A truck system is an arrangement in which employees are paid in commodities or some money substitute (such as vouchers or token coins, called in some dialects scrip or chit) rather than with standard money. This limits employees' ability to choose how to spend their earnings—generally to the benefit of the employer. As an example, company scrip might be usable only for the purchase of goods at a company-owned store, where prices are set artificially high. The practice has been widely criticized as exploitative because there is no competition to lower prices. Legislation to curtail it, part of the larger field of labour law and employment standards, exists in many countries (for example, the British Truck Acts).
The practice is ostensibly one of a free and legal exchange, whereby an employer offers something of value (typically goods, food or housing) in exchange for labor, with the result being the same as if the laborer had been paid money and then spent the money on those necessities. The word truck came into the English language within this context, from the French troquer, meaning to "exchange" or "barter". A truck system differs from this kind of open barter or payment in kind system by creating or taking advantage of a closed economic system in which workers have little or no opportunity to choose other work arrangements, and can easily become so indebted to their employers that they are unable to leave the system legally.
While this system had long existed in many parts of the world, it was widespread during the 18th and early-19th centuries in Britain. Despite a long history of legislation intended to curb truck systems (Truck Acts), they remained common into the 20th century. In a prosecution brought against a Manchester cotton manufacturer in 1827 one worker gave evidence that he had received wages of only two shillings in nine months; the rest "he was obliged to take [in goods] from the manufacturer's daughter, who was also the cashier".
Where wages are paid to workmen who are expected to lay out a part of the money for the good of the shop. Tommy means bread or a penny roll, or the food taken by a workman in his handkerchief; it also means goods in lieu of money.
In the Midland Tour of his Rural Rides, the agriculturist and political reformer William Cobbett reports the use of "the truck or tommy system" in Wolverhampton and Shrewsbury. He describes the logic of the Tommy as:
The manner of carrying on the tommy system is this: suppose there to be a master who employs a hundred men. That hundred men, let us suppose, to earn a pound a week each. This is not the case in the iron-works; but no matter, we can illustrate our meaning by one sum as well as by another. These men lay out weekly the whole of the hundred pounds in victuals, drink, clothing, bedding, fuel, and house-rent. Now, the master finding the profits of his trade fall off very much, and being at the same time in want of money to pay the hundred pounds weekly, and perceiving that these hundred pounds are carried away at once, and given to shopkeepers of various descriptions; to butchers, bakers, drapers, hatters, shoemakers, and the rest; and knowing that, on an average, these shopkeepers must all have a profit of thirty per cent., or more, he determines to keep this thirty per cent. to himself; and this is thirty pounds a week gained as a shop-keeper, which amounts to 1,560l. a year. He, therefore, sets up a tommy shop: a long place containing every commodity that the workman can want, liquor and house-room excepted.
Although Cobbett sees nothing wrong in itself in the tommy system, he notes that The only question is in this case of the manufacturing tommy work, whether the master charges a higher price than the shop-keepers would charge; but given the guaranteed market Cobbett sees no reason why any master should ever abuse the system. However, in rural regions he notes the virtual monopoly of the shopkeeper:
I have often had to observe on the cruel effects of the suppression of markets and fairs, and on the consequent power of extortion possessed by the country shop-keepers. And what a thing it is to reflect on, that these shopkeepers have the whole of the labouring men of England constantly in their debt; have on an average a mortgage on their wages to the amount of five or six weeks, and make them pay any price that they choose to extort.
One reason for the truck system in the early history of the United States is that there was no national form of paper currency and an insufficient supply of coinage. Banknotes were the majority of the money in circulation. Banknotes were discounted relative to gold and silver (e.g. a $5 banknote might be exchanged for $4.50 of coins) and the discount depended on the financial strength of the issuing bank and distance from the bank. During financial crises many banks failed and their notes became worthless.
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