Secondly, as the ownership of the product implies that the continuance of risk and the indetermination of the amount of the residue are always coexistent, the residue of the product must constitute the reward for risk, and the only possible inducement to incur risk.

Thirdly, that the mere calculation of the subjective value of a risk does not make such value a constituent of cost-to become a cost the anticipated loss must be actually suffered or the risk itself transferred to another with a consideration; that such a transfer is simply the division between two undertakers, both of the risk itself and of the residue of the product, which is its reward; and that the insurer of a risk, despite his receiving a specified sum for taking it upon himself, nevertheless looks to a residue for his remuneration.

Fourthly, no one ever assumes a risk for a consideration only equal to its subjective value to himself, when he can get more for doing it. His subjective valuation marks the limit below which his anticipations ⚫ of reward will not go; but the amount he will exact is really determined by the subjective valuation his would-be competitor, just deterred from assuming the same risk, places upon it, allowance being made for the special facilities possessed by each.

Fifthly, that the excess afforded by the residue over the undertaker's subjective valuation of his risk is a monopoly gain and a part of the profit of the entrepreneur, but is not a fundamentally distinct form of income, being only an increment or augmentation of the reward for risk, because the influence of monopoly is distributive rather than productive.

Sixthly, that not only such things as have present value and are capital can be risked, but also things of present value that are not capital, such as land, and things of only prospective value, such as wages, salaries, and interest yet to be earned, and even reputation. Industrial venturing is not, therefore, the peculiar and exclusive function of the capitalist; and, even when capital is ventured, the venturing of it is a function of its actual possessor, the entrepreneur, and not of the mere claimant, which the capitalist is.

Seventhly, that enterprise, or risk-taking, is to be ranked along with land, labor, and capital, as one of the four fundamental divisions of the productive forces, and profit, its reward, is to be classed with rent, wages, and interest as one of the four radically distinct forms of income.

CHAPTER IX

THE WAGE SYSTEM AND THE WORKER

A. Problems at Issue

"The worker" is here used in the popular sense of the term, meaning the wage-earner. In the language of technical economics the term sometimes has wider significance, including, for example, the physician, the lawyer, and many others. But for our present purposes "worker" means the dependent worker-dependent, that is, upon an employer for his hire.

When the discussion is thus narrowed to the dependent worker, it is apparent that he is, to a considerable extent, subject to the risks and uncertainties of capital. If the position of capital is insecure, the worker will be insecure in his employment and thus his livelihood is uncertain. Notwithstanding the fact that the entrepreneur serves as a sort of insurance concern for the worker, as was seen in the preceding section; notwithstanding the fact that the large indirect costs of modern industry bring some pressure upon the entrepreneur, in a period of waning demand for the product, to retain his workers longer than was the case under the domestic system, it still remains true as a broad generalization that the worker is liable to suffer from the uncertainties in which capital and management find themselves. It matters not at all that the worker has had little, if any, part in bringing about the state of affairs which has caused these uncertainties.

And there are other uncertainties for the worker even when capital is quite secure. Industrial accident, occupational disease, fatigue, inadequate wage, inadequate opportunity, are all possibilities and in thousands of cases they become actualities. These uncertainties arise in part from the nature of the technical processes of modern industry; in part from the position in which the worker finds himself in industrial society; in part from inadequate and at times even hostile social control.

The evils of the situation are countenanced by no one. Opinions vary concerning the proper corrective measures. We are not now concerned in passing judgment upon these measures. Much more study should be undertaken before we should attempt such a thing.

Our present task is to see the situation, appraise the causes, and take cognizance of the structures arising in our society to meet the case.

It must not be supposed that there is nothing but evil in the situation. There are many elements of certainty and security. Then, too, many of the matters open to criticism are not really constituent parts of the wage system, properly understood. Indeed they are sometimes directly antagonistic to it. Professor Fetter has defined the wage system as "the organization of industry wherein some men, owning and directing capital, buy at their competitive value the services of men without capital." A moment's reflection will show that it is not an essential part of the wage system that the parties should be unequal in the competitive struggle. Quite the reverse. As Fetter says "the typical wage system would be one in which all such hindrances were lacking, in which there were no social or political limitations on free competition except such as would help in educating and training the worker."

Are we, in our present wage system, developing social classes or are we merely developing ever-changing plastic social groups? The best opinion inclines to the latter view, but the situation is well worth canvassing so that we may have some appreciation of the factors making for and against rigidity in social stratification.

QUESTIONS

1. What interest has society at large in the status and progress of the worker? On what possible grounds could one advocate a fair living wage for workers? Could it at all be urged from the point of view of society as a whole?

2. "The worker is the victim of all the causes of insecurity affecting capital and has others peculiar to his own lot." Is this true? What are some of those peculiar to his own lot?

3. The insecurity of labor has been ascribed to one or more of the following: (a) the machine system; (b) production on a large scale; (c) pecuniary competition; (d) the sensitiveness of modern industry; (e) the scheme of prices; (f) the rhythm of the business cycle; (g) the rapid development of technique; (h) dependence upon distant and future markets; (i) specialization. Are these points well taken? Do they make for insecurity of capital?

4. People talk of the labor problem. Is there really a single labor problem? If so, what is it?

5. Presumably one thing in which we are interested is that of having as large and efficient a labor force as possible in order to do the work society

needs to have done. Is a waste of labor power involved in (a) the care of the sick? (b) the care of persons too young to work? (c) the care of persons too old to work? (d) compulsory school attendance? (e) premature death? (f) militarism? (g) debauchery?

6. May the problems of unemployment be expected to become less acute if the pecuniary organization of society is perfected? If the rhythm of the trade cycle is lessened? if our tariff policy becomes more stable? if the railroad systems are brought under government ownership? if regulated monopoly displaces competition quite extensively? if the volume of immigration is reduced? if the government prescribes conditions of employment and rates of wages? if collective bargaining becomes universal? if industrial development proceeds at a slower rate? if society adopts socialism?

7. What are the causes of unemployment? What is meant by saying its consequences are cumulative?

8. Has machinery increased or diminished unemployment?

9. "It is worth noting that a change in industrial structure is not in itself a cause of unemployment. It may cause a man to lose his last job; it does not explain what prevents him from getting a new one." Assume this to be true. What does prevent him from getting a new one? 10. "Industry today is mobile. For any agent in modern industry to be reasonably secure it must therefore be mobile, but mobility is, by force of circumstances, forbidden the worker." Examine this position. II. "The machine technology covers so small a fraction of the life-history of mankind that its discipline has not yet produced a mechanically standardized race." What does this mean? What of it?

12. Are you inclined to attribute the nervous breakdowns so frequent in modern industry to machine industry or to the gain spirit applied to machine industry or to something else?

13. "Responsibility for industrial accidents and even for industrial conditions is largely social. The responsible individual cannot be isolated." Explain.

14. "Society, not the worker, is responsible for industrial accidents, occupational diseases, etc. Then let society bear the loss. Why punish the employer?" Examine this position.

15. Wherein do the forces of demand and supply operate in peculiar ways with respect to labor?

16. "Formerly the workman owned the instruments with which he worked. Today the instruments are all owned by another class, the capitalists. Now, since without instruments the workman's labor-power is useless, he is obliged to accept such wages as the capitalist may dictate, even though these are far below what the laborer produces." Write out the converse of this argument showing that the capitalist is at the mercy of the laborer. Is either statement correct?

17. What is meant by "the insecurity of the laborer due to intense competition"?

18. Characterize the "wage contract" from the point of view of security of the worker.

19. Draw up a list of reasons why the employer is likely to have a superior position in the bargaining relation. What of it? In so far as evil consequences result from this situation, are they evil consequences to the worker or to society at large?

20. What effect has the transfer of thought, skill, and intelligence from the worker to the machine and to management had upon the security of the worker's position?

21. It is sometimes said that the greatest difficulty with the situation in which labor finds itself is that its uncertainties and insecurities are cumulative. What does this mean? Does it seem true to you? 22. What is meant by (a) the law of negligence; (b) the doctrine of assumed risks, and (c) the fellow-servant doctrine? Why are these positions so criticized today? Were they ever satisfactory?

23. It has been said that the laborer has not been relieved of his uncertainties as adequately as has been capital through the agency of social control. Is this probable? Tell why you think it probable that matters have worked out in this way.

24. Many people complain concerning the situation which "freedom of contract" has placed upon the worker. Just what is the meaning of "freedom of contract"? Wherein has it difficulties for the worker?

25. "The right of a person to sell his labor upon such terms as he deems proper is, in its essence, the same as the right of the purchaser of labor to prescribe the conditions upon which he will accept such labor from the person offering to sell it. In all particulars the employer and the employee have equality of right." Is this "equality of right" a reality or a legal fiction? Does it benefit one of the two parties more than the other?

26. "Our great trouble is the lack of organization in the labor market. The market for corn, cotton, steel, etc., is highly organized. That for labor is highly disorganized. If it were well organized most of the elements of insecurity of the worker would disappear." Why has the market for labor remained unorganized as compared with that for cotton ? What concrete things would make for organization of this market? Would it accomplish what is here claimed for it? Is organization of the labor market synonymous with organized labor?

27. Are there any motive forces which tend to bring about the regularization of industry through action by individuals?

28. Just how does regulation of output by the employer tend to stabilize the position of the worker?