What Is a Scrip?
A scrip is a substitute or alternative to legal tender. Holding a scrip entitles the bearer to receive something in return. Scrips come in many different forms, primarily as a form of credit, with the document acknowledging the debt. Scrips also represent a temporary document representing fractional shares resulting from a split or spin-off, or they may indicate currency issued by a private corporation such as frequent flier miles.
Because they are used as currency substitutes, scrips can be useful in the study of money and monetary economy.
Key Takeaways
- A scrip is a substitute or alternative to legal tender that entitles the bearer to receive something in return.
- Scrips come in many different forms, usually as a form of credit.
- Scrips have been used to compensate or pay employees, and in communities when money was unavailable or in short supply.
- Some companies may offer dividends in the form of shares rather than cash. These are called scrip dividends.
- Gift cards, reward points, and coupons are popular examples of scrips.
Unlocking the Power of Scrip
In a broad sense, the term scrip refers to any type of substitutional currency that replaces legal tender. In many instances, a scrip is a form of credit but is generally always some form of documentation of debt.
Scrips were created to pay or compensate employees under the truck system. This system, which began during the Industrial Revolution, meant that employees were paid in kind with commodities, vouchers, tokens, or some other form instead of cash. This was usually to the benefit of the employer, not the employee.
Scrips have also been widely used in localized commerce when traditional or legal currency is unavailable or in short supply. This includes small communities or towns—such as the first coal towns—in remote locations, military bases, ships at sea for long periods of time, and in occupied countries during wartime. The practice of paying wages in company scrip was abolished by the Fair Labor Standards Act of 1938. The same law abolished child labor and set the minimum wage at 25 cents an hour.
Varieties of Scrip
During the American industrial revolution, scrip was a common form of payment in company towns and remote communities where the employer was also the only provider of food and housing. By paying workers in a private currency that could only be used in the company stores, the employer could both extract more wealth from their workers and also prevent them from leaving. The exploitative nature of company scrip was a factor in several strikes and armed rebellions.
Although paying wages in scrip was prohibited in 1938, they are still used in today’s world. In certain companies, scrips may come in the form of rewards points or coupons. For example, Canadian retailer Canadian Tire issues its own form of currency—Canadian Tire money—that looks like real currency but isn’t. Customers receive a percentage of Canadian Tire money back when they make purchases. This
Related Terms: legal tender, credit, dividends, gift cards, vouchers.
References
- Department of Labor. “Fair Labor Standards Act of 1938: Maximum Effort for Minimum Wage”.
- History.com. “The Battle of Blair Mountain”.
- CFAJournal. “Scrip Dividend”.
