The Gospel of Wealth
And Other Timely Essays
by Andrew Carnegie

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--- Page 92. The Gospel of Wealth - V An Employer's View of the Labor Question

V

An Employer's View of the Labor Question

1. THE struggle in which labor has been engaged during the past three hundred years, first against authority and then against capital, has been a triumphal march. Victory after victory has been achieved. Even so late as in Shakespere’s time, remains of villeinage or serfdom still existed in England. Before that, not only the labor but the person of the laborer belonged to the chief. The workers were either slaves or serfs; men and women were sold with the estate upon which they worked, and became the property of the new lord, just as did the timber which grew on the land. In those days we hear nothing of strikes or of trades-unions, or differences of opinion between employer and employed. The fact is, labor had then no right which the chief, or employer, was bound to respect. Even as late as the beginning of this century, the position of the laborer in some departments was such as can scarcely be credited. What do our laboring friends think of this, that down to 1779 the miners of Britain were in a state of serfdom. They "were compelled by law to remain in the pits as long as the owner chose to keep them at work there, and were actually sold as part of the capital invested in the works. If they accepted an engagement elsewhere, their master could always have them fetched back and flogged as thieves for having attempted to rob him of their labor. This law was modified in 1779, but was not repealed till after the acts passed in

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1797 and 1799" (The Trades-Unions of England, p. 119).

    (2) By Louis Philippe, Albert d'Orleans, Comte de Paris (1830-1894). His Les Associations ouvries en Angleterre was translated and published in England in 1869 (Thomas Hughes, ed.).

This was only ninety-seven years ago. Men are still living who were living then. Again, in France, as late as 1806, every workman had to procure a license; and in Russia, down to our own days, agricultural laborers were sold with the soil they tilled.

Baha'i Comment

2. Consider the change, nay, the revolution. Now the poorest laborer in America or in England, or indeed throughout the civilized world, who can handle a pick or a shovel, stands upon equal terms with the purchaser of his labor. He sells or withholds it as may seem best to him. He negotiates, and thus rises to the dignity of an independent contractor. When he has performed the work he bargained to do, he owes his employer nothing, and is under no obligation to him. Not only has the laborer conquered his political and personal freedom: he has achieved industrial freedom as well, as far as the law can give it, and he now fronts his master, proclaiming himself his equal under the law.

Baha'i Comment

3. But, notwithstanding this complete revolution, it is evident that the permanent relations to each other of labor and capital have not yet evolved. The present adjustment does not work without friction, and changes must be made before we can have industrial pence. To-day we find collisions between these forces, capital and labor, when there should be combination. The mill hands of an industrial village in France have just risen against their employers, attacked the manager's home and killed him. The streets of another French village are barricaded against the expected forces of order. The ship-builders of Sunderland, in England, are at the verge of starvation, owing to a quarrel with their employers; and Leicester has just been the scene of industrial riots. In our country, labor disputes and strikes were never so numerous as now.

    (3) For work stoppages -- strikes or boycotts -- there are only fragmentary figures before 1850. Beginning with that date the United States Commissioner of Labor began a more systematic compilation. These statistics bore out Carnegie's contention. Following the depression of 1884-1885 there was a nationwide wave of strikes. In 1885, when Carnegie must have been maturing this essay, an index of strikes and workers involved increased by fifty per cent. The next year, 1886, was to be even more fruitful of labor turbulence. Its full impact came in May, after the publication of this essay, but the rapid growth of labor union membership, the multiplication of new unions, and "the great railroad strike" on the southwest lines of Jay Gould occurred in the early months of that year.

East and West, North and South,

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everywhere, there is unrest, showing that an equilibrium has not yet been reached between employers and employed.

Baha'i Comment

4. A strike or lockout is, in itself, a ridiculous affair. Whether a failure or a success, it gives no direct proof of its justice or injustice. In this it resembles war between two nations. It is simply a question of strength and endurance between the contestants. The gage of battle, or the duel, is not more senseless, as a means of establishing what is just and fair, than an industrial strike or lockout. It would be folly to conclude that we have reached any permanent adjustment between capital and labor until strikes and lockouts are as much things of the past as the gage of battle or the duel have become in the most advanced communities.

Baha'i Comment

5. Taking for granted, then, that some further modifications must be made between capital and labor, I propose to consider the various plans that have been suggested by which labor can advance another stage in its development in relation to capital. And, as a preliminary, let it be noted that it is only labor and capital in their greatest masses which it is necessary to consider. It is only in large establishments that the industrial unrest of which I have spoken ominously manifests itself. The farmer who hires a man to assist him, or the gentleman who engages a groom or a butler, is not affected by strikes. The innumerable cases in which a few men only are directly concerned, which comprise in the aggregate the most of labor, present upon the whole a tolerably satisfactory condition of affairs. This clears the ground of much, and leaves us to deal only with the immense mining

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and manufacturing concerns of recent growth, in which capital and labor often array themselves in alarming antagonism.

Baha'i Comment

6. Among expedients suggested for their better reconciliation, the first place must be assigned to the idea of cooperation, or the plan by which the workers are to become part-owners in enterprises, and share their fortunes.

    (4) Producer's co-operation was of immense interest to organized labor in the post-Civil War era. Aside from harmonizing appealingly with American ideals, it was during depression years a form of unemployment relief. The officers of the Knights of Labor gave the device much verbal, though inconstant, support; it also made a wide appeal to liberal preachers, professors, and editors. Even E. L. Godkin (1831-1902), editor of the Nation and generally a conservative spokesman, supported co-operation. In the mid-eighties, the "highest point of the cooperative movement," producers' cooperative ventures numbered 135, chiefly in mining, cooperage, and shoes. Most were very small scale enterprises.

There is no doubt that if this could be effected it would have the same beneficial effect upon the workman which the ownership of land has upon the man who has hitherto tilled the land for another. The sense of ownership would make of him more of a man as regards himself, and hence more of a citizen as regards the commonwealth. But we are here met by a difficulty which I confess I have not yet been able to overcome, and which renders me less sanguine than I should like to be in regard to cooperation. The difficulty is this, and it seems to me inherent in all gigantic manufacturing, mining, and commercial operations. Two men or two combinations of men will erect blast-furnaces, iron-mills, cotton-mills, or piano manufactories adjoining each other, or engage in shipping or commercial business. They will start with actual capital and credit; and to those only superficially acquainted with the personnel of these concerns, success will seem as likely to attend the one as the other. Nevertheless, one will fail after dragging along a lifeless existence, and pass into the hands of its creditors; while the neighboring mill or business will make a fortune for its owners. Now, the successful manufacturer, dividing every month or every year a proportion of his profits among his workmen, either as a bonus or as dividends upon shares

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owned by them, will not only have a happy and contented body of operatives, but he will inevitably attract from his rival the very best workmen in every department. His rival, having no profits to divide among his workmen, and paying them only a small assured minimum to enable them to live, finds himself despoiled of foremen and of workmen necessary to carry on his business successfully. His workmen are discontented and, in their own opinion, defrauded of the proper fruits of their skill, through incapacity or inattention of their employers. Thus, unequal business capacity in the management produces unequal results.

Baha'i Comment

7. It will be precisely the same if one of these manufactories belongs to the workmen themselves; but in this case, in the present stage of development of the workmen, the chances of failure will be enormously increased. It is, indeed, greatly to be doubted whether any body of working-men in the world could to-day organize and successfully carry on a mining or manufacturing or commercial business in competition with concerns owned by men trained to affairs. If any such cooperative organization succeeds, it may be taken for granted that it is principally owing to the exceptional business ability of one of the managers, and only in a very small degree to the efforts of the mass of workmen-owners. This business ability is excessively rare, as is proved by the incredibly large proportion of those who enter upon the stormy sea of business only to fail. I should say that twenty cooperative concerns would fail to every one that would succeed. There are, of course, a few successful establishments, notably two in France and one in England, which are organized upon the cooperative plan, in which the workmen participate in the profits. But these were all created by the present owners, who now generously share the profits with their workmen, and are making the success of their manufactories upon the cooperative plan the proud work of their lives. What these concerns will become when the genius for affairs is no longer with them to guide, is a matter of grave doubt and, to me,

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of foreboding. I can, of course, picture in my mind a state of civilization in which the most talented business men shall find their most cherished work in carrying on immense concerns, not primarily for their own personal aggrandizement, but for the good of the masses of workers engaged therein, and their families; but this is only a foreshadowing of a dim and distant future. When a class of such men has evolved, the problem of capital and labor will be permanently solved to the entire satisfaction of both. But as this manifestly belongs to a future generation, I cannot consider cooperation, or common ownership, as the next immediate step in advance which it is possible for labor to make in its upward path.

Baha'i Comment

8. The next suggestion is that peaceful settlement of differences should be reached through arbitration. Here we are upon firmer ground. I would lay it down as a maxim that there is no excuse for a strike or a lockout until arbitration of differences has been offered by one party and refused by the other. No doubt serious trouble attends even arbitration at present, from the difficulty of procuring suitable men to judge intelligently between the disputants. There is a natural disinclination among business men to expose their business to men in whom they have not entire confidence. We lack, so far, in America a retired class of men of affairs. Our vile practice is to keep on accumulating more dollars until we die. If it were the custom here, as it is in England, for men to withdraw from active business after acquiring a fortune, this class would furnish the proper arbitrators. On the other hand, the ex-presidents of trades-unions, such as Mr. Jarrett or Mr. Wihle,

    (5) John Jarrett, an immigrant from Wales, was a mill worker who became President of the Amalgamated Association of Iron and Steel Workers, a consolidation of the various craft unions in the industry. When the Federation of Organized Trades and Labor Unions, a predecessor of the American Federation, was organized in 1881, Jarrett became the first president. William Weihe (the Carnegie misspelling reflects on his acquaintance with the union in his industry), a native American, succeeded Jarrett in the early eighties as President of the Amalgamated Association of Iron and Steel Workers. Ironically, in view of Carnegie's admiration, Weihe was president of the Association in 1892, when at the Homestead Works, one of the Carnegie plants, occurred the classic test of strength between union and management, the latter represented by Henry Clay Frick (1849-1918). The Homestead Strike of 1892 was, of course, subsequent to this essay.

after they have retired from active control, would

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commend themselves to the manufacturers and to the men as possessed of the necessary technical knowledge, and educated to a point where commercial reasons would not be without their proper weight upon them. I consider that of all the agencies immediately available to prevent wasteful and embittering contests between capital and labor, arbitration is the most powerful and most beneficial.

Baha'i Comment

9. The influence of trades-unions upon the relations between the employer and employed has been much discussed. Some establishments in America have refused to recognize the right of the men to form themselves into these unions, although I am not aware that any concern in England would dare to take this position. This policy, however, may be regarded as only a temporary phase of the situation. The right of the working-men to combine and to form trades-unions is no less sacred than the right of the manufacturer to enter into associations and conferences with his fellows, and it must sooner or later be conceded. Indeed, it gives one but a poor opinion of the American workman if he permits himself to be deprived of a right which his fellow in England long since conquered for himself. My experience has been that trades-unions, upon the whole, are beneficial both to labor and to capital. They certainly educate the working-men, and give them a truer conception of the relations of capital and labor than they could otherwise form. The ablest and best workmen eventually come to the front in these organizations; and it may be laid down as a rule that the more intelligent the workman the fewer the contests with employers. It is not the intelligent workman, who knows that labor without his brother capital is helpless, but the blatant ignorant man, who regards capital as the natural enemy of labor, who does so much to embitter the relations between employer and

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employed; and the power of this ignorant demagogue arises chiefly from the lack of proper organization among the men through which their real voice can be expressed. This voice will always be found in favor of the judicious and intelligent representative. Of course, as men become intelligent more deference must be paid to them personally and to their rights, and even to their opinions and prejudices; and, upon the whole, a greater share of profits must be paid in the day of prosperity to the intelligent than to the ignorant workman. He cannot be imposed upon so readily. On the other hand, he will be found much readier to accept reduced compensation when business is depressed; and it is better in the long run for capital to be served by the highest intelligence, and to be made well aware of the fact that it is dealing with men who know what is due to them, both as to treatment and compensation.

Baha'i Comment

10. One great source of the trouble between employers and employed arises from the fact that the immense establishments of to-day, in which alone we find serious conflicts between capital and labor, are not managed by their owners, but by salaried officers, who cannot possibly have any permanent interest in the welfare of the working-men. These officials are chiefly anxious to present a satisfactory balance-sheet at the end of the year, that their hundreds of shareholders may receive the usual dividends, and that they may therefore be secure in their positions, and be allowed to manage the business without unpleasant interference either by directors or shareholders. It is notable that bitter strikes seldom occur in small establishments where the owner comes into direct contact with his men, and knows their qualities, their struggles, and their aspirations. It is the chairman, situated hundreds of miles away from his men, who only pays a flying visit to the works and perhaps finds time to walk through the mill or mine once or twice a year, that is chiefly responsible for the disputes which break out at intervals. I have noticed that the manager who confers oftenest with a committee of

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his leading men has the least trouble with his workmen. Although it may be impracticable for the presidents of these large corporations to know the working-men personally, the manager at the mills, having a committee of his best men to present their suggestions and wishes from time to time, can do much to maintain and strengthen amicable relations, if not interfered with from headquarters. I, therefore, recognize in trades-unions, or, better still, in organizations of the men of each establishment, who select representatives to speak for them, a means, not of further embittering the relations between employer and employed, but of improving them.

Baha'i Comment

11. It is astonishing how small a sacrifice upon the part of the employer will sometimes greatly benefit the men. I remember that at one of our meetings with a committee, it was incidentally remarked by one speaker that the necessity for obtaining credit at the stores in the neighborhood was a grave tax upon the men. An ordinary workman, he said, could not afford to maintain himself and family for a month, and as he only received his pay monthly, he was compelled to obtain credit and to pay exorbitantly for everything, whereas, if he had the cash, he could, buy at twenty-five per cent less. "Well," I said, "why cannot we overcome that by paying every two weeks?" The reply was: "We did not like to ask it, because we have always understood that it would cause much trouble; but if you do that it will be worth an advance of five per cent. in our wages." We have paid semi-monthly since. Another speaker happened to say that although they were in the midst of coal, the price charged for small lots delivered at their houses was a certain sum per bushel. The price named was double what our best coal was costing us. How easy for us to deliver to our men such coal as they required, and charge them cost! This was done without a cent's loss to us, but with much gain to the men. Several other points similar to these have arisen by which their labors might be lightened or products increased, and others suggesting changes in machinery or facilities which, but for the

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conferences referred to, would have been unthought of by the employer and probably never asked for by the men. For these and other reasons I attribute the greatest importance to an organization of the men, through whose duly elected representatives the managers may be kept informed from time to time of their grievances and suggestions. No matter how able the manager, the clever workman can often show him how beneficial changes can be made in the special branch in which that workman labors. Unless the relations between manager and workmen are not only amicable but friendly, the owners miss much; nor is any man a first-class manager who has not the confidence and respect, and even the admiration, of his workmen. No man is a true gentleman who does not inspire the affection and devotion of his servants. The danger is that such committees may ask conferences too often; three or four meetings per year should be regarded as sufficient.

Baha'i Comment

12. I come now to the greatest cause of the friction which prevails between capital and labor in the largest establishments the real essence of the trouble, and the remedy I have to propose.

Baha'i Comment

13. The trouble is that the men are not paid at any time the compensation proper to that time. All large concerns necessarily keep filled with orders, say for six months in advance, and these orders are taken, of course, at prices prevailing when they are booked. This year's operations furnish perhaps the best illustration of the difficulty. Steel rails at the end of last year for delivery this year were $29 per ton at the works. Of course the mills entered orders freely at this price, and kept on entering them until the demand growing unexpectedly great carried prices up to $35 per ton. Now, the various mills in America are compelled for the next six months or more to run up orders which do not average $31 per ton at the seaboard and Pittsburg and pay $34 at Chicago. Transportation, ironstone, and prices of all kinds have advanced upon them in the meantime, and they must therefore run the

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bulk of the year upon very small margins of profit. But the men, noticing in the papers the "great boom in steel rails," very naturally demand their share of the advance, and, under existing faulty arrangements between capital and labor, they have secured it. The employers, therefore, have grudgingly given what they know under proper arrangements they should not have been required to give, and there has been friction, and still is dissatisfaction upon the part of the employers. Reverse this picture. The steel-rail market falls again. The mills have still six months' work at prices above the prevailing market, and can afford to pay men higher wages than the then existing state of the market would apparently justify. But having just been amerced in extra payments for labor which they should not have paid, they naturally attempt to reduce wages as the market price of rails goes down, and there arises discontent among the men, and we have a repetition of the negotiations and strikes which have characterized the beginning of this year. In other words, when the employer is going down the employee insists on going up, and vice versa. What we must seek is a plan by which the men will receive high wages when their employers are receiving high prices for their product, and hence are making large profits; and, per contra, when the employers are receiving low prices for product, and therefore small if any profits, the men will receive low wages.

    (6) Methods of paying labor, whereby wages had a fluctuating relation with changes in the market price of the product, were not uncommon at this time in American industry. Wages were lowered when prices fell and vice versa. Attempts to introduce maximum or minimum limits to wage changes were variants of the scheme. Workers of course preferred a fixed rate of wages. Sliding scales existed in coal mining, shipping on the Great Lakes, and in the iron and steel industry. A dispute over this feature of payment was one facet of the Homestead outbreak.

If this plan can be found, employers and employed will be "in the same boat," rejoicing together in their prosperity, and calling into play their fortitude together in adversity. There will be no room for quarrels, and instead of a feeling of antagonism

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there will be a feeling of partnership between employers and employed.

Baha'i Comment

14. There is a simple means of producing this result, and to its general introduction both employers and employed should steadily bend their energies. Wages should be based upon a sliding scale, in proportion to the net prices received for product month by month. And I here gladly pay Mr. Potter, president of the North Chicago Rolling Mill Company, the great compliment to say that he has already taken a step in this direction, for to-day he is working his principal mill upon this plan. The result is that he has had no stoppage whatever this year, nor any dissatisfaction. All has gone smoothly along, and this in itself is worth at least as much to the manufacturer and to the men as the difference in wages one way or another which can arise from the new system.

Baha'i Comment

15. The celebrated Crescent Steel Works of Pittsburg, manufacturers of the highest grades of tool steel, pay their skilled workmen by a sliding scale, based upon prices received for product - an important factor in the eminent success of that firm. The scale adopted by the iron manufacturers and workmen is only an approach to the true sliding scale; nevertheless it is a decided gain both to capital and labor, as it is adopted from year to year, and hence eliminates strikes on account of wages during the year, and limits these interruptions from that cause to the yearly negotiation as to the justice or injustice of the scale. As this scale, however, is not based upon the prices actually received for product, but upon the published list of prices, which should be received in theory, there is not complete mutuality between the parties. In depressed times, such as the iron industry has been passing through in recent years, enormous concessions upon the published card prices have been necessary to effect sales, and in these the workmen have not shared with their employers. If, however, there was added to the scale, even in its present form, a stipulation that all causes of difference

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which could not be postponed till the end of the year, and then considered with the scale, should be referred to arbitration, and that, in case of failure of the owners and workmen to agree at the yearly conference, arbitration should also be resorted to, strikes and lockouts would be entirely eliminated from the iron business; and if the award of the arbitrators took effect from the date of reference the works could run without a day's interruption.

Baha'i Comment

16. Dismissing, therefore, for the present all consideration of cooperation as not being within measurable distance, I believe that the next steps in the advance toward permanent, peaceful relations between capital and labor are:

Baha'i Comment

17. First. That compensation be paid the men based upon a sliding scale in proportion to the prices received for product.

Baha'i Comment

18. Second. A proper organization of the men of every works to be made, by which the natural leaders, the best men, will eventually come to the front and confer freely with the employers.

Baha'i Comment

19. Third. Peaceful arbitration to be in all cases resorted to for the settlement of differences which the owners and the mill committee cannot themselves adjust in friendly conference.

Baha'i Comment

20. Fourth. No interruption ever to occur to the operations of the establishment, since the decision of the arbitrators shall be made to take effect from the date of reference.

Baha'i Comment

21. If these measures were adopted by an establishment, several important advantages would be gained:

Baha'i Comment

22. First. The employer and employed would simultaneously share their prosperity or adversity with each other. The scale once settled, the feeling of antagonism would be gone, and a feeling of mutuality would ensue. Capital and labor would be shoulder to shoulder, supporting each other.

Baha'i Comment

23. Second. There could be neither strike nor lockout, since both parties had agreed to abide by a forthcoming decision of disputed points. Knowing that in the last resort strangers were to be called in to decide what should be a family affair,

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the cases would, indeed, be few which would not be amicably adjusted by the original parties without calling in others to judge between them.

Baha'i Comment

24. Whatever the future may have in store for labor, the evolutionist, who sees nothing but certain and steady progress for the race, will never attempt to set bounds to its triumphs, even to its final form of complete and universal industrial cooperation, which I hope is some day to be reached. But I am persuaded that the next step forward is to be in the direction I have here ventured to point out; and as one who is now most anxious to contribute his part toward helping forward the day of amicable relations between the two forces of capital and labor, which are not enemies, but are really auxiliaries who stand or fall together, I ask at the hands of both capital and labor a careful consideration of these views.

Baha'i Comment

Carnegie Text Goes Here

Baha'i Comment