"The labor problem" is the

economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analy ...

term widely used toward the turn of the 20th century with various applications. It has been defined in many ways, such as "the problem of improving the conditions of employment of the wage-earning classes." The labor problem encompasses the difficulties faced by wage-earners and employers who began to cut wages for various reasons including increased technology, desire for lower costs or to stay in business. The wage-earning classes responded with strikes, by unionizing and by committing acts of outright violence. It was a nationwide problem that spanned nearly all industries and helped contribute to modern business conditions still seen today. Possible causes include the failure to account for the negative

externality In economics, an externality or external cost is an indirect cost or benefit to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced goods involved in either co ...

of reproduction in the face of finite natural resources which results in over-supply of labor and falling living standards for wage-laborers, depersonalization by machines and poor working conditions.

Time frame

A popular debate about the labor problem is the time that it encompasses. Some characterize it back as far as the 1860s, which is when many unions and groups began to form. However there wasn’t a problem present at this time with the formation of these unions. Also, the first strike was a result of the problem between wage earners and union officials, not employers and unions or employers and wage-earners, which was the main conflict of this time.“The Labor Movement: A Violent Period in American History.” ILWU Local 19, n.d. Web. 5 November 2013. Since the problem was within unions and not between unions and employers, the Labor Problem had not yet become an issue. Many also attribute the end of the problem to the end of the 1920s. This has some merit but is also open to interpretation. Reforms began to pass to correct many of the problems but reforms continued to pass well into the 1930s, 1940s and 1950s. The

civil rights movement The civil rights movement was a nonviolent social and political movement and campaign from 1954 to 1968 in the United States to abolish legalized institutional Racial segregation in the United States, racial segregation, Racial discrimination ...

took over in the United States, which brought about even further legislation. Many attribute the end of the labor problem to the late 1920s because it marks a significant drop in strikes and violence and an increase in passed legislation aimed at correcting the labor issues.

Causes

At the turn of the century, machines were beginning to take a stronger footing in the economy, which drove costs down. Always trying to maximize profits, employers saw fit to lower wages for two main reasons. Machines were making the production process cheaper meaning wages took up a bigger percentage of costs, and when times were particularly tough, it made sense to cut wages to stay in business. This depersonalization of the production process meant that people essentially became expendable. People were not eliminated completely but there was a significant job loss. This led to lower wages in the

long run In economics, the long-run is a theoretical concept in which all markets are in equilibrium, and all prices and quantities have fully adjusted and are in equilibrium. The long-run contrasts with the short-run, in which there are some constraints an ...

because

fixed costs In accounting and economics, 'fixed costs', also known as indirect costs or overhead costs, are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be recurring, such as interest or r ...

decreased (with increased technology) so employers saw fit to cut wage expenses for this now partially expendable labor force. Although the problem spanned many industries, they were not all concerned with the same problems. For example, the steel industry was mainly concerned with being phased out due to technological advances while other industries, namely textiles, had problems with

child labor Child labour refers to the exploitation of children through any form of work that deprives children of their childhood, interferes with their ability to attend regular school, and is mentally, physically, socially and morally harmful. Such ...

and working conditions. The variety of problems and concerns led to legislation being passed, which covered different areas and led to greater reform.

Notable events

Riots broke out in

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in 1877 due to the negligence of union officials. It began as a railroad strike but eventually formed riots that lasted four days and killed fifty people. The first strike due to depersonalization by machines was the

Homestead Strike The Homestead strike, also known as the Homestead steel strike, Homestead massacre, or Battle of Homestead, was an industrial lockout and strike that began on July 1, 1892, culminating in a battle in which strikers defeated private security age ...

in 1892 on the

Carnegie Steel Company Carnegie Steel Company was a steel-producing company primarily created by Andrew Carnegie and several close associates to manage businesses at steel mills in the Pittsburgh, Pennsylvania area in the late 19th century. The company was formed ...

by the

Amalgamated Association of Iron and Steel Workers Amalgamated Association of Iron and Steel Workers (AA) was an American labor union formed in 1876 to represent iron and steel workers. It partnered with the Steel Workers Organizing Committee of the CIO, in November 1935. Both organizations dis ...

(AA). This ultimately resulted in the attempted assassination of

Henry Clay Frick Henry Clay Frick (December 19, 1849 – December 2, 1919) was an American industrialist, financier, and art patron. He founded the H. C. Frick & Company coke manufacturing company, was chairman of the Carnegie Steel Company, and played a major ...

, Chairman of The Carnegie Steel Company, and a crushing blow in the attempt to unionize steel workers. Another example is the

Pullman Strike The Pullman Strike was two interrelated strikes in 1894 that shaped national labor policy in the United States during a period of deep economic depression. First came a strike by the American Railway Union (ARU) against the Pullman factory in Chi ...

in 1894, where almost 4,000 workers who were members of the

American Railway Union The American Railway Union (ARU) was briefly among the largest labor unions of its time and one of the first industrial unions in the United States. Launched at a meeting held in Chicago in February 1893, the ARU won an early victory in a strik ...

(ARU) went on a strike without permission of the union to protest wage cuts by the

Pullman Company The Pullman Company, founded by George Pullman, was a manufacturer of railroad cars in the mid-to-late 19th century through the first half of the 20th century, during the boom of railroads in the United States. Through rapid late-19th century ...

. One extreme example occurred when train engineers and laborer stopped a train before it reached the station in

New York City New York, often called New York City or NYC, is the most populous city in the United States. With a 2020 population of 8,804,190 distributed over , New York City is also the most densely populated major city in the U ...

, stranding men, women and children alike in the heat.Field 1893, pp. 61-68

Effects

Legislation like the

Wagner Act The National Labor Relations Act of 1935, also known as the Wagner Act, is a foundational statute of United States labor law that guarantees the right of private sector employees to organize into trade unions, engage in collective bargaining, and ...

(1935) and the Fair Labor Standards Act (1938) were passed which forced employers to participate in collective bargaining and presented a minimum wage respectively."Timeline of labor issues and events." Wikipedia: The Free Encyclopedia. Wikimedia Foundation, Inc. 18 Dec. 2013. Web. 10 Nov. 2013. Child Labor laws have also been reformed, limiting the age at which children can begin work and what type of work they can perform. The

Department of Labor The Ministry of Labour ('' UK''), or Labor ('' US''), also known as the Department of Labour, or Labor, is a government department responsible for setting labour standards, labour dispute mechanisms, employment, workforce participation, training, a ...

was established in 1913. While some pieces of legislation like the aforementioned

and Fair Labor Standards Act were not passed until the 1930s, their roots trace back to this Labor Problem at the turn of the century when demand for reform was growing in popularity. Many aspects of modern business like an established 40-hour work week, overtime pay,

collective bargaining Collective bargaining is a process of negotiation between employers and a group of employees aimed at agreements to regulate working salaries, working conditions, benefits, and other aspects of workers' compensation and rights for workers. The ...

and safer working conditions among numerous other reforms can all trace their roots back to this time period and the legislation passed to correct it.

Notes

References

* Field, David D.; Oren B. Taft (1893). "Solutions of the Labor Problem". ''North American Review''. 156 (434): 60–68.

External links

* {{DEFAULTSORT:Labor problem History of economic thought Labour economics Production economics Socialism