98 SECTIONAL ADDRESSES. 
and there is a widespread feeling that, in the past, wages awards have 
largely been made by this rule-of-thumb method. It is of the first 
importance, therefore, that clear and well-recognised principles should 
be established, and in considering the question one would naturally 
expect to find guidance in the laws of those States which have adopted 
compulsory arbitration for wages disputes. Unfortunately they have 
shirked the difficulty, and left it to the arbitrator to make and interpret 
his own code of rules. According to some Australian Acts reasonable 
wages are defined as ‘the average prices of payment paid by reputable 
employers to employees of average capacity.’ But the ‘ reputable 
employers ’ clause has proved a broken reed, and embodies no principle 
of practical value. Tor, in the first place, there are industries in which 
a standard wage is paid by all employers so that in the event of a 
dispute there are either no reputable or else no disreputable employers— 
whichever you please. In the second place, even if there are certain 
employers in an industry who pay higher wages than others, it does not 
follow either that the employers who pay less are not reputable or that 
the higher-paid employees are of average capacity. The probability is 
that they are not—that they are above the average. The justification 
for paying higher wages is that you get the pick of the basket by so 
doing. And efficiency is so important that it is worth the while of any 
given firm to adopt this course if it can be sure that others will not follow 
suit. If, unfortunately for it, they do, it no longer gets the pick, and 
the game is spoiled. Henry Ford is only able to pay higher wages than 
his rivals because this policy enables him to adopt the strictest tests 
of efficiency. 
The weakness of this clause has led the Australian Commonwealth 
to adopt another principle for the guidance of arbitrators, namely, that 
the conditions as to the remuneration of labour are to be such as the 
President of the Commonwealth Court of Conciliation and Arbitration 
shall declare to be fair and reasonable. ‘That is not a very illuminating 
or helpful principle, and Mr. Higgins, the President of the Court, has 
complained very bitterly that the Legislature has left to him what it 
ought to have done itself by defining what is meant by ‘fair and 
reasonable.” Everyone, even the disreputable employer, will agree that 
wages must be fair and reasonable, but with this meaningless proposi- 
tion our unanimity comes to an abrupt end, for we find the most 
divergent views as to what constitutes fairness or reasonableness. One 
school—and a powerful one, too—holds that a fair wage is one that is 
determined by the higgling of the market, that it is established by the | 
law of supply and demand. ‘The money rate of wages,’ says Walter 
Bagehot, ‘is a case of supply and demand—that is, it is determined by 
the amount of money which the owners of it wish to expend in labour, 
by the eagerness with which they want that labour, by the amount of 
labour in the market which wishes to sell itself for money, and by the 
eagerness with which the labourers desire that money.’ No doubt in a 
perfect world, and if everyone were a perfectly free agent, the law of 
supply and demand might safely be left to take its own course. And 
even in the imperfect world in which we live it has its value as a 
criterion in the determination of wages, and must always be regarded 
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