COST OF LABOR-WAGE SYSTEMS 1. Labor in general.—It has been shown that the material entering into a given article can in most in stances be ascertained in advance. Bills of material can be made out, material can be measured, weighed or counted, and the value entering into a given part can be recorded with sufficient accuracy. Labor costs, however, present a somewhat different problem. The amount and value of the material going into a given part will, in general, be fairly constant, but the value of the labor bestowed upon the same opera tion at different times in the manufacture of similar part may vary within wide limits unless measures are employed to prevent such variation. Labor is usually the largest item entering into factory costs and since, also, the direct labor is often used as a means of measuring the factory expense which be longs to each part, it is evident that labor costs should be accurately determined if possible.
In industries employing large and expensive ma chinery, labor costs are doubly important. So far as actual wages are concerned it might make little dif ference whether a workman were paid $3.00 or $4.00 a day; but if the difference in wages is a measure of relative efficiency, and if this difference is reflected many-fold in the product of a large and costly machine, the difference in output might be very marked. It is, therefore, highly important that care ful records be kept which shall enable the manager to tell as closely as possible the labor costs of all opera tions performed. Even where accurate detail labor costs are not obtainable it is good policy to make a record of all time expended, if for no other reason than to impress the workman continually with the value of time. There is seldom much difficulty in obtaining and recording the time bestowed upon any given part, but to find out whether or not this recorded time is a just amount is not an easy matter.
For the manufacturer pressed by competition, there are, apparently, only two ways of reducing costs.
One is by reducing wages; the other is by developing better methods. But low wages do not necessarily mean low costs, since labor is not as yet such a closely definable quantity as material. In fact, the latest philosophy of industrial administration tends to in dicate that low labor costs and cheap output, far from being synonymous, may be diametrically op posed, and that low productive costs can often be ob tained only by incurring high labor costs. At least, high labor costs and low productive costs are not nec essarily antagonistic. A comprehensive discussion of wage systems is, of course, outside the scope of this discussion, but it is necessary at least to show the na tune and influence of wage systems first, because this will indicate the problems met in actually recording labor; and, second, because this will also indicate certain tendencies in modern methods which will un doubtedly have a marked effect on cost finding and cost-finding methods.
2. Two primary methods of rewarding labor.— There are two, and only two, primary methods of paying for work. One is to pay the workman for the amount of time which he spends on the work, at an agreed rate per unit of time; and the other is to pay for the amount of work which he performs at an agreed rate per piece. The first method is called daywork, because formerly the most usual time unit paid for was one day. The other is known as piece work, since payment is made by the piece. All other schemes for compensating labor are combinations, of one kind or another, of these two primary methods. These two principles, and the difference between them, should be carefully noted. Some of the ad vanced wage systems now in use have a complex ap pearance and would seem, at first sight, to rest upon deeper reasoning. But careful analysis will show that, in all cases, these principles alone lie at their root. It should be remembered, also, that the basic rates of any and all wage systems are fixed, in the last analysis, by competition.