258 Profit and Loss Sharing in Agriculture, [june. 



between the employer and employees. On the other hand, 

 any such proposal would effectively ruin the schemxC in the 

 eyes of the workers, and in any case it must be recognised that 

 wages cannot be expected to fluctuate in the same way as profits. 



In such circumstances as the above the writer has proposed 

 to carry forward the deficit to the year 1919-20 and make it a 

 first charge on the surplus shown for that year, or, the reserve 

 fund may be drawn upon to cancel whole or part of the deficit. 



9. The Reserve Fund. — It is clear that the most critical time 

 in the life of a profit and loss sharing scheme is the period which 

 elapses before the reserve fund has reached an amount large 

 enough to meet the contingency which has here arisen. 

 Various methods of meeting this difficulty have been suggested, 

 such as the creation of a reserve fund by the employer at the 

 commencement of the scheme. On a broad view of the case, 

 however, it is obvious that unless such a scheme can be com- 

 pletely self-supporting over a period of years it cannot possibly 

 survive for very long. In other words, the scheme ought to 

 resolve itself into a profit-slidLr'mg scheme. Losses there may be 

 in occasional years or even in successive years, but unless the 

 profi.ts exceed the losses by an appreciable amount over a period 

 of years nothing can save the scheme from speedy extinction. 



It may be useful, therefore, to take the results from the farm 

 in question and show how a profit-sharing scheme would have 

 worked out had it been in operation since 1905. These results 

 are summarised in Table 1. (p. 260.) 



1 0. The Scheme for 1 4 years — It is evident that had the scheme 

 started in 19 14 the reserve fund in 1918 would have been large 

 enough to tide over the year 191 8-1 9. In the table, the deficit 

 of £148, together with sufficient to pay a 5 per cent. " dividend " 

 on wages, viz., £64, has been drawn from the reserve fund, 

 which at Michaelmas, 1919, stands at £ZM' Had the reserve 

 fund been larger it would have been possible to pay up to 10 

 per cent, on wages, but in view of the previous experience it 

 would appear to be unwise to make too severe a call upon the 

 reserve fund. 



In considering this table attention may be directed to the 

 following points : — 



[a) A profit and loss sharing scheme was nt)t actually in 



operation on this farm, 

 [h] The Balances shown and the cash wages paid are as 

 given in the accounts, but the adjustments which 

 have been made are not necessarily those which 



