Is Profit Sharing The Cure For Labour Troubles?
“Profit-sharing” is a general term covering various ways of giving the workmen in a business a share in its profits. It is claimed that this arrangement gives the workmen an interest in the success of the business, makes them more economical, and is an incentive to greater industry. It also helps to bridge over the gulf between employers and employees by making the incomes of both dependent directly upon the amount of profits. In this way, a system of profit sharing renders the relations between employers and their employees more cordial and so would prevent labour disputes, strikes and lockouts.
There are different ways in which the workman’s share of profits can be paid to him: either in cash at the end of the business year, or in shares of stock in the company for which he works (thus making the workman a partial owner of the business); or it may be amassed in a savings or insurance fund, from which in his old age the workman receives a pension, or his family an annuity or cash premium at the time of his death.
It was a French firm that first adopted a successful system of profit-sharing in 1842. In the latter half of the 19th Century profit sharing was much discussed, and by 1878 a hundred and twenty firms had adopted it. The number grew steadily till about 1896; since then, however, the system has declined, and not much is heard of it to-day.
There were several reasons for this failure of the system of profit-sharing. One was the opposition of most labour leaders.
They opposed profit-sharing because it appeared to them to be a sop offered to the workmen to detach them from their Trade Unions. Many workmen, too, were suspicious of it, looking on it as a sort of bribe to get them to give up their rights. But perhaps the chief cause for the failure was the refusal of the workmen to share losses as well as gains. The employers argued that when their employees were given a share of business profits, it was only fair that they should be asked to share business losses by accepting lower wages during a trade depression. This the workmen would never agree to. So while the employer shared his profits with his workmen, he was left to bear all the business losses himself.
Anyway, profit-sharing did not solve the labour problem, and it is not likely now that it will ever be the cure for labour troubles.