Labor and employer relations evolved considerably in America and Europe during the nineteenth century. Free labor struggled to get better working conditions and higher wages, leading to labor-management strife. Many workers decided that unionization was the best way to resist employers and to fight for better working conditions. Unions’ endeavors to raise wages and to improve working conditions were perhaps inevitable in the face of increased productivity. All too many employers resorted to unethical actions to suppress worker interests, although unions, too, chose violent and unethical methods. Unions represented workers with sometimes diverse preferences. Craft unions and industrial unions had different goals and histories.
The coal mining industry may have experienced some of the most contentious labor and owner relationships in American labor history. West Virginia’s coal mines provide an illustrative example that will be covered later in the chapter.
Business executives decided to promote welfare programs for their workers, in part to ward off unionization and government regulation. Workers chafed under even the paternalistic corporate welfare and other employer actions designed to foster greater productivity and harmony.
Economists derived new theories regarding the fairness of wages in the nineteenth and twentieth centuries. They hoped these new theories would rationalize the setting of wages and possibly stem discontent among workers.
Labor unions and large firms, though, occasionally united in supporting legislation that they knew would injure the interests of owners and workers at smaller plants or in other industries. Although workers were sometimes victimized, such victimization did not make them virtuous.
Worker Productivity and Malfeasance
Small business owners may be able to adequately monitor their employers’ efforts and productivity. As businesses get larger, though, no one person can monitor all of the employees. Employees can employ deception to appear productive, including claiming credit for other workers’ efforts. Employers resort to increasingly complicated performance measures; such efforts leave a “tremendous wiggle room for deceptive activities (Shulman 2007, 141).” Because such efforts may inundate decision makers with a torrent of information, people “start to pay less attention to the particulars of the information swamping them.” The overload creates “obfuscation parading as clarity.” The valuable signs can easily be missed (Vaughan 1996, 250).
Employers also worry about employees embezzling money, supplies, or goods. Employees and even managers have varying motives for embezzling. Modern American employers conduct investigations into prospective and current employees’ credit-worthiness. Besides employees embezzling money to pay debts, some employees are getting revenge against their company for perceived grievances, while other employees are simply greedy. The conundrum for embezzling employees, though, is how to successfully deceive superiors, since embezzling employees are “subvert[ing] some set of social controls … and [need] to feign trustworthiness.” Anthropologist David Shulman concludes that “organizations inevitably have structural and cultural blind spots in their social control, in part because casual deceptions are so important in an organization’s dramaturgical infrastructure.”1 Shulman asks whether business organizations (and this applies to any organization, including non-profit and governmental) created cultures that “subtly encourage the rationalization of misconduct …. Individual excuses and justifications are a symptom of an underlying set of organizational mechanisms that allow both individuals and organizations to detach themselves from adverse moral assessments of deception.” An organization that tolerates “slightly questionable behavior” may be unwittingly promoting an escalation of misbehavior, a domino theory of unethical behavior (Shulman 2007, 145–146, 164).
Workers and Compensation
There was a fairly close connection between productivity and wages. One of the results of the “marginalist revolution” in economic thinking during the 1860s and 1870s was the idea that wages would and should be set equal to the marginal revenue product of labor (the incremental increase in revenue from hiring an additional identical worker or unit of labor). The early proponents of the marginalist revolution thought that this economic finding would establish some sort of ethical rationale for a market-determined wage. Economic exploitation was defined as paying workers less than their marginal revenue product . However, complete unanimity regarding this belief was and is still lacking for the validity of this economic theory.
The problem with associating marginal revenue product of labor with an ethical distribution of incomes is that “The product or contribution is always measured in terms of price, which does not correspond closely with ethical value or human significance. The money value of a product is a matter of the ‘demand,’ which in turn reflects the tastes and purchasing power of the buying public and the availability of substitute commodities. All these factors are largely created and controlled by the workings of the economic system itself. Hence their results can have in themselves no ethical significance as standards for judging the system (Knight 1935, 55–56).”
Many people believe that such a process might create a disproportionate number of jobs with very low wages. For instance, some charities employ disabled people to put together crafts-type items; the pay is often very low, because the productivity level is so low (Schecter 2013, no page numbers; WBEZ915 2013, no page numbers). Is this ethical? Is it exploitive?
The demand for labor depends upon workers’ marginal productivity (the incremental increase in output) and the market price of the output they produce. If workers’ marginal revenue productivity (the incremental increase in revenue) increases, perhaps because the employer provides more capital per worker; workers become more proficient through gaining experience; workers attain more knowledge; or the price of the output increases—then the demand for workers increases and both employers and workers share the gains. Employers earn more profits, and workers receive higher wages.
The supply of labor depends on several factors, many outside of an individual worker’s control (such as population changes, diseases such as the Black Death in medieval times, or other factors), including workers’ willingness to work, which is the subjective trade-off workers make between more leisure and more income (which is converted into consumption). A worker’s willingness to work at a particular job also depends upon workplace safety, amenities, and other factors. If a job is particularly nasty, fewer workers will be willing to take such a job at any given wage, reducing the supply of labor for that job and forcing the employer to pay higher wages.
All of this is tidily explained in any principles of microeconomics textbook. Students and the general public are entitled to wonder, “Does this stuff really work in the real world?” Economists studying historical data are often able to test whether such factors as danger, unpleasantness, and isolation affect the supply of labor for such jobs and therefore the wage.
Discontented Workers
Workers frequently accused masters of conspiring to suppress wages. Even Adam Smith recognized the tendency: “Masters are always and every where in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. To violate this combination is every where a most unpopular action, and a sort of reproach to a master among his neighbours and equals.” According to physician and author Andrew Ure, some owners, though, were practicing an early example of “efficiency wages ” (later practiced by Henry Ford and his $5 day wage), whereby workers were paid more than the market wage in the hopes of motivating workers to work harder in order to keep getting the high wage (Smith 1981, 84; Ure 1835, 366).
Whether the workers’ plight would have been better under socialism or communism was doubtful. Thomas Aquinas recognized the ills of the communist system, whereby workers were transformed into slaves regulated by central direction; he also predicted that the workers would rebel against the functionaries, as they “would have to drudge in return for meager rations, whilst the functionaries take it easy and enjoy the lion’s share of the profits (Hoeffner 1985, 29).”
Pope Leo XIII highlighted the growing issue of labor and management strife. He issued an encyclical, Rerum Novarum , in 1891 and described the problem thusly: “some opportune remedy must be found quickly for the misery and wretchedness pressing so unjustly on the majority of the working class: for the ancient workingmen’s guilds were abolished in the last century, and no other protective organization took their place.” He disdained the socialist movement, arguing that “the working man himself would be among the first to suffer” from socialist programs. He based his belief upon an interesting argument: “Socialists , therefore, by endeavoring to transfer the possessions of individuals to the community at large, strike at the interests of every wage-earner, since they would deprive him of the liberty of disposing of his wages, and thereby of all hope and possibility of increasing his resources and of bettering his condition in life.”
Pope Leo XIII, though, emphasized that the wealthy owner or employer should not “look upon their work people as their bondsmen, but to respect in every man his dignity as a person ennobled by Christian character.” He countenanced the free bargaining over wages, except where one party held a disproportionate bargaining position. Otherwise, the state would be needed only to adjudicate non-compliance with the contract. Therefore, employers should not exploit their stronger bargaining position vis-à-vis workers: “to exercise pressure upon the...