A Piece-Rate System: Being a Step Toward Partial Solution of the Labor Problem

The central claim is that the 'ordinary piece-work system' produces 'a permanent antagonism between employers and men,' forcing even the best workmen to act as hypocrites to avoid rate cuts . Taylor's differential rate system—offering a high price for fast, perfect work and a low price for slow or defective work—is designed to align worker and employer interests through scientific measurement rather than bargaining. This 1895 paper is the technical blueprint; The Principles of Scientific Management (1911) is the philosophical manifesto that grew from it .

Taylor proposed the differential rate system, which offers two prices for the same job: a high rate if the work is completed in the scientifically determined shortest time and in perfect condition, and a low rate if it takes longer or has imperfections . The high rate is set so a workman can earn more per day than is usual in similar establishments. This is 'directly the opposite of the ordinary plan of piece-work in which the wages of the workmen are reduced when they increase their productivity' .

Taylor introduced elementary rate-fixing as a method of determining piece-work prices by studying the time required for each elementary operation into which manufacturing could be analyzed. These operations were classified, recorded, and indexed; when a price was needed, the job was divided into its elementary operations, times were looked up from records, and the total was summed . This replaced the old method of 'guessing at the time required for any new piece of work' based on records of whole jobs, making rates 'founded upon exact observation, instead of accident or deception' .

Taylor explicitly distinguished his system from ordinary piece-work on the grounds that ordinary piece-work 'involves a permanent antagonism between employers and men, and a certainty of punishment for each workman who reaches a high rate of efficiency' . His differential rate, by contrast, 'makes each workman's interests the same as that of his employer, pays a premium for high efficiency' and convinces each man 'that it is for his permanent advantage to turn out each day the best quality and maximum quantity of work' . The key innovation is that the rate is scientifically determined rather than set by bargaining or guesswork.

Taylor argued that unions were the 'proper and legitimate answer' to the 'herding of men together into classes, regardless of personal character and performance' under day-work and ordinary piece-work systems . He believed the necessity for unions 'disappears when men are paid, and not positions'—when employers study each man's character and performance and pay accordingly, keeping accurate records of attendance, punctuality, and work quality . He claimed there had 'never been a strike under the differential rate system of piece-work' in ten years of steel industry operation .

Taylor read the paper before the American Society of Mechanical Engineers in 1895, and it was published in the Transactions of the ASME, volume 16, pages 856–903 . It was also issued as a standalone publication that year . The Library of Congress describes it as 'the first of several well-known works Taylor wrote' and notes it 'led him to write his book, The Principles of Scientific Management' . The paper included discussion from the ASME floor, a format Taylor used again in his later work .