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Pigou, A. C., Essays in Applied Economics. By Henry Higgs
Rist, C., La déflation en pratique. By J. I. Craig
Robertson, D. H., The Ebb and Flow of Unemployment. By N. B; Dearle 444
Rowe, J. W. F., Wages in the Coal Industry. By H. S. Furniss
Salzmann, L. F., English Industries in the Middle Ages. By J. H.
Clapham

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Schwiedland, E., Volkswirtschaftslehre. Vol. III. By M. Epstein
Sells, Dorothy, The British Trade Boards System. By R. Wilson
Shah, K. T., Trade, Tariffs, and Transport in India. By Sir. J. M.
Douie
Shepherd, E. C., The Fixing of Wages in Government Employment. By
Prof. H. Clay
Silberling, N. J., British Prices and Business Cycles, 1779-1850. By
J. H. Clapham
Thurnwald, R., Die Gestaltung der Wirtschaftsentwicklung. By Prof.
E. Schwiedland

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Venn, J. A., Foundations of Agricultural Economics. By C. S. Orwin
Viallaté, A., L'Impérialisme économique (1870-1920). By F. E.
Lawley
Virgilii, F., Cooperazione, nella dottrina e nella legislazione. By L.
Smith-Gordon
Weber, M., Gesammelte Aufsätze zur Wissenschaftslehre. By Prof.
E. Schwiedland

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Williams, G., Social Aspects of Industrial Problems. By Barbara
Wootton
Withers, H., Bankers and Credit. By J. I. Craig

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Wolf, J., Markkurs, Reparationen und russisches Geschäft. By T. E.
Gregory
Zizek, F., Grundriss der Statistik. By Prof. E. Schwiedland
Zizek, F., Hauptprobleme der statistischen Methodenlehre.

E. Schwiedland

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NOTES AND MEMORANDA :—

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Back, W. J., The Attack upon the Organiser Class
Dumbell, Stanley, The Beginnings of the Liverpool Cotton Trade
Fussell, G. E., The Agricultural Population and the Rental of Land
Hamilton, Prof. C. J., The Protection of the Indian Steel Industry
Hawtrey, R. G., The Report of the Federal Reserve Board, 1923
Keynes, J. M., Bibliographical List of the Writings of Alfred Marshall
Lehfeldt, Prof. R. A., Currency and Bank Credit

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Leppington, C. H. d'E., The War's Influence upon Village Life
Macgregor, Prof. D. H., Sanctions for Discount Policy
Meredith, Prof. H. O., The Irish Fiscal Inquiry
Moreland, W. H., Economic Conditions in Mogul India
Robertson, D. H., Note on the Real Ratio of International Interchange
Soyeda, J., Japanese Affairs
Tocker, A. H., The Effects of the Trade Cycle in New Zealand

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RECENT PERIODICALS AND NEW BOOKS

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THE ECONOMIC JOURNALARY

MARCH, 1924

THE POST-WAR WAGES PROBLEM 1

I

BEFORE the war the economic changes to which wages had to be adjusted were gradual. Rates of wages, therefore, had a high degree of stability, and the relations between wages in allied or neighbouring occupations were equally stable. Wages, it may fairly be said, constituted a system, since there were well-understood rates for most occupations; the relations between these were stable and generally accepted, and a change in any one rate would prompt demands for a change in other rates. It was this systematic character of wages that made wage changes so simple a problem compared with to-day's task. The abstract and unanswerable general problem, What is a fair wage? never came up; the problem was always the problem of a particular rate for a particular job. This was argued by reference to the normal relation between the rate for that job and other rates, and to relevant economic changes that might justify a departure from that normal relation. A change in the value of money might make necessary a whole series of changes in rates of money wages, in order to restore the previous relation between different trades, or between wages and profits; but the problem was limited to modifying an established system of rates, so as to keep it in harmony with the economic facts on which wages ultimately rest. This modification itself was done largely by collective bargaining, for the individual employer or wage-earner, not by him; the ordinary employer had to work to conditions of employment which were set for him. Hence the wage system lent some of its own stability to prices, which, even more than wages, have got out of step since the war.

The effect of the war was to dislocate this system and destroy

1 Paper read before Section F of the British Association at Liverpool, September, 1923.

No. 133.-VOL. XXXIV.

B

its stability, with the result that we have been forced to face the problem of wages as a whole, and to consider absolute levels of wages in place of merely making adjustments. This result has been brought about in three ways: the war substituted sudden and extensive changes for the gradual changes to which we were accustomed before; it interrupted the process of continuous adjustment of wages to changed commercial conditions; and it introduced modifications, that brought wages into closer correspondence with war-time economic needs, but caused them to diverge from normal commercial needs.

The rise in the cost of living, the profits of munition makers, the early losses and subsequent profits of other manufacturers, dilution, the creation of new industrial districts, the Government control of railways and coal-all involved either the need or the opportunity for extensive changes in wages, which the existing machinery of collective bargaining was too cumbrous to cope with. The orderly modification of wages to suit changes in the supply of different kinds of labour and changes in the demand for different kinds of work necessarily stopped, because the normal commercial basis of employment was lost. Instead, we had an attempt on the part of the Government to limit wage changes to bare cost of living advances, and to rely on other, authoritative, methods to direct labour to the changed purposes to which the war had given rise.

Government control of wages, however, was successful only in lessening the force of the pull that the war enabled favoured classes of workers to exert; it did not neutralise it. Hence there were important modifications in wages, justified by the needs of industry in war-time, but bearing no necessary relation to peace-time commercial conditions. Unskilled labour, male and female, being for the first time insufficient to meet demand, was able to improve its relative position; the Committee on Production's policy of awarding flat-rate advances to meet the increased cost of living was a recognition, probably unconscious, of the improved bargaining position of the labourer. Control lost much of its effectiveness, because it was not imposed at the outbreak of war; by the time it was imposed systematically, considerable divergences had already taken place in the advances secured by different classes of workers. And in some directions control accentuated rather than prevented divergence from peacetime ratios. The encouragement of systems of payment by results, before sufficient experience was available to set piece-rates and bonus-times that would yield without wide variation earnings of

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the intended amount, led to wide divergences of wages, and
created the so-called "skilled man's grievance," which the 12
per cent. bonus of 1917 was intended to remove. The pledge to
pay dilutees the same rates as the skilled men whose place they
took for the same work involved disturbance in normal relations.
The practice of adjusting wages by national awards, coupled
with the reservation of the right to bring up the case of excep-
tionally low-rated districts, led to a levelling up of wages in each
occupation. So far as the local differences thus swept away
were due to permanent economic differences, the effect of this
levelling up was to force wages out of correspondence with
normal commercial conditions. And these war-time innovations
lasted just long enough to encourage the workers who had gained
by them to hope that they would be permanent, but not long
enough to extinguish the recollection, and therefore the influence,
of the pre-war ratios that they superseded.

In this dislocation of the pre-war relations between the
wages of different classes of work-people is to be found the
explanation of a large part of the discontent that has led
to strikes and lock-outs since the war. If workers before
the war had insisted on questioning every rate, on accepting
none that could be neither justified by an acceptable ethical
argument nor enforced by a lock-out, we should not have
enjoyed the (relative) industrial peace that we did. In fact, as
we saw, the problem of wage-fixing was limited to adjusting
particular rates to particular economic changes, always with
reference to a system of rates that was generally accepted. Since
the war this necessary basis has been missing. Few workers
could not point to someone whose relative position had improved
more than their own, so that any improvement they had secured
left them unsatisfied. The habit of comparison with allied and
neighbouring classes, which before the war acted as a restraining
force, preventing a group from exploiting to the full any tem-
porary bargaining advantage it possessed, now operated in the
opposite direction, exciting further demands. The influence of
the pre-war system of relations was still operative, since it led
workers who had not maintained their position in the scale to
expect and demand compensating advances; but it did not
operate as an effective argument for a reduction where workers
had improved their relative position.

Employers were equally without guidance as to what they could concede, since commercial conditions were so hard to judge. They resisted demands for increases in wages on the ground that

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