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STATISTICS OF FOREIGN AND DOMESTIC WAGES, PRICES, FREIGHT AND TARIFF RATES, AND OF DOMESTIC EXPORTS
PRODUCTIVITY AND WAGES OF UNITED STATES AND FOREIGN
One of the most common topics of discussion in hearings and debates upon the tariff is the low rate of wages in foreign countries compared with the high wages in the United States. A great many statistics are available showing comparative domestic and foreign rates of wages, but for purposes of guidance in tariff legislation they usually suffer from two prominent defects.
In the first place a comparison of the wages of the many different kinds of operatives in any industry is of little value unless the relative importance of each operative is known. For example, a foreman in an American shop may receive double the wage received by a foreman in a German shop, but if there are 20 workers under each foreman, the higher wage of the American may not make much difference in the total cost. Or an American weaver may receive double the pay of an English weaver, but the American weaver, having several low-wage helpers, may confine his work to highly technical operations while the English weaver devotes a large part of his time to various chores incidental to the operation of the machine. Thus, while all the wage rates in the foreign and domestic establishment might be the same, the different organization and numbers of the different operatives may be such that the total wage paid would be quite different.
There are also questions of bonuses, and additional rates for overtime which are not usually included in a comparison of wage rates. .
For the foregoing reasons, a comparison of wage rates in a foreign and domestic industry gives little information with respect to actual differences in total wage payments.
The second defect inherent in a comparison of foreign and domestic wages alone is that such a comparison does not take into consideration the productivity of the wage earner. The organization of productive operations, the mechanical equipment, and power employed are as important factors in modern production as labor itself. The highly-paid workman operating an efficient machine may produce at a lower labor cost than the low-paid worker operating an old inefficient machine.
It follows therefore that a comparison of foreign and domestic wage rates is an inadequate criterion for the establishment of tariff rates.
A true measure of the significance of the differences in foreign and domestic wages can be ascertained only by a detailed investigation of costs of production. Cost of production studies, however, are expensive, require much time, and frequently are out of the question because of the refusal of foreign producers to show their records. The fact that many articles are manufactured jointly with other articles, and the problem of obtaining the same grades of foreign and domestic goods, add to the difficulties of the cost comparisons.
Since, for the above reasons, detailed foreign and domestic cost comparisons can not be expected in the near future to cover more than a small fraction of the competitive field, and since an uncritical comparison only of the rates of foreign and domestic wages is misleading, it has seemed desirable to make as careful a study as available statistics permit of actual wages paid in different countries in their relation to the productivity of the wage earner. The published statistics that can be used for this purpose may be divided into two groups: (1) Certain comparative studies that have been made of national income, of the productivity of agriculture, and of special industries, such as coal; (2) industrial census statistics which give for certain industries among other things the average number of workers, the total wages paid, the quantity and/or value of output. Russia, Great Britain, and Germany are the only foreign countries whose industrial census statistics are at all complete. Russian statistics of wages can not be used because of the uncertain value of the ruble. Germany and Great Britain, however, publish statistics which can be used for the purposes of this study.
This chapter, therefore, undertakes to examine the available information on the question of foreign and domestic wages and labor productivity that may be found in (1) general data and special studies and (2) industrial census statistics.
1. General data and special studies.-Workers can not, in the long run, receive as wage earners more than is produced. If the national production or income is small, it necessarily follows that wages will be small. A number of studies have been made of national income. In all cases the figures obtained are estimates and subject to considerable error. All estimates agree, however, in placing the total per capita income of European countries much lower than that of the United States.
The following statistics of national wealth and income have been taken from a table compiled by Redmond & Co., investment bankers of New York City
Per capita wealth and income of certain countries, 1927 1
Assuming that the relative shares of the national income received by capital and labor are about the same in one country as in another country, it is evident that the basic reason for the low average wages
paid in European countries is the low national production, the national income and national production being the same thing.'
Statistics appearing later in this report show that the average English wage in manufacturing industry is 40 per cent of the average United States wage. The above table shows that the per capita income of the United Kingdom is 58 per cent of the income in the United States. The German wage in manufactures is about 33 per cent of the United States wage and the German per capita production (per capita income) is 27 per cent of the United States per capita production (per capita income).
These facts show that the low wages of the European workmen are mainly caused by their low productivity. Industry can not pay them more than they produce. In the United States, on the other hand, per capita productivity (income) is high and therefore high
A certain amount of general information relative to productivity and wages may be obtained by a comparison of agricultural production in the United States and Europe. Agriculture is a basic industry in most countries. Its productivity and wage rates have a marked influence upon wages paid in other industries. Indeed, throughout much of the history of the United States, it was the alternative opportunity open to wage earners to become independent farmers that compelled manufacturers to pay high wages. The wage rate at which the laborer was willing to work was often determined by what he could produce if he took up a farm for himself.
The following table shows the percentage of the population engaged in agriculture, forestry, and fishing in the United States and certain European countries.
Percentage of working population engaged in agriculture, forestry, and fishing
League of Nations, Agriculture and the International Economic Crisis, Geneva, 1927, p. 11.
With an appreciation of the importance that agriculture has upon the wage rate of a country it is interesting to make a comparison of the productivity of the agricultural worker in the United States and Europe. No exact figures may be obtained on this subject, but in 1923 the United States Department of Agriculture made an estimate covering the seven crops: Wheat, rye, barley, oats, potatoes, tobacco, and sugar beets. In these commodities the average production in the United States per person directly employed was found to be 259 per cent of the average production per person directly employed in the United Kingdom, Germany, Belgium, and France combined.?
Excluding income from foreign investments, • Agricultural Year book, 1923, p. 477,
It is stated at the Department of Agriculture that the superiority of agricultural productivity of the United States has greatly increased since the foregoing estimate was made.
The following table compares farm wages in the United States and certain European countries in 1924 and 1925. It shows that the wages in the United States bore about the same quantitative ratio to wages in European countries as labor productivity in the United States bore to that in Europe.
Average wages of farm laborers in the United States and foreign countries 1
U.S. Department of Labor, Monthly Labor Review, August, 1927, p. 116.
In 1927-28 a very comprehensive investigation was made by the International Labor Office of output and earnings in the coal industry. The following table shows for the principal producing countries the average annual output per worker and the average annual earnings per worker.
Output and earnings per worker in coal mines in specified countries, 1925 1
1 Data from: International Labor Office, Studies and Reports, Series D (Wages and Hours of Work) No. 18; Wages and Flours of Work in the Coal Mining Industry, Geneva, 1928, pp. 117, 133, 272, 276.
: For foreign countries these figures include employers' contributions to social insurance. : All bituminous inines.
While the wages paid in the United States are much higher than those paid in European countries, the productivity per worker is so much higher in the United States that the labor cost in this country is much less, as shown by the following table: