The Significance of Wage Uniformity [Reprint 2016 ed.] 9781512817270

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I N D U S T R Y - W I D E COLLECTIVE B A R G A I N I N G SERIES

The

SIGNIFICANCE of

WAGE UNIFORMITY Thomas Kennedy

U N I V E R S I T Y OF P E N N S Y L V A N I A

PRESS

Industry - Wide

Collective

Bargaining

Series

George W. Taylor, Editor Induatry-Wide Collective Bargaining: An Annotated Bibliography Selma P. Kessler, Compiler 1.50 Collective Bargaining in the Steel Industry Robert Tilove

75

The Taft-Hartley Act and Multi-Employer Bargaining Jesse Freidin

.75

Social Implications of Industry-Wide Bargaining Otto Pollak

1.50

The San Francisco Employers' Council George O. Bahrs

75

Collective Bargaining in the Pacific Coast Pulp and Paper Industry Clark Kerr and Roger Randall 75 Multi-Employer Bargaining: Nature and Scope Frank C. Pierson

1.00

Collective Bargaining in the Bituminous Coal Industry Waldo E. Fisher

1.50

Collective Bargaining in the Trucking Industry Nathan P. Feinsinger

75

The Significance of Wage Uniformity Thomas Kennedy

75

In Preparation Problems of Hourly Rate Uniformity John R. Abersold Multi-Employer Bargaining and the Anti-Trust Laws Bert W. Levy The Philadelphia Printing Industry: A Case Study John W. Seybold Management Problems Implicit in Multi-Employer Bargaining Sylvester Garrett and Reed Tripp Conference on Industry-Wide Collective Bargaining: Proceedings

The

SIGNIFICANCE of

WAGE

UNIFORMITY

Thomas Kennedy

Published for the LABOR RELATIONS COUNCIL of the WHARTON SCHOOL OF FINANCE AND COMMERCE by the

UNIVERSITY

OF P E N N S Y L V A N I A Philadelphia 1949

PRESS

Copyright 1949 UNIVERSITY OF PENNSYLVANIA PRESS Manufactured

in the United States of

America

Thomas Kennedy is Assistant Professor of Industrial Relations at the Wharton School of the University of Pennsylvania. From 1941-43 he served as Impartial Chairman in the Full-Fashioned Hosiery Industry. He is the author of Effective Labor Arbitration (University of Pennsylvania Press, 1948).

Preface In most appraisals of multi-employer bargaining, discussions are limited to the advantages and to the disadvantages that derive from applying uniform policies or standard conditions of work to a number of competing business enterprises. The marked variations between the actual policies adopted in various situations, in an effort to stabilize working conditions, are either ignored or lightly dismissed. Yet the choice between different "stabilizing policies" involves extremely vital considerations. What is to be stabilized? This particular aspect of multi-employer bargaining constitutes a distinctive series of problems that stand out in their own right as a challenge to understanding. The exact policy that is followed—in "taking wages out of competition," for example—will have a great bearing upon the relative advantages and disadvantages of the joint employer relationship itself. Because he has taken up this challenge, Thomas Kennedy has plowed new ground in his study for this series which he has titled: The Significance of Wage Uniformity. Dr. Kennedy sharply contrasts the widely different economic consequences that result from attempts in multi-employer bargaining to attain uniformity of various, selected elements of the wage bargain. An agreement under which several companies pay identical hourly rates for similar job classifications, for example, can be expected to bring about wide differences in labor cost per unit of product. Hourly earnings of employees may thereby be stabilized, but weekly and annual earnings may not be. Competition in the sale of goods will depend, more than ever, upon management efficiency and might very well be intensified. A stabilization policy of this sort has apparently been appraised as highly inadequate for the needs of several'highly competitive industries. In the needle trades, at any event, an altogether different wage stabilization policy has been followed. In those and in other industries, stabilized piece-rate scales have been introduced. A uniformity of labor costs is the goal along with a stabilization of employment opportunities. One of the consequences, however, is a relatively wide [iii]

variation in the hourly wages earned by the employees. Under this policy, hourly earnings are not stabilized at all. On the contrary, the range of hourly earnings may be substantially widened if the same piece-rate scale is applied both by companies which have achieved a high rate of production and by those which have not adequately solved their production problems. There is more complexity to industry-wide bargaining than meets the casual eye. How should wages be stabilized in each case of multi-employer bargaining? In the light of Dr. Kennedy's findings, this policy question stands out as a matter of extreme importance, not only to those who actually practice multi-employer bargaining, but also to all those who would intelligently evaluate this kind of dealing. Reference has just been made to the striking contrast between a wage policy with uniform hourly earnings of employees as the main objective and a wage policy with uniform labor costs as the goal. In his study, Dr. Kennedy intensively analyzes these two wage policies and five additional ones. All of them have been utilized to some degree in an effort to secure wage stabilization between competing plants. Each one of them calls for the discriminating consideration given by Dr. Kennedy. Upon a careful reading of The Significance of Wage Uniformity, one will doubtless conclude that, altogether too frequently, the issue over industry-wide collective bargaining has been argued without a full appreciation of the complexities and variations of that process. There is much to the point of view that the institution of industry-wide bargaining cannot either be approved or condemned in toto. Sometimes it provides urgently needed stabilization at a minimum cost; sometimes the results are far from salutary. Much depends upon the policies that are adopted. The economic consequences of the various policies, adopted and followed in multi-employer bargaining, surely need much closer scrutiny than has heretofore been given. By raising this question, Dr. Kennedy has made a significant contribution to the search for understanding about multi-employer collective bargaining. GEORGE W . TAYLOR

Philadelphia December 28, 1948

[iv]

The Significance of Wage Uniformity Introduction

I

N recent discussion of multi-employer bargaining, there has been a tendency to regard wage uniformity as a single clear-cut concept with a single set of economic consequences. Research in a number of industries in which this type of bargaining has been adopted reveals that there are various kinds of wage uniformity with widely varying economic consequences. It is important, in appraising various experiences, to make very clear the kind of wage uniformity which is practiced. There are at least seven basic types, any one or a combination of which may serve as the goal of multi-employer bargaining. These types may be listed as follows: 1. Uniformity of rate per unit of output. 2. Uniformity of rate per unit of skill and effort required. 3. Uniformity of rate per hour of labor of a particular type. 4. Uniformity of rate ranges. 5. Uniformity of minimum rates. 6. Uniformity of rate changes. 7. Uniformity of total costs. It is the purpose of this study to describe the nature of these types of wage uniformity, to show the relationships which exist between them, to point out some of the administrative problems which are encountered with each of them, and finally to compare their economic effects. As the analysis proceeds, it will be discovered that the seven types are not complementary but quite dissimilar. The more fully one type is achieved, the more thoroughly others are violated. The complete achievement of one tends to make impossible the achievement of others. For this reason wage policy under multiemployer bargaining usually represents a combination of the basic types, arrived at by a series of compromises whereby the parties to the bargaining try to achieve the maximum total benefit by pursuing each type of uniformity to the point where the [i]

advantages derived from it are deemed to be about equal to the disadvantages which it creates by preventing the accomplishment of the other types of uniformity. Before proceeding with a detailed analysis of each of the types, reference to the experience of the parties to the National Labor Agreement in the full-fashioned hosiery industry will serve to illustrate the practical problems of wage policy and administration created by the local labor market pressures against uniformity and the conflict between the types of uniformity.

Experience in the Full-Fashioned Hosiery Industry Uniformity of rate per unit of output. The full-fashioned hosiery industry is and always has been a piece-rate industry. Prior to 1929, piece rates were negotiated by the Union separately with each company. They varied from mill to mill depending on the local conditions and the bargaining strength of the parties at each plant. 2 In 1929 multi-employer bargaining on a national scale (though not with all units in the industry) was undertaken. From the beginning of this national bargaining, "uniformity of rate per unit of output" has been the basic objective of the wage uniformity policy. The first National Agreement contained a schedule of "standard prices," that is piece rates composed of standard labor rates and lists of extras and deductions for special style features. The parties specifically stated their purpose. It w a s : "In order to maintain fair standards in the industry, the conditions of work and the cost of labor shall be equalized . . ." On the surface this statement may appear to be quite clear. Conditions of work and labor costs were to be made uniform throughout all mills which became signatories to the National Agreement. A "most favored nation clause" in the Agreement, moreover, guaranteed that these same terms would apply throughout all unionized mills in the industry. The Union pledges itself that in order to carry out the spirit of this agreement it will not enter into any agreement with any employer not signatory hereto or a counterpart hereof which will provide terms as favorable as those herein contained. 1

T h e t e r m " u n i f o r m i t y of r a t e p e r u n i t of o u t p u t " r a t h e r t h a n " u n i f o r m i t y of piece r a t e s " is U3ed advisedly. F o r reason, see p p . 17-18. 2 T h e r e was some multi-employer b a r g a i n i n g in 1928 between t h e U n i o n a n d a n u m b e r of Philadelphia mills only. F o r a description of the development of the national b a r g a i n i n g , see T h o m a s Kennedy, Effective Labor Arbitration: The Impartial Chairmanship of the Full-Fashioned Hosiery Industry ( P h i l a d e l p h i a : University of P e n n s y l v a n i a Press, 1948), Ch. 3.

[2]

Thus, if this Agreement were carried out, direct labor costs per unit of product would be standardized throughout the entire unionized section of the industry. But what if working conditions could not be made uniform? What if special conditions arose which prevented a company from paying the standard rates even though working conditions were uniform? In the actual day-to-day application of the Agreement over a number of years, numerous such problems have arisen. Because the parties themselves have been unable to settle many of them by negotiations, they have presented them for decision to the Impartial Chairman. An examination of the cases presented and the decisions rendered by the Hosiery Impartial Chairman shows clearly the major conflicts which can arise between some of the basic types of wage uniformity in multi-employer bargaining. The pressure of the local labor market. I n one of the first cases

to come before Dr. George W. Taylor when he was serving as Impartial Chairman, a company objected to applying a certain standard Agreement rate which management claimed was out of line with the local labor market. To pay it, the company argued, would be to place its wages for that task considerably above those paid by other industries in the same community for comparable work. The Impartial Chairman, however, insisted that the company pay the standard rate despite the local conditions. In his decision he stated: It is clear that each contracting party agrees to the principle of equalizing labor costs in the industry. Each fashioned hosiery plant has agreed that its labor costs shall be equal to the labor costs of other hosiery mills. This major objective cannot be achieved if local conditions provide an excuse for deviating from the wage structure agreed upon. If the fact that Paterson has a large number of winders provides a basis for paying a wage at variance from that agreed upon, then the way is open to pay rates above and below those specified in the general agreement in every occupation. This is so contrary to the basis of the agreement that the claim of the firm based upon peculiarities of local labor conditions cannot be allowed.3

In general this has continued to be the policy in the hosiery industry. The uniqueness of most of the skills necessary for the manufacture of hosiery has made it easier to apply this wage policy here than would be true in many other industries. The hosiery knitting, topping, looping, seaming, examining, boarding, pairing, and mending skills are vital for making hosiery, but they "Decision E 10 of the Impartial Chairman of the Full-Fashioned Hosiery Industry.

[3]

are of limited usefulness in other purpose or non-transferable skills. uniformity under multi-employer largely to industries which employ

industries. They are specialIt is significant that piece-rate bargaining has been limited unique skills.

Not all of the hosiery workers, however, are required to possess unique skills. A few electricians, stationary engineers, firemen, janitors, etc., are included in the work force of every sizable hosiery plant. Uniformity of rates for such occupations has been abandoned and local labor market conditions are looked to for guidance. The National Labor Agreement contains the following provision: "Rates of pay for engineers and firemen shall be equal to the prevailing Union rates of pay for engineers and firemen within the locality of the member mill." The same principle is applied to other multi-industry skills. Thus some flexibility in favor of local labor market uniformity has been considered desirable. This pressure of the local labor market does not represent a conflict between the different types of uniformity which may serve as goals of multi-employer bargaining, but is instead a major anti-uniformity force which interferes with the achievement of any type of wage uniformity under multi-employer bargaining. More important for this study are the conflicts between the types of uniformity. The hosiery experience provides several interesting illustrations. The conflict with uniformity of total costs. In another case presented to the Impartial Chairman, a company attempted to secure a reduction of 30 per cent below the uniform Agreement rates because of its "poor financial condition." The company claimed that a majority of its employees had voted in favor of the reduction at a plant meeting after management had explained that without the reduction "it could get no orders at all." Through lower labor rates the company was seeking a means of offsetting other of its costs which were higher than those existing elsewhere in the industry. It was proposing in fact "uniformity of total costs" in place of "uniformity of rate per unit of output."

The Impartial Chairman insisted that the uniform rates be paid and stated that the company had not acted within its rights in seeking to have its employees agree to return part of their wage to the company. Such an agreement would be contrary

[4]

to the National Agreement—because it is a deviation from the principle that labor costs of member mills are to be equal. 4

Except for a period of three years, 1938-1941, this has remained the policy in the industry. In 1938, in the face of a very highly competitive situation in the industry, the parties agreed to abandon uniformity of piece rates. Rates were negotiated with each mill taking into account the ability to pay in each case. This tended of course to move the industry toward "uniformity of total costs." In negotiating decreases in this manner, however, the Union insisted that all of the savings so secured by the companies should be employed to purchase new equipment in order that costs might be reduced and a condition eventually established in which uniform piece rates could be adopted again. This condition was achieved in 1941 and since that time no deviation from the standard piece rates has been permitted because of "inability to pay." It is significant that in hosiery, as in the other industries where multi-employer bargaining has been successful, union-management cooperation has been deemed essential to increase the efficiency of the marginal firms in order to enable them to continue to operate under the uniform rates and thus preserve jobs for union members. In the hosiery industry the Union has accepted this as a definite responsibility. Soon after uniformity of piecerates was adopted William Smith, secretary-treasurer of the Federation, wrote: "The Union for sometime past has . . . come to recognize the need for assuming a certain definite share in establishing more efficient operation in the mills where its members are employed."5 The Employers' Association in the hosiery industry also has considered its task more than that of a bargaining agency. Committed to rate uniformity, it has had to develop a concern about the impact of uniform rates upon its high-cost members. It has concerned itself from the beginning, therefore, with their production problems. If the output per worker in any department of any mill has dropped considerably below the industry average, the Association has offered technical advice and assistance to the company if it has desired such aid. The companies which have been able to solve their production problems without the Associa* Decision F 19. 'William Smith, "Hosiery Workers' New Agreement," Textile

[5]

World

{January

1930), p . 629.

tion's help have approved of the aid which it has offered to other Association mills because low worker earnings in any member mill tend to generate pressure for increases in the uniform piecerate scale which is applicable to all member mills. Prior to his death in 1946, Mr. George Lang, who was an expert on knitting and manufacturing problems, served as President of the Association. In that capacity he was available for consultation with any of the member mills. Whenever a production problem arose which threatened the workers' earnings and the company's competitive position, he worked in cooperation with the Union and the plant management to overcome the difficulty. Since Mr. Lang's death, his former assistants have continued this work. The technical aid and cooperation provided by the Association and the Union have reduced the conflict between "uniformity of rate per unit of output" and "uniformity of total costs." The success of multi-employer bargaining in the industry has been due in no small measure to this factor. The conflict with uniformity of hourly rates. In another case a company sought deductions from the uniform piece rate because an employee's earnings were above the average for the industry and in numerous cases the Union asked for extras because "the average wage of the knitters is below normal." 6 In these cases the Impartial Chairman denied the requests for exceptions to the uniform rates solely because of relatively high or relatively low earnings per se. In denying the request of the company for lower rates, he stated: The mere fact that earnings are relatively high at standard piece rates gives the company no right to reduce rates. . . . Since the boxing costs have definitely not been excessive, this company should not question the right of a boxer with exceptional ability to secure exceptional earnings. 7

In denying the request of the Union for higher rates, he stated:

The object is not toward making uniform earnings and it is to be expected that certain variations in earnings will prevail between plants. 8 Low production and low earnings . . . do not result in payment of an extra if the "off condition" is caused by lack of efficiency on the part of the operators. 9

It must be emphasized that in these cases the Impartial Chairman was concerned with differences in workers' earnings per se. In his decisions he stated that relatively high or relatively low earn« Decision E 35.

'Decision L 4.

8

Decision E 36.

[6]

"Decision E 25.

ings in themselves provide no basis for exceptions to the uniform rates. It was the employees' effort and skill and not the methods and conditions of work which were abnormal and therefore gave rise to earnings above or below the industry average. Under uniformity of rate per unit of output, management and labor must be prepared to accept a considerable range of hourly earnings, even when methods and working conditions are standardized. Table I, which is a reproduction of data taken from TABLE I PRODUCTION AND EARNINGS OP BACKRACK BY C O M P A N I E S 1 0

KNITTERS

42-gauge, 24 section (plain nylon) Company (by code number)

6 19 21 29 30 32 37 41 66 67 74 78 79 80 83 101 102 103 104 123 215 Total 45-24, Nylon-Plain 10

Number of Workers

Average Hourly Production

Average Hourly Earnings

14 114 35 32 2 14 32 36 6 6 1 5 8 7 5 23 142 13 45 141 28

1.326 1.006 1.010 1.091 0.819 0.996 1.009 1.093 1.021 1.255 1.175 1.077 1.010 1.012 1.144 1.113 1.120 1.226 1.255 1.182 1.118

$2,345 1.911 1.867 2.028 1.518 1.865 1.858 2.028 1.785 2.268 2.138 2.093 1.938 1.873 2.061 1.993 2.061 2.300 2.304 2.228 2.078

709

1.108

G. Allan Dash, Jr., Earnings of Futl-Fashioned Hosiery Workers ( P h i l a d e l p h i a : Office of t h e I m p a r t i a l C h a i r m a n , 1948), p . 33.

[7]

$2,061 in

Union

MiTU—ItiT

the 1947 Wage Study of the hosiery industry, indicates the differences in earnings which may be expected even on the same type of equipment producing the same general type of goods. Only if production per worker is rigidly controlled will hourly earnings be uniform. Under such conditions, however, the piece-rate incentive is destroyed. In other words, "uniformity of rate per unit of output" and "uniformity of rate per hour of labor" are in conflict. In adopting the former, the hosiery industry eliminated the possibility of the latter. The

conflict with

uniformity

of

rate

unit of

skill

and

effort

required. If equipment, methods of operation, quality of raw material, working conditions, or quality standards vary materially between plants, a worker in one plant will have to exert considerably more skill and effort than his fellow-worker in another plant in order to produce the same number of acceptable units of a particular product. As a result, "uniformity of rate per unit of output" means that one worker may receive much less pay per unit of skill and effort expended than his fellow-worker in another plant. Assuming that both workers exert the same amount of skill and effort per hour, their hourly earnings differ through no fault of their own. In other words, opportunities to earn are not equal. The most important conflict in the area of wage uniformity in the hosiery industry has centered around this problem. It was a conflict which the parties to the Hosiery Agreement recognized from the beginning of their multi-employer bargaining. In the first National Labor Agreement, they prefaced the clause calling for "equalized labor costs" with a phrase calling for "equalized conditions of work." In reality, of course, conditions of work are never completely uniform throughout an industry. In the hosiery industry differences in equipment, methods, raw materials, working conditions, and quality standards continued to exist in the plants which were signatories to the National Labor Agreement. From the beginning the parties recognized that, while minor differences in equipment required no differences in piece rates for the same product, any major differences should. New-type knitting machines which permitted workers to produce many more dozens of hosiery per week than they could produce on the old machines were given lower rates. The first Agreement provided: [8]

Until such time as a joint time study shall be made, to determine the proper rate, less than the basic rate, which shall apply to the long section and speed machines, the rate shall be determined as follows: The rate on long high-speed legging machines will be one cent less per section over 18 per dozen, plus one-half cent less per section per dozen for each four courses over fifty-two. In other words, a 24-section machine running sixty-four courses per minute will pay six cents less per dozen for sections and nine cents less per dozen for speed, or a total of 15 cents less per dozen. Long high speed footers will pay one-half cent less per section per dozen over twenty, and one-quarter cent less per section per dozen for each four courses over fifty-two. In other words, a 24-section footer running sixty-four courses per minute will pay five cents less per dozen; a 28-section footer running sixty-four courses per minute will pay ten cents less per dozen.

These equipment differentials, necessary as they have been to induce the capital investment required to modernize the mills and to provide more equitable relationships among the earnings of the workers, have interfered with complete "uniformity of rate per unit of output." The result has been differences in direct labor costs between the plants. The companies with the new highspeed equipment have been able to produce a dozen of a particular type of stocking at a lower direct labor cost than the companies with the old slow equipment. The extent of the equipment differentials has become a matter of conflict, not only between the Employers' Association and the Union but also between companies within the Employers' Association. In addition to variations in piece rates for major differences in equipment, the Association and the Union have also agreed from time to time on deviations from the uniform rates to compensate for major variations of raw materials, methods of operation, or general working conditions. In a few job classifications where the method of operation is more or less individual with each plant, standard rates have never been established. Rates have been negotiated for each individual mill with the hope of achieving equal earning opportunities for the workers. Thus where the variations from standard conditions have been major, the parties have given preference to "uniformity of rate per unit of skill and effort." Differences in the piece rates and therefore in the direct labor costs for the same product have been approved. The real difficulties have been over the minor rather than over the major variations in equipment, methods, raw material, [9]

conditions and quality standards. How f a r should the granting of exceptions be carried? Should each minor variation between mills in any of these areas result in a different rate? Or should the uniform rate apply to a range of situations rather than to a definite standard? If so how broad should the range be? These are the questions which the parties, unable to settle themselves in many cases, presented to their Impartial Chairman for decision. In a number of cases the Union requested extras over and above the Agreement rates for equipment, methods, raw material, or working conditions which it considered substandard. By substandard the Union meant that the workers had less opportunity to earn than was true on the average in the rest of the industry. In these cases the Union referred to the Agreement clause calling for "equalized conditions of work." It was only under such conditions the Union claimed that the standard piece rates were intended to apply. Under the Agreement, it argued, a worker could not be expected to spend substantially more time, skill, and effort in one plant than he would have to spend elsewhere in the industry for the same rate. It was not the workers' fault, the Union contended, that some managements were inefficient. Higher piece rates should be paid therefore, under such conditions in order that all workers would have equal opportunities to earn. The companies objected to the Union's approach in these cases and insisted that the equality intended by the Agreement was "uniformity of rate per unit of output." They agreed that certain major differences in equipment and method might require deviations from the standard rates and pointed to the machine differentials in the Agreement as evidence that such adjustments had been made. To interpret the Agreement to mean that every deviation from average conditions in the industry, however, should result in a special piece rate, the companies contended, would necessitate the establishment of separate rates for each operation in each plant since conditions were nowhere exactly the same as the average. Such action, the companies argued, would destroy the basic purpose of the equality-of-rates. clause which was to result in an equalization of labor cost per unit of output on the same general type of equipment in all plants and thus make possible a stabilization of production costs throughout the industry. In a number of other cases under opposite conditions, that is where equipment, methods, raw material, and working conditions [10]

in a particular plant were substantially above the industry average, the parties switched points of view. The companies argued in favor of rates below standard, contending that management and not labor had created the conditions which made it possible for an average worker to turn out more than average production at the plant in question and, therefore, management was entitled to a saving through lower rates. To decide otherwise, they contended, would remove from management a strong incentive for technological improvements which, in this highly competitive and partially unionized industry, was essential to the workers' as well as management's welfare. The workers would not be penalized, they pointed out, since management was seeking only that the rates should be set so as to give the same opportunity to earn as existed on the average elsewhere in Association mills. The Union replied, by adopting the arguments of the companies in the cases involving relatively high earnings. It argued that if special rates were permitted for each deviation from standard, there would have to be a separate rate for each plant which would completely destroy the uniformity of piece rates intended by the Agreement. Furthermore it contended that the conditions which made possible the higher production at the plant or plants under consideration were brought about only with the cooperation of the workers and, therefore, they had a right to share in the savings. The companies gained through lower overhead and other non-labor costs. The workers, therefore, had a right to gain in the higher earnings made possible by the maintenance of the standard piece rates. The Impartial Chairman's task has not been easy. In each case he has had to determine: a. what constitutes the standard task for which the uniform piece rate was intended, b. what extent of variation from the standard task, if any, should be considered normal and therefore not subject to an extra or deduction from the uniform piece rate, c. to what extent does the task in the case in question actually vary from the standard task, d. if the variation from the standard task is greater than normal, how large should be the deviation from the uniform rate in order to compensate equitably for it. [il]

When they adopted uniform piece rates, the Union and the Association did not describe in detail the job content for which the rates were intended. Such descriptions have never been developed. A s a result the Impartial Chairman has had no accepted criteria by which to judge tasks which either party has claimed to be non-standard. Over a period of time, however, he has become familiar with the contents of the jobs in a number of mills. This background has enabled him to judge abnormal conditions when they have arisen. In a number of cases, however, he has considered it necessary to make industry-wide studies of the occupations. 11 If the result of such a study has indicated that the condition in question prevails generally throughout the industry, the Impartial Chairman has considered it as standard and has refused extras and deductions from the uniform piece rate. A f t e r one such study the Impartial Chairman ruled as follows: The Impartial Chairman must, therefore, deny the Union's request for an extra for this task. It would not be fair to ask this Company to assume an extra cost for a task which is included in the regular seamer or examiner rate elsewhere. 12

In another case he ruled: The Impartial Chairman cannot agree with the Union, therefore, that a condition exists on these machines which is unique in the industry and therefore requires . . . extras. Under a uniform labor agreement this Company is entitled to the same rates as other companies unless such a uniqueness can be shown to exist. 13

Where the Impartial Chairman has been convinced that the condition is unusual, decision has been more difficult because it has necessitated the determination of the range from standard conditions within which the standard piece rate would be permitted. In one case in which the Impartial Chairman refused an extra, he wrote: In the development of uniform national rates, however, it is obviously impractical to set different rates for every method of making reinforcements. If an added rate were set in these instances because of a slightly more difficult procedure, then a rate lower than the regular, standard rate, should be set in plants making the toe-block in a manner requiring less than usual requirements. Such cases have already been brought to the attention of the Impartial Chairman. The rate schedule for reinforcements alone would be a bulky document, if each different type of reinforcements were assigned a special rate. " Decisions E 34, H 32, H 35, N 4. 440 of the Impartial Chairman of the Full-Fashioned Hosiery Industry. 444.

12 Memo 13 Memo

[12]

The wage rate structure embodied in the National Agreement is based upon the determination of uniform rates applicable to somewhat varying tasks, tackles and extra operations. . . . The rates designated by agreement or decision are for varying but standards methods of performance. The union claim in this case could be upheld only if the method of making the toe-block resulted in a substantial loss of production and, if in addition, it could be shown that the methods employed were so unusual and were so different from standard practice that the rate for block toe could not be considered as applicable. 14

In general, there has been no formula for establishing the range. In one case the Impartial Chairman did attempt to set a standard which might be used to measure its size. In referring to the application of the uniform rates to old machines of varying conditions, he stated: "As much as 10 per cent variation from average production is expectable and normal." 15 This would indicate that so long as the equipment was in a condition which permitted production by an average operator within 10 per cent of the industry average, no extras or deductions would be granted. This 10 per cent deviation, however, was mentioned only in this one decision dealing with the condition of old equipment. In a more recent decision in which the Impartial Chairman granted an extra for a non-standard device on a new machine, he stated: The earnings picture does indicate clearly that no major problems are encountered by use of this device. However, the Impartial Chairman cannot agree with the thesis advanced which is that as long as earnings exceed or equal the standard earnings on new machines, no extras are payable for unusual and non-standard operations no matter what the operation is. Uniform backrack rayon rates are now established for these machines. If no special device were on these machines the uniform rates would be payable. There can be no question but that this is a non-standard and unusual device. Moreover, company officials freely admit that the device does involve some lost knitting time on the part of the knitter and that it is a device which requires frequent attention. 16

Thus the range has been a matter for the Impartial Chairman to determine in each case. Decisions have been based on the "rule of reason." If the variation has been "reasonable" in his judgment, no extra or deduction has been granted. If it has been "unreasonable," a special rate has been ordered. In one case, for example, in which an extra was refused by the Impartial Chairman, he ruled: 14

Decision F 36. See also Decisions H 13, K 18.

13

Decision H 42.

18

Memo 425.

[13]

Signatory plants cannot be required to do their tasks in an identical manner, but must be permitted the right to meet their individual needs without paying extra rates or making deductions for reasonable variations. 17

In another case the Impartial Chairman, in upholding the request of the Union for an extra, stated: It is reasonable to assume that the parties to the National Labor Agreement intended that the rate provided therein should apply in each plant only to operations which are reasonably similar to those used throughout the industry. The company is entitled to the standard rate only if and when it adopts the standard method . . . 1 8

This policy of applying the standard rate to a "reasonable range" of variation from the standard or usual practice in the industry has had the result of permitting the workers to share in the savings resulting from minor technological improvements. During the life of each contract there are a great many such improvements in the industry and the workers find that their opportunity to earn is increased under the standard rates. Moreover the result is cumulative. An improvement which proves successful in one mill is soon adopted elsewhere and becomes part of the usual or standard practice. As one would expect, this policy has induced the workers to be quite cooperative with management's efforts to promote improvements in machinery and methods. In establishing extras and deductions to be applied to situations which he has judged to be "unreasonably" different from the usual practice in the industry, the Impartial Chairman has not been guided entirely by the desire to create uniform opportunities to earn. In these cases also he has recognized the right of the workers to share in the savings of technological improvements. In this respect, however, he has not broken new ground in the industry. Management and Union in their negotiations established the policy. 19 Thus the workers in the industry have found their earnings increased not only by minor, but also by major, technological changes during the life of an Agreement. Under such conditions it is understandable that they should look favorably upon technological change, whether minor or major in character. Variations in quality standards from mill to mill have also " D e c i s i o n G 42. " M e m o 356. " K e n n e d y , op. cit., p p . 185-88.

[14]

caused considerable difficulty within the industry. When workers are paid, as they are in the hosiery industry, by the number of "acceptable" units that they produce, the definition of "acceptable" becomes very important. If one company is so strict in its quality standards that out of a certain lot of hosiery it rejects 30 per cent whereas elsewhere in the industry only 10 per cent of that certain lot would have been rejected, the effect on "uniformity of rate per unit of skill and effort required" is clear. Uniformity of piece rates under such conditions assures inequality of opportunity to earn. This problem of quality standards has never been satisfactorily solved in the hosiery industry. As recently as 1943 the Impartial Chairman stated: Just where the line between seconds and thirds falls is not clear [the worker is paid for seconds but not for thirds] but it appears certain that this company has been more severe in its classification than is the practice in many other mills in the industry. In an industry with national uniform piece rates this problem of different standards in different mills is of great significance. It is clear that if one mill accepts and another rejects certain stockings while both pay the same piece-rates, the knitters in the two mills are not being treated on the basis of equality so far as earnings prospects are concerned. Because of the difficulties which are certain to reoccur under such a condition the Imparital Chairman recommends that the parties endeavor to establish uniform standards for determining what constituted an acceptable . . . stocking. 20

The problem has caused conflict not only between the Union and the Association but also between companies within the Association. As a whole the branded mills maintain higher quality standards than the unbranded mills.21 If permitted to pay the same piece rate per "acceptable" stocking as the unbranded mills, they would gain a competitive advantage. The branded mills, therefore, have insisted that the uniform rates were intended to apply regardless of the quality standards, whereas the unbranded mills have urged lower rates for themselves. Closely related to the conflict over the quality standards for merchandise has been the standard of job performance which a company has a right to expect for the standard rates. If one company is permitted to establish much higher standards of job performance than another, "uniformity of rate per unit of output" obviously results in lack of "uniformity of rate per unit of skill 20 21

Memo 449. There a r e exceptions to this s t a t e m e n t . standards.

Some of t h e u n b r a n d e d mills have very h i g h quality-

[15]

and effort required." Opportunities to earn are not equal. The determination and acceptance of a standard of job performance, however, has not been easy. A number of cases have required the attention of the Impartial Chairman. In one case involving the job performance expected of the examiners, the Impartial Chairman left no ground for doubt. He ruled that: The standard for the examiner's job is that every defective stocking must be segregated, and no countenance can be given to a point of view that an examiner is permitted to pass any certain percentage of bad work. 22

With this exception, however, no rigid formulae for job performances have been developed either by the parties or by the Impartial Chairman. It has been a question again of a "reasonable range" as determined finally by the Impartial Chairman. Thus in one case in which the Impartial Chairman denied a company the right to discipline knitters and loopers for failure to detect and segregate certain defective work he stated: There is no general rule that can be made to define the limits of what constitutes carelessness or negligence in workmanship. . . . The company procedure requires a degree of inspection by the knitters that is not contemplated by the piece-rates established by the Agreement. It means that an inspection short of perfect will result in a decrease in earnings. The passing of a reasonable amount of mends by the knitter cannot be considered as negligence in the sense that replacements must be made. 23

In another case concerning job standards for boarders, he ruled: A good boarding job requires more than merely placing stockings on forms and taking them off. The skilled boarder in doing a good job will match lengths and match heels within a reasonable degree of accuracy. The boarder is expected to pay particular attention to these points, always recognizing that aboslute matching is difficult to achieve in boarding. 24

Finally, there has been one other condition under which "uniformity of rate per unit of skill and effort required" and "uniformity of rate per unit of output" have conflicted, that is where a temporary nonstandard condition has resulted in temporary low earnings. This problem has been met by the establishment of hourly rates which become effective under a variety of temporarily abnormal operating conditions. The hourly rates are related to the individual worker's previous piece-work performance—80, 90, and 100 per cent of previous piece-rate earnings being paid under »Decision J 8.

23

Decision F 30.

[16]

«Decision F 27.

conditions set forth in the Agreement. 25 These hourly rates are not paid if piece-rates result in higher earnings or if it can be proved that the low production is the fault of the worker. The resultant nature of w a g e uniformity in the hosiery industry.

The analysis has revealed that wage uniformity in the hosiery industry is not a static, single, clear-cut concept. The basic type is "uniformity of rate per unit of output," but this has been modified considerably in order not to violate too much "uniformity of rate per unit of skill and effort required." The uniform piece rates apply within a "reasonable range" of conditions, but beyond that range the standard rates are adjusted in order to keep in line the earnings between workers expending the same skill and effort. The experience in the hosiery industry has been recounted in order to show the practical problems which must be met in a system of multi-employer bargaining because of the conflicts in the types of uniformity. Intelligent handling of these problems necessitates a knowledge of the various types of uniformity, the relationship between them, the techniques by which each may be achieved, and the economic effects of each. The next section of this study, therefore, will be devoted to such an analysis. General Analysis of Types of W a g e Uniformity Seven types of wage uniformity have been selected as goals in the various industries in which multi-employer bargaining is practiced. These were listed on page one and will now be discussed seriatim. In each case it will be assumed that it is the desire to achieve completely the type of uniformtiy being discussed. Particular attention will be given to the effects of the various types of uniformity on: 1. the equalization of employee earnings 2. the stabilization of prices 3. the elimination of marginal firms 4. the distribution of the labor force 5. the introduction of technological changes 1. Uniformity of rate per unit of output. This designation has been selected advisedly in preference to "uniformity of piece rates." In practice, "uniformity of piece rates" has come to imply ffi

For

details, see Kennedy, op. cit., p p . 12-15.

[17]

uniformity of rate per unit of product on the same general type of equipment and with the same general type of working conditions. The term "uniformity of rate per unit of output" implies no such qualification and, for this discussion, it is not intended that it should. It is used here to mean simply the same rate for the same unit of ouput regardless of the type of equipment or the conditions of work. It is a more basic concept and lends itself to more precise economic analysis than the term "uniformity of piece rates" which has to be discussed with its implied qualifications as noted in the brief recounting of the hosiery experience. Under this type of uniformity the earnings of each individual worker depends on the number of units of product which he turns out. Even if the production conditions in all the plants of the industry were identical, there would still be differences in earnings of workers depending on the efficiency of the workers themselves. Some of this variation could be eliminated by more careful selection and placement,26 but considerable difference in workers' earnings will occur wherever uniform piece rates are paid, unless production is pegged by the workers or completely controlled by the machines. Because the average efficiency of the workers varies from plant to plant in an industry, the plant averages of earnings of workers are also certain to vary and would do so even if production conditions were the same in all plants. Production conditions, however, are never identical from plant to plant in an industry. Some plants are more efficient than others because of better raw material, equipment, supervision, or other factors. The result is that the same worker by the expenditure of a certain amount of skill and effort can turn out more units of product in one plant than in another and since workers are paid by the unit of output under this type of uniformity, earnings of workers vary from plant to plant for this reason also. As a matter of fact, these two causes of differences in earnings tend to reinforce each other because the more efficient workers are attracted to the more efficient plants. As a result, considerable differences in earnings for the same occupation may be expected from plant to plant. The 1947 Wage Study of the Full-Fashioned Hosiery Industry 2 7 shows regular hourly earnings of knitters varying from an average of $1.21 on 39 gauge 18 section machines » S e e Joseph Tiffin, Industrial " D a s h , op. cit., p p . 38, 41.

Psychology

(New Y o r k : Prentice Hall, 1946), p. 19.

[18]

in one plant to an average of $2.75 on 51 gauge 26 section machines in another plant. The difference would be much greater if "uniformity of rate per unit of output" were followed rigidly in this industry. As explained previously, machine and other differentials have been made a p a r t of the hosiery wage schedule and these have tended to reduce the range of earnings. Before adopting this type of uniformity as the goal of their multi-employer bargaining, therefore, both the union and the companies should determine whether they are willing and able to accept wide inter-plant differences in workers' earnings which in many cases will not be related to differences in skill and effort on the p a r t of the workers. One of the reasons that companies engage in multi-employer bargaining is to stabilize production costs which, it is hoped, will eliminate "cut-throat competition" and bring about a degree of price stabilization. The extent to which this type of uniformity or any of the other types to be discussed may affect "industry stabilization" depends greatly on the percentage of labor costs to total costs. It is significant that in most of the industries in which multi-employer bargaining has been adopted, labor costs are a relatively high percentage of total costs. By equalizing direct labor costs per unit of product in all plants in an industry, "uniformity of rate per unit of output" is effective in aiding industry stabilization. Total costs still differ from plant to plant. If the marginal plants had lower piece rates than the other plants prior to multi-employer bargaining, the introduction of this type of uniformity could result in greater variation in total costs in the industry than previously existed. The great threat to stability in these high labor cost industries in years past, however, has been the competitive lowering of wage rates followed by price decreases followed by more wage decreases until the market became demoralized. This type of uniformity eliminates competition in direct labor costs and thus serves as an aid to price stability. Marginal mills which, prior to multi-employer bargaining, were able to continue in operation only because of lower direct labor costs per unit of output may be driven out of the field. The immediate pressure in this respect depends on the range of total costs among the companies, the relation of labor costs to total costs, and the level at which the uniform rates are established. The uniform rates could be set so low as to enable the most [19]

inefficient firm to continue in operation. Research indicates, however, that rate uniformity generally has not been accomplished in that way.28 On the other hand, the level cannot be established so high as to cause too many company failures with a resultant loss of many jobs. As illustrated in the hosiery industry, the Union and the Employers' Association are usually very active in offering technical aid to the firms which find it difficult to pay the uniform rates. The task is to eliminate marginal firms by converting them into efficient firms. Where rate uniformity under multi-employer bargaining has been most effective, union-management cooperation has been highly developed.29 The effect of this type of uniformity on the marginal firms is not as severe, however, as the effects of two other types of uniformity—"uniformity of rate per hour" and "uniformity of rate per unit of skill and effort required." cFor although direct labor costs per unit of output are equalized in all plants, the cost per unit of "labor" consumed is not equalized. The inefficient plants pay less than the efficient plants for each hour of work and each unit of skill and effort expended by the workers. Although the workers in the inefficient plants must spend more time and energy to produce a unit of output, they receive the same piece rate as in the more efficient plants. To put this another way, the efficient plants pay a higher rate per hour and per unit of skill and effort consumed. In the piece-rate industries where "uniformity of rate per unit of output" is the wage policy, the efficient companies have usually been willing to go along because, prior to uniformity, the labor advantage of the marginal firms was even greater. Then, in many cases, they actually received lower piece rates per unit of output. Thus the move to uniformity of direct labor cost per unit of output has been a competitive gain for the efficient companies— 2* In the Chicago men's clothing industry, " . . . all levelling wag upward." Amalgamated Clothing Workers of America, Research Department, The Clothing Workers oj Chicago, 19J0-SS ( C h i c a g o : Chicago Joint Board, Amalgamated Clothing Workers of America, 1922), p, 32. In the pottery industry, attempts at " a v e r a g e p r i c i n g " met with severe opposition f r o m the workers in the high wage companies. David A . McCabe, National Collective Bargaining in the Pottery Industry ( B a l t i m o r e : Johns Hopkins Press, 1932), p. 190. In the lace curtain industry, adoption of the Philadelphia list, which was midway on the range of rates, was prevented by workers in the Scranton area where rates were higher. Gladys Palmer, Labor Relations in the Lace a/nd Lace Curtain Industries in the United States ( W a s h i n g t o n : Bureau of Labor Statistics, 1925), p. 53. 2» In 1941 the International Ladies Garment Workers Union established a "Management Engineering Department" which is directed by a professional industrial engineer.

[20]

so much so at times that certain marginal firms have been forced from the field. It should be realized by the union and by all the companies entering into multi-employer bargaining with this type of uniformity, however, that subsidization by labor of inefficient companies is not completely eliminated. The inefficient plants still receive the advantage of paying less than the efficient companies per hour of labor and per unit of skill and effort consumed. The differences in workers' earnings have a tendency to cause labor to move from the inefficient to the efficient plants. The inefficient plants, therefore, have a somewhat higher labor turnover, which causes total labor costs, including training, to be higher than those of the efficient mills. In addition, the residue of workers that remains in the inefficient mills may be less capable. This would tend to cause higher wastage and overhead costs and lower quality of product. When the labor market is tight, the inefficient mills may even find it difficult to continue operation under the uniform piece rates. Under this type of uniformity, therefore, some pressure to either increase efficiency or pay "under-the-table" extras may be exerted by the labor market on the inefficient firms. A number of studies in the field indicate, however, that the wage-differential factor is not as potent as the job-loss factor in causing workers to change their place of employment.30 Professor Dunlop of Harvard has stated it as follows: "Wage oriented mobility is very low, union or no union. Job oriented mobility is much higher." 31 To the extent that the theory expounded by Professor Dunlop is true, this type of uniformity, which results in wage differentials but which is not as effective in causing job losses in the marginal or inefficient firms as certain other types of uniformity, is not as effective as some of the other types in causing a more economic distribution of the labor force. In other words, this type of uniformity does not place as strong economic pressure on the marginal firms as some of the other types. As a result there are fewer failures among the marginal firms. Because they remain in business, the job-loss factor of labor mobility does not become effective. Workers are not forced to move to the more efficient firms where their labor would be more productive. It may be 30

W. R u p e r t M a c L a u r i n and Charles A . Myers, " W a g e and t h e M o v e m e n t of F a c t o r y Labor," Quarterly Journal of Economics ( F e b r u a r y 1 9 4 3 ) , p p . 2 4 1 - 6 4 ; J o s e p h S h i s t e r a n d Lloyd G. Reynolds, " J o b S a t i s f a c t i o n a n d Labor Mobility," 1947, unpublished m a n u s c r i p t .

31

J o h n T. Dunlop, " E c o n o m i c A s p e c t s Conference on Inditstry-Wide Collective

of I n d u s t r y - W i d e Collective B a r g a i n i n g , " Proceedings, Bargaining ( U n i v e r s i t y of P e n n s y l v a n i a P r e s s , 1 9 4 8 ) .

[21]

concluded, therefore, that it is not as effective as some of the other types in bringing about a more economic distribution of the labor resources of the country. A final economic result of "uniformity of rate per unit of output" is its effect on technological change and on the distribution of the gains from such changes. Since piece rates per unit of output remain the same regardless of the manner in which production is carried on, technological changes have no effect on direct labor costs. The workers gain in increased pay, but management's gain is limited to decreased overhead, plus less power and raw material expenditures. There may also be the advantage of better quality merchandise which will bring higher prices. The major gains of technological changes, however, if this type of uniformity is carried out strictly, accrue to labor—not to management. In fact, since new equipment and other means of increasing efficiency usually require investment of funds which adds to overhead costs, the advantages of any technological change in costs other than labor must be considerable to provide management with an incentive to be progressive. It may be concluded, therefore, that in general this type of uniformity interferes with the most effective distribution of capital in the economy. In the industries where labor costs are equalized there are, however, two factors which help technological change. First, there is little or no opposition on the part of the employees to technological change. In fact, the employees directly and through their unions have frequently demanded, and in some cases (as in the hosiery industry) have helped to finance, technological changes in order to secure the higher earnings which such changes give them. Second, there has not been rigid adherence to uniformity of piece rates per unit of output. Major technological changes have frequently resulted in changes in piece rates. It should be emphasized, however, that such changes in rates represent abandonment of the type of uniformity under discussion. 2. Uniformity

of

rate per

unit of

skill

and

effort

required.

This is the type of uniformity that would be brought about by a completely balanced piece-rate structure. It envisages all piece rates set in such a way that the employment by any worker of more skill, effort, or any of the other factors considered as components of jobs would be compensated commensurately. It is very different from "uniformity of rate per unit of output." Marshall [22]

recognized the necessity for drawing a distinction between the two for purposes of economic analysis. In Principles of Economics he wrote: When the payment f o r w o r k of any kind is apportioned to the quantity and quality of the w o r k turned out, it is said that uniform rates of piecework wages are being paid; and if two persons w o r k under the same conditions and with equally good appliances, they are paid in proportion to their efficiencies when they receive piece-work wages calculated by the same lists of prices for each several kind of work. If however the appliances are not equally good a uniform rate of piece-work wages gives results disproportionate to the efficiency of the workers. If, for instance, the same lists of piece-work wages w e r e used in cotton mills supplied with old-fashioned machinery, as in those which have the latest improvements, the apparent equality would represent a real inequality . . . . . . . w e require the use of a new term. W e m a y find it in efficiency wages, or more broadly efficiency earnings; that is earnings measured, not as time-earnings are with reference to the time spent in earning them; and not as piece-work earnings are with reference to the amount of output resulting f r o m the w o r k by which they are earned; but with reference to the exertion of ability and efficiency required of the worker. 3 2

There is only one set of conditions under which "uniformity of rate per unit of output" and "uniformity of rate per unit of skill and effort" could coincide, that is, if throughout the whole bargaining unit all jobs were completely standardized and all working conditions made completely identical. In reality, of course, such is never the case. Jobs are never completely standardized and working conditions are never completely identical from plant to plant or even within the same plant. The result is that these first two types of uniformity cannot be approached simultaneously. In fact, management and labor usually discover that the attainment of one interferes with the attainment of the other and conflicts between the parties occur regarding which one should have preference. Reference has already been made to these conflicts in the hosiery industry. If carried out rigidly, this type of uniformity would be very difficult to administer. Job evaluation is still much more of an art than a science, yet if this type of uniformity is to be completely achieved, exact definition and measurement of a unit of skill and effort is required. The possibilities for disagreements between the parties over relative amounts of skill and effort required by various 3 2 Alfred

Marshall, Principles 1938), pp. 548-49.

of Economics

(Eighth Edition; London: Macmillan and Co., Ltd.,

[23]

tasks are obvious. As a matter of fact, it cannot result in uniformity in the sense that this phrase is usually employed for, if carried to its logical conclusion, this type of uniformity necessitates as many separate piece rates as there are work places in factories in the bargaining unit. The only uniformity is in relation to a standard created by the job evaluator and known as "a unit of skill and effort." Any change in a method or a working condition requires a reévaluation of the piece rate. Thus, unless all technological changes are forbidden or undertaken uniformly and simultaneously in all plants, rates require continuous readjustments. From the point of view of the earnings of the workers, however, it is much fairer and more logical than "uniformity of rate per unit of output." There are still differences in earnings, of course, but no longer are they related to conditions beyond the employee. A worker putting forth a certain amount of skill and effort, earns the same as any other worker expending the same amount of skill and effort regardless of where he is employed in the bargaining area. This has the effect of causing an inefficient or marginal plant to be just as good a place to work as a highly efficient plant so f a r as earnings are concerned. Workers may still feel the desire to transfer to the more efficient plants because of the feeling of frustration and lack of pride which accompanies employment under inefficient management, but the wage differential incentive to mobility is removed. The economic effects of "uniformity of rate per unit of skill and effort" on the companies of the industry are quite different from those resulting from "uniformity of rate per unit of output." It is not as effective in aiding in the stabilization of prices, since direct labor costs can still vary considerably, depending on the extent of differences in the efficiency of management and plant in the various companies. If honestly and carefully administered, it is effective, nevertheless, in preventing the competitive forcing down of wage rates—the most serious obstacle to price stabilization in competitive industries which the parties may hope to eliminate through multi-employer collective bargaining. It would appear to lend itself more to "chiseling," however, than "uniformity of rate per unit of output." Assuming that other factors including the level at which uniformity is established are the same, the inefficient or marginal firms find it more difficult to compete under this type of uniformity [24]

than under "uniformity of rate per unit of output." Each firm has to pay the same rate per unit of "labor" consumed. There is no subsidization of production by lower rates per unit of skill and effort for the inefficient. As a result, direct labor costs per unit of product of the inefficient firms are higher than those of the efficient firms. Under this variety of uniformity, therefore, a high premium is placed on efficiency and in a highly competitive industry the inefficient or marginal plants are more rapidly eliminated. In the plants which remain in the industry, profits are related more closely to efficiency of management than under any of the other types of uniformity. As already indicated, recent studies show that the job-loss factor is the most important cause of labor mobility. This type of uniformity, through its more ruthless elimination under competition of marginal firms, is more effective than "uniformity of rate per unit of output" in activating the job-loss factor. The elimination of the marginal plants forces the workers to seek job opportunities in the more efficient plants where their productivity is greater. It may be concluded, therefore, that this type of uniformity is more effective in bringing about a more economic distribution of the labor resources of the country. Management receives maximum encouragement to undertake technological changes under this type of uniformity. Whereas under "uniformity of rate per unit of output" the advantages of technological changes accrue primarily to labor in the form of higher wages, under this type they accrue primarily to management in the form of higher profits. Indeed, because technological changes more frequently decrease than increase the amount of skill and effort required of the worker, wages are decreased by technological changes if this type of uniformity is strictly followed. Thus management gains not only by securing more units of product per worker but also by being permitted to pay less wages per worker. In this respect, the gain to management is greater than under any other type including uniformity of hourly rates which will be discussed later. It may be concluded, therefore, that since management must initiate technological changes, "uniformity of rate per unit of skill and effort required" results in greater industrial progress and better distribution of capital than does any other type. The workers, of course, could not be expected to greet technological [25]

changes with enthusiasm under this type of uniformity. In fact, it is probably to their interest to oppose such changes. This is in sharp contrast to the effect of "uniformity of rate per unit of output" in this respect. 3. Uniformity

of rate per hour of labor of a particular type.

This type of uniformity is accomplished wherever standard hourly wage rates are enforced throughout an industry. It can be achieved in a piece-rate industry, however, only if production per hour is strictly controlled so that a fixed quantity per hour is turned out by each employee. Under such conditions, and only under such conditions, can "uniformity of rate per unit of product" and "uniformity of rate per hour of labor" be achieved simultaneously. Since such control is very difficult to enforce throughout an entire bargaining area, the two types are generally mutually exclusive. Likewise, this type of uniformity and "uniformity of rate per unit of skill and effort" cannot be achieved simultaneously, for under this type one worker may put forth only half as much skill and effort as another, but both receive the same earnings. Thus management and labor may achieve any one of these three types of uniformity in an industry, but in achieving one they eliminate the possibility of the others. In its usual form, a standard hourly rate for each occupation or job is enforced throughout the bargaining area, making it easier to administer than either of the two types previously discussed. Machinists, electricians, boiler makers, etc. are each paid a standard occupational hourly rate. Administrative difficulties usually arise only in the determination of work jurisdiction. If rates are based on jobs rather than on occupations, however, administrative difficulties are increased because the separate jobs must be analyzed and evaluated from time to time if hourly earnings are to be comparable to the type of work performed. The title of this type of uniformity indicates clearly its effect on workers' earnings. Through earnings it affects production. Since all workers receive the same pay regardless of production, there is no monetary incentive for the worker to increase production. In this respect, "uniformity of rate per hour of labor" differs from both of those previously discussed. Likewise, there is no monetary incentive to move from inefficient to efficient plants except that the efficient may be in a better position to offer full-time work. In this respect the effect of this type of uniformity is [26]

similar to that of "uniformity of rate per unit of skill and effort," but differs from that of "uniformity of rate per unit of output." The effect of uniform hourly rates on the stabilization of prices is very similar to "uniformity of rate per unit of skill and effort." It has the advantage that rates under it are less a matter of judgment than under "uniformity of rates per unit of skill and effort" and, therefore, less subject to "chiseling." It does not result, however, in the complete equalization of direct labor costs as is true under "uniformity of rate per unit of product" and, therefore, is not likely to be as effective in causing price stability as that type of uniformity. It will exert considerable pressure in this direction, however, by preventing competitive raising or lowering of wage rates within the bargaining area. If the level at which uniformity is established is reasonably high and if labor costs represent a large percentage of total costs, hourly rate uniformity bears heavily upon the marginal firms. Since each company must pay the same hourly rates regardless of the quantity of product turned out, there is no subsidization by lower wages of the inefficient producers as might occur under "uniformity of rate per unit of output." Whether this type is more or less effective in this respect than "uniformity of rate per unit of skill and effort" is difficult to judge. It is likely that, in most cases, the inefficient firms are less effective in their attraction, selection, and training of workers and, therefore, operate with a poorer grade of labor. Since they must pay the same hourly rates for this less efficient labor under "uniformity of rate per hour of labor," they may be placed in an even worse competitive position than under "uniformity of rate per unit of skill and effort." On the other hand, technological changes are more likely to be introduced by the efficient rather than by the inefficient firms, and somewhat greater advantages from technological changes may accrue to management under "uniform rates per unit of skill and effort." Thus it is difficult to determine which of these two types is more effective in this respect. It is clear, however, that both are very effective and are more effective than any of the other types of uniformity in eliminating the inefficient or marginal firms. Because workers' earnings are the same in all companies under this type of uniformity, the wage differential factor is not active as a cause of labor mobility. On the other hand, since this is one of [27]

the most effective types in eliminating marginal or inefficient firms, it follows that it is very effective in activating the more potent jobloss factor of labor mobility. It may be concluded, therefore, that a more economic distribution of the labor resources is strongly aided by uniformity of hourly rates. Reference has been made to the strong encouragement given to technological change by this type of uniformity. Since hourly rates for workers remain the same regardless of the number of units produced per worker, any increase in production per worker reduces direct labor costs accordingly. Thus management has ample incentive (although perhaps not as much as under "uniformity of rate per unit of skill and effort") to introduce laborsaving devices. Although labor does not suffer losses in wage rates (unless it is agreed that the new methods shall be performed by lower paid classifications of workers), it does not find its earnings increased by the improvements and, since the new method may result in lay-offs also, labor is not likely to welcome technological changes under this type of uniformity. Thus the effect of "uniformity of rate per hour of labor" on technological progress is in Sharp contrast to the effect of "uniformity of rate per unit of output." 4. Uniformity of rate ranges. Ranges of hourly rates rather than single hourly rates are frequently employed by companies as a method of wage payment. When multi-employer bargaining is undertaken in industries where this method has been prevalent, rate range uniformity rather than single hourly rate uniformity may be adopted. If the rate ranges are narrow and if the position of the individual worker's rate within a range is determined automatically, the administration of this type of uniformity and its economic effects are similar to those of uniformity of single hourly rates. The wider the ranges and the more that judgment enters into the determination of the position of an individual worker's rate within a range, however, the greater do the administrative problems and the economic effects differ from those of uniform single hourly rates. The earnings of workers of the same general type will differ within a plant and from plant to plant under this type of uniformity. One machinist may receive the rate at the bottom of the range, another the rate at the top. If position within the range is automatically determined by seniority, the difference in rates may [28]

have little relationship to ability and skill exerted. 33 On the other hand, if position within the range is determined by merit rating, earnings may approach the results obtained under "uniformity of rate per unit of skill and effort." Much depends upon administration. If uniform criteria for judging merit are established throughout the industry and if these are applied identically, a worker in one plant would presumably receive the same rate as a worker expending roughly the same skill and effort in another plant. It could never be as direct a measure of skill and effort as a perfectly balanced piece-rate structure, but it could be close. On the other hand, if both the criteria for position within the range and/or the severity with which such criteria are applied vary from plant to plant, earnings within the industry may have little relationship to differences in the skill and effort put forth by the workers. One company may rate a certain machinist at $1.00 per hour, whereas another company might have rated the same man at $1.30. Thus, where the administration is not uniform, multi-employer rate ranges may appear more as a device for placing limits on the disparity of earnings than as a means of achieving uniformity of earnings. The effect of this type of uniformity on price stabilization through stabilization of labor costs may also be similar to single hourly rate uniformity. Here again, however, much will depend on the extent of the ranges and the degree to which administration is uniform if merit rating is employed as the basis of determining positions within the ranges. In an industry where labor costs are a high percentage of total costs, some companies may be able to cut costs and, therefore, prices considerably by following a tight policy with respect to increases within the ranges. In a similar manner, the effect of "uniformity of rate ranges" on the elimination of marginal firms may be very similar to or quite different from single hourly rate uniformity if positions within (ranges are determined by merit. If ranges are sufficiently broad, an otherwise submarginal firm may remain in competition by keeping all of its rates near the minima of the ranges. The recent experience in some companies with hourly rate ranges, where a certain percentage increase in rates resulted in a much lower increase in average straight-time hourly earnings over the en33

It may be argued that most workers develop more skill and effort with time spent on the job, and so in most cases automatic progression and merit progression coincide.

[29]

suing year because the company followed a tighter policy on merit increases, suggests the possibilities for marginal firms under this type of uniformity. To the extent that marginal firms are protected, labor mobility due to the job-loss factor is impeded, but the less effective wage differential factor is activated. If uniform administration results in elimination of the marginal firms, the more potent job-loss factor is activated as it is under single hourly rate uniformity. With respect to technological changes, the effect is very similar to that of hourly rates. Introduction of new equipment does not increase the earnings of labor during the life of the contract. Instead the advantages of such changes accrue to management in the form of lower costs per unit of output. Thus management in each company is encouraged to undertake technological changes, but labor may not be expected to be as enthusiastic about them as under "uniformity of rate per unit of output." The analysis of the effects of this type of uniformity does not result in conclusions as definite and precise as those in the first three types. The reason is that the concept itself is not as precise as the others. As has been emphasized throughout the analysis, the nature of the administration is of great importance in this type. The economic effects depend considerably upon the degree of uniformity of administration which is accomplished. 5. Uniformity of m i n i m u m rates. In a number of industries the union and the employers' association negotiate standard piece rates or hourly rates and provide that no lower rates may be paid. It is agreed, however, that individual firms and the union may bargain higher rates if they so desire, or that the company may pay a higher rate to an exceptionally efficient worker. Referring to this condition in the men's clothing industry in 1940, the Executive Board of the Amalgamated Clothing Workers Union reported, "We recognized that standardization could be realized only by establishing a uniform minimum labor cost . . ." 31 The minimum rates established in this way must not be confused with the 40 cents-per-hour minimum of the Fair Labor Standards Act. These rates are usually considerably higher than 40 cents per hour, vary with jobs and/or occupations, and may be piece-rate as well as hourly-rate minima. 34

A m a l g a m a t e d Clothing W o r k e r s of America, Documentary Y o r k : 1941). p . 33.

[30]

History,

ACWA:

3988-1940

(New

Once the minima are determined, there are usually few administrative problems except that of policing the firms, especially the inefficient or marginal firms and those in low-wage areas, to prevent violations. This job is usually assigned to the union. In attempting to determine the economic effects of uniform minimum rates, it is necessary to distinguish between minimum piece rates and minimum hourly rates. In the case of minimum piece rates, the economic effects are analogous to a combination of those of "uniformity of rate per unit of output" and "uniformity of rate per unit of skill and effort," whereas in the case of minimum hourly rates they are analogous to those of "uniform rate per hour of labor of a particular type." The fewer the rates above the minima and the narrower the spread between the minimum and the maximum rates, the closer are the analogies. If the minima become the maxima also, as has happened in some industries, then the analogies are complete. Under uniform minimum piece rates, earnings of workers vary from plant to plant but not to the extent that they would vary if there were no such minima. Even in those industries which pay the minima throughout, there are variations in earnings reflecting differences in the abilities and efforts of the workers and in the efficiencies of the plants. In addition, in most industries rates above the minima are secured in some plants because of "ability-to-pay." In other words, the union insists that certain companies pay above the minima because they are in a position to do so and still remain in a good competitive position. To the extent that this occurs, a condition of "uniformity of total costs" is approached and the differentials of earnings of workers between plants is increased. On the other hand, rates above the minima may be secured because of "inability-to-earn." In other words, the union may insist that the inefficient plants pay higher piece rates in order that their workers may have earnings more nearly comparable to those in the efficient plants. To the extent that this occurs, a condition of "uniformity of rate per unit of skill and effort" is approached and the interplant earnings differentials of workers are decreased. In general, however, it is the former, rather than the latter condition which prevails. Maintenance of the minimum piece rates is usually all the union can hope to accomplish in the marginal firms. In fact the minima are usually established with that purpose in mind. [31]

Under uniform hourly rates, there are no differences in the earnings of workers of a particular type between plants which pay the minimum rates only. Thus the "inability-to-earn" argument cannot be employed except as a means of raising the minima of the whole industry. The "ability-to-pay" argument, however, may be used by the union as effectively as under uniform minimum piece rates and with the same results. Where the union is successful in securing hourly rates above the minima on the basis of "abilityto-pay" only, workers' earnings become unequal but without reference to skill and ability. Most increases above either piece-rate or hourly-rate minima, therefore, are secured from the more efficient firms with the "ability-to-pay." From the union's point of view, there is much to be said for this type of uniformity since it places a floor but no ceiling on rates. It prevents the marginal plants and those in lowwage areas from securing lower rates comparable to their economic needs and the conditions of the local labor market, but leaves the union free where it has greater bargaining strength to secure higher rates. The average wage in the industry can be raised immediately to a higher level than would be possible under complete uniformity of piece rates or hourly rates. Thus the Executive Board of the Amalgamated Clothing Workers reports: Not only have cut-throat competition and inter-market rivalry been abolished, but our members have realized immediate advantages measured in dollars and cents. Increases in substandard shops required to bring them up to established minimum standards resulted in an annual pay increase of from one million to one million two hundred and fifty thousand dollars for twenty thousand of our members. . . . Increases in earnings in some cases ran as high as from 25% to 40% and the great majority of workers realized increases of between 5% and 10%. 35

If uniform rates instead of uniform minimum rates had been established, the increases in the substandard mills might have been offset by decreases in the mills which were paying above standard. By agreeing to minimum standards only, the Amalgamated avoided any leveling down. The establishment of minimum piece rates or minimum hourly rates aids stabilization of the price structure of the industry. It is not as effective in this respect as complete uniformity of piece 85

Amalgamated Clothing Workers of America, op. cit., p. 36, italics added.

[32]

rates or hourly rates, but it does provide a floor beyond which wage cuts may not go and in so doing limits the extent to which price cutting may be based on competitive wage cutting. The effect on the marginal firms depends on the percentage of labor costs to total costs, the range of total costs, and the level at which the minimum piece rates or minimum hourly rates are established. The level can be so high as to force out of business many of those firms which were originally marginal. Once the minimum rates are established, the competitive position of the inefficient firms which remain in business will depend upon the extent to which the union pursues the "ability-to-pay" as compared with the "inability-to-earn" policy in demanding rates above the minima. "Ability-to-pay" will place the marginal firms in a better competitive position, whereas "inability-to-earn" will have the opposite effect. To the extent that marginal firms are eliminated by the establishment of the minimum rates and by the employment by the union of the "inability-to-earn" policy, the job-loss factor of labor mobility is made effective. If, as the studies previously cited indicate, the job-loss factor is more potent than the wage differential factor in causing labor mobility, a more economic distribution of the labor force would seem to be encouraged by this type of uniformity to the extent that minimum rates are set high and the "inability-to-earn" policy is pursued. The effect on technological change depends partly on the level at which the minimum rates are established. If the rates are set comparatively high the firms, especially the marginal firms, have strong pressure placed on them to find more efficient methods of operation. Once the minima have been established, the effect on technological change also depends on whether the extras above the minima are based on "ability-to-pay" or "inability-to-earn." To the extent that the latter is followed, technological changes will be encouraged. To the extent that the former is followed, it will be discouraged. 6. Uniformity of rale changes. This type of uniformity is accomplished by adding to or removing from the existing wage structure of the industry a uniform layer of pay. The result is not the equalization of wage rates throughout the industry, but a structure which continues whatever lack of uniformity which existed prior to the increase or decrease. It makes a difference, [33]

of course, whether the changes are made as percentages of existing rates or as so many cents per hour across the board. Percentage changes leave undisturbed whatever balance or lack of balance previously existed, but either increase or decrease the cents-perhour differentials. Across the board cents-per-hour changes modify whatever balance or lack of balance previously existed in the rate structure of the industry. Administration of this type of uniformity, in an industry where the method of pay is uniform between plants and consists of a simple hourly-rate or piece-rate structure, is not difficult. Percentage increases, however, are more easily administered than cents-per-hour increases in a piece-rate industry. Cents-per-hour increases or decreases in a piece-rate industry necessitate either adding the hourly amount to or subtracting it from the piece-rate pay after it has been calculated, or resetting each piece rate so as to cause the "average" worker in each classification to have his earnings per hour increased or decreased by the determined amount. In industries where the companies have complicated and varied piece-rate or bonus systems the development and administration of a plan which will result in uniform increases or decreases in all plants may be very difficult. Uniformity of rate changes may be administered without multi-employer bargaining. In fact, in recent years in a number of the major industries the tendency has been for the union to reach a settlement with the major producer and then insist on the same increases from all other employers in the industry. When this occurs, the major producer actually is engaging in multi-employer bargaining but usually without the consent and advice of the other union employers. The union's insistence on a uniform settlement throughout the industry is understandable. Once it has settled with the major producer for a certain amount, it cannot hope to secure more from his competitors. On the other hand, to settle with the competitors for less would bring the wrath of the major producer down on the head of the union. Under this type of uniformity, the average wage in the industry may be higher or lower than it would have been with no uniformity at all. By accepting uniform changes of rates the union gives up the opportunity to secure especially high increases from those companies with exceptional "ability-to-pay." The marginal or inefficient companies, on the other hand, lose the opportunity to [34]

secure smaller increases or larger decreases because of their exceptional "inability-to-pay." There is some reason to believe that in competitive industries uniformity of rate changes tends to keep the average wage from rising as high as it otherwise would in prosperity, and from falling as low as it otherwise would in depression. Uniformity of rate changes, especially if done by percentage increases or decreases, does not necessarily result in equitable wage rates between the companies of an industry unless that condition existed prior to the adoption of this policy. It does, of course, prevent the widening of inequities, but at the same time it prevents the narrowing of them. Whether the final rate structure shows more inter-plant equity for the workers than there would have been with no uniformity, therefore, depends upon whether the widening or narrowing forces would have been stronger if uniformity of changes had not been adopted. Uniform increases or decreases in rates are likely to have a more stabilizing effect on the price structure of an industry than nonuniform changes. Especially during periods when an industry is depressed, uniform decreases prevent the operation of whipsawing whereby decreases of rates in one plant lead to decreases in other plants, which become the basis for further decreases in the first plant. It does not follow, however, that because a condition of price stability existed in an industry prior to an increase or decrease, a uniform rate change will continue the stabilized condition. The percentage of wage costs to total costs varies between companies and if the differences in this respect are great in the industry, it is possible for a uniform increase or decrease to have an unstabilizing effect. In general, the hours of labor per unit of product are usually higher in the marginal firms and in those in low-wage areas. This is due partly to the greater mechanization in the more efficient firms and those in high-wage areas. Thus a uniform cents-per-hour increase is likely to be more costly per unit of output to the marginal firms and to those in low-wage areas. A uniform centsper-hour decrease, on the other hand, is likely to be more advantageous to the marginal firms and to those in low-wage areas. Whether percentage changes work to the competitive advantage of the efficient or of the inefficient firms is more difficult to ascer[35]

tain. It depends, among other things, on whether the rates were higher in the efficient or in the inefficient companies prior to the adoption of the policy of uniform changes and also on the difference in percentage of labor costs to total costs in the two types of units. It is impossible to draw a conclusion on this point with the statistics which are available at this time. Thus the complete effect of this type of uniformity on the marginal firms cannot be determined, but since without uniformity of changes in rates the marginal firms would be more likely to increase their rates less in good times and decrease their rates more in poor times than the efficient firms, it may be concluded that this type of uniformity is less favorable to the marginal firms than "no uniformity" or "uniformity of total costs." The analysis of the effect of "uniformity of rate changes" on labor mobility must also lack the precision which can be given in some of the other types. To the extent that wage inequities are preserved, they continue to exert their usual pressure in this respect. Likewise, to the extent that uniformity of changes in rates prevents marginal firms from securing further special advantages necessary to keep them in business, the more potent job-loss factor of labor mobility is activated. Here again the most that can be said is that it probably results in a more economic distribution of the labor force than would occur under "no uniformity" or "uniformity of total costs." This type of uniformity encourages technological change. Without uniformity of changes in rates, the companies which would tend to introduce technological advancements may be discouraged from doing so because the union might demand rate changes in relation to "ability-to-pay" which could eliminate the competitive advantage which technological changes might supply. This discouragement is removed by this type which maintains the original spread between the rate structures of the various companies regardless of the technological improvements undertaken by the more progressive among them. 7. Uniformity of total costs. In some multi-employer bargaining there is a tendency toward this type of uniformity. McCabe refers to its existence in the bituminous coal industry as follows: . . . the so-called "principle of competitive equality" sanctioned lower tonnage rates for less favorably situated mines, with respect to trans[36]

portation costs at least, as well as exemptions in some degree from higher tonnage rates for abnormally difficult conditions for the miners. 36

The tendency is usually found where certain companies are at a competitive disadvantage because of poor location or other natural causes beyond the control of management. To force these inefficient companies to pay the same hourly or piece-rate wages may force their retirement from the field as union companies. The union may wish to prevent their retirement, however, because it may be impossible for it to absorb in other union companies the members who would lose their jobs. The more efficient producers in the employers' association may also prefer to permit these plants to operate with lower wage rates under the control of the association and the union rather than to force them to leave the association and break with the union, in which case they might be able to operate at even lower labor costs. The efficient plants, therefore, may prefer to allow differentials in labor costs sufficient to offset the other disadvantages of the inefficient firms because the alternative may be worse. In both the men's and women's clothing industries, the "geographic isolation factor" is accepted as a reasonable basis for rates below the minimum standards. It is recognized that plants outside of New York City have additional costs due to location. In order to keep the "out-of-town" shops in a satisfactory competitive position, differentials of from 7 to 10 cents per coat are permitted in the men's clothing industry. One official of the Amalgamated Clothing Workers of America said, "We do what is necessary to keep those shops in business and keep them union."37 In the women's clothing industry, a difference of approximately 10 per cent exists between the piece rates paid in the metropolitan shops and those paid in the New Jersey and Pennsylvania shops. According to representatives of the International Ladies Garment Workers Union, "The differences are largely for the purpose of caring for higher costs." 38 "Uniformity of total costs" is closely related to the "abilityto-pay" argument frequently encountered in labor negotiations. David A. M c C a b e , " P r o b l e m s of I n d u s t r y - W i d e o r R e g i o n a l T r a d e A g r e e m e n t s , " American Economic Review, V o l . X X X I I I , S u p p l e m e n t 2 ( M a r c h 1 9 4 3 ) , p. 167. " F r o m c o n v e r s a t i o n s w i t h e x e c u t i v e s o f t h e A m a l g a m a t e d C l o t h i n g W o r k e r s U n i o n in O c t o b e r 1947. " F r o m conversations with executives of the International Ladies G a r m e n t W o r k e r s U n i o n in October 1947. M

[37]

In fact, it represents the "ability-to-pay" argument carried to its logical conclusion. It is achieved by varying wage rates between plants strictly on the basis of "ability-to-pay." If carried out completely, administration of this type of uniformity would be very difficult. It would necessitate the opening of company books to the union and the changing of rates from time to time in all companies in order to compensate for any increase or decrease in efficiency of operation. The effect of "uniformity of total costs" on the earnings of the workers is the least logical and least defensible of all the types of uniformity. Earnings vary between the firms in direct relation to the efficiency of the plant, even though the differences may be completely beyond the control of the workers. In fact, wages assume the role generally assigned to profits in the free-enterprise economy. Whereas it is customary to think of profits as varying between firms in an industry in relation to differences in efficiency, under this type of uniformity profits are uniform, but wages vary with the efficiency of the firm. In other words, wages become residual, that is, they are what remains after all other costs, including a normal profit, have been removed from the company's income. Under a piece-rate system, however, individual workers can still increase their earnings and, as a matter of fact, the workers as a group in any plant have a very strong incentive to increase production, since the total amount of the increase accrues to their advantages in the form of higher wages. Theoretically, this type of uniformity should result in the stabilizing of the price of the product, since no one company is in a position to sell below the costs of production of any other company. In practice, however, it may result in continuous pressure of supply on demand since all producers are kept in the business by lower labor costs wherever necessary. In order to sell the total supply of goods, price cuts may be necessary which, in turn, would have to be followed by wage cuts. There is no guarantee against competitive wage reductions. In fact, just the opposite appears probable. From what has been written already, it should be clear that "uniformity of total costs" is the most advantageous of all types for the marginal or inefficient firms. Whereas under "uniformity of rates per unit of product," company inefficiency was partially subsidized by lower wages, here it is completely subsidized. No [38]

marginal firm need have any fear of failing so long as it can secure labor and so long as its disadvantages in other respects are not so great that they cannot be compensated by lower labor costs. Some movement of workers from the inefficient to the efficient plants is brought about under this type of uniformity by the differences in wages which are greater than under any other type of uniformity. Because the marginal firms are aided by subsidization through lower wages, however, the job-loss factor of labor mobility is not active. Since the latter appears to be a more potent factor than wage differentials, it may be concluded that this type of uniformity is not very effective in bringing about a more economic distribution of the labor force. Finally, this type of uniformity is the most harmful to progress because management secures no advantage from technological changes. Improvements in efficiency increase wages but not profits. The workers, therefore, are much interested in securing new techniques and new equipment. Since technological changes depend primarily upon the incentive to management, however, little progress may be expected. It may be concluded, therefore, that this type of uniformity interferes with the most economic distribution of capital. Conclusions The preceding analysis leads to a number of conclusions: 1. There is a variety of types of uniformity which may be achieved under multi-employer bargaining. Seven of these: a. uniformity of rate per unit of output, b. uniformity of rate per unit of skill and effort required, c. uniformity of rate per hour of labor of a particular type, d. uniformity of rate ranges, e. uniformity of minimum rates, f. uniformity of rate changes, and g. uniformity of total costs, have been analyzed in this study. 2. These various types of uniformity are not complementary. Management and labor in any industry should be fully aware of the conflict between them when and if they agree to undertake multiemployer bargaining, and should have a clear understanding of the [39]

type which they intend to achieve or the extent to which they will be willing to compromise between two or more types. 3. The economic effects of the several types are very different. Analysis has revealed the following: a. One type results in an equitable (with respect to the skill and effort expended by the workers) relationship between the earnings of workers in different companies, whereas another results in a very inequitable relationship. b. One type is very effective in aiding price stabilization in an industry, whereas another is rather ineffective. c. One type results in heavy subsidization of marginal and inefficient firms by means of lower wages, whereas another type effectively aids in the elimination of the marginal and inefficient firms. d. One type encourages a more economic distribution of the labor force only by the wage-differential factor of mobility, whereas another type activates the more potent job-loss factor. e. One type leaves management with little or no incentive to introduce technological changes, whereas another greatly rewards management for such action. These very different economic effects explain in part the conflicting opinions among management groups regarding the values and dangers of multi-employer bargaining. Each group tends to evaluate it in terms of the type of uniformity which exists or would be likely to exist in its own industry. Its opinions may be correct for one type of uniformity but do not have validity for all types of multi-employer bargaining. This leads to a further conclusion. 4. It is meaningless to speak of the economic results of multiemployer bargaining as a whole. If labor and management through collective bargaining and Congress through legislation desire to deal intelligently with this problem, they must recognize that there are distinctly different types of multi-employer bargaining and that they have very different economic effects. 5. Finally, the analysis should suggest to the labor economist that the marginal productivity theory of wages does not offer an adequate explanation of wages under multi-employer bargaining. It calls for a new approach in which the objective of the parties to the labor agreement is recognized as an active determinant of the nature of the applicable wage theory. [40]