CHART SHOWING COMPARATIVE COST TO THE GOVERNMENT DURING THE FIRST THIRTY-FIVE YEARS OF THE SAVINGS AND ANNUITY PLAN EMBODIED IN THE PERKINS AND GILLETT BILLS, AND A PENSION GIVING THE SAME BENEFITS AS THE PERKINS BILL, BUT WHOLLY AT GOVERNMENT EXPENSE.

The computations made to show the cost of the straight pension are minimum charges, no allowance being made for gratuities, compensations for loss of office, compassionate allowances, or any of the extras that are sure to spring up and flourish under a pension system. On the other hand, the computations made to show the cost of putting into effect the Perkins or Gillett bill are maximum charges, as no allowance is made for resignations, for the fact that the calculations are based on present salaries rather than average salaries, or for the retention in office of some employees past the age of retirement. In an ordinary service the rate of resignation is usually equal to the rate of mortality. The present salary of the individual is usually higher than his average salary for his entire period of service.

The table showing the cost of civil pensions is carried out to 35 years only, and is below the actual cost of a civil pension by the amount required to pension those who will come into the service hereafter at ages above 35 years and hence be entitled to pension within the 35 years shown in the table.

DIFFERENCE BETWEEN CIVIL AND MILITARY PENSIONS.

The argument is sometimes advanced that, whatever the expense of a pension, the members of the civil service are as much entitled to that benefit as are members of the military and naval service. This argument will not bear analysis. The State demands from the individual who enters the military or naval service the surrender of many rights and privileges of which the individual entering the civil service is not deprived. First, the State requires a definite term of service, all the best years of his life in the case of the officer or a minimum number of years in the case of the enlisted man. Then the State reserves the right of dismissing the individual when his most useful years are past, since it is not only desirable but absolutely imperative if an army or navy is to be maintained at a high standard of efficiency that the personnel be composed of men in the prime of life. While in the service, the individual is, theoretically at least, under orders constantly, not 7 hours a day, but 24, except when granted definite leave of absence from duty. His personal liberty is constantly curtailed, even his apparel, speech, and manners being subject to scrutiny and criticism such as would not be endured by members of the civil service. His pay is supposed to be sufficient for his needs, but in the case of neither officer nor private is it sufficient in itself to be an inducement to enter the Army or Navy. The attraction is supposed to be the honor and dignity attached to the service, and the chance it offers him for winning distinction. Finally, in case of war, he must go into battle and give his life, if necessary, for the State. In return for his renunciation of personal liberty, his willingness to defend the State with his life, and the forfeiture of his

chance to provide for his old age by some other means, the State agrees to grant him a pension when he reaches the age of retirement. The civil servant, on the other hand, makes no agreement on taking office to be subject to military discipline or to risk his life and limb in time of war. His duties are seldom of a hazardous nature. The regulations to which he is obliged to conform are usually what would be customary in an ordinary business office and no more.

Instead, however, of the practice regarding the pensioning of officers of the Army and the Navy being taken as a model for the civil service, it may even be questioned whether the pensioning of Army and Navy officers might not be wisely remodeled on the basis here proposed for the civil service, with the addition of a provision for special recognition in the matter of retiring allowances in the case of those officers who actually go into battle. It is at least a subject open to debate whether members of the military and naval services and other police organizations might not be considered fairly treated in times of peace if they were given adequate salaries and required to set aside enough out of them overy month to pay for their retiring allowances. Nor is this suggestion so unprecedented as some may think. In 1885 the British Parliament appointed a select committee to inquire into the subject of national provident insurance. This committee spent two years investigating conditions imposed by various private employers of labor upon those in their employment in order to provide for their superannuation. It was impressed with the growing cost of pensions, and came to the conclusion that not only the civil but the military establishments of the State also might well follow the example of private business firms in requiring employees to contribute to their pensions. They stated in their report that they

Are of opinion that all persons hereafter appointed to the service of the Crown, whether civil or military, whose service at present counts toward pension, should contribute toward that pension by a percentage deduction from salaries or pay. The steady and rapid growth of the pension list points to approximate revision of the entire policy of burdening the public with the provision of pensions; the enterprise of private individuals and firms indicates the advantage of self-help as a condition of employment (which it might be proper to supplement with State help); and your committee recommend that not only in service counting under the present system toward pension but also in the police and other unpensioned branches of the public service contribution to a pension fund should be made obligatory.1

THE CIVIL PENSION IS DEMORALIZING TO THE SERVICE.

Setting aside all comparisons then of the civil service with the military or naval, there are two sound arguments against a civil pension besides the heavy charge that it makes on the resources of

1 Second Report of Commission on Civil Establishments. 1888, appendix, p. 423.

the country which discredit it with those who have the efficiency of the civil service and the welfare of the civil servants at heart.

First, it is demoralizing to the service. It makes dismissal of the inefficient difficult, since it is hard for the superior officer to cause his subordinate not only loss of position but also loss of the pension which he has partly earned and counts as an asset of office. The result is a breaking down of the moral tone of the members of the service, especially of the younger employees, since they come to feel they are safe however badly they do their work and unappreciated however well they do it. In an article entitled "The mischief of pensions," an observer of the English system, named Michael Peters, brings out the danger in words that will bear quoting:

There is this just scruple that besets the Government and hampers it on every side that men whom it would be desirable to remove or supersede have not been fully paid for the work which they have done in the past until their pension falls due, and that it can not be justice to make them forfeit this deferred remuneration on account of present deficiencies. This difficulty gives occasion for the very broad margin of conduct within which a Government servant may maintain his position; the reluctance to dispense with the services of men lacking in energy or interest in their work; the system of shunting an official, who has progressed on the ladder of routine to a position for which he is not fitted, from one department, where he is "making a mess of it," to another unfortunate department, where it is probable he will do the same; the unwritten law which decrees that an official once in receipt of a certain salary must in future, apart from any consideration of ability, occupy posts of equal or higher value, but can not occupy one of less value, because the ultimate pension is calculated in a certain ratio to the salary received at the date of retirement. This tolerance of ineptitude reacts upon the officials themselves and upon the junior officials in particular. These see that, however much energy and endeavor they may put forth, advance in their profession is cramped into a matter of routine by the repletion of higher posts with men in whom slackness or inability appears to be a matter of no importance. Moreover, they have to suffer the gall of constant service under the thumb of such men, whose influence is necessarily repressive and numbing, who do not appreciate energy, possibly even damp it, discouraging too much zeal because they are not themselves able to understand it, and because they have, nevertheless, a dread that it might reflect disparagingly on themselves. This it is that, through monotonous years of subordinate service, breaks the heart of many a young man full of praiseworthy zeal and activity; this it is that kills originality and initiative in the young, so that, when they in turn reach those posts of higher responsibility, they have learned to do their work as did their seniors before them-as a machine makes matches. Added to which these young officials have the fact constantly before their eyes, that whether they exert themselves or whether they refrain from exerting themselves, they will ultimately, and with routine precision, arrive at those same posts and be able to stick to them, provided only that they are able to quench their ardor and work themselves down to a soft and convenient complacency.1

1 See "The mischief of pensions," Part II, by Michael Peters, in the Gentleman's Magazine, London, September, 1907, p. 227.

DIFFERENCE BETWEEN GOVERNMENT SERVICE AND PRIVATE BUSINESS.

The question may be raised why a straight pension should be demoralizing to the Government service when the testimony of private employers is to the effect that they have found it helpful in the maintenance of discipline. The answer is that conditions of employment in the Government service are diametrically different from those in private service. A straight pension is a powerful aid to the ordinary employer in holding his men and in keeping up their standard of efficiency, as brought out by the Hon. Frank A. Vanderlip, president of the National City Bank of New York, in an article on "Insurance for workingmen," published in the North American Review in December, 1905. Said he

When employees realize that unsatisfactory conduct may at any time lose them not only their present position-a loss which in such a labor market as ours might be easily made good-but that it entails further the loss of a very valuable asset, the employee's right to a pension, the incentive to good conduct is greatly increased. It operates especially as an incentive to hold men between the ages of 40 and 50 when they have acquired the experience and skill which makes them especially valuable, and prevents their being tempted away by slightly increased wages for a temporary period.

This statement is entirely correct when applied to business institutions. It is not wholly correct when applied to the Government service. A straight pension is a powerful aid to the Government as well as to a corporation in holding its employees, but there is this radical difference in its operation under the two conditions: In the case of the Government it operates to hold the poor employees rather than the good and to break down rather than to keep up the standard of efficiency. This is explained by two fundamental differences in the conditions of labor when a private corporation is the employer and when the United States Government acts in that capacity. These are, first, the fact that there is seldom any relationship between the value and the cost of a Government output such as there always is in the case of a commodity produced by a private corporation, and, secondly, the fact that the man at the head of a Government office or shop has much less authority over his subordinates than has an executive officer similarly placed in a private business.

Business enterprises are conducted for the purpose of paying dividends, and as inefficiency on the part of an employee has a direct bearing on the dividends, it will not be tolerated. On the other hand, the great majority of Government employees are not engaged in the production of commercial articles which must be sold at a profit in competition, and the loss to the Government through inefficiency is not so apparent or so easily measured. It may, for instance, cost the Government a hundred thousand dollars to get out a highly scientific or technical report which is, economically, either at the time or ulti