hardly be expected to improve the situation greatly."

Profit sharing undoubtedly requires, moreover, a somewhat high degree of intelligence among the workmen. Experience has shown, also, that for the successful application of participation it is absolutely requisite that the employer should have an intelligent idea of the system, should apply it wisely, and should not indulge in utopian anticipations.

Still other difficulties are found “(1) in the smallness of the amount which can thus be distributed among the workmen, without unduly diminishing the employer's interest in production; (2) in the suspicions likely to arise regarding the employer's good faith in declaring the amount thus subject to distribution, unless the workmen, or a committee of them, are to be allowed such access to the employer's books and accounts as few business men would willingly concede; and (3) in the perplexing question, what shall be done, under such a system, in the not infrequent cases where the employer realizes, not a profit, but a loss.''2

Moreover, though experience shows that usually there is an increase of zeal in the working force, and the relations between employers and employees are excellent, there have been exceptions, even to this rule. In many cases, undoubtedly, where the bonus is paid only at the end of the year, "the strength of the incentive to activity,

'Gilman, Profit Sharing, pp. 393-394. Walker, Political Economy, p. 350.

which the hope of earning bonus affords, is seriously impaired by the delay in its payment.'

Industrial partnership shows few signs of extension, and, though it has proved in certain instances the most brilliantly successful form of profit sharing, is probably destined to only a circumscribed existence in the near future. Profit sharing by means of stock ownership, on the other hand, seems to have increased in favor, especially in the United States, within recent years. This method appeals strongly to the speculative instinct, which has permeated every social class, and finds in this fact its greatest strength. In this appeal to the speculative instinct, however, it finds also a fundamental weakness, and possibly even a certain fundamental viciousness.

While individually many profit sharing schemes have been eminently successful, as a type they have attained only limited social significance. Mr. Monroe, in the article previously mentioned, arrives at two general conclusions: "First, that such a system will succeed only with a select few of employers, those with whom social motives have an extraordinary influence and with a grade of skilled or intelligent labor. Second, such a system is of some importance to society from a statical point of view, but little, if any at all, from that of social progress. Though these conclusions may seem somewhat too unfavorable to the system, it is undoubtedly true that individual instances of successful profit sharing are no more effective in the solution of the labor problem than

991

1 American Journal of Sociology, Vol. I, p. 709.

are individual instances of successful coöperative colonies. (b) Objections to the Principle of Profit_Sharing: There are, moreover, several objections to the principle of profit sharing, which strike at the root of the system and cast doubt upon its social value, regardless of its economie foundation. In the first place, "if it be expedient that manual workers should share in the general prosperity or depression of the industry in which they are engaged, the sharing of profits and losses made by individual firms is clearly the wrong way to set about it. This result can only be attained by a formal or informal sliding scale of wages, dependent on the general conditions of the industry, and not on the ability of individual employers to adapt themselves to these conditions.''

Another serious objection to the system "is the manner in which profit sharing offends against that cardinal principle of industrial remuneration which demands 'that every man shall receive his own reward according to his own labor.' For while, under the ordinary wage-system, the remuneration of the labor of the employees is made wholly independent of the ultimate financial results of the business-results which depend, in the main, on the skill and industry, not of the workmen, but of their mas ter-under the method of profit sharing, it is quite possible that the workman who, in the hope of earning 'bonus to labor,' has done work 10 per cent. in excess of the normal standard, may, even under a liberal scheme, find that, instead of receiving an addition to his normal wages of,

'Potter, History of Cooperation, p. 161.

say 7 per cent., the bad management of his employer has reduced his bonus to so low a level that he has to be content with a supplement equivalent to only 2 per cent. on his wages, or that ** no bonus whatever is forthcoming."" As President Hadley says: "To make his wages depend on net profits, under these circumstances, is to force him to participate in the speculations of his employer-a result neither equitable as between individuals nor desirable for society as a whole."

Finally, a third objection which has been brought against the principle of participation is that, while it may, when applied in individual instances, promote industrial peace, "the nature of the profit sharing method is such that its general adoption, so far from decreasing the occurrence of industrial strife, might quite conceivably multiply the causes of difference between employers and employed." To the usual causes of disagreement there might easily be added, for instance, questions concerning the amount and the distribution of the bonus.

REFERENCES: There are several comprehensive general works upon the subject of profit sharing, the most important of which are: Sharing the Profits, by Miss Mary Whiton Calkins, 1888; Profit Sharing Between Capital and Labor, by Mr. Sedley Taylor, 1886; the report on "Profit Sharing." by Col. Carroll D. Wright, in the Seventeenth Annual Report of the (Massachusetts) Bureau of Statistics of Labor, 1886, pp. 155-236; Profit Sharing Between Employer and Employee (1889) and A Dividend to Labor (1899), by Mr. Nicholas Paine Gilman. The last named book, though only partly devoted to true profit sharing, describes in detail some of the most recent American experiments. The student is advised to read at least one of the first four works. Other descriptions of profit sharing experiments, as well as interesting and valuable articles on the subject, may be found by reference to the files of the monthly bulletin published from 1892 to 1896 by the Association for

1Schloss. Methods of Industrial Remuneration, pp. 305-306.

2 Ibid, p. 295.

the Promotion of Profit Sharing and entitled Employer and Employed. Other references upon specific subjects are as follows:

SUPPLEMENTARY READINGS:

1. Economic Aspects of Profit Sharing:

(a) Schloss, Methods of Industrial Remuneration (3d ed.), pp. 239-309.

(b) Hadley, Economics, pp. 370-378.

2. Experiments in the United States:

3.

(a) Gilman, "Profit Sharing in the United States," The New England Magazine, New Series, Vol. 7, pp. 120-128.

(b) Monroe, "Profit Sharing in the United States," American Journal of Sociology, Vol. I, pp. 685-709.

(c) Howerth, "Profit Sharing at Ivorydale," American Journal of Sociology, Vol. 2, pp. 43-57.

(d) Blackmar, "Two Examples of Successful Profit Sharing." The Forum, Vol. XIX, pp. 57-67.

(e) Cabot, "An Instance of Profit Sharing," Review of Re views, Vol. 26, pp. 325-326.

Stock Ownership by Employees:

(a) Eighth Biennial Report of the Bureau of Labor Statistics of Iowa, pp. 13-15. (Plan of the Illinois Central Railroad.)

(b) Wellman, "Profit Sharing in the Steel Corporation," Review of Reviews, Vol. 27, pp. 326-331.