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T H E J O U R N A L O F I N D U S T R I A L A N D ENGINEERIATG C H E M I S T R Y
lative bodies, manufacturers, those indirectly interested in the growth of American chemical manufacture, and last, but not least, we require the aggressive support of the Chemical Society individually and collectively to act as a connecting link between the various chemical manufacturing branches. The most productive field, it would appear, in which t o direct the united efforts of all is to assist in providing for fair and proper tariff legislation.
CAPITALIZATION OF TRAINING AS A BASIS FOR COMPENSATION By E. 0. HWNRICH Received October 28, 1916
During the several years that I have been engaged in independent practice I have received numerous applications for work from chemists in various stages of professional development. In nearly every case the applicant had no definite ideas regarding the value of his services either t o himself or t o me and stated his case with considerable detriment t o himself. Even among the mature chemical workers of my acquaintance the fundamental propositions of business do not seem t o be included in all instances in their valuation of services rendered or sought. On the contrary the view seems to prevail t h a t the cost of living is synonymous with the cost of production of service and if this is covered, all is well. What I have t o suggest herc is neither nem- nor novel. M y whole purpose is to make a comparison which may be of service in affording a. slightly different angle of view on the question of pay; to suggest a test for comparing service with compensation; and to intimate that the cost of living is not completely synonymous with the cost of service production. KOmatter what may be the stage of his career, the chemist’s essential capital consists of 1400 g. of gray matter, supposedly keen, His progress in a large measure depends on how he values and markets what he can extract from it and convert into service. Under our competitive conditions he must regard himself as a salesman and sell his services under the same principles which govern the sale of commodities. These principles may he stated thus: ( I ) Service rendered must produce a profit t o the recipient, thereby fixing its maximum value. ( 2 ) Service rendered must yield a profit to the producer, thereby fixing its minimum value. All too often is the chemist inclined t o overlook that jobs and lines of business follow these common rules. He sees only the leaves and thinks not of the root. The acorn of business is capital, by which is meant accumulations of productive wealth. Like a living thing the growth of business requires constant intensive cultivation, with constant comparative reference to the original acorn and the t a p root which sprang from it. I n a like manner the job, by which is meant that which produces income through service, has somewhere in i t a tangible acorn from which it sprang and a t a p root to keep it steady. This acorn is nothing else than the cost of preparation, computed as fairly as possible, with suitable credits and debits from time t o time for appreciation and depreciation with changing environment. From this point of view it becomes apparent that the charge for rendering service legitimately includes other things besides mere cost of living. As a matter of fact a certain investment has been made in training and equipment in order t o produce a minimum earning capacity and the cost of living merely enters as the acid test t o determine the sufficiency of the investment. The real factors t o be taken into consideration are ( I ) equipment and overhead charges; ( 2 ) capacity for work, or, the time element. These are all elements which can be determined with a fair approximation t o accuracy for each individual case. Moreover, the increment t o the principal can also be worked out
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since it is true that intensive cultivation ol a job is largely a matter of ability and effort t o convert daily experiences into working knowledge, for reserve equipment in the handling oE new problems. The growing, rising chemist should always want to know. He will progress measurably as he reaches out for information in varying directions and organizes it for his practical use, When he sells his service this constructive reorganization of previous experiences is the big value that the chemist has t o cultivate and offer. Few can rise without i t ; and if one has it, or will adopt it deliberately, his name will not be a frequent visitor on the waiting job list of his Alma Mater.. I t will take him from the minor to the major stages of responsibility for it comes pretty near being the whole thing in personal values. Granted then that every chemist is willing continually t o study and reorganize his accumulating experiences, all t h a t remains is t o see that the initial pay is as fair as possible. To what he may be entitled by way of compensation can be most easily determined by comparison with distinctly different types of investment. To illustrate let us compute an average investment for a man a t the end of a normal college course and establish his initial salary. Under normal conditions the student pays during his college career not only the cost of living and attendance, but surrenders his earning capacity during that time. An 18-year-old high school graduate can readily earn $600.00 per year; a t 20, $720.00 per year; and a t 21, $780.00 per year. By surrendering these earnings he invests in this way during the 4 years $2700.00. He also invests 4 years’ sustenance a t $600.00 per year, or % ~ O O . O O , In addition, the State has invested in him as a high school graduate 8 grades a t b4o.oo per year and 4 grades a t 31oo.00 per year, amounting t o J720.00. The total investment nom amounts t o Sj820.00. Deducting the usual 15 per cent knocked off of first cost for the first year in nearly all lines of business, leaves $4940.00, and most graduates have enough books and chemical apparatus by way of equipment legitimately to make the round sum lor the first year out of college, $5000. Here then comes the issue. Is the man with SjO00 invested in training entitled t o the same return as the man with Sjooa invested in a personally conducted business? I think hc is. The only obscure point arising is what the other fellow realizes from his investment in the average case. bIy own observations lead me to believe that the average merchant turns his stock twice a year with a +o per cent gross margin, or 80 per cent increment for the year. Out of this come his operating costs, except salary, averaging jj per cent of the gross earnings. The employee has no operating cost. Eliminating it we arrive a t the proper point for comparison-the net return as salary on equivalent capital. Extracting the operating charge leaves z j per cent of 8 0 per cent as the net return or 20 per cent on the original investment, equal to $1000 per year as the amount which his investment should bring. Cultivated with constructive curiosity the principal should the compound interest law, increase according to P = where “be” equals Po, the principal a t the time “ t equals zero,” or graduation from college, and “7” is legitimately chosen from a consideration of new experiences. I n this way income can be tested from time to time. In doing this many contingencies may arise in each individual case. Yet with a base established along the foregoing lines a legitimate conclusion can be reached with fair-minded treatment of the factors arising, and a more equitable relation established between buyer and seller of services. The investment in training when capitalized must be sufficient t o provide the cost, of living, with a surplus for contingencies, for depreciation and wear, and for individual growth.
