Two other methods which seek to fix the remuneration for labor in such a way as to avoid industrial disputes are cooperation and profit sharing. Under the plan of cooperation the workers become the employer. Whatever profits are made, are divided among the workers and the losses must be borne by them. There is here no possibility of disputes between employer and employee. The cooperative plan is at its best in enterprises where little capital is required, where the workers are pretty nearly all on the same level of skill, and where there is a local market for the products. On the other hand, where there is much capital required, where the organization of labor is complicated, and where a high degree of skill is required in marketing the product, cooperative production is at a great disadvantage.

Under the profit-sharing plan the employer is retained and the laborers are paid wages. But in addition to the stipulated wages, they receive a percentage also of the net profits of the business. The purpose of the plan of profit-sharing from the employer's point of view is to enlist the interest of the employees in the enterprise and to secure their cooperation in making such economies as are possible as well as to keep them contented and to avoid strikes. Profit-sharing may take the form of a cash payment to the employees at the end of the business year or a bonus may be paid to them in the form of shares of stock in the corporation or in the form of old age or invalidity or life insurance. Profit-sharing has not been widely adopted partly because of the hostility of trade unions, who see in it a plan to weaken their position, and partly because it masquerades as philanthropy on the part of the employer.

Various efficiency plans have been evolved in recent years which contemplate rewarding the worker not in proportion to the net profits of the business but in proportion to the gains from his improved productivity. These systems are objected to, on the part of the union, on the ground that they are merely devices for speeding up the employees and that the ultimate result will be the same as the result of other speeding up devices; namely, that when the employees are all speeded up to increased efficiency, wages will be cut so that wages plus bonus will be no greater than the former wages alone. Unfortunately, there is much historical justification for this fear on the part of the wage earners. It is to be hoped, however, that some solution may be arrived at by employers and employees by which both parties may be made to see the utility of introducing efficiency systems which will effect economies in materials and in the time of workers and increase their wages without unduly taxing their strength.

Questions

1. What is meant by wages? Does a person ever pay wages to himself?

2. How does an increase in the demand for labor affect wages? An increase in the supply of labor?

3. Is labor as mobile as wheat? Why?

4. Where laborers compete for positions are their wages likely to be equal? Explain.

5. Where there is free competition will the costs of labor to the employers tend to be equal? Explain.

6. Contrast real and nominal wages.

7. Contrast efficiency wages with time wages and piecework wages.

8. How does labor monopoly affect wages?

9. Why do rates of wages differ from occupation to occupation?

10. Does shortening the workday increase the productivity of labor? What is the real justification of the eight-hour day?

11. Under what disadvantages are the laborers as bargainers? What are the benefits of collective bargaining?

12. Contrast the plan of organization of the American Federation of Labor with that of the Industrial Workers of the World.

13. What is a strike? A boycott? Discuss the legality of picketing.

14. What is meant by conciliation and arbitration?

15. What conditions of production are favorable to cooperation? Unfavorable?

16. What is the plan of profit sharing?

Supplementary Reading

Carver, Distribution of Wealth, Chap. iv. Ely, Outlines, Chaps. xxii. and xxiii. Groat, Organized Labor in America, Part III. Marshall, Principles, Book VI., Chaps. iii.-v. Ryan, A Living Wage, Chaps. iii.-vii. Seager, Principles, Chap. xv. Seligman, Principles, Chaps. xxvi. and xxvii. Taussig, Principles, Chaps. xlvii. and xlviii.