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board determinations, but only by force of example and not because of any legal compulsion to follow these precedents. In turn it may be said that the judges in the arbitration courts have frequently been influenced and guided by the determinations of the wages boards.1
Altho originally established to provide a minimum rate of wages in the trades in which wages were below the sum necessary to provide a decent subsistence for the worker, wages boards in Australia have long ceased to be guided by the notion of a subsistence wage. The workers in the strongly organized trades would not consider it worth their while to struggle to secure a minimum wage which was merely a subsistence wage. The wage for which they contend is the standard rate or wage, the one which will become the prevailing rate or wage in the trade in question. The result is that minimum rates of pay are established in the same way and on the same basis as they are established under voluntary collective bargaining where both employers and employees are well organized. Employers who at first strenuously objected to this have ceased to urge their objections and now recognize that so long as their competitors are obliged to pay the same wages there is little reason to fear the standard rates. At times when they have had reason to feel that the rates were fixed too high by the board, and that in consequence they would be unable to compete with outsiders, the employers have appealed to the Court of Industrial Appeals for a reduction of the rates fixed by the board. Reductions have been made by the Court in Victoria in the following trades or occupations: artificial manure, boilermaking, bread, builders' laborers, commercial clerks, fell-mongers, fuel and fodder, and ice. In one or two
1 For a statement of the principles followed by the arbitration courts in fixing wages, see my article on Judicial Determination of the Minimum Wage in Australia" in American Economic Review, June, 1913.
other trades, certain employees have secured from the Court an advance in wages over those allowed by the boards, but this advance has been due to a readjustment of the board rates in the various branches of the trade rather than to any intentional design on the part of the Court to raise wages above those established by the board.
Statements are frequently made that any system of wage regulation through wages boards or compulsory arbitration is bound to exercise a leveling effect upon wages. The original intent of the law, it is said, was to establish a minimum wage which should afford a decent subsistence to the worker but which should by no means represent the maximum wage in the trade or even the average wage. The board, however, under the strong pressure of the workers' representatives is led to fix the minimum so high that, it is claimed, employers can pay it only by bringing down the wages of the most competent workers to the rates established by the board for the less competent. In other words, the minimum wage becomes the maximum, and it is held that there is no incentive for the ambitious worker to put forth his best efforts. That this is one of the results of wages board determinations is an opinion which has been held by more than one investigator1 and it is even now shared by many men in Victoria, not only by employers but by men prominent in public life like Messrs. Deakin, Peacock, and Watt, who have been and are still friendly to the wages board plan.
In spite of this strong support given to the theory, it appears to be one which is supported by a priori arguments rather than one based on the proof of actual experience. No doubt boards have at times made the
1 Clark, op. cit., pp. 65-66. Schachner, op. cit., pp. 246–247. Report of the Royal Commission of 1902 in Victoria, pp. xxxviii, xlv, xlix.
mistake of setting the minimum rate too high, a rate at which it was profitable to employ only the best employees. Perhaps at other times, altho the minimum fixed was low, some employers have taken advantage of it to reduce the wages of their workers. But in a country in which labor is as scarce as it is in most trades in Australia this has not been the usual result of a wages board determination. Several times in talking with employers who held such opinions as the above, I have asked them whether in their own factories the majority of the employees were working at the minimum rates. Invariably it has turned out to be the case that few if any of their own employees were working at rates as low as the minimum established by the boards. Of course in those trades where payment by the piece prevails, there is no danger of equality of earnings. But even where time wages are the rule, there is no good and sufficient reason why the regulation of wages by wages boards should cause wages to seek a level.
Employers are not obliged under minimum-wage laws to retain in their employ any one who is unable to earn the minimum fixed by the board, nor do they as a matter of fact do so. On the other hand, there is no reason why men whose superior ability has enabled them prior to a determination to earn a wage in excess of the minimum fixed by the board should allow their wages to be brought down to the legal minimum merely because their employers may have been compelled to raise the wages of those employees who had been paid less than the minimum established by the board. In the highly sweated trades, where advantage had been taken of the individual's poverty and weakness, the first effect of the determinations was undoubtedly to raise the wages of most of the employees. In this way the wages may be said to have been "leveled up," i. e.,
the gap between the poorest-paid and the best-paid workers was lessened.
This would account for such a condition as was described by the Royal Commission of 1902, which discovered that "there are clothing factories where no woman or girl receives more than 20s. a week" (the minimum wage fixed by the board). Evidence furnished to the Commission showed that in this industry many if not most of the employees had been receiving less than 20s. a week prior to the determination. There was no evidence that the wages of the more competent workers had been reduced, but employers who were obliged to pay the legal minimum to all their hands introduced the task system, i. e., they required a certain minimum output in return for the 20s. wage.'
The testimony of the factory inspectors and the wages statistics collected by them do not bear out the contention of those who claim that the wages boards' determinations tend to level wages. In Victoria the late Mr. Ord said in 1901: "The special board system has now been in force in a few trades since 1897 and I have no hesitation in saying that the minimum wage is never the maximum wage," and he quotes both the minimum and the average wages in several of the board trades to confirm his statements.3 Mr. Bannigan, the Chief Inspector in South Australia, said with reference to the first determination in the clothing trade:
So far I have not heard of any case of levelling down of the higher paid workers and the increased wage fixed for the lower-paid hands has merely resulted, so far as can be seen at present, in a demand for more experienced workers.1
1 Report of Royal Commission of 1902, p. xxxviii.
2 Ibid., p. xl.
Report of the Chief Factory Inspector for 1901, pp. 11-12.
Report of the Chief Inspector of Factories in South Australia for 1905, p. 2.
The later wage statistics, so far as can be ascertained, tend to support this view of the inspectors that wages are not brought down to the level established by the board's determinations. Unfortunately, the method of presenting wage statistics in Victoria and other Australian states is not one which brings out the effect of a determination as it would be brought out if classified weekly wages or classified weekly earnings were given. The annual reports of the inspectors' office in Victoria show in one set of tables the minimum rates established by the boards in the various trades for which wages boards have been provided. In another table the average weekly wage for the trade as a whole is shown; the workers being classified only according to sex and age. In most of the trades, however, not one minimum wage is fixed for adults but several minima according to occupation or the nature of the work. Comparisons can only be made, therefore, between minimum wages and average wages and then only in those trades in which the adult workers are unclassified and one minimum wage has been fixed for all the adult males or all the adult females. In a few cases, however, comparisons may be made in this way for trades in which a considerable number of workers are employed. In the following table, unless otherwise stated, the figures refer to adult male workers.
Those who have been led to believe that the determinations of wages boards tend to establish one level wage for all workers irrespective of their abilities, have apparently been influenced by the fact that in nearly every industry where time wages prevail the great majority of the workers in any given occupation receive the same weekly wages, and since in the trades governed by the special boards this standard wage or rate of pay is generally the minimum wage fixed by the board, the