Sec. 11. #Difficulties in profit-sharing.# It seems at first difficult to explain this comparative failure of a plan that looks so attractive in spirit and of which so much was hoped.  Yet objections come from the side both of the workman and of the employer.  The workman lacks knowledge of the business and is suspicious of the bookkeeping.  If at the end of the year the books show no profits, the workman loses confidence, considers the plan to be mere deception, and rejects it.  The working of the plan remains in the employer’s hands, and the workman really is not a partner in the business.  Moreover, the plan puts a limitation upon the workman’s freedom to compete for better wages by changing his place of work.  It is indispensable to make length of service in some degree a condition to the sharing of profits.  Workmen, coming and going, cannot be allowed to share; the percentage given to the others increases with length of employment.  Whenever men are thus practically subject to a fine (equal to the amount of shared profits) if they accept a better position, there is danger of a covert lowering of wages.  The plan tends to break up the trade-unions, which is one of the reasons that the employers like it, and is the main reason that organized labor opposes it.

The employer on his part objects to the interference with his management, the troublesome inspection of the books, and the constant complaints of the workmen.  He dislikes to have the profits known; if they are large, the advertisement of success invites competition; if they are small, publicity may injure credit and depress the value of the enterprise.  In view of all these difficulties it is not surprising that while the plan often starts promisingly, it usually fails after a short trial.  Business methods are severely subject to the principle of the survival of the fittest.  Through competition and the survival of the firms that adopt improvements, better methods must eventually supplant poorer ones.  If a method fails to spread when it has been tried for seventy-five years and all are free to adopt it, the strong probability is that it has serious defects inherent in it.

Sec. 12. #Defective theory of profit-sharing.# It is usually better to make wages depend on the worker’s efficiency rather than on the profits of the whole business.  The strongest motive to efficiency is present when reward is connected immediately and directly with effort, not with some result only slightly under the worker’s control.  Any change in the amount of profits is only partially and indirectly related to increased effort of the worker.  The “profits” may be nothing, tho all the manual workers may be exerting themselves to the utmost.  The wage bill is but one of the groups of costs.  Profits are the net result of many influences.  Chief among these is the skill in planning and conducting the business.  This function of management is either performed by the same person that is carrying