The New York Times business section blog Economix, ran a story yesterday including commentary from sociologist Viviana Zelizer about the history of holiday bonuses – an especially interesting topic given the recent outrage surrounding bonuses for failing companies’ executives.
Over at The Huffington Post, the Princeton sociologist Viviana A. Zelizer recounts some interesting milestones in the history of the bonus, and traces its evolution from gift to entitlement:
At the turn of the 20th century, U.S. employers began substituting the traditional 19th century Christmas offerings to employees — turkeys, watches, candy or gold coins — with a cash bonus. As early as 1902, J. P. Morgan & Company had apparently broken the record by giving each of their employees a full-year’s salary as a Christmas present. Gifts of cash were increasingly standardized, calculated as a percentage of the wage. By 1911, 10 percent was considered “liberal.” Some banks went as far as substituting the Christmas present for a first of the year merit increase in salary.
Most employers, however, continued to want to treat the bonus as a discretionary gift; after all, this custom of “remembering the workers” served them well to oversee and regulate workers’ productivity as well as assuring their loyalty. Indeed, it is reported that Woolworth’s first Christmas cash bonus to employees in 1899 ($5 for each year of service, with a limit of $25) was meant to match competitors’ higher wages and avoid a salesgirls’ strike. It was probably also a cheaper way to pay overtime. Around 1910, a 25-year-old saleswoman working in a New York department store told a National Consumers’ League investigator that in the week before Christmas “she worked standing over fourteen hours every day… so painful to the feet becomes the act of standing for these long periods that some of the girls forgo eating at noon in order to give themselves ..a foot-bath.” For this overtime the store gave her $20 “presented to her, not as payment, but as a Christmas gift.”
Significantly, while some companies offered a bonus to every employee, others made the Christmas present contingent on length of service or a worker’s efficiency record. Or on a worker’s proper disposition of the bonus; in Christmas 1914, a large Minneapolis flour-milling company reportedly gave each of their employees a $25 check to be deposited at a savings bank, the gift-check being valueless otherwise.
But the similarity to other forms of compensation invited recipients to treat the bonus as an entitlement, pressing for a definition of the additional income as a right. The personalization of a business gift from employer to employee was hard to sustain when the bestowal was standardized and expected. By the 1950s, the Christmas bonus officially lost its status as a gift: when a firm announced a reduction in its annual Christmas bonus as a way to make up for the expense of introducing a costly new retirement plan, the union tried to negotiate the employees’ holiday bonus. After the company refused any bargaining, the union appealed to the National Labor Relations Board. The Board ruled that the Christmas bonus could no longer be considered an employer’s discretionary gift but an expected and negotiable component of a worker’s wage. While a dissenting board member protested that a “genuine Christmas gift has no place at the bargaining table” (Niles-Bement-Pond Company and Amalgamated Local No. 405, International Union, United Automobile, Aircract & Agricultural Implement Workers of America, C.I.O., 1952), it was generally agreed that the bonus was no longer a present but a separate category of payment from the regular paycheck. The benefactor-beneficiary component of the employer-employee relationship, it follows, was vanishing…
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