Harmony in Labour Relations. III: Specific Programmes in the United States

Irish Jesuit Province

Harmony in Labour Relations. III: Specific Programmes in the United StatesAuthor(s): Daniel LyonsSource: The Irish Monthly, Vol. 77, No. 911 (May, 1949), pp. 219-224Published by: Irish Jesuit ProvinceStable URL: http://www.jstor.org/stable/20515987 .

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HARMONY IN LABOUR RELATIONS III.?SPECIFIC PROGRAMMES IN THE UNITED STATES

By DANIEL LYONS, SJ.

IN the present state of industrial society there is one glaring defect, and both management and labour are unhappy about it: the worker is not interested in his work. Since capital can do nothing without

labour, this situation constitutes the bottleneck of industry. The reasons why the labourer is not interested in his work are clear :

(1) his creative abilities are unused so that sufficient technical

interest is not aroused; (2) his abilities for managing and direct

ing have no opportunity to function, consequently that interest which comes from control over the processes of production is lacking; (3) there is no connection between the quality of his work and the

wage or salary he receives, so that as long as the worker does enough to keep his job he does not even have an economic motive for being interested in his work.

Because of such conditions, Pope Pius XI declared : "

In the present state of human society . . .We deem it ad

visable that the wage-contract should, when possible, be modified

somewhat by a contract of partnership, as is already being tried in various ways, to the no small gain both of the wage earners and

of the employers. In this way wage earners are made sharers in some sort in the ownership, or the management, or the profits."

It is evident that mere free competition cannot be the guiding prin

ciple of the economic world, for such a principle readily degenerates into a ruthless spirit of economic supremacy. The liberalism of the

last century, and Adam Smith's "

laissez-faire "

of the century before, have been tried before the bar of public opinion and been found want

ing. But some sort of social reconstruction is certainly on the agenda of the western world. Must it be Communism, which the Church has

forever condemned as inherently evil? Must it be that extreme form

of Socialism, which the Church has similarly condemned, and which

even the Communists admit is a mere stepping-stone to Communism?

The sovereign pontiffs have repeatedly insisted that this longed-for social reconstruction must be preceded by a profound renewal of the

Christian spirit. To have any effect* they declare, social reform must

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IRISH MONTHLY

be based on "

social justice and social charity." With this in mind, three systems which are being used to great advantage in the United

States will be considered: (1) the guaranteed annual wage; (2) mul

tiple management; (3) profit-sharing.

I. The Guaranteed Annual Wage

When Mr. Eric Johnston retired a few years ago as President of the

United States Chamber of Commerce, he said in his farewell speech : ?

" We businessmen say we regret to see slack times and seasonal

unemployment. We say we are for steadier jobs. Then what's

wrong with the annual wage? That's what it means, isn't it?

Steady jobs."

The United States Department of Labour recently reported that out

of ninety thousand businessmen who were questioned, the majority were in favour of some form of guaranteed income for their em

ployees. Unions have been advocating the guaranteed annual wage for several years, and the proposal has already been adopted in many

places. One of the most widely known annual wage plans is that in use since

1934 by the Hormel Company? in Austin, Minnesota. A meat packing firm, its business is highly seasonal. Livestock are born in certain

seasons, and the farmers bring them to the packers at certain times.

But to workers who get paid by the hour, the uncertainty of slack

seasons entails serious hardship. The Hormel Company first inaugurated the annual wage plan in

1933. The employees werei suspicious of it, called a strike against it.

and the plan was abolished. In the following year, however, the union

requested that the plan be restored. This is how it functions : from

sales prospects the company estimates the annual wage of the workers

for the ensuing year, agreeing to pay that amount in fifty-two equal instalments. During slack periods the workers may be employed for

only twenty-five hours a week, while in the busiest seasons they may work over fifty. If they work more than an average of forty hours

per week throughout the year they receive a bonus; if they average less

than forty hours weekly during the year they owe that many hours

of work to the company for the following year.

At Hormel, the emphasis is on production rather than clock hours

spent on the job. Speed allows extra bonuses and more leisure time.

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LABOUR RELATIONS

The C.L?. Union there has accepted responsibility for the quality of the work performed, and it takes punitive action, when necessary, to enforce discipline. The Hormel plan is similar to numerous other

adaptations of the guaranteed annual wage. In most cases> the indivi

dual workers are free to work either on an hourly pay rate or on the

fixed weekly rate for all seasons. Naturally, nearly all of them choose

the fixed rate at once, or their wives soon talk them into doing so. It

takes security to raise a family.

Economists who favour the annual wage insist that it must not

be considered as a guarantee against depression unemployment. For most firms to pay out wages during prolonged unemployment would be merely a short-cut to disaster. If this were to be the result

of annual wage programmes during the next business depression, the

whole movement would fall into disrepute for fifty years. Wise advo

cates of the plan insist that its purpose is to" provide steady income

where work is seasonal or otherwise unsteady. They maintain that the

unions themselves should favour limited responsibility on the part of

the company, to keep the plan from failing altogether.

II. Multiple Management

Workers are usually neither capable nor eager to participate in those

affairs which concern the financing of the company, its purchasing of

materials, or its finding a market. In the production line, however, they are both anxious and competent to participate. Working conditions,

safety, shop discipline, seniority, promotion, discharge, improvement of machinery, and progress in efficiency, all concern the workers.

Multiple management springs from a realization that a hundred

heads are better than one, and that workers who are allowed to take

part in the function of management are also more interested in their

job. In 1920, the United States Commissioner of Labour, Dr. Royal Meeker, made some strong statements along these lines. He said* in

part: ?

"I insist that the management, even scientific management, has not a monopoly of all the brains in an establishment. . .

There is a tremendous latent creative force in the workers of

to-day which is not being utilized at all .. . The goodwill of the

workers is a much more potent force making for industrial effi

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IRISH MONTHLY

ciency than all the scientific management formulas and systems of production... Workers are not different f^om employers."

Since Dr. Meeker uttered these words, thousands of American firms

have found it practical to adopt multiple management programmes. A classical example is the plan which has been in use since 1931 in

the huge McCormick spice and tea plant, in Baltimore. For its basic

operation the plan has four boards of management: the board of

directors, the junior board, the sales board, and the factory board.

The board of directors is much the same as in any other company. The junior board is composed of office executives. The sales board is

chosen from sales agents. The factory board is selected from workmen

in the production line. Members of each board are chosen for intervals

of six months by the vote of their fellow employees, or by the vote of

fellow board members. In the latter case, one board member is

replaced each term. The purpose of the respective boards is to make

recommendations for improving operations in their part of the plant The senior board must approve the recommendations, but where

these are unanimous, they are approved in nearly every case.

One of the best known instances of labour sharing in management is found in the shops of the Baltimore and Ohio Railroad, where the

participation is carried on through the union officials. Within the last

ten years more than twenty-five thousand suggestions have been made

for improving shop operations. Of this number, twenty-one thousand were adopted. The Amalgamated Clothing Workers of America and

the International Ladies* Garment Workers' Union have also been

outstanding in the multiple management field.

Enlightened employers have found that the benefits which flow

from allowing labour to share in management are incalculable: the workers become more interested in their work and are more content

with it; employees are more concerned about the progress of the com

pany; the cold, business relationship between capital and labour is

replaced by something like a human relationship.

III. Profit-sharing

Organized labour can still recall when profit-sharing was used to

weaken unions, as well as to serve as a delusive substitute for higher wages. But there are now thousands of laudable profit-sharing plans in existence to-day.

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LABOUR RELATIONS

When a United States Senate committee investigated the question of profit-sharing, in 1939, the committee reported: "The public interest in the matter is tremendous." Since that time both labour and

management have become increasingly interested in the subject. Mr.

Eric Johnston declared, before the members of the United States

Chamber of Commerce: ?

"We say we really want to see more diffusion of the good things of the world. Then what's wrong with profit-sharing? What's

wrong with giving our workers a real incentive to produce more

for their own profit?and for yours?" In 1945, shortly before giving the address from which the above

paragraph is taken, Mr. Johnston started a multiple management and

profit-sharing plan in the four west coast industries which he directs.

The plan is simple: twenty-five per cent, of the net profit, before taxes and dividends, is to be split among the employees. Paid annually in a lump sum, the dividend is made according to a unit system : one

unit for each twenty-five pounds of wages, one unit for each year of

service, five units for each term on the junior multiple management board, fifteen units for assistant department managers, and so forth.

Since the junior board has complete access to the company's books

and can frankly inquire into any phase of the company's business, the

plan is a workable one. It is a replica of the McCormick plan.

Shortly before World War II, the Rockefeller Foundation sponsored a study of 165 profit-sharing plans then in use in America. The one

reported most satisfactory was the plan which Mr. M. A. Joslyn started, in 1919, in the Joslyn Manufacturing and Supply Company.

Mr. Joslyn, a graduate of Notre Dame University, inaugurated a plan

whereby the employees contribute from two and a half to five per cent,

of their weekly pay cheques into a retirement fund. The company pays into the fund not less than ten per cent, of its annual net operating

earnings, but not more than four times the amount paid in by the

employees. Various precautions are taken to prevent abuses. For

example, the company does not gain by discharging anyone. The profit-sharing plan of the Nunn-Bush Shoe Company operates

as follows : the company pays from thirty-five to fifty per cent, of its

profits into the fund. Employees do not contribute. The portion credited to each participant is in direct ratio to his earnings, plus his

length of service. Employees may draw out of the fund only upon

reaching the optional retirement age (forty-five for women and fifty

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IRISH MONTHLY

for men). The money may be drawn through an annuity, or by pay ment in monthly or annual instalments.

Perhaps the most simple of all profit-sharing plans is that used in the Kaiser-Frazer plant, where twenty-five shillings are set aside to be

distributed to the employees for every automobile that rolls off the

assembly Une (one every fifty seconds). In all recommendable profit sharing programmes, abuses are prevented by the payment of union

wages simultaneously with the profit-sharing agreement. The question might well be asked: "Of course, labour favours

profit-sharing. But what does the employer get out of it?" No better source can be referred to than the report of the United States Senate

committee that investigated the matter. The committee found, as

hundreds of employers have found, that the result of honest profit

sharing is increased production, more loyalty, higher efficiency, less

strikes. From the committee report, which contains enough figures to

fill a telephone directory, it is learned that twenty per cent, of those

companies without profit-sharing have strikes, but only ten per cent,

of those that share their profits have strikes. Furthermore, those com

panies with ideal profit-sharing systems have no strikes at all.

Before profit-sharing will succeed, both sides must enter the plan

unselfishly, in a spirit of co-operation and goodwill. But employers are pleasantly surprised as they discover how much better their plants run when labour and management work together, instead of against each other. At present there are more than eight thousand profit

sharing and pension plans operating in the United States, with more

than one hundred million pounds being paid into them annually. All three of these systems, the guaranteed annual wage, multiple

management, and profit-sharing, are designed to bring out the best

that is in capitalism, and to cure the causes of class struggle, which

lead to Communism. All three are built on a spirit of mutual respect and co-operation, which is a Christian spirit.

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Harmony in Labour Relations. III: Specific Programmes in the United States