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REDFIELD OF NEW YORK IN THE HOUSE OF REPRESENTATIVES * MONDAY, JUNE 12, 1911 -...-…-…- …！！！！！º w ~~~~ ſaeae （sæſº！！！！！！！！！！！！！！！！！！！！ !！！！！！！！！！！！！！！！！！！！！！！！！！！！！！！！！！！！！！！!！.>>：）！！！ -º ， + º ： • • • • ► ►sse e-º， º ~~~~ .. ， ！- º ：-） • • • • • • ► ► ► ► ► ► ► ►► ſae * …：.…..”…№！！！！！！ºg º ae g * * * saer， º ∞<！ ！！ ！！ ！！ !! {ſ} ; Mr. MANN. I understand the gentleman has been able to sell his goods abroad. On the Same basis of price as that at Which he SOld them at home? Mr. REDFIELD. YeS. Mr. MANN. That seems to be a very good result of the working policy of our administration. [Applause On the Republican side.] 100701–10096 Mr. REDFIELD. And I propose, Mr. Chairman, if my time pº tS. to tell the reason why. I want to take up then, Mr. Chairman, the thingº been omitted in this discussion. I wish to deal with the question Of §ost Of production—what it involves, what the elements in it are—and to go thiºgh it With SOme Care. *\ , But a few more illustrations may be interesting also. My agent in the cit,” of Calcutta said to me, “Do you see those shoes?” I said, “Yes.” He said, “I paid $3.85 for those shoes.” “Why,” I said, “that is an American shoe.” “Yes,” he said, “I bought it here. It is the regular American $5 shoe.” I said, “Are you sure?” He said, “Yes.” I wore them to New York and went into the store on Broadway where they are sold and asked what the price was there, and I was told it was their regular $5 shoe. I shall be glad to give names and addresses to any gentleman in the House Who inquires in private. I hold in my hand a little lead pencil. It is a small, ordinary pencil. It has upon it the name of the American Pencil Co., of New York. I bought it in the middle of Java, out of stock. I have in my home in Washington SOme men’s toilet articles—shaving soap, and so forth, made in New Jersey. I bought them in Hongkong. I found them in Stock in drug Stores around the planet. Of Course they are Sent there as gifts. We all realize now that it is impossible to sell goods, made at American wages, abroad. [Laughter On the Democratic Side.] And, Mr. Chairman, I have here an advertisement of a most peculiar kind. It is from the Drapers’ Record, which is a leading textile paper of Great Britain. It is an advertisement Of the Pacific Mills, of BOSton, United States Of America. It is a whole page advertisement, and it reads: -- Serpentine crepe is stocked by the largest retailers in Great Britain because the English public have found it is the greatest cotton crepe in the world. It proceeds to enlarge upon it, and Says: By our extensive advertising in the leading British publications we are creating a very lively demand for serpentine crepe amongst a certain class of householders. They proceed with a guarantee, and then state that their London agent is pre- pared to fill all orders for serpentine crepe. This is signed by the Pacific Mills, of Boston, Mass., giving the address of their agents not only for Great Britain, but for Australia, New Zealand, SOuth Africa, and Other Colonies. $: :: 3: $: >; #: *: On a maini street of the city of Batavia is a very nice office building. It is One Of the most creditable Office buildings in Java, and OVer the dOOr are these words, “United States Steel Products Co.” Now, of course, it is thoughtful and kind of the United States Steel Products Co. to go there and build a useless building. I would suggest to the Committee investigating the United States Steel Corporation to inquire as to whether One of their subsidiaries is giving away its product in the Dutch East Indies. Yet, after all, We are told that though foreign manufacturers are handicapped by distance, by time, and by freight, We Cam not compete with them because we pay high Wages and they pay low Wages. *. Finally, to end what I was going to say in illustration, just let me read a list of 10 departments of One export journal stating the American goods that they are offering abroad, for Sale in Open Competition, Mr. Chairman, with Germany and Great Britain. And at the risk of being a little bit weariSome, I think it may inform this House to know how Completely we are unable to compete with the foreign manufacturer. I read, therefore, “ironmongery, fine tools, bicycles, Sporting goods, lamps, raZOrs, firearms, Carriage makers’ Supplies, Sanitary , goods, lighting Systems, dry goods, men’s furnishing goods, boots and shoes, cor- . Sets, hats and Caps, textiles, clothing, women’s furnishings, Office furniture, Office devices, Stationery, type Writers, filing Cabinets, printers’ Supplies, paper, machine tools "-a friend in Rotterdam sold two that were made in New Jersey the other day when I was there—“boilers, lubricants, electrical material, valves, wood- Working machinery, belting, Shafting, pulleys, packing, furniture, kitchenware,” and SO forth. * #: *: sº: 3: 5%: *: :: Mr. HARDY. Razors are in the gentleman’s list, are they? Mr. REDFIELD. Razors are here; also agricultural machinery. On that matter of agricultural machinery I am reminded of another thing. - Have any of my friends On this side of the House heard a gentleman on that Side of the House mention or account for this particular fact, that there are manufacturing houses in America that sell no goods in the United States? 100701—10096 - They pºlyg Sºfiigh wages as anyone. There is one in Poughkeepsie, N. Y., mak- ing agrºſſtural machinery. Another is in or near Newburgh, N. Y. There are many £ºfe; one in New York City. - Agºyet the feature of this discussion is the fear of foreign makers in Ameri- cajº’imarkets, ignoring the fact that foreign designs, foreign measurement, for- _2}eign methods are often such as to make their products useless here at any price. • * The discussion, therefore, from a manufacturing Standpoint, has been of the most elementary character. It is assumed, without argument, that American manufacturers can not compete in the World’s market On even terms Without protection, and can not even hold their own at home. The only suggested way of meeting competition is by reducing wages, the crudest, the coarsest, and the most brutal Of all methods. [Applause On the Democratic Side.] The Only form of competition that appears to be known is in the prices at which goods are sold, and yet Some American goods Selling widely abroad bring higher prices in Europe and Other foreign markets than goods produced of the • Same kind in the marketS Where they are sold. zS º' Nº 2; xi. 2: :: Nºt: ::: The necessity therefore exists for a broader view of this whole subject which shall take into account facts that have not yet appeared, and to consider it from a practical rather than from a theoretical side. - :: :: nk it: xt: * :k Let us consider, if you please, the cost of production from the manufacturers' Standpoint. What is it and What does it involve and how Shall it be handled 2 TJnless I am mistaken, these gentlemen before me who are practitioners Of the law will find that they have discovered a strictly professional problem in deal- ing With cost, an intricate and Complex thing—not a thing which can be bitten Off at a bite and called the rate of Wages. • There are four groups that enter into every factory COSt: 1. The Cost Of labor. 2. The COSt Of material. 3. Burden cost (or overhead charges). 4. Selling COSt. The aggregate of these four fixes the point per unit of product where profit begins. Let us discuss them Separately. First, labor cost. In a modern industry this is often not the largest element in cost per unit Of their product. In Some industries it is rarely the largest element in unit cost. In my own experience there have been many cases where, had the labor cost equaled the other elements of cost per unit, I should have thought my Superintendent needed Overhauling. I am told that in an American locomotive the percentage of labor COst is 20 and that the percentage of ma- terial cost and of burden and Overhead charges is 80. 14: * sk :: *: :: >'s Now, Mr. Chairman, it needs only the statement to show that the important factor in labor Cost is not the rate of wage, but the rate of output. It is not what you pay, but what you get for what you pay that counts. Once, when my office was located in the city of Paris, I employed a lot of French Carpenters and paid them 10 francs a day—$1.90 each—and at the end of three or four-days I was well-nigh crazy. Down the long aisle of the build- ing I Saw a familiar-looking tool box, with a saw Sticking from the end, and I ran to the place and found a man who looked like an American Carpenter. I said, “Are you a Yankee?” and he said, “Yes.” I said, “I want to employ you now.” He said, “Boss, I charge $4.50 a day.” I said, “Come right along.” Two days later I discharged four Frenchmen, and my one American carpenter did more work than the four Frenchmen. [Applause..] And I saved money by the process. And, if Somebody Wants to ask me the question, , there are sound, SOber, Serious reasons Why the American Carpenter did as much work as four Frenchmen, and I Shall be very glad, if you wish to detain me, to go into the . details Of the reason why that man is SO much more efficient. SEVERAL MEMBERS. Let uS have the reasons. Mr. REDFIELD. In employing a French carpenter, he goes to work hav- ing eaten almost nothing. For breakfast he has nothing more than a bit, a little bit, of bread, without butter, and coffee. At 11 o’clock he stops to eat a little bread and drink a little sour wine. That is all, all I ever saw any of them eat. At 3 o'clock he stops again to eat a little bread and drink a little SOur Wine. After he gets through at night he has what he calls a dinner. Such 100701—10.096 - a man can never work at any labor requiring steady physical 1011 COn- tinuously under pressure in competition with a man who eats th meals a day. [Laughter and applause.] - ..º I speak from some knowledge of French and also of German factories, ºl would like my friends on the other side to explain the folly of the Englishmīāp. who once asked me to go into his factory and tell him how to cut down his labor cost. What a fool that Englishman must have been Yet I might pause right there to tell what I found at that particular time in that English factory. A MEMBER. Tell us. - Mr. REDFIELD. I found a screw machine making bolts of various sizes, and a boy running it at a very small Wage, probably about 2 shillings a day. I stood looking at the boy and his product; first, twenty #-inch bolts, and then twenty-five #-inch bolts, and then fifty #-inch bolts, and then five Or six 1-inch bolts, and then back to quarter inch. I went to the Superintendent and said to him, “That boy is costing you more than a man who earns $3 a day would in One of our shops.” He said, “Why?” I said, “His time is used in altering tools. He is “breaking up,” as We Say, altering his Imacine from time to time and stopping his processes 10 to 15 times a day.” He said, “What would you do?” I said, “Give him one size and let him run all day on that. The next morning give him another Size and let him run all day On that, and the next morning give him another Size ; do not Stop your machines, but run them Steadily on One size.” “Why,” he said, “Mr. REDFIELD, We can not get foremen to think that Out.” :k :}; :}; :}: * :k ::: I have just stated in the matter of labor cost the serious element is not the rate Of Wage, but the rate Of Output. For example, in COmpeting with a Swedish COricern at One time it was inquired how it was practicable SO to do. - I said, “How much does he produce?” “Four hundred a day.” I said, “Our Output is twenty-eight hundred a day.” One Of the things, gentlemen, I would like to burn into your thought is this—the essentially variable quality Of cost. It can not be talked about as a fixed thing. Cost is everywhere and always variable, at every time and in every place. :: :}; :}; :}: :}; - :}; sk Output varies with the character of the workmen, the equipment, its ar- rangement, Ör Other local COnditions, with the nature Of the Superintendence, with the discipline, and so forth. It is absurd to assume that work done by a man paid $4 daily costs more per annum than Work done by a man paid $2 daily. It may be more or less costly, and depends upon other conditions. Therefore, because certain goods are produced at a certain labor cost per unit when the wage rate is $3 per day in a certain place, it can never be argued that the same wage rate On similar goods results in a like labor COst per unit in an- Other place. It may vary from 10 to 50 per cent. To discuss the Wage rate as the controlling factor in labor cost per unit is both inadequate and misleading. The railroads are a very notable example of this. The English railways have vastly cheaper labor than we, but their freight charge per ton-mile is two and One-half times Ours. With pride the Indian railway department told this last winter that, though their labor is one-eighth of ours in cost per day, they had Succeeded in getting down to a trifle lower freight Cost per ton-mile than we. They had been years at it, with labor one-eighth of ours, and had just suc- Ceeded. I have in my hand a letter from my OWI) representative in Rangoon, saying, “Figure on an apparatus using native labor cheap but bad.” To say a man gets $3 per day means nothing at all as to the COSt Of his product. It may be either low or high, and the Wage rate taken by itself alone affords no basis of comparison. Apart from the wage rate, labor cost per unit is very largely under the control of the manufacturer and may be radically altered without Changing the Wage rate. SNow, the question as to a manufacturer’s control of his labor cost apart from the Wage rate I want to illustrate by examples. >}; :}; :k :k :}; >}: :}: I know a factory in which the product was doubled in two years without adding a man Or Without adding a machine. And this is the Way it was done : It is a very interesting experience in labor Cost. The men had been paid on day work. The labor mén have, and they properly have, a horror of piecework, as it is commonly administered, because, I am Sorry to Say, manufacturers have 100701–10096 - f so abused, affe piecework principle that the laboring men have justly come to e Applause..] AS pieceWOrk is bandled in most factories it Ought to be haled, it is hated, but in this particular factory the head of the concern got the iſſea that he could save by guaranteeing his men a high wage. That is quðer doctrine for the Other Side Of the House. He got the idea in his head . ... that he could save by paying a high Wage, and he said—and I speak of it because I was called into consultation at the time—“We will guarantee your day rates; you shall always earn your present day’s pay. We will also guar- antee that your piecework rates Shall not be cut. We Will agree with One an- other that obvious mistakes will be corrected either way, but if you earn large pay, understand, your piecework rate shall not be cut.” That was true. That factory operated upon that basis for many years. The wages of Some men went up to $6, and in Some Odd cases even to $7 a day. I had the pleasure of Selling some of the product Of this shop abroad, against European Competition. Now, when the men were guaranteed an unlimited earning rate, See What happened. The manufacturer said, “There is the machine. There is your power. Go ahead. Earn all you can, and GOd bleSS you.” [Applause on the Democratic side.] Now, naturally the first result of that was largely to in- crease the product. Then three other things happened. The manufacturer went to a man and said, “Pat, you are earning pretty good Wages. It does not make any difference to me what you earn. The more you earn the better for us both. But there is one thing you can not afford, and that is to have your machine shut down for repairs. It hurts me, and it hurts you every hour that that machine is idle, and your machine is Of that particular kind and engaged in that particular Work that knocks it to pieces if it is not properly taken care of. Every hour it is delayed in operation it hurts both you and me.” Says Pat, “What is it that you want?” “I want you to spend about 15 minutes before work starts every morning in Overhauling that machine in your own interest. DO not let it get into Such shape that it will need repairs.” Gentlemen, I can not tell you the exact number of thousands of dollars per annum that was saved in that factory in that Simple way, but it was several times $10,000 a year, just that item of examining carefully the machines every morning before beginning regular Operations. In the next place, the System of using fuel had been more Or less Careless in this shop. The manufacturer went to his Workmen and Said to them, “Boys, you are not going to be Cut, no matter what you earn. You Can not afford to waste time in firing improperly. You must be careful.” His men did as instructed. At the end Of three Or four Weeks about an hour and a quarter’s time Was saved each day, amounting to one-eighth of the operating time of that part Of the plant, besides a Saving of fuel. Now, in most factories the element Of defective goods is a large element of cost. This manufacturer went to his men and Said, “BOys, you are well paid. There is no limit, practically, to What you can earn. But it is not fair on that basis to make any bad goods.” The men thought the matter Over among them- selves, and finally they came to him and Said “What is it you want?” and he said, “I want you to replace the bad goods in your Own time and to replace the material that you waste.” And right there Was Saved. Several thousand dollars more in the COurse of a year. In those ways, without touching the rate of wage, the output of that factory went up double in two years; and the Same thing, to a greater or less degree, depending upon different circumstances, is possible everywhere. But some one will Say about the Case I have quoted that there must have been lax manage- ment theretofore. I can assure him that was not the Case. I met an American leather manufacturer while abroad. He had some Eng- lish Visitors come into his plant, and showed them how he was making a hun- dred dozen of a certain kind Of Skin per day—that is, doing a Certain Operation on that many per day—and they said to him : “That is very good, indeed; better than we do, and we are very Emuch pleased with it.” But he did not tell them that he had just bought a machine that did 300 dozen a day. And when a few years later he went to see them in Great Britain and found they had risen to his Standard Of 100 dozen a day, he did not tell them then that he had put in another machine that did 600 dozen a day. Labor cost per unit varies with time and place, and in the same shop is con- stantly changing. It is unlike in each Of Several mills producing the same goods, belonging to the Same Company. A Superintendent who would take three 100701—10096 mills making the same goods, under the same ouwnership, in tºe different cities, and get the cost alike would be a wonder. For example, I ha'º in mind two factories, belonging to the same concern, where for two years lºgs been a constant effort to get the costs alike in making the same goods. But What are you going to do when in one factory power costs three times as much as it dOes in the Other ? * “ss, Labor cost is affected by sanitary and climatic conditions. It varies with the * Quantity and the quality of the Output, and it can never be assumed that it is at the close of the year what it was at the beginning of the year in the same shop. It is enormously modified by the progress of invention. The labor cost in your shop in January may be in Some respects entirely wiped out by July. The labor cost in July may be entirely altered by December; else what is your purchasing agent for, and for what purpose are you feeling out all over the world for the latest machinery? Base a tax upon the January COSt, that is just equal to the difference in foreign Cost, if there be such a thing, and it is altogether altered by July, and by December it may be three times the difference. And every manufacturer knows these things and lives up to them every day, but does not always talk about them in public. [Applause and laughter.] Labor cost varies with the arrangement Of machinery within the shop. It is affected by the Space available. It varies with changes in material, with the sufficiency and the regularity of the Supply Of material and its suitability to the work. And the labor cost Of Monday when the Stock runs out Monday after- noon and new stock comes in Tuesday is not the same on Tuesday that it was On Monday. The steel mill may have made an error and your labor cost go flying up for the time. And I am Speaking now, gentlemen, from an experience in figuring labor costs to hundredths of a cent per unit. Labor cost is affected by the lighting and the power equipment of the shop, and Will change with the going Of One Superintendent and the coming of an- other. I am sure I need only to say these things One after the other to have their entire reasonableness made plain to you all. Labor cost will alter radically within a month, by the introduction of new tools, new machinery, or the change of a process, even to the extent of having a whole process eliminated. It varies with the wastefulness of material used in producing an article, excessive use of Supplies, the loss Of time and material occasioned in making defective goods; and every one of these items has to be Carefully watched by any alert manufacturer. The labor cost is affected by methods of paying (by piecework on a righteous basis, and by day’s work on an unrighteous basis) and by a just and Considerate application of the methods Of paying apart from the amount paid. Labor cost is, therefore, a variable element. It can not be measured by any fixed standard. To offer a fixed rate of duty to cover the difference in labor cost is to state an absurdity, for the one is variable and the other is fixed. But labor cost in any factory is both direct and indirect, as will be made plain ; upon the proper adjustment Of One to the Other depends in a degree the labor COSt. Reaffirming, therefore, that in many industries the unit cost of labor is not the largest element of the total unit cost, but may be a small percentage thereof, we pass to consider the cost of material. This is the most fixed of all the elements of cost, but Only a little thought is needed to show that this, too, is . variable. In two shops, one buying in large quantities and the other Small Quantities of the same goods, the price of the material will vary. In two large shops which buy the same quantity, but have buyers of different skill and dif- fering in amount of free capital with which to purchase, the cost will Vary. In two shops in the same business, but located differently with respect to trans- portation, the cost will vary. Within the shops the cost of material will vary with the handling facilities provided and with the space available for storage. The cost of material will vary with the system of receiving the same and storing them. The cost of material must always include such important and Variable items as freight, Cartage, Wharfage, demurºrage, and the like. The cost of material must always include the wages of the storekeeper and a share of rental for the space occupied by it. The cost of material will Vary also with such depreciation as will take place if it is not protected against loss. This, therefore, though relatively a fixed quantity, is variable, so that in dif- ferent shops, in the same line of business, it can not be argued that the net material cost in One even approximates that in another. The cost of material must include the factory supplies, the purchase, keeping, and management of which is an important and Complex element Of COSt Where 100701–10096 9 thousands gay easily go out of sight. Consider what it may mean to have one purchasgºf bad lubricating oil. Its use on valuable and delicate machinery IOOl 393é the loss of thousands of dollars in a week. ºzºhave Ónly obtained what is known as prime cost, or actual outlay, and have _-štill to consider two serious elements in cost, each of which sometimes amounts to a larger total than either labor or material, and sometimes exceeds both. We therefore take up, third, cost of burden or overhead charges. This is often ignored or not appreciated at true value. More Concerns are wrecked by failure to estimate or manage it properly than by any other single cause save perhaps insufficient Capital. I have in mind a factory in which I was employed where I could not per- suade my employer that a certain machine which was selling for $8,000 was in reality costing $9,000. He thought he knew. He said, “I have been in this business 30 years, and I ought to know my own business”; and to a question as to how he carried his Costs he said he kept them in his head, with that result. He insisted that his burden charge was 10 per cent, whereas, as a matter of fact, it was nearer 80 per cent, and it became me very Speedily to find other employment, and at the end of two years that concern failed. • Among the items Covered in burden cost are such as these : Taxes and assess- ments, repairs to buildingS and machinery ; indirect labor, Superintendence, ex- periments, insurance and fire protection—two different things, depreciation, bad debts, accidents, interest and discounts, power, heat, and light, and legal ex- penses, every one of them matters needing the most careful attention, if they are to be kept Within reasonable limits. A large concern located. On expensive land in a City with high rates of assess- ment and taxes may bear a burden in this single respect enough to pay a profit on the entire investment of a small Concern more favorably placed ; but, as showing the Complex nature of this problem, the same concern may, by reason of its equipment and its efficient Organization, produce goods, though paying the same or higher wages, SO Cheaply as to Overcome this handicap. Repairs vary with the character of the buildings, their age, their location, with climate, and with respect to machinery, with the care given to it. In some industries this item Of Repairs is very large. Indirect labor is an unfortunate necessity in every industry. A cotton mill employs carpenters and steam fitters, whose presence is necessary, but whose expense is a burden on the output. Every modern shop has to have a tool room. This question of indirect cost is often a very serious one, and is a matter requiring the closest professional study. The cost of superintendence is apt to be heavy in proportion as the labor is cheap. I was very much interested in what the gentleman from Connecticut [Mr. HILL] said about the jute mills in Calcutta in his recent address, because Only eight weeks ago I was in those jute mills talking with the Superintendent. I find it a very excellent plan, if you wish to get at the details of a factory, to avoid the owner, [Laughter and applause..] I asked this gentleman in this large jute mill about the question of his labor. He said it was cheap, very cheap. I said, “Is it wasteful?” He answered, “Fixtremely wasteful.” I asked him in what other respect it was bad, and he said it was bad in the respect that it required an unusual amount of European superintendence—three to four times as much as they would give in Scotland. Experiments looking toward new or better Output, tools, or machines are a very expensive item in many factories. It is hardly necessary to say that in- Surance varies. An Old Wooden mill must Charge the COSt Of its Output with many times the unit cost for insurance that is borne by goods produced in modern so-called slow-burning buildings. The actual loss from fires, over and above that covered by insurance, is a part of the burden cost frequently for- gotten and of uncertain amount, but often serious. Depreciation is a large item of cost, amounting often to as much as 10 per cent per annum of the entire value of the machinery, buildings, and other equipment, varying with Condi- tions. Sometimes neglected by manufacturers, it forms a burden of a Self- enforcing character, which, if not reckoned as an annual addition to the burden cost, will come in a lump sum whenever machinery or buildings must be re- placed. The loss arising through machinery thrown out of date by new inven- tions is a serious part of burden cost frequently forgotten. The loss arising from the continued use of antiquated and slow-producing apparatus is another large part of burden cost. ' 100701–10096 10 Some few years ago I visited a large English engineering sh and to my horror discovered an old-fashioned single cylinder walking-beam éºlle being built. I asked what that was for, and they said it was for a cottº ſº Oldham. Alongside of that they were building Several modern triple-e § engines. I said, “Why is that old type being built; it is 50 years behihººl the times.” He said, “Simply because the owner said his father had one like #, and he wanted the Same thing.” I Once Sold a large Order of g0Ods to a COn- cern in the city of Leeds, in England. That was a very absurd thing to do, be- cause Leeds is a great industrial town. It was, Of Course, another Case of our benevolence, but they bought the goods. When I came to the question of the allowance for finishing on the goods I said, “How much Shall I allow On each surface for finishing?” “Oh,” they said, “One-eighth of an inch.” I said, “Our usual practice is one thirty-second.” They said, “Mr. REDFIELD, I wish you would be serious.” I said, “I am entirely serious. . You have bought here a modern American plant of machinery.” That is quite a European habit. I Said, “You have got this fine plant Of American machinery. You are now pro- posing to require of it four times the amount of work that it was built to do, or else run it far below its normal speed.” “Well,” they said, “that is our custom and practice,” and therefore because of that custom it required four times the machining Work to finish those goods that We put on them in America. This question of slow-producing apparatus is sometimes by itself alone very serious. I recall one large sugar refinery in New York City that closed on that account alone. I recall another where the Single item of Cartage was SO great they had to go out of business. I recall three woolen mills that stood idle for years because their machinery was out of date and they would not replace it, and another that was idle and stood idle because it was 3 miles from a railroad and the Cartage killed it. Those are the things that do it, and not the dif- ference in the Wage rate. [Applause on the Democratic side.] The losses from accident are a constant terror to every manufacturer, and yet I stood, within the last few weeks, in a factory claiming high protection at Our hands here, Which could have made a profit by Saving in handling charges alone, but which stood to lose—for lack Of Care for human flesh and blood, and because of failure to properly protect its machinery—thousands of dollars every year. [Applause On the Democratic side.] -- The loss arising from bad accounts is present in every business, and varies With the Care in Selling g000S. The burden Charge arising from interest and discounts varies with the amount of free capital available in the business. I do not refer to the interest upon bonds or the interest on the total investment, with which some concerns charge themselves as an expense, but rather the interest that is to be paid upon real- estate mortgages and upon money borrowed to Supply working Capital and for discounts allowed Customers for prepayment. * Power, heat, and light very greatly. The Source of power is so variable that no general statement can be made. For example, power from water, from steam, from electricity, or from gas engines. I am interested in two concerns using electric power largely. One pays 5 cents per kilowatt hour, taking it from steam ; the other 13 cents a kilowatt hour, taking it from water, a difference of over 300 per cent in the power rate. It will be seen that the item Of burden COSt is One of importance and difficult to define. It is one in which every manufacturer is very closely interested, because it very Often affects the COSt Of his production far more than the rate of wages that he payS. Manufacturers, however, are very apt to assume the burden cost to be less than it is. Instead of making a careful study of it, they take what seems to be the obvious Course, of reducing the pay roll, instead of the more economical Course of studying closely their burden charges. Once my partner said to me, “Although your department of this business is not the factory, I want you to go into it every day for an hour or two, simply to find what is wrong.” And for 10 years I never went a day that I did not find Something that could be bettered. Before a manufacturer comes to you, gentle- men on this side Of the House, claiming the right to have you tax this whole people for his benefit, he should show affirmatively facts to the effect that his methods are the best that are known. [Applause on the Democratic side.] When a tariff bill was pending, Mr. Chairman, Some years ago, a representa- tive of a crucible-steel works in Pittsburg came into my office and said, “I have a petition I would like to have you sign.” I said, “What is it?” He replied, “It is a petition to have the duty upon our product advanced,” I asked him 100701–10096 © 11 talked ºff freely with me for many years, assuming, as a matter of course, źfeed with them in their particular views, and this man went on to say *wer to my question as to why they wanted this additional duty: “We }. * got to keep the standard of American living; we have got to hold up the , American rate of Wages and See that Our American working people live on a basis far better than the pauper labor of Europe.” I said, “That is very in- teresting. How much of the proposed increase do you propose to add to your pay roll?” He said they had not yet given that serious consideration. [Laugh- ter.] I asked him if he would add any portion of this increased duty to the pay roll, and he replied that they had not got to that yet. I said to him, “I have already signed a petition to have Our duty reduced, but if you will enter into a contract with me here and now that within a year after the duty is increased you will add any percentage to your pay roll, then I will recall my petition and sign yours and publish the facts.” He said, “You could not expect me to do that.” [Laughter.] I said to him, “Now, Mr. So-and-so "?–I knew him very well—I Said, “Now, Mr. So-and-So, you are paying 10 per cent, are you not?” He said he was. I then asked him if his desire was not simply to pay a little better than 10 per cent. He said, “Well, Mr. REDFIELD, you know how these things go.” [Laughter.] The reduction of wage rate is always an expensive process, involves serious, unseen, but real loSSes. Who shall calculate accurately the difference in labor cost in a large factory between the output of a force of, say, 1,000 mechanics, well paid, well equipped, well housed, with ample light and power, with machinery well arranged, with material exactly suited to their purposes, with management that wins the loyalty and enthusiasm of the men by liberal pay and just treatment, and the output of an equal force of men working in poor light, with variable, insufficient power, poor equipment, with wages cut to the Smallest limit, with improper Sanitary Conditions, and harsh treatment? [Applause.] The difference between the output under above conditions may be the dif- ference between ruin and dividends. You can not confine human nature within the limits of a wage rate. Wholly Outside of the rate of pay there is unlimited SCOpe for brains in manufacturing. [Applause On the Demogratic side.] But in all this We have merely produced Our goods and laid them at the factory door. They are not yet sold, and before their sale takes place another serious element Of cost must be added. Therefore we must discuss selling ex- pense. This selling expense is Sometimes as large as the entire Cost Of labor, material, and burden. I have only to mention to you what it Costs to sell automobiles in order to get your immediate assent to that. Selling cost includes such items as traveling expenses, , commissions, advertising, office salaries and rental, postage and stationery, packing and shipping expense, office equipment, office heat and light, and similar items. I need only mention these to show at Once that they are of a very variable character. In some lines the cost of advertising alone is equal to the combined cost of all things else put together. In some industries traveling expenses are a very heavy item. Office expenses are very high in Other indus- tries, and in others Office expenses might well be greater if they would so insure the ascertainment and reduction Of burden Cost. Some time ago a manufacturer claiming to need protection told me, in answer to the question, “Do you keep your costs accurately 2” “I carry them in my head.” He said, “I have been thinking for Some time Of putting in a COst-keeping system. It would cost about $4,000 to install the system, and I have not yet seen my way clear to it.” I Said to him, “Do you know whether that room or this room or the other room pays you a profit or costs you a loss?” He said, “No.” I said, “How can you economize if you can not tell that? How Can you know where to economize?” And yet he has the cheek to expect us to vote to tax the people in order that he may make a profit. [Applause On the Democratic Side.] “In one concern well known to me the burden and selling costs were double that of material and labor, and labor was least of all. Misleading and in- accurate statements frequently arise from lack of accurate accounting and cost keeping. Manufacturers are frequently ignorant of their own costs. I know Of One So ignorant Of his own business that he had $400,000' stolen from him, Mr. Chairman, and did not know it. [Daughter on the Democratic side.] Manufacturers have been often seeking the cheap rather than the economical. Cost is often assumed to be in labor where it is actually consumed itſ burden, or 100701–10096 12 valuable by-products are neglected that would carry the burden dissi in Whole or in part. $º From the above, if you have been so kind as to follow me closely,” will be obvious that no assumption can ever be made that in order toº cost wages need be touched. On the contrary, the field for Saving º wages, and for the economical use of the funds spent in wages, is SO large as tº tax the powers of the human mind. There are four whole classes of COSt, each comprising numerous important items, that should be studied carefully before the question of reducing wages is So much as thought Of. I am going to Speak in a few minutes, if you will allow me so long, Of three things that I am sure have never been mentioned here—hidden reserves, COm- pounded duties, and double incomes. They are rather abstruse, but extremely illuminating things, and I am led to think of them by the fact that I have not yet mentioned the serious element in cost called officers' salaries. Did you ever hear the proposition laid down that if the pay roll was cut the Officers’ salaries should be cut in proportion ? And is it not perfectly Sound that Since the margin of living is narrower for the workman, the man who has the broader margin should be cut first and most? [Applause..] It would seem perfectly obvious. I have touched but lightly upon the abuse of the piecework system, but I Rnow one factory where five times the rate was cut lest the men earn too much. I say, gentlemen, it is an absolutely Sound principle that he who comes before the Ways and Means Committee of this EIouse claiming the use of the taxing power in his behalf shall Come, in this and in all respects, with Clean hands. [Applause.] Since it is clear that COst is a large and complex subject, of which the item of labor forms but one, and often a minor, part, and that cost is fluctuating and variable, it follows that no tax can be laid which will in different places and at different times always COver the difference in cost between foreign and domestic producers. Mr. HARRISON of New York. Does the gentleman mean by “cost of labor ’’ the Republican phrase “cost of production ”? e Mr. REDFIELD. I Will repeat it. I think it will be then Clear. Since it is ckear that the COSt Of production is a large and complex subject, of which the item Of labor forms but One, and often a minor, part, and that cost is fluctuating and variable, it follows that no tax can be laid which will in different places and at different times always cover the difference in cost between foreign and domestic producers. [Applause.] There is no such fixed difference in cost between foreign and domestic pro- ducers. There is not, and there never can be, such a thing as fixity of cost. The difference—mark it well, gentlemen ; I know from practical experience it is true—the difference between three domestic concerns in labor cost may be as great, Or even greater, than the difference between- foreign and domestic COIncerns in the Salme line. The attempt to adjust a tariff rate to COver Such a difference is therefore absurd. If it provides for the difference in the cost of foreign goods and of American goods made in an American factory where those goods are expensively made, it would provide an enormous bonus for an Ameri- can manufacturer who made his goods economically. If it provides for the difference between foreign COSt and American cost for goods made in the most efficient American mill, it will not protect at all the American maker whose cost is high. You may have an injustice done one American manufacturer or an enormous profit paid to another, and you can not avoid it. It is in the nature of things. No law can get at it. And if your proposed duty provides for the average foreign COSt—an impossible thing to learn—it does not provide, there- fore, for the skillful and economical exceptions among foreign manufacturers. . . How in God’s name, gentlemen, shall anybody ever learn the foreign cost of articles? Has any Ways and Means Committee in this House ever had brought before it the actual cost sheets of an American factory? They are the core and kernel of the manufacturer’s business. He would not dare to produce them here lest his competitor find them out, but were they here produced this little theory and COntention about the difference in cost between goods at home and abroad WOuld Oftentimes be found to be in favor of the United States manufac- turer. [Laughter and applause on the Democratic side.] Does any One Of you. Suppose that that advertisement of the Pacific mills in Lowell, Mass.; was published in an English paper for fun? And if it was not published for fun in an English paper, how is it that the Pacific mills can sell 100701–10096 13 against Fºsh makers in their own country? This sort of a thing makes me a little ºd. [Laughter.] ºxists, therefore, in the difference of cost no possible basis for a tariff tax. £any general statements have been made by American manufacturers rºëcting the disastrous effects of lower duties on their business, but how many *&T theiu ever brought their cost sheets into the light? It is not what the manu- facturer says he can do, but what he does do. What does his COst account ShoW 2 The only way I know to make a Tariff Commission worth anything is to give it the power to bring the cost sheets before it [applause on the Democratic side], and if that be done can you see and hear the howls that would go up from the manufacturers of the COuntry? Mr. HARRISON of New York. Will the gentleman explain how it is possible to give a Tariff Commission power to bring the foreign cost sheets before it? Mr. REDFIELD. It can not be done. There is no way known to me—and I may say it has been my duty to strive for years to find out—there is no way known to me to get at the real cost of producing a thing in Germany, France, or any foreign Country. When, if ever, was there a man Who Could suggest a method whereby you could inquire into the business of a foreign Concern Or whereby the facts concerning the inner details of its Operation could be brought to light in this country? It is a perfectly absurd thing on its face, and I say it Can not be dOne. E[OW many American manufacturers are Willing to have their methods Of production and COSt accounts Openly analyzed to show whether or not they could produce goods cheaper than a foreign competitor 2 There is no reason for tax- ing the Whole American people because either manufacturers are lacking in Scientific study of their own business or unwilling to let the facts come Out. The talk of the rate Of Wages as fixing the cost of production Ought to end as being hopelessly ignorant and unscientific. [Applause on the Democratic side.] The following may be safely affirmed : First, the rate of Wages is not always, perhaps not usually, the controlling element in Cost; Second, competition is not always, SOImetimes not at all, a matter Of Selling price; it is Often a matter Of Quality, Often a matter of design, and often a matter of suitability ; third, the cost of production is more influenced by rate Of Output and its quality than by rate Of Wage Or hours of labor. About 12 years ago the head of a concern in Brooklyn decided that he would put his factory On a 9-hour-a-day basis. He became satisfied that there was an element in the 10-hour day that was real, but difficult to see, namely, the “tired ” hour. He became Satisfied that the tenth hour was the “tired ” hour—that at that time the point was reached under which a man could not work to the highest advantage. He put his factory on the 9-hour-a-day basis, and kept a very Careful record Of his cost. At the end of the year it was 4 per cent to the good ; he made an absolutely larger product. [Applause.] Mr. MCCOY. And the Wages remained the same? Mr. REDFIELD. The wages remained the same. I presume you gentlemen are all aware of the experiment that took place in the great shipbuilding yards of William Denny & Sons, who, as a result of conferences between them and their Workmen, agreed that they would try the eight-hour day for a year, at the end of which time if the results showed no disadvantage to earnings in the eight-hour day it would be retained, otherwise the men agreed to go back to the nine-hour day. As a result, at the end of the year they retained the eight- hour day, because it paid. [Applause..] I do not mean to argue from this that you could go with an ax and cut everything arbitrarily to eight hours, but that. the proper and reasonable adjustment of things to that will some day obtain is linquestioned. [Applause.] Given Scientific management, constant and careful study of operations and details of Cost—and I am going to read that again if I may, for I think this is the Crux of the whole question—given scientific mamagement, constant and Careful Study of Operations and details of cost, modern buildings and equipment, p?'Opér arrangement of plant and proper material, ample power, space, and light, a high wage rate means inevitably a low labor cost per unit of profit and the minimum of labor cost. [Applause.] Mr. Chairman, I saw them driving piles in Japan. Twenty women, each with a rope, lifted the pile. They were paid 20 cents a day in our money. I got a friend whose business was making pile drivers in New York to look at it, and We figured the cost of the piles. They cost four times as much to drive as it COst to drive them in New York. I could keep you here all day long with ex- 100701–10096 14 carefully day in ment of amples of the same kind. I was in a brickyard in Singapore, whº calculated the product of the men. Their rate of pay was 35 cer our money. I happened to have in my pocket a Very accurate COst a brickmaking company in one of our eastern cities, signed by its piº and when the superintendent of the Singapore yard and I figured his º cost together they were precisely the same. Now, these principles have stočič the test, gentlemen, of two panics and of a single year when we lost 35 per cent of all our business at one stroke, because the industry that gave it to us collapsed. New business had to be found from Some other place. Yet no man's Wages were Cut. A steadily decreasing labor Cost per unit of product is not in Consistent with, but on the contrary is normal to, a coincident advance in the rate of pay for the work, when accompanied by careful Study of methods and equipment, as previously suggested. Conversely, low-priced labor nearly always is costly per wnit produced, and usually is imConsistent with good tools, equipment, (Vnd large and fine product, else such labor would not be low-priced. Now, let us ask one single question which our friends on the other side will be sure to ask you if I Stop right there, and that is, Are not foreign manu- facturers as well placed as American manufacturers, Save in the single excep- tion of wages? You are bound to face that question. Are they not as well placed as we, save in the single exception of wages? To ask that question, however, is to answer it in the minds of all familiar with the details of the facts. The answer Can Only be in the negative. It is nowhere claimed that foreign labor is as efficient as American labor. I have a letter from the head of a great Japanese cotton mill, in which he says there are in his mill from three to four times the number Of employees for the Same number of looms that there are in an American mill. I Visited a rubber factory in Singapore where the superintendent, a French- man, told me it took five Malays to do one Frenchman’s work. In an English shop I saw five men pushing a truck to move, say, 400 pounds, for which they were paid $1.25 each, or $6.25 total, and an American manufacturer who was with me shrugged his shoulders when he saw it and said he would have a small crane and a man at $3.50 a day to run it. It is not claimed that the European labor is of as high morale and perSOnnel as American, and here I want to tell you two remarkable stories, one of which, at least, is typical. In a large shop in England, where I spent 10 days in a factory, there was one young man who seemed to me very industrious. I said to his employer, “Why do not you raise his pay; I think he is worth it.”. He said, “I can not.” I said “Can not ; what do you mean?” “Well,” he said, “he will not let nae raise his pay. That man earns 2 pounds a week—$10. I have offered him 10 shilling extra, and each time. he lays off just enough to make his 2 pounds a week.” [Laughter.] The point I want to make to you gentlemen is that this is typical, and that if you are running a factory in Manchester, Birmingham, I,eeds, Glasgow, Oldham, you would have to deal with men whose pay you can not raise. They will not accept it ; they do not want more pay. You are up against a condition there we know nothing about here. Now, secondly. A large European manufacturer said to me, “Mr. REDFIELD, what allowance do you make in your factory for loss of time from drink?” I said, “None.” “Oh,” he said, “do be serious.” I said, “I am perfectly serious.” “Well,” he said, “I know your workmen drink.” I said, “They do ; but no self-respecting American mechanic will work at the bench permanently alongside a drunkard.” Now, that is true Of Our American mechanics. The first-class mechanics in this country will not keep in a shop the man who is habitually a drunkard ; they will freeze him out. In fact, the superintendent would not have him in the place. º I learn On information and belief, and my Observation at least confirms it, that there is a regular loss in Birmingham Of about 4 per cent, in Manchester Of about 8 per cent, and in Glasgow. Of about 12 per cent of the total time of the factories On account Of the men being absent from Over-Sunday drinking, and that in Glasgow they do not expect to get a full shop until Wednesday morning. If those things are not true, let us have the facts. I believe them to be true, and I believe this is a thing against which the English master struggles without success, namely, a force of men often sodden with drink, which we do not have to deal with in this country at all. I believe if you went with me into an English factory yard among the men you would see it. European concerns are eagerly Seeking American equipment and studying American methods. Con- 100701—10096 15 in are equipped with American machinery; also in Paris and many As. They send men Over here constantly to study Our American cost &tion. Nowhere is the rate of output equal to that in America. My competitor told me they could not do Such work as We did. Nowhere is the problem of Saving labor cost so closely studied as it is here. Labor- saving machinery is an American specialty and product, and the concerns in Europe that manufacture with the best labor-saving machinery are concerns that have taken their inspiration from being here On the Spot and studying here. I have known the heads Of great European COncerns to keep their SOms here year after year to study our American methods of production. Nowhere is the cost Of transportation SO low as it is in America ; nowhere are such facilities Offered for transit as in America ; and nowhere do the railway companies adjust themselves So closely to the needs of manufacturers. Nowhere is the discipline in a factory SO close, and SO Sharp, and SO keen, as in an American Shop, and in proportion to the pay Of the men being high, that disciplirie becomes Vol- untary. Rarely abroad do Sanitary conditions equal those in America, and nowhere do living conditions equal those in America. Nowhere is there a more efficient type of men, who are therefore better producers, but the standard Of living is fixed by the man and not, by the pay roll. It is not dependent upon his Wage, but upon the relation between his income and his outgo. Merely to pay a man $5 a day does not create a standard of living. That depends on the man himself. In India men wear upon their shoulder a sign which says they are peonS—“Peon No. 1,” and SO On. Peonage is a crime in this Country, and the difference between the two represents the standard, not of pay alone, but Of manhood. It is admitted that some elements of burden cost more in other Countries. Compare the taxes; compare the question of military Service, which interrupts no American laborer, but does seriously interrupt the operation of Shops abroad. It is admitted that the problems of burden and selling cost are nowhere SO closely studied as here'; and, finally, the whole question of scientific management, now SO common, is American, and the only men who teach it are Americans. From the above sketch it is affirmed, without fear of successful contradiction, that American production to-day is often as cheap or cheaper in the labor cost per unit than foreign, and, so far from needing protection, it needs to be set free, that we may conquer the world. [Applause on the Democratic side.] But Why do not American manufacturers sell as cheaply as foreigners? Sometimes, they privately say, because the law permits high prices and they, Of Course, Sell in the highest available market. Did you ever think of what the hidden reserve in a factory is or may be? You never see it in the books Or never know it by the statements. A statement may be made to your Ways and Means Committee that may be perfectly clear and yet not show the facts. I know of a concern that was profiting largely. It was not desirable that, for purposes of taxation, the profits should appear, So they discovered that their real estate was not as valuable as it had been before, and they marked $100,000 off the valuation of it. At the end of another year or two, during which they had done well, they found that their real estate had depreciated further, and they marked another $100,000 off the value of it. There was a hidden reserve of $200,000 which no statement showed. And yet that statement would be filed as an accurate Statement of fact. There are many cases of that kind; I do not say Of that exact detail. . Did you ever consider the righteousness in a manufacturing concern of officers drawing a large income as Officers and also drawing another income as stock- holders? Is it fair that they shall Come to you and to me and ask that We tax our fellow men in their behalf when certain men in that concern are draw- ing a large salary as officers and large dividends as stockholders? And what- ever the facts may be, is it not but right and fair that they should be clearly known when they come and ask for taxation in their behalf? Did you ever consider what compounded duties amount to when you buy something from a retailer 2 Some One comes to me for an estimate Of cost. I, the Original maker, take what the actual cost Of the material in that thing is to me. That includes the amount by which the price is enhanced by the duty. I then forget the duty. I take the total cost to me and add my percentage of profit, and it goes to the wholesale dealer. You, a secondary manufacturer, perhaps, go to the wholesale dealer and buy from him, and he takes the total cost, which includes the Original duty compounded by my percentage of profit, and he adds to that total his percentage of profit and compounds it again. He 100701–10096 16 so sells it to you, and you, in turn, sell it to your customer, another perhaps, and again the duty is Compounded. Your wholesaler sells it to a retailer, and again it is compounded: the time your retailer sells it that duty has been compounded, in extreme four Or five times. It can not be prevented. So long as the Original COS the duty is there it must be compounded over and Over and Over again. You Can not eSCape it. - I believe, gentlemen, that protection is an injury to American manufacturers by limiting their Scope and by narrowing their horizons. I believe it costs them enormously in the loss of foreign business, and that is one reason why manufacturers in this country are so rapidly ceasing to be protectionists. I have never seen On the other side of the House a list produced of the manu- facturers in any line who have not applied for a protective duty, nor have you. But One reason why the manufacturers of this country are abandoming the protectionist faith is that their plants have been stimulated to become so large that Only in rare years has the demand in this COuntry become enough to take their total product, and they have got to sell it abroad. [Applause on the Democratic Side.] And so long as they must pay the high price for materials they find it is Sometimes difficult to sell abroad, although Such is the efficiency and such the cheapness of their labor in this country, as compared with that of Europe, that that single fact does Oftentimes enable them to get their goods sold in foreign markets. [Applause on the Democratic side.] - Consider the position of a manufacturer whose raw material is, as it always must be, the product of another industry, who finds his bome market restricted or OverSupplied, and turns, as he must needs turn, abroad for a market. He is handicapped by compounded duties on his raw material in a market where, by reason of the law, prices are often high. Nothing but the keenest application of brains to equipment and to output, coupled with the exceptional efficiency Of his workmen, permits him to Secure the needed Outlet. * An Overstocked domestic market is Often no theory, but a real Condition. Take away the shackles that bind the manufacturer, and When these condi- tions occur he will be free to sell in the World’s markets, without touching his pay roll. Protection, however, causes a manufacturer almost inevitably to depend on the Government for help, instead of Carefully and minutely studying the de- tails Of his Own business. The manufacturer should be his Own Severest Critic and should never be satisfied with his results. In every modern shop “six months ago '” should be ancient history. Protection, however, has enabled the American manufacturers to prosper by Selling to their fellow countrymen at prices so high, that they have not thought it necessary to study their own busi- mess closely, because they depend upon GOvernment backing. [Applause on the Democratic side.] Two men went out of a meeting Of One Of the committees of this House at the time a tariff bill was pending SOme years ago; they went out yonder, and one put his hand on the other’s back, “And now,” he said, “if we can not make money we never can.” [Laughter and applause On the Democratic side.] Such stories as these that I have told you, gentlemen, are the Commonplaces Of manufacturers’ Offices. [Laughter On the Democratic Side.] Now, however, that Scientific manufacturing as a profession has begun and is growing, the fact is found that we can and often do produce as cheaply hère as abroad, not despite of, but because Of, the higher rates Of Wages here, which are but a partial measurement of the higher efficiency and character of the American workman and of the fine equipment put at his disposal. [Prolonged applause on the Democratic side.] 100701–10096 / O |.l º| *º titleitiºn. ! ! ! . º ºº ºil ºf . Tº º f { * º: º º -º fſyº i- : wº---- |- |j l stºl Tºº } º º {} -º d º-- ſ- w | # : &ºlº º § } º tº- : ſ --º º ºiººº Htºt[. ºiºº - -ºº :!-#º º§:º º:º }- ºB sºtº ſº|º ºQ-ºtº ºº|+g ;- # iº:| liii. 3 9015 06699 O931 º, sº .* §§ º