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Frances Perkins, Secretary
Isador Lubin, Commissioner (on leave)
A . F. Hinrichs, A cting Commissioner


Incentive-W age Plans and
Collective Bargaining

Prepared b y th e

B ulletin

7s[o. 717

(Reprinted from the M onthly Labor R eview , July 1942,
w ith additional data]


For sale by the Superintendent o f Documents, Washington, D. C.

Price 5 cent*


Development of incentive systems____________________________ ________
Prevalence of incentive-wage plans_____________________________________
Union reactions toward incentive wages_________________________________
Reasons for worker opposition to incentive wages_______________________
Effect of incentive plans on efficiency and employment__________________
Effect of incentive plans on unionization________________________________
Collective-bargaining controls. ^________________________________________
Union participation in setting rates and job standards___________________
Adjustments through grievance procedure_________________________________
Appendix.— Some incentive-wage clauses in union agreements___________








U n it e d S t a t e s D e p a r t m e n t o f L a b o r ,
B u r e a u o f L a b o r S t a t is t ic s ,

W ashington , D . C ., A u gust 4, 194%*
T h e S ecretary of L abor:

I have the honor to transmit herewith a report on incentive-wage
>lans and collective bargaining. The report summarizes the findings
rom a study of incentive plans as viewed by workers and their union
representatives, made by the Bureau of Labor Statistics during the
winter of 1940-41.
This bulletin, a portion of which appeared in the Monthly Labor
Review, July 1942, was prepared by Fred Joiner and Van Dusen
Kennedy, under the direction of Florence Peterson, Chief of the
Industrial Relations Division.


A . F . H i n r i c h s , A ctin g Com m issioner


F r a n c e s P e r k i n s , Secretary qf Labor



B ulletin J^o. 717 o f the
U nited States Bureau o f Labor Statistics
[Reprinted from the M onthly L abor R e v ie w , July 1942, with additional data.]

FEW management policies have aroused as much opposition from
workers as have incentive-wage systems. Workers have organized
into trade-unions, gone on strike, adopted limitations on output,
refused to work with “ pace-setters,” and tried many other methods to
thwart or control incentive systems. Some unions have succeeded
in eliminating or modifying incentive plans or preventing their intro­
duction in individual plants. On the other hand, incentive methods
prevail in some plants and industries that are working under wellestablished union agreements.
Much of the disrepute of incentive systems among workers is due
to past experience with the rate cutting and the speed-up which often
accompany incentive plans, as well as to the w orked general distrust
of a purely “ scientific” approach to their jobs. The application of
collective bargaining to the determination of job standards and incen­
tive rates in many cases has removed or alleviated grievances regard­
ing incentive-wage methods. Many union agreements now contain
specific prohibitions against rate cutting and other “ unfair” timestudy and incentive practices. Equally important, unions have ob­
tained the right to participate in the actual rate-setting procedure in
some plants, and in others the right to appeal any unfair incentive
rate or practice through the grievance procedure. In many cases,
where these controls have been effectively applied, the traditional
opposition of organized labor has been modified to the point of at least
passive acceptance of incentive methods of payment.
Development o f Incentive System s

An incentive-wage plan is a method of wage payment by which
earnings fluctuate more or less in accordance with actual output, thus
providing an immediate financial stimulant to workers to increase
their efforts and output. The simplest form of such wages consists of
straight piece rates, under which a fixed sum is paid for each article
produced or worked on. Under the more complex incentive systems,
a premium or bonus is allowed for production in excess of a previously
determined standard. Incentive methods of wage payment are most
easily applied when the work to be performed is highly repetitious,




with measurable units of output in which the speed and dexterity of
the workman has an important effect on individual output.
In the early days of the factory system, piece work was common
only in such industries as clothing and textile manufacture. These
industries had their beginnings in home work, the worker being paid
by the bundle for completed or semicompleted work. When the work
was transferred to the factory, it was divided into many operations,
making possible a further refinement in the incentive system. In
the majority of early industrial establishments, however, piece work
was not applied, because the tasks to be performed were extremely
varied and required workers of higher all-round skill than was possessed
by the more specialized piece worker.
With the introduction and expansion of factory production methods
during the last half of the nineteenth century, skilled all-round jobs
tended to. be subdivided into many simple routine operations. This
movement was accelerated and popularized by Frederick Taylor and
other proponents of “ scientific management,” and led to the wide­
spread introduction of incentive methods of wage payment. The use
of time-study observations made possible a more exact measurement
of work effort as a basis for incentive wages, as well as the elimina­
tion of inefficient working routines and self-imposed limits on pro­
The introduction of complex incentive methods in conjunction with
scientific-management techniques was a significant feature of the
decade following the first World War. The rapid growth of such
industries as the manufacture of automobiles and of electrical prod­
ucts, which were characterized by frequent style and model changes
and continuous improvement in process and equipment, made nec­
essary more detailed attention to production and efficiency problems.
The time-study staff became a regular part of large factory operations.
Many companies, both large and small, hired outside engineers, each
of whom had developed his own particular type of incentive system.
The installation of some of these plans was accompanied by thorough
reorganization of factory production along more efficient lines, with
the result that the incentive system increased production and earnings
without marked increases in work effort on the part of the employees.
In other cases, incentive systems were imposed on existing inefficient
management methods, and such savings as were made in labor cost
resulted only from speeding up of the workers. No matter how
thorough the original installation, inequities and confusion frequently
developed after the engineer departed and the local management was
left to carry on a complicated system, the essentials of which were
only faintly understood in some cases.
Prevalence o f Incentive-W age Plans

There is considerable variation in the extent to which incentivewage plans have been adopted in the different industries. This may
be due to the nature of the work performed in the several industries
or trades, to the diverse attitudes of management, or to the resistance
or lack of resistance to incentive wages by the workers and their
unions. The following indicates the prevalence of incentive wages
among 26 selected industries.



Prevalence of Incentive Methods of Wage Payment Among Production Workers in
Selected Industries 1

Nonferrous smelt­
ing and refining
Printing and pub­


Leather, luggage,
belting, etc.
Machine tool
Meat packing
Nonferrous mining
Pulp and paper


Flat glass


G eneral

Coal mining
Hats and milli­

The construction and printing industries are outstanding for the
almost complete absence of incentive-wage systems, owing in large
part to the opposition of the unions. Some paperhangers and lathers
are on a piece-work basis, but most of the building-union constitu­
tions forbid incentive methods of wage payment. Very few union
printers work under incentive plans although a few of the large non­
union publishing houses pay on a piece-work basis. The International
Typographical Union recently adopted a constitutional provision
prohibiting its local unions from accepting piece-work or other incen­
tive payments in their new agreements.
The Pacific coast shipbufiding agreement forbids piece-work or
bonus-wage systems, but incentive-wage plans are prevalent in the
large shipyards on the Atlantic coast. Bonus systems are prohibited in
Government navy yards and arsenals.2 In aircraft manufacturing, in­
centive methods are confined to a few plants in the eastern area. The
important west coast pulp and paper agreement prohibits incentive
plans, although there are bonus plans in a few pulp and paper plants
Widespread changes in methods of wage payments have taken place
in the automobile industry during recent years as a result of union pres­
sure. Since 1934many of the largest units in this industry have changed
from piece-work, group-bonus, and other incentive plans to a straight
hourly wage basis. Similar changes have taken place in many of the
automobile-parts companies. At present less than a fifth of the
workers in the motor-vehicle industry are paid on an incentive basis.
In contrast to the automobile industry is the flat-glass industry,
where the union has effected a very substantial increase in the coverage
of incentive plans and has actively favored the extension of group
incentive methods. Whereas most unions are particularly opposed to
group incentives, the glass workers’ union has favored this form of
incentive plan, because production methods peculiar to this industry
seem to make such group arrangements desirable. The union’s*
1 Excludes clerks, maintenance and repair men, inspectors, designers, packers, trackers, and other special
workers in occupations incidental to production. The term ‘ ‘incentive methods of wage payment” includes
piece work as well as the more complex premium or bonus systems.
* Since 1914-15 there have been riders attached to the Arm y, N avy and Post Office Appropriation Acts
specifying that no part of the appropriation “ shall be available for the salary or pay of any officer, manager,
superintendent, foreman or other person or persons having charge of the work of any employee of the U. S.
Government while making or causing to be made with a stop watch or other time-measuring device a time
study of any job of any such employee between the starting and completion thereof, or of the movements of
any such employee while engaged Upon such work; nor shall any part of the appropriations made in this
act be available to pay any premiums or bonus or cash reward to any employee in addition to his regular
wages, except for suggestions resulting in improvements or economy in the operation of any Government
plant; . . .” (Public A ct N o. 441, 77th Cong.)



present policy was arrived at only after full discussion with employers
on the question of abolishing all incentive plans in the industry.
In a number of industries where incentive methods of wage pay­
ment were established before the workers became organized, these
incentive systems have continued under collective bargaining. A
large proportion of the employees in the electrical-equipment industry
are paid under various forms of incentive systems. Almost all coal is
mined on a tonnage basis. In the rubber-tire industry various “ point”
incentive systems have been widely established. More than half of
the employees in the steel industry are either piece or bonus workers.
Incentive wages are also in effect in several machine-tool plants
working under union agreements.
In several industries practically all the production workers are paid
piece rates, the simplest form of incentive-wage payment. Included
are the apparel industries—clothing, shoes, hosiery, hats, and milli­
nery—which have long been characterized as “ piece-rate” industries.
Union Reactions Toward Incentive Wages


Even though most unions have officially adopted an attitude of
opposition to incentive-wage plans, there is a wide divergence in actual
practice with regard to them. Most unions adapt their tactics to
the current situation in their industry or plant. Some incentive
plans have been abolished or modified as a result of union pressure.
In some cases the union has cooperated in extending the incentive
plan to workers not previously covered by it. A few instances were
found in which the union had been successful in eliminating the in­
centive-wage plan, but later, because of competitive necessity, had
cooperated with the employer in reestablishing it. Also, there were
a few cases in which the employer, partly as a result of union pressure,
had made substantial changes in the type of plan used, without dis­
carding the incentive principle; as, for example, by the substitution
of straight piece work for one of the more complicated bonus-type
In general, the attitude of each union can be explained in terms of
its past experience with its particular incentive problems, the length
of its collective-bargaining relations, and the degree of satisfaction
obtained under collective bargaining. Many unions have been able
to secure certain controls and restrictions in the operation of incentivewage plans and thus have eliminated some of the abuses about which
workers complain. Where the union has been allowed to participate
in the day-to-day administration of the incentive system, many of
the workers* fears and suspicions have been removed. Bitter opposi­
tion has sometimes changed to at least passive acceptance, if not actual
support for incentives, after machinery has been established to permit
ready appeal for adjusting rates and job standards which workers and
the union consider unjust.*
* The following sections summarize the findings from a study of plans as viewed b y workers and their
union representatives, made b y the Bureau of Labor Statistics during the winter of 1040-41. Eighteen
industries were covered, principal attention being given to the textile, shoe, clothing, electrical, steel, auto,
glass, and rubber industries. The 66 plants visited were located chiefly in New York, New England, the
Pittsburgh area, and the principal Great Lakes industrial centers, with a limited number in the South.
Agents of the Bureau of Labor Statistics interviewed national, regional, and local union officials, employers'
representatives, impartial arbitrators, and others who had knowledge of the situations. N o attempt was
made to evaluate the various types of wage incentive systems in the plants surveyed. Rather, the study
was limited to worker attitudes toward incentive wages and the specific procedures developed for handling
wage rates, production standards, and related problems of incentive-wage systems under collective



There are economic factors inherent in certain industries which
seem to make piece-work or other incentive plans logical forms of
wage payment. Unions in these industries are aware of the problems
and have made very little effort to eliminate such plans. For example,
piece work in general has been acceptable to unions in the apparel
trades because of the importance of manual skill and control, which
results in wide variations in individual worker productivity. Thus,
there are always sizable groups of faster workers who may feel that a
change to time work would cause a decrease in their earnings. In
addition, the apparel industries are subject to wide seasonal fluctua­
tion in production and employment. Unions in these industries prac­
tice rigid work sharing during slack seasons. The piece-work method
makes work sharing possible, since employers are assured a fixed labor
cost regardless of the amount of work to be done. Unions realize
that without this fixed labor cost per unit of output, very few employ­
ers would consent to the rigid work sharing which both the workers
and union feel to be desirable in these industries. Also, these unions
have adopted a policy of stabilizing labor costs among competing
employers. Piece work facilitates stabilization, since unit labor costs
may be determined in advance, and do not depend on the relative
efficiency of the individual workers or establishments.
Reasons fo r W orker Opposition to Incentive W ages

Much of the disrepute of incentive systems among workers is due
to the cutting of rates after they are once established for a job.
Workers tiy to increase their production to secure the higher earnings
made possible by the incentive system. When, as a result of these
efforts, their average earnings become higher than those for similar
or comparable work in the surrounding labor market, some employers
reduce rates in order to bring earnings back to the competitive level.
Workers then find that they have increased their effort and output
without increasing their earnings. Another employer practice is to
make time studies of the operations upon which rates have been
established, and to cut rates if the study reveals that production
could be increased. The result may be a continual increase in required
individual production, which is referred to by the workers as the
“ speed-up.”
Some workers report that the speed-up has resulted in pushing up
output almost to the maximum of human endurance, without sub­
stantial increase in earnings. Management representatives in several
different plants testified to the importance of the ever-present workers1
fear of rate cuts; they reported that production immediately rose
20 to 30 percent in their plants after the management announced a
guaranty of piece rates for the duration of the jobs on which they
were set.
Guaranties against rate cuts, however, do not entirely dispose of
the fear of rate cutting. Efficient management of any plant neces­
sitates continuous improvement in process, materials, and equipment.
Workers and unions do not question the employer's right to revise
rates on any process which is changed to such an extent as to make
the operation easier to perform. But the question arises as to what
constitutes actual rate cutting and what, m fact, is legitimate rate



revision. A further complication is the fact that the workers them­
selves sometimes invent short cuts which amount to a change in
process, thereby materially increasing their earnings, only to have
their rates reduced when the next time study is made.
Some management representatives maintain that when workers
increase their efficiency through their own skill they should enjoy
the benefits but that when it is accomplished by eliminating definite
elements from operations, rates should be changed because specifi­
cations have been altered. In practice, it may be difficult to dis­
tinguish management from labor contributions and both of these
from changes in specifications. An employer who wishes to make a
fair settlement is deterred when his competitors follow the practice
of bringing their rates into line with the change in process regardless
of how it was accomplished.
In computing workers’ pay for their output, the more complex in­
centive systems make use of formulas that are confusing to most of the
workers. The pay is not calculated according to the mere number
of pieces produced or the number of hours of work but by means of
some special unit such as a “ manit” or a “ B-hour.” Workers claim
that the use of a complex formula for wage payment facilitates rate
cutting, because actual changes in production standards which affect
the unit of measurement may be concealed from them. Whether
rate cutting occurs or not, the worker finds it difficult to check the
relationship between his pay and his output or effort. Thus, while
simple piece rates are often accepted by workers as logical and neces­
sary, the more complicated bonus and premium plans, with their
mathematical formulas for determining the workers’ earnings, are
likely to arouse deep suspicion.
A form of automatic rate cutting takes place in the ‘ ‘decreasing
earnings curve” which is an essential part of the so-called “ gainsharing” incentive systems. Inherent in the formulas by which
earnings are computed under these plans is the principle that the
reward shall be in a decreasing ratio for increased output. These
incentive systems are referred to as “ gain sharing,” because a part
of the value of the workers’ increased production above “ task” is
retained by management for efficient supervision and efficient working
conditions which theoretically helped make possible the increased
output. Naturally enough, workers do not understand the compli­
cated theories behind such sharing of gains between management
and labor for increased output, and often refer to the decreasing
earnings curve as the “ take-away curve.”

Underlying the workers’ fear and suspicion of rate cutting is their
objection and uneasiness over a purely “ scientific” approach to their
jobs. Workers claim that almost any job contains elements which
cannot be evaluated by the quantitative, stop-watch technique.
They point to unpredictable variations in the quality of materials,
in working equipment, and in other conditions surrounding their jobs.
They know that every time study is adjusted to include “ allowances”
for delay, fatigue, and personal time which are arbitrarily determined.
They are conscious of the fact that each of the job elements measured
by the stop watch is evaluated by the time-study expert on the basis



of his judgment as to whether the worker being timed is a slow,
fast, or average worker.
Basically, the workers’ grievances against scientific management,
especially as practiced in the early days, are attributable to the ten­
dency of management engineers to consider labor as impersonal and
as a part of the machine process. Workers feel that they are being
treated as abstract “ labor,” rather than human beings at work,
when engineers break down jobs into repetitive operations, study
work methods to discover short cuts and more efficient routines,
shorten the cycle of operations which each workman is allowed to
perform, and emphasize financial reward instead of creative work­
manship as an incentive towards efficient production.
Workers’ objections to “ scientific” wage setting may be alleviated
or enhanced by management’s approach to the time-study problem.
In some plants, no one may become a member of the time-study
staff who has not had years of working experience on regular produc­
tion. In many instances, however, time-study “ experts” are employed
who have no first-hand familiarity with the jobs they are investigat­
ing. The “ scientific” determination of working methods and stand­
ards by such persons is viewed with suspicion and distrust by workers
on the job. Moreover, the impersonal treatment which workers
resent is likely to be accentuated when an outside engineering firm
is engaged to install an incentive plan. Such a firm is not subject
to the controls of personal friendship and community interest which
may influence a local plant management.
Workers are particularly opposed to the practices, formerly in
widespread use, of employing secret or concealed time studies, or
of placing “ pace setters” in a department temporarily to get fast
timings. These are viewed as instances of employer “ cheating” on
incentive workers, and they increase the hostility of workers toward
all time-study methods.
As noted previously, the more complicated the incentive system,
the more opposition it arouses in the workers. To many workers,
the very “ scientific” nature of the job standards under the complex
plans appear merely another means of concealing from them the rate
cuts and speed-up of which they complain. Although disagreement
over piece rate, bonus rate, or production standard may represent
simply a difference of opinion as to what constitutes “ a fair day’s
work for a fair day’s pay,” the question is often complicated by man­
agement’s conviction tnat the workers will not accept facts proved
by scientific study and by the workers’ feeling that while they are
not able to disprove management’s technical case they know their
own jobs and believe that “ the rates are not right.”
Effect o f Incentive Plans on Efficiency and Em ploym ent

Although incentive plans are in general intended to increase worker
efficiency, many workers and union officials interviewed during the
course of the Bureau’s study maintained that they result in an actual
decrease in efficiency. Specifically, it was contended that some
incentive plans had increased production per worker at the expense
of his health and safety, and that in the long rim, this did not promote
true efficiency. Instances were cited in which the introduction of
incentive systems had resulted in an increase in the amount of spoiled
477578 ° ~ 4 2 --------2



and damaged goods, even to the extent, in some cases, of offsetting
the savings in Tabor cost resulting from the speed-up.

In some piece-rate industries, the workers charge that employers
tolerate an inefficient production process because, under the piece-rate
system, they are assured a fixed labor cost per unit regardless of
individual output. In such cases the workers themselves bear the
burden of the cost of inefficiency, since their earnings are directly
affected by lowered production.
Related to the problem of efficiency is the lack of effective super­
vision which prevails under some incentive plans. Advocates of
incentives have emphasized how such plans cut supervisory costs
because workers have a financial stimulant to maintain and increase
production. Although the workers themselves usually enjoy this
freedom from close supervision, in some cases it may contribute to
lower total plant efficiency, at least over a period of time.
On the other hand, when incentives result in higher per capita
output as a result of the speed-up of individual production, the result
may be a decrease in employment. Even though expanding business
might absorb the increased output, there is an instinctive fear on the
part of the workers, based on past experience, that the sum total of
jobs has been decreased and that job opportunities have been lost for
Frequently, the installation of an incentive-wage system has
resulted in an immediate decrease in employment in the plant. The
burden of such unemployment is likely to fall on the older and the
slower workers who are unable to maintain ,the increased tempo of
production even though the quality of their work may be satisfactory.
Under a straight piece-work system slow producers may be retained,
since the unit labor cost is not greatly affected. Under the incentive
plans incorporating a guaranteed minimum wage or “ task,” workers
are eliminated who do not consistently make their “ task” or minimum
E ffect o f Incentive Plans on Unionization

To some employers, one of the principal advantages of incentive
methods is the competitive spirit which is engendered. From the
workers1 point of view, such competition may lead to bitter rivalries
and jealousies and a general atmosphere of tension. This personal
friction is enhanced when group incentives are introduced, as earnings
of each worker are dependent on the output of the group as a whole.
Proponents of group incentives maintain that the group exercises
“ cooperative self-supervision” because of the attention which faster
workers must pay to individuals in the group who fall behind in their
work-efforts. However, some of these group incentive plans have
been abandoned because of the internal friction created within the
Friction engendered by incentives has proved an obstacle to unioni­
zation in some plants. Workers reported instances of employer
favoritism in the distribution of hard and easy work, and of the
encouragement of individual high producers so as to impair the group
solidarity which is necessary to effective union action.4 The fact
that such complaints were beard, even in the highly organized plants
* Frederick Taylor is reported to have said that scientific management makes collective bargaining and
trade-unions unnecessary as protection to workers, since under scientific management all shop problems
are settled b y law and science. (Robert Franklin Hoxie: Scientific Management and Labor, p. 164.)



covered by the Bureau's survey, indicates the widespread extent of
such grivances against incentives.
In spite of these tendencies which deter union organization, the
grievances arising under incentive plans have tended in some cases to
encourage organization of the workers. In the plants covered by this
survey, at least, unionism was strongly supported by the workers
because of their conviction that their unions afforded the surest
means of preventing injustices and settling grievances arising from
the day-to-day operation of the incentive plans.
Collective-Bargaining Controls

The application of collective bargaining to the determination of
wage rates often effects substantial changes in the workers' point of
view, even though the same incentive plan remains in operation. The
right of union participation in determining rates and standards, the
right of grievance negotiation to eliminate specific abuses, together
with the safeguards negotiated between the union and the employer,
all have the effect of modifying to a considerable extent all types of
incentive plans.
When unions once find that incentive systems in their industry
cannot be eliminated, at least for the present, most of them direct
their attention to collective-bargaining controls which will alleviate
some of the workers' grievances under the incentive system. These
controls, usually outlined in the union agreement, are of three general
types: (1) Specific safeguards which set up certain guaranties and
prohibitions on incentive practices; (2) the right of union participa­
tion in the adjustment of incentive rates and standards; and (3) in
the absence of joint participation, the right to appeal any rate which
a member considers unsatisfactory, usually through the regular
grievance procedure.
To prevent rate cutting and speed-up, unions attach the most
importance to guaranties against cuts in rates after they have been
established for a job or operation. The guaranty assures employees
that production increases resulting solely from their own increased
effort or efficiency will not result in rate cuts which take away the
resulting extra earnings. A conditional clause, allowing the employer
to change rates when new methods or equipment are introduced,
usually accompanies such guaranties.
Guaranteed earnings, in the form of minimum hourly rates for
incentive workers, are provided under pome types of incentive plans.
Union efforts are directed toward raising these minima as high as
possible in order to protect workers against wide fluctuations in their
weekly earnings as a result of irregularity of work and other causes
beyond their control. Another form of protection is the payment
of an established hourly rate for time lost through machine break­
down, failure to receive work, experimenting with new patterns or
models, etc.
Not yet common, but increasingly a union objective, are guaranties
which will assure the average experienced worker a given percentage
of earnings over basic rates. To some extent such guaranties reduce
the effect of the incentive wage, since workers who reach a certain
average efficiency are assured of weekly earnings commensurate with
such efficiency regardless of minor fluctuations m daily production.



Specific safeguards in connection with time studies include the
prohibition of secret or concealed time studies and employer encour­
agement of “ pace setting” or other practices which workers have
come to regard as unfair. In some cases the percentage allowances
for fatigue, delay, etc., which must be added to the time allowed for
the job performance, are specified in the union agreements. Other
agreements outline the conditions under which time studies must
be made.
Union Participation in Setting Rates and Job Standards

Some unions consider that their greatest protection under incentivewage plans is the right of day-to-day participation in the setting of
rates and standards on all new or changed models or operations.
This form of participation is typical in the clothing industries where
piece rates prevail. Such advance participation, of course, does not
prevent the union from taking up as a grievance any new rates which,
after a trial period, do not enable the workers to equal their previous
earnings. Also, day-to-day bargaining over piece rates is no sub­
stitute for the regular annual or biennial negotiations over the general
level of wages in the bargaining area.

In the organized section of the apparel industries, such as those
manufacturing men’s and women’s clothing, hosiery, millinery and
shoes, unions have gained very complete participation in rate setting.
The development, in the major producing centers, of more systematic
price-settlement procedures which protect the workers from the hard­
ships of earlier competitive price setting has done much to make piece
work acceptable to them.
In the women’s garment industry, the New York Dress Joint Board
representing the various craft locals of the International Ladies’
Garment Workers’ Union has developed a “ unit system” of price
settlement and price lists for standard operations in the various price
ranges as yardsticks to guide actual price making. These yardsticks
were drawn up by the union using time-study procedures, but are
only informally observed in price settlement. # Each craft working
under each employer usually has its own price committee which
meets with him as often as necessary to settle individual prices.
If agreement is not reached in this way, the business agent of the
craft concerned is called in; if the deadlock continues the case is
taken to the Price Adjustment Bureau for impartial decision. The
New York coat and suit industry also uses yardstick tables of prices
and follows a very similar procedure. Under the “ contracting sys­
tem” that is characteristic of both branches of the industry, workers
were never adequately safeguarded as long as individual subcontractors
were permitted to set piece prices. Hence, an essential factor in the
present^ price-settlement arrangement is that jobbers are responsible
for setting all prices for their contractors.
In the greater part of the men’s clothing industry, piece rates are
set within the framework of the Amalgamated Clothing Workers’
stabilization program inaugurated in 1939. This establishes minimum
total labor costs negotiated between the union and several employers’
associations for several basic grades of garments. Stabilization does



not standardize individual piece prices, and each new model in a local
shop requires a price list. Ordinarily the price list is drawn up by
the appropriate union price expert in consultation with a manage­
ment representative, but all price lists must have the final approval
of the stabilization department, which is located in the national office
and is responsible to the president of the union. The stabilization
program thus gives complete responsibility in the enforcement of
wage standards to the union’s stabilization department.
In the full-fashioned-hosiery industry, the majority of employers
whose employees are unionized are members of the Full Fashioned
Hosiery Manufacturers of America, Inc. The union, the American
Federation of Hosiery Workers, has worked out with the employers’
association a system of standardizing piece rates for all members
through a basic list of piece rates. All changes in style or type of ma­
chine and other variations which affect piece rates are included, either
in the basic list or as “ extras” which are added to the basic rates to
make the total piece rate for each operation. The major burden of
negotiating piece rates, therefore, does not fall on the individual
employer or the local union. A large proportion of the piece rates
which arise during the course of a manufacturing season can be de­
termined simply by reference to the established list. All rates which
cannot be settled in this manner are referred to officials of the em­
ployers’ association and regional officials of the union. If they cannot
agree, the rates are referred to the permanent impartial chairman for
settlement. Temporary rates are often established for unfamiliar
work, and either party may request a change in rate if the temporary
rate does not prove satisfactory. In the past few years comprehen­
sive studies of individual earnings in union mills have been made by
the impartial chairman. These studies provide a constant check,
available to both the union and the employers, as to whether or not
rates in a particular plant are out of line with those in other union
In the shoe industry, although there is some degree of standardiza­
tion among competing employers in each locality, there is practically
no standardization on a wider basis in the industry. Even within a
given locality the union has, in some cases, offered lower piece rates
to individual employers who needed additional encouragement to stay
in business in that city. In several of the Massachusetts shoe centers
covered in the Bureau’s survey, piece rates are standardized on the
basis of city-wide price lists for each operation, with centralized bar­
gaining over new rates through shoe employers’ associations. In these
centers the settlement of piece rates on new styles is taken out of the
hands of individual employers. The employers’ associations have
price-settlement experts who negotiate with the business agents of the
unions. The basic price lists were drawn up with the impartial assist­
ance of the Massachusetts State Board of Mediation and Arbitration
which also arbitrates new rates upon request.

In the textile industry the changing of piece rates on new styles
and new materials is not so important as the introduction of new
methods and new types of machinery. In some textile plants a piece
rate is adjusted only at the time a change is made in the work assign­
ment or loom load. This in turn accompanies either a major change



in equipment or the accumulation of many minor changes which causes
the employer to ask for larger work loads. This may arise only once
or twice in many years of negotiations between the employer and the
union. Because of the highly competitive nature of the textile indus­
try, unionized plants must generally follow the work assignments in
unorganized plants, to enable the unionized plant to stay in business.
In this industry the union has asked for, and in many cases received,
the right to participate in all work-load changes before they become
effective. Negotiations for such major changes are often protracted.
They may be accompanied by independent research on the part of
the union as to work loads on similar equipment in other plants; time
studies of the new operations by the union, independent of the em­
ployer; trial periods as long as 3 months; and, finally, if a deadlock
ensues, arbitration.
In several of the textile cases studied, the union obtained two impor­
tant concessions from the management before agreeing to a work-load
change: (1) That no one would be discharged as a result of “ stretch­
out” (displaced workers were absorbed on other work throughout the
factory); and (2) that no worker would suffer a decrease in earnings
as a result of the new assignments. As a matter of fact, actual earn­
ings of workers usually increased somewhat, although piece rates were,
of course, lowered as a result of the increased work loads.

Except for the joint participation in rate setting in the industries
just described, there are very few examples of union participation in
the determination of incentive standards before they are put into effect.
In a few small steel-products plants, where few changes occur in rates
and no time-study procedures are used, joint union-management deter­
mination of rates has become accepted practice.
In the steel industry, also, there have been instances of unionmanagement negotiations over job classifications and evaluations. In
the flat-glass industry the union effected standardization of job classi­
fications between the two largest producers as a result of joint unionmanagement negotiations.
Union participation in some phase of time-study procedure is some­
what more common than actual joint determination of rates. In many
plants union representatives are consulted about each time study that
is made, and are thus given a voice in choosing the worker to be timed
and an opportunity to observe the study in order to insure that nor­
mal working conditions are maintained during the timing.
Although there are a few examples of joint rate setting outside the
apparel industries, these do not necessarily indicate a trend toward
the joint determination of all incentive standards in other industries.
Many union leaders interviewed during the course of this study ex­
pressed doubt that unions in mass-production industries should accept
such responsibility. According to these leaders, the setting of rates
and standards is a management function, and the union must remain
free to challenge any decision of management. If union leaders par­
ticipate in setting of rates, the rank-and-file membership may lose
confidence in them, should those rates prove unsatisfactory. At the
same time, such participation hinders a union official from acting as
a grievance agent for workers dissatisfied with rates which he has
assisted in determining.



Adjustm ents Through Grievance Procedure

Most unions have adopted the grievance method as the means of
controlling incentive abuses. In many plants in the mass-production
industries unions have no other choice, since the determination of rates
and standards is performed by a large staff of management experts
through elaborate time-study procedure. In such cases the unions
have not been able to afford the expense of matching this technical
staff with union representatives with similar training.

In several of the cases covered by the Bureau's survey, in which
rates and standards are set solely by management, a specified period
of notice is given the union before the rates take effect. This allows
the union time to negotiate with management through the grievance
procedure, if the proposed rate is objected to by workers. The period
of such advance notice ranges from 20 hours to 2 weeks. In one case
all “ major” changes are “ cleared” with the union representative,
while in another case all new and revised rates must be signed by the
union department committeeman before taking effect.
Many employers, however, are reluctant to give advance notice
because they feel that the proposed piece rates on new production
items or on new machines are always likely to seem too low to the
workers until by actual work experience they gain the skill and get
into the new routine. It is common practice m some industries to
establish piece rates only after production has been under way for
eriods ranging from a few hours to several weeks. In many plants,
owever, piece-work rates are established immediately upon the
introduction of the new process or change in process, and appeals for
adjustment may not be made until after a specified trial period.



Most union agreements set forth in more or less detail the successive
steps in the handling of grievances. Cases involving incentive rates
and job standards in most plants are brought up through the regular
grievance procedure. The foundation of all grievance procedure is
the daily interchange in the shop between foremen and umon stewards
or committeemen. They must see that prevailing incentive rates
and standards in their departments or units are not infringed upon
and that guaranties under the agreement are upheld. They must
handle and settle, if possible, grievances relating to such matters. In
some plants covered by this survey, the foreman has the power to
overrule the time-study representative in decisions affecting jobs,
timings, rates, or standards in his own department. Thus, foremen
are often successful in obtaining the necessary adjustments and cor­
rections in the first instance, eliminating successive bargaining steps
and delay.
Most local unions in large manufacturing establishments maintain
a paid business agent whose function it is to prepare and present
cases to plant management officials. When grievances over incentive
rates cannot be settled between the foreman and union committeeman,
it is the practice in many companies to discuss them at regular meet­



ings, scheduled once a week or every 2 weeks, between the union
business agent and shop committee and the director of labor relations
or other management officials concerned with wage rates and pro­
duction standards. Although it is increasingly the practice to have
the union submit grievances in written form, informality seems to
characterize the treatment of grievances in most establishments.
Occasionally, special committees are established by the union, or
jointly by union and management, to consider particular problems
arising in connection with the operation of an incentive system. One
large electrical-equipment plant, in order to reduce the burden on
the regular union-management grievance meetings, instituted the
practice of having small joint subcommittees investigate and report
on certain of the more complicated incentive issues.

In connection with its grievance procedure on incentive-rate cases,
unions have sought more complete participation in time-study
methods. Usually, this involves the right to post observers when a
re-study is made of a disputed rate. Unions thus are able to challenge
and, if necessary, carry up to the highest plant officials, any instances
o f “ unfair” time studies. They are able to observe the conditions
surrounding the time study, to object if “ too perfect” conditions are
arranged in such a way as to secure fast timings. Unions may investi­
gate and protest the allowances for personal time, speed and effort
rating, and other factors which make up the final timing values.
In rare cases unions have secured the right to make their own time
studies in order to check those taken by company officials. Usually,
these studies are made by higher union officials who have experience
in technical problems of the industry.

Som e Incentive-W age Clauses in Union A greem ents



The time standards on which the bonus system is based in departments which
now have it and in departments into which it is to be introduced shall not be
changed to the disadvantage of the employees unless there is a change in method,
machinery, tools, fixtures, materials, or design. Improved motions and processes
introduced by employees will not result in the change of the standard time so
long as the character of the work remains the same. The employer shall consult
with the union before putting into effect any changes of standards.

Piece-work rates shall be established not later than 30 days after the start of
reduction on any new job; such rates shall be subject to review and negotiation
y the union not later than 60 days after start of job. If an operator cannot
make out on an assigned rate, the job will be retimed and adjusted if incorrect.
If adjusted, the new rate will be retroactive.
In timing all jobs, the time allowed for performing an operation shall be the
time necessary for the regular operator familiar with the operation, the tools,
equipment, the material provided, and the quality of the finished part up to the
standard required by the inspection department, without causing excess scrap, or
undue damage, wear of tools and equipment, with operator working at a pace he
can maintain day after day without injury to himself or his fellow employees;
with such time allowed to replenish the supplies, oil and clean the equipment,
and all the details that are necessary and which are expected to occur in the
ordinary day's work. Those are classed as contingencies and a percentage shall
be added to the time allowed to take care of them. In addition, 10 percent of the
time allowed for actually performing the operation shall be added for personal



The union shall select a committee whose duty it shall be to meet with the
representatives of the company from time to time to agree upon and establish
any and all piece-work rates on any and all new piece work.
No employee shall suffer any reduction in wages or wage rate in any amount,
directly or indirectly, at any time during the term of this contract.

For the purpose of creating a more general uniformity in an equalization of
labor standards within the organized dress industry, the parties hereto agree
that all operators, finishers, and pressers shall be employed on a piece-work basis.
It is the intention of the parties that each member of the [employers association]
shall comply with this provision without any unnecessary delay. Exceptions to
this provision may be made by the joint board of Dress and Waistmakers' Union
and the association, with the approval of the administrative board.
Place of Settlement
Where a member of the association maintains an inside shop and/or deals
with or gives work to contractors, the piece rates shall be adjusted and settled
with such member for all of the piece workers of his inside shop, if he maintains
1 These clauses have been selected as representative of the wide variety of union agreement provisions
dealing with piece-rate settlement, time studies, and other features of incentive-wage plans. Although
identified as to industry, the clauses are not necessarily typical of agreements for the industry indicated.




one, and all of his contractors’ shops at the same time, either on the member’s
premises or on neutral premises, in the discretion of the member, who shall have
the right to exercise his discretion at the beginning of each season. The neutral
premises provided for herein shall be selected by the parties hereto and main­
tained by them.
Price Committee
In the adjustment and settlement of piece rates, the member of the asso­
ciation and/or his representative, a representative of the union, and a repre­
sentative committee of the workers of the contractors’ shops and inside shops
involved shall participate.
Earnings Above Minimum
(c) This system of settling piece rates with the jobber is not to increase piece
rates in such shops where the workers’ earnings are above the minimums pro­
vided for in this agreement.
Unsettled Garments
(d) Garments shall be settled before they are put in work. However, workers
may work on unsettled garments for the current week, provided that such gar­
ments are settled in time so that the workers will receive pay on the next following
regular pay day for all work performed on such garments during the week preced­
ing. At the time of settlement of piece rates, there shall be recorded in triplicate
on a special form for each style settled, the style number thereof, a full description
thereof, and the piece rates for each craft. Each such form shall be signed by the
member of the association whose garments are settled, or his representative, and
the representative of the committee of the workers. Upon request of either party
to this agreement, the administrative board and/or the impartial chairman shall
settle the prices on any garments in dispute within 48 hours.
Inside Shop


The same procedure shall be followed in the settlement of piece rates where
member of the association maintains an inside shop and does not deal with any
Guaranteed Minimum Wages
The employees in the crafts enumerated below working on a piece-work basis
shall receive not less than the following guaranteed minimum wages:
per hour
Operators_______________________________________ $
per hour

Piece-work standard rates will be established by time-study analysis of the job
or from standards and records of performance, and payment will be made for the
satisfactory work done.
No changes in permanent standard rates will be made unless a change has been
made in the conditions, methods, equipment, tools, or materials used on the job.
The foregoing will not prohibit the adjustment of rates by restudy if the rates are
found to be in error or unfair to the worker. Time studies and rates will continue
to be made on the basis of fairness and equity and the working capacities of normal

The parties recognize that in order to increase production in response to the
demands of the United States Government, and at the same time to increase the
earnings of employees who participate in such increased production, the company
has established a “ wage-incentive” plan in a number of its departments. The
parties further recognize that the wage-incentive plan to the extent to which it
is now in operation has been accomplishing its objectives. The company accord­
ingly will extend the wage-incentive plan as soon as the necessary time studies
and other data can be assembled to such other operations throughout its plants
to which the plan may be applied. The union and all its members engaged in
operations to which the wage-incentive plan is extended will cooperate with the
company in the establishment and successful operation of the plan.




Employees assigned piece work or contract work shall receive not less than their
hourly rate when assigned such work. Employees so assigned and able to earn
more than their hourly rate, shall receive all earnings in excess of their hourly
It is agreed that as, when, and to the extent desired by the company, an
incentive plan may be extended to the fitting and assembly departments com­
parable in character to that prevailing in the machinery, scraping, and painting
departments. The union shall cooperate with the employer in working out the
same, provided, however, that such incentive plan shall only be put into operation
if mutually agreed upon by and between the union and the employer.

All time standards and their methods of derivation shall be made known and
accessible to employees concerned and the union.
The union will be advised of any changes in time standards. Employees
will be notified of all changes in standards before becoming effective. There will
be no reduction in standards without a corresponding change in methods of
operation, unless mutually agreed to. Any disputed standard will be given a
reasonable trial and, if found unsatisfactory, the complaint will be negotiated as
expeditiously as possible. Changes will be retroactive to time of installation of
complaint. In no case will they be retroactive for more than 60 days.
Allowed time will be given the workers to compensate for reduction in output
as a result of causes over which they have no control, except for mechanical
break-down. The latter will be compensated for at the guaranteed rate of pay.

No incentive work shall be started until after the contract price has been fixed.
No employee shall be assigned to incentive work under a contract unless a copy
of the contract describing the work is delivered to him in person prior to his com­
mencing work. There shall be no reduction made in the contract price during the
progress of the job or after the completion of any job, except when some reduction
is made in the quantity or quality of work originally specified in the incentive-work
contract and any employee’s complaint concerning his incentive contract may
be taken up for adjustment.

Where timing is required to determine prices on new patterns and new kinds
of work, such timing shall be done in the factory by the workers in the particular
branch involved. The workers chosen shall be satisfactory to both parties.
Such price settlements shall be negotiated upon at least once a week.
Where timing is required, it is agreed that — cents is the standard rate of pay
per hour for major skilled operations by workers of average speed, efficiency, and
ability. A departure from the — cent timing rate shall be made when such is
required in fairness to both parties.
Prices for outside and trimming cutting shall be figured according to the base
prices and extras of the individual patterns and units involved as established by
agreement between the union and the firm, and such patterns shall be uniformly
interpreted in accordance with the standards now prevailing in a majority of
representative factories in the New York shoe industry, to be agreed on between
the parties.
The rates of pay or piece-work prices shall be determined by both parties on
the basis of prevailing standards in the shoe industry of New York. In the absence
of any trade prices to serve as a basis for comparison, and timing is necessary to
determine the price, such timing shall be done by the operator after acquiring
sufficient experience to the mutual satisfaction of both parties.
All prices for new work or revised prices because of a change of operation, shall
be retroactive as of the date when such work came through the various depart­
ments of the factory.

It is recognized that changing conditions and circumstances may, from time to
time, require adjustment of wage rates or modification of wage-rate plans because
of alleged inequalities, development of new manufacturing processes, changes in
the content of jobs, or mechanical improvements brought about by the corpora­



tion in the interest of improved methods and product. Under such circumstances
the following procedure shall apply:
When a bona fide new job or position is to be established—
(a) Management will develop an appropriate rate by the regular procedure in
effect in the corporation for its industrial engineering and industrial relations
activities, including the employment of job evaluation, and accepted industrial
engineering methods.
(b) Such procedure having been conformed to, the rate may be established by
management to cover the job or position in question. The union grievance
committeeman or committeemen representing the employee or employees to be
affected shall be informed by management m advance concerning such rates.
The rate having been established may subsequently be subject to adjustment as
provided in paragraph (c) below.
(c) If, after a reasonable trial period following the establishment by manage­
ment of the rate or rates for new jobs or positions, grievances are alleged by either
employees or management concerning such rates— which grievances cannot be
satisfactorily adjusted by mutual agreement— the question as to the equity of
such rates in relation to "the plant rate structure and the requirements of the job
or position as established by sound industrial engineering procedures may be
appealed to an impartial arbitrator in accordance with the provisions of section 7,
“ Adjustment of Grievances,” but no formal grievances may be presented under
section 7 until a reasonable period has elapsed since the installation of the rates
and the operation of the equipment to which the new rates apply, which period
will permit of study and adjustment, if necessary, of the rates of the varying
conditions of operation attendant upon the establishment of the new operation
to which the new jobs or positions apply. It is recognized that the term “ reason­
able period” may vary with the type of operation or equipment to which the new
rates apply, but shall not, unless by mutual agreement, be construed to apply to
a period in excess of 12 months.

Piece-work rates now established shall remain in force and effect for the term
of this agreement, providing, however, that upon the installation of new equip­
ment or changes in operations which do not substantially change the nature of
the jobs, the company agrees that under any rate adjustments, the scale of earn­
ings shall be maintained at least at the same level as prior to the date of this
agreement, provided, however, the employee puts forth the same reasonable
effort in performing his job as heretofore. Disputes as to new piece-work rates
shall be subject to arbitration. All employees paid for working on piece-rate
basis shall, in addition to their earnings at the established piece rates, be paid an
additional 12 cents per hour for each hour worked on piece work.
It is mutually agreed by the parties hereto, that all existing bonus arrangements
now or heretofore in effect will, after careful study and analysis, be adjusted up
or down or eliminated upon an equitable basis.