The Online Library of Liberty

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• Preface.
• Lecture I.
• Lecture II.
• Lecture III.
• Lecture IV.
• Lecture V.
• Lecture VI.
• Lecture VII.
• Lecture VIII.
• Lecture IX.
• Lecture X.
• Lecture XI.
• Appendix.
• Note On Page 32.
• Page 37.
• Page 39.
• Page 57.
• Page 65.
• Page 133.
• Page 145.
• Page 149.
• Page 164.
• Page 175.
• Page 183.
• Page 203.
• Page 223.

LECTURE X.

Gentlemen,—

Our next subject of enquiry is naturally relating to the wages of a labourer, and what it is that determines their amount. In their whole science of Political-Economy, there is no subject more important than this. The class whose livelihood depends upon the wages they receive as a remuneration for their labour, is a very numerous one. In Ireland it is, I believe, more than equal to all the other classes. In England not quite so much. There is no question, therefore, that we should feel so desirous of resolving with accuracy as this, how far, and by what means, legislation can promote the prosperity of this numerous class of our fellow countrymen—whether by directly regulating their wages by law, or by making such wise rules for the promotion of trade and industry as will enable the labourer, by fair contract, to procure from his employer an adequate remuneration for his toil. What adds a peculiar importance to such enquiries as those we are now entering upon is that the opinions held respecting them may exercise an immense influence over the peace and happiness of the country, independent of the effect they may have upon legislation. This it is that makes it so important that all should be aware of the truth. As far as legislation is concerned, false opinions held by a few might be disregarded; but obedience, peace, and order, are more likely to prevail where every person sees that he cannot attribute his misfortunes and difficulties to the state of the laws. Those who live upon the wages of their labour, form not only the most numerous, but also the poorest, and the most ignorant class of society. It comprises those who, when they suffer, are the least able to assist themselves, or to investigate the causes of their calamity. Sudden vicissitudes in their small incomes generally arise from causes which they cannot be aware of, and over which, even if they knew them, they could exercise very little control. The rich man whose income is diminished, may retrench a little from his superfluities; but to the poor labourer, a diminution of income means a deprivation of some of the necessaries of life. I shall not at present enter upon those enquiries which relate solely to the vicissitudes of trade, and those periods of unusual prosperity or adversity which occasionally throw a momentary light or shade upon the condition of every order of society. I shall for the present confine myself to those causes which determine the permanent, natural, or average rate of wages.

There is one cause commonly assigned for the relative wages of labour in different countries, to which I cannot agree, and which is generally supported by a confused species of reasoning, confusing primary and secondary causes, and mixing metaphor and analogy with apparent demonstrative reasoning. The doctrine I allude to is this, that the value of labour, like every thing else, depends upon the cost of production, and that the cost of production of a labourer is that sum which according to his natural or artificial wants, is sufficient to support the labourer, together with, on the average, such a family as is necessary in order to keep up the population of the country, and to enable it to increase or remain stationary, according as the wants of the nation require an increasing or a stationary population. We know how the cost of production of any article has the power of regulating its average price, since the being able to procure such a price is the only and the necessary condition on which any persons will continue to produce the article. But the attempt to prove this truth by analogy, and to find out what is the cost of production of common labourers, appears to be a trifling with a serious subject. No such calculations are made previous to the production of a common labourer. He is not produced for the sake of what he can afterwards earn. The expression therefore, “cost of production,” is merely metaphorical when applied to such a case; and no argument can be drawn from it, since the analogy is deficient in the very circumstance through which the cost of production affects the price of articles of commerce. But it is said that if the country requires stationary population, the labourer must earn so much as, according to the scale of living which habit or necessity has introduced among his order, will be sufficient to support himself, and on an average, such a family as will keep up a stationary population: and if an increasing population is required, he must earn more in order to maintain a larger family, in proportion to the rapidity with which the population is required to increase: for that otherwise the stationary in the one case, or the increasing population in the other, would fail to be kept up.

In this I have given, I trust, a fair statement of the arguments generally used to prove that the wages of the labourer depends upon the expense of his maintenance and usual style of his living, instead of his expenses and his mode of living depending pretty much upon his wages, as most people, and I confess myself among the number, would most readily imagine to be the case. The argument, if logically stated, would assume the form of a hypothetic syllogism, in which the premises, viz. the major, which contains the substance of the argument, and the minor, which is usually suppressed, as if it were self-evident, are both false. But laying aside the rules of logic, as a reference to them is not often a very intelligible or popular mode of explaining the subject, you may observe that the argument consists of two propositions, connected by the alternative phrase “otherwise.” Thus—the labourer must earn certain wages according to his real or imaginary wants, otherwise the population required by the country would not be kept up. The validity of this argument requires that the second proposition should be impossible, and should follow from the denial of the first. Now, is this the case? Does a population fall short or decrease, or does it ever cease to increase, in consequence of the wages of labour proving insufficient to support the necessary family? If such an event ever takes place, which no one attempts to prove impossible, it is an instance of that alternative case, on the impossibility of the existence of which, the argument depends; unless, indeed, such an interpretation is given to the phrase “population required by the country,” as will deprive both the argument, and the proposition proved by it, of all meaning. Indeed the argument and proposition are generally stated without this latter phrase, and I think the omission has the advantage of rendering them more intelligible. But even granting that population will always march on at its proper pre-determined pace, and that the wages of labour will always be sufficient to sustain it on its march, does it never happen that this increase of population has the effect of depriving the labourer of some of the comforts which he had heretofore enjoyed; may not the labourers, by descending a little in the scale of comfort, be enabled to support that average family which is necessary to increase the population? Indeed those who hold the opinion which I am combating, generally maintain, although not very consistently, that the increase of population frequently deteriorates the condition of the labourer, and diminishes his comforts; that in fact it is the most usual and natural cause of such a change in his situation. Is not this an admission that the circumstance of the labourer’s being used to a certain degree of comfort, is not sufficient to procure it for him permanently, by keeping down the population to such a quantity as is consistent with his obtaining his usual rate of wages, since, notwithstanding such habits, the population does increase, so as to compel the labourer frequently to surrender many of his accustomed enjoyments. I do not deny that it is for many reasons desirable that the labourer should be accustomed to think a certain degree of comfort indispensable. Such habits, such wishes on his part, if not the cause of his receiving suitable wages, are at least the effect of his prosperity, and therefore imply that his situation is such as we should all desire it to be. Such wishes and habits may even lead to a continuance of his prosperity, by inducing him to make extraordinary exertions, rather than forego those comforts and decencies which he has been used to consider indispensable to his happiness; and it may prevent him from forming those reckless matrimonial engagements which are supposed to produce a redundancy of population, inconsistent with the comfortable subsistence of the labourer. All I am contending for is, that the wages of the labourer depend upon the value of his labour, and not upon his wants, whether natural or acquired, and that if his wants and necessities exercise, as they do, some influence upon the wages of his labour, it is indirect and secondary, produced by their effect upon the growth of the population, and that this effect is not analogous to the effect which the cost of production has upon the price of commodities. My present enquiry is not what has brought this or any other country to its present state, but what it is that in the present state of population, science, and civilization, has the power of determining the amount of wages which the labourer receives.

I have already remarked that we ought, in Political-Economy, carefully to distinguish between the primary or immediate causes of any phenomenon, and those whose influence is remote or secondary, and which either act through their effect upon the primary causes, or perhaps in some instances modify the effect of those primary causes themselves. The neglect of this distinction has had the effect, if I mistake not, of producing among political-economists many disputes about words, or which might almost be disregarded and considered as merely verbal, were it not that we often see deductions of serious consequences drawn from propositions originally founded on verbal subtleties or misapplications of language. I think that the doctrine which makes the price dependent upon the cost of production, and be regulated by it exclusively, has its origin in this source. The cost of production does indirectly or mediately affect the supply in most cases, and in some it influences even both the supply and demand, or at least the effect which the existing state of supply and demand has upon prices. But all this influence upon prices is indirect and mediate. The importance of the question, whether rent ought to be considered a part of the cost of production, is caused by the same confusion, to which we naturally become more liable as we approach more complicated questions.

There are many matters which have the most powerful effects upon the fate of the labourer, and in common conversation it might be allowable to attribute his prosperity or misery to causes which affect him very remotely; and this follows from the nature of the language used to communicate our ideas to each other. Most effects are produced by a variety of causes, all concurring to the same effect, and all essential to its production; so that if any one of those causes had been absent, the effect would not have been produced. Some of those causes are generally certain laws of nature, others are mere facts, and properly speaking they altogether combine to form one cause. But in ordinary conversation, if we were asked the cause of any event, we should not answer by stating all the causes which concurred to produce it. We should attend more to the object which the interrogator had in view, and merely inform him of that cause which we supposed him previously ignorant of; and we should not hesitate to say that that was the cause, whether it was a fact or a law of nature, and whether its connection with the event enquired about, was immediate or remote. Hence the word cause is used in a very extended sense. But this does not make it the less important to distinguish the immediate and primary, from the mediate and secondary causes, and to examine and lay down accurately the rules by which they are connected. We shall then be able to form clear ideas, and what is scarcely less important, to use correct and consistent language respecting the operation of those causes, and we shall not be involved either in a confusion of ideas or a verbal controversy, if we find, as we frequently shall find, the primary causes producing a certain effect, and that effect reacting upon the secondary causes, in such a manner as through them to influence the primary causes, and thus to prevent the first effect from being permanent. Examples of this species of rotation are very numerous, and I shall mention some of them at another time: to do so at present would be a disorderly digression. I may however remark that such instances shew very strongly the necessity of studying the subject methodically, as very little progress can be made by detached arguments. By merely selecting what part of the circle he begins with, any man may by tolerably specious reasoning, draw any consequence he pleases. But before I engage further in any argument to shew that the wages of labour do not depend upon the wants of the labourer, it may not be out of order to shew upon what I think they do and must depend.

It is evident that the wages of labour, like the exchangeable value of every thing else, must depend upon the relation between the supply and the demand. It is also plain enough, that the supply consists of the present existing race of labourers. But on what does the demand depend? Undoubtedly, in the case of the great body of labourers, the demand is caused by the utility or value of the work which they are capable of performing. Menial servants, and those labourers usually termed unproductive, must be maintained by funds derived from other sources: but the wages of the great mass of labourers must be paid out of the produce, or the price of the produce of their labour. This, then, supplies us with a measure which we can apply to the wages of certain labourers, and by proportion to which, on the principles mentioned in a former lecture, the wages of every class of labourers can be ascertained. This gives us the measure of each labourer’s wages in the articles which he contributes to produce, and by proportion we ascertain the quantity of any other article which he can procure in exchange for them. The average value of any article depends upon the quantity and value of the labour which called it into existence, considering as one of the causes of the superior value of labour, in forming part of the cost of production, the greater length of time which must elapse before the article on which it is expended can come into the consumer’s hands. It is true that this addition to the value of the labour, does not appear in the form of increased wages to the labourer, because the latter requires his wages for his immediate subsistence, and the ultimate value of his labour is, as it were, discounted for him by his employer, who keeps the work, and when disposing of it, charges the full value of the labour if he sells it to the consumer. But if he gives it to any intermediate merchant or manufacturer, he in return has, as it were, to pay discount for the interval between the time at which he parts with it and the time at which it is ultimately sold to the consumer. In other language, he receives profits only proportioned to the length of time which has elapsed between his payment of the labourer’s wages and his receiving the price of the article in the state in which he disposes of it. But each person thus receiving a profit on the advances which he was compelled to make, while the commodity was in his possession, it comes to the consumer or ultimate purchaser charged with a profit proportional to the time elapsed between the payment of each labourer’s wages and the ultimate sale of the finished article. In this manner the relative values of any two things are found, by comparing the quantity and the kind of labour employed in the production of each, taking care in the comparison, to make an addition to the value of each day’s labour, proportioned to the rate of profit in the country, and the interval that must generally elapse between the execution of that labour and the completion and sale of the entire work. The share of the article which each labourer will receive, is found by computing how much of the entire value consists of labour, and how much of profit, and then dividing the former share among the labourers, in proportion to the quantity and value of each man’s labour. Thus, if the rate of profits is ten per cent. per annum, and a commodity is fabricated by the labour of ten men, each contributing equal quantities and values of labour, and each being paid his wages, on an average, a year before the sale of the article. Then the wages of each labourer must be of what it sells for, the remaining going as profit to the capitalist; and this must equally happen whether the article is one of luxury or necessity. A similar result would take place, if instead of ten, the work was executed by nine labourers, one of whom was entitled to double wages, on account of the difficulty, hardship, or disagreeableness of the employment, the skill required to execute it, or any of those circumstances which make one man’s labour more valuable than another’s. He will receive of the price of the work, the rest of the labourers and the capitalist will receive each. Hence the real wages of the labourer, that is, his command of the necessaries and comforts of life, will depend entirely on the rate of profits, and on the efficiency of labour in producing those articles on which the wages of labour are usually expended. To make this clearer, suppose that a single labourer employed for a year in the cultivation of that inferior soil which yields no rent, or more accurately speaking, employed in the production of that corn in the price of which rent does not enter as an ingredient, can raise 44 quarters of corn, then profits being at 10 per cent., his wages must amount to 40 quarters: and if a cotton weaver’s labour is, on the ground of superior hardship, or skill, or any of those principles to which I have already alluded, equal to once and a half that of an agricultural labourer, then the wages of such a manufacturer for one year must be 60 quarters of corn; and if 20 quarters are sufficient for the consumption of himself and his family, then the one will have the price of 20, and the other that of 40 quarters, to expend in the purchase of other necessaries, comforts, or luxuries. Now suppose that the labour of 20 men for a year can produce calico enough to clothe 330 families, then the rate of profit remaining as before, each weaver must receive as wages the price of as much calico as would clothe 15 families, and of course this would be the same as the price of 60 quarters of corn. Hence the agricultural labourer could procure sufficient calico to clothe his family for the price of 4 quarters of corn. But if manufacturing industry was one half less productive, then 20 labourers would earn only the clothing for 150 families, and the price of the clothing of a labourer’s family would be equal to the price of 8 quarters of corn; that is, to ⅕ instead of of the agricultural labourer’s wages.

In the same manner may be calculated how much of any commodity can be procured by any labourer in exchange for his wages, viz. by first calculating what portion will be received by the labourer employed in its fabrication, and then, on the principles which determine the relative wages of labour, determining the proportion that must exist between the wages of this latter labourer and those of the one whose wages we desire to ascertain. A labourer will not receive for his wages either more or less than the amount of what he produces, minus the profits received by the capitalist. The proportion of the price of the article which will go to profit, will depend upon the rate of profit in the country, and on the length of time for which the advance is made. If the rate of profits was 10 per cent., and every man’s labour was of equal value, and employed at the average interval of a year from the production of each commodity: then of the price of every article, should go to the capitalist, and the remaining should be divided among the labourers in proportion to the quantity of labour which each devoted to its fabrication, and the prices of articles should be proportional to the quantity of labour employed in its production; and the wages of the labourers would depend upon the productiveness of labour: the more they produced, the more they would receive.

Now how does the supposition I have made, differ from the real state of facts? 1st. One man’s labour is not equal in value to that of another. 2nd. There is an immense difference between the various lengths of time that elapse between the employment of a labourer, and the sale of the commodity in producing which he has been employed. Of those circumstances, the first has evidently only the effect of introducing a new consideration into the calculation, which distributes to each labourer his share of the price of the finished commodity. The rate of profits being the same, the sum to be divided among the labourers will be also the same, namely, of the value of the entire article, and each man’s share will be proportional to the quantity and relative value of his labour jointly. The principles on which the relative values of different kinds of labour are to be computed, I mentioned in a former lecture. They are the natural effects of free competition, and of circumstances which tend to diminish the competition among labourers in certain employments, by rendering many persons unwilling to engage, or unable to succeed in them. The fact, therefore, that labour of different kinds is of different degrees of value, does not in the least interfere with the truth of this proposition. The wages of labour depend upon the rate of profit and the productiveness of labour employed in the fabrication of those commodities in which the wages of labour are paid, and therefore the comforts of the labourer will depend upon the rate of profits, the relative value of his labour, and the productiveness of that labour which is employed in fabricating those commodities on which he wishes to expend his wages. Now, is the truth of this proposition affected by the second circumstance which I mentioned, namely, that different lengths of time must frequently elapse between the employment of the labourer and the ultimate sale of his work? I think not in the least. It renders the calculation more complex, and therefore more difficult to be described, though not more difficult to be conceived; but it leaves unaltered the principle on which the calculation is to be made. The proportion of the wages of the different labourers employed in making any article is to be estimated on the same principle as before, namely, by a reference to the value of each man’s labour, and to the quantity which he gave; but there is a little more complexity in the computation of the proportion of the entire work which is to be divided among the labourers. Compute it thus: to each man’s wages is be added a profit proportional to the interval that must elapse between their being advanced and the sale of the article. This will give the proportion of the total value of the article to the share distributed in wages among the labourers. Observe that this last calculation does not suppose that I know the absolute amount of wages paid to any labourer; it only supposes that I know the proportion of their wages one to another, and I have already attempted to explain the circumstances upon which this proportion depends. Let an ordinary day’s labour of some particular description be taken as the unit or standard, by relation to which every other kind of labour is to be measured. It is not necessary that this unit should be of an average value between the extremes. By relation to this, the value of the labour which any man bestows upon an article may be expressed by a number, and another number will express the profit on the advances made to him. The wages of the other labourers and the corresponding profits may be similarly expressed, and the sum of those numbers will represent the entire value of the article. In the same way, the value of any other article may be calculated, and therefore the quantity of any commodity or commodities which a man may receive in exchange for the labour of a day, a week, or a year. It is true that in many cases no man could make those calculations; but the principle of competition leads to the same result with as much certainty as if such calculations were made and acted upon in every instance; and it is useful to bear in mind the principle of this calculation, because it shews the circumstances upon which the wages of the labourer depend, and to which we should direct our attention when we wish to ameliorate his condition. We must diminish the rate of profits, or increase the productiveness of labour. It is demonstrably true, that nothing else can procure him any increase of wages.

He cannot gain much by a reduction of the rate of profits. If a labourer earns 8d. a day, advanced to him at an average interval of a year before the produce of his work is sold, a reduction of profits from 10 to 5 per cent. would not add ½d. a day to his wages, and the total surrender of profits could not raise his wages to 9d. a day; besides, it is utterly impossible for any direct act of legislation to diminish profits in such a manner as to improve the condition of the labourer. This can only be effected by the gradual increase of capital, and by the spread of peace, and order, and justice, and freedom, and security; in short, by every law, and custom, and circumstance which would enable capital to accumulate, or invite it to come, or induce it to stay. From the wages of the labourer must be necessarily abstracted a certain sum proportional to the rate of profit, and an additional sum for an insurance against fraud and outrage. Every destruction of property by fraud or violence increases the amount of this insurance, and thus the irresistible nature of things imposes a tax upon the labourer sufficient to indemnify his employer for every injury occasioned by his misconduct. Another necessary consequence from what I have proved to you to-day is, that taxes, unless so far as their sudden imposition disturbs the channel in which industry has been accustomed to flow, cannot affect the condition of the labourer, except when they are imposed upon the commodities on which he would desire to expend his wages. The payment of a tax may be considered as part of the cost of production of the commodity on which it is imposed, and in all cases it falls upon the unproductive consumer; that is, upon the person who consumes it in such a manner as that the mere consumption does not transfer its value to any thing else.

At first, this consequence might seem to follow from what I have stated respecting the proportion in which the price of any commodity is divided between the labourers and the capitalist, viz. that the introduction of machinery might sometimes diminish wages, for that taking, as we must, the expense of making the machine as a portion of the cost of production of the article, some of the labour must have been expended at a greater length of time before the sale of the commodity, and therefore a greater proportion of its price will consist of profits, and this will have the same effect in depressing wages, as if an increase was made to the rate of profits. The answer to this is, that a machine is never resorted to, except for the purpose of producing commodities more cheaply, that is, more cheaply independent of any reduction in the wages of labour or the rate of profits. Such reduction would produce a corresponding reduction of price, independent of the machinery. Therefore from the cost of production there must be more labour subtracted than there has been profit added, and each man’s labour will purchase more of the article than it did before.

I trust, Gentlemen, that you will attend to the difference between a proof founded on an abstraction, and one founded upon a supposition. The former cannot but lead to truth, although its application may be a matter of some difficulty; the latter may lead to truth or falsehood, according as the supposition upon which it is founded is or is not conformable to the reality of things. The doctrines respecting rent, to which I called your attention this Term, are founded on a supposition which I attempted to shew was verified by experience. The theory of profits which I attempted to prove on Tuesday, is founded partly upon facts lying within the knowledge of all, and partly upon abstract reasoning. The theory of wages which I explained to-day, is founded upon mere abstract reasoning, and cannot be false in any time or country. Other circumstances may powerfully affect the rate of wages, or profits, or rent, but they must do so in some manner not inconsistent with the propositions which I attempted to explain to you. In my next lecture, which will conclude the business of this Term, I shall shew some of the consequences that result from those propositions, and the manner in which rent, wages, and profits, vary in relation to each other with the progress of society.