UNEMPLOYMENT INSURANCE IS COMING
Commons, John R.
Unemployment Insurance Is Coming Labor Must Be Given Greater Security in Its Work; Ruber Bill to Be Basis of Action Before Wisconsin Legislature By JOHN R. COMMONS (Professor Economics University...
...It has other evils, however...
...must limit apprenticeship, must shorten the hours, must share his work with the unemployed in order to take up the slack of unemployment and make the world go round...
...it is a collective responsibility and collective action is necessary...
...They want wages, interest and security...
...The Huber bill which was introduced in the Wisconsin legislature is based entirely upon the principles and upon the procedure of the accident compensation law of the state...
...They cannot collectively manage industry...
...PRODUCES ONE-FIFTH OF APPLES ONE small district in the state of Washing, ton, equal to only a township and a half inj area, produced approximately a fifth of the commercial apple crop of the United States in 1921...
...One little valley, only 35 miles long and containing only 30,000 acres' of orchards, produced 16,000 carloads of apples, a crop valued at $25,000,000...
...meaning by labor the manual, mental and managerial abilities of workers and managers...
...In the times past it was important to get people to save, and to get them to trust their savings to business men...
...no one business man can do it by himself...
...Labor as a class includes young workers coming into industry...
...They work and wait...
...One of the illustrious examples in this country is the Den-nison Manufacturing Co., Framingham, Mass...
...This theory is not peculiar to labor unions...
...profits swell...
...We look upon labor and capital as productive, meaning by capital the steam power, the electricity, the machinery, buildings, railroads of the industrial revolution...
...The cycle of unemployment is the cycle of rush orders...
...Business establishments go into bankruptcy or liquidation...
...The business cycle is probably a cause of wars more than it is a result of wars...
...Labor as a class, in control of industry, breaks down on depreciation accounts, on reserve funds, on the credit system, on discipline...
...If all people were exactly equal, physically, morally and economically, then nobody could take any advantage over anybody else and it would be perfectly safe to have absolute liberty unrestrained by duty...
...We may condemn the fallacy of making work by restricting the amount of work...
...The credit system breaks down...
...More than any other group in the community, they have suffered from the manipulations of profiteers...
...The wage earner and the investor are much alike...
...Financiers might hurry it up or delay it a few days, but could not arbitrarily produce it...
...Liberty means labor turnover...
...American Employers Stabilizing WHERE the industry does not equalize itself the employer must make some special arrangement in order to keep labor steadily employed throughout the year...
...must restrict output...
...In some cases the adjustment is made by hiring men by the year on a salary basis...
...Power brings responsibility—responsibility for inflation, responsibility for the collapses that follow inflation...
...They do not see that it is the credit system...
...The Association makes a charge of 40c a barrel for milling rough rice, and advances 60% the value of the rice to it3 members...
...the future looks more assuring than it is...
...The building workmen receive high wages, say $1 an hour, but as they work only about eight months of the year that $1 an hour is equivalent to only about 65 cents an hour through the year...
...They introduced many other products to which their employes could be transferred, and they trained their workers so that they might change from one occupation to another or something like it...
...The question of labor turnover may not be considered a serious feature of the unemployment problem...
...It is found in the enforcement of contracts and in liberty to get rich by buying and selling...
...Where labor restricted output in 1919 and 1920 in order to raise wages and prolong jobs, employers restricted output in 1921 in order to keep up prices and keep down wages...
...A few of them, like Lenin and Trotsky, will get on top and manage the others...
...England and Europe waited too long before they tried to establish security of the job, and now, in the last predicament, when the wage earning population is the bulk of the population, they find themselves menaced by the insecurity of jobs...
...Trade Unionists' Explanation IT was 70 years ago, also, that modern trade-unionism started in England and America...
...he must take on more laborers, he must get out his orders quickly or somebody else is going to get those orders...
...The causes must be found by going back to the year 1919 when the inflation of credit was going on...
...It was the over-expansion of 1919 that caused the collapse of 1920...
...Then the disparity would equalize itself by capital and labor shifting from the low-priced and over-supplied industries to the high-priced and under-supplied industries...
...They had produced too much...
...Ruber Bill to Be Basis of Action Before Wisconsin Legislature By JOHN R. COMMONS (Professor Economics University of Wisconsin) One of the big problems before the coming session of the Wisconsin legislature will be the solution of the unemployment question...
...Labor turnover can be accommodated on about three days' time for hunting a job if employment Is steady...
...But if there is great inequality then the strong have duties corresponding to their inequalities...
...Prices rise...
...must go slow...
...A democracy would never have elected John D. Rockefeller to manage the oil business or Andrew Carnegie to manage the steel business...
...includes individuals coming and going...
...Most serious, labor as a class can manage industry only by popular election of the boss, and no class of people, intellectual or manual, can permanently be trusted to elect their own bosses...
...Labor as a class remains where it was...
...Even wars make little difference...
...Democracy and Management LABOR has attempted to operate industry and has always either broken down if unsuccessful or gone over to the capitalists if successful...
...It is the common conviction of all wage-earners, burned into them by experience...
...Seventy years ago Karl Marx came upon the scene with exactly the opposite interpretation...
...Then the cycle repeats itself...
...If that is not accomplished, then there remains the alternative...
...Cooperation is the only sure way for the farmer to protect himself against exploitation and speculation...
...In an unorganized factory, if a man goes in and kills the job, the men touch him on the shoulder and say, "What's the rush...
...Yet, considering our economic situation, these doctrines are illusions...
...The labor turnover as a cause of unemployment is not a serious matter...
...They are a cycle which comes regularly every year...
...Now they manufacture several thousand different articles, and for several years they have had no unemployment They have stabilized their industry by dovetailing and spreading out It has required ingenuity, good management, and good salesmanship, but it has been accomplished...
...It exceeded the apple crop of Colorado, California, Oregon and Idaho combined...
...But the business man is the dynamic factor...
...speculation over-reaches itself...
...Yet it does not seem possible that any conspiracy could have produced this collapse out of a clear sky...
...They co-ordinated their sales department with their production department and it became the business of thefr salesmen to induce the retailers to order in advance so that the manufacturing could come along throughout the year instead of being concentrated in one season...
...It might realize that, while this credit system and liberty to get rich are the foundations of prosperity and must be preserved at all hazards, yet, on the other hand, it is this very credit system, and this liberty to get rich by buying and selling, that is the cause of the disastrous cycles of prosperity and depression of the last 100 years...
...Workingmen, taxpayers, farmers, are helpless before it...
...that the workers on the job can manage the production of wealth better than the business men, the bankers and the financiers in the offices or on Wall Street...
...They did it by various devices, well known to manufacturers at the present time...
...Then they adopted a definite purpose of stabilizing their business...
...The older economists held that the elasticity of modern business was provided for in the rise and fall of prices through the law of supply and demand...
...If one person is trying to stabilize his industry by not over-expanding and not taking too many rush orders, he simply knows that his competitors will get his business...
...If a right of action at $1 a day for 13 weeks while out of work :s given to the working man who is laid off through no fault of his own, then the employers will stabilize their work, and will set up employment departments to get other employers to take on their workers when they are compelled to lay them off through lack of work.— Editor's Note...
...Consequently with a regularly recurring cycle, both the firms and the workmen learn to adjust themselves...
...But laborers and capitalists know that they do produce too much to pay wages, interest, rents and profits...
...It is blindness to history to preach that labor as a class can ever manage industry...
...They think that it is machinery and labor and the engineering profession that produce wealth...
...They were self-elected by natural selection in the struggle for profits and they came to the front by their superior ability to select subordinates, to manage laborers, and to inspire the confidence of investors...
...This company started as manufacturers of Christmas trinkets...
...In England perhaps four-fifths of the population are wage earners and their families...
...Better for him Is a steady force of good and willing workers, Who feel that his industry is a place where they want to stay for life...
...Yet there are establishments that go on the other policy...
...Modern capitalism overthrew feudalism because it furnished to investors security of investments...
...too many buildings and factories are constructed...
...pay the worker higher wages during the busy season so that he can tide himself over until the following busy season, which can be calculated upon...
...But if all the business men, who are competing with each other, know that the banks are treating the others in the same way then stabilization might be expected to work...
...Modern capitalism is built also on the doctrine of equality as well as liberty...
...Management Is Challenged WHY is it that many workingmen in all parts of the world have gotten the idea that they can manage business better than the business man...
...but then they become business men and immediately organize a corporation, close the doors and hire other laborers to work for them...
...We might have production of wealth without the credit system, but it would be the hand-to-mouth production which would turn us back to feudalism or Russia...
...Anybody would trust his savings to John D. Rockefeller, however much they denounced him, but nobody would trust his savings in large amounts to the business agents of a labor union or to a board of directors elected by the employes...
...In the hard times of 1893 to 1897 it was skating on thin ice, and they had great difficulties, but they succeeded...
...Our capitalist system results in great inequalities, and even enlarges the natural inequalities among men...
...Today it is becoming more important to get the willingness of investors...
...wages follow...
...Just as modern business must have a reserve fund in the banks and a reserve stock of goods on the shelves and in the warehouses, in order to provide elasticity, so it must have a reserve army of that other commodity, labor, which it can draw upon in periods of prosperity and then throw upon its own resources in periods of adversity...
...It is expensive to the employer...
...THE serious point of the so-called conflict of capital and labor during the last hundred years has been unemployment...
...The employers now began to restrict output...
...The sales department must be subject to the production department, so that rush orders are not taken on that cannot be delivered except by an over-expansion of the business with a certainty that the men must be laid off after the rush orders have been finished...
...The mill will be operated exclusively for the members...
...In America they are probably one-third...
...The law makes him responsible for the security of investments but does not make him responsible for the security of jobs...
...Those who survive are those who can make profits and maintain discipline...
...This is a matter of choice, largely, with the management...
...The banker put the screws on the manufacturer...
...Job Instability and Prices THE summer and winter seasons are not the most serious problem of unemployment...
...Worker Has No Security BUT capitalism has failed to give to the wage earner that security of the job which it has given to the investor in the security of his investment...
...But this kind of capital and labor does not produce wealth...
...When credit is good and prosperity is around, people will not wait...
...It is partly this mistaken theory as to what it is that produces wealth...
...Now we find that is less important...
...He initiates, plans, overcomes risks, takes responsibilities...
...It is the business revolution of the seventeenth century that established our credit system, and our credit system is nothing more or less than confidence in the future...
...must spread out the work...
...The rise and fall of prices through oscillations of demand and supply made the system elastic and harmonious...
...their efficiency had fallen off a third or a half...
...in other cases by dovetailing industries, such as the coal and ice business...
...Farmers believe that it was a conspiracy to rob them of their property...
...Individuals rising out of the labor class can manage industry...
...The cycle moves around every eight or 10 years...
...So with unemployment insurance...
...The leading example is in the building trades in north-em sections...
...The accident compensation law goes on the idea that if a right of action is given to the working man against his employer for compensation on account of accident at a dollar and a half a day, the employer will install safety devices, will build up a safety department, will shorten the periods of disability, and will proceed to reduce these accidents...
...It was the business of the sales department to adapt itself to the work of the production department This idea is well recognized...
...Their busy season began in September, when the retailers ordered their goods, and ended with about three or four months of intense crowding and overwork...
...He is the captain of industry...
...They are passive...
...As our industrial system grows in size, wage earners who have little or no investments except their labor power are becoming a dominant part of the nation's population...
...Consequently in the Huber bill for the insurance and prevention of unemployment it is provided that the first three days of unemployment shall not be considered unemployment...
...everybody is confident and overconfident...
...Three years ago business, newspapers, intellectuals, were calling upon the laborers to work harder...
...it means that the employer who is dissatisfied with the inefficiency or misconduct of the employe can dismiss him or he can look for a job for which he is better fitted...
...Redfield's Experience MODERN business can stabilize seasonal employment if it is deemed worth while, and can even stabilize the credit cycle...
...Disaster of Business Depressions AMERICA should take its lesson early...
...Redfield, former secretary of commerce, has cited his own case in the metal industries, where since the year 1890 they had not laid off a man on account of lack of work...
...Many workingmen and farmers, at the present time, are of the opinion that our sudden disastrous slump of 1920 was brought about by a conspiracy to destroy their unions...
...If commodities in some directions were abundant then their prices would fall, which meant that the prices of other commodities would rise...
...The bill places the date at the beginning of unemployment compensation the fourth day after the Workman is laid off...
...A Management Problem THE three main causes of unemployment are the labor turnover, the seasons and the credit system...
...Why has the idea spread so widely...
...MARKET RICE COOPERATIVELY RICE growers in Louisiana have organized themselves into the Louisiana Growers* Cooperative Association which will handle one milion bags of rice for its members this season...
...We are accustomed to look upon capitalism as a product of the industrial revolution...
...There was no conspiracy at that time...
...no bank can do it by itself...
...The service of refusing him credit in order to prevent expansion was much greater than would have been the service of furnishing him credit...
...Laborers can produce wealth, but they cannot produce it in the enormous abundance, and cannot conduct industry on the enormous scale required to support modern populations, unless backed up by a banking system that furnishes security of investments...
...Hundreds and thousands of working-men are laid off...
...The credit system is founded on the responsibility of business management to the widows, orphans, working men and retired business men who have put their savings into industry...
...This unique experiment in producers' cooperation by Louisiana farmers is further evidence that the cooperative principle knows no limits...
...The Knights of Labor was their last great attempt in this country to manage the production of wealth on a co-operative basis...
...He rejected the law of demand and supply, with its oscillation of prices, and held that the elasticity of modern capitalism is found in the reserve army of the unemployed...
...It started on the same hypothesis of unemployment but it retained the economists' doctrine of demand and supply...
...It was accomplished through division of labor on the part of the management...
...includes those who have failed in business, includes immigrants, negroes, women and children...
...Business accumulates a large amount of involuntary savings out of the margin between wages and prices...
...Services of Banker Paramount BUT more important than the employer is the banker as the stabilizer of employment During the recent over-expansion a certain manufacturer applied for a loan of $250,-000 in order to enlarge the plant...
...So that the inducement to stabilize employment in order that it may be really effective must not only take the example of those manufacturers who have pioneered the way themselves, but must interest the entire banking system of the state or nation in the plan...
...Yet there are large building contractors who are learning how to spread their work over the year...
...The banker turned the application over to the bank's industrial engineer, recently added to the staff, and he showed the manufacturer how, by better economy and better labor management, he could get along without the loan of $250,000...
...The banking system, which is the center of the credit system, more than the business man who is the actual employer, can stabilize industry, and, in stabilizing industry, stabilize employment The difficulty is that no one individual can do it alone...
...They consider It is better for them to have a procession of floaters than it is to have steady workers...
...Then suddenly several millions of them were laid off by the employers...
...Foundations of Capitalism OUR capitalist system has grown up, not by popular election but by struggle for profits and natural selection...
...Socialism in Europe, Guild Socialism in England, the Plumb plan in America, all agree on this...
...The business man thinks then that he must expand his factory...
...A cleaning mill with capacity of 2,000 barrels a day has ben leased, and also a warehouse with a storage capacity of 150,000 bags...
...Six or eight months afterward, when the collapse came, the manufacturer was profuse with thanks to the banker...
...What's the hurry...
...Trade unionists differ from unorganized labor in that they have power to put into effect what the others would if they Could...
...It gives enormous power to those who control the credit system of the country...
...And who shall say that they are not right...
...Rather it is a good feature of modern liberty...
...Hence any improvement that looks to the prevention of unemployment must go back to the period of inflation and prevent the over-expansion that caused the unemployment...
...Now they begin manufacturing Christmas cards 15 months before they are actually sold to the ultimate consumer...
...It is doubtless true that labor and capital never can produce too much to supply our wants...
...It is security of investments and liberty to get rich in the struggle for profits that produce our modern enormous wealth...
...then the inevitable collapse...
...The apples from this small area exceeded the crop of the entire state of New York, until a few years ago the leading apple state...
...Our enormous production of wealth goes back to the business revolution of the seventeenth century...
...The building trade mechanic ordinarily does not have any other occupation that he can dovetail, so that in the busy season we pay him $1 an hour, 65 cents of which is wages and 35 cents of which is a kind of insurance in order that he may be on hand the next season when we want to open up business...
...they were stringing out the jobs...
...But they assumed that capital and labor were fluid, so that everybody was employed practically all the time and all commodities were on the markets and were being bought and sold all the time...
...Willing, ready and able to work, needing the work for themselves and families, there is no demand for their work...
...it means that the worker can quit one job and go to another...
...Without the credit system people would not trust their commodities out of their own hands...
...There is not enough work to go around, because the wage fund is limited, and therefore the workman must string out his job...
...Certain industries have a busy period in the summer, others in the winter...
...Capitalism and the Job THUS the two great forces, socialism and trade unionism, have arisen to attack the supremacy of capitalism, and each is based upon the greatest defect of our capitalist system, its inability to furnish security of the job...
Vol. 14 • December 1922 • No. 12
