The Evening Star (January 11, 1946)
ON THE RECORD —
How wages should be based on productivity
By Dorothy Thompson
Lest anyone should draw wrong conclusions from what has been said in this column on the General Motors-UAW controversy, let me say that I believe labor’s basic premise in the present controversy is, if I properly understand it, correct.
The fact that a single member of an industry can, perhaps, pay a 30 percent or a 50 percent increase in wages is no argument to my mind, however, that it should.
Wages, in general, should rise in accordance with average overall gains in productivity. Many technical factors contribute to the special efficiency of some industries and some members of an industry, other than the efficiency of wage-labor, and if wages in the most efficient industries absorb all gains, the wage structure of the whole economy will be distorted. It is, therefore, better for industry to maintain a wage level in conformity to general productivity and for especially efficient industries to pass on exceptional productivity in the form of bonuses to their workers. This has been our criticism of UAW in its controversy with GM.
However, labor’s thesis that the economy should attempt to keep prices level and profits stable, while passing on increased productivity in higher wages rather than in inflated profits or lower prices, is sound.
It is easier to add gains in productivity to wages than to guarantee that they will be reflected in lower prices, since prices are less determined by cost than by market demand, and consumers cannot be organized.
Monopolistic practices, even such as are of the nature of industrial agreements, militate against price drops.
This is of advantage to most workers, except to farmers, for whom cheaper industrial prices are important. But these are probably less important than stable prices, plus the steady market afforded by high-wage-regularly-employed worker-consumers.
It is a step forward when labor shows a disposition to take into calculation the welfare of the whole economy, and to bargain on the basis of what industry can afford without passing increased costs on in the form of increased prices. But if it sets the standard by the most efficient it will tend toward monopoly.
There can be an automatic test of the rate of increase or decrease of productivity which would permit wage rates to be otherwise determined than by the periodic civil wars of strikes. The concept that the strike is an essential democratic “right” – or that it is an essential democratic right of management to make arbitrary decisions—is as silly as to argue that measles or flu are democratic rights. Given an integrated philosophy regarding wages, prices, profits, and their relation to productivity, collective bargaining should reduce itself to registering the facts, together with a public umpire. The problem and its answer would become mathematical.
But wages based, as they should be, on productivity, should not be fixed too high in advance speculation regarding productivity, nor for an industry by the productivity rate of its highest member, nor by temporary factors, such as abnormal demand, which could better be compensated for by profit sharing.
For it is psychologically difficult to decrease wages, and yet workers’ income based on productivity (the only real factor in ability to pay) must have the element of elasticity. The way to introduce it is for workers to share profits and losses with investors, beyond their wages, which would then be in the form of a minimum guarantee.
The habit of management to vote themselves bonuses in prosperous years, is irritating to workers and stockholders. Able management is rare, but it is also, for that reason, well compensated. Bonuses to management and not to workers are on the assumption that management is investing its labor, while the wage-workers are selling theirs.
Some part of the workers’ income should come in the form of return from work regarded as capital.
Certainly the object of a satisfactory democratic economy in a society of free men is not to make millionaires, but widely to diffuse ownership and opportunity, maintain all workers on a decent level, and encourage and reward superior effort at all levels. There is only one reasonable or moral objective for any social or economic system, and that is the improvement of the human type. And, on the whole, neither subsistence existence nor great wealth develop human virtues.
Either workers must have some of the privileges, opportunities, and responsibilities of owners, or increasing numbers of them will vote to exchange their present bosses for the State.
Since I think that by so doing they will but permanently confirm their propertyless status, I am against it.
But if the capitalist system remains a proletarian system, it won’t be able to compete with the real or fancied greater security and equality of state capitalism. It must offer both more security and greater opportunity.