Inside Contract System Concerning Its Generosity to the Craft Workers - Literature review Example

WAS THE INSIDE CONTRACT SYSTEM TOO GENEROUS TO CRAFT WORKERS? By Location Introduction The Inside Contract system has been an important tool in the development of the American Industry. The system characterized many industries in the United States from the earliest decades of the 19th century through. Even though useful in the U.S, the system prevailed precisely in those industries that constituted the American System of manufacturing. The industries included sewing machines, firearms, watches, farm implements, and machine tools among others. Ideally, inside contracting occurred whenever a firm owner contracted with artisans or master craftsmen to produce consistent components of the final product. It replaced the putting-out system and differed from it in that final work of a product was done in the owner’s factory rather than the artisans’ workshop. The paper is a critical analysis of the Inside Contract system concerning its generosity to the craft workers. The Inside Contract system was a useful expedient for the American machine builders. Though, it is more useful to the manufacturers than it is for the craft workers(Nelson, 2004, p. 38). The system increased the output of the manufacturers and allowed them to take advantage of the growing markets to make more profits. Some firms expanded slowly and continued to require the services of highly skilled craft workers at crucial points, making it necessary to retain the system. Other companies increased their output more rapidly and introduced mass production technologies. For such companies, the contract system fell into disfavour, and most crafts workers lost their job opportunities. The Singer Sewing Machine Company is a good illustration of the shortfalls that befell the craft workers after its successful implementation. The Company introduced contract work in 1863 in a bid to eliminate the difficulties in the making of precision parts. The contractors put in extra efforts and worked diligently to improve the quality of the products. The result was the realization of very high profits by the Company. Despite the huge profits, the management team was dissatisfied with contractors’ efforts and replaced the whole system with that of salaried foremen in 1883. For the Singer Sewing Machine Company, the Inside Contract system had proved unnecessary for the maintenance of product quality and work incentives.Through such cases, experience has proved how a liberal and wise policy can lead to the establishment of a good system of accounts(Nelson, 2004, p. 38). The Inside Contract system is too generous to the supervisors since it provides them with the greatest opportunity for influence and initiative. The introduction of the system during its earlier stages was based on providing the contractor with virtually unlimited authority. However, after the contract is negotiated, the most important function of the manufacturer was to provide an able force of industry inspectors. The contractor was only tasked with making all the important decisions relating to what, how, when and by whom the product should be made. In addition, he also had the opportunity to know the actual costs of production. As a result, some people have described the Inside Contract system as an arrangement set to substitute the cost accounting system. The reason behind this thought was because the craft workers had almost complete control over the labour force in the factory. In most firms, the management was not even aware of the daily wage of the contractor employees. The Inside Contract system gave the craft workers more power and independence that ultimately led to the abandonment of the whole system(Nelson, 2004, p. 39). Even though their work was effective throughout their period of work, most managers increasingly became ignorant of the activities carried out by craft workers. After a few years of work, the managers gradually increased their control over their companies and forced most of the craft workers to retire and seek different job opportunities for survival. Through this, the Inside Contract system proved too mean to the craft workers and more generous to the managers and other workers in a Company. The craft workers were proved useless, even though, their influence in was acknowledgeable. Although the Inside Contract system varied slightly among industries, the primary form of the system was almost similar (Hayami, 2004, p. 257). Under the Inside contracting system, the management of a firm provided machinery and floor space, supplied working capital and raw materials and arranged for the sale of the complete product. The Inside Contractors were tasked with hiring their employees, supervising the work process and receiving a piece rate for the completed goods. Inside Contractors handled their duties as agents of the owners of the enterprises(Hayami, 2004, p. 258). The system reflected the managerial difficulties that were associated with the direct employment relations in a Company. Responsibilities, risks and additional costs were partly shifted to the craft workers, creating greater flexibilities in circumstances that require greater managerial knowledge and skills. The Inside Contract system seemed anachronistic with its effects on the costs of production(Lamprecht, 2004, p. 93). Perhaps, the social status of the craft workers was the most visible indication of this. In most of the firms, the earnings of the contractors far exceeded the wage of any foreman as well as the salary of most Company officers. Also, the contractors served as influential figures within and without their work area. The contractors’ status seemed commensurate with its contribution to the society, but later led to the confusion of priorities due to the growing number of white-collar workers. The Inside Contracting apparently prevailed in the machinery factories but was later adopted by the other manufacturers who majorly relied on the skill workers to perform the production processes. The largest motivator for the adoption and implementation of the Inside Contract system was not to give the contractors more freedom. Instead, the management authority found it challenging to deal with population density in the production of its products(Roth, 2006, p. 69). Also, the reason for adoption of this system could be due to functions played by the village community in the development of the countries. As pointed out, this was an important economic resource that ensured efficient production in the rural industries. Relational contracting served as an effective tool in the efficient utilization of resources. Therefore, the inside contracting system would be useless in the absence of the resources associated with the village community. The Inside Contract system, practise allowed skilled workers to work on a task basis and permitted them to take charge of particular phases of production(Witt, 2004, p. 105). For instance, in iron rolling mills, the workers contracted collectively with their employees on a tonnage rate and controlled the division of labour and the allocation of pay packages. For other skilled craft workers such as the steel workers, coal miners and machinists, knowledge and specialized made it possible for them remain self-directing during the processes of their industrial work. Thus, most skilled workers were able to develop and implement work rules that would maintain a relative measure of autonomy during the production process. The piece-work payment systems, though exploitative to some extent, had a similar effect on the contracting particulars of labour arrangements. Firms that sought to replace the crafts workers discretion, with the command-and-control hierarchies, often faced crude and imprecise production phases and costs. More foremen dominated the workplaces with little accountability and very few standards of conduct that guided the exercise of authority(Panda, 2004, p. 15). The ineffective cost-accounting measures obscured the relative costs and merits involved during management of employees. The arbitrary power of foremen was a theoretical antithetical to the skills displayed by industrial craft workers. Therefore, the foreman system operated on a non-rationalized basis and was sloppy and ineffective. Also, workers were forced frequently to retain considerable discretion over their work processes. Conclusion Even though the system of Inside Contracting has received little attention from most economic historians, it has been effective in the development of most industries in America. During its introduction, the system allowed manufacturers to pay more attention to improving their speed machine technology. Supervisory power was delegated to the department of foremen that served as inside contractors. The coordination between management organs and the contractors proved effective in serving the needs of the Company. But, there was little freedom and benefit enjoyed by the contractors. The imminent phasing out of this category of workers from most industries proves the inefficient support of the system to their requirements. Bibliography Hayami, Y., 2004. Toward the rural-based development of commerce and industry : selected experiences from East Asia. 3rd ed. Washington, DC: World Bank. Lamprecht, J. L., 2004. Quality and Power in the Supply Chain: What Industry Does for the Sake of Quality. 3rd ed. Newnes: South Wales Pubishing. Nelson, D., 2004. Managers and workers : origins of the twentieth-century factory system in the United States, 1880-1920. 4th ed. Madison, Wisconsin: University of Wisconsin Press. Panda, N. M., 2004. Activity based costing for Indian Industries. 2nd ed. New Delhi: Mittal Publishers. Roth, M. P., 2006. Prisons and prison systems : a global encyclopedia. 1st ed. Westport, Conn: Greenwood Press. Witt, J. F., 2004. The accidental republic : crippled workingmen, destitute widows, and the remaking of American law. 1st ed. Cambridge, Mass: Harvard University Press. Read More