Evening journal., 1915-07-07


received preliminary report from
its Committee on the Division of the
Peoples Income. which consists Of
W. J. Pape of Waterbury, Conn, chair
man, Prof John b. Clark of Columbia
University and the Rev. John A. Ryan
Of St. Paul Seminary. ST. Paul. The
committee was charged with an in
vestigation of the oft-repeated asser-
ton that in the division of the prod
uct Of modern industry the lions
shares goes to capital and that labor
is allotted only meagre pittance.
Not infrequently IL Is stated that Of
the annual product as little as one
fifth goes to labor and that capital
absorbs as much as four-hfths. In
this extreme form it finds frequent
expression in the verbal and printed
utterances of the rank and file Of
the Socialist party.
The assertion is based upon a state
nent set afoat soon after the results
of the 1900 census we're announced.
This was to the effect that the cen
sus proved the average annual prod
uct per worker in manufacturing in
dustries to be S2.420 sometimes stat
ed as S2.471, of which he received
s437 in wages, which Is Is per cent
Il is believed to have been originated
by "The Appeal TO Reason" a Social
ist weekly which has often repeated
il in different Forms. The report of
the committee contains letters from
many Socialist writer's, some of whom
approve this view while others take
more moderate position. The report
also shows that this is not an official
doctrine of the Socialist party, which
has never endorsed il in its platform.
In fact, the Socialist Congressional
Campaign Handbook for 1914 states
the percentage Of wealth produced
received by the worker as SLY per
cent. Nevertheless the 1S per cent.
proportion has been repeated so often
and denied so seldom that it is fire.
quently assumed to be true. Though
Il is a statistical error of the first
magnitude. it has become one OF the
common-pl places of popular economic
thought and is not infrequently re-
heated by those in high places
Exhaustive Investigation Made.
In view of the currency thus given
by so many present-day writer's ana
speakers to the belief that labor re
ceives but one-hfth Of the product OF
industry. the committee has undertake
en- an extended investigation of avail
able statistics bearing upon this point.
The conclusion reached that, IN
general, after miscellaneous expenses
and the cost of materials or supplies
are deducted. the net earnings in in
dustrv are divided two-thirds FOR
wages and salaries and one-third for
interest. Profits and the upkeep OF
capitai. since out OF this share the
capitalist must sooner OF later pro-
vide for depreciation. Instead OF re-
ceiving four times as much OF the
nroduct as does labor. capital receives
onlv half as much So far as the divi-
sion between labor and capital differs
In different branches OF Industry II
appears to be due mainly to the need
for different allowances for the up
keep Of capital.
THE trap into which so many who
undertake to reason from the census
have fallen lies in the hasty assump-
ton that the gross product OF man
ufacturing industries is the measure
of tho wealth produced. The commit
tee shows that the wage-earner does
not produce the S2,420 at which the
per capita product was valued when
! completed. His materials, which cost
S1.395. must be charged up to him
and consequently deducted from the
gross product
ON 1899 the materials used the
report continues. 'were equivalent &c
81 sos per worker and since the
products we're valued at S2,42O pc
worker. and since the difference, 81,
OPS. represents the value per worker
which manufacturing has produced.
This is the added value which, Tho
report SAYS. is the true product II
manufacturing industry. lt was th'
amount of new wealth produced pc
wage-earner. The census puOlcatohl
! explicitly point out that this Is INT
figure which best represents the ne
wealth created by manufacturing IN
'dustry. and warn their reaoer
against the error caused by using tn
gross product which includes TN
value of materials used.
Where the Fallacy Lay.
Out Of this Added Value the manu-
facturer must meet the misceilane
Gus expenses of conducting his bus
mess which consist Of payments 70
taxes, advertising. rents, royalties, IN
surance. travelling. and the like, a
we'll as his payroll or labor cost be
fore he can figure upon a share 10
himself. Deducting the miscellane
Gus expenses. there remained IN 1870
fund of $3.50 per employe to be di
vided between labor and capital. Q
this sum $500 or 66.4 per cent wen
to labor and 1929 or SS.6 per cen
went to capital But a part of capi
tails share musf be used FOR the re
,,Irnfchp,onf of canifal and is rpitho