1.—In the brief survey earlier in this book of the present industrial situation in the United States, it was concluded that the improvement of the economic position of the lowest paid groups of wage earners was one of the chief objects to be borne in mind when striving to work out a policy of wage settlement for industrial peace. In the following chapters a study was made of the causes of the formation and existence of relatively separate groups of wage earners, and of the forces which determine the level of earnings for the various groups. It was observed that the lowest paid groups of wage earners tended to be separated from the more fortunate groups; they have relatively independent economic fortunes. Two reasons exist, therefore, for giving separate treatment to the question of the principles by which the wages of these least favorably placed groups of wage earners should be settled—as part of the policy of wage settlement for industrial peace. Firstly, because their economic position is a matter of special concern; secondly, because the wage incomes of these groups are determined, in part, by forces which do not affect equally, or in the same way, the wages of the other groups.

The living wage principle as put forth in this chapter is the principle suggested for use in the settlement of wages for these least favorably placed groups of workers. It is the second of the measures, intended to form a policy of wage settlement for industrial peace.

2.—It is not necessary to give here the wage statistics for the groups of wage earners who are lowest in the industrial scale. They form the record of the fact that a considerable percentage of all female industrial wage earners, and some groups of male wage earners who perform unskilled work, are in receipt of wages insufficient to enable them to live according to those conceptions of the minimum level of satisfactory economic existence which have been formulated by public agencies from time to time.[113]

3.—The general idea of the living wage is not a new one. It has been the subject of many definitions. A comparison of a few of the best attempts to express the idea shows, on the one hand, the definite purpose which is its inspiration and, on the other hand, an inescapable element of indefiniteness which persists in all instances where the idea has been enacted into policy.

The definition given to the living wage idea by the South Australian Industrial Court (an agency which has made searching efforts to explain its underlying assumptions) is that all wage earners should receive "a wage that will meet the reasonable and normal needs of the average citizen in a particular locality."[114] In the declaration of the war labor policy of the Dominion of Canada one can read that "all workers, including common laborers shall be entitled to a wage ample to enable them with thrift to maintain themselves and families in decency and comfort, and to make reasonable provision for old age."[115] And contained among those principles laid down for the guidance of the United States War Labor Board is the following, "In fixing wages, minimum rates of pay shall be established which will insure the subsistence of the worker and his family in health and comfort."[116]

These definitions reveal clearly the aim which inspires them. They express a determination to secure for the least favorably placed members of the industrial community wages sufficient to enable them to share with the rest of the community prospects of an active and happy life, as the run of men understand that idea at any time and place. Still all these definitions—including the one just given—assert a goal sufficiently indefinite to permit, and indeed necessitate interpretation according to the circumstances under which the idea is translated into policy. The clarity of the idea arises from a simple belief. That belief is that any body of individuals of average honesty, though they disagree in many things, can reach a large measure of agreement as to the minimum income which will enable the ordinary wage earner to live a life which satisfies, in a minimum measure, the ideals of life current in the community. The indefiniteness of the idea arises out of the fact that it is not likely that this body of men will be in complete agreement as to this minimum income; and therefore the wage finally settled upon is likely to represent a compromise between conflicting opinions. This is well brought out in a passage contained in one of the reports of the Minimum Wage Board of the District of Columbia. "... Cost of living is such an unstandardized subject that a mathematically accurate determination is impossible. In each conference there are as many different opinions as there are members. In general, the employers want a wage sufficient to maintain existing standards of living in the industry, while the employees contend that the standard of living should be improved. The wage finally agreed upon is not a scientific determination based solely on facts, but rather a compromise of opinion between the two groups, modified as it may be, by the opinion of the public."[117]

The reference contained in practically all definitions of the living wage principle to the standards of a particular time and place assists greatly in interpreting the principle into policy.[118] For this reference is tantamount to saying that the standard of economic life which shall be deemed to satisfy the principle, should be fixed primarily by comparison with the standard of life of the wage earning and middle classes in the community at the given time. This comparison tends to govern the content of the living wage idea. It brings the living wage determination into direct relation with—or makes it relative to—the productive capacity of the industrial system at the time and place in question. For a study of the standard of life of the wage earners and the middle classes of the community is of great assistance in indicating the standard of life to which it may be possible to raise even the worst paid industrial groups, by those adjustments in production and distribution which it is the object of a living wage policy to produce. This essential relativity of the living wage idea is well pointed out in a decision of Justice Brown of the South Australian Industrial Court. "... The statutory definition of the living wage is a wage adequate to meet the normal and reasonable needs of the worker. In other words, the conception is ethical rather than economic. The Court has not to determine the value of the services rendered, but to determine what is necessary to meet normal and relative needs. It should be obvious that in the interpretation of reasonable needs the court cannot be wholly indifferent to the national income. The reasonable needs of the worker in a community where national income is high are greater than the reasonable needs of the worker in a community where the national income is low."[119]

The living wage has ordinarily been assessed on different bases for men and women. The basis of assessment for each has been the subject for much controversy. The most generally upheld basis of assessment is, in the case of the male wage earner, to assess his needs on the supposition that he is the supporter of a family consisting of himself, wife, and two or three small children; and in the case of the female wage earner, to assess her needs on the supposition that she is living alone, and is dependent upon her own earnings for her support, and that she has no other obligations. These bases of assessment do not meet all of the demands of logic—applied to the living wage idea—nor, as will be seen, is the choice of different bases of assessment for men and women entirely free of difficulty.[120]

The reasoning, which has been used ordinarily in support of the suggested basis of assessment for men is well set forth in another decision of Justice Brown, "I look upon the maintenance of home life as of supreme importance to the community. I regard the wage paid to the adult male as essentially and in substance a family wage. True, so far as single men are concerned, it has long been settled that the minimum (living) wage should not be less than that of the married man. In other words, in discussing the needs of the male worker, a man with a family to support has been taken as a basis of assessment. Any other conclusion would prejudice the married man in search of employment and would tend to produce sterility of the population, and would place the industrial court in the invidious position of fixing wages at a rate which would make it difficult, if not impossible, for single men to save something for the time when they may have the felicity to become supporters of a family."[121] The argument in support of the suggested basis of assessment for women rests upon a sentiment to the effect that every worker should earn, at least, enough to enable her to support herself, even though the actual necessity does not exist in many cases, and though in many other cases the female wage earner has obligations beyond self-support.

4.—After these preliminaries, it is possible to make more definite recommendations concerning living wage policy—with a view towards the adoption of the living wage principle as part of a policy of wage settlement. Firstly, as to scope. It should apply to all groups of workers whose average annual earnings fall below the sum settled upon by the constituted agency as the minimum necessary for the fulfillment of the living wage idea. The statistical definition of the term "average" as just used should also be left to the constituted agency. Allowance should be made in each occupation for a small percentage of sub-ordinary workers.

Secondly, as to the basis of assessment of the living wage, and the procedure by which it should be fixed. There should be an extensive and (so far as it is possible) impartial investigation of the cost of that minimum standard of economic life which it is the intention of living wage policy to secure for all industrial wage earners. In the determination of what should be included in the minimum standard, attention should be paid to the income levels of the wage earners in general, and of the middle classes. The wages now received by the lowest paid groups would also be an important consideration.

The living wage settled upon by this process of investigation should be in the form of a weekly standard wage. It should be considered as a minimum only for any occupation to which it is applied. Like other standard wage rates, it should be subject to limitation or variation in accordance with the conclusions reached on that subject in the preceding chapters.[122] The questions which arise out of the fact that it would have to be enforced in a number of different industries, and under widely different conditions will be considered at a later point.[123] The bases of assessment for men and women should be those discussed and approved in the preceding section. The living wage that is fixed should be subject to reconsideration and revision at definite periods; aside from the revisions which may be called for as the result of price movement,[124] or under the profits test which is suggested later in the book.[125]

5.—So much then for the central features of the living wage proposals. We have now to consider the probable result of their enforcement; and any criticisms to which they may be fairly subject in their proposed form. Thus we will be enabled to discover what modifications, large or small, are advisable.

Objection may be taken, first of all, against the scope of these proposals. So far living wage legislation in the United States has been applied to female industrial workers only. The argument against the extension of the principle to male wage earners is put on two grounds—the constitutional and the economic. On the constitutional argument, only the briefest comment will be attempted; and that without any intention to dogmatize upon a most complicated subject. That is that the test of the constitutionality of these proposals should be the balance of good or harm they promise. The constitution is at bottom but a very wise guide as to what public good and harm consists of. But as the conditions and facts which determine good and harm change, these changes should be reflected in the interpretation of the constitution. These living wage proposals do not, it seems to me, offend against any of the fundamental ideas which the constitution contains.

The economic argument against the extension of the living wage policy to male wage earners is usually based on the contention that it is unnecessary, or that it has a bad effect upon the spirit and character of the male wage earners concerned, or upon both these contentions. As to its necessity, the statistics of wages for the least favorably placed groups of male wage earners, and observation of their economic handicaps offer sufficient evidence. As to the belief that the extension would be destructive of the spirit or character of the male wage earners concerned, there is little or no factual support for that view, and much to refute it. A minimum level of economic existence is requisite to the growth and development of personal initiative and of a spirit of self-confidence. Vigor and independence of temper and action is not bred in a position of extreme economic dependence. One does not have to be blind to the dangers of paternalistic legislation to believe that living wage policy for male wage earners is justified, under modern industrial conditions. All the more so, since experience with living wage legislation proves that it encourages voluntary organization among the wage earners. And this fact, indeed, is also a fair answer to the tough dislike of the American labor unions for all other methods of settling the wages of male workers than that of collective bargaining.

6.—We may now pass from the possible objections to the scope of these proposals, to those which may be fairly leveled against their substance. Although the living wage principle has been used in wage settlement throughout the Australian Dominions, in many English industries, and in a limited number of industries in some of the American states, the controversy which arose over it, when first it was introduced, is far from quieted. This is explained, in part, by the extreme difficulty of getting evidence as to its results which is beyond the shadow of doubt. That is due, in part, to the great variety of conditions under which it has operated. Its results are always complicated by circumstances which differ from place to place. Again, there is the fact that such experiments as that of the living wage are apt to be judged from a rapidly changing viewpoint.

The very conscientious efforts which have been made, however, to measure the effect of the various experiments with living wage legislation furnish us with much valuable material on most of the debated matters. No attempt can be made here to reproduce the various sides of the controversy, or to summarize the evidence which has been collected upon the disputed aspects of the subject.[126] Much of it covers the same matters which were treated in our analysis of the principle of wage standardization. In my opinion, the existing evidence warrants the advocacy of an extension of the living wage policy in the United States. It furnishes us also with valuable instruction as to the form in which the policy is likely to work out most satisfactorily. The value of the living wage principle as an instrument for bringing about an improvement in the economic condition of the lowest grades of industrial workers, without producing equivalent harm in any other direction, is also supported by general theoretical reasoning; that is, by a study of the forces which govern wages in general, and the wages of these lowest groups in particular. In the study of these forces, earlier in the book, it was pointed out that the outcome of distribution may be affected by just such assertions of purpose as that represented by the living wage policy. If labor organization has been able to increase the wages of certain groups of wage earners without doing equivalent harm in any other direction, there is reason for believing that a living wage policy can accomplish something of the same result for the lowest grades of industrial labor, which have been up to the present practically without organization. And, indeed, in England, the Trades Boards, which are the machinery of the living wage policy, are ordinarily regarded as fulfilling practically the same functions as organization does for the more favorably placed groups.[127]

Furthermore, the nature of certain of the forces which account for the low wage levels of the groups that would be affected by the living wage policy, give the above argument special force. For among those forces are these: that their wages have been, at times, less than the amount necessary to enable them to do as efficient work as they were capable of doing; and so low, frequently, as to make the struggle for self-improvement and advancement, for members of these groups, a very difficult matter. Thus the numbers in these groups have been kept greater than they would have been otherwise. Furthermore, their wages have been, at times so low that efficient industrial management counted little in success. Furthermore, these groups have had practically no organization or leadership to prevent their employment under conditions most unfavorable to their health, energy, and general welfare. And lastly, that the present industrial system has a tendency to take advantage of economic weakness wherever it exists. Against these considerations must be put, perhaps, the submission shown by these groups to the course of industrial development, and the constant service they have given, in their position of dependence, in monotonous and wearisome work.

The case of the living wage policy rests upon the opinion that the introduction of living wage standards will give rise to a series of adjustments in production and distribution. And that the net sum of the results of these adjustments, perhaps only after a temporary period of dislocation in some instances, will be to increase the wages of the lowest grades of wage earners—without doing equivalent harm in any other direction. It also rests on the opinion that the permanent economic advancement of these lowest groups of wage earners is a practicable ideal—though fate seems to take a special delight in dealing harshly with this particular ideal.

7.—Among the adjustments, however, which general reasoning suggests as a possible consequence of the enforcement of a living wage policy are some which it is the part of policy to guard against. Existing evidence shows that they have not often followed upon previous enforcements of living wage policy; yet they must be borne in mind. They are firstly: the possibility that employment of the wage earners who are affected by the living wage policy may be permanently reduced. This may result either because of price increase in the commodities produced by these wage earners, or because of substitution into their occupations of other classes of labor or of machinery. And secondly: the possibility that the enforcement of the living wage policy will bring about a concentration of employment upon the more efficient members of the groups affected, and thus throw out of employment the very individuals who are most in need of help. And thirdly: the possibility that there will be an increase in the numbers of those groups which the living wage principle is designed to aid, with consequences similar to those suggested under the second heading. I my opinion, the chances that any of these things will result from the enforcement of a living wage policy in the United States to-day are small. Yet to put the matter summarily,—these are the dangers which those entrusted with the administration of a living wage policy would have to be alive to; and if they become real, seek to overcome, by shaping their policy according to the facts that confront them. The factors which will determine whether any or all of these undesirable results will ensue are many. They cannot be balanced in the abstract. Yet general reasoning enables us to discern those which will make that likelihood greater or smaller in any occupation or industry.

We may start by enumerating those factors which enter into the likelihood that a reduction of employment will result from the enforcement of a living wage policy. They are: Firstly, the amount of wage increase undertaken; secondly, the importance of the wages received by the groups in question in the total expenses of production; thirdly, the shape of the demand curve for the products of the groups; fourthly, the chances for improvements in the methods of production; fifthly, the chances of encouraging better business management by enforcing living wage standards; sixthly, the effect of the wage increases upon the efficiency of the groups affected, and their fitness for advancement to more skilled work; seventhly, upon the opportunities for substitution of machinery; and lastly upon the ultimate effects of the introduction of machinery on the employment of these groups.

Turning now to the second possibility, that the enforcement of living wage standards will cause a concentration of employment upon the more efficient workmen, thus throwing out of employment those most in need of help, here, too, a great number of factors have to be reckoned with. They, however, have already been dealt with in the previous discussion of the effect of standardization upon the distribution of employment. There is no need of enumerating them again in this place. One point of difference should be observed, however. The differences of individual efficiency among the workers that would be affected by the living wage policy are more substantial than the differences of individual efficiency among the members of the more skilled wage earners. And, therefore, while it would be unnecessary to make any special provision for the least efficient members of the more skilled groups upon the introduction of standardization, it might at the start be decidedly good policy to make special provision for the least efficient members of the unskilled groups. Under practically all living wage legislation special provision is made for them.

It should also be remarked in this connection, that the probable greater range of individual efficiency among the unskilled as compared with the skilled is in some measure to be attributed to their present low wage levels. Inefficiency is likely to grow upon itself. Mr. Aves has remarked pertinently in this regard, "As with the 'unemployed' or the 'unfair employer' so with the 'incompetent' and the 'slow,' none of these represent well defined classes. All are elastic. Some can be created and all merge by imperceptible degrees into the classes above."[128] The enforcement of a living wage policy, it may be hoped, would in itself reduce the range of individual efficiency among the unskilled. For it would keep from the ranks of the "incompetent" and "slow" some who might have found place elsewhere had their chances been somewhat better.

We turn to the third possibility—that as a result of enforcement of a living wage policy there will be an increase in numbers in those groups who fall within its scope. Here the pertinent factors are: Firstly, the movement out of the lowest paid groups into those more favorably placed, owing to the effect of increased wages upon individual capacity and the use of individual opportunity; secondly, upon the movement from other groups into the groups affected by the living wage policy, due to the wage increases brought about by the policy, and thirdly, upon the effect of these wage increases upon the frequency of family labor, and upon the age of entry into and retirement from industry.

8.—So much, then, for the possible undesirable consequences of the application of the living wage principle. It is evident that the policy must be put in such a form as will make possible a careful study of the facts of each industry or occupation and adaptation to these facts. The following proposals are made primarily with the view that they will permit this flexibility. They are also designed, however, to fit into the other requirements of the general policy of wage settlement for industrial peace, which is under study.

It is proposed that there should be in every industry which is included within the general scheme of wage settlement a joint council or board. There might also be occupational boards or councils. These councils or boards should consist of representatives of the workers and of the employers. Representatives of the public might act upon these boards or councils in advisory capacity. There might be both a central board or council, and various district boards or councils in each industry. These joint boards could be given other duties outside of the administration of the living wage policy. That matter will be taken up at a later point. Here, note will be taken only of the part they could play in the administration of the living wage policy. The joint boards or councils should be advisory to the central authority which is constituted to administer the policy of wage settlement as a whole. The functions of this central authority in regard to the formulation and declaration of the living wage for men and women have already been discussed. It should be provided, however, that the central authority should make no living wage declaration or hand down any order until it has received the report of the joint boards or councils in the industries or occupations in question upon the subject of such decisions or orders. The report of the joint boards or councils should be given great weight by the central authority in arriving at decisions. The joint boards or councils should be permitted to submit both majority and minority reports to the central authority.

Among the matters arising in the course of the administration of the living wage policy, upon which the joint boards or councils should be called upon to advise the central authority, are the following: Firstly, upon the wage to be prescribed in that industry or occupation. Each joint council should be free to recommend a wage less than the wage declared to be a living wage by the central authority, giving its reasons for the same. It should also be free to recommend a wage more than the declared living wage, giving its reasons in this case also. The conclusions reached in regard to "nominal variations" as between different sections of an industry are equally valid as between industries or occupations.[129] Secondly, upon questions connected with the form of wage payment, and the arrangement of piece-work lists designed to yield the prescribed living wage. Thirdly, upon the question of sub-ordinary workers in an occupation or industry, and upon the issuance of permits for the same to work for less than the prescribed wage. Fourthly, as to whether the wage fixed for any industry or occupation should be varied or limited. Fifthly, upon any difficulties that may present themselves because of the fact that the living wages for men and women are assessed on different bases. Lastly, upon these boards or councils should rest the duty of observing how well the declarations or orders of the central authority are observed; and of studying the effect of the prescribed wages upon these classes of wage earners that the living wage policy is designed to help, and upon the industry in general; and of reporting periodically to the central authority upon the same.

It is true that the procedure of these councils would consist largely of the compromise of conflicting opinions. It will be the duty of the central authority, however, to prevent them from settling down to that rÉgime—nor should the central authority consider itself bound to accept the advice of these joint councils or boards. 9.—The determination of the relation between the living wage for men and women is one of the difficult questions that will have to be met in the course of the enforcement of any living wage policy. The position of women, both in industry and in society is at present undergoing change. The limit and direction of this change cannot be marked out with certainty. Therefore, the presuppositions upon which present policy may be constructed may become invalid in a comparatively short time. The unsatisfactoriness of leaving the question to be settled by the decision of the market has become increasingly plain. That policy produces, on the one hand, a constant effort on the part of the employers to so modify their processes of production as to take advantage of the low range of women's wages, irrespective of the effect on men's wages and of the suitability of the occupation in question for women; and, on the other hand, a constant effort on the part of the men to keep the women out of all new employments.

The best advised foundation for present policy, in my opinion, is the two separate bases of assessment, suggested above.[130] In its favor, it may be pointed out that it corresponds to a certain extent to the existing relation between the wages of men and women in industry, and it would not, therefore, produce any violent change. Its unsatisfactoriness lies in the possibility that it may gradually lead to a displacement of men by women in many employments. On the question of whether such displacement is to be desired, there is room for the very deepest differences of opinion. It seems to me, however, that the industrial history of the nineteenth century proves the supreme importance of the wage of the head of the family to the general welfare of the family. For that reason, it is, in my opinion, wise to protect the wage of the male head of the family; and thus to provide that when men and women are employed upon the same work or when women are introduced into employments hitherto filled by men, the wage rates for men should be enforced throughout the employment. This ruling could be interpreted in some cases in terms of the relative efficiency of men and women, if there was a clear difference of efficiency. Of course, if the term "relative efficiency" is construed to include the difference in the indirect or overhead expense involved in the employment of male or female labor in any occupation, such a policy would amount to throwing open every field of employment to women.

There are a number of alternative policies that might be pursued in order to ensure that the use of different bases of assessment for the living wage for men and women should not lead to haphazard displacement of men by women. Justice Brown in the Printing Trades Case has called attention to the most important of them. "... I suggest," he writes, "that with respect to any industry or grade, where the prima facie formula above (that is, a different living wage for men and women) is challenged, evidence should be given to show that it is desirable, having in view the interests of all parties and of the community, that men should be retained in that industry or grade even though such retention might involve some departure from the formula in question. Where such evidence is satisfactory there are several alternatives open to an industrial court. (1) To fix the same wage for women as for men. (2) To fix a ratio wage where it is proved to the satisfaction of the Court that the average woman is not of equal value to the employer. (3) To exclude women. (4) To accept the prima facie mode of assessment, but to limit the proportion of women who may be employed by any particular employer in any particular industry or grade.... The task of choosing may often be one of extreme difficulty and delicacy."[131] The task of fixing the relation between men's wages and women's wages will be even more delicate when the introduction of women into a field of employment follows upon a modification of the processes of production involved.[132] As was said above, to give advice upon the question of the relation between men's wages and women's wages, should be one of the duties of the joint boards or councils in the various industries. The course to be pursued should be decided upon by balancing all of the interests involved. It is to be desired that the same policy be pursued throughout all industries or occupations rather than divergent ones, and the central authority should strive to attain unity of policy.

10.—The complications introduced into the administration of the living wage principle by changes in the general price level have yet to be dealt with. It has been seen that changes in the general price level affect the outcome of distribution and, for that reason, any policy of wage settlement must include provision for the adjustment of wages to price changes. We have now to consider how this adjustment can best be carried out.

The central authority is obviously the most suitable body to supervise the process of adjustment. The adjustment to price change should be expressed as a percentage addition to or subtraction from the existing wage. The central authority should be charged with the collection of all necessary price data. This body should then proceed upon the advice of the joint boards or councils in the industries concerned. Unless some strong reason to the contrary exists, however, a uniform policy of adjustment should be pursued—resting upon the following principles.

11.—The conclusions reached in Chapter V in regard to the policy to be pursued in the adjustment of wages to changes in the price level fall into two groups. Firstly, those which have to do with the choice of the basis of calculation of wage adjustments. Secondly, those which have to do with the choice of the actual policy of adjustment during times of rising and falling prices. The same division and order is maintained in the following attempt to sketch out a good plan of adjustment of living wage rates.

First, then, these wage rates should be varied in accordance with the movement of a price index number. This index number should represent the prices of all the important commodities produced within the country, but so weighted as to give a defined importance (50 per cent. was suggested) to the prices of those classes of foodstuffs, clothing, housing accommodations, and other commodities upon which the wage earners tend to spend the bulk of their income. It was sufficiently emphasized in the earlier discussion of this subject that this basis of calculation was in the nature of a compromise, and was not beyond criticism. Adjustments should not be undertaken unless the index number of prices has moved at least 5 per cent. (the figure is meant to be merely a suggestion) and adjustment should not be more frequent than twice a year (again a suggestion, only).

Secondly, as to the policy of adjustment to be pursued in times of rising and falling price levels, respectively. The policy for a period of rising prices can be very briefly stated. All wage rates prescribed under the living wage policy should be increased by the same percentage as the index number of prices moves upward. There is one case in which this policy cannot be justified theoretically. That is when the increase of prices can be wholly or mainly accounted for by a falling off in the general level of industrial productivity. However, in my opinion, it will be hardly practicable to attempt to distinguish this case from other cases of price increase,—save in an entirely exceptional circumstance, such as a period of war invasion.

The policy to be pursued during a period of falling prices cannot be stated so briefly. The difficulties involved have already been discussed at length.[133] The following policy based upon that analysis is tentatively suggested. The complexities of the subject are too great to permit of dogmatism. Firstly, the occasion for the price decline may be such as was termed "natural," as for example when it is brought about by a general advance in the arts of production, or by the development of the means of transport. In this case, it will be satisfactory to keep wage rates unchanged, though prices decline. It is in these periods that chance is afforded of bringing about genuine improvement in the economic position of the least favorably placed groups of wage earners.

Secondly, the price decline may be a sign of reaction from a previous period of rapid price increase, and of a general tendency on the part of entrepreneurs to keep down production costs and to proceed with circumspection throughout. Nevertheless if little forced liquidation occurs; if there has been no serious overextension of credit during the previous period; if the maintenance of the existing price level, or of a slightly lowered one, would not impose too great a strain upon the banking system—there would be no good cause to reduce wages. This judgment rests on the supposition that the facts of the industrial situation give promise that industrial recovery will take place even if prices do not drop greatly, and drop gradually rather than sharply.

Thirdly, the price decline may be caused—at the beginning at all events—by much forced liquidation of a character that is disastrous to the enterprises compelled to liquidate. It may have been preceded by a great over-expansion of credit; and the maintenance of the existing price level might mean a steady source of danger to the banking and commercial system. Then the soundest policy is to reduce wages as prices fall. To the extent that the trouble may be due to special causes such as over-investment in particular directions, this reduction of wages may be unnecessary. But it will probably be found that the recovery from a genuine industrial crisis will be facilitated if a heavy price decline is stimulated by wage reduction.

No wage reductions should be undertaken unless conditions making the case are clearly present. The central authority could avail itself of the advice of the Federal Reserve Board. The lowering of wage rates might be put off until the price decline has reached, say, eight or ten per cent. And the percentage of the reduction of wages might be smaller than the percentage of price decline; say, a three per cent. reduction of wages for every four per cent. reduction in prices. Lastly, when it is judged that the pressure on the financial system is definitely at an end, no further reduction in wages should be ordered even though the price decline continues.[134] In concluding this discussion one general reflection may be permitted. That is to the effect that no policy of wage settlement will, in itself, suffice to protect the standard of life of the lowest industrial classes during critical industrial times; whether such a time be one of rapidly rising prices of foodstuffs due to poor harvests, or to war, or whether it be a period of industrial panic and precipitate price decline. Much can be done to protect the standard of life of these classes by measures outside of the scope of any policy of wage settlement. The suggestion made by Professor Taussig that it may be possible to regularize the supplies of the principal agricultural products from year to year deserves careful consideration.[135] The best policy, undoubtedly, is one which would enable and encourage the lowest paid industrial classes to accumulate something for hard times. 12.—The design of the living wage policy is to procure for all members of the industrial community the economic essentials of a hopeful and active life. Ultimate success in the maintenance of any conceived standard of life, will, in the long run, depend upon those general relationships which were examined in the earlier chapters. The more productive the industrial organization as a whole is, the better are the chances for the least favored industrial groups to improve their economic condition. The less the economic waste, due to maldistribution and to other causes, the greater the product of industry will be. The greater the economic capacity of the lowest grades of wage earners, the more general their intelligence and the steadier their spirit, the more determined their organization, the better will be their chances of increasing their share of the total product. And lastly, the smaller in numbers these are compared with the need of the economic system for them, the stronger their economic position will be.

This is but to restate some of the important influences governing the wages of the lowest groups of industrial workers. But to restate them is to emphasize the fact that the living wage policy must be looked upon merely as one agency among many, directed to the same end. In economic affairs, as in political affairs, to bring about a change in one place it is necessary to bring about a change in many places.

[113] The best short summaries of the pre-war wage situation are—"The Standard of Living among the Industrial People of America" (1911), by F. H. Streightoff, and an article by C. E. Persons in the February, 1915, issue of The Quarterly Journal of Economics. For a more extensive study see the Report of the Commission of Enquiry of the Board of Trade (Great Britain) into working class rents, etc., which contains material of great value. A recent comprehensive survey of wages in the United States, undertaken by the Bureau of Labor Statistics for the War Industries Board was published in May, 1920. It is Bulletin No. 265, U. S. Bureau of Labor Statistics, "Industrial Survey in Selected Industries in the United States, 1919."