to be factors of great importance in limiting labor 
 available for the period of reorganization in Continental 
 Europe and in the colonies related to the European nations 
 that have engaged in the four years' conflict. There is bound 
 to be, from purely physical causes, a shortage of man power 
 in these countries. 
 
 On the other hand, we know that with the great burden 
 of debt which the war has laid upon the contesting nations, 
 
their only salvation lies through intense labor and increased 
 production and a consequent struggle for the trade of the 
 world. 
 
 The unprecedented requirements of the allied nations 
 have stimulated the spirit of invention, have broken down 
 many of the impediments to production and stimulated the 
 use of machinery and means of production along American 
 methods, so that the manufacturing production per man in 
 the allied countries, particularly England, has been heavily 
 increased. It follows that the advantage which, through our 
 manufacturing skill, we undoubtedly possessed in the period 
 preceding the war, has been decreased. As an instance it has 
 been reported that in the making of ammunition, the pro- 
 duction per man in English arsenals, which before war was 
 markedly less than in the American shops, had toward the 
 end of the period of the war surpassed our own. Further, it 
 would appear that, whatever problems the reconstruction 
 period may bring, the relations between the wage-earners 
 and management and the breadth of vision with which these 
 groups have been approaching their mutual problems, have 
 been vastly improved in England as compared with the pre- 
 war period. 
 
 Men Return as Contracts Cease. 
 
 Now the war is over. Our men from' the camps and our 
 men from the ranks abroad are returning to the farms, the 
 offices and the factories. Our great organizations built solely 
 for the production of war requirements are emptying their 
 thousands upon the labor market. Hundreds of establish- 
 ments, large and small, that had increased or modified their 
 facilities to meet the special requirements of warfare, not 
 only for our own soldiery during the last year and a half, 
 but also for the soldiery of the allies for the past four years, 
 are, simultaneously with the return of these millions of men, 
 having their contracts cancelled. 
 
 The problem of industry is now to reorganize the imple- 
 ments of manufacture to meet the demands of peace, to find 
 work for the returning khaki-clad thousands, and, most 
 fundamentally of all, to find the markets which shall take 
 the product of these facilities and of these men, and in addi- 
 
tion of those men and women, who, as soldiers of industry, 
 have just as truly been prosecuting the war at home by the 
 contribution of their united efforts in the production of 
 munitions, clothing and food. He would indeed be more 
 than a man who could measure the problem and fit its 
 answer and the man would be fool-hardy who would attempt 
 the functions of a prophet. 
 
 The problem of immigration and of emigration will be 
 a factor of no little importance in the final tale, but this is so 
 insoluble a question at present that it can only be sug- 
 gested, not answered. It would appear, however, as more 
 than a mere probability that the period of inflation and 
 apparent great prosperity which this country has been going 
 through, must be succeeded by deflation and a time, perhaps 
 measured by months rather than years, of pronounced de- 
 cline in volume of business. After this period has passed 
 we may hope that, partly in consequence of the great de- 
 struction of material things which the war has entailed, 
 there will follow a period of tremendous production of 
 essentials and of great general prosperity for America. 
 
 Immediate Decline in Wages Undesirable. 
 
 Perhaps one of the most vital problems will turn upon 
 the distribution which shall be given to the values that are 
 to be created. Are they to be apportioned as heretofore or 
 are they to be differently distributed? Too many employers, 
 with their minds more on the experience of the past than 
 the promise of the future, have been watching anxiously 
 and often nervously the constant rise in money wages. The 
 thought has been borne strongly in upon them that the his- 
 torical and therefore the most natural and correct method of 
 meeting the period of declining business and profits is 
 through the prompt reduction of the wage rate attained 
 through the stimulation of these past years of conflict. It 
 does not seem possible, however, that such a thought can 
 be the proper immediate reaction of peace to the spirit 
 which impelled the United States to take up arms in the 
 fight against the Central Powers. Surely none of us whose 
 minds have accompanied our hearts in determining our 
 relation to the great struggle can dismiss the conviction that 
 the democracy for which we have battled is not democracy 
 
of the ballot alone, but democracy in all fundamental rela- 
 tions, including those that are industrial as well as those 
 that are political. We have struggled for a democracy, not 
 Utopian or unguarded, but controlled by law and recognizing 
 efforts and purposes, intelligence and capacity, a democracy 
 using law to bring to the less gifted or less fortunate higher 
 ambitions and growing efficiency. 
 
 Nor is it unreasonable to believe that along this line may 
 be found the most genuine and most broad prosperity of all 
 groups. 
 
 A study of the figures of the income of our nation for a 
 long period preceding the war will reveal the fact that, in 
 the years of relatively lowest domestic consumption, the 
 ratio of our income from sales outside of our country to the 
 income from business within our country was approximately 
 as one to five, while in years of active home trade the ratio 
 has been from one to ten, to one to seven. 
 
 Home Markets Most Important. 
 
 There are, in the United States, more than thirty million 
 people largely dependent upon fixed compensation; and of 
 these the wage-earners in our factories, offices, mills and 
 mines are the largest single group. It would follow that the 
 prosperity of our home market and consequently the pros- 
 perity of the manufacturers of America depends upon the 
 buying capacity of the wage-earners of this country in a 
 degree that we have not been wont to measure adequately. 
 
 So it is hard to believe that in moments of sober reflec- 
 tion the manufacturer of America will begrudge for the 
 wage-earners of America the considerable gain that has ac- 
 crued to at least a very large number of them and their 
 families through their increased income above the actual 
 advance in cost of living during the period of the war. 
 
 Freak wages growing out of careless setting of high 
 piece rates in cost-plus war work and other such absurdities 
 or blunders, to apply no worse names, will, of course, not 
 stand the light of common sense business and will have to 
 go; and the men who have been the lucky recipients in the 
 past, while quite humanly protesting, will accept the neces- 
 sary situation much as a lucky business man would say 
 
good bye to a passing shower of profit. Wage-earners are 
 human and humanly sensible. 
 
 May Hold Share of World Trade. 
 
 It may be quite possible by ingenuity, invention and 
 management, through the stimulation to individual produc- 
 tion that naturally accompanies a period of depressed in- 
 dustry, and, most important because as yet quite unmeas- 
 ured, through a careful study of the possibilities of improved 
 industrial relations between management and men, that we 
 may hold our share of the world's trade. It is hard to de- 
 termine what is any nation's just share. Perhaps it is all 
 that it can fairly get, but we surely may assume that in the 
 long run we cannot afford to struggle for trade at the expense 
 of the physical and moral and social development of any 
 group of our population. We know that as citizens of a 
 nation we love and wish to make greater and more powerful 
 in all good lines, industrial managers will unselfishly de- 
 termine, and as shrewd business men in all honorable and 
 far-seeing self-interest will unite, to promote the upgrading 
 of those, who through lack of training, or opportunity, or 
 native ability or because of improper economic methods, 
 have lived under inadequate standards. If need be the op- 
 portunities of the future must now as always, with far-see- 
 ing men, warrant temporary and immediate sacrifice. 
 
 Food Must Decline Before Wages. 
 
 When the prices of foodstuffs shall have fallen by the 
 removal of artificial props and through the returned pro- 
 ductivity of various lands at present either wasted by war 
 or handicapped through shortage of laborers or through 
 unwillingness to toil; when abnormal profits and wasteful 
 methods incident to the period of the war have been elim- 
 inated; and when, through a closer co-operation between 
 management and wage-earners, the possibilities of increased 
 production have been secured, the elements that go to make 
 the wage-earner's budget will show an appreciable decrease. 
 Then and not until then regulated by the maintenance 
 of general and not class prosperity, should adjustments in 
 
wage rates be attempted on the basis of the buying value of 
 the dollar. 
 
 If the worst comes and, through the pressure of com- 
 petition from abroad, it becomes evident that with all other 
 resources exhausted, general employment and consequently 
 general prosperity can only be maintained by a decline in 
 commodity wage, such further adjustment must necessarily 
 follow. 
 
 It is necessary to emphasize that until all other expedi- 
 ents are exhausted, the policy of forcing a lower standard 
 of living by reduction of the money wage, while living costs 
 are still approximately at their peak, or at any time to reduce 
 the commodity wage, particularly to do so by arbitrary dis- 
 charge and rehiring or any of the other discredited methods 
 which have at times been more or less common, would be 
 the veriest exhibition of not only injustice, but of folly. It 
 would surely be accompanied by hostility on the part of 
 the great wage-earning community, as well as on 'the part 
 of the clear-thinking men in the community at large; would 
 be the surest way to increase the power of the demagogue, 
 whether he be politician or unprincipled labor leader; would 
 widen the unfortunate cleavage, which we should be mend- 
 ing instead of spreading, between wage-earners and man- 
 agement; and, at the present crisis when the influenza of 
 Bolshevism is abroad in the world, it would undoubtedly 
 rapidly spread this disease in our own country. It would, 
 in short, be bad morals and bad business. 
 
 More than once reference has been made above to the 
 increase in production which it is believed would follow 
 improved relations between labor, management and capital. 
 This is a problem that burdens the minds of all sincere 
 students of the ideals that have supported the world war. 
 Many efforts to develop a new democracy of industry are 
 being made in England and serious and promising ventures 
 in this direction are being launched in the United States. 
 The thread of gold that runs through the fabric of all 
 these plans is the recognition of the inherent mutuality of 
 interest of labor and management. These are indispensable 
 one lo the other and must come to represent not classes of 
 men, but factors of success often combined in a single indi- 
 vidual. Exploitation of the wage-earner on the one hand 
 
or disintegration of management or capital on the other, 
 can in the long run work to the good of none and are 
 destructive of production of goods, which is the basis of our 
 prosperity. Confidence in mutual justice and fair dealing 
 between man and man is bound to open the fountains of 
 effective energy in production as nothing else can do to the 
 unfolding of the greatest material and social prosperity the 
 world has known. 
 
 Jan. 13, 1919. 
 
 10 
 
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