CHAPTER XI.

RELATIVE WAGES.

§ 1. The Determination of Relative Wages. The determination of the causes of wages in different employments, so far as they depend upon industrial competition, involves the application of the same principles as in the last chapter; but the application is much more difficult, because, instead of two great groups of labourers and capitalists, we have a multitude of subdivisions all under the influence of reciprocal demand. Each of these industrial groups, again, consists of employers and employed, and the proportional distribution of wages and profits is a matter of conflict. Every group might at first be supposed, like a great monopolist, to try to obtain as much as possible of the general product of the society, which is practically measured in money. But the conflict within the group weakens its collective power in bargaining. At the same time the power is still further weakened by the competition of master with master, and man with man. Thus, the idea of a multitude of struggling monopolistic groups is out of place precisely in proportion as industrial competition is effective. It is fortunate, both for the theory of wages and the progress of civilisation, that it is so; for, all that we can predicate, with any probability, of a nation of monopolistic castes is that, on the whole, less would be produced at a greater real cost. At the present stage, without anticipating the theory of value, it is possible, on the lines laid down by Adam Smith, to indicate some of the principal causes of differences of wages in different

employments. In the first place, it will be shown that both the minimum that any class of labourers will accept, and the maximum that any class of employers can give, are both subject to variation; and, secondly, the modes in which industrial competition affects relative wages will be examined. We shall thus be prepared to discuss in the next chapter the modes in which wages were once mainly and are still partially determined by law and custom.

§ 2. The Minimum of Wages that Labour will accept. It may be thought to need no demonstration that the lowest rate of wages that can be permanent in any occupation must be sufficient to support the labourers, and to enable them one with another to keep up their numbers.1 In most countries, however, in which slavery has prevailed, it has been found cheaper to import slaves than to rear them. In most societies, also, in which labour is free, there is a certain class - sometimes very considerable in numbers - the members of which do not earn even the bare necessaries, and who depend, in part at least, on some form of charity. In the richest countries in the world, at the present day, the margin of able-bodied pauperism fluctuates.

When we ascend above these low levels of subsistence, we reach the strata in which the standard of comfort becomes still more variable from class to class, place to place, and time to time. The standard of comfort operates mainly by affecting the supply of labour through the birthrate, and its working depends, not so much on the judgment of individuals whether their children will eventually be as well off as themselves, as on a mass of customs and opinions that may or may not be well-founded. In some countries people cannot marry under a certain age or without a certain amount of money, and in others where the law is silent, the voice of class sentiment is equally strong. It may well happen, however, that in spite of these restrictions and ideas the supply of children may be excessive, 1 Cf. Adam Smith, Bk. I., Ch. VIII. Ricardo, Ch. V.

the standard of comfort may fall in the next generation, and the process may be continued indefinitely.

It is to be observed that at first sight the standard of comfort seems to operate, as a rule, most strongly in the higher classes of labour, especially amongst the so-called professional classes, that is to say, in these classes it operates most in retarding marriage and diminishing the number of children. But these classes are liable to be increased from above and below under modern conditions, and in former times the same result was achieved through the action of different causes, especially charitable education. It appears, then, that the standard of comfort is not itself sufficient to determine the minimum of wages, whether in the lower or the higher grades of labour, — for this standard is itself variable and elastic, and only operates indirectly and slowly. Masons, shoemakers, and even common labourers, as Adam Smith has shown, have for long periods had a higher minimum wage than curates, and "that unprosperous race of men called men of letters"; and, in our own day, many artisans habitually receive a higher minimum than teachers and clerks, in spite of the apparently higher standard of comfort of the latter.

It is worth recalling the reasons given by Adam Smith 2 to show that the wages of common agricultural labourers in Great Britain in his time were nowhere regulated by the lowest rate "consistent with common humanity." most cases the reasons apply with still more force at the present time.

In

(a) Summer wages he is referring to agricultural labour are always highest; but especially owing to the cost of fuel, the maintenance of a family is most expensive in winter.

(b) Wages do not fluctuate with the price of provisions, and accordingly if the labourers can live in the dear years they have a surplus over the minimum when food is cheap.

1 Cf. Adam Smith, Bk. I., Ch. X., p. 2.

2 Bk. I., Ch. VIII.

(c) Wages vary more from place to place than the price of provisions at any given time the latter may be considered nearly uniform over the whole country. Thus if the labouring poor can maintain themselves in places where the price of labour is lowest, they must be in affluence where it is highest.

(d) The variations in the price of labour not only do not correspond either in place or time with those in the price of provisions, but they are frequently quite opposite.1 Thus again the average must be above the necessary minimum. It will be seen that the principle underlying these various examples is the same: real wages are unequal — the lowest rate supports life therefore the other rates must yield a surplus. Thus, if we were to follow out recent. analogies, we might speak of the surplus as labourers' rent.

But after all needful qualifications have been made as to the variableness and elasticity of the standard of comfort, the central position of what is really the Malthusian theory of population remains unshaken. The cheaper the staple food (e.g., rice or potatoes as compared with wheat and meat), and other necessaries (e.g., the waist-cloth of the Indian and the Sunday clothes of the Briton), so much lower is the minimum of wages that the lowest classes of labour (ordinary unskilled labour) will accept, and the increase of population tends to make the actual rate approach the possible if only like the curve, which draws nearer and nearer to, but never actually touches, its asymptote.

The practical deduction so much emphasised by the older economists should not be allowed to drop out of sight, namely, that it is of great practical importance for a

1 This point is treated with much elaboration and with many historical references. McCulloch also argues with later examples, that in dear years money wages are likely to fall, because the labourers are more anxious to work, and therefore the supply of labour is increased, e.g., women and children must work. Principles of Political Economy, p. 389. See also Brentano: "Arbeitslohn und Arbeitszeit."

nation not to live on the cheapest food attainable, since in case of need there would be no inferior substitute to fall back upon. The Irish potato famine is the usual and sufficiently striking example. Precisely the same argument may be applied to all the other necessaries of labour: clothing, house-room, and education. It is also equally important to lay stress on the position to which in recent times more attention has been paid that a rise in the standard of comfort does not necessarily mean a rise in the cost of labour; it may, on the other hand, be more than counterbalanced by an increase in efficiency.1

§ 3. The Maximum of Wages that Employers can afford. It is no more easy to assign a precise maximum than a precise minimum to wages. We may, of course, say that wages can never rise above what the employers of that class of labour can afford to give, but then there is always the ulterior question how much can they afford, and what are the determining causes? If the labour consists of services that perish in the act, as in the typical case of domestic servants, the maximum total cannot exceed the surplus income of the employers that is available after other necessary expenses are met. This, however, tells us nothing of the rate of wages unless we know the number of labourers. But the number depends on a variety of causes, one of which is the rate of wages itself, and even if we knew the number we obtain only an arithmetical average which admits of being made up by endless variations in the rates for different kinds of service. The surplus funds also, which are put aside for the employment of labour, depend partly upon the incomes of employers, partly upon the prices of other things, and partly upon the price of labour. Thus, even in this apparently simple case, we cannot arrive at any precise maximum of wages.

If the labour is devoted to the production of vendible commodities, again we may, of course, always say that wages cannot exceed the sum total obtained for the articles 1 Cf. Schoenhof, op. cit., and Brentano, op. cit.