Understanding Scrips: History, Uses, and Modern Applications

Scrips refer to any object that is used as an alternative or substitute to legal tender. They were a popular alternative to wages and were used as a means to exploit workers. Today, scrips are used in the form of gift cards, tokens, certificates, and rewards points.

Summary

• Scrips refer to any objects used as an alternative or substitute for legal tender. They were a substitute for wages as a way to exploit workers, now deemed illegal under labor laws.
• Today, scrips are used as additional compensation, such as gift cards, reward points, tokens, and certificates.
• The Métis scrips are a historical example of scrips used by the Canadian government.

History of Scrips

Scrips can be thought of as a form of credit in the absence of cash, entitling the scrip holder to receive certain goods or cash when redeemed. They became the popular source of compensation under the truck system.

The truck system is a practice in which employers pay workers with money substitutes. Such substitutes included vouchersVoucherA voucher is an internal document within a company that is issued by the accounts payable (AP) department. It can be seen as a “memorandum”, commodities, tokens, and more. Typically, the scrip is worth less than what the wages would have been for the same work. Furthermore, the scrips limit what the workers can redeem, whereas, with cash, the uses are limitless.

For example, it was commonplace for logging communities managed by a single company to issue scrips that can only be used at the company store. Because of the isolation of the store, it acts as a monopolistic price-setter. Therefore, not only were workers being exploited for not receiving their fair wages in cash but they were also exploited as profits by the company store.

During the Great DepressionThe Great DepressionThe Great Depression was a worldwide economic depression that took place from the late 1920s through the 1930s. For decades, debates went on about what caused the economic catastrophe, and economists remain split over a number of different schools of thought., scrips became a widely used form of wages due to the lack of money circulation. Such practices of using scrips in place of wages are no longer permitted in many countries today.

Scrips Today

Today, scrips are still widely used, but as a form of additional compensation and bonuses instead of as a replacement for wages. The most prevalent form of scrips is gift cards. Despite the limiting aspect of gift cards compared to cash, they are still very popular because it is often unusual to use cash as a gift and the recipient is less likely to decline gift cards than cash gifts.

Another common form of scrips is reward points, such as PC Optimum Points. Consumers can rack up points at participating merchants, and points can only be redeemed at Loblaw subsidiaries, such as the Real Canadian Superstore and Shoppers Drug Mart.

Lastly, scrips are also used as tokens, such as at arcades like Chuck E Cheese or casino chips. Token holders may only derive value from using tokens where they are issued.

Nowadays, scrips are often used strategically by businesses to ensure customer retention. Gift cards lack value if they are not spent at participating merchants. The same logic applies to reward points and tokens.

In the context of the stock market, scrips are entitlements to a fractional share of stock. If a listed company is facing liquidityLiquidityIn financial markets, liquidity refers to how quickly an investment can be sold without negatively impacting its price. The more liquid an investment is, the more quickly it can be sold (and vice versa), and the easier it is to sell it for fair value. All else being equal, more liquid assets trade at a premium and illiquid assets trade at a discount. problems or decides to reinvest the cash into the company, they may issue scrips instead of cash dividends.

Métis Scrips

In 1870, under the Manitoba Act, scrips were issued by the Canadian government to the Métis as an IOU that can be redeemed for money or land. The Métis are descendants of First Nations and European origins. However, it became clear that the government used scrips to reduce tension instead of providing genuine compensation.

The scrips were extremely disorganized and hard to redeem, causing many delays and frustration. In 2013, the Supreme Court of Canada declared the wrongdoings of the government, and currently, the redemption process for Métis scrips is still active.

More Resources

CFI is the official provider of the Certified Banking & Credit Analyst (CBCA)®Program Page - CBCAGet CFI's CBCA™ certification and become a Commercial Banking & Credit Analyst. Enroll and advance your career with our certification programs and courses. certification program, designed to transform anyone into a world-class financial analyst.

In order to help you become a world-class financial analyst and advance your career to your fullest potential, these additional resources will be very helpful:

• CryptocurrencyCryptocurrencyCryptocurrency is a form of digital currency that is based on blockchain networking. Cryptocurrency like Bitcoin and Ethereum are becoming widely accepted.
• RemunerationRemunerationRemuneration is any type of compensation or payment that an individual or employee receives as payment for their services or the work that they do for an organization or company. It includes whatever base salary an employee receives, along with other types of payment that accrue during the course of their work, which
• Customer BondingCustomer BondingCustomer bonding is the process through which a company or organization makes connections with its customers. The goal of customer bonding is to develop a
• Fiat MoneyFiat MoneyFiat money is a currency that lacks intrinsic value and is established as a legal tender by government regulation. Traditionally, currencies