SUBSIDIZED WAGES
IN the debate on unemployment in the House of Commons on Thursday, March 26th, Sir Alfred Mond enthusiastically supported a proposal, which has often been made, that in the present industrial crisis the unemployment dole should be paid over to the employers in order that they should be enabled to take on men whom now they cannot afford to employ at all. At first sight it is, of course, an extraordinarily attractive scheme. It tempts you to say to yourself, Hundreds of thousands of men are standing idle, not because there are no markets for goods, but because employers cannot pay the Trade Union rates of wages for producing those goods. With a very little help— just a few shillings more than the employers can manage —industries all over the country would absorb more men. By the simple act of making the dole a part of wages instead of a charity the transformation would be effected. A few administrative strokes of the pen and hey presto ! the thing is done. And more benefits than now meet the eye would follow. Youths who are running mentally and morally to waste because they are not being trained in any job would get back to a normal, useful and self-respecting life. Is it not worth doing ? Why do the Government hesitate ? " The difficulty is that things would not work out so easily and charmingly as in the vision we have described. History shows us that schemes just like those which are now proposed have been tried before and have done harm rather than good.
But before we come to the objections let us state still further the case for subsidized wages. We will quote a statement which we have received from Mr. Claude G. Bryan, a director of Palmers' Shipbuilding and Iron Company. He asks for a subsidy in the first place for his own industry. He has explained to us that he admits the naturalness of the objection that it would be unfair to pay out of the National Insurance Fund, which is derived from all industries, a sum of money to a particular industry, since the other industries contributing to the fund might protest. He suggests that if the Government could adopt his proposal for helping the shipbuilding industry they should make the same offer to any other industry to which it could be applied. He adds, however, that the shipbuilding industry has a kind of first claim, because it is in dire straits, because it is of vital importance to the whole nation, and because it involves an exceptionally large percentage of labour in proportion to the material used. Now we will quote Mr. Bryan's statement :- " The possibility of utilizing the dole as a subsidy to assist the shipbuilding interests of the country is one which ought to be very carefully considered by the Government. It is true that there are many objections to it, both on principle and possibly in its application, but the extremity of this industry is so great that every effort ought to be made to overcome such difficulties as exist.
The proposal is that the Government should offer to ship- building employers the dole for every man now unemployed who could be employed in the shipyards. On the Tyneside, where one of our own establishments is situated, the average rate of dole now being paid is 23s. It is suggested that the Government should allow the sum of 20s. per week for every additional man employed. The Government would thus save 3s. per week per man. The other beneficial effects of such an arrangement would be many :— (1) An increase of revenue under the National Health Insurance Act, which would come from the employ- ment of additional men.
(2) As direct labour constitutes such a large percentage of the cost of building of ships, the allowance of £1 per week per man works out at a saving to the shipbuilder of approximately £2 per ton.
13) By means of this margin of £2 per ton on present
prices, the shipbuilders of Great Britain could prevent nearly all of the British orders for ships going abroad and could even recapture foreign orders.
The tonnage output of the kingdom in 1924 was ab- normally small, and if British shipbuilders could accept anything like Continental prices there is hardly any doubt that the output in 1925 might be double that of the previous year.
If this result followed, it would mean that approxi- mately twice as many men would be employed in the shipyards as were employed in the previous year.
The demand for steel, pig iron, coal, coke and ocean freight would be greatly increased, causing a distinct revival in all ancillary trades.
The depression in the shipbuilding and iron and steel trades is driving the highly skilled operative in these trades either to other occupations or, worse still, out of the country. Great Britain has lost thousands of skilled workmen through this cause. Our shipbuilding industry is consequently beComing less skilful and the shipbuilding of other nations who procure our men is becoming more skilful. Besides, the shipbuilding, iron and steel trades are the key industries of the country in its military aspect, and if they are allowed to fall into further decay, our recuperative ability will be greatly imperilled.
There is a difficulty in _applying this solution to the ship- building industry in general without laying the Government
open to the charge that one shipyard might be receiving preferential treatment over another. To meet this difficulty my suggestion would be that a datum line of shipyard employment should be determined. For this purpose, it would not be reasonable to include the years of the War nor perhaps the years 1919 and 1920. But, if the average number of shipyard employees in every yard of the kingdom from January 1st, 1921, to January 1st, 1925, were taken as a datum line, it would pretty accurately reflect the state of the industry during its years of acute depression. This method should not include yards which have during that period been wholly shut down, for to include these would be to give them an unfair advantage in a datum line as compared with those British shipbuilders who have kept their yards going, more or less, in spite of the loss involved. The Govern- ment then might fairly say to all the shipyards : ' We will allow you 20s. per week for every man now unemployed whom you can employ over and above your datum line.' The Government already possesses accurate records of the numbers employed in all shipyards, on account of the assess- ment made upon these yards for their contributions under the National Health Insurance Act. This would eliminate any fiction or inaccuracy as regards the datum line."
We confess that this project has thrown something of a spell upon us. We should like to see it thoroughly examined. It is impossible to forget, however, the discouraging and even disastrous results of the principle. of subsidized wages in the past. Never were the unem- ployed in such a sad case, never were they so demoralized, and never were they so unwisely treated as in the years between the end of the Napoleonic Wars and the great Commission of 1832. Few Reports in our national history provide such gloomy or such salutary reading as the Report of that Commission. It led to the Poor Law Reforms of 1834. The Report tells us how wages were subsidized out of the rates. The universal result was that the men could not be persuaded to do their best for employers, as they declared that the employer was not paying a fair wage. They said in effect, " The total wage we are getting—that is to say, what the employer pays plus what we get from the rates—is the fair wage. If less than that were a fair wage public money would not have been called in to our rescue. It is admitted, therefore, that the part which the em- ployer pays is not a fair wage. Why should we put ourselves out at all, or do more than loiter about, for an employer who clearly is not doing the right thing by us ? " It was useless to argue that unless the wages had been subsidized the employer could not have offered employment at all. Demoralization was the result in . fact, though in theory the men may have had no grievance.
Nor was the harm confined to the labourers. The employers were also to a lesser extent demoralized by having their wage bills backed with public money. The tendency was for them to depend upon this support and to protest year after year that they could not do without it. They were prevented from getting back to a self-supporting basis. They did not care so much as they should have done about finding, keeping and encouraging good workmen because their stake in each man's merits was smaller than it had been under normal conditions. One of the most notorious arrangements thrown up by those harrowing times was the Speenham- land system among agricultural labourers, by which allowances were fixed according to the size of the family and the price of bread. This system completely under- mined the labourer's independence. However hard he might work in order to get himself and his family off the rates, he had to go on the rates in the end in order to get work ! For farmers simply refused to employ any but rate-aided labour. They could get it cheaper.
Possibly the disasters which occurred in those days might be avoided by the better organization of our own days. All we want to do is to point out that the plan of subsidized wages has been tried before and is full of hidden dangers which are perhaps more psychological than economic. Let us face them and let us examine what is proposed not in ignorance but with full know- ledge. One strong argument for trying the discarded principle once more is that demoralization is bad already among the unemployed and is growing worse. It is not, therefore, a sound argument against subsidized wages to say that they would cause demoralization. The question is whether they would help at all—whether they would cause. the present demoralization to be appreciably decreased.
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