BULLETIN

of the Siberian Institute of Technology

Vol. 1 (47), Livr. 4.
Tomsk. 1927.

PROCEEDINGS

of the Siberian Institute of Technology

Volume 1 (47). Issue 4.

CONTENTS OF THE ISSUE:

Page		Page
1	I. N. Butakov, prof. Wages of workers in production	1
1	I. N. Boutakoff, prof. Les salaires des ouvriers de l’industrie	1

Tomsk.
1927.

Printed at the printing and lithography works of the Tomsk Railway, Makarovsky Lane, No. 4.

Okrlit No. 1337.
Print run: 850 copies.

Table of Contents

	Page
Methods of inducing more intensive labor	1
Profit-sharing system	2
Bonus systems	5
Advantages of bonus systems	6
Objections to bonus systems	12
Choice of bonus systems	15
Establishment of bases	16
Shop-floor wage	18
American forms of labor remuneration	21
Taylor’s differential system	21
Gantt’s system	23
Emerson’s system	23
Significance of incentive systems	25
Bonuses for administrative and technical personnel	27

I. N. Butakov, Prof. STI.

Wages of Workers in Production

Methods of Inducing More Intensive Labor

The methods used in industry by which a worker may be encouraged to more intensive labor can be grouped in the following order:

I. The most primitive methods, amounting to vigilant supervision over workers and disciplinary penalties, up to and including dismissal from service in cases of slow work and evident signs of laziness.

II. Methods intended to interest the worker himself in increasing productivity, namely:

a) prospects for improving one’s well-being in the future in connection with further advancement in service;

b) the possibility of a continuous increase in the remuneration received, or simultaneous rewards for diligence;

c) participation in the profits of the enterprise;

d) incentive forms of remuneration for labor, ensuring a certain, predetermined increase in earnings depending on the productivity achieved by the worker.

Methods of the first group are applied rather often, chiefly in work of a temporary and casual character, where the assignment of any norms of productivity, as well as verification of the degree of productivity attained, is difficult and sometimes even outright impossible. With the primitive organization of this kind of work, when workers have no personal interest in the results of their labor, a certain level of productivity, a fairly low one, has to be maintained here exclusively by measures of administrative control, by appointing a large number of overseers, which raises the cost of production without, nevertheless, achieving proper productivity. This primitive organization was typical of the conditions of slave economy, when the morally negative side of the system mattered little—a side that is bound to offend the sense of personal dignity of the modern cultured worker—namely, this petty regimentation and supervision on the part of an overseer, for whose abuse of power the widest scope is here opened as well.

At the present time, the methods indicated in the second group are of far greater importance. The first of them, as based on the hope of future advancement in service, is a powerful means of increasing a worker’s capacity for work. However, the stimulating effect of this method can be significant only for workers who are especially qualified and gifted, who, by their development and moral cast of character, are able to count on promotion up the steps of the hierarchical ladder as vacancies arise and are able to assume the burden of responsibility connected with a higher official position. Here one must know how to wait. The number of such workers is usually not large in an enterprise compared with the rest of their mass, for whom it is important to have other incentives, acting more immediately, at a closer distance, and, above all, more regularly, so that a more direct dependence may be established between effort and reward,

which can be achieved to a certain degree, in the opinion of some, by regularly increasing the daily (piece-rate, hourly) wage for zeal shown in the work. The drawback of this method is that here the increase in the daily wage takes on the character, each time, of a kind of favor to the worker; it is not the latter’s legal right and very often depends on the subjective disposition of the immediate superior, on favoritism, on good relations; in assigning supplements to the daily wage, various extraneous considerations may figure instead of impartiality and justice. Workers, not infrequently, wishing to obtain a supplement, try only to please the foreman instead of working intensively. In the final analysis, there is here no direct, entirely evident dependence between the worker’s output and the increase in his daily, hourly, or in general time wage. This form of time payment, based on the constancy of remuneration per unit of working time, merely for the very fact of the worker’s presence at work, regardless of what quantity of products he produces, is the most elementary method of paying the labor of workers in industrial enterprises. If we set aside the worker’s possible sense of duty, what makes him work under this form of payment is the presence of persons from the administration, and the fear of losing supplements to his time wage or even of being dismissed from service altogether in case of unusual laziness. As a result, it turns out that this device for interesting the worker in increasing his productivity differs little from the primitive devices of the first group.

Nevertheless, there are cases when time payment is preferred to any other. This occurs, for example, when careful execution of the work is far more important than its speed, as is the case with artistic and elegant products. In those cases when the character of the work performed changes every day, if not every hour, payment is usually also made on a time basis; likewise, when work of a new kind is introduced, it is customary to put the worker on time wages until his productivity per unit of time has been ascertained.

If the wage per hour in monetary units (rubles, kopecks) is \(a\), and the quantity of time expended on producing the work is \(t\), then the worker’s earnings are:
\(S = a \cdot t\), i.e., the worker’s earnings vary with time according to the law of a straight line passing through the origin of coordinates, the tangent of whose angle of inclination to the axis of abscissas \(t\) is \(a\). As for the change in the hourly wage itself, for the given case

\[ a = \frac{S}{t} = \mathrm{const.} \]

it represents, as \(t\) changes, a straight line parallel to the axis \(t\). In drawings 1 and 2 the construction is carried out for the case \(a = 0.5\) rubles.

Profit-Sharing System.

Turning now to the system of profit sharing in the enterprise, at first glance we cannot deny this form of payment great reasonableness and attractiveness. Indeed, the participation of workers in profits, it would seem, should smooth out the contradiction between the interests of the enterprise and the worker, instilling in the latter the conviction that he has passed from the position of a hired hand, living only by wages, to the position of a comrade in profits: he has begun to work not only for the entrepreneur, but also for himself. A community of interests arises. Thanks to the worker’s greater energy, his greater care for the tools and materials entrusted to him, and the resulting possibility of saving a considerable share of the costs of supervision—thanks to all this, under the profit-sharing system such gains may be achieved as had not existed before.

However, this principle, which at first glance seemed so valuable, in practice proves to be far from so fruitful.^1) First of all, it may quite well happen that, despite all the worker’s efforts, despite his conscientious attitude toward the work, the enterprise incurs losses for the operating year as a result of mistakes by management, the inactivity of the managerial staff, an unfavorable business situation, and so forth. Thus the workers receive nothing of the expected profits. It is clear that in the following operating year they will not show their former diligence in work, for they will consider that they have been treated unjustly.

This feeling of injustice will be especially acute because workers are often not in a position to check the accounting operations of the enterprise; these are not so simple, and, moreover, contain a certain element of subjectivity: depending on the degree of caution with which the balance sheet is drawn up, one or another profit may be calculated. Therefore there will always be some measure of distrust here on the part of the workers, who will feel that they have been cheated, especially in bad years. This must inevitably disturb the atmosphere of trust and the harmony of interests.

Furthermore, a share in the total profit, divided among all the workers, gives one man more than he deserves and another less, since people are not equal in diligence and ability. There is no doubt that under such conditions a diligent and experienced worker will quickly lose his inclination toward intensive labor, seeing that he has to work for his lazy or incapable comrades. An able and industrious worker will inevitably sink, under such circumstances, to the level of his incapable fellow workers. An aggravating circumstance here must also be considered the fact that, as is known,^2) for successful work there is required a grouping of people into small artels of no more than 5–10 persons in each, working together in one another’s sight, if it is not possible to organize people’s work individually. In the case under consideration, however, the group is the entire staff of the enterprise, and, given the considerable size of the latter, it appears highly probable that many workers will not work diligently, since none of them can be sure that, while he is exerting every effort to increase the profits of the enterprise, at the same time some of his comrades, working in a part of the enterprise remote from him, are treating the matter carelessly, forcing him to earn a large premium for them.

A further shortcoming of the form of remuneration described is also that the reward for effort is here too remote, for in order to receive profits one must wait until the end of the operating year. The economic weakness of the worker, who usually lives from day to day, does not allow him to wait for some receipts (sometimes doubtful ones) until the end of the year, which, strictly speaking, annuls every incentive to increase productivity.

It is also necessary to note that in an enterprise of the progressive modern type, profit is usually created by improving organization and equipment, which is chiefly the result of the efforts of the administrative-technical and commercial personnel of the enterprise and requires expenditures by the entrepreneur. If the worker receives his share of the profit, this is often not in the slightest degree connected, for him, with any additional expenditure of energy; it is not the result of his labor, but simply a gift, unearned income for

^1) Spencer. Principles of Sociology. St. Petersburg, 1898, vol. II, p. 679.
Schloss. Forms of Wages. St. Petersburg, 1900, pp. 286–309.
Engineer. 1911, No. 10. Krzhizhanovsky. Critical review of modern systems of payment for the labor of foremen and workers, pp. 309–310.
John Cole. The Wage System. Moscow, 1923, pp. 112–115.

^2) Butakov. Administrative-Technical Organization of Industrial Enterprises. Tomsk, 1921, pp. 9–17.

at the expense of the energy of the managerial personnel, and partly at the expense of the entrepreneur, who provided the means for improving the production process. The same remark also applies to commercial operations, which, apart from the will of the workers, may yield good profits owing to the excellent organization of the sale of the products of production, skillful purchases of raw materials, etc.

After what has been said, there is nothing surprising in the fact that the method described for encouraging workers to more productive labor has not in practice produced the expected results. In individual cases the introduction of a profit-sharing system did indeed induce workers—at least the most diligent and intelligent among the personnel—to perform their work more zealously and more carefully than before; this phenomenon can especially be observed in the very first period after the introduction of the new arrangement, until closer acquaintance with the results has brought about neglect and indifference toward it. Thus, a profit-sharing system was introduced by Prof. Abbe at the Zeiss optical factory in Jena among a selection of workers of exceptional intelligence, where, according to some testimony, it yielded comparatively favorable results. Of interest, however, is the lengthy assessment of the very initiator of the introduction of the system, Prof. Abbe:¹ namely: “We cannot ascribe to the introduction of the profit-sharing system any favorable consequences for the enterprise, such as, for example, an increase in diligence, zeal, etc., on the part of the participants in the work. Likewise, we have not been able to establish any noticeable results of the system’s operation in social or moral respects.”

Another kind of workers’ participation in profits consists in their being given the opportunity to acquire shares of the enterprise on favorable terms. This system was applied, for example, in the United States of America on an especially broad scale by the Steel Trust. For the first time, in 1903, the company used 2,000,000 dollars, the remainder from the profits of the preceding year, to purchase 25,000 shares, which it offered to 168,000 employees at the rate of 82.5, payable in installments over three years. In order to incline the workers to retain the shares, an extraordinary dividend of 5 dollars per share per year was promised on condition that the shares remain for more than 6 years in the hands of the original purchaser.² The proposal was met with general sympathy: 48,083 shares were acquired by the company’s workers. Soon afterward there occurred a fall in the price, which they wished to forestall by the operation described: the shares fell to 50. In order to reassure the workers and at the same time prevent a further decline in the price, which would inevitably have occurred if the workers had begun to sell their shares, the company undertook to buy back the shares held by the workers at the rate of 85.5 only if the workers kept them until the end of 1908. Already in December 1903 the company made a new issue on the same terms as before, but at the rate of 55. Again 10,248 workers bought a total of 32,519 shares. And since the shares, meanwhile, again rose to 82, this time the workers found themselves in a winning position.

Here the worker participates in profits no longer as an employee, by virtue of the work he performs, but on the basis of the fact that he owns a certain capital in shares. The aim pursued by this measure is clear: to attract, retain, and encourage to more intensive work such a body of employees and workers as would itself be interested in the enterprise, as owners. Without speaking already of the fact that many of the objections formulated above with regard to the first form of profit-sharing retain their force here as well, in the present case one must especially take into account the consideration that the work—

¹ Werkstatts Technik. 1910, p. 32. Seffer. Ueber das zurzeit zweckmässigste Lohnsystem für gewerbliche Arbeiter.

² Zombart. Why Is There No Socialism in the United States? St. Petersburg, 1907, p. 103.

workers are not inclined to place their savings in securities, which represent a very unreliable value. This is why, for the mass of workers, participation in the profits of an enterprise as shareholders is not the correct solution to the question of payment for their labor.

Bonus systems.

In this way we have gradually approached subgroup g) of group II of methods for encouraging workers to more intensive labor. Here it was natural first of all to dwell on the idea of issuing a bonus to those workers who finish the work earlier than the appointed time. Therefore, if the actual time (the work time) for the performance of some work proved to be \(t\), and the appointed time (the basis) \(t_1\), then, with the value of a daily (shop) hour of work equal to \(\alpha\), the worker’s earnings will be: \(S=\alpha t+k(t_1-t)\alpha\), where \(\alpha t\) is the time wage (daily, basic, shop wage), and \(k(t_1-t)\alpha\) is the bonus, with \(k\) the coefficient showing what part of the bonus term \((t_1-t)\alpha\) will accrue to the worker’s benefit. The equation \(S=\alpha t+k(t_1-t)\alpha\) characterizes an entire group of forms of labor payment known as bonus forms. By assigning one value or another to the coefficient \(k\), we can obtain any bonus form at our discretion. In practice the following forms of payment have become widespread: for \(k=1\), the Prussian-Hesse system, where \(S=\alpha t+\alpha t_1-\alpha t=\alpha t_1=\mathrm{const}\); for \(k=0.33\) or \(0.5\), the Halsey system, in which \(S=\alpha t+(0.33\)

or \(0.5)(t_1-t)\alpha\); for \(k=\dfrac{t}{t_1}\), the Rowan system, in which \(S=\alpha t+\dfrac{t}{t_1}(t_1-t)\alpha\).

If \(S=\alpha t\) represents (Fig. 1) a straight line passing through the origin of coordinates, and if for \(t=t_1=10\) hours and \(S=0.5\cdot10=5\) rubles, then for the Prussian-Hesse system \(S=\alpha t_1\) is a straight line parallel to the axis of abscissas \(t\), drawn at a distance from the origin equal to \(0.5\times10=5\). Taking, for example, \(k=0.5\), we find for the Halsey system \(S=0.5\alpha t+0.5\alpha t_1\), i.e. in this case as well the worker’s earnings change along a straight line passing from the origin at a distance \(0.5\alpha t_1=0.5\cdot0.5\cdot10=2.5\) at an angle of inclination to the axis \(t\), whose tangent is \(0.5\alpha\), so that for \(t=t_1\) we have \(S=\alpha t_1=0.5\cdot10=5\). Finally, for the Rowan system:

\[ S=2\alpha t-\frac{\alpha t^2}{t_1}. \]

This is the equation of a curve of the second order, in which the coefficients \(B\) and \(C\) in the equation of the general form:

\[ Ax^2+Bxy+Cy^2+Dx+Ey+F=0 \]

are equal to 0. Consequently, \(AC-B^2=0\), which characterizes, as is known, a parabola. For \(S=0\) we have \(t=0\) and \(t=2t_1\). For the greatest value of \(S\), we obtain:

\[ \frac{dS}{dt}=2\alpha-2\alpha\cdot\frac{t}{t_1}=0, \]

whence \(t=t_1\) and \(S=\alpha t_1\), which determines the coordinates of the vertex of the parabola. The parabola is constructed by the method clear from Fig. 1. Since in any of the bonus forms of payment the total earnings \(S\) consist of the daily (shop) wage (the work time) \(\alpha t\) plus the bonus \(k(t_1-t)\alpha\), in Fig. 1 we have the amount of the bonus: for example, in the case of completing the work earlier than the basis (10 hours), namely within 6 hours, in the form of the segments: \(ab\)—for the Prussian-Hesse system; \(ac\)—for the Halsey system; \(ad\)—for the Rowan system. From Fig. 1 it is evident that at \(t=0.5t_1\) the bonus in the Halsey system is equal to the bonus in the Rowan system; before this point, workers working under the Rowan system are in more advantageous conditions, while beyond this limit the Halsey system becomes more advantageous for them. The same follows directly if we equate the bonus terms: \(0.5(t_1-t)=\dfrac{t}{t_1}(t_1-t)\), whence \(t=0.5t_1\).

Since before \(\dfrac{t}{t_1}=0.5\) we always have \(\dfrac{t}{t_1}>0.5\), it is clear that the Rowan system is more advantageous

workers up to this limit, and then \(\dfrac{t}{t_1} > 0.5\), and the preference is on the side of the Halsey system. For the Rowan system it is characteristic that the amount of the bonus, at first increasing up to the moment corresponding to a saving of 5 hours from a 10-hour base, i.e. up to \(5 \cdot 100 : 10 = 50\%\), then decreases, reaching zero at \(t = 0\), despite the continuing reduction of the time spent on the work. Thus the bonus in the Rowan system has a maximum—

\[ \frac{a(t_1 - 2t)}{t} = 0, \]

whence \(t = \tfrac{1}{2}t_1\), i.e. the truly maximum bonus is obtained in those cases when the saving of time is close to one half of the base.

From the laws of change of total earnings \(S\) as a function of \(t\), let us now turn to the change in the hourly earnings \(p\), likewise as a function of \(t\). For the case of day work, the law of this latter change was established above:

\[ \frac{S}{t} = \frac{at}{t} = a = p. \]

For the Prusso-Hessen system:

\[ p = \frac{S}{t} = \frac{at_1}{t}, \]

whence

\[ p \cdot t = \text{const.}, \]

i.e. the change in hourly earnings follows the law of a hyperbola. For \(t = 0\), \(p = \infty\), and for \(p = 0\), \(t = \infty\), i.e. the axes of coordinates are the asymptotes of the equilateral hyperbola. To construct the hyperbola one more point is needed, which we find by putting \(t = t_1\); then \(p = a\). Thus, by the method indicated in Fig. 2, we construct the hyperbola. For the Halsey system we have:

\[ p = \frac{S}{t} = 0.5a + 0.5\,\frac{t_1}{t}a. \]

This is the equation of a hyperbola. For \(t = 0\), \(p = \infty\); if

\[ p = 0.5a, \]

then

\[ 0.5a\,\frac{t_1}{t} = 0, \]

which is possible when \(t = \infty\). Thus the asymptotes of the hyperbola are: the axis of ordinates and a straight line parallel to the axis of abscissas, drawn from the origin at a distance \(= 0.5a\). The construction of the hyperbola is carried out in Fig. 2. This hyperbola lies below the corresponding hyperbola for the Prusso-Hessen system, which indicates a slower increase in hourly earnings as \(t\) decreases, although for \(t = t_1\) both hyperbolas have the common point \(p = a\). Finally, for the Rowan system the hourly earnings are

\[ p = S/t = 2a - at/t_1, \]

which gives a straight line passing from the origin at a distance \(2a\). For \(t = t_1\), \(p = a\). The straight line is shown in Fig. 2. The hourly earnings of the Halsey and Rowan systems are the same:

\[ p = 0.5a + 0.5a\,\frac{t_1}{t} = 2a - a\,\frac{t}{t_1} \]

when \(t = t_1\) and when \(t = 0.5t_1\), as is seen also from Fig. 2. From Fig. 2 it is also evident that only in the case \(t = 0\) do the hourly earnings in the Rowan system become \(2a\). This follows directly also from the formula

\[ p = a\left(1 + \frac{t_1 - t}{t_1}\right), \]

from which it is clear that always

\[ \frac{t_1 - t}{t_1} < 1. \]

Thus the worker’s hourly earnings here, under no conditions, can reach 100% of his basic (shop) hourly wage.

Advantages of Bonus Systems

From what has been said it follows that the essence of all bonus forms of labor payment amounts to this: the worker is assigned to perform a certain job within a definite time (the base). In this respect bonus systems differ from the so-called piecework form of labor payment, where the work is performed for a definite, previously assigned monetary wage. In this case the worker reـ

receive such pay per unit of work independently of the time actually spent on carrying out that unit. In this respect the piece-rate system converges with the Prusso-Hessian one, since the piece-rate price is, in essence, nothing other than the product of the base by the cost of a shop hour, i.e., in the Prusso-Hessian system we have the piece-rate price decomposed into its elements. To understand the advantages of such decomposition, one should bear in mind that the time required to perform the work is a technical element accessible to regulation, within known limits, by the enterprise’s technical agencies, and determined by the objective conditions of production itself; whereas the cost of a shop hour is an economic factor, variable, taking into account local conditions of costliness, determined partly by the national and partly also by the world conjuncture, and, as such, little susceptible to the regulation just mentioned.

It is known that in the period preceding the last world war, the cost of living was rising, as may be seen from the following brief data on changes in the general level of prices outside our country:¹)

Years	England	United States	Germany
1896–1900	96.5	97.1	99.4
1901–1905	101.0	112.7	108.7
1907	109.8	129.5	132.7
1910	—	131.6	—
September 1911	121.7	—	139.4

The following index figures already relate to our Russian conditions and concern food products, clothing, footwear, heating, and lighting.²)

Years	Flour, rye (Moscow)	Flour, wheat (Moscow)	Groats (Moscow)	Meat (St. Petersburg)	Millet (Moscow)	Lard (SPB)	Butter, cow (Moscow)	Eggs (Moscow)	Milk (Moscow)
1890–99	100	100	100	100	100	100	100	100	100
1900–09	117.6	118.8	111.2	119.4	122.7	129.6	111.8	114.2	106.0

¹) Proceedings of Kharkov University, 1912, book 2. Antsyferov. The Rise in Prices and the Increased Cost of Living.

²) Proceedings of the Moscow Commercial Institute. Economic Section, book 1, 1913, p. 136. Sotilin. On the Increased Cost of Living in Russia in 1900–1909 and Its Causes.

Also: Ministry of Trade and Industry. A Compendium of Commodity Prices on the Principal Russian and Foreign Markets for 1912. SPB, 1913, pp. II–VII.

Years	Cotton yarn (Moscow)	Woolen yarn (Moscow)	Leather (Moscow)	Firewood (Moscow)	Coal (Rostov-Don)	Kerosene (Moscow)
1890–99	100	100	100	100	100	100
1900–09	120.6	122.0	165.5	99.8	117.2	116.8

The rise in the cost of living is a complex phenomenon, and there are different views as to its nature¹. Without going into the details of this question, we shall confine ourselves to establishing only the fact itself. With the beginning of the world war, the rise in the cost of living and the increase in wages for workers proceeded at a rapid pace. Thus, for example, the French Ministry of Labor gives figures for the increase in wages for workers in the coal industry².

Years	Northern basin	Northern basin, %	Canal basin	Canal basin, %	Loire basin	Loire basin, %
1913	6.20	100	4.13	100	4.05	100
1914	6.34	103	5.59	135	4.85	120
1918	13.17	213	11.77	285	10.27	250
1919	16.77	270	15.03	360	14.12	345

According to data of the United Steel Co. trust (America), concerning its own workers, whose number reaches 250,000 persons, the average earnings of the latter amounted, in dollars, to:

Year	Per day	Per year
1913	2.92	905
1914	2.97	905
1915	3.01	925
1916	3.36	1042
1917	4.16	1296
1918	5.38	1685
1919	6.17	1902

Increase in % from 1913 to 1919:

per day — 108

per year — 111

In the following table we have the indices of the Ministry of Labor in England, in %% of the increase in items of expenditure constituting the essential contents of a working family’s budget (food, clothing, heating, lighting, etc.), as against prewar prices¹:

	1915	1916	1917	1918	1919	1920	1921
January	10–15	35	65	85–90	120	125	165

The greatest increase falls in November 1920, when it reached 176%, having fallen in June 1921 already to 119%.

Analogous data may be cited for any country, both neutral and directly drawn into the orbit of the terrible war. Everywhere and in all places we observe one and the same picture of a rapid rise in the cost of living and an increase in workers’ earnings from the moment military complications set in.

Under such conditions, piece-work rates are subject to continuous changes, and the economic aspect completely obscures the technical one. Workers feel that their insufficient earnings, failing to keep pace with the rising cost of living, are due to low piece-work prices. The struggle shifts onto the plane of raising them. Since, on the other hand, the piece-work rates themselves are usually drawn up not from precise observations and determination of the actual cost of the given work, but in most cases “by eye,” with a calculation to yield a certain increment, it is understandable what broad field for misunderstandings is opened here. The situation becomes especially burdensome when life begins to grow cheaper and it becomes necessary to reduce piece-work rates. Then there begins a period of continuous conflict. In this respect the period after 1905–1906 is especially instructive for us, when life, beginning to return to normal, required a reduction of rates that no longer corresponded to the new economic conjuncture.

If from periods of upheaval in national life we turn to periods of its normal course, then here too the inconvenience of piece-work rates may be seen from the following. As we have seen, life in the prewar years was continuously becoming more expensive, the natural result of which would have been to expect an increase in piece-work rates in accordance with the rising cost of living. Meanwhile, in enterprises progressive piece-work rates remained unchanged, or even everywhere and repeatedly were lowered, which always caused sharp dissatisfaction on the part of the workers. The fact is that the management of a properly functioning enterprise is always concerned with introducing improvements into the production process, and these improvements in many cases not only have the character of a fundamental re-equipment with the replacement of obsolete machines and tools by more productive ones, but also come down to measures of an organizational order or to a series of small, at times scarcely noticeable, adjustments that accelerate the course of the production process, in their sum to a very considerable extent. If, in the case mentioned above of fundamental re-equipment, a lowering of rates seems convincing to a certain degree, then in the presence of circumstances of the second category it seems to workers completely incomprehensible and unjust, given a general rise in the cost of living.

When we have a premium system, then in this case the reaction to the rise in the cost of living is created by the factor \(a\); the base \(t\), however, is completely emancipated from any dependence on economics, being a purely technical factor. With an improvement in the technique and organization of production, the base \(t_1\) will be lowered, which is understandable and convincing to all, while the factor—

—the shop \(a\)—the shop cost of an hour—will rise together with the cost of living, a fact which workers can always be shown if they object to the nonconformity of earnings with the cost of living. Only when bonus systems are applied does the technical factor (the base \(t_1\)) become independent, and a broad possibility opens up for the calm work of the administrative and technical personnel in the direction of improving the production process and reducing the cost of the products of production, without in the least having to reckon with changes in the cost of living. This is the most important advantage of bonus forms of labor remuneration. Western European and American practice has long taken account of this advantageous aspect of the latter, and bonus systems have found the widest application abroad. Evidently understanding perfectly well the advantages described, in the years of grave wartime complications with their increasing cost of living, the Germans, almost on the eve of the war of 1914, introduced with the utmost haste on their railway network the Prusso-Hessian system in place of the piece-rate system that had long been practiced.¹

Turning to further advantages of bonus forms of remuneration as compared with piecework, it is necessary to note their advantage in the case of artel (brigade) work. When piecework takes place, the distribution of the total earnings among the members of the brigade is usually made in proportion, first, to the number of hours of actual work of each (attendance), and, secondly, to the day (hourly, shop, basic) wage. Thus, out of the total earnings, with an equal number of hours of attendance, workers who have a higher shop wage receive a larger sum. The latter usually increases with the worker’s years of service not only because of an increase in his productivity, but also in connection with his good service qualities, in connection with the accumulation of his experience, which makes it possible to find his bearings in the mass of work cases encountered in practice. With years of service a worker’s productivity may even weaken together with the general decline in his capacity for work; nevertheless, a high shop wage is often preserved for him as a privilege of his long-standing service. On this ground misunderstandings often arise, and complaints on the part of the young members of the brigade, who have small ordinary shop wages, against the old men, whose high shop wage they have to work off. An accidental accumulation in a brigade of persons with high shop wages lowers the brigade’s extra earnings, for the excess of piecework earnings over the cost of attendance becomes small, lower than the average for other brigades. This may lead either to an increase in the rates for such a brigade, or to bad relations being created between it and the administration. Bonus forms, however, make it possible to distribute the sum of the bases \(t_1\) worked out, in proportion exclusively to the time of actual work of each member of the brigade. Let us take an example. Suppose that some brigade has worked out, during a definite interval of time (for example, in a month), a sum of bases for various orders amounting to 2000 hours, while all the members of the artel were actually at work (in attendance) for 1600 hours. Then:

\[ S = at + k \cdot a \cdot (t_1 - t) = at + at \cdot (t_1 - t) k_o, \]

where \(k_o\), for the systems of Prusso-Hessian, Halsey, and Rowan, is respectively equal to:

\[ \frac{1}{t}, \quad \frac{0.33\text{--}0.5}{t}, \quad \text{and} \quad \frac{1}{t_1}. \]

Thus, the earnings of the whole brigade and of each of its workers are represented as the sum of the cost of shop attendance \(at\) plus a certain percentage of it in the form of a bonus (pri-

earnings). In our particular example we have the percentage of extra earnings:

Prusso-Hessian system—

\[ \frac{(t_1-t)100}{t}=\frac{2000-1600}{1600}\cdot 100=25\%. \]

Gehlsen system—

\[ \frac{0.5(t_1-t)100}{t}=12.5\%. \]

Rowan system—

\[ \frac{t_1-t}{t_1}\cdot 100=\frac{2000-1600}{2000}\cdot 100=20\%. \]

Hence it is evident that the percentage of extra earnings does not depend on the shop wage of the workers, and consequently the earnings of any member of our brigade who has worked 200 hours in a month and receives an hourly shop wage \(\alpha=0.1\) rubles will, for the three cases under consideration, be \(S_1=0.1\cdot200+0.25\cdot0.1\cdot200=25\) rubles; \(S_2=0.1\cdot200+0.125\cdot0.1\cdot200=22\) rubles 50 kopecks, and \(S_3=0.1\cdot200+0.20\cdot0.1\cdot200=24\) rubles.

At the same time, even in individual work the application of bonus systems can provide serious advantages in that it makes it possible often to have greater freedom in assigning people to separate jobs. Here it is possible not to adhere to the rule, as under the piece-rate system, of having a special type of product, priced at a high shop wage, for the more expensive workers. There are cases when many orders come in for products requiring simple processing, which ought to be given to cheap hands. The opposite also occurs. And since work is usually of an urgent character, orders have to be distributed to vacant positions, whereby simple jobs sometimes fall to expensive workers. A piece-rate valuation constructed for workers receiving a low wage gives expensive workers no opportunity to have any extra earnings, and piece work in this case loses all interest for them. Conversely, a young capable worker with as yet a low shop wage cannot, under the piece-rate system, be admitted to that special type of product set aside for a high shop wage, since he could earn an enormous percentage of extra earnings on that work.

Further, as an advantage of bonus systems one must note the attainment, when they are applied, of the possibility of a direct comparison of standards for the same jobs in different localities. Under the piece-rate system such comparison is hampered by the distorting influence of local conditions of high cost, and in order to obtain comparable results it is necessary to know the local prices of labor. This advantage has especially great significance when there are homogeneous enterprises under the centralized management of some single owner and geographically located in different districts. For example, a network of railways operated as a state enterprise. In the above-mentioned introduction of the Prusso-Hessian system on the German network’s roads, this was one of the serious motives in favor of its introduction, for comparison of standards opened the possibility of detecting striking differences in the standards of various railway workshops, pointing to shortcomings of equipment, location, organization of work, etc., which provided material for measures to improve matters, encouraging the leveling of those lagging behind with those ahead.

But the most important significance undoubtedly belongs to this assignment, in the form of standards, of a definite quantity of time for carrying out a job. In this way the question is transferred from the plane of determining rates “by eye,” as is usually done under the piece-rate system, to the plane of the need to establish standards by observing the duration of work by an ordinarily average worker; this, of course, introduces greater clarity and stability into the standards and eliminates many misunderstandings.

A specific advantage of the Halsey and Rowan systems is that here, along with an increase in the worker’s productivity (the time \(t\) is reduced), the cost of the product of production is reduced. This reduction is due not only to a decrease, per unit of product, in the value of overhead expenses because of the acceleration of the production process, which takes place under all incentive systems, but also to a reduction in the cost of labor power per unit of output, which follows directly from the formula: \(S = at + k(t_1 - t)\cdot a\) when \(k < 1\). From this point of view, it would seem advantageous to give \(k\) the smallest value; but at the same time the impulse toward increasing productivity falls as the size of the bonus component is reduced. If in the Rowan system the value \(k=t/t_1\) is quite definite, then for the Halsey system the usual values are, as we see, \(k=0.33\) or \(0.5\), as providing the greatest convenience in calculating earnings and in control on the part of the workers. Halsey himself, director of the Canadian Rand Drill Co. in Cherbrooke, recommends not setting too high a level for the bases: he prefers to cut the bonus rates somewhat, giving \(k=0.33\). In this way it is achieved that even a less skilled worker sees before him the possibility of improving his earnings, and, on the other hand, the need to lower the size of the bases in the future is forestalled—the need for this, according to Halsey, being a “fatal step.” Norris, director of the Bickford Drill and Tool Company, considers the principle of a low size of bonuses and broad limits of bases appropriate only in enterprises in which ordinary (shop) day wages and the “sluggish working week” associated with them formerly predominated.

Objections to bonus systems.

We shall now turn to an examination of some objections to bonus forms of labor remuneration. The usual objection here is the indication that the cost of the product being manufactured varies depending on the time of actual manufacture and on the shop wages of the workers, which makes it difficult to draw up estimates of every kind¹. In application to any modern industrial enterprise, this objection must be regarded as an anachronism, as a survival of that old time when the cost of a product was determined chiefly by the cost of material and labor power. With the modern development of technology and with the existence of the complex organizational apparatus of enterprises, overhead expenses now begin to come to the fore; their reflection in factory costs depends substantially on the time required to manufacture these products of production. The time factor can no longer in any way be ignored², and in drawing up estimates it must, one way or another, be properly taken into account. Likewise, in drawing up estimates one must have a fully clear idea of those groups of workers who will have to be engaged in carrying out the future work, i.e., have an idea of their shop wages.

It is further pointed out, as a major shortcoming of bonus systems, that the cost of one and the same job depends on whether it is performed by a young worker and, consequently, one with low shop wages, or by an old one with high shop wages; moreover, cases are probable when good work by the young worker will be incomparably cheaper than mediocre work by the old worker³. Meanwhile the question under consideration, in itself, is apparently simple, and there are no inconveniences here at all, just as they are not found in the fact that some zemstvo employee,

having served several five-year periods, receives more than his younger comrade in the same work, or as an old and a young teacher of one and the same subject do. In these cases the young are aware that the difference in earnings is due to the long standing of irreproachable service, and that in due course they themselves will make use of this privilege. This consideration has its significance, since there is nothing worse than the consciousness that, however long one serves, one will still achieve nothing; this kills all energy. In the present case, however, the existing difference in the remuneration of labor will be for the young a constant reminder that continuous service without a term is valued quite realistically. At the same time this attaches people to the enterprise and makes them value the years of their former work in it.

Under the piecework system we encounter, to a certain extent, the same phenomenon, but only in a disguised form, which has already been discussed above: here old experienced people are put on the best machines, and for them a special kind of article is designated for a high daily wage. Under the brigade method, old foremen with large salaries, as we have seen, live at the expense of young workers with low daily wages, which is an even greater anomaly. Therefore the objection under consideration cannot be regarded as at all serious.

Special objections were raised concerning the Halsey and Rowan systems. Thus, many acknowledge as unjust the fact that the remuneration for time saved belongs to the worker only in part in these systems¹. Opponents of the Halsey and Rowan systems of this kind, from the standpoint of the supposed interests of the workers, cannot but be reminded that foreign workers’ unions fight precisely against the piecework system and, if they permit its application as an inevitable evil, they strive strictly to regulate the productivity of each worker so that it should by no means be high, forbidding him to earn above the norms determined in advance by the union. In the event of violation of this, the workers are subjected to fines, and for repeated violations are even excluded from the union². The chief reason for this attitude of the unions toward piece wages lies in the fact that, in the opinion of the unions, it has a tendency to encourage such a degree of intensity of labor as is harmful to the entire working class as a whole³. The petty bargaining accompanying piece wages, “nibbling,” the use of the services of especially skilful workers, “chasers,” “bell-horses”—all these are devices hotly condemned by workers’ unions⁴. From this point of view, the Halsey and especially the Rowan systems, with their diminishing impulse toward increasing productivity, are worthy of particular attention, as eliminating the possibility of reproaches of an exploitative tendency. There is nothing surprising in the fact that the Halsey and Rowan systems are readily accepted by the workers’ unions of England and America, and that both sides—both employers and workers—come together on them as on a compromise⁵.

We have already seen earlier that, in a progressive enterprise, the expenditure of time per unit of product must decrease, which is dictated by the interests of the consumer. This is mainly the result of the work of the administrative personnel of the enterprise and is usually connected with additional—

by the entrepreneur’s expenses for improving the conditions of the production process. Under these conditions, the withholding of part of the bonus in favor of the enterprise is entirely natural, if we do not wish to allow the workers to receive income not due to labor. In the piece-rate system the same goal is achieved by periodic cuts in the rates. In the case of the bonus systems of Halsey and Rowan, the bases appear capable of being kept unchanged, not only with this purely evolutionary process of gradual improvement of production in view, but even in many cases of major re-equipment of the enterprise. The latter applies especially to the Rowan system. One cannot fail to cite an interesting comparison. At the Rowan & Co. works in Glasgow, for one job a basis of 42 hours was assigned. The worker completed the job in 28 hours. The factory administration did not change the basis. Then machines of greater power were installed, and the job began to be performed in 16 hours, and still the basis could calmly be left unchanged. Precisely under the Rowan system it is possible to avoid the “fatal step,” in the sense of cutting the bases, even more than under the Halsey system, which is capable, as it were, of ensuring to a significant degree the friendly cooperation of workers and administration, usually disrupted by precisely this necessity of constantly cutting piece-work prices. With the application of the Halsey and Rowan systems, the administration, taking care of its business appearance, is compelled to show initiative in improving the organization of work, whereby responsibility for the progress of the business is transferred from the less cultured strata of the personnel of industrial enterprises to the more intelligent upper ranks, who by their position are obliged to introduce more of the “brain” element into the common work of raising the level of material culture.

As a major shortcoming of the Rowan system, further, people usually point to the diminishing impulse to work as productivity increases. The encouragement to increasing productivity may be represented as follows:

\[ A=\frac{p^{1}/a-p/a}{t_{1}/t^{1}-t_{1}/t}, \]

where \(p/a\) is the measure of hourly earnings at a definite productivity, \(p^{1}/a\) is the measure at increasing productivity, \(t_{1}/t^{1}\) is the coefficient of the worker’s productivity in the first case, and \(t_{1}/t\) in the second. Since

\[ p=a\left(1+\frac{t_{1}-t}{t_{1}}\right)=a\left(2-\frac{t}{t_{1}}\right), \]

then

\[ p^{1}/a-p/a =2-\frac{t^{1}}{t_{1}}-2+\frac{t}{t_{1}} =\frac{t}{t_{1}}-\frac{t^{1}}{t_{1}} =\frac{1}{t_{1}/t}-\frac{1}{t_{1}/t^{1}}, \]

whence:

\[ p^{1}/a-p/a =\frac{t_{1}/t^{1}-t_{1}/t}{t_{1}/t\cdot t_{1}/t^{1}}, \]

so that the encouragement

\[ A=\frac{1}{t_{1}/t\cdot t_{1}/t^{1}}. \]

The quantity

\[ \frac{1}{t_{1}/t\cdot t_{1}/t^{1}} \]

for small differences between \(t_{1}/t\) and \(t_{1}/t^{1}\) approaches

\[ \frac{1}{(t_{1}/t)^{2}}. \]

The encouragement to increasing productivity depends strongly on the degree of productivity attained and decreases with its square. Thus, if at a definite productivity \(t_{1}/t=2\) and \(A=1/4\), while at a lower productivity \(t_{1}/t=1\) and \(A=1\), then the Rowan system encourages the production of the next unit of work in the first case four times more weakly than in the second case; i.e., this system encourages the less industrious worker more strongly than the more capable one: at the upper limits the impulse to increasing productivity noticeably weakens. In defense of the Rowan system it may be pointed out that the piece-rate system as well, under the ordinary conditions of its application, also does not produce an intensification of the impulse, for workers, taught by the bitter experience of previous reductions in rates, begin artificially to prolong the work, so that the profit does not go beyond certain limits regarded as permissible, thanks to

¹ Z. d. V. d. In., 1903, No. 5. Preuss, Das Prämiensystem der Arbeiterlöhnung, p. 174.

whereby the effect of the strong incentive to increase productivity, which constitutes the advantage of the piecework system, disappears entirely—namely, all the time saved goes toward increasing the worker’s earnings. In any case, there is unquestionably a serious defect here in the Rowan system, the results of which become especially apparent under the following circumstances. Knowing this property of the Rowan system—that whatever base is set, the worker can under all conditions obtain a bonus of less than 100% of the piece rate—bases are often set, in order to avoid disputes with workers, much higher than is actually necessary. Suppose a certain job can be performed in 4 hours. Wishing to secure for the worker a 50% bonus, a base of 8 hours is set. But the worker does not agree and asks for 12 hours. Since such a base

gives only:

\[ \frac{12-4}{12}\cdot 100 = 66\% \]

increase, which cannot be considered exaggerated, in the end they agree to this size of base. If the cost of a piecework hour is taken as 1 ruble, then with an expenditure of 4 actual hours we shall have the worker’s total earnings (the cost of labor power in the product): \(4 \times 1 + 0.66 \times 4 = 6\) rubles 64 kopecks, or 1 ruble 66 kopecks per hour. With an expenditure of 6 actual hours, however, these earnings are: \(6 \times 1 + 0.50 \times 6 = 9\) rubles, or 1 ruble 50 kopecks per hour. Thus the difference in hourly earnings is 16 kopecks, i.e., about 10%. This is such an insignificant difference that the worker will prefer to work more freely, without special effort, with earnings of 1 ruble 50 kopecks per hour. For the enterprise, however, the work will in the second case cost 2 rubles 36 kopecks more, i.e., approximately 35% more than in the first case; and, if the work was being performed on any machine-tools, the latter will be insufficiently utilized. To this defect of the Rowan system, which can have such serious consequences from an unconscious attitude toward its essence, one must add one more important inconvenience: the calculation of earnings under this system is especially little understood by workers, and under our Russian conditions one often has to listen to statements about supposedly allowed errors in the calculation of earnings: the workers think they have been cheated.

Summing up everything said for and against the possibility of introducing premium forms of payment in industrial enterprises instead of the piecework system, one must come to the conclusion that there are quite definite considerations in favor of such an introduction, while objections “against” must be accepted with great caution. Even serious objections to the Rowan system become significant only in the event of abuse of its essence.

Choice of Premium Systems

With regard to the choice of one system or another in a given concrete setting, only the following general indications can be given. For industrial enterprises preparing to pass from the daily wage, usually practiced at the beginning of their existence, to a more impulsive one, one may recommend the application of the Rowan system or Halsey with \(k = 0.33\), since, until sufficient experience has been accumulated for drawing up more substantiated bases \(t_1\), which is possible after full acquaintance with the local peculiarities of organization, equipment, personnel, etc., the setting of bases, volens-nolens, can only be roughly approximate. In the course of time, however, once all the circumstances of the work have been clarified, it will undoubtedly prove more advantageous, for the purpose of accelerating the production process, to apply a more impulsive system—for example, Halsey with \(k = 0.5\), or even the system with \(k = 1\). In older enterprises, where the piecework system has been practiced for many years, the application of the Halsey and Rowan forms of payment may encounter serious difficulties and op-

position on the part of the workers; why the system with \(k = 1\) is here the more rational one—especially since, from the production point of view as well, the greater impulsiveness of such a system is highly desirable.

Setting the bases.

The application of bonus systems requires, first of all, the establishment of the bases \(t_1\), which are the fundamental elements, as we have seen, also in the setting of piecework prices. For the majority of practical cases this problem is not solved so simply, although the method usually practiced in industrial enterprises—setting the piecework price by eye—takes from “experienced” foremen the minimum time. The possible inaccuracy of such an approximate determination of the bases is shown by the following experiment, carried out by Eng. Weishuhn at the Berlin secondary technical school in evening courses for foremen. In one of his lectures, Eng. Weishuhn distributed to the students sheets showing one and the same casting, which was to be machined to the dimensions indicated on the drawing (Fig. 3). Those of the students who at their plants usually set piecework pay were asked to indicate the duration of machining of the given part. Seventeen answers were received, of which three determined the duration of machining as 40–42 min., one as 50 min., two as 60 min., two as 70 min., one as 75 min., one as 85 min., three as 105 min., and four as 120 min. For ease of review, the number of answers was plotted in the form of squares along a line on which the time in minutes was marked (Fig. 4). It is curious, of course, that the time was determined by some foremen as three times greater than by others; but still more curious is that there were more such extreme determinations of time than middle ones¹.

After what has been said, one cannot but agree with Hattaway’s apt expression that foremen set one or another piecework price by “covering the left eye and falling into a trance.” The piecework prices initially set in this way are subsequently corrected from year to year, the chief basis for such correction being not actual knowledge of the time of production of individual operations, but the amount of the worker’s earnings (the amount of his bonus, of the increment to shop pay), so that it does not exceed certain limits considered permissible in the given district. If these “customary” norms are exceeded, the piecework prices are lowered, and the worker’s earnings are gradually brought within the customary bounds. On the other hand, the workers themselves, as was noted above, ultimately try to adopt such a pace of work as would spare them the unpleasant operation of further cuts in rates. Then a more or less settled state arises for the given enterprise, and the rates are approved as valid for a more or less prolonged period. Such, in general outline, is the path by which rates historically take shape in old enterprises; and, thanks to the application of the statistical method, they are gradually freed of the major incongruities which, as a rule, occur in the initial versions as a consequence of setting prices “by eye.”

The transition from existing piecework prices to the bases \(t_1\) is carried out as follows: it is necessary first of all to establish the average hourly earnings of the workers in the given range of jobs. To do this, one need only divide the total monetary earnings of the given group of workers over a definite period of time (a month, half-year, year, etc.) by the number of actual hours of work during the same period of time owed by the group under consideration

workers on her work. If now each of the existing piece rates for the work falling within the purview of our group of workers is divided by the average hourly earnings determined in the above-indicated manner, the average actual time of each separate job, \(t_0\), will be obtained in man-hours. Consequently, if the piece rate is \(B\) and the hourly earnings are \(p\), then \(t_0 = B/p\). For example, in order to obtain figures for the actual expenditure of time, in man-hours \(t_0\), on the production of boiler work in the raising of locomotives, samples were taken on the Tomsk Railway from the “conditions” of piecework in 1915, as a year of normal work of the traction-service sections, in the following manner:

Traction section	Nos. of conditions and time of their compilation	Total amount of earnings per month according to the condition	Number of shop hours (subscript present)	Average hourly earnings, as quotient \(3 : 4\)	Nos. of locomotives and series	Cost for each locomotive	Expenditure of man-hours, as quotient \(7 : 5\)
1	2	3	4	5	6	7	8
Ilansky ......	35 March 1915	85 r. 54 k.	324	26 k.	3041 ser. On.	41 r. 55 k.	157
Ilansky ......	35 March 1915	85 r. 54 k.	324	26 k.	1218 ser. O.	43 r. 99 k.	167

Now, in order to obtain the base \(t_1\), it must be borne in mind that \(t_1 > t_0\), i.e. the average worker, working under a premium system, has the right to count on receiving a bonus, i.e. \(t_1 = t_0 + \gamma t_0\).

The size of the bonus is usually recognized as sufficient at \(20\%\)–\(50\%\) of the shop wage \(at\) ^1). Taking \(k(t_1 - t) = 0.5t\), we find:

\[ t_1 = \frac{0.5t + kt}{k} = t\left(\frac{0.5}{k} + 1\right), \]

so that for the systems \(k = 1\), \(k = 0.5\), and \(k = \frac{t}{t_1}\) we have, successively:

\[ t_1 = 1.5t;\quad t_1 = 2t;\quad t_1 = t\left(\frac{0.5}{\frac{t}{t_1}} + 1\right) = 2t, \]

i.e. in the expression \(t_1 = t_0 + \gamma t_0\), in the particular case under consideration, when the bonus amounts to \(50\%\) of \(at\), for the systems \(k = 1\), \(k = 0.5\), and \(k = \frac{t}{t_1}\), for \(\gamma\) we have: \(\gamma = 0.5\); \(\gamma = 1\), and \(\gamma = 1\).

In choosing the coefficient \(\gamma\), one must be guided by the nature of the work: this coefficient must be the larger, the heavier the work. Taylor ^2) testifies: “The condition thanks to which it is possible to combine high wages with low expenditures on labor is the willingness of a good worker to work with the greatest productivity when his earnings are raised by 30%–100%. Here 30% applies to cases where no special intelligence, dexterity, attention, or particular physical strain is needed; for work requiring physical strain and causing fatigue, it is recommended to assign 50%–60%; work requiring special knowledge, associated with considerable attention, but not requi—

^1) Besprozvanny. Modern Organization of American Factories. Moscow, 1919, p. 22.
Johnson. Wage Systems. Moscow, 1923, p. 42.
Rev. gén. d. chem. d. fer., 1906, 2-e S., No. 1. Asselin et Collin. Notes de voyage en Amerique, pp. 27–29.

^2) Taylor. Administrative-Technical Organization of Industrial Enterprises, 1912, St. Petersburg, p. 7.

• involving great physical effort (for example, the work of a turner) requires an increase in pay of 70%—80%, and, finally, for work requiring dexterity, quick-wittedness, concentrated attention, strength, and physical labor, as, for example, work on a large steam hammer performing varied operations, the percentage should be 80%—100%.

The above-described method of establishing the bases \(t_1\) may be called statistical, and the possibility of its application is conditioned by the enterprise’s having: 1) piece-work rates; 2) data on workers’ full earnings by groups of jobs; 3) data on the actual expenditure of time (worker downtime) for each of the same groups of jobs over the same period of time. All this statistical material must relate to years of established operation of the enterprise, when working conditions may be considered more or less normal.

But even in this favorable case, when all such data are present, the bases, being established by the method described, still cannot be considered irreproachable, for their source is piece-work rates, which, despite numerous corrections, nevertheless contain many errors and in individual cases may differ greatly from the actual expenditure of time required to perform one job or another. Therefore, immediately upon establishing these roughly approximate bases, it is recommended to proceed gradually to checking them by observing the actual time taken by workers of average qualities to perform certain jobs, especially those that are often repeated, or whose bases arouse doubts on the part either of the enterprise or of the workers. To begin with, this may be the roughest kind of time study, not yet setting as its goal a detailed study of the elements of movements.

Shop Wage.

Turning now to the hourly shop wage \(a\), let us note that under our present conditions it is determined as the quotient obtained by dividing the monthly tariff rate, according to the worker’s grade on the tariff scale, by 192, where 192 is the number of working hours accepted as the monthly norm. In prewar times, when there was no centralized distribution of workers according to tariff scales, there nevertheless existed rather definite ratios between the wages of workers and of other craftsmen and their helpers. Thus, Professor Time¹ testified, on the basis of the experience of European countries and Russia, that if the wages of true artisan-workers are taken as unity, then blacksmiths and boilermakers, by reason of the difficulty of their work, usually receive wages 20%—30% higher, while helpers and laborers receive 40%—50% lower. These ratios, with certain variations, of course, were preserved in subsequent times as well; for example, Engineer Pestich, while head of the Alexandrovsk Workshops of the Catherine Railway, at the end of the 1900s proposed for the guidance of shop mechanics the following table of the comparative value of labor of workers by specialty, taking the earnings of a fitter as unity.²

Boilermaker, coppersmith—1.25; foundry worker, blacksmith, spring maker—1.15—1.20; patternmaker—1.10; stamper, tinsmith—1.00; riveter—0.95; turner of the mechanical shop, shaper—0.90; chisel worker, milling-machine operator, boilermaker’s helper, pipe fitter—0.85; wheel-shop turner, painter, planer—0.75; grinder, hammerman—0.70; drill-press operator, bolt-cutter—0.65; furnace worker, hewer—

¹ Time. Fundamentals of Machine Building, vol. I, issue 2. St. Petersburg, 1884, p. 276.
² Engineer, 1912, No. 9, p. 277, Galaktionov. Alexandrovsk Workshops of the Catherine Railway.

molders, bandager—0.55; unskilled laborer—0.35—0.40. It is curious to note that the terrible European war, in its third year, had changed little in the ratios of wages of workers of different specialties and, for example, according to data from 15 Petrograd enterprises, at the beginning of 1916 the following average hourly earnings of workers existed: ^1)

Specialty	Average hourly earnings	Ratio
Fitters	47 kopecks	1.00
Smiths	60 »	1.28
Foundry workers	55 »	1.18
Milling-machine operators	49 »	1.04
Machinists	43 »	0.91
Hammermen	31 »	0.66
Unskilled laborers	20 »	0.42

What has been said above characterizes the sufficient stability of the ratios under consideration, a definite correspondence existing between the cost of unskilled and qualified labor power. There is nothing surprising in this, for qualified artisan labor is connected with unskilled labor through intermediate stages, links; the most capable representatives of the latter, entering a factory as simple unskilled laborers, look around, gradually become accustomed to some “special” job and, after one or another interval of time, become assistants and then master workers. “Between the pay for labor of one quality,” V. Chernov once justly observed, ^2) “and the pay for another, higher or lower quality, there exists a certain proportionality which tends to be preserved when all wages move simultaneously upward or downward.” From the foregoing it follows that the wages of industrial workers in every country are dependent, through the unskilled laborers, on the level of its agriculture, on the quantitative and qualitative composition of the “reserve labor army,” recruited mainly from the villages, from refugees from agriculture, who provide a mass of unqualified, unskilled labor. ^3) As we saw in the example of the Aleksandrovsk railway workshops, already then, in the period, pred—

^1) Industry and Trade, 1916, No. 43, p. 336. D. D. Wages.

^2) V. Chernov. The Peasant and the Worker as Categories of the Economic Order. Odessa, 1917, p. 26.

^3) That the wages of agricultural workers determine the wages of unskilled laborers can be seen clearly in the example of America.

In the extensive agriculture of the western states of North America, the productivity of the agricultural worker’s labor is three times higher than in the more intensive agriculture of the eastern, densely populated states. The presence of uncultivated lands, thanks to the great productivity of extensive agriculture, makes expansion of cultivated areas possible and profitable, creates a demand in agriculture for labor power; agriculture absorbs it and does not push it out into industry. Therefore here the wages of an agricultural worker must be higher than in the more densely populated agricultural districts, and at the same time wages in industry must also be higher, since the local agricultural population does not exert pressure upon their level.

For the North American states with the highest wages we have:

Growth of wheat production from 1883–1908	Average weekly wage	Population density
Montana — 400%	18.6 dollars	1.7
Idaho — 1500%	15.3 »	1.9
Colorado — 425%	14.78 »	5.2
Washington — 800%	12.15 »	7.7

For states with low wages:

Growth of wheat production from 1883–1908	Average weekly wage	Population density
Virginia — 30%	below 8 »	46.2
Georgia — 12%	6.7 »	37.2
North Carolina — 13%	5.92 »	39.0

Maslov. Capitalism, Part I, St. Petersburg, 1914, p. 65.

that existed after the last world war, attempts were made here and there to introduce some system into the spontaneous process of distributing workers by categories of pay. With the introduction of the above-mentioned bonus form of payment on the railways of the Prussian-Hessian network, a special wage scale was developed. Something analogous had been applied even earlier on the Bavarian state railways and on the federal Swiss railways.^1) Thus, even then the first foundations were laid for tariff policy in the field of assigning workers to tariff grades—the foundations of the so-called “qualification of occupations,” when the aim is to give a clear characterization of the requirements placed upon each worker depending on his belonging to one or another grade, and to establish precisely the intervals that, given the state of industry, separate the various grades of the tariff scale. All persons who apply their labor in the national economy are, under the present mode of production, divided in our country into four principal grades: a) workers, b) office personnel, c) technical organizers, and d) administrative organizers. Within each group there are also considerable differences among the various occupations. Owing to these differences, the principal grouping in turn breaks down into several parts.

The chief criterion on the basis of which the principal group of workers is subdivided is the complexity of the methods of work they employ. The most complex labor is considered to be that which requires a combination of muscular movements with a tension of nervous energy governing them. The simplest is recognized as labor requiring a tension of muscular energy expressed in diverse movements of the organs of the human body, while the chief work requires little tension of nervous energy. Within this range of distribution of workers’ labor the following kinds of workers are distinguished: a) highly skilled workers, b) skilled workers, c) trained workers, and d) unskilled laborers. Beginning with the lowest category (unskilled laborers) and ending with the highest (administrative organizers of production), there is established a gradation of labor that gradually becomes more complex, imperceptibly passing from the application of muscular energy to the application chiefly of nervous energy. The task of assignment to tariff grades consists in indicating, with proper allowance for differences in the complexity of the labor applied, the exact boundaries of the principal features of the worker’s work. Such boundaries would be precisely established if it were possible to express the various degrees of complexity of labor in the form of mathematical units, the relation of which to one another would give an idea of the interrelation of the complexities of labor. This mathematical ratio of different occupations according to their characteristic features finds its expression, in crude form, through the ratio of wage rates by tariff grades. In addition to complexity, labor possesses certain other characterizing features, owing to the presence of which the construction of tariff grades, built on the criterion of complexity, may be somewhat modified. Preliminary study indicates the existence of the following such features: a) complexity, b) precision, c) professional skill, d) difficulty, e) danger, f) harmfulness. Until the scientific analysis of the various occupations has been carried out, it seems difficult to determine precisely the coefficients characterizing these features.^2) The question of the “qualification of occupations” is still far from being scientifically developed,^3) which is why at present one has to make use of “tariff scales” that are far from perfect. Each tariff grade corresponds to a wage rate, located—

^1) Antoshin. Information and data on the workshops of Russian railways and on certain foreign ones. St. Petersburg, 1910, p. 65.

^2) Goltsman. Norming of Labor. Moscow, 1919.

^3) Organization of Labor, 1921, No. 1. Strymilin. On the question of the classification of labor. Proletarian Culture, 1919, Nos. 9–10. Gastev. On the tendencies of proletarian culture.

…in a definite multiple ratio to the rate of the first grade. The size of the latter cannot be the same for different regions of the country, which are situated in different economic conditions, at different levels of expensiveness. Therefore the wage scale, while uniform in the sense of the ratios between grades, gives different amounts of rates depending on the wage zone; in assigning it, in addition to the above considerations of an economic order, one is also guided by considerations of the importance of particular regions from the point of view of the general interests of the national economy, so as to create an incentive for the movement of labor power to where it is needed.¹)

American Forms of Wage Payment.

It was indicated above how important an exact, and not approximate, knowledge is of the time required to perform a given work operation. The expensive equipment of modern industry especially imperiously dictates this necessity for exact accounting of time with a possible reduction of the production process, in view of the method—becoming generally accepted—of distributing overhead expenses in proportion to the time spent on the performance of the work. The study of the elements of time and motions on a first-class worker, with the concomitant rationalization of the entire work process, has become the slogan of the day in the advanced industrial countries, especially in the N.-Am. United States. In connection with this, new forms of wage payment have appeared there. The common feature of all of them is the circumstance that the bases here are established on the foundations of Taylorization; the productivity of first-class workers, ascertained under the conditions of fully organized production, is taken as the initial norm. This is the essential difference from the proper bonus forms, which usually proceed from the conditions of productivity of a worker with average abilities. All three forms of payment—Taylor’s, Gantt’s, and Emerson’s—provide for the payment of a bonus (premium) for the performance of work within the time assigned for it. If, however, this does not occur, the worker’s earnings are considerably reduced according to a law whose nature differs depending on the form of payment. Likewise, the shortening of the assigned time as compared with the basis is rewarded differently in each form of payment.

Taylor’s Differential System.

Let us first turn to Taylor’s “differential system.” In Taylor’s works we nowhere find a mathematical formulation of his “differential system.” Explaining his system by numerical examples, Taylor says that, if a worker has not kept within the appointed time and has not produced, say, in 5 hours the 5 assigned units of output, then he not only is deprived of the bonus, receiving only for the units completed on time, but he is obliged to complete the remaining units, not finished up to the norm, without pay. Suppose that the worker made only four pieces in five hours; then he will receive for all five pieces: \(4 \times 25 = 100\) kopecks, if the price of a piece is 25 kopecks. And since he spent time on 5 pieces at a slow rate of work: \(5 \times 5 / 4 = 6.25\) hours, his hourly earnings will amount to only:

\[ \frac{100}{6.25} = 16 \]

kopecks. If during 5 hours the worker managed to make only 3 pieces, then for the 5 pieces of the norm he will receive \(3 \times 25 = 75\) kopecks, and his hourly

¹) Schmidt. Tariff policy and its immediate tasks. Moscow, 1920, p. 35.

earnings 75: \((5 \times 5) / 3 = 9\) kopecks. From these examples, given by Taylor himself, it is seen that hourly earnings, in its differential form of payment, for an unsuccessful worker fall in proportion to the square of the time. And, consequently: if within the assigned time \(T_1\) it is necessary to manufacture \(m\) units of production with pay for all \(Q_1\) rubles, then the hourly wage \(a = Q_1 / T_1\),

the basis—the assigned time per 1 piece—\(= t_1 = \dfrac{T_1}{m}\), and the cost of labor power in a unit of product,

\[ S_1 = Q_1 / m = \frac{a \cdot t_1 \cdot m}{m} = a t_1 . \]

Suppose that by the deadline only \(n < m\) pieces have been completed. Then, in accordance with the preceding, it is necessary to pay for them

\[ Q = Q_1 \frac{n}{m} = a t_1 n, \]

and the remaining \(m - n\) pieces will be made free of charge. Obviously, the manufacture of all \(m\) pieces in the given case would have taken more time, namely

\[ T = T_1 \frac{m}{n} = \frac{m^2}{n} \cdot t_1, \]

so that the cost of an hour of labor would have fallen to:

\[ p = Q : T = a t_1 n : \frac{m^2}{n} t_1 = a \frac{n^2}{m^2}. \]

And since

\[ T = T_1 \frac{m}{n}, \]

then

\[ \frac{n^2}{m^2} = \frac{T_1^2}{T^2}, \]

which, upon substituting \(T_1 = m t_1\) and \(T = m t\), gives

\[ \frac{n^2}{m^2} = \frac{t_1^2}{t^2}, \]

i.e.

\[ p = a \cdot \frac{t_1^2}{t^2}. \]

Thus the hourly earnings \(p\) of a worker in the case of nonfulfillment of the basis decrease in inverse proportion to the square of the time actually expended \(t\), i.e. the change of \(p\) occurs in this case according to the law of a cubic hyperbola, whose asymptotes are, at \(t = 0\), the \(p\)-axis, for then \(p = \infty\), and, at \(p = 0\), the \(t\)-axis, since then \(t = \infty\). The construction of this cubic hyperbola may be carried out as a polytropic curve of the form \(p = p t^2 = \mathrm{const.}\) with exponent 2, using, for example, Brauer’s method. The angles of the auxiliary straight lines from the origin \(\alpha\) and \(\beta\) are determined by setting \(\alpha = 30^\circ\). Then: \(1 + \tg \beta = / 1 + \tg \alpha /^{2}\), whence \(\beta = 56^\circ\) (Fig. 7). In the case of fulfillment of the basis \(t_1\), the hourly wage immediately increases by a premium (bonus), say, by 20%, so that

\[ \frac{1.2 Q_1}{T_1} = \frac{1.2 S_1}{t_1} = p_1. \]

With further acceleration of work and saving of time in comparison with the basis \(t \leq t_1\), the change in hourly earnings proceeds as in the Prusso-Hesse system, i.e. according to the law of an equilateral hyperbola, for \(1.2 S_1\) is paid in full, independently of the time of completion of the work. Thus, for changes in \(p\) as a function of \(t\), for \(t \leq t_1\) we have

\[ pt = p_1 t_1 = 1.2 S_1 = \mathrm{const.} \]

The graphical representation of \(p\) as a function of the change in \(t\) is given in Fig. 7 for \(t_1 = 5\) hours, for \(a = 50\) kopecks, and \(p_1 = 1.2 \times 50 = 60\) kopecks.

Passing now to the law of change of the total cost of labor power in a unit of product \(S\) as a function of the change in \(t\), we have, up to \(t \geq t_1\), for

\[ S = p \cdot t = a \cdot \frac{t_1^2}{t}, \]

i.e.

\[ St = a t_1^2 = \mathrm{const.}, \]

which characterizes an equilateral hyperbola with asymptotes \(S\) and \(t\). At \(t = t_1\), the value \(S\), after the addition of the premium (bonus), at once becomes \(S_1 = 1.2S\), and this cost of labor power in a unit of product remains unchanged for all changes \(t \leq t_1\), and therefore will be represented as a straight line parallel to the \(t\)-axis. In Fig. 8 the construction is made for \(t_1 = 5\), \(S_1 = 6\) with a bonus of 20%.

From what has been said it is clear that the differential system: 1) gives no guaranteed minimum wage; 2) acts extremely energetically and quickly reduces the earnings of an unsuccessful worker to the level of impossibility of existence; 3) creates a situation in which “the worst workers are removed, and the best are attracted”; 4) can be applied

only after all working conditions have been standardized and fully regulated; 5) it requires accuracy and care in setting the bases, since any error causes either a disproportionately large loss for the worker, or an equally unjustifiably rapid growth of his earnings; 6) it is especially useful when the work is repeated from day to day, since with varied work the pressure of the differential system becomes excessively strong; 7) it is recommended in all cases where it is desirable to develop the greatest productivity, and this must be striven for chiefly in enterprises with costly plant, equipment, and structures.

Beginning with \(t \leq t_1\), the differential system becomes a premium system, and the general formula for premium forms of payment \(S = \alpha t + k \cdot \alpha (t_1 - t)\) for the value of labor power in the product in the present case takes the form: \(= 1.2 \cdot \alpha t + 1.2 \cdot \alpha(t_1 - t)\), with coefficient \(k = 1\).

Gantt System.

Gantt’s form of payment is not so severe toward the worker who fails to keep up, and, on the other hand, is not so energetic in rewarding the worker who succeeds. In the event that the basis is not fulfilled (\(t \geq t_1\)), the worker is paid here according to the time (shop) rate \(\alpha\); when the work is completed on time, however, he, as in Taylor’s system, receives a premium (bonus), say, 20%–25% of the basis. Thus, for example, for the value of labor power in the product when \(t \leq t_1\) we have, in Gantt:

\[ S = \alpha t + 0.25 \alpha t_1 \]

i.e., in the present case

\[ k = \frac{0.25 t_1}{t_1 - t}, \]

and the hourly earnings:

\[ p = \frac{S}{t} = \alpha + \frac{0.25 \alpha t_1}{t}. \]

Consequently, \(S\) changes, when \(t \leq t_1\), according to the law of a straight line, for the construction of which we have the points: \(S = 0.25\alpha t_1\) at \(t = 0\) and \(S = 1.25\alpha t_1\) at \(t = t_1\), while \(p\) changes according to the law of an equilateral hyperbola with asymptotes: the \(p\)-axis and the straight line parallel to the \(t\)-axis, drawn at a distance \(p = \alpha\). At \(t = t_1\) we have \(p = \alpha + 0.25\alpha = 1.25\alpha\) as the initial point for constructing the equilateral hyperbola. Another variant of the Gantt system is the change in the value of labor power in the product of production when \(t \leq t_1\), as in Halsey:

\[ S = 1.25\alpha t + 0.5 \cdot 1.25(t_1 - t). \]

The change in total earnings \(S\) and hourly earnings \(p\) as a function of the change in \(t\), for the case \(t_1 = 5\), \(\alpha = 1\), and with a bonus of 25%, is shown in Drawing 9 for both variants.

Emerson System.

Emerson’s system is based on the so-called “productivity coefficient,” by which is to be understood the ratio of the actually achieved productivity to the productivity possible under normal working conditions, expressed in percentages. Suppose, for example, that during a month, with 250 actual hours (attendance), a worker performed work corresponding to 300 hours according to norms (sum of bases); then his productivity coefficient will be:

\[ 100 \times \frac{300}{250} = 120\%. \]

At a productivity coefficient of 100% the bonus is 20%, but, unlike the Taylor and Gantt systems, here a bonus is also established for lower degrees of productivity, namely:

For a productivity coefficient of	Bonus equals
67%	0%
74%	1%
80%	3.27%
85%	6.17%
90%	9.91%
100%	20.00%

If the coefficient of productivity is above 100%, then for each percent above one hundred the bonus is increased by 1%. Thus, in the case of the above example, with an hourly shop wage of 25 kopecks, we shall have: for attendance of 250 hours \(=250\times25=62\) rubles 50 kopecks; a 20% bonus for productivity:

\[ 100\%=\frac{62{,}50}{100}\cdot 20=12\ \text{rub.}\ 50\ \text{k.}; \]

for exceeding 100% by 20% \(=12\) rubles 50 kopecks, so that the worker’s full monthly earnings are: \(62{,}5+12{,}5+12{,}5=87{,}5\) rubles. If the worker’s productivity coefficient is \(\leqq 67\%\), no bonus is paid, and he receives only the shop (time) wage. On the basis of what has been said, we have, for \(t_1\leqq t\), i.e. when the coefficient of productivity is \(\leqq 100\%\), the cost of labor power in the product:

\[ S=1{,}2\alpha t+\alpha t\cdot \frac{t_1-t}{t}=1{,}2\cdot \alpha t+\alpha(t_1-t), \]

so that in the general formula for premium payments in the present case

\[ K=\frac{1}{1{,}2} \]

and the change of \(S\) follows a straight-line law; moreover, when \(t=0\), we have \(S=t_1\), and when \(t=t_1\), we obtain \(=1{,}2\alpha t_1\) (Fig. 5). The change in hourly earnings in this case,

\[ p=0{,}2\alpha+\frac{\alpha t_1}{t}, \]

follows the law of an equilateral hyperbola, the asymptotes of which are, on the one hand, the axis \(p\), since at \(t=0\) we obtain \(p=\infty\), and, on the other hand, a straight line drawn parallel to the axis \(t\) at a distance from the latter \(p=0{,}2\alpha\). For the point of the hyperbola at \(t=t_1\), we have \(p=1{,}2\cdot\alpha\) (Fig. 5). In the intervals between productivity coefficients from 67% to 100%, the change in the bonus follows a certain smooth curve; to determine its nature, into the general equation of the form \(y=C+C_1x+C_2x^2+C_3x^3\) we shall substitute successively for \(y\), from the preceding, the values: 0; 3.27; 9.91 and 20, with the corresponding values of \(x\), namely: 67; 80; 90; 100. It is not difficult to see that \(C_3\) will be close to zero, and then we have:

\[ 87{,}5-y-2{,}574x+0{,}019x^2=0. \]

The cost of labor power in the product of production in the interval under consideration can therefore be expressed by the formula:

\[ S=\alpha t+\frac{y}{100}\alpha\cdot t =\alpha t+\alpha t\left(0{,}875-2{,}574\,\frac{t_1}{t}+1{,}9\,\frac{t_1^2}{t^2}\right), \]

so that

\[ K=\frac{t\left(0{,}975-2{,}574\,t_1/t+1{,}9\,t_1^2/t^2\right)}{t_1-t}. \]

The expression for \(S\) may be rewritten as follows:

\[ 1{,}875\alpha t^2-St-2{,}574\alpha t_1t+1{,}9\alpha t_1^2=0. \]

This is the equation of a hyperbola, since in the general equation of curves of the second order:

\[ Ax^2+Bxy+Cy^2+Dx+Ey+F=0 \]

we have \(AC-B^2=-1<0\). Transforming the equation of our hyperbola into the form:

\[ t^2-t\left(\frac{S}{1{,}875\alpha}+1{,}37t_1\right)+1{,}01t_1^2=0, \]

which may be written:

\[ \left[t-\frac{1}{2}\left(\frac{S}{1{,}875\alpha}+1{,}37t_1\right)\right]^2 -\frac{1}{4}\left(\frac{S}{1{,}875\alpha}+1{,}37t_1\right)^2 +1{,}01t_1^2=0, \]

so that the equation of the asymptotes is:

\[ \left[t-\frac{1}{2}\left(\frac{S}{1{,}875\alpha}+1{,}37t_1\right)\right]^2 -\frac{1}{4}\left(\frac{S}{1{,}875\alpha}+1{,}37t_1\right)^2=0, \]

i.e.

\[ \left[ t-\frac{1}{2}\left(\frac{S}{1{,}875\alpha}+1{,}37t_1\right) +\frac{1}{2}\left(\frac{S}{1{,}875\alpha}+1{,}37t_1\right) \right]\times \]

\[ \times \left[t-\frac{1}{2}\left(\frac{S}{1.875a}+1.37t_1\right)-\frac{1}{2}\left(-\frac{S}{1.875a}+1.37t_1\right)\right]=0, \]

whence the coordinates of the center of the hyperbola are \(t=0\) and \(S=-2.57at_1\). The equation of one asymptote is \(t=0\), and of the other: \(S=1.875at-2.57at_1\). Having the asymptotes and a point of the hyperbola \((S_1=1.2at_1\) and \(t_1)\), we construct the hyperbola itself by the method of secants in Fig. 5.

Emerson’s hourly earnings in the interval of the productivity coefficient \(67\%\)—\(100\%\) will be expressed as: \(p=(1.875-2.574t_1/t+1.9t_1^2/t^2)a\), i.e., they vary according to the law of a cubic curve, which we construct from two given points for \(t=t_1\) and \(t=\dfrac{1}{0.67}t_1=1.39t_1\), and from some intermediate points, as has been done in Fig. 6.

In concluding the review of the new systems of labor remuneration, it is necessary to point out that they are reproached for being insufficiently intelligible to the ordinary worker¹. Here the role is apparently played by the absence of direct proportionality between wages and output, by the existence of different methods of calculating earnings depending on the interval in which the actual expenditure of time lies in relation to the base, and also by the undoubted complexity of the law of change of earnings in Taylor’s system in the interval \(t>t_1\) and in Emerson’s system in the interval \(\dfrac{t}{t_1}>0.67\) and \(\dfrac{t}{t_1}<1.00\). From the standpoint of simplicity and intelligibility, all premium systems undoubtedly yield to simple piecework, the calculation under which is extremely elementary and accessible to the simplest mind. This is its sole advantage in the presence of the major shortcomings indicated above.

The Significance of Incentive Systems

One cannot deny, nevertheless, the fact that the newest American forms of labor remuneration, being applied in the setting of a rationalized work process, must, by exerting strong pressure on the worker, have a considerable moral influence on him, not allowing him to sink, drawing him upward to the level of the most productive and qualified workers in the given craft. In precisely this inducement of the will to labor one cannot fail to see the great significance of all incentive forms of remuneration in general, considering that the attention of a person left to himself very readily becomes dispersed over circumstances harmful to the aims of the production process. Very often this external pressure makes it possible to reveal a person’s real capacity for the work to which he has been assigned, a capacity previously dormant. But besides establishing the will, this elementary consequence of applying incentive systems, such application must be a stimulating factor in the technical progress of the enterprise, a factor in the improvement of methods of work, as a result of which there will take place a gradual replacement of purely physical strain by nervous strain, with liberation from purely muscular labor. Thus incentive systems have as their ultimate aim not an increase in the expenditure of the worker’s energy, not the exhaustion of his strength; rather, the incentive should be paid for the creation of a more economical method of conducting the work. The question of applying incentive systems for many branches of modern industry presents itself in an aspect entirely different from that which obtained in the period of handicraft production or weakly developed capitalism, when rapidity of movement and the force of muscular strain

of the subject of labor were the chief factors determining labor productivity, and when the strongest worker (“speeders,” “horses with bells”) dragged along the whole shop, exhausting the strength of the weaker workers. Hence the accusation that incentive systems had a sweatshop effect was quite understandable, for it is clear that under the conditions described productivity standards could have no objective basis and depended entirely on the physical endurance of the workers employed in the enterprise. Now the matter is altogether different: it is not at all a question of “driving” the workers. The point is only to proportion, to adapt the pace of workers’ efforts to the technical working capacity of the machine being served. One may stand at the machine doing nothing, taking advantage of the foreman’s absence; one may shift the belt onto the idle pulley or “cut the air,” but then it must be admitted without circumlocution that in these cases what is taking place is not work, but sabotage. The machine makes it possible to calculate its productivity quite impartially, mathematically. Under such conditions it is fair to require that the worker deliver the productivity which the machine possesses. Labor productivity must be normed on the basis of this iron mathematics. Whoever disciplines himself more quickly than others in the sense of submitting to this iron rhythm of the machine, taking from it everything that it can give, has the right to preferential enjoyment of better living conditions through higher remuneration for labor¹. Together with the introduction of incentive systems there will undoubtedly come a reduction of the “empty spaces,” the “pores in the working day,” which create passive fatigue in the worker; as a result, productive work may be intensified while preserving the previous expenditure of energy. Fatigue itself from work, when an awakened interest in the matter is present, will set in later, for it has been established that interest increases the activity of the heart and blood pressure, creates a more energetic washing away of the poisons of fatigue, acting upon a person like invigorating music, and thereby increasing tissue metabolism. It is permissible to think that this also creates the release of a greater sum of energy in our nerve centers. All this together must contribute to an increase in labor productivity. Further, there is no doubt that these incentive systems satisfy the sense of justice inherent in people. In our age of narrow specialization the worker is in most cases deprived of the possibility of seeing the work completed by himself, for he is the performer of only some one partial operation: the work must pass through many hands before the finished product is obtained. Meanwhile everyone naturally wants to know the degree of benefit he brings to society, which is to a certain extent measured by the amount of earnings under incentive systems. In this the worker has a certain scale for measuring his labor; he receives a certain possibility of becoming aware of the degree of his usefulness and significance for his own production and for the whole of society as a whole. The sense of justice finds satisfaction in the fact that for greater output the worker also receives greater pay. Here, in essence, is the realization of the old socialist ideal of the right to the full product of one’s labor. Indeed, from the recognition of this right it inevitably follows that the worker cannot lay claim to a share of the social product exceeding his productivity. If such an expanded right were granted to him, it would thereby be necessary to restrict the right of another worker to the product of his labor; for it is clear that surplus value, wherever it may go, is possible only under the condition of the exploitation of another’s labor and its incomplete payment. Opponents of incentive systems assume that those who are more capable and, by virtue of this, produce more value, must as it were give up their surplus to others, less capable. Their gifts constitute their disadvantage, for they occasion an intensified and in no way recompensed expenditure of energy. This

there must be so high a type of people as to be capable of lifelong self-sacrifice.

But even the less gifted must, in such an ideal society, possess high moral qualities. What, then, must be their condition when they receive chronic handouts from the more capable? It is also curious to note that sometimes opponents of incentive systems try to substantiate their anti-productive point of view by reference to scientific socialism. The irrelevance of the founder of scientific socialism, K. Marx, to this ideology is clearly seen from the following words of his: “The call for equality in wages is based on an error, on a senseless desire that will never be fulfilled. It is the product of a false and superficial radicalism, which accepts hypotheses and tries to evade their consequences. The value of labor-power, like that of every commodity, is regulated on the basis of the wage system. And since different kinds of labor-power have different values or require different quantities of labor for their creation, they also attain different prices on the labor market. To demand equal or even only fair remuneration on the basis of the wage system is the same as demanding freedom on the basis of the slave system.”¹ Our production, owing to the pseudo-productive ideology of people alien to production, was placed in the initial period of our revolution in a very difficult position as a result of the refusal to apply incentive systems; but the common sense of the Russian people, in the person of the production workers themselves, ultimately overcame this difficult situation, and as early as the Third All-Russian Congress of Trade Unions² recognized the application of incentive systems as entirely necessary, in strict dependence on the results of work.

Bonuses for administrative and technical personnel.

In conclusion it is necessary, if only briefly, to touch upon the methods of incentive remuneration for administrative and technical personnel as applied in practice. In some cases the principle put forward here is payment according to the average output of the group of rank-and-file workers managed by the given administrator, so that if, for example, the workers of a machine shop received on average a bonus (extra earnings) amounting to 50% of their basic pay \((\sum a t)\), then the foreman (manager) directing this group of people should receive the same 50% of his basic pay. The latter, however, is usually paid to persons in the administration in the form of a sum constant from month to month, regardless of the number of working hours in the month, with deductions only for days of absence and days of illness. Such a principle of incentive remuneration for administrative and technical personnel cannot be considered successful, since the activity of rank-and-file workers and that of the directing personnel differ substantially: whereas the former are occupied with carrying out the piecework operations assigned to them and, thanks to incentive systems, are interested in performing as many of these as possible, the administration must strive to produce, in the same period of time, a larger quantity of finished products, which result from a certain series of piecework operations. Under poor administration an enormous number of piecework operations may be performed, but comparatively few finished products may result, for the piecework operations proceed without a plan, spontaneously, and are scattered. The enterprise or part of it proves to be burdened with a mass of unfinished products. From what has been said it follows that the administration should be bonused for the output of the greatest

¹ K. Marx. Wages, Price and Profit. St. Petersburg, 1899, p. 30.
² Resolutions and Decrees of the Third All-Russian Congress of Trade Unions. Moscow, 1920, p. 35.

the number of finished articles from a given number of partial operations, or, in other words, for the fulfillment and overfulfillment of production assignments, which must be constructed on the basis of an analysis of the means of production of the given enterprise or of its part. In this case, fulfillment of production assignments leads to the administration’s receiving an additional remuneration in a definite percentage of the basic salary; moreover, overfulfillment of the assignment is rewarded by a proportional increase in the additional remuneration, while failure to fulfill the assignment completely reduces—usually likewise proportionally—the right to a bonus up to a certain limit (for example, up to 75%), after which no bonus is paid at all. In this there is a certain analogy with the Emerson system described above. To this it must be added that in some cases the rewarding of administrative personnel according to the average percentage of workers’ earnings led to abuses, since the establishment of rates lay with this administration, and since the same administration accepted completed work; under such conditions the administrative personnel was, as it were, deliberately impelled by the described bonus system toward artificially raising the percentage of their workers’ earnings, without relation to their actual productivity. True, in certain enterprises organized according to Taylor’s administrative scheme, the principle of rewarding according to the average percentage of earnings of the group of workers served by a given specialist foreman was applied successfully; but in that case the setting of norms and rates was carried out by another specialist foreman, whose bonus decreased as the bonus of the first foreman increased; here there was an obvious opposition of interests. As for the quality and quantity of work, here too there could be no apprehension, because acceptance of work under Taylor is also conducted by a special specialist foreman.

The activity of the administrative and technical personnel is not exhausted by technical expediency alone: it must be linked with the economy of production so that the product is obtained cheaply. Hence the second important approach to rewarding administrative and technical personnel: for the economy achieved in expenditures as compared with the initial estimates of the cost of the given products of production. The latter principle, to a certain degree, covers the principle of rewarding for the fulfillment of production assignments, since the absolute amount of the economy obtained becomes greater with an increase in the number of units of output produced. Therefore at the present time administrative and technical personnel are most often rewarded for the economy achieved, while imposing, however, the condition that the bonus be paid in full only upon fulfillment of production assignments; otherwise it is reduced according to one law or another. The economy obtained is usually paid out as a bonus to the administration not in full, but in part—for example, 50%; the other part of the achieved economy goes to the benefit of the enterprise, taking into account that the achievement of economy required from the enterprise certain expenditures for rationalizing the production process, as well as for improving the living and sanitary-hygienic conditions of ordinary workers.

To the article by I. M. Butaev

Fig. 1

Change in total earnings

Prusko-Hesser

Total
Loose-grain
Day work

Vertical axis: rubles.

Fig. 2

Change in hourly earnings

Prusko-Hesser
Loose-grain
Total
Day work

Horizontal axis: hours.

In connection with the article by I. N. Bulgakov

Change in the worker’s value
in the product in the Emerson system

\[ \frac{t_1}{t}=0.67 \]

Fig. 5

Change in hourly earnings
in the Emerson system

\[ \frac{t_1}{t}=0.67. \]

Fig. 6

To the article by M. N. Butakov

Differential form of Taylor

Change in hourly earnings
Fig. 7

Change in the cost of labor in the product
Fig. 8

Change in the cost of labor in the product and hourly earnings for Gantt’s system
Fig. 9

Labels in Fig. 9:

• hourly earnings
• minimum in the product
• cost of labor in the product
• earnings

For the article by M. N. Butylkov

Fig. 3.

Visible dimension labels: 75; 40; 98; 150; 29.

Fig. 4.

Visible scale labels: 40, 45, 50, 55, 60, 65, 70, 75, 80, 85, 90, 95, 100, 105, 110, 115, 120.

1. Holzman. Regulation and Naturalization of Wages. Moscow, 1917, p. 97. ↩↩↩↩↩↩↩↩

2. Izv. O-va dlya sodeistv. uluchsh. i razv. manufak. promyshl., 1907, No. 6, Möller: Organization of American machine-building plants. ↩↩↩

3. Schloss. Forms of Wages. St. Petersburg, 1900, p. 61. ↩↩

4. S. and B. Webb. Theory and Practice of English Trade Unionism. St. Petersburg, 1900, pp. 235, 243. ↩

5. Mitchel. Organized Labor. Moscow, 1907, p. 245; also Biul. Polit. O-va., 1912, No. 5. The Vickers System of Management, p. 243, and Möller, op. cit., p. 272. See also: Rev. mécan., 1904, p. 149. Bosler. Le système des primes en Angleterre et aux Etats-Unis. ↩