The Functions of the Industrial Counselor — Possible Relations of Scientific Management and Labor Unions

An address at the Annual Meeting, December 5, 1914.

By ROBERT G. VALENTINE, Industrial Counselor, Boston

In beginning my work I had to adopt as a working hypothesis very distinct tentative beliefs. One working hypothesis I adopted was a belief in Scientific Management and claim to understand it very much as you do. The second hypothesis is that I believe in absolute democracy in group action on matters. Without assenting to any particular form of association, I feel that in any community or in any group of people, where you did not find a sane quiet beginning towards group action, that group or that concern, or those individuals are headed for trouble. And so in accepting the facts of our time as we find them, I believe in Trade Unionism as one distinct form of democratic development, despite all its imperfections and its monstrous economical fallacies.

Last Saturday I was called on the telephone by one of a firm of Buffalo lawyers, who asked if I knew anything about a text-book concern in Massachusetts. I told him I had no accurate information about it. He said, “Assuming what you have seen in the papers and what you know about it is all true, would you consider that firm financially sound at the present time?” I said, “Yes, sir.”

Then, “Assuming also what you know about it, would you consider that firm, or would you not consider that firm as sound in its methods of management and its processes of doing the work?” Knowing the concern to be what any of us would consider an up-to-date, clean-cut business concern, I said, “Yes; I should consider it perfectly solvent, both financially and as regards the way it is works its processes.”

Next I was asked, “Do you think that concern is industrially solvent, meaning that the relations between employers and employees in that concern, and all the partners in that concern, between themselves, and any other relations they have with each other, and with their employees, and with outside labor forces of any kind, and their relations with the management itself, were not only all fixed pretty soundly, but were developing in the right direction?” I replied, “From what I know of that concern I should not consider that concern industrially sound. I do consider it financially sound. I do consider it sound as to its plant and equipment and methods and processes of manufacture and operation, but not so on the side of human relations existing all throughout.”
The man inquiring then said, “That is what I wanted to know. I had some doubts about it myself; and we will look into it further now, from what you have said.”

Now, to me it is significant that that type of question is rising. I want to place before you that same question in another form.

Imagine that a large industrial concern desires to issue new capital stock. The ordinary process is for it to go to its bankers. Bankers talk over the situation, and if they think generally well of the plan, they ask the industrial company to have its financial condition certified to by an impartial disinterested concern of public accountants. Bankers also get, either from those accountants or directly through a firm of industrial engineers, a certificate as to the condition of the plant and the equipment. Those certificates appear in the prospectus of the new securities, and stand to the investing public as a mark of the care taken by the bankers before they lend their names to the flotation of the securities. It also assures the public that the concern did not have capital tied up in unnecessary stores; that its methods of stores keeping were in keeping with economy.

The day is not far distant when the same bankers will demand a third certificate, in connection with any such transaction. The third certificate will testify to the industrial relations existing within the concern. It will be made by industrial counselors, and will certify as to the industrial relations existing in this concern. This concern may have a good bill of health on the first two points, and yet in the next six months they might have a strike on their hands which would make their securities worth nothing beyond the pieces of paper they are written on.

I think that third certificate will read somewhat as follows:

“We have investigated the condition of the X. Y. Z. Co.; first, as to questions of fundamental organization, particularly in their relation to the economic and social forces of the day; second, we have examined all questions of personnel such as description of jobs, selection and development of personnel; third, we have investigated questions of rates, amounts and methods of pay; fourth, we have examined questions of attitude toward labor unions, and all forms of association; fifth, we have investigated relations to labor laws, both state and federal, and to court decisions affecting labor; sixth, we have investigated questions affecting the relations of the concern to the public, particularly in matters of safety, sanitation, health and regularity of employment; and we find that the X. Y. Z. Company is giving due attention to the human relations in industry and is not likely to be involved in serious labor trouble or to carry a heavy burden of dissatisfaction cost.”

Such a certificate may seem like the wildest dream to a large percentage of employers in the world to-day; but it will no longer seem so when we can educate ourselves to the point of being willing to move on from some of the outworn political and economical and social theories of our time and give to these problems some of the thought now given to questions of finance and plant. The manufacturer will then change from the condition of a blind or honestly puzzled employer, clinging to traditions of inherited belief in a worn-out economic and social theory, into a business-like practical sense of the concrete industrial forces and opportunities around him.

In making an audit of this kind—an industrial audit—the first task of the industrial counselor is to get the concern oriented. This means analyzing its organization and finding out whether this organization has effective roots in modern conditions. For example: A concern which is found to be doing nothing toward some form of self-government among the employees, can get from me no honest certificate of security against labor troubles.

One of the first things a concern anxious to get headed right must do is to lift its employment department from a subordinate place in some operating department to a level with the manufacturing, selling and accounting branches, and place it directly in charge of a partner or major manager, one of whose chief duties it shall be to develop a perpetual human audit of the kind I am suggesting here. With this personnel branch of its business thus developed at one end of its line of major functions, and some form of internal association among all its members developing at the other end of the line, the concern will become more and more conscious of its real industrial status. From a business point of view no organization of this kind can or should be defended except on the ground either that it pays or that it is necessary in view of existing or imminent law. In saying this I am not for a moment denying to business men other virtues than business virtues; but it is a cardinal point of good business administration, as of ethics, to keep pay and patronage apart.

Don’t be led astray by the size of the job when I say that the head of the personnel division of a concern must be actively in touch with economic, industrial, social and political forces of the day; he must be alive to the meaning of trade unionism; he must be able to distinguish between its constructive meaning and its destructive meannesses. He must be equally ready to admit the meannesses of his fellow managers, and anxious about their constructive side. He must be alive to the trend of even the humblest business toward a status in the public service, for the public character that our railroads have taken will be rapidly followed by an effective public interest in the foods we eat and from which we are individually powerless to bar the poison. I am not asking that the personnel manager shall approve of these things. It is not a question of approval or disapproval, but he must be alive to them. So he must be alive to the growth of co-operation, to the real contribution of the trusts, to the growth of consumer’s controls, to the backwardness of our educational system as a whole, despite its noble exceptions. He must be alive, still whether he agrees or not, to “votes for women” and the feminist movement. For the personnel manager, in order to be fit for his job, must be an industrial counselor.

And these are questions which affect your business. And when you go to put them clearly down on paper and to analyze them, you will find them not more numerous or more varied than the problems you face in your selling and manufacturing departments and in your accounting department.

While not more numerous, and not more varied, it is true they are more subtle; harder to get a line on because just as in physics you have a number of variables, full of different elements. Yet nevertheless it is fairly definite at that end. And at the other end of science you have the whole field of socialism, which is full of the definite and intangible, and yet it is capable of scientific analysis.

Having charted the situation of the concern in these questions of fundamental organization, the industrial auditor passes on to questions of personnel. At the bottom, the concern is its own business personnel. What are the fruitful sources of labor supply for the concern? Except at the bottom grades is the concern itself its own best resource? It should be. Roads up, out, and in, should be developed. Its basic discipline should be its own educational system. Its foremen and superintendents should be teachers instead of bosses. Are the jobs clearly stated? The best concern to-day has criminally wasteful gaps between functions and overlapping of functions. Are the wastes of selecting wrong people for jobs minimized? Is the concern alive with useful counsel one to another? Are individual friction and jealousy seared and withered and co-operative spirit drawn forth by the magnetic power of what the concern as a whole stands for, clearly held in the minds of each individual within it?

The industrial auditor then passes to questions of pay. Is the wage system already beginning to be modified by some form of profit and loss sharing, which, by the way, can only healthfully exist when a concern has at least rudimentary beginnings toward that bogey of the unawakened employer called “share in the management.” The verbal bogeys lose their terror before easily installed sane beginnings of self-government. What do the people make by the week, by the month, by the quarter, by the year?

Out of the pay envelope must come the living powers of employe and manager. For both, the questions are vital of savings, of insurance against illness, accident, unemployment, old age and death; of housing; of purchasing power; and of such social questions as health, education and recreation. That is what each one in this room is up against, whether he considers it or not. To what extent may the concern, and should the concern, efficiently share in these?

And from these more internal questions of organization, personnel and pay, the industrial auditor proceeds to the relation of the concern to labor organizations, labor laws, and public standards. If the concern deals with labor unions, are its dealings merely defensive or are they constructive? Does it take a legitimate hand in seeing that wise laws are framed, or does it fight the principle of a new labor law in toto and stand aloof from details only to be handed later an inefficient statute, a hybrid output of timid politicians and sentimental philanthropists? Are the employees safe from fire and accident? Are conditions sanitary? Is the need of a healthy personnel understood? The shifting force in a large business is at once, perhaps, the greatest waste of our times both from the point of view of the business itself and the community.

The development of the technique of an industrial audit is, of course, in its infancy. But already the constructive power of merely asking these businesslike and practical questions in an ordered and businesslike fashion has been wonderfully fruitful. They open up new horizons to business enterprises. The organization chart of an old time industrial engineer showed a lot of pretty oblongs or ovals connected by interesting lines. Functions and positions held impersonal sway among them. In the new organization chart, the people appear by name; the best paper organization in the world is nothing apart from the men and women who run it. The quality of the personnel is the last and greatest fact in business solvency.

Today when a business concern gets into labor troubles the usual course is for the management to call in their lawyer. As a rule, lawyers have no grounding in the industrial problem; and furthermore, the methods and practices of our courts are not at all the methods and practices proper to the decision of industrial questions. That is one reason why the courts are not the arena in which labor problems can be successfully tried out. Courts are not equipped either with the knowledge or with the machinery. Many lawyers, of course, as individuals, have gone into various aspects of the industrial problem, and some of them so deeply and skilfully as to have been already in a position of substantially practising another profession alongside of their legal profession.

The industrial counselor should not be the advocate of either side in a controversy, helping it to put its own ideas across. He should be a master in the growing laws of industry and should have it specifically understood in connection with every service he performs, that his job begins and ends by helping his client to understand and fulfil those laws. Thus he is valuable either to employers, employees, or the public, and whichever is his client, in the sense of paying him, can expect from him only such service as is to the interest of all three parties. No scientific and just service could be built on other grounds. It must be understood that his job begins and ends by helping his clients to understand and fulfil those laws; and thus he is valuable alike to employers, employees and the public.

Possible Relations of Scientific Management and Labor Unions

Suppose a manufacturer should say to me, “I wish to start, equip and run a new plant in a certain section of the country.” I suppose the ordinary method would be to begin to decide about the size of the plant, what you would make, etc. After you had decided what you were to manufacture you would start to consider building the plant and equipping it, and the processes of manufacture and management. And after it was all together you would expect to pick up your labor supply.

The first thing that I would do if I were confronted with such a proposition would be to make a study of the labor situation in that locality before the ground was broken. The first thing I would do would be to take up the question of labor supply, with all of the existing sources of labor supply at that time. I would go to the labor unions and raise all the questions in advance that might be raised afterwards, as far as one could humanly foresee them. Next, I would show that insofar as there were any unions in that vicinity connected with those trades—I should run a preferential shop—I would appeal to the unions for men before I appealed to anybody else. If they could give the men I wanted I would take them in preference to anybody else. Then I would say that I would pay as the piece rate of my wages the union rate in that vicinity, regardless of whether or not the shop was unionized. And any other methods of pay would have to be built on that.

Then I would make the union mad by telling them that I would pay a minimum wage in that factory. My great quarrel with the union men is that they have their minds fixed on so much an hour, and they are giving shamefully too little attention to the idea that a week is the shortest unit a man can count on.

I would like to see the union leaders awaken to that job, and see that the ideal of employment is not the week, but it is one year. A year containing the four seasons is the lowest ideal unit of planning which one should engage in. But if one could get industry on a carefully graded weekly basis, instead of the hourly rate, a great step in advance would be made.

When I put that question to a small group of manufacturers the other day, they came back and said, “Supposing you could not afford to pay the minimum wage in some catastrophic time?” Then I said, “That concern should be declared industrially insolvent, exactly as they do when a man does not meet a note or a company does not meet the interest on its bonds.”

Then I would demand that you should plan as far as you possibly could for regularity of employment; first by regulating your own business to the greatest extent possible, and secondly, that you establish and have some idea of co-operative relationship with other concerns in other lines of industry, so that when your slack period came, when yours came against his full period, you could make some shift to the advantage of each, and thirdly, as business men looking after your own interests, that you take some kind of interest in state public work, so the state would not be going into the market when wages were high and business good, but instead when conditions of unemployment bad.

When I had done those things in regard to the labor situation then I would turn to the side of production, and I should consider there everything that deals with individual capacity and in its relation to securing the greatest possible output socially possible at any time. Absolutely getting out of limitation of output, it seems the first thing is to develop the selling department as nearly as possible to a state of perfection, and study the flow of orders that will come into that plant through proper salesmanship. It has been my experience that frequently the selling side of the business is left to be organized until long after the factory side has been organized. At the end when you have your selling organization completed in this new factory, then I would do all my planning work, and all the system for maintenance of schedule, and all kinds of work analysis. I think before the Motion-and-Time people get on the job, these things should be considered, task matters should be considered.

Then I would shift the lower costs to the heading called “The Rights of the Consumer in the Business”; and there I would lay out the maximum conditions of the business. I would not wait for the law to reach me—I would have no watered stock, restricted dividends, no concealed management salaries—and I would see that the sanitary conditions are good; and then I would say, that it is due to me and to the consumer for me to get my unit cost lower and lower and lower.

If there were some labor union men in this meeting I should take pleasure in saying that where I had arranged to deal with the unions—and this of course would be easier in a perfectly new undertaking, rather than in an old one, although it is practical in both—I could still get by every single thing that a majority of you people in this room would declare to be legitimate scientific management; that I could get by every single element, because the whole business of relationship between employer and employe would have been shifted from the violent method of adjustment to a constitutional basis, and the whole list of crimes now committed by labor unions and by employers also would have departed.

Discussion

HENRY P. KENDALL: Mr. Valentine has made some revolutionary suggestions. He has touched on one significant factor of organization—lifting the employment department to an equal status with that which has to do with the production, with machinery, with sales, and other parts of the organization. I think that too little attention is given to the employment feature in any industrial concern. The old form of putting that work up to the foreman, to hire and to discharge, to regulate wages, administer discipline is fast becoming archaic.

I am not ready to accept Mr. Valentine’s theory of putting such a man on the same status as the other partnership members in the business. I do not know where such men can be secured at the present time. It is a stiff proposition to get by a Board of Directors, too, I am afraid. I feel sure, however, that that sort of thing is coming.

The matter of the regularization of employment is a question of the utmost importance to the American people. It is a part of this question of non-employment now surging throughout the country, in the different cities and different states. I feel that for any management to impress the people they must organize by industries, and force a change in the customs of the country that affect seasonal employment. One of the greatest drawbacks in the business in which I am engaged—that is the printing and the binding of school books—is that it is a seasonal employment. As schools open in September and public school boards never adopt the books until their last meeting in June, it brings the business of furnishing these books into a few months and prevents the manufacturers from knowing in the winter time what they can manufacture. There is no reason why pressure should not be brought on the public authorities to compel school boards to adopt in January the books for their next season’s business. And yet that custom is one of the causes in the book business for seasonal employment. Each manufacturer and employer must work to meet these conditions.

In the second part of his paper, the “Possible Relations of Scientific Management and Labor Unions” I feel that Mr. Valentine is a rank theorist. The whole hypothesis of democracy in industry is all right as a working hypothesis. There are some of us, however, who are engaged in one single cross section of industry. We have to think of the payroll for next week, how labor opposition will affect our sales next month, and how this law will absorb our surplus through factory changes and workmen’s compensation. That is, we are fighting the whole situation all over the country; but we also have an eye on the cross section which affects us; and we are powerless as an individual plant to affect the whole problem.

I do not know that I should begin that new industry which Mr. Valentine speaks of in exactly the way he would. I should have too much fear that in some communities with the closed shop prevailing, and the labor union leader who could hardly be distinguished from the ward boss politician—and there are such—whether such an industry could even get started, to say nothing of holding its own later on. Those are problems which a man viewing the cross section too closely might well hesitate to take his chances on.

There are always other factors which control labor unions than merely the local group. Your local group in the city may be entirely in sympathy with your enterprise and willing to co-operate in every way. The national union and the affiliated unions may have the opposite view. The question is whether you can view a particular industry, or your particular job for the next five years as the basis for the whole theory of industrial democracy, or the cross section of it which will touch you in the next five years; will you not have to view it as a cross section, but with the understanding and sympathy and belief which you should have for the whole problem.

MR. C. B. THOMPSON: With Mr. Valentine’s main point, the necessity of recognizing and co-operating with organized labor, I must of course agree. I have been preaching this policy continuously for two years and I proposed a definite method of co-operation between employers and organized labor at the Chicago meeting of the Western Economic Society early in 1913.

It seems to me, however, that Mr. Valentine’s suggestion has omitted one vital factor. Assuming that sooner or later we will have to work with labor unions, what are we going to do about their policies of restriction of output and equalized wages? Both these policies are of course denied by some labor union leaders but their existence and constant practice are matters of every-day observation. If we must sooner or later accept collective bargaining as a policy of Scientific Management, our bargain must include some specific and definite provision for the application of these principles of Scientific Management which are not in harmony with restriction of output and equalized pay for unequal effort. There must be provision for the establishment and enforcement of a proper day’s work and for the characteristic application of the bonus.

ROBERT T. KENT: Several years ago I proposed that unions should grade their own workmen according to their ability; that a $4 a day man should get a card showing that he was a $4 man; a $3 a day man should get a card showing him to be a $3 man. The employer could agree with the union that if he wanted a $4 a day man the union would supply him with such a man. Today, if we get a union man in the shop, we cannot be sure that the union has supplied us with the kind of man we want. The union insists that we pay the union rate, whether or not the man is nothing more than a $2 a day man. The fact that he carries a union card entitles him, solely by virtue of that card, to demand the union wage. If the employer could be sure in getting a union man he would not be paying $4 for a $2 man, there would be less opposition to union shops.

I believe that the Brass Workers Union of England has adopted this scheme of grading its men according to their ability; that a man unsatisfied with his wages could apply for examination before a joint board selected by the employer, the unions and the town authorities. The man had to demonstrate that he was a better man in his trade than the rating assigned to him called for. If he failed in the examination he had to abide by the rating he had, and he was debarred for six months by the union from applying for an examination to regrade him. If the unions would take a step like the Brass Union in England is reported to have taken, we would have less difficulty over the question of closed and open shops.

C. N. LAUER: Mr. Valentine stated that in starting a new industry he would discuss his problem with the trade unions in the locality. What would he accomplish by that except a closed shop?

MR. VALENTINE: You would have a closed shop with the union working with you instead of opposing you. The only difference between a preferential and a union or closed shop is the method of getting the men. The preferential shop arrives at the closed shop with the door always open to get people from outside if the union cannot supply men who are up to the standard, and the union must accept your standard. Those who claim that there is an ultimate difference between the closed and preferential shop are wrong. For the union to state that it will make a closed shop is violent, whereas a preferential shop is headed for the closed shop by the educational method, which leaves everyone in better shape.

W. J. ADAM: What does Mr. Valentine mean by cooperating with employees to restrict output for a definite period. What is accomplished by that?

MR. VALENTINE: Assume that a concern was refusing to deal with unions, or with forms of association, I would consider it absolutely necessary as a practical method for the union, in order to retain its membership and get ready for the ultimate results which will come from group action, to insist on group action and equal wages. Otherwise their organization drops. As in war, they must present a steady, unbroken fighting line. As soon as the necessity of fighting for their life as an organization is removed, you will find the union assisting you in differentiating labor. But until this little element of democracy is infused into the movement, the unions will deal with you as a group. The moment the union is recognized, the level wage is the worst thing that they can have.

SANFORD E. THOMPSON: Not long ago in Chicago a prominent labor leader said that he believed in the principles of scientific management so far as they applied to the elimination of unnecessary operations and of unnecessary work for the employees. More recently I was talking with the president of one of the strongest labor organizations in the country, and he agreed that if a two dollar man could replace a three dollar man at a machine, so that the three dollar man could be employed elsewhere at a higher class of work for which he was fitted, it would be advantageous. Such indications show a tendency toward the acceptance of some of the fundamental, economic principles referred to by Mr. Valentine.

One of the primary difficulties with many labor union men is the belief way down deep in their hearts that there is not work enough to go around unless they work slowly. This of course is another way of expressing belief in the limitation of output. This point was brought forcibly to my attention the other day by a member of the Department of Public Works of a province of Australia. He told me that the leaders of the unions there were taking the definite stand that there was not work enough for their men unless they worked slowly. With this in mind the bricklayers have limited their output to 450 bricks per day on all classes of work, although even with the larger sized brick that are used in the United States they could readily lay twice this number in many cases. As a result of this stand, the cost of building operations had increased, he said, so much as to greatly retard construction.

The matter of seasonal employment brought up by Mr. Valentine I consider one of the most vital problems from the standpoint of the working man and, in fact, for all classes of wage earners—a problem much more serious than that of the minimum weekly wage. A very interesting little book has been written by the Misses Clark and Wyatt on “Making Both Ends Meet.” They bring out in a most interesting manner and very fairly the difficulties met by wage earners through irregularity of employment. The prevention of seasonal idleness must involve in many cases a readjustment of wages and also a readjustment of prices, for a margin of profit is essential in any industry if it is to live, and in many cases the margin is so small that a radical change would simply cause a shutdown which would throw the factories entirely out of business.

Recently a Committee of the Boston Chamber of Commerce, cooperating with the American Association for Labor Legislation and the American Association on Unemployment, has been making an investigation of seasonal employment, and while no final report has as yet been presented, some tentative suggestions have been formulated. These illustrate the effect of irregularity of work upon both the manufacturers and the employees. As the suggestions so far as I know have appeared simply in the publication of the Boston Chamber of Commerce, “Current Affairs,” and they may be of interest in this connection, and I give them, as follows:

  1. On the basis of records, a careful calculation of expected output should be made in factories at the beginning of each year, and this output divided as equally as possible among the different months—advertising, buying and selling being directed to this end.
  2. A close connection should be maintained in factories between the manufacturing and selling departments, and the head of the sales department should thoroughly understand the manufacturing end of the business and organize his selling force so as to find or develop markets that will take goods in the slack season.
  3. Manufacturers should consider carefully the advantages of keeping a stock department. Such a department is practically a storage for temporary surplus, making possible production in advance of demand.
  4. Manufacturers should endeavor to bring to bear upon jobbers and retailers a strong influence to anticipate sales and place orders early.
  5. In certain industries where rapid changes in style are particularly detrimental, organized attempts should be made to restrict such changes of style within reasonable limits.
  6. Manufacturers should study the possibility of developing a variety of products and introducing new lines which will be likely to find a market in seasons when sales of other staple lines fall off.
  7. All establishments of any considerable size should maintain a special employment department required to keep careful records of employment, including the number of workers of each class employed throughout the year in each department; the wages, hours worked, number hired and discharged. The policy of such a department should be directed toward maintaining regularity as far as possible and instructing other departments of the business as to their employment requirements.
  8. So far as possible, employees should be shifted from one department to another so that they may become familiar with various kinds of work necessary to the conduct of the business. In certain seasons, such training may make comparatively easy an increase of the force in some departments and a decrease of the force in others, thus reducing or eliminating the necessity of discharging experienced workers.
  9. Employers should be educated to the necessity of maintaining an efficient organization by providing regular work, even at some apparent financial loss, in order to prevent the much greater financial loss incident to the reorganization of the working force at the beginning of the busy season.
  10. Every effort should be made to bring about a thorough organization of the labor market in every trade or group of allied trades. It would be a great advantage to employers to be able to draw their labor from a central bureau which would, with experience, reach a position where it would be able to meet the demand for workers by shifting them rapidly from one job or one employer to another.

H. T. NOYES: I think Mr. Valentine’s theory is right. I believe the development of the profession of industrial counselor is of interest to those with the subject of scientific management at heart; and I believe the two subjects go together, and that the minds of business men may be opened to these points. I sympathize with Mr. Valentine’s viewpoint, but I think his theories have carried him very far.

One suggestion he made seems ridiculous to me. I am connected with an industry that must use a payroll. Mr. Valentine spoke of the institution that guaranteed a weekly minimum, whatever the conditions of the industry. Theoretically it is fine, but extreme conditions sometimes arise. He said that in a given industry he would assume the responsibility of standing squarely on this proposition, that if an industry failed to meet its weekly guarantees, that it should be declared insolvent and put in the hands of a receiver, as it would be practically for a failure to meet financial obligations.

I will give him a few figures: Many industries in the last few months, due to the very unusual condition of affairs, have been booking business at 25 to 30 to 40 percent of normal. Out of the clear sky things have happened which could not have been foreseen. Assume that industry had guaranteed weekly payments—say 1,000 people are guaranteed by a concern a weekly minimum, it might easily be true under these conditions, if they paid that weekly guarantee they could lose in one month perhaps an amount equal to what they would pay for one year on their bonded indebtedness and by way of dividend on their preferred stock. Their loss in one month might equal or be somewhat in excess of the sum they would have to pay annually on bonds and like indebtedness. Therefore it seems to me Mr. Valentine should be criticized for making such emphatic statements and saying that such a concern should be placed in the same category with the bankrupt.

MR. VALENTINE: There is nothing so theoretical as a practical man. I do not want for one minute to appear to retreat from the statement I made, but possibly it was overlooked, and you are almost entirely sure to overlook it, that I said, “A very carefully guarded weekly minimum.” I do not retreat from my general statement: It should be a carefully guarded minimum; and if you went over with me the definite safeguards you would be inclined, I believe, to agree with me.

The particular safeguards I worked out, I worked out with a partner and a manager in a concern employing 1,000 people outside of the industry in question under this minimum wage matter. And it was the manager of this concern employing about 1,000 people that developed a plan for a weekly minimum wage under certain conditions which he felt he would be perfectly safe in adopting in his plant, and which he is considering adopting irrespective of whether the law established a minimum wage in his industry or not.

The particular element in the plan he worked out was: That the weekly minimum wage should be installed by ten-week periods. We will say that the law determined that instead of an hourly rate with an $8 minimum, the weekly rate minimum should be $7.75; that there should be reduction for voluntary absence, and the manager should be free to turn anybody out, and he should not be restricted from paying this minimum to any number.

Then, in a sense, the minimum wage is not a wage, it is simply a retainer fee for labor. I ask you, when you come to me, what does it cost you to work, and you say that you can get by on $7 a week. Then after you have been with me a few weeks I would determine if you were or were not working within your retainer fee, and also determine whether your wages should be more or less than that amount.

It is merely a retainer fee for labor, and the man must earn that money in the course of the week for the employer, in order to enable the employer to pay him that much out of it. So you see he creates his own wage scale.

Now this is the most helpful thing I had done for me, and that is that even that weekly wage, $7.50, should not be paid to the employee for each week, but that it should be for a period of ten weeks preceding. That is, the employees should count on $7.50 each week, and when they earn anything in any given week, say $6, they get $6 for that week; and if they earn $8 the next week, they get $8, and when it is figured up at the end of the ten weeks, the extra $1 for one week will balance the lesser payment of another week.

PROF. HOXIE: I have been studying the bringing together of organized workers and employers. The possibility of bringing them together into some collective arrangement, whereby the principles of scientific management could be put over, has occurred to me. Now I do not think that abstractly there is any great difficulty to be found in getting some agreement between employers and workers whereby the principles of scientific management can be applied to industry under collective agreement. I say abstractly. The trouble is to do it concretely.

The trouble lies in two things: (1) The unions think they know all about scientific management, whereas they know nothing about it. (2) The employers and scientific managers think that they know unionism, and they know less about that than the unions know about them.

There is a constantly reiterated statement of employers and scientific managers that the unionists believe in the restriction of a scientific output. Now, the unionists do not believe any such thing. They do restrict output, we will have to grant, but they do not believe in it. And that means simply this, that you cannot say what the unionists believe in until you get below the surface of their actions and have discovered the reasons for their actions. The employers simply see the actions of the unions, and they assume to know what the beliefs of the unions are and what you can depend on the unions to do. The unions do the same thing for the scientific managers and the employers. If each could understand the why of the attitude of the other side, we would be able to come to some agreement. Why don’t we get to the point where we can have each side understand the why of the other side?—Because when the unionists discuss the deviltry of the employers and explain it, they do it among themselves; and when the scientific managers discuss the question of the possibility of getting together with the unions, they tell each other what the unions do. My suggestion to you is if you want to promote the science of management, that you change your constitution so as to admit members of unions, and then make a campaign among the labor organizations; and if you do that I will furnish you with some names of trade unionists that will join your organization, who are as keen as any of you here, and when you come to the discussion of restriction of output, you will find out why they take that stand.