Business Looks at Unemployment
I
To find work for the worker has become a universal task. As an international problem it has been taken up by the Economic Committee of the League of Nations. President Hoover’s Conference on Unemployment and a special committee of the United States Senate are approaching it as a national problem. Legislative commissions are attacking it as a state problem. Numerous trade organizations are weighing it as the most formidable of the difficulties barring the way to industrial advancement, and as many more civic organizations are considering it as the most portentous of social questions.
At the turn of the year there were approximately 14,000,000 workers in the United States and Europe for whom no work had been found, and efforts to check the rising tide of suffering and distress were world-wide. Great Britain, in 1911, had set the example by establishing its state system of unemployment insurance, which has since become the ‘ dole,’ and the movement spread to Austria, Australia, Bulgaria, Germany, the Irish Free State, Italy, and Poland. Voluntary systems are in force in eight other countries. It has been estimated that 37,500,000 workers, not including Russia’s sweating millions, now have thrown about them a protective mantle of one sort or another to shield them against the hardships of economic storm and stress. As this is written, twenty-four bills, all looking to the same end, are pending before sixteen state legislatures in this country.
Of all the palliatives and remedies proposed or applied, it cannot be said that any holds promise of curing the disease. Government has found no way out of the economic dilemma which faces these efforts to allay the fear of unemployment. If the worker is to be sheltered against the privation and distress that follow in the wake of involuntary idleness, productive enterprise must eventually bear the cost at the risk of intensifying the ailment. Paul cannot be paid without the danger of pauperizing Peter. The National Confederation of Employers’ Organizations of Great Britain points to the heavy public expenditure for social services — $1,946,600,000 in 1929 — as one of the serious obstacles to national economic recovery. Even Russia, with all its scorn of bourgeois practices and philosophy, has been unable to suspend this inexorable rule. It has injected capitalistic lifeblood into the veins of production by transfusing it from the veins of consumption, paying for the power plants and factories of the Five-Year Plan with enforced labor and meagre rations. Many of the social nostrums proposed for the cure of unemployment would reverse this process by paying for relief with industrial plants.
Unfortunately, ill-assorted and antagonistic as they are, unemployment and business cannot be forcibly divorced. They are at opposite ends of the economic seesaw. When business goes up, unemployment declines, and when unemployment rises, consumption languishes and business sinks to lower levels.
This inescapable relationship was obvious enough when bread-and-butter getting was largely a matter of shepherding flocks and tilling the soil and industry kept close to the domestic hearth. The choice between working and having and not working and doing without was a mere matter of volition. No one cherished the delusion, now not uncommon, that a way could be found by which one could stand idle in the market place and at the same time receive the penny that was the hire of the worker in the vineyard.
So interpreted, the parable still holds good. Getting a job is not so simple a matter as applying to the lord of the vineyard or turning one’s hand to one of the many tasks that crowded the days of our fathers before the coming of the machine. Nevertheless business — busy-ness — and unemployment, or idleness, remain antithetical. They cannot be reconciled by a wave of the legislative wand or the invocation of social justice. Sympathy for those who suffer, however keen it may be, cannot be minted into coin to pay for their relief. Neither can a paternalistic state provide them with necessities merely by enacting a law.
Obviously the only cure for unemployment is employment, as the only effective remedy for idleness is work. But this affords small consolation to the worker who makes his futile rounds looking for something to do. Between him and his job modern industrial civilization has interposed a system of producing, financing, storing, transporting, advertising, and distributing so vast that the plight of the man who can find no task to which he may put his hand and the plight of business, which should provide the task, are frequently not associated at all.
Baffled and bewildered, the worker justly demands opportunity to earn a livelihood, and the industrial order which denies him this opportunity cannot escape indictment on the plea that the giving of it does not lie within its control. To him the machine which robs him of his toil is a relentless monster. He cannot understand why the overthrow of a government five thousand miles away, a discovery by a scientist of whom he has never heard, an invention that has revolutionized the making of glass bottles or the shaping of steel, the collapse of an unwise economic policy that has swamped world markets with a deluge of commodities, should deprive him of a chance to work.
Neither can it be gainsaid that business, long after the machine had begun to change the whole aspect of industry, looked upon unemployment as a social misfortune or an act of Providence, the distressing effects of which were to be alleviated by poor laws and almshouses, and not as an economic ailment which would inevitably sap its own strength. It was slow to recognize the consumer in the worker. Many of the early directors of industry were disposed to look upon themselves as beneficent dispensers of employment who stood between the poor and the threat of destitution rather than seekers of the largess that is conferred by the lengthy pay roll. The wage earner was obscured in the lengthening vista of demand.
II
The widening of the breach between the worker and his job is the price paid for productive efficiency. When industry forsook the serenity and security of the domestic fireside and sought out markets in the far corners of the world, it exposed itself to the winds and storms that blow up and down the Seven Seas. It laid itself open to the vicissitudes of political agitation and turmoil. By massing its resources in huge plants and regimenting labor in highly trained armies, it increased its output enormously, but at the same time it sacrificed the flexibility and mobility it possessed when every man was his own master. By enlisting science and invention, it opened the door to the feverish forging of new economic weapons that are constantly widening and altering the character of the conflict in which it is engaged.
Change takes its toll of industry in unemployment and obsolescence. When manufacturing was a household craft, the worker encountered no difficulty in turning from one task to another. If there was no wood to be hewn, there was water to be drawn, wool to be carded and spun, candles to be dipped. No elaborate readjustment of machinery, no shifting and training of labor, no planning of advertising and sales campaigns, were necessary. To adapt modern industry to the changing requirements of consumer demand is quite another thing. When public taste turned from narrow to wide carpets, new looms had to be installed, factories had to be rearranged, and labor had to be trained to the new task. When Henry Ford decided to manufacture a new model of his automobile, an army of workers was affected and millions were spent in designing and installing new equipment. It would be fatuous to attempt to escape these disadvantages, as some suggest, by returning to the older and simpler order of existence. Our fathers avoided them, but they went without broad-loom carpets and automobiles.
For the havoc wrought upon industry and its workers by economic changes and dislocations, the machine bears the heaviest burden of blame. It is the most spectacular of the devices originated to relieve labor of muscular toil — but it is not the only one. Industrial engineering and business management are constantly shortening the steps of production and reducing the waste of time and effort. But the machine is luridly portrayed in its social effects as an economic Juggernaut.
From the first its advance was resisted. Appeals were made to government to stay its march centuries ago when use was first made of the power of flowing water. Labor took more direct measures by resorting to sabotage, smashing the looms which marked the beginning of the end of household industries. At the present time critics are pointing to ‘technological unemployment’ as the most disconcerting of the evils which follow in its train, another name for the age-old grievance.
More often than not, this is taken to mean that the machine is constantly encroaching upon the right to labor and that the opportunity to earn a livelihood is constantly shrinking. In the narrow perspective of single industries this is true. The continuous mill in steel enables four men, operating gigantic machines housed in a building two and a half blocks long, to do the work formerly done by from thirty to fifty men. The continuous furnace and automatic machine in glass have almost entirely eliminated human labor, and machines of incredible deftness make and box matches and other articles without the touch of a finger. But these changes are probably no greater, relatively, than those ushered in by Stephenson’s locomotive, which sounded the knell of the stagecoach and all that went with it, the passing of which is now one of the forgotten episodes of economic history.
The general level of employment is rising, not falling. Since the beginning of the century the number of workers has increased 20 per cent more rapidly than the total population, and this in a period when the machine was advancing most rapidly. From 1900 to 1930, the population growth was 61.5 per cent. From 1899 to 1929, industrial employment increased by 85.5 per cent.
New industries have more than filled the gaps as the old have fallen from the ranks. Thirty million people, it is estimated, are dependent for their living upon five industries which had not been born or were in their infancy at the dawn of the century which has not yet run a third of its course. Bigger locomotives and better road beds have made it possible for crews to haul longer and heavier trains, and the railroads have been steadily increasing their traffic while reducing their pay rolls — a continuation of the economic change which began when the locomotive supplanted the stagecoach. But new industrial armies have been recruited to build highways, operate motor trucks and buses and airplanes, and man the shops and garages to keep them in repair.
Technological unemployment is an ailment resulting not from the diminution of employment but from the immobility of employment, or its equivalent, industry. It arises not because there is less work to be done but because the worker is not in the right place and the equipment is not at hand to do it. Boiler makers cannot be converted into automobile makers or textile weavers overnight. Mechanics cannot be shifted from a declining to a growing industry by a factory order. Glass blowers cannot turn readily to another pursuit. Manufacture cannot be diverted from the making of commodities of which there is a surplus to the making of commodities of which there is a dearth, or of entirely new commodities which must be fitted into the pattern of existence or adjusted to the fluctuations in demand due to a dozen causes, without a long period of preparation and adjustment.
Left to itself, business sooner or later adapts itself to the conditions which impede its advance. Industry gathers its forces for new effort and masters the difficulties which brought it to a momentary halt. Gradually the maladjustment is righted, new tasks are set, unemployment declines, and the economic balance — the ideal of perfection at which modern economists aim — is restored.
But this is accomplished by the operation of the law of the jungle — the survival of the fittest. Payment is exacted in appalling distress and untold waste, and the grim threat of such a disaster raises it to the stature of a calamity by halting expenditure, stimulating the undue husbanding of resources to meet the anticipated shock, and checking consumption. The lethargic fear spreads to production, the pace of industry begins to lag, and the dreaded downward sweep of the business cycle is on.
The industrial structure cannot be buttressed against the tremors of industrial adjustment and change by the awakening of a sense of social justice or the intervention of a benevolent government. Too often efforts to alleviate the hardships of unemployment have the effect of prolonging it, as Great Britain’s experience with the dole has revealed. Government attempts to counteract the oscillations frequently magnify the evil at which they are aimed. Glutted wheat, rubber, sugar, coffee, and other commodity markets bear witness to the futility of political manœuvres to steer industry clear of economic reefs and shoal waters. The ailment is a business ailment, and the remedy, if one is to be found, must be a business remedy.
III
Business stability is still a nebulous phrase. It cannot without undue stretching be made to fit the American ideal, which is based on growth, development, progress — all of them other names for change. Even in its more restricted sense, the constant balance of production and consumption, it might not be altogether desirable. Only by the arbitrary regulation and control of one or the other would it be practicable — at a cost which the public would probably be reluctant to pay.
The drive of individual enterprise which explores new paths, awakens new desires, and creates new products does not go hand in hand with arbitrary regulation and control. The one, actuated by the spirit of adventure, looks constantly to new horizons and envisions new conquests. The other holds to well-trodden ways. The public must choose between them. It cannot have both.
Production and employment could be kept at a constant level if the balancing were done on the side of consumption, and the public, instead of buying what it wanted, were compelled to take what was given it. Russia is conducting such an experiment on a colossal scale and it is the one country over which the shadow of unemployment has not fallen. Production has been stabilized, but by saying what food the people shall eat, what clothes they shall wear, and drawing the pattern of existence to which their lives shall conform. It is inevitable that any prescribed level of living shall be a lower level than that which would be attained by the exhilarating stimulus of individual striving.
In an industrial democracy, like the United States, production is the servant, not the master, and industrial change may be regarded as a virtue, not a vice. The rôle of business is to meet new wants, to discover new and better ways of satisfying the old, to adapt itself to the vagaries of popular desire. There is no fixed and standardized order of living to which it may adjust itself. There is no definitely prescribed task for it to do. The census reports that there are 202,000 persons employed in the shoe industry. By working 300 days in the year 81,811 workers could produce all of the shoes now made by the 202,000. But to do this it would be necessary to know a year in advance what kinds of shoes the public would demand, what styles would strike its fancy. All of the shoes needed could probably be produced by a smaller number of workers if the public were compelled to take the kind of shoes the manufacturers might choose to make. But shoes have long since ceased to be regarded merely as a protective covering for the feet.
Business might have assumed a greater degree of stability and, by the same token, a greater security of employment, if the public had been bound to continue to use brooms and farm wagons and ride in Concord coaches on the highways. But instead it gave the public carpet sweepers and automobiles and railroads, and thousands of workers were temporarily thrown out of employment and dismantled factories stood as a dismal reminder of the price of economic freedom. Undoubtedly all of the evils of the present industrial system are not to be ascribed to a laudable effort on the part of business to give the public what it wants. Unrestrained production has led to a surplus both of plants and of output in many industries. To devise a system of reasonable direction and control is one of the immediate tasks it faces. But the essence of that direction and control must be voluntary coöperation, based on exact and comprehensive exchange of knowledge and experience between the units of industry.
It is inconceivable that business, by any possible measure of coöperation, can develop the prescience which will enable it to anticipate and prepare for the multitude of changes which are arising daily to impede its progress. Neither will government be any more successful in charting in advance for industry a course that will lie wholly in placid waters. Government is much less sensitive to the signs of approaching economic storm than business itself. Finally, it is to be doubted whether the public will forgo its freedom to purchase the things it wants in order that production may be safeguarded against the fluctuations and whims of consumer demand. Whatever its faults, the economic régime under which it has lived is one under which the United States has grown great. This country is the one important industrial power that lias set up no artificial barriers against the evils of unemployment, but, up to the present time, it has been less in need of them than those countries where industry has fallen under the shadow of government.
IV
Because the ultimate goal of perfect flexibility, by which business can immediately adapt itself to changing conditions, is not in sight, it does not follow that the approach to it is hopelessly blocked. Nor is the failure to attain it adequate reason for scrapping the present industrial system and setting up one that might, in practice, prove to be much worse. In prospect there are formidable difficulties — less dangerous because they cannot be immediately overcome than because they might be ignored. In retrospect there is a record of achievement, especially during the past quarter century, which marks a significant advance in the self-regulation and self-control of industry and justifies the hope that eventually a way will be found to reduce substantially the dips and rises marking the oscillations from which most economic evils flow, and to assure a sufficient measure of permanency to provide a basis for insuring employment against the disturbing effects of changes which cannot be fathomed in advance.
Not the least significant aspect of the present depression is the recognition by business management that unemployment is not alone a social problem giving rise to deplorable human distress, but a source of prodigious economic waste. The Committee on Stabilization of Industry for the Prevention of Unemployment of the State of New York said in the opening paragraph of its report : —
From the viewpoint of business and the community, quite apart from the human suffering involved, unemployment represents waste and a bar to progress. Industrial and business leaders and government officials in this country are recognizing this fact, even as they rally their forces to meet the present need of relief.
Long before the signs of the present depression began to appear in the halting trade and industries of European countries, — preceding by a considerable period the collapse of the bull market in the United States, — business was applying itself to the task of reducing the waste that unemployment entails.
Normal fluctuation in employment, labor turnover, is equivalent to the labor of 1,500,000 to 1,750,000 workers in the manufacturing industries. The Commissioner of Labor Statistics estimates that 2,700,000 persons, out of a total of 9,000,000 industrial workers, change their jobs during a single year. For this, business pays a direct charge in the cost of replacement and an indirect charge in the reduction of consuming capacity. Management, directing its attention to industrial relations, is constantly trying to reduce this ebb and flow by improving conditions under which employees work and live, by inducing them to identify their interest more closely with the interests of the industry in which they are employed through stock ownership and increasing participation in the direction of its activities. The human has become quite as important as the mechanical side of industry, but one lacks the spectacular and the dramatic elements of the other and is frequently overlooked.
From 375,000 to 400,000 workers are affected by seasonal fluctuations. Substantial progress in overcoming these irregularities has already been made. Every one of the sixteen industrial groups into which industry is divided in the manufacturing census is represented by one or another of more than two hundred individual plants or corporations which have undertaken stabilizing operations. Some keep the stream of production at even flow by adjusting it to the year-to-year rather than the season-to-season demand, making the necessary adjustment in accumulated stocks instead of in the rate of manufacture. Others accomplish the same purpose by the balancing of diversified production, counteracting the seasonal dip in demand for one commodity by the seasonal rise in the demand for another. Still others, such as the fruit packers, attain the necessary flexibility of production by cold storing of primary materials which can be drawn upon as needed. Others, such as dairies, reverse the process by storing butter. Builders have extended seasonal operations by planning work under shelter during the inclement months.
These efforts to counteract the effects of industrial change are confined to the relatively narrow limits of single industries, but signs of a wider measure of coöperation to the same end are appearing on the business horizon. Trade associations are turning their attention to marketing with the general aim of adjusting production more accurately to consumption and avoiding the dislocations which result from excessive production.
Efforts are being made to place reasonable limitations upon the number of sizes and varieties of manufactured commodities and to check the multiplication of styles, the most intangible and elusive of the factors that make for industrial uncertainty, springing in many cases from an overzealousness on the side of production to meet the whims and idiosyncrasies of the few rather than the demands of the many. The shoe industry — including leather manufacturers, shoe manufacturers and distributors — is making such an attempt to keep style changes within reasonable bounds.
Cities, through their chambers and associations of commerce, are abandoning old ‘ booster’ methods of expanding their industries by the indiscriminate acquisition of plants, and are seeking only those which tend to counteract, rather than add to, the seasonal swing of unemployment. The principal industries of Rochester, New York, have evolved a plan of assuring to their workers a minimum period of employment through the year. Philadelphia, Fond du Lac, and other cities are working to similar ends.
These efforts constitute a beginning and are already fruitful of results, but their scope is limited. Many of the broader fluctuations and changes in industry lie beyond the control of individual management except in the case of the larger unit corporations, — such as telephone and telegraph, railroad, steel, public utilities, — in which widespread operations are directed by centralized administrative authority. The same end can be achieved by closer coöperation, by the development of efficient trade associations. To look to the future, it is a fair conclusion that the necessary administrative direction will be established in one way or another — by the establishment of gigantic industrial units each master of its own field, by the voluntary cooperation of smaller units, or, ultimately, by the injurious substitution for private management of rigid government control.
The laissez faire policy leads to the first. With every economic storm, smaller and weaker units are swept to destruction, clearing the way for merger and consolidation. The strong and the fit survive and extend their dominion; the weak pay the cost. Congress attempted to stem this tide of change by erecting a barrier of antitrust laws, but it. is a serious question whether, in attempting to regulate the effects, it did not prevent the regulation of the cause; whether, in halting the stride of individual corporations toward industrial domination, it did not impede the advance of smaller corporations toward collective management of larger industrial affairs for the conduct of which the public is now demanding that they be held responsible.
If the middle course is to be followed and industry, through voluntary cooperation, is to shoulder the burden of maintaining the uncertain economic balance and keep employment and productive enterprise more nearly on an even keel, the next practical step will be to enable industries to broaden the sphere of collective management in order to counteract the disturbing effects of economic change. Planning by individual industrial establishments to anticipate and prepare for seasonal changes, fluctuations in consumer demand, and technological development, might be broadened to planning by whole industries. Nor is there any economic reason why the process should stop there. As the individual manufacturer achieves stability of operation by making complementary commodities, the seasonal fluctuations of which counterbalance one another, complementary industries might mutually strengthen and support one another. Moves in this direction have already been made. More than sixty industries dealing with one or another phase of construction are attempting to meet on common ground to promote the stability of their operations.
V
At most it is not to be expected, nor is it to be desired, that business shall so manage its affairs that it will reach a state of perfect quiescence and serenity unruffled by change. Many of the disturbing influences lie beyond its control. Political upheavals which upset world markets, tariffs which impede the normal flow of trade currents, shifts in consumption due to changing custom, cannot be anticipated. The shadow of uncertainty cannot be altogether dispelled.
But, although the level of the industrial stream rises and falls, from year to year its flow continues. Business at the present time rides in triumph when it is at flood and stagnates when its currents grow sluggish. But the mean flow determines the rate of progress, and to this mean flow it is beginning to adjust itself. Business has gone further in this direction in the past quarter century than in all the years since the Industrial Revolution swelled the trickling rivulets of commodity production to turgid torrents. It is beginning to limit its operations not by its capacity to make but by its capacity to sell, and the alternate dips and crests due to production outrunning consumption arc slowly being smoothed out.
Business management, in the case of individual establishments, has been able to gauge and adjust itself to the mean level of consumer demand and reduce the margin of variation to such an extent that it is assured of a reasonable measure of continuity of operation, and can, by the same token, assure a reasonable measure of continuity of employment throughout the year. The necessary balance, to compensate for unforeseen changes, is attained by the device of insurance. By putting by a reserve from earnings when the tide is at its crest, to be drawn upon when the flow subsides, the necessary adjustments to compensate for changes which cannot be calculated in advance may be made.
Certain of the industries which meet needs that are continuous throughout the year and are not, for that reason, as subject as others to the fluctuations of a volatile or transitory demand, — such as the trades affected by style changes, — might, and probably will, follow the example of individual concerns. Whatever the rapids and narrows and the broad reaches where its currents lag, the stream of production flows on until it eventually meets the sea of consumption. In good times or bad, whether demand soars on the wings of speculative elation or plods slowly under the burden of fear, certain basic wants must be met. Nor are these the elemental wants which might have been recognized as essential a century or less ago. In the United States, at least, there is a level below which the standard of living will not be brought by anything short of a cataclysm. The identification of these wants and the means to supply them, a better knowledge of the permanent as distinguished from the transitory elements of our economic life, of the continuous rather than the impulsive changes, will provide a sufficient measure of certainty to enable business to go forward Confidently and to adjust the employment necessary to the performance of this task in such a way that the worker will have the assurance of a stable income.
Whatever the causes, the effects of cyclical unemployment are obvious. It might begin in the collapse of fictitious values created by an outburst of speculation, in the accumulation of undigested surpluses of commodities, in the scarcity of working capital or the freezing of credit — in the piling up of obstacles which block the path of business. But it ends in fear and the loss of economic morale. Capital becomes apprehensive and investment lags. The worker begins to hoard his resources against the approaching rainy day. The buyer begins to curtail his purchases. Consumption hesitates, demand begins to shrink, production declines, and the shadow of unemployment deepens. Frantic attempts to prepare for the disaster often hasten its coming and prolong its stay.
If the fear of the evils that arise in the wake of depression of this magnitude can be allayed, many of them will probably not appear at all. If the worker were assured of a reasonable measure of employment, he would not husband his resources to meet the distress of unemployment, consumption would remain at a more nearly normal level, production would not halt.
The blighting effects of cyclical depression are not due solely to the inability of the unemployed to spend, but also to the disinclination of the employed to buy. In the United States at the beginning of this year there were, according to the Department of Commerce, 6,000,000 unemployed, but the employed numbered probably 39,000,000 or 40,000,000. The saving of the many, rather than the deprivation of the few, had most to do with the hesitancy that was felt throughout the business structure. If the employed or a substantial number of the employed were assured that their work would continue, much of the apprehension would disappear, the business pace would quicken, and the margin of unemployment would probably be substantially reduced.
The social approach to the problem presented by the cyclical depression is to alleviate the distress of the unemployed, an obligation that must be recognized if society is to endure. The business approach is to safeguard the security of the employed as well as to provide work for those who are idle through no fault of their own; to control, as far as may be consistent with the traditional ideal of unregulated consumption, the dislocations and changes which retard the orderly advance of industry, and to develop its flexibility and resiliency so that it may adapt itself to new conditions which are the inevitable accompaniment of growth.
Difficult as the attainment of this ideal may be, it is not altogether visionary. Business has already laid a practical basis for further attempts along this line. If the methods already pursued by individual concerns can be followed by industries and groups of industries, many of the hazards of employment will be avoided and industry will march with surer pace.
For nearly two centuries industry has been building the gigantic productive machine which has lifted from millions of human beings the threat of starvation and want and has set new limits of sustenance for the increasing populations of the world. Beginning by harnessing water, it brought steam under control and is now developing electricity and releasing the forces locked in the chemical balance of the constituents of matter. It has applied this power literally to the moving of mountains as well as to the stitching of gloves and the wrapping of a stick of chewing gum.
It is conceivable that this resourcefulness has developed so rapidly that it has not been applied skillfully to the uses to which it may be put. It is inconceivable that it shall be arbitrarily halted because the most has not been made of it. Already business is occupied with the task of bringing this power under better direction and control. Having built the machine, industry is devising ways of using it to greater advantage. It is turning its attention from the development of production to development of distribution, to making the machine subservient, not hostile, to human needs. Perhaps industry is entering upon its second phase of revolutionary development, which is the logical sequence of the first industrial revolution which marked the rise of the present economic system.
Of necessity this second phase must, for a time, be a record of experiment and trial. The habits and customs which characterize the world of business cannot be brought into conformity with a social ideal overnight. But neither can they be recast in a new mould by arbitrary decree. It does not lie with government any more than with any of its citizens to flout economic law, and only injury and misdirection and delay would result from political interference with the working out of these natural forces.