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Bible Encyclopedias

1911 Encyclopedia Britannica

Wage - System in Industry

"WAGE - SYSTEM IN Industry. - The normal systems of payment for the work of persons employed in industry under the capitalist system are wage-payment and salary-payment. It is not easy to draw an absolute line of distinction between these two forms of payment. Wages are usually paid weekly, and salaries over a longer period - monthly, or quarterly, for example. There are, however, cases of weekly salaries, and of wages paid monthly. Moreover, a good many of the supervisory grades in various industries are paid what is called an " upstanding wage," which in many of its conditions approximates rather to the salary basis of payment than to the wage as ordinarily understood. Usually the salary-earner possesses a higher status and a slightly greater measure of security than the wage-earner. Wages are, as a rule, paid only for hours actually worked, subject to the conditions mentioned below, and any period of illness or suspension of work for any cause, whether under the worker's control or not, involves a cessation of the payment of wages. Salary-earners, on the other hand, are in many cases paid during periods of sickness, and are usually paid for a full week, or month, even if some spells of enforced absence from work or failure of work due to some other cause are included. There are, however, very many intermediate varieties between the continuous salary paid throughout the whole year, and the wage paid only for hours actually worked. The salary-earner, it should be remarked, is usually entitled to a longer period of notice, from a month upward, than the wage-earner, who can usually be dismissed or suspended on a week's notice or less. The period adopted as a basis for the calculation of wages differs from trade to trade, and even from district to district or factory to factory within the same trade. In some cases the basis is hourly, in others a weekly rate of wages is laid down. In either case, there may be, but in the majority of cases is not, what is termed the " guaranteed week," that is, a guaranteed minimum weekly payment, irrespective of the number of hours of employment which the employed person is actually able to secure. In certain other cases, notably that of the dockers, there is the " guaranteed day," but not the " guaranteed week." The demand for greater measure of security than is afforded by hourly payment, without any guarantee of the week or the day, has increased, and a number of trades have secured concessions giving them guarantees of one sort or another.

Broadly speaking, the methods of remunerating the wageearner under the wage-system can be divided into two main groups: (r) time-payments, and (2) " payment by results," although there are many intermediate varieties, and disputes often arise on the question whether a particular system is or is not to be regarded as " payment by results." (r) Under the time-work (or " day-work ") system, the worker's remuneration varies with the time which he actually spends on the employer's business. Thus, carpenters and joiners in certain districts in the building industry in Great Britain have a time-rate of 2S. an hour, and the majority of grades on the railways have time-rates varying from 65s. per week upward. These time-rates are practically always fixed in relation to a definite number of hours in the week, and if a larger number of hours has to be worked, the hours in excess of the standard week are termed overtime, and are usually remunerated on a slightly higher hourly rate - " time and a quarter," " time and a third," " time and a half " or " double time," for example. Extra payment is also frequently made for work done during the week-end or at night (" night-shift "). The time-work system operates throughout a large number of trades, including the greater part of the building industry and the railway and road transport services, and almost the whole range of non-manual employment. In many other industries it is found side by side with various systems of " payment by results." In almost every time-work industry there are some piece-workers; and in almost every piece-work industry some time-workers. A particularly obnoxious form of time-work is that known as " task-work," under which the worker is required to perform a definite amount of labour in return for a time wage, but receives no additional remuneration for higher output. This is strongly opposed by trade unions and does not prevail at all in organized industries in Great Britain.

(2) Under the term " payment by results " are comprehended many different methods of wage payment, the common factor among them being that, to a greater or less extent, the worker's earnings under them vary with the amount of output which he, either individually, or in conjunction with a group of his fellowworkers, is able to produce. The amount of work produced may not be the sole factor determining his remuneration under a system of "payment by results "; for such systems are very frequently, and in the organized trades usually, accompanied by guaranteed minimum or standard time-rates, which the worker is entitled to receive irrespective of the actual output which he produces. Strongly organized trade unions in many industries have consented to accept " payment by results " only on the condition that the standard time-rates of wages shall be guaranteed irrespective of output (e.g. engineering).

The simplest form of " payment by results " is that known as " piece-work." Under this system, a price is fixed for each unit of the commodity upon the production of which the worker is engaged, e.g. if the worker is turning out screws, a price will be fixed per hundred, or per gross of screws, this price being calculated, in theory at least, according to the time which is estimated to be necessary for the performance of the operation in question. Sometimes, as in the " time logs " in the tailoring trade, the piece-work price is expressed not in terms of money, but in terms of hours, and the worker is paid for so many hours at the standard rate, irrespective of the time actually occupied on the job. " Straight " piece-work systems vary very much in complexity. Where the operations are simple, and the character of the goods produced uniform, piece-work prices can be laid down with almost mathematical accuracy; but as soon as provision has to be made for a wide range of different products complications almost inevitably arise. These complications are of two kinds. The cotton industry in Great Britain is almost entirely a piece-work industry; but, despite the immense variety in the types of cotton goods produced and the variation in the times required for the spinning and weaving of different types of goods, piece-work rates can be devised to correspond with practically mathematical accuracy to the time required for the job because of the high degree of standardization at which the industry has arrived. The piece-work lists agreed to by the weaving trade unions and the cotton manufacturers are immensely complicated, and only skilled technicians are able to understand them. The universal acceptance of piece-work in the cotton industry is mainly accounted for by the fact that, under the system which has been adopted, a given amount of effort can be approximately relied upon under normal conditions to produce equivalent earnings.

This is much more difficult to secure in such an industry as engineering, where the products are far less uniform and where also the machinery which the worker is called upon to manipulate is far less standardized, so that it may take very different times to do the same job on two different machines. The fixing of piece-work prices in the engineering industry in Great Britain is therefore a constant source of friction, and it has been found impossible to express, in any tables corresponding to the cotton piece-work lists, the fair remuneration for most forms of work on engineering products. Piece-work prices in the engineering industry are a constant subject of workshop and trade-union bargaining, and there is a strong resistance in many sections of the industry to the introduction of piece-work, largely because there is not, as in the cotton industry, any simple method of arriving at a fair price, and the system thus produces constant allegations of " speeding up " and " price-cutting " on the one side, and of " speeding down " and " restriction of output " on the other. Where, owing to special circumstances, it is regarded as impossible to fix in advance a piece-work price for a particular job, the worker, especially in the engineering and shipbuilding industries, is sometimes paid what is called a " lieu rate," e.g. " time and a third " or " time and a half " for the hours actually occupied on the job in lieu of a fixed piece-work price.

The other main system of payment by results is the system of " bonus on output." Under this system the worker is normally paid a time-rate irrespective of output; but, if the output exceeds a given minimum, an additional bonus, calculated upon this excess output, is paid. There are literally hundreds of different methods of calculating this bonus. The system to which the greatest attention has been attracted in recent years, both in Great Britain and in America, is the " premium bonus system " in its various forms, of which the two best-known are the " Halsey " and the " Rowan " premium bonus systems. Under both these systems, a " basis time " is fixed for the accomplishment of the piece of work in question. If the work is done in less than the basis time, the workman is paid, over and above his timerate of wages, which is guaranteed, a bonus, proportionate in one way or another to the time saved. The effect of this method of payment is that, under both the Halsey and the Rowan system, the labour cost of the job to the employer falls with every increase in output, while at the same time the earnings of the workman increase, but not in proportion to the increase in output. The simpler of the two best-known premium bonus systems is the " Halsey " system, so called after its inventor Mr.

F. A. Halsey, an American efficiency engineer. Under this system, the workman is paid a fraction, usually either a third or a half, of his time-rate for time saved. Thus supposing the time allowed for an operation is 12 hours, and a worker, whose timerate is a shilling an hour, does it in 9 hours, he will be paid at his time-rate for the 9 hours, and in addition will receive payment for a further hour or for an hour and a half, according to the particular variety of the system adopted.

The Rowan system is more complicated. The simplest way of explaining it is to say that for every io% that is saved on the time allowed, the workman receives a io°/ o increase in earnings. The more complicated way is to quote the quite unnecessarily abstruse formula which is usually adopted by those who desire to explain the system. This formula is as follows: Time saved Bonus - X Time taken. Time allowed There are all manner of modifications of these two systems, in the direction both of greater simplicity and in that of greater complexity. The advocates of " scientific management " have been especially active in devising fresh variations in the method of payment, intended to stimulate the workers' productive efficiency in the fullest degree. Efficiency engineers often contend that it is necessary to work out a different formula for each type of operation in order to apply in each case precisely the right stimulus to increased output. Most of these systems are based in one way or another on the premium bonus system in one or other of its two forms, or on the so-called " differential piece-rate " system advocated by Mr. F. W. Taylor, the founder of " scientific management." Under this system, two different piece-rates are fixed for the same job, and at the same time a standard output per hour is laid down. When the worker reaches or exceeds the standard output he is paid on the higher piece-rate; when he falls below the standard of output he is paid on the lower piece-rate. Day-work rates are not guaranteed. The object of this system is stated to be the elimination from the job of the less efficient worker by discouraging him with the offer of a lower piece-work price. It is impossible to attempt to chronicle the many different bonus and piece-work systems which have been put forward in Great Britain and America. The Ministry of Munitions in England, during the World War, accumulated a list of many hundreds of different systems which were actually in operation in the British engineering shops alone. It is particularly in the engineering and kindred industries that this wide diversity of forms of wage-payment exists.

It should be noted that both the piece-work system and the various bonus systems and adaptations of them can be operated either on an individual or on a collective basis. Under the individual system a single worker is remunerated in accordance with his individual output. Under the collective system a group of workers is treated as a unit, and the piece-work price or bonus is paid in respect of the output of the whole group. Collective systems are most often found where the work itself necessarily involves collaboration, and where it is therefore difficult or impossible to separate the individual contribution of the workers engaged upon it (e.g. " squad " or " gang " work). It has, however, been applied also in a large number of cases over a considerably wider area in the form of an output bonus paid on the work of a whole shop or factory. In these cases, bonus is sometimes paid only to workers directly engaged on production; but in other cases auxiliary workers, such as foremen, millwrights, maintenance workers, and even workers on the staff, may share in the pool. Many such systems were adopted in shell factories in various countries during the war.

A variety of collective " payment by results " is that which is known as the " fellowship " system. Under this system, the workers themselves form groups on a voluntary basis, and share out among themselves, either through the office of the firm, or by a subsequent re-division of the sums paid through the office, their collective earnings. This system usually operates among " fellowships " of skilled workers in a particular craft or in closely related crafts.

There are many different ways of sharing out the payment made under collective systems of " payment by results." The most usual method is that each worker included in the group shares in the payment in proportion to his time-rate and to the hours worked on the job. Sometimes, however, the pool, or any surplus over the time-rates of the workers concerned, is equally shared, and sometimes regard is paid only to one or other of the two factors mentioned above. In a few cases a specially large share in the pool is offered as an inducement to a leading worker, or to a few leading workers; but the system in this form approaches the system of " sub-contracting," which is universally objected to by the trade-union movement.

" Sub-contracting " is usually understood to mean a system under which one worker undertakes a piece of work which requires the coordinated labour of a group of workers. The subcontractor receives the whole sum paid for the execution of the job, making, subject to any limitations that may be laid down in his contract, his own wage contract with the workers under him, and retaining any surplus for himself. Often a sub-contractor, himself paid " by results," remunerates the workers under him on a time-work basis. It is generally recognized that the sub-contracting system is open to grave abuse, and with the advance of trade-union organization it has been gradually eliminated from industry, surviving only in a comparatively small number of cases. The outstanding instances of it in the past have been the " butty " system in the mining industry, which still exists in one or two British coalfields, and the methods of payment which used to be adopted in many sections of the iron and steel industry.

Distinct from both the piece-work system and the various bonus systems is the system of " commission," which is applied in a certain number of occupations. Under this system the worker receives a commission on " takings " or on profits either as his sole mode of remuneration, or as an addition to a minimum wage or salary. This is the position of most workers in the insurance business, and of a number of managerial and semi-managerial workers in the distributive trades. It is also found occasionally in other occupations.

The attitude of employers and workers towards these various systems of wage-payment differs widely from case to case. Recently, attention has been mainly concentrated on the endeavours of employers to introduce systems of " payment by results " into industries in which time-work systems are at present largely in operation, e.g. building, engineering, shipbuilding. Usually these attempts have met with strong tradeunion opposition. It must not, however, be concluded that employers are universally favourable or trade unions universally opposed to " payment by results." The position differs from industry to industry. In the textile industries, and in a number of the less-organized occupations, " payment by results " has been introduced and maintained not merely with the acquiescence, but often at the instance of the workers, who have seen in it an opportunity of securing higher earnings. At the other extreme, the worst forms of " sweating " in industry are very frequently found in conjunction with the time-work system of payment. In the past, trade unions have usually favoured, or at least not opposed, " payment by results " in those industries in which a standard of measurement can be found of such a character as to insure that, under normal conditions, a given amount of effort expended will result in a given amount of output, and therefore of earnings under the system. On the other hand, the unions have generally been opposed to the introduction of " payment by results " in those industries in which no such standard can be laid down, as well as in other cases where it has been contended that ." speeding up," consequent upon the inducement offered for higher output, would have the effect of impairing the quality of the work done (e.g. building). Where " payment by results " has been accepted in industries of this latter type, a struggle has often followed over the question whether the right of the organized workers to bargain collectively over the fixing of piecework prices or " basis times " shall or shall not be recognized. This struggle is still in progress over a wide range of industries; but the fixing of piece-work prices and " basis times " is still normally done by the employer or his representative, subject only to protest by the workers or their representatives.

It should be noted that the growth of " scientific management " has given a great impetus to the introduction of " payment by results," and has also considerably affected the methods adopted by employers in fixing piece-work prices or " basis times." In the great majority of factories, other than textile factories, in which systems of payment by results are in operation, piecework prices are still fixed in a very haphazard fashion, and modified from time to time in accordance with actual experience of their working. But, where one feature or another of " scientific management " has been introduced, experiments have been made designed to introduce a greater scientific accuracy into the fixing of prices and times. The methods which have been introduced with this object are mainly those of " time study " and " motion study." " Time study " means an attempt, by actual observation of the doing of a particular job, either by a selected worker or in a number of selected cases, to fix the time which ought to be occupied in the doing of it by a normal worker. " Motion study " means the observation of the doing of a job with a view to eliminating all surplus motions, and to the laying down in detail of the method by which it can be done with the maximum of efficiency and in the least possible time. The former method has been adopted by a number of firms in Great Britain, the latter in comparatively few cases. Both are largely in operation in America. " Time study " and " motion study " are usually resented by the workers employed, and are regarded as devices adopted by the employer with a view to " speeding up." It is also contended that both, and especially " motion study," result in making work more monotonous and in taking such variety of initiative as remains to the worker under modern factory conditions out of his hands and in concentrating control in the hands of a small body of expert rate-fixers, or " timestudy " and " motion-study " experts.

Where piece-work or bonus systems are in operation, friction is very likely to arise because there is a constant suspicion on the part of the workers that the employer is endeavouring to " cut " piece-work prices and to " speed up " the slower workers to the pace of the more rapid. Employers, on the other hand, allege that workers deliberately slow down with a view to forcing up piece-work prices. It is impossible to estimate the relative productivity of workers under time-work systems and under systems of " payment by results "; but it may be taken as certain that no system of " payment by results " which has yet been devised has succeeded in eliminating friction or the possibility of " pricecutting " on the one hand, and " restriction of output " with a view to securing higher prices on the other. Perhaps the nearest approach to the elimination of these two factors is in the cotton industry; but the comparatively smooth working of the piecework system in this case is mainly due to the peculiar standardized character both of the product and of the machinery. The cotton " price-list " system cannot readily be adapted for use in the majority of industries.


There are only two books giving a general survey of the various wage systems. These are (1) Methods of Industrial Remuneration by D. F. Schoss (Williams and Norgate), which was written a good many years ago, and is now in many respects out of date, and (2) The Payment of Wages by G. D. H. Cole, which is the most recent study. See also, for conditions in England, Industrial Democracy by Sidney and Beatrice Webb, and The Works Manager To-day by Sidney Webb. There is an immense literature dealing with scientific management in relation to " payment by results." Reference may be made especially to Scientific Management and Labour by R. F. Hoxie; Scientific Management by C. B. Thomson; Scientific Management by F. W. Taylor; Scientific Management by H. B. Drury; Efficiency and other works by Harrington Emerson; Work, Wages and Profit by H. L. Gant; and A Rational Wages System by H. Atkinson. For premium bonus systems, see The Premium System of Paying Wages, published by The Engineer; The Rowan Premium Bonus System by W. Rowan Thompson; and The Premium Bonus System, Report of an Enquiry, published by the British Trades Union Congress. A great deal of information will also be found in the following reports issued by the Board of Trade: " Report on Collective Agreements " (1910) and " Report on Standard Piece-Rates." Unfortunately, however, no new or revised editions of these have been issued since some years before the war. See also the Final Report of the Commission on Industrial Relations, published by the U.S. Government in 1915. (G. D. H. C.)

Copyright Statement
These files are public domain.

Bibliography Information
Chisholm, Hugh, General Editor. Entry for 'Wage - System in Industry'. 1911 Encyclopedia Britanica. 1910.

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