1

out.

The extent to which the principle is applicable is the matter now to be tested by experience.

An important argument for the wider extension of profit sharing, thoroughly approved in a number of instances, is its value as a training school for coöperative production. Numerous years' experience as an employee in a profit-sharing house supplies precisely that tuition in the knowledge and the virtues of business needed by the average workman. Great commercial establishments like the Maison Leclaire, the Godin foundry, the Coöperative Paper Works of Angoulême and the Bon Marché, have enforced upon large bodies of people in a leading handicraft, in two prominent manufactures and in a great distributive concern the truth that success in trade and production demands more than the strict application of the democratic principle. These four concerns are virtually coöperative; certainly, they secure to the employees and stockholders the substantial benefits of purely coöperative productive enterprises, while they are still, logically, profit-sharing establishments. There has been a process of development in them, out of profit sharing on the basis of the ordinary wages system into profit sharing on a basis of modified coöperation. In this slowness of growth and in the education which it implies reside the strength and the promise of permanence of these houses.

The unmodified wages system compensating the employee according to his hours or the actual amount of work accomplished; various modifications of it like "progressive wages;" profit sharing, inclining to coöperative production; and coöperative production itself, though in a less degree than the preceding methods, are the probable forms of the labor contract

in the near future. There is no necessity for attempting to predict the proportion in which these systems will divide the industrial field among them ten years or a hundred years hence. It seems to me probable, however, that, with a steady progress in intellectual enlightenment and moral ability, such modifications of the wages system as profit sharing will be widely extended, and that they will lead, in the course of time, to a much larger practice of coöperative production proper than we now see.

CHAPTER IX.

INDUSTRIAL PARTNERSHIP.

I. WHAT PROFIT SHARING MEANS.

THE position to which a careful study of the record of the system of dividing the profits leads many I have thus stated: "Profit Sharing, the division of realized profits between the capitalist, the employer and the employee, in addition to regular interest, salary and wages, is the most equitable and generally satisfactory method of remunerating the three industrial agents." Subsequent observation and reflection have strengthened my belief in the soundness of this view. Profit Sharing has attracted much attention in the last four years; there has been a substantial increase in the number of firms practicing it, and a considerable public opinion in favor of it has been developed. It is by no means a cure-all, even for troubles specifically industrial; much less is it a panacea for the many distresses of our time not due to industrial causes. To aid the movement toward a rational evolution of the wages system, I would here supplement the exposition and the argument of my detailed work on the subject. The present chapter considers with some fullness two or three leading objections made to the method, and states compactly the advance which profit sharing has made in the last 1 Profit Sharing, p. 412; 1889.

four years; both sections largely take for granted the facts and the arguments I have heretofore presented.

Profit Sharing should be defined by the addition of the words "between employer and employee." Mr. Sedley Taylor obscured a proper distinction when he qualified the division as one "between capital and labor." It is not the capitalist as such, but the employer who contracts with the employee; even when the two functions are united in the same person, as they often are, they should be kept logically distinct. Profit Sharing, thus defined, is a step forward, both natural and necessary, in "the evolution of the wages system." But the most forcible, as it is also the most common objection to this development derives its apparent strength from a very obvious criticism suggested by the name. Profit and loss are the Siamese twins of business. If one is mentioned, the other immediately presents itself to the mind. Hence arises the usual objection to the scheme of profit sharing that it does not include the sharing of losses by the employee. Because loss is not associated with profit in the name of the method, it does not, however, follow that no provision has actually been made to remedy the superficial inequity which it requires no keenness of mind to observe. If we consider the matter with a little care, we shall see that the standard systems of profit sharing do not suffer from this objection, the whole force of which lies in its immediate plausibility.

One point only need be remembered to change the vigor of the criticism in question into weakness: the workingman should be treated as fairly as the manThe employer may fail, in a certain year, of that recompense in profits to which his business talent

ager.

seems to entitle him. He draws a

salary in proportion to the importance of the place. If trade is flourishing, he generally receives also a share of the profits. If the venture is for the time unsuccessful, he will redouble, if possible, his pains and skill. The capitalist does not require him after a bad year to pay back a part of the large salary which he has been receiving. If the manager fails to obtain a good profit over and above wages, salary and interest, and even the payment of interest becomes uncertain, his salary, which stands as the usual just recompense of his skill and power, will be cut down. He is not supposed to do less now than in successful years; he is quite likely to do more. He loses in bad years, however, the difference between his normal salary and the lower amount which he actually receives; but out of this reduced salary he is not expected to take a portion toward making good any loss of interest to the capitalist, in the year past.

The employee contributes to the joint undertaking hand-labor qualified by a varying amount of intelligence. For this hand-labor he receives, under the common wages system, a fixed return by the day or the week. He can expect nothing beyond this in the shape of a share in the net profits, however slight, after all expenses for interest, salaries, wages, reserve, depreciation, and repairs have been met. us now suppose that his employer admits him to a share in the profits, a share determined in all its conditions by the employer, and moderate in size as it is based on a calculation of the probabilities of a series of years, good and bad. Under the stimulus of this promised bonus, the workman is expected to increase the efficiency of his labor, as regards quantity