INDUSRIAL ABBITKATION.

Otago Daily Times, Issue 14244, 19 June 1908, Page 2

INDUSRIAL ABBITKATION.

—» DR FINDLAY ON PROFIT-SHARING, SUGGESTED BASIS OF WAGE .REGULATION. A "NEEDS WAGE" AND /'EXERTION. WAGE,"

(Special to ■ the Otago Daily Times.)

WELLINGTON, June 17. | The Hon. Dr Findlay (Attorney-general) delivered an important speech to-night on the subject of industrial arbitration. After replying to criticisms of his argument in his recent speech at Wanganni that prices of necessaries of life had not been appreciably increased through the operation of the Arbitration Act, he proceeded to offer a criticism of the act with a view to suggesting and justifying certain proposed amendments. He agreed that the Use to which the act had been put had tended to a uniform or dead-level wage in each grade for all workers, whether good, bad, or indifferent; that the Conciliation Boards had entirely failed to achieve the result Mr Reeves had anticipated; that the act, as it stands,. mode no satisfactory provision for the enforcement of awards; that the provision in the act regarding what was called "victimising" required some amendment; and the act had in practice, through no fault of the court, been unable to secure' the expedition of its operation which was so desirable. Dr Findlay then proceeded:— No Arbitration Act can create a Fortunate' purse out of which the rewards of labour can be indefinitely increased. No arbitrativo act can increase the stock of .wealth out of which increased wages may bo paid. If, then, it can be shown that our present national income is such as makes impossible any marked improvement in the remuneration of the wage-earners we must first seek some means of increasing our production before we set ourselves toi_ increase our distribution of wealth. This increased production can be effected only by an increased efficiency on the part both of the entrepreneur and the employee. To this topic I wiJl return again. Meanwhile lot me give you a few figures to show the means available in Now Zealand to improve the workers' lot and the limits of this improvement. Here is a return prepared by the Begistrar-gcncral which is of great interest, and one to which I shall refer frequently in this part of my address:— Estimated Wage-easninos op the People, males. to *< a ° H . * ■H j?l Is '§ Occupations. § g 3g jjaV 3 'A* <% <igS £. £. 1. Professional ~ .. 12,221 144.8 1,769,00!) 2. Domestic .. .. 0,701 .79.3 631,405 3. Commercial .. . 29,003 115.9 3,301,400 4. Transport .. .. 21,224 108.0 2,616,200 5. Industrial .. .. 85.230 94.1 8,025,6 ft). ,6. Agricultural, pastoral, mineral, and other primary producers .. . G3.G24 73.3 4,603,603 7. Indefinite ~ .. 6.020 95.0 571,900 227,083 94.8 21,530,900 females. 1. Professional 8,008 67.2 538,109 2. Domestic .. .. 27.596 37.3 1,029,300 3. Commercial 6,141 37.9 248,608 4. Transport - .. .. 731 59.8 43,700 -.5. Industrial .. .. 15,316 40.1 614,200 6. Africultnrnl, pastoral, mineral, and other primary producers, 1,932 22.4 43,300 7; Indefinite; . .. 3,182 50.0 159,100 63,189 42,3^2.671,200 , TOTALS. Males , .. ..£21.539,900 . Females .- .. 2,671,200 ' "' £24,211,100 From this return it will bo seen that there are 290,272 wagc-earnere of all kinds in this country, and this return shows their avorago wages—wages which in the majority of cases might well stand an increment. Suppose, then, a benevolent court decreed that all wage-earners should have a. shilling a day more—not a very magnificent increase—it would require an annual sum of no loss than £4,528,243jand if the court was in a still more kindly humour and gave the wage-earners 2s a day more it wotdd require only £9,056,486 per annum. But it may ba said that those are idle calculations, since the great body of wego-eVirnors are receiving a wage which justifies no increase. Unfortunately, No. Would it were so! Peruse and consider the return I have read and the average wages it discloses. But if you do not like averages, lot jno give you this surprising information: In this'country all wage-earners whose income exceeds .-G3CO a year have to furnish returns of their income to the commissioner and pay tax on the excess. I will produce an authoritative retur.i shortly on this subject, hut meanwhile let me tell you that of tho 290,272 wage-earners in New Zealand, high and low, including the highest paid managers and officials outside the civil service, only 1835 receive in salary over £300 a year, while in the civil ser : vice (including for the purpose «:bool teachers) 643 get more than this £6 per week. In private employ, then, out of the hundreds of thousands engaged, 1835 wageearners only get more than the sum of £300 a year. I do not overlook the fact that some deductions aro allowed in the income assessment for life .insurance premiums, but these inappreciably affect my figures. I have had other returns prepared showing what wage the vast majority of our workers receive—not on an average, hut .individually;—and, without swamping my address just now with figures, I am .in a position to fay that it is lower, I am sure, than what most reasonable and sympathetic investigators would like to see. But sympathy and well-wishing are of little use if met by stern facte which show that to increase the wage-earners' income ■but Is a day involves n payment of over four millions and a half sterling every year. Thia illustrate the apt-to-be-for-gotten fact that to confer any widespread benefit upon the workers requires a substantial increase of our national income. Last, year we raised the wages of the police force and prison warders by 6d a day, and this cost this young country £8170 per annum. I wish to impress these facts upon those who hazily fancy that somewhere is stored abundant wealth which upon a just and proper distribution is sufficient to place everybody in affluence. This is A PERNICIOUS FALLACY. Rut perhaps it is supposed the profits made by the employers of our industrial classes are such as should yield substanital increases'in wages. Let us see. Here is tho return I promised, prepared for mo by the Commissioner of Taxes:1. Totnl number of income taxpayers 10,420 2. Amount of net incouio assessed for tax 'before deducting exemptions £10,105,573 3. Number of wage »ud salary earners who pay tax .. 2,483 4. Number of civil servants, who pay tax 402 Number of teachers who pay tax 156 5. Number iii private employ (including those employed l by local authorities, etc.) .. 1,835 6. Number of taxpayers who are traders, manufacturers, or carrying on any business: — Persons and firrno.. 4,827 Non-resident traders 174 Companies .. .. 884 6,885 7. Amount of net income of such traders, manufacturers, etc.: Firms and persons .. .. £4,032,553 Non - resident traders . ' 128,120 Companies- .. 3.594,900 £7,775,573 It should be noted that in the greatmajority of cases of business men, firms, arid companies, the net income assessed for taxation is necessarily greater than would be shown by the taxpayers' balance sheets. This is the result.of numerous items debited to profit and loss not being deductible for income lax purposes, and consequently added Ijy the department, in assessing, to the , ha.anre shown by taxpayer's accounts. ! P. llaykb, Commissioner of Taxes.

• 1907-8. Income Tax-payers. Salaried officers: — Civil servants ~ 492 Teachers .. 15s Others 1,a35 m j 8,483 Traders, manufacturers, and business men:— Firms and persons 4,827 Non-resident traders .. 174 Companies .. .. 884 n • • , 5 1 885 Professional and unspecified ~ 2,052 Total 10,420 1907-8. Net income assessed for tax before docketing exceptions:— Traders, manufacturers, and business men .. £7,775,579 Others" 2.329J994 Total £10,105,573 Now, let it be remembered that every person or firm who, or which in any trade, calling, or business (except farming land) makes more profit per annum than £300 per year has to pay income tax on tho excess, and that every company has to pay on all its profits without deduction, and we find that of all the shopkeepers, traders, manufacturers, factoryowners, or other business men, or i»ms, only. 4827 in New Zealand make over. £300 a year. Those who make £300 a year or less are, in tho vast, majority of cases, ge'tting no more than the reasonable, or less ttian reasonable, wages of management, and hence those can scarcely be said to l>e getting more than a. modest wage. Ono hundred and seventy-four nonresident traders wore also assessed. Wo also find that only 884 companies made any profit at all. I am excluding land companies and income on mortgages. Now, the profits earned by these fortunate 5085, in excess of the exemption whero allowed, is £7,775,579 per annum. But lot no 0:10 fancy that these profits are, from a national point of view, a final balance of profits over all losses in industrial enterprises. If we are considering how tho whole general body of workers can bo better paid out of profits, wo must investigate the profits of all the industrial enterprises in which the general body of wage earners are employed. But the £7,775,579 of profits I have referred to arc not a national net balance. In every year in this country, as in every other country, some industrial enterprises employing labour aro producing no profits at all, but aro carried on at a loss. I do. not say that they aro carried on year in ami year out at a loss, but in any given year the totals of .that occasional loss, which every great or oonsidcrablo industrial or commercial enterprise has to undergo, must ho very great. Only bankers and business men, or, better eti 11, the Commissioner of Taxes, could form oven a rough approximation of what this loss on the year's balance sheet amounts to, taking every business concern of every kind (oxcept farming) all over New Zealand. I am unablo to name any definite Sum, but the Commissioner of Taxes, on. tho fullest consideration, thinks it amounts to a total which is equivalent to 25 per ceut. of the £7,775,579 assessed as profits by the Income Tax Commissioner—that is, to nearly £2,000,000 a year. But before we can csti■male the 'net amount of profits made in all businesses, and available as a fund to increase wages, we must deduct these great annual 10-=so>—and so reduced we would probably find that the whole sum, if wipA as available for distribution among the workers ■ employed in business in increased wages, would not yield a rife of very much, per day. .But t-hero is eti-11 another important consideration regarding these profits, and it is this: If a man begins business, and puts £10,000 into if, whioh is lying; invested at interest on gilt-edged securities, and yielding him, without any care or effort at all, £400 a year, he expects, and rightly expects, to get out of ', his business with.'all its risks, fluctuations, , and anxieties, sufficient income to provide interest proper on his invested capital and . a reasonable amount of profit in addition. j But another way: if the workers were , investigating the amount of profits made , by all employers, with a view to taking a new share of these profits for increasing I wages, they would recognise that before t the net amount of profits waa determined, i a minimum rate at least of interest should first bo deducted for the capital invested, \ and used in the business by the employer. , Now, with t.hii made clear, let us turn again to the £7,775,579 of profits above I referred to. In arriving at this sum no , deductions are allowed by the income tax j assessment for the capital of tho trader, . firm, or company employed in the. bnsi-, . ness, unless it be invested in the business, , land, and buildings, and then a deduction [ for rent is allowed, and if it is lent out , on mortgage the interest is not assessed ( as profits. It is true a deduction is allowed for interest on borrowed capital j so employed in the business,' but not- for . the capital _ of the trader or company, t himself or itself. Now, what capital upon , which no interest- is deducted for income I tax purposes is invested to produce this ; £7,775,579. I have not the definite amount, j but such figures as I have will help you. . I cannot -give the capital so invested by ,' private persons and • firms, who represent ; nearly four-fifths of all the businesses upon f whose profits income tax is paid.« I have, i however, some figures with regard to Com- , panics.' Tho following return shows the ; paid-up capital in each district. I was . unable to get the Auckland figures as to I the paid-up capital in time for this addre-s, f and so had to Toly upon an average. I' was, moreover, unable to get a West-land \ return: — [ Return op Public Companies ; (Not inending British, Foreign, or Land) I carrying on business in New Zealand.' Nominal Capital [ District. No. capital, paid up. - Auckland . . 305 £10,669,030 £6,403,000* , Otago .. . . 271 10.553,419 8538,970 . Wellington .. 242 7,196.14(5 3,160,897 , Christchurch 151 5.146,710 2.867 841 . New Plymouth . 70 593,325 237,187 , Inverca-rgill GO 492,572 307,494 Hawke's Bay . 37 856,000 350,473 Nelson .. 28 420,950 169,022 Poverty Boy . 13 . 273,850 102,632 1 Marlborough 12 64,500 12,954 - Westland .. . lteturn not yet to hand i Totals .. ..1,189 £36,266,502£22,149,510. 'Fixed on average. 1 Betubjt op ah, Private Cohpanies 1 Doing Business in New Zealand. No .. 394 .. Nominal capital .. £3,807,937 I have been unable to get the paid-up capital of private companies. It is, no i doubt, verv much nearer the nominal capii tab But even if the proportions were the ■ same the paid-up capital would amount to 1 £2,327,083. That is, a total capital invested ■ of £24,476,593 by companies to earn profits in New Zoalapd. And since any company that makes any profit assossed on it. the profits stated in the foregoing return is all the profits made by any 01" theso companies in New Zealand. But such companies as arc assessed are assessed on only £3,594,900 profits, while firms and persons arc assessed on £4,052,553 profits, about 14 , per cent, more, so that there is no doubt \ that to earn this £4,052,553 tho capital .In-

to him who condemns the standard I now outline I would put this question, " What I lictter can you propose?" In my belief, if our compulsory arbitration system ia now to continue it must continue to bo a wage regulator; and tho best standard that can bo devised for its guidanco is, I think, a double-or, rather, a primary and a supplementary—standard. Tho primary standard should be THE NEEDS OF THE WORKER, ' and when I suggest this standard J do nob mean what tho workor thinks to be his needs or what the employer thinks- to bo those needs, but the needs which society, through tho Arbitration Court, taking an enlightened viow of tlio means available, of tho worker's position and welfare, and of social interests, deems necessary or proper. This, as.Hobson points out, is the rationale of the labour movement in its strugglo for a "living" or a minimum wage. This olaim is tho primary step towards tlio substitution of a rational wage system, based upon needs, for the anarchio strugglo of disordered competition, which only feigns to apportion nay according to' individual productivity. A wago based on this standard is not a baro subsistence wage, but one which should allow for all those conventional decencies as aro essential to a worker's self-respect; Iu fact, so far as Wellington awards are concerned, this basis ig constantly urged upon tho court as the proper one, and is, in fact, if not professedly, tho basis of many of tho awards made here and elsewhere In the absence of any prescribed standard, it is tho one the court lias more and more fully adopted, oither expressly or inferentially. Thm standard is not stationary, but ouo which must increase as the ■ general standard of comfort rises with increasing wealth and civilisation. Nor is a needs wage necessarily uniform for all trades and callings. It has been well said that, as we raise the character of tho work, wo have to deal with a class of workers whose social efficiency demands continual progress in the development of his mental and moral, and, it may be, his physical powers. The necessity of this development impsses more needs upon the worker, and social utility demands that these needs should be supplied with a higher needs wage-or, in other words, a higher grade workor should have a higher rate of pay than a low grade worker, because his needs, reasonably.considered, are greater. In New Zealand tho difficulty of fixing a needs wago is enhanced by the difference in the cost of living in different industrial districts, but tho settlement of theso differences could bo left to the court. A perfectly-adjusted living wage .should look beyond tho worker himself to his burdens and responsibilities, and on this basis a married worker, with wife and young children dependent on him, should receive a needs wage sufficient to main- a tain in decency himself, his wife and young children—especially since in Tearing and bringing up a family such a worker is discharging ono of tho highest duties of citizenship. It is estimated that there aro 96,000 married workers in Now Zealand in all grades.and classes of employment. Now, a needs wago is necessarily more or less uniform in the different trades, and this uniformity would produce the same discouragement of superior care, skill, and industry as is found under the present conditions. It is idle to assume equality of industrial efficiency in the workers in all the different oallings. Inequality, not equality, is Nature's rule, and any rule, law, or system which fails to give any incentive or encouragement to the exercise of superior efficiency causes a heavy loss to the wholo community. It causes, indeed, a double loss—first, the loss of that ' additional wealth that would otherwise havo hecn produced, and, second, .in time, the loss from non-exercise of tho very superior efficiency itself. Wo all know what freedom of opportunity has done for progressive people. We all see what the denial of it has done to those. Eastern peoples still in the thrall of caste, upon whom a miserable dead level is imposed by law or custom! Progress demands, that extra caro, skill, and effort should have extra reward, or you will in time produco ao industrial stagnation. It is worth some thought and trouble to even jlartly secure ' the one and avoid the other. I would ask • the censorious to remember this. Now tho needs wago should bo supplemented Y AN EXERTION WAGE* The expediency of. owners recognising superior skill or greater energy has long . been seen, by employer's in tho Old World, and has resulted in what ib known as gressivo wages. 'Blie system is as follows :j (1) There is a fixed minimum wagV. (2) This is suppleineiited by a'promjuia ■■' corresponding to industry- and efficiency. * - . (3) Tho minimum- Vage is based upon the hours of employment irrespootivo of the work done—in. other words, the w*go ds for a day's work, not for the work of the day. (4) Then, a specified quantum of work is fixed corresponding to that amount of work done on tho average in, such day's work, and the worker gets an

vested oy tlio firms and persons must bo enormous. From all these figures and others m tlio commissioner's possession, lie is I of opinion thai at least 40,000,000 pound) sterling is invested to produco tho £7,775,578, Jn respect of which invested capital 110 ■ deductions are- made in ineoino tax returns. This sum at 5 per cent, is £2,000,000 a year. Heneo a reduction for losses I havo mentioned, and for interest on this invested capital, would reduce these assessed profits to some £3,700,000, which would (jive ail persons, firms, and companies, great and small, an averago annual profit over the exemption of about £630. Now I' havo gono into these figures to stive tho workers somo idoa-it may bo only a vory rough idea—of what amount of profits, fairly and properly so-called, could, under- any circumstances, bo made available- for distribution as increased wages. Wo have seen that income tax is assessed on £7,775,579. 1 havo pointed out that for such a purpose as that last mentioned there must first bo deducted tho periodic annual losses in those business (establishments employing labour. This would reduce tho above sum greatly. But there must bo the further deduction I have mentioned for interest. , itenco if you take tho profits of every trailing, manufacturing, and commercial business carried on' by. a firm or person in Now Zealand which is making over £300 a year, and all tho profits of the company assessed, and deduct from the whole excess the groat periodic annual losses of thoso establishments which lose in any given year, and further deduct that portion of this oxcoss which is really interest on • capital and not profits at all, you will find that the final balance of profits so produced would, if distributed as increased wages among all thoso wage-earners employed in every capacity by the persons, firms, or companies carrying on business in New Zealand (except, of course, farming), leave these wage-earners but a very small increase indeed in their wages. Let it be also noted that the year's profits I havo taken are a record—the largest that New Zealand has seen. But all this is a calcii; lation upon a purely hypothetical basis. Any/ attempt to lay violent hands upon these profits for such a purpose would, of course, put an end to all business enterprise, 'and thus destroy the vei'y source from which tho profits are drawn. Now, it must ho realised that basinet ability is itself an agent of production, ■ and that the .competent employer is himself a creator of wealth, and iiot a mere parasite upon the production of labour. The ability of tho omployer is a vital concern of tho workers, for they have a direct source of loss in a bungling entrepreneur Admitting, as any impartial man must" that, business ability is itself a producer, it still remains to decide whether on the figures I have given business ability ' in general seems to bo overpaid in Now Zealand. It is not necessary for me to offer an opinion. Now, all I have so far said under this head of amendments of the Arbitration Act is but preparatory to a consideration of the amendments suggested. I havo not adduced these figures to show that the general level of tho waj;es o{ labour cannot be raised. I think it can, but I wanted to clear tlio ground for a discussion of tho means'toy which this uso can bo effected and to demonstrate that unloss inoro wealth is produced, both by increased effort and co-operation on the part of both employers and employed, there is not much prospect of any marked rise in the general loYcl of 'the workers' wages. Is there room for this increascdi effort and co-operation? Assuredly there is. Walker, in his political economy, shows what business ability can do bpth in saving waste and promotion of production, and incidentally ho establishes the fact that sOmo of tho worst enemies of the workers are incapable and blundering employers. Tho average business ability of this country is high; the average industrial efficiency is high, as well may be inferred if only from the intelligence and physical stamina of our- people. But do the human agencies of production produce in service or commodities the fair and reasonable maximum of their capacities? I am certain thoy do not, and the one great desideratum now in New Zealand is some inducement, satisfactory to both tho great agents—employer and workers—to establish and maintain that GENUINE CO-OPERATION which will produce the best, results. I believe that desideratum can be at least largely supplied by an improved Arbitration Act. Now, before I proceed to show ihis let me ask ybu to recognise that our Arbitration Act has, served, and must serve, two purposes which are distinct." i'irsb, it now dischargts tho function of a. standard wage regulator—a kind of State Wages Board to which—and not to their ■employers—tho workers in practice appeal to fix a fair wage. This appeal is not made to prevent u, strike, for thcro is rarely a gonuine dispute, and the function of the tribunal has become that of saying what the State (as represented by tho court, or. at anyrate, tho president) thinks tlio standard wage should be. Tho second function whioh the act is asked to dischargo is strikc-pfe-' volition by pains and penalties. I propose to consider tho functions separately. 1. What direction or guide does'our present act contain an to what should be the standard wngo in the different callings? Absolutely none. Nowhere in the original act or any of its amendments is there any hint or reference as to what that wage should be. The court itself has not, as far as I know, ever propounded any basis. One can see from looking along its.career that it lias sought to effect the readjustment which is essential to bring the methods and the shares of modern production into closer and closer union with true social welfare. But this, is sailing by a distant star often lost iti haze. One general result of its award rates of wages fixed as a minimum has been to make that wage the standard—at once the minimum and tho maximum—with such discouraging effects upon the workers as 1 have already fully indicated. Now, the court must not,- and does not, proceed hy haphazard methods. What, basis, then, for fixing wages has it mainly employed? Plainly not a competitive standard, for that would fix'itself witheut the interventien of the court by the marked rate; and the competitive, standard was ono which the court/ was , established to check. Equally plainly, It cannot be a profitsharing standard. This the court has indeed expressly,stated, and it has declined, as it had to decline, to enter upon an inquiry as to the profits of all the employers as a basis of wages. Profit-shaving, indeed, as a method of industrial remuneration has been found illusory and unsatisfactory. I cannot now enter upon it 3 history, but even under a voluntary system, whefe employer and workers have mutually agreed to a basis, It has broken down in countless cases after fair trial. A system is doomed to failure under which— (n) The workers havo no coice or control in tlio management; (b) in which a worker may work much harder and produco mere, and yet, owing to the management, in which he has no share, the business makes p loss,and all the worker's extra' efforts go unrewarded; (c) in whioh the industrial worker, however imfch or little ho works, shares the profits but does not sharp the losses; (d) in whioh the idler workers sharo profits along with the most industrious ami skilful; (e) in which there is no natural basis of division; (f) in which, if tlio whole increase of the profits is due to the increase and excollenoy of the workers' efforts, the employer still takes his share, and vice vorsa where it is a business ability alone whioh makes the profit, tho workers take their share. These are but a few of the objections evon where profitsharing system i 6 based upon voluntary arrangement, but ask yourselves how enormously increased the difficulties and objections would be if a profit-sharing tystem was forced on employers by an Arbitration Court—forced on 200 or 300 ■ employers all making different rates of [ profit, in tho same trade. How could it bo done? It is impossible. Tho essence of such success as it has had has been cordial co-operation between employers and employees, and yet, excopt where the circumstances were special and both sides heartily united, it has taon a failure. There aro millions of business establishments in Great Britain and America, but how few have tried tlio system? To uso the words of an article on this subject in the " Enoyclopaidia of Social Reform": " Profit-sharing has been before the world 50 years. Largely tried, it has to-day only 108 firms in all the United States and Great Britain. Society demands a better remedy than that, whioh has accomplished so little in 50 years, and that of doubtful good." And Schloss, a mo3t sympathetic investigator, declares that "(ho radical defect of a method of industrial remuneration under which the reward of tho servant's labour is made contingent upon the good on .bad management of the business by his employer and upon tho hazards of commercial fortuno renders it difficult to admit, even with a great degree ofreserve, the claim of those novel arrangements to havo established a substantial improvement in the ordinary wage system." What other wage standard then is open to the Arbitration Court? This brings us down lo the bod rock of the matter. Before I suggest the most satisfactory basis let me impress this upon you: No standard that can be devised is at all a perfect one. It is a-choice of tho least inadequate;-and

Additional sum proportionate to the I excess of tho output ovor tlvis sfan- i dard as the reward for his extra i effort or skill. j This prinoiplo au some form or other has J boon adopted in many oases in tho Old ', World. It appears in at least three dig. ! tinot forms: (1) Tho form I have just described; (2) tho form in which each worker who exceeds the standard gets a premium fixed irrespective of tho ralio of the excess to the standard—for example, at Rhoinis wine-bottlers receive five, francs" a. day, but if they bottlo more, it does not matter how many or how fow more than a certain numbor (tho standard), they got an additional frano a day, (5) a.'prize offered to a email number among I3io oporatives who may within a. given time produce tho greatest output. This may be termed a prize day wage. . Now 1 want to objections which are likely to be raised to this system. Wic praotico of paying a premium or extra wage to one or a fow oporatives in order to force the pace of all is strongly condemned by trade unions, and from the glaring abuses of the system rightly condemned;. I need not delay to set out tho objections to tho class of "chasers," "runners." and "bell-horses" employed in different callings at. a premium to be pacemakers for all. Tho oppressive tendency of this peculiar system has justified trade union opposition. Bat this system has .never yet in the world, as far as I know, been tried under a Compulsory Arbitration Act, with powers to prevent tliese abuses, and upon examination it will be found that its evils are due to the fact that the employer (in the absence of the controlling power of an Arbitration Act over him) has been able to use, or, rather, Abuse, tho system for his.own profit. But surely in tho hands of an Arbitration Court, seeking sincerely to apply it for the reasonable bonofit of "the workers, it can be made a most effective means of "gain-s-baring." It is suggested, therefore, that in addition to the needs wage to bo now fixed as I have indicated, there should ho a progressive wage, based on "gainsharing." This gain-6haring. it will be observed, is sharing the gain or wiving of the cast of produolion, irrespective, of the late of profit realised by the employer, and is to he definitely distinguished from scliemcs of profit-sharing under which thp amount of tho bonus is dependent upon the realised profits (if any) of tho businesses —an entirely different thing. This scheme has teen tried successfully in several great enterprises—tried, let it be remembered, in the absence of any State guarantee of fairness, Buch as could lie scoured' by the Arbitration Act. It was introduced in IE9I in the workshops of the Rand Drill Company, at Sherbrooke,! in Carlada. by Mr F. A. Haleoy. The essential features of Mr Halsey's, plan consist in fixing on tho basis of previous experience the time required to do a given; piece of work, and offering the workman, if he could get the job done in less than this standard time, a premium for every hour saved in its execution. Mr Ualeey took rare to fix the standard time on the basis of uhat an average man, anil not a quick operative, required for the performance of the job. Mr Halsey also urges that to cut down the scale after it has once been fixed on the ground that under it the workmen are earning too much, is a fatal step. Tor, as he says, "if the premiums are out down the workmen will rightly understand it to mean (as under the piecework plan) that their earnings are not to be permitted to pass a certain limit, and thai too much exertion is unsafe." This, of course, can bo safely presented when you have an Arbitration Court liko oure. The settled cbjectkm of trade unions to piecework systems: and progressive wage systems is based uopn the painful experience that periodic "cuts" or reductions in tho rate ov alterations in the standard were made as the increased exertions of the workers under these systems secured for them better wages. This ground of objection can in New Zealand' be entirely removed or, rather, prevented. Mr Halsey's system increases the exertion wage in proportion to the degree of additional effort required in the different callings to exceed the standard. What has been the 1 result of Mr Halsey's system? Let me state his own, words (I am quoting from Schloss on "Methods of Industrial Remuneration," wbioh is the latest information I have):—" Speaking broadly," ho says, "I should cay that tho average increase of output due to the system has been front 25 to 35 per cent., and the proportion of premiums has been such as to mako the increased earnings of the workman rather less than one half of the saving of the employing company." Thus it will be seen that if the workers had got tho whole increase due to their additional exertion, instead of dividing it with tho company (as under Mr Halsey's system), workers on, say, 50s a week would receive, with their exertion wage, from 62s 6d to 67s per week—a very substantial supplement. Since 1891 until now, as far as I have been abb to learn, there has been in force in tho engine works of a largo firm (Willans and RobinBon, of Rugby and Thames, Ditton) a successful trial of tho progressive wage or gain-sharing system. Their practice is as follows:—(1) In respect of all work done in their works a certain sum termed a "reference rate" is fixed. (2) If the amount earned on the job 'as ordinary time wages falls below tho reference rate, then tho balance (i.e., tho difference between tho actual cost in- time wages and tho reference rate) is divided equally betwoen the employers and the workman or the group of workmen employed on tho job. That is, the employees receive by way of bonus (in addition to their time wages) ono half of the amount by which the reference rate price exceeds the sum of these time wages. Of course, the workmen receive thoir full time or needs wages in any case, even if they should amount to more than the reference rate. It will be observed that here the omployers take .half the product of tho extra exertion of the worker. TJlit is not an essential part of the scheme, and the part the employers should take—if they should take any part at all—would, in New Zealand, be determined by the Arbitration Court. This scheme of Willans and Robinson makes a basio principle of keeping tho referenco rates—once fixed—unchanged; recognising, as it does, tlat any system of exertion, wage, to ho successful, must mako tho workman feel that, if by increased, oxcrtion, or skill or oiicfulness, or by discovering improved methods of work, ho can reduce the time necessary for the execution of the work confided to him, the rate of his exertion wage will not on that account be lowered. Another point is that the workmen know, before' they start the work, what tlie reference rate is, and what the rate of exertion wage is to be. Moreover, the exertion rate is to apply to each job separately, so that any loss on one is not to be taken into account against the workman in relation to future jobs. Lastly, the exertion wage, whorevcr possible, is to be paid regularly with the minimum (as I call it), or needs wage. Tho general result of this scheme is, to give the worker a special interest in his work ami increase his wasjes without impairing the general excellence of his work. To those who object that such a system involves complicated bookkeeping, it is, perhaps, sufficient to reply that the firms in question did not

find this so, and that any additional bookkeoping it did involve was well worth the trouble as helping accurate ooat keeping. So far 1 havo dealt with a system of individual gain sharing—that is, of a progressive wage for tho industrial worker. But in fome cases this is impracticable, and a collective progressive wago has been in many cases tried successfully, For instance, in a manufacturing industry, the " preparers" in a woollen yarn factory in some factories work in sets of four. Each of the workers in these groups of four receive a wcokly wage. Then the output of each set of four is measured, and if it exceeds a specified standard the excess entitles the four workers to have divided among them a presented sum as an exertion wage. Numerous instances could be given of this system. It has been employed with greatest success where machinery run by steam or other power is ussd by a group of operatives. In these caws it lias ken found possible for a set of workmen by diligence, and by working together in a loyal and intelligent manner, and without iu any way over-exciting themselves, to increase their output and their earnings. But the system has not been confined to manufacturing industries: it has been successful in many others. In this system the exertion wage may bo divided either (a) among all the members in equal shares, or (b) it may he divided in accordance with the importance of the services rendered by each member of the group. The nature 'of this division could be determined either by voluntary agreement between the men or by tic./i osurt, if necessary. Even exposed to all the difficulties and dangers incident to a system which is largely at the mercy of the employers, this system bos produced excellent results. For example, the scheme of COLLECTIVE GAIN-SHARING which was, and as far as I know is, in operation at the Thames Ironworks, is of particular interest by reason both of its peculiar features and of the circumstances under which this system of progressive wages is applied, 'file plan adopted is that if tho actual cost of the work in time wogos comes to less than the standard labour cost, the group by which Die work is done receives j>y way of a bonus, not a part, a« is commonly the case, but the whole of the difference between the actual and the standard costs. The circumstances here under which this system was adopted were said ,to be as unfavourable to it as could be well imagined, for the requirement generally found essential lo the success of the system is that of "repetition work"; but here it was comparatively absent. There is, indeed, infinite variety iii the work done in this yard: the large size and complex character of a great part of the work done greatly added to tho difficulty of fixing a satisfactory standard of the labour costs upon which tho system is based, and yet it seenis the system works—or worked-vory well for both employers and men. Let me add a few words as to the cases in which the collective progressive wage is used instead of the individual progressive wage. In certain cases work is done by a number of men, each working up to the other. In these cases it is often practically impossible to ascertain in what proportion each man has contributed to the joint output. Here the collective rather than the individual gain-sharing is inevitable. Nbw, I wish to again remind trades , unions that the objections which havo ' been raised in Great Britain to different forms of this syßtem have nearly all lieen objections to the abuses of the system, and not lo the system itself—abuses which, in the absence of any such control or compulsion as that provided by an Arbitration Court, the soluslmess of employers was mainly responsible for. If the system lias been a pronounced success in so many cases in the absence of any tribunal to fix fair standards, surely it could achieve far wider success where a competent court could not only fix the standards, but maintain them and prevent- any abuses of the system. •Let it be remembered that I am not seeking to introduce into the operations of the act some unnecessary experiment. I hold it to be of paramount importance not only lo the workers and employers, but tho whole community, that the workers should have some

DIRECT PECUNIARY INTEREST in the product of their labour. To give all workers, fast or slow, careful or careless, the same wage—to offer no inducement whatever to the worker to take a real and lively interest in his work—to reduce wages to tho same dead level whatever be tho result of the wage-earners' efforts or skill or care—really tends to degrade Jabour. It tends to rob it of that living and wholesome interest, if not a love of tho work, which can prevent tho sense of drudgery 'and add even a pleasure to effort, ffhe system suggested cannot injure the workers, Undor it they arc secured the same minimum, or needs, wage as they now receive under the court's awards; and, assuming the standards aro reasonably fixed by agreement between tho employers and employees or by the court, there is no reason why, without any over-exertion, the great birlk of the workers should not materially increase their wages. The employers could have no reason to complain, for tho system only provides that the workers' additional wage is to be paid of the additional production of their labour. I bolieve that in a great many industries and trades this system, either of individual gain-sharing or collective gainsharing, could be. applied, especially if it loeeived the support and co-operation • of the labour unions. But seeing the motive for proposing it is the benefit of the workers, and seeing that the unions may object to have it thrust on them, I should provide that it was to be prescribed by the court only in such cases as the unions desired. Here you have a method of producing more wealth for the direct benefit of the workers', and thus indirectly for the benefit of the whole community. Before I leave this part of my address I want to make this quite clear: The Prime Minister, in an important speech lie delivered recently at Onehunga, dealt with necessary amendments of the Arbitration Act, and strongly expressed the opinion that some system of progressive wage should be adopted -by tho court. I know that he has given this topic very anxious thought, but what I have said to-night must mjt be taken as committing the Grofernmont to the schemes I have outlined. I desire it to bo understood that I have done no more than explain views and material which aro having the closest attention of the Government.

The attitude of the State to strikes has undergone a curious change, and as it is the social aspect of a Btrike, and that aspect only, which warrants the interference of the State, the change I have referred to it instructive. Originally in England the organisation of workers V means of combinations in restraint of trade las it was called)' was illegal and a penal offence. Even under the act of 1825 some Judges held all strikes were unlawful and punishable as a conspiracy. In England to-day a strike, even if it involves a breach of contract, is not illegal save in a few cases. When the legality of a strike was clearly established the State first treated it as essentially a matter between employer and workman calling for no intervention. In 1875, however, England passed a law which, in effeot, provides punishment with fine or imprisonment for any strike in breach of contract where the workers in gas or water works know that by their leaving work they w'ill deprivo consumers wholly or in part of their supply, and this law also extends to those whose leaving work may endanger life—cause probable injury to other persons, or expose property to destruction. This law (although the act doos not expressly name strikes) proceeds on the basis that, wliert « strike in breach of contract causes directly the risks, injures, and losses to the publio I have mentioned, it is a penal offence and no louger merely a matter between employer and workman. This is the true justification for the State's interference. As regards other strikes, England has made no other provision than the Conciliation Act, 1896, superseding earlier ciuietments. This merely provides for conciliation when the parties desire it. In other parts of the British Empire the State has more actively interfered, and legislation lias Rone along three separate lines, which are as follow:-(a) That of providing no prohibition against strikes or lockouts, but. merely for the fixing of a minimum wage for the several trades, as in the Victorian Act of 1896. There is no law against strikes or lockouts in Victoria, (lij The second line is that of making strikes illegal until the Court of Compulsory Arbitration has heard and decided the dispute. Then there may be either a strike or lockout. This was our law until the act of 1905. (c) The third line is that of directly penalising strikes made before or after an award.

None of this legislation confines itself to the Knglish system of distinguishing between strikes that directly cause gn-nt damage or privation to tiie people ami those which do not. Yet, no doubt, this is the truo principle. There is. for instance, a very strong reason why the light suppliers, or wator suoplieM, or milk s»M>pliers of a. great 'oitv 'who strike, knowing that their aotion will endanger the life, health, or safety of the whole community, should be held guilty of a penal offence, hut taa--same.- cwid<irataoD& scarcely.- wply

to aerated water makers or brewery hands. In tho former case few reasonable men would deny that a strike, with tho knowledge of its cruel results, should be considered a disgraceful act and a penal offence, i especially with a court open to the men, while in tho latter case, as the strikers ' would feel that nobody would suffer more than a little inconvenience, the offence of | striking has no such gravity. The view, however, is ' extending that all strikes inflict fioino lose upon the communilj—that they are A BREACH OF THAT IMPLIED UNDERSTANDING between the great independent classes that if one class will do its part tho other classes.will do theirs. Strikes are in this aspect a desertion of duty. They are, moreover, a breach of industrial peace, and just afi a private assault involves both the individuals concerned and the State, so with strikes they may partake of both a civil and a penal character. As regards the penalty for striking, I gave full reasons at Wangauui for objecting to imprisonment, except, of course, in such extreme oases as those made ]>enal by the English Act of 1075, aixl I need jiot repeat my argument here. It is curious to olieervo that in tho evolution of this compulsory arbitration in the different Australian States and perhaps in New Zealand the more numerous and defiant the strikes and strikers tho more and more stringent has tho law been made against them. It is sufficient to lake for illustration New South Wales. The result of the iir-itating, defiant, and numerous strikes there has been to finally place upon the Statute Book the moot ipenal and drastic strike-prevention law in existence. Let me close this long address with these few observations. It should lie tho aim of every country to provent strikes, not by severe pains and penalties, but by providing, if it be possible, such conditions of labour and suoh a fair, prompt, and' competent tribunal as will secure to the workers all they con ovor reasonably hope to attain by a resort to tho blind force of a strike. This we are trying to provide, but uo such provision can achieve its purpose if it has to oncounter invincible prejudice or irrational antagonism. Its ltr-st hope lies in enlisting for a fair trial the moderation, intelligence, and enlightened self-interest of the great body of tho workers themselves. And not only the best hope of the act hut the best hope of this country a 6 a whole lies in that same moderation and intelligence. The majority On our electoral rolls consist of men and women receiving (not- on an avorago, but individually) £150 or leas .per (tnnum, together -with the wives of such male workers. In their hands tho destinies of Ibis Dominion lie, and in mv judgment our destinies could not be safer. For the sanity, the fairness, and the industry of tilie great body of workers is not to be judged by the silly demands and violent designs of a noisy fow, since one might as well doubt tlw general sobriety of our whole people because a few are given to intemperance. We must not confound noise -with numbers, as we are apt to do, owing to the. widespread publicity the press gives to tihe vehemence of every little knot of discontents. We have in New 7,ea.)and a democracy of workers, the level of whoso intelligence, ability, and material comfort is higher than anywhoro else in the world. 'I heir intelligence is this country's best security. They will demand progress and thoy will enforce it, but it will bo a progress along safe lines. They can distinguish an appeal to reason from an appeal to passion, and will always enlist under those who promise prudent guidance to steadily bettering, conditions rather than under those self-appointed deliverers who Reek their miraculous emancipation from an imaginary bondage.