The Tale of a Shirt; W. M. Curtiss

';';Can you believe the figures? Maybe the manufacturer was just trying to justify the high prices he was charg ing." ';';They are all government figures. Now the farmer, Andy Johnson, has a little cotton farm in Texas. He owns his farm, which includes a house for his family, a barn and a shed for his machinery. He also has a couple of tenant houses for the folks who help him take care of his cotton. ';';In the spring he has to get his land ready; then he plants the cotton, and during the summer he has to culti vate it to keep down the weeds. When harvest time comes, he and his family and all the hired help turn out to pick the cotton by hand." ';';O.K., Joe, but it didn't take much of that cotton for this $3.00 shirt. How much of the $3.00 did Andy John son get?" "Actually, Mr. Jones, Johnson got 22.5 cents for the cotton that went into the shirt. Now you can see that most of the 22.5 cents was for labor-his own, labor of his family, and his hired help. The figures showed that 16.8 cents of the 22.5 cents he got was for labor; the rest, 5.7 cents, was for the use of his land and buildings and his equipment. You might say that the 5.7 cents was pay for the capital he had invested in his business. Of course, cotton farming, like most other kinds of farming, is a risky business. There's always the chance of poor weather and a crop failure. Then there's the risk that when Johnson [203 ] gets his crop ready to market, the price of cotton may have dropped and he will have to sell at a loss. I suppose you might figure that part of that 5.7 cents is pay for the risk he takes. In good years he may make a little extra to offset the bad ones."

"Well, Joe, that 22.5 cents looks reasonable enough and it's easy to see that most of it is for labor. But you're still a long way from the $3.00 that I am asked to pay for the shirt." "Let's follow this cotton along." Through the Cotton Gin "The next fellow to handle the cotton was Walter Brown. Walter operates a cotton gin. He takes the cotton as it comes from the farmer and cleans it. Then he puts it through the gin which separates the cotton seed from the cotton fibers and then packs the fibers into bales of about 500 pounds each." "How much of the $3.00 does Brown get for his job of ginning?" "He gets 2.1 cents, but of course he's set up to handle a lot of cotton, and it doesn't cost much to handle the small amount required for a shirt. Again most of the 2.1 cents goes to the labor which Walter Brown supplies, and a little is pay for the use of his machinery, equip ment, and buildings."

"What happens to it after the ginner gets through with it, Joe?" "The next step takes the cotton from the ginner to the [204 ] mills, and some important things happen in between. For want of a better name, let's call the next handler the merchandiser, Albert Hunt. He>s a fairly large operator and assembles cotton from many gins in sufficient quan tity to have something to offer to the mill operators. Mr. Hunt has a powerful cotton press that compresses the bales as he receives them into smaller bales-still weigh ing about 500 pounds, though. He does a lot of other things to the cotton. He takes samples of his cotton and grades them, so that he can sell it to the mills on specifica tions. Then, too, he stores the cotton in his warehouse until the mills are ready for it. Naturally, he has to pay insurance on it and finance it while it's in storage." "Well, Joe, what does Hunt get out of the $3.00 for all these services?~' "Out of the $3.00 the merchandiser gets just 6.8 cents.

Most of this is for the labor of handling and sampling the cotton and moving it in and out of warehouses. Some of it, though, has to pay for Hunt's machinery, for his ware houses, and for the money he has tied up in the storage of the cotton until the mills want it." "I suppose the mills get it next. We haven't used up much of the $3.00 yet." "Right. The Apex Company gets the cotton from Mr. Hunt. The first thing they do is to card and comb out the cotton fibers. Then they put these fibers through a machine that spins them into cotton yam. The yarn is then knitted or woven into cloth." "What part of the $3.00 do they get?" "They get 31.5 cents for their job of spinning and [205 ] weaving. It is estimated that 26.7 cents of the 31.5 cents is for labor in their plant and 4.8 cents is pay for the use of their extensive plant and machinery." ~'Now, I suppose, we're ready to put the shirt together."

'~N 0, not yet. There's one more process we haven't covered. The cloth must be bleached or dyed or printed. That is the job of the Unicorn Corporation. Then they put up the cloth in finished bolts ready for manufacture. The Unicorn Corporation gets 25.5 cents of the $3.00 for their work on the cloth, and a small part of the 25.5 cents is for the use of their machinery and equipment; again, most of it is for labor in the plant." "So far, Joe, we've taken the shirt through five dif ferent processes and if I've added correctly, we've ac counted for less than 90 cents of the $3.00 and we're all ready to manufacture the shirt. Is that right?" "Yes, Mr. Jones. The Quality Shirt Company takes the bleached, dyed, or printed cloth and makes it into shirts. The process includes cutting, assembling, and finishing, as well as the addition of buttons and thread which is also cotton. For its job, the Quality Company gets about 90 cents of the final $3.00. Approximately 76 cents of this is for labor in the plant and 14 cents is pay for the plant capital."

Distribution Services "Now that the shirt is made, I'd think that it's about ready for the customer; but I see we've used only about $1.80 of the $3.00 he pays for it. How come, Joe?" [206 ] "Well, Mr. Jones, the rest of it is in the field of distribu tion and that's getting close to the job I know something about. I believe many people overlook the importance of that part of it. It includes services we can't very well do without in our complex economy. Let's see what it costs. "First, there's the wholesaler who takes the shirts from the manufacturer to the retail store. The wholesaler must assemble and warehouse shirts from many different manufacturers. He also stores them until the retail trade is ready for them. Of course, there's transportation every step of the way for this shirt. For all these services, the wholesaler gets 24.6 cents of the final $3.00 paid by the buyer. "Now comes the last job in getting the shirt from the farmer to you, Mr. Jones. That's retailing-the job we do right here in the store. That may seem like a simple job to you, but actually it's a bit complex. We must try to anticipate our customers' demands and plan our business in advance. We must stock a few of many different sizes and kinds of shirts. We must display them in an attractive way. We have an advertising bill, too. We must hire salesmen to sell them. We often sell on credit terms.

Every retailer makes mistakes and :flnds he has to sacri :flce some of his merchandise at reduced prices, some times at a loss. "For all these services, we get 98 cents out of the $3.00 you pay for the shirt. You may think this is too much. Apparently other people have thought so, too, and have tried to do it for less. You probably recall several [207 ] up and down the street who have tried it and have gone broke. There' s tremendous competition in the retail busi ness and I believe you would :find that if 98 cents is too much, competition would soon force it down." 'Well, Joe, the way you put it seems reasonable enough to me. It looks to me like competition all along the line would tend to keep the prices reasonable. Now that we see what the $3.00 was used for, why can't we add all the costs together?" High Labor Costs "We can, and when we do, we :find that Andy Johnson the farmer, Walter Brown the ginner, Albert Hunt the merchandiser, the Apex Company, the Unicorn Corpora tion, the Quality Shirt Company, the wholesaler, and our own retail store here-all of us got a part of the $3.00.

The amount spent for labor was about $2.52 of the $8.00 and the balance, 48 cents, was pay for tools, machinery, land, buildings, financing, and even a little for risk all along the line." "It's really amazing to me that workers along the line get that much of the $3.00. If my arithmetic is correct, they get 84 per cent of the amount the customer pays and the 16 per cent left over goes for the tools which the workers use. Isn't that what is commonly referred to as capital?" "That's right, Mr. Jones." 'What you say is probably true for shirts, but how about automobiles, refrigerators, food, houses,·and all the [208 ] other things we consumers have to buy? Is the final dollar which the buyer pays divided between the worker and his tools in the same way?" "No, Mr. Jones, not exactly the same way. But the booklet I told you about gave a similar breakdown for all manufacturing combined. For the five years before the war, out of each dollar of income contributed by all manufacturing in the" United States, 85 cents went to workers for their labor, and 15 cents was pay for the tools which workers used."

"Then the shirt business looks just about like all manu facturing, Joe?" "That's right, Mr. Jones, and similar figures for all corporations in the United States tell about the same story. Even if you consider the entire nation's business, 82 per cent of the income was for labor and 18 per cent for the tools which workers use." "Well, Joe, I must confess I've picked up some new ideas from your story. I always figured that labor got less than half of the value of a product sold and that the rest was profit to middlemen and manufacturers. When you put it on the basis of providing tools of the workers, it throws a new light on it. Actually, these tools must be pretty important, aren't they?" "You're right, Mr. Jones, they are important. It is no accident that American workers can earn a pair of shoes with seven hours of work compared with 104 hours re quired by an average Russian worker. I've seen estimates that the value of tools which workers have at their dis[209 ] posal in this country averages around $10,000 per worker.

No wonder he's so productive." "But where do these tools come from, Joe?" "They are made possible by savings. A great many people in this country save a little of the income they get for their work and invest it in tools which make the workers more productive. People will not save their money for future use instead of spending it when they get it, unless they are paid something for it. This pay ment is like interest or dividends, and much of the 15 cents for tools we were talking about is in the form of pay for savings, or interest and dividends." c;c;All right, Joe, wrap it up." [Joe made no mention of the taxes that help boost the price of the shirt to three dollars. But thafs another story. EDITOR] [210 ] MORE THAN THE TRAFFIC WILL BEAR t'l paulof. poirol ~ THE Communist Manifesto of more than a hundred years ago accused capitalists of "charging all the traffic will bear," and called for government ownership and control of industry as a corrective for the alleged evil. But the more that socialistic cure has been applied through the years-the more the government has interfered in the market place-the more embarrassing is the result. In stead of a free market price, which is all the traffic will bear, the regulated price invariably proves to be more than the traffic will bear.