From the standpoint of the employer, the rate per unit should be based on the productiveness of the individual, and should insure to the most skillful, a wage as high as, or slightly higher than, he would receive under the day─wage plan. This would, in theory, give to the less skillful man a wage exactly commensurate with his skill. But as workers become more and more skillful, and increase at the same time their productiveness and their earning capacity above normal, there is a tendency on the part of the employer to reduce the rate per unit to bring the aggregate wage back to normal. The result is that the worker, fearing a reduction in the rate, limits his production to the number of units that will insure an average wage. Thus the system fails in its object. It does not reduce the cost of production to the lowest point. However, when piece rates are intelligently applied they are found very satisfactory in certain lines. But in all cases, the piece rate tends toward a uniform rate of production, and, while reducing the cost of superintendence, involves the expense of inspection. The latter, however, is not necessarily an added expense, for, as a rule, inspection is required regardless of the wage system in use. =5. Premium Systems.= To obviate the difficulties found in both the day─wage and piece─rate plans, the _premium_ or _bonus_ system was evolved. This improved system of wages is intended to fulfill the following conditions: 1. A guaranteed rate per hour for each grade of work for a contract period. 2. An average earning power continuously higher than usual. 3. A lower cost per unit to the employer as wages automatically increase. 4. A supplemental earning power, or bonus, to the worker above the day wage, the bonus being based on efficiency. The premium system is a combination of day wage and piece rate, involving the establishment of standard times for stated tasks. It is based on the theory that if, when a standard time has been fairly established, the worker performs a task in less than standard time, he is entitled to a bonus, or extra pay, for the time saved. The bonus is based on the wage rate paid for standard time. For what part of the time saved the workman should be paid, depends on circumstances. It might be argued that the workman is entitled to full pay for all of the time saved, but other factors than the dexterity of the workman enter into the time saving. The employer supplies additional power, there is an extra cost for wear and tear on machinery, and an extra quality of material; all have a bearing on time saving. The employer is, therefore, entitled to a part of the saving.