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The Pamphlet Collection of Sir Robert Stout: Volume 81

VI.—The Economics of the Minimum Wage

page 16

VI.—The Economics of the Minimum Wage.

Call that which is just equal, not that which is equal just.—Greek proverb.

The result of our investigation up to this point has been to find that a system intended by Parliament as one for the settlement of strikes has proved in actual practice to be an arrangement for placing the regulation of all trade and industry under the control of the unions exercised through a court created for the purpose. The union leader is constituted a Lycurgus, organising things according to his own ideas, and he is busily engaged in framing a constitution for a society composed of consumers, employers, and wage-earners, amongst whom he undertakes to distribute wealth as be thinks proper. How little consideration the consumer receives either from the unions or from the court we still see further on. The unions assert and exercise through the court the right to say what wages all classes of workers are to receive and what work they shall give in return; and the question arises whether this is practicable in a community not founded upon pure Socialism, but upon private property, and ostensibly upon freedom of contract, and in which industries are carried on by private employers at their own risk and with their own capital. This attempt is made by arbitrarily fixing a minimum wage for each industry, and it is probably not the least use arguing with the workers that all such efforts to enrich one class at the expense of another are wholly unceonomic; for they would probably reply, So much the better': nor is it any use expecting to convince them that the only way to permanently raise wages is to increase production. For the teachings of history and economies not only the unionists, but the delegates they send to Parliament, have the most profound contempt; and so it is useless to prove that such arbitrary devices to increase wages are as ineffectual as were the "Statute of Labourers" and the conspiracy laws to keep wages down. The unionist refuses to believe that wages are proportioned to the productivity of industry and the aboudance of capital, and that whatever tends to restrict output, whether it be legislation or union regulations, reacts in the long run upon the worker. Unfortunately for the worker the tendency of unionism has been to lead him to look upon wages as so much money extracted from the capitalist, and to regard the capitalist as an enemy to be despoiled; whereas facts show that if the interests of capital and labour are not identical they are certainly not antagonistic: they are reciprocal. The real antagonism is between employer and employer. There is reason to fear that the evil done by unionism infostering this spirit of antagonism far morethan countervails any good they do a country which has been described as the Paradise of the worker's, the agitators tell him that he is unjustly treated that he has a right to more than he receives, that the only obstacle to his obtaining more is the employer, and that the way to extract it is by coercion. Such teaching is especially mischievous in a country such as New Zealand, where the people are omnipotent. Unionism has its uses, but as an instrument of socialistic warfare it is utterly mischievous. At present this is carried on by means of legislation directed against capital through the Arbitration Court.

By means of incessant labour legislation and everlasting disputes capital is kept in a state of uncertainty and perturbation, but the union leaders either refuse to cognise the fact or glory in it. They it the idea of frightening capital, and call it a "bogey" set up by the employers just as they laughed at the "bogey" of foreign competition in the engineering lock-out of 1897-8.

In England the danger is proving to be so real that a scheme is now on foot send union delegates abroad to see for themselves and report to their deluded con freres. In France the Socialist Labour party is actively engaged in labour legislation, and M. Millerand, the representative of that party in the Ministry, has found it necessary to warn them of the danger of frightening capital into taking flight. In New Zealand there are urmistakable signs that capital is becoming alarmed, but nothing short of actual experience can bring conviction to the averange unionist, whilst as for the agitator ho glories in frightening captital.

At present the unions are concentrating their efforts mainly upon two objects—using the court for the purpose of securing preference for unionists sod getting a minimum wage fixed in every trade. They seem to think that the decree of the court can maintain a "living" wage in spite even of bad times. We could forgive to unionism a great deal if it tended to promote the efficiency of labour, but it cannot and does not make any such pretension. There can, indeed, be no doubt that the joint effect of the minimum wage and the preference to unionists is very much in the opposite direction. Formerly the unions consisted of the elite of the workmen, be cause the policy was to exclude men who were not worth the standard wage; but this is now impossible. The effect of this is to countervail whatever tendency union- page 17 ism had towards increasing the efficiency of labour, which is admitted by Dr and Mrs Webb to be essential to justify their existence. It has no doubt made them more "independent" as the following incident will show:—A master painter engaged two unionists for a job of painting and papering; one he selected because of his being an expert paperhanger, and the other because of his skill as a painter. On visiting the job for the first time he found the paperhanger doing the painting and the painter doing the paperhanging. On asking the men to change places, one of them, instead of complying, told this tyrannical master to go to—with his job, and left. This is what unionists would call a spirit of independence. It is perfectly clear that when such a spirit as this pervades the men an employer has no control over his business, and to dismiss a unionist for disregarding instructions is out of the question. But even Mill, the great advocate of unionism, admits that to extract work from employees without the power of dismissal is not practicable. But matters are coming to such a pass in this best of all possible countries that employers durst not dismiss a workman if he is a unionist. The following little incident illustrates the obverse side of the unionists' idea of independence. An employer on his way to a job one morning forgathered with two of his men. The employer happened to be carrying a parcel of material for the job, and the men relived him of the burden. Presently they hastily handed him back the parcel, pointing to some workmen who had come in sight some distance off, and explaining that if they should be seen by other members of the union carrying anything for the employer before starting time they were liable to be reported to the union and finded! Anything more contemptible than such a spirit amongst men it were indeed difficult to imagin: tyranny, miscalled independence, towards employers and espionage and intimidation as between themselves, and throught it all the determination to give employer as little value as possible for wages received.

The evil effects of the minimum wage (especially when combined with preference, whilst membership of a union is no guarantee of competence) are obvious. In the first place, although the fixed wage is a minimum, it is to be expected that the minimum will tend to become the maximum. An employer compelled to pay some of his men more than they are worth is certain to pay good men less than they are worth, unless the demand for labour is so great as to make this impossible. This tendency is admitted by the authors of "Industrial Democracy," and our experience in New Zealnd shows this to be the actual result. The skilled workman, who is naturally inclined to take pleasure in the full exercise of his skill, and who is probably too high spirited to submit to union tyranny, is affronted to find that the duffer at his elbow, who perhaps works on the "ca," canny" principle, receives the same wage as himself. The effect of this upon the industry of the country must be very serious; but what is most serious is the effect upon the character and efficiency of the worker. The effect upon apprentices must be most pernicious; knowing that as soon as he becomes a journeyman he become entitled to the minimum wage, the apprentice has no incentive to improve himself and carry on his education. Decline of efficiency is inevitable, and I am informed by employers in the building trade that within the last few years it has been so marked that, in estimating the cost of work, they have to allow for three men where formerly they allowed for only two, If this be really the effect of unionism and regulation of industry by law, then there could be no greater condemnation, for it is not only our industries that are endangered, but the character of our people, and even civilization itself.

Let us now proceed to consider some of the more direct effects of the minimum wage. The unions strenuously claim credit for the general rise in wages; but there is good reason to believe that in many cases it has been attained not by means of unionism, but in spite of it—by reason of the increase of production, by the increased use of machinery, and improved methods of work. As to the fact of the increase there is no doubt: not only the nominal (money) wages but the real wages have increased, because the prices of the necessities and conveniences of life have tended to decrease even more than nominal wages have increased. That this is the tendency under conditions of freedom there is no doubt; but can the same be said under a system used for the purpose of artificially and arbitrarily raising wages? The answer must be in the negative so far as the New Zealand experiment is concerned. Nominal (money) wages have been raised in many instance by the court, but even unionists admit that prices have gone up in a greater proportion. The ultimate outcome is that real wages (i.e, number of commodities that can be bought with the money wages) have not increased. A natural rise of wages does not increase prices or diminish profits but an arbitrary rise tends to produce both of effects, and the only way of increasing the income and improving the material condition of the wage-earner is through a natural and permanent advance of real wages. The worker's standard of living page 18 is not improved by merely giving him more money to spend, but by enabling him to buy more of the good things of life with his wages. Unfortunately his notions on the subject are perverted and confused: he imagines, with Ben Tillet, that wages should regulate prices instead of prices regulating wages, and one can easily see that this pre-posterous idea lies at the root of many of the demands made before the court. But even the unionists are beginning to realise the absurdity of the idea that a general rise of wages attained by means of an equal or greater rise in prices is beneficial; and in some cases it has actually been suggested that the court might raise wages by reducing the price of the raw material! A beautiful illustration of the difficulties created by artificial devices for raising wages! The unionist leaders seek to evade this difficulty, and at the same time appeal to the pre-judice against employers, by putting into the worker's head that most mischievous and fallacious conception that wages come out of the employer's pocket. The unionist imbued with the teachings of Karl Marx thinks it is for the benefit of the workers that the employer's capital should be eaten up and consumed in the payment of wages.

The recent history of the boot trade in New Zealand presents a lesson which even the unionists are taking to heart. It will be remembered that the court, having regard to the effect of the importation of American goods upon the local industry, refused to raise the minimum wage. What is the result? That the workers, recognising the impossibility of keeping up wages by decree of the court, have joined the employers in sending two operatives to the United States to learn the American system. Here, then, is a case in which even unionists have been constrained to admit that neither acts of Parliament, nor awards, nor further protection could enable them to compete with the Americans, and that the only way is to increase and cheapen production.

The same thing must happen in all industries in which foreign competition can operate. There are, no doubt, some industries in which it is possible to maintain a minimum wage by raising prices, and in some trades there has existed what can only be described as a conspiracy between the unionists and the employers (to which the Conciliation Boards and the court have been parties) against the interests of the public as consumers. But, after all, the workers themselves constitute by far the larger proportion of the consumers, so that an increase of (nominal) wages gained at the cost of an equal (and probably greater) increase in the cost of necessaries is no real benefit to them, whilst such an increase is positively unfair to other classes in the community. Here we come face to face with, one of the fundamental objections to the minimum wage—the fact that it does not give the first place to the interest of the consumer. No one objects to the unions seeking to obtain for the workers a greater share of the social wealth of the community, but when they try to attain this end at the expense of other classes or otherwise than by increasing the wealth of the community their influence is wholly mischievous.

There is one class in particular that has all to lose and nothing to gain by the action, of the unions, and the Court of Arbitrations, and, indeed, by our boasted labour; legislation generally—the farmers, the most important class in the community. Agriculture, according to a Chinese proverb, is the root of the social tree, and manufacture: and trade are merely the branches. I remember seeing a pictorial presentation of the same idea in a country storekeeper's almanao, where the clergyman was represented as praying for all, the advocate as pleading for all, the soldier as fighting for all, whilst the farmer at his plough came last, saying "I work for all." When the unionist mechanic, who makes the farmer's plough, applies to the court for an increase of wages, he imagines he can overcome all objection by suggesting an equal increase in the price of the plough; and when the statutory Providence to whom we have entrusted the regulation of all our industries ventures mildly to suggest that an increase in the price might reduce work by increasing importations, the unionist is ready with his favourite remedy—more protection by increase of duty; or if the industry in question happens to be one in which the farmer's produce forms the raw material the unionist will suggest that the difficulty might be met by a reduction in the price paid to the producer—the farmer. This actually happened in the case of the tanners when a reduction in the price of hides was suggested! And yet the unionists and yet unionists Premier think the farmers should not form unions. Self-protection is the utmost the poor farmer can hope to achieve by forming unions, for neither the statutory Providence that presides over the sublime Court of Arbitration, nor the omnipotent Parliament itself can fix a minimum price for the farmers' oats, his wheat, or we mutton, or his wool. No, not even if the Trades and Labour Council gave them permission to fix a minimum price and vouchsafed to the farmers the official countenance and support of the Labour party.

Even the unionists themselves are beginning to have a doubt as to the practicability of fixing and maintaining a minimum age by ordinance, and it is beginning to dawn upon them that they may eventually "have page 19 to come out by the same hole where they in "The labour advocates before the boards and the court are in the habit of attempting to justify their demand for incase of wages by pointing to the great in the cost of necessaries of life, and especially the rise in house rents. They are compelled to admit that to some extent this is the result of the working of the system but they find it necessary to complete the circle by bringing all industries under awards In a recent case one of the labour advocates urged upon the board the fact that Dunedin is one of the most expensive towns in the world to live in! and therefore it was necessary to raise wages: the old circle of protection and restriction making further protection necessary.

One of the favourite arguments of the agitator, termed advocate, is the enormous increase in house rents, which he, of course, attributes to the rapacity of the landlords. The landlord may have to pay about one-third more for material and labour in order that the worker may receive higher wages, but he must not raise the rent; and in order to reduce rents the Government or the municipality must build houses to be let to the poor workers at low rents! At all hazards the wage-earner must be saved from the consequences of his own action. If the wicked capitalists button up their pockets and refuse to make work for him then the Government must do it! As for the farmers and other classes who suffer equally in consequence of increased prices, they are not worth considering!

Such are some of the difficulties incidental to attempts to fix arbitrarily the rate of wages. Another evil inseparable from the minimum wage is the hardship it entails upon the elderly and the slow workman. In many cases employers are anxious to keep on faithful workmen when they are past their best, and are no longer worth the minimum wage, but of course at a lower wage. But this is not business, but mere kindliness, and it is not allowed by the unions: such men must become pensioners on the State. We are, of course, aware that the awards make provision for "permits." allowing elderly or slow workmen to take employment at wages less than the minimum. But such a system is open to many objections—it is humiliating to the workmen; and, except when the demand for labour is exceptional, employers prefer to have nothing to do with men who are neither worth the minimum nor free to take work at a wage which the worker himself, as well as the employer, may consider fair. It pays the employer better to pay the minimum to good men than to pay less to inferior men. Many a deserving man has had to endure bitter humiliation and hardship from the operation of the minimum wage in Victoria, and there the system has utterly broken down.

An instance of this has been brought under my notice as I write. An employer in Christchurch was keeping on one of his workmen when he was over 70 years of age, and paying him 7s a day. The unionists came along and insisted upon the employer paying the minimum wage, and the consequence was that the workman had to be turned adrift. The unionists will no doubt say he can get an old-age pension; and if he cannot, he is entitled to charitable aid!

We have yet to learn that there are some demands which can only be made by madmen and listened to by fools, and this demand for a minimum wage in all industries seems to be one of them. At the root of it lies the Utopian cry "Equality and Fraternity," at once preached and discredited by the French Revolution. For Liberty we have substituted Liberalism, which in New Zealand means its opposite; and we are likely to learn by experience the truth of the saying, "Equality may be a right, but no human power can convert it into a fact."' But we may perhaps console ourselves with the reflection that there is a presumption, that what cannot be accomplished ought not to be accomplished.