Front Page Titles (by Subject) CHAPTER 18: THE VALUE OF LABOR AND THE CHOICE OF OCCUPATIONS - Economics, vol. 1: Economic Principles
The Online Library of Liberty
A project of Liberty Fund, Inc.
CHAPTER 18: THE VALUE OF LABOR AND THE CHOICE OF OCCUPATIONS - Frank A. Fetter, Economics, vol. 1: Economic Principles 
Economics, vol. 1: Economic Principles, (New York: The Century Co., 1915).
Part of: Economics, 2 vols.
About Liberty Fund:
Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.
The text is in the public domain.
Fair use statement:
This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
THE VALUE OF LABOR AND THE CHOICE OF OCCUPATIONS
§ 1. Services of labor comparable with uses of wealth. § 2. Limitations of the labor-supply. § 3. The direction of labor guided by the value of its results. § 4. Value of labor to the isolated laborer. § 5. Rewards and sacrifices incident to occupations. § 6. Psychic factors in labor-incomes. § 7. Costs and deductions from nominal labor-incomes § 8. The long-time and ultimate rewards of labor. § 9. Rarity of ability limiting choice of occupations. § 10. Imputation of value to labor and to uses of wealth.
§ 1. Services of labor comparable with uses of wealth. In the last two chapters we have sought to suggest in some measure the variety of human talents and the various conditions under which human labor is exerted for economic purposes. The aim of this and the succeeding chapter is to make clear the manner in which the various kinds of labor are evaluated (the value-problem), and how they are sold in the market (the price-problem of wages). Fortunately, we have already, in the theories of usance and of rent, all that is essential and fundamental to theories of labor-value and of wages. Man’s services and wealth’s uses move in parallel lines and are of parallel nature in contributing to the securing of income. Human actions directed toward some desired end constitute a usance of human beings; they are valuable services just as the work of domestic animals, the uses of tools, and the motions of machinery are valuable uses of wealth. These valuable services, partly rendered directly to persons and partly embodied in goods, constitute labor-incomes, comparable to the usance of wealth, the wealth-incomes. (See also Chapter 19, section 12.) The free laborer sells his services (separable uses) just as the owner of a more or less durative agent sells its usance, without selling the use-bearer. Our task, therefore, now is not to formulate a theory essentially different from the general theory of value and of price, but merely to show how labor exemplifies the general principles of value and of price, and particularly those of usance and rent, already set forth; noting any circumstances surrounding the process that are somewhat peculiar to the case of labor.
We know that value is the expression of a certain choice among goods, and price expresses a ratio of exchange that is arrived at among a number of buyers and sellers whose choices embody demand and supply. Let us look first at the more subjective aspects of the problem; that is, the value which labor as an agent for gratifying desires has to the human being who possesses the labor-power.
§ 2. Limitations of the labor-supply. The fundamental condition of all valuation is limitation of supply relative to the desires; so it is in the case of the valuation of labor. We have no difficulty in recognizing that some qualities of labor are scarce. There are some acts that are more difficult than others and some which few men can perform at all. Most women will confess that they cannot warble as Patti could, most men will admit that they have not the mercantile ability of John Wanamaker. There are not enough great surgeons with magic deftness of hand. There are not enough great medical specialists, men of marvelous insight, who do not guess and blunder, whose diagnosis is swift and sure. The man of mediocre capacity recognizes even through the fog of his self-esteem that there is a reason for the high value of rare services such as these. The proverb, “There ’s always room at the top,” is both a cheering and a pathetic truth. In every branch of human effort there is a never-ending lack of that higher qualification and training required for the best results.
But it is not so easy to see that the commonest services have value only because, at any particular time and place, they are scarce. Compared with the possible desires there are many things to be done if there were to be had at a low enough cost (or price) labor efficient to do them. It is, alas, true that there may be a temporary maladjustment of industry, when either in a particular factory, or in a particular locality, or more generally at a time of industrial depression, there is a superfluity of human labor. This is the acute problem of unemployment. There is at all times a superfluity of human agents of certain kinds. Children are often eager to help, and grieve when they are told that they are “more bother than they are worth.” Many of the ignorant, the insane, the feeble-minded, the vicious, drunken, and debauched, numbering unhappily many millions, can give to the world only negative uses, more properly called disservices. This is the chronic problem of the unemployable. But services of normal men are nearly always in demand, and the higher services are so rare that they are in great demand; except for temporary maladjustments in industry in our complex exchanging economy, labor of every kind is scarce, relative to the objects of desire which it might aid in procuring. Man’s desires have no bounds, his powers are limited. No community has regularly at its command an absolute surplus of labor services (tho there are temporary maladjustments).1 Either through lack of ability or lack of skill and endurance and willingness to work, the people in a community altogether are unable to do enough work to satiate all the desires to which labor could minister.2 Men’s strength and endurance fail after a few hours of exertion, and the desire to rest overcomes, at the end of each day’s labor, the desire for other goods which continuance of labor could secure. If labor were available in unlimited amounts, it would afford an unlimited supply of ultimate services (so far as they are dependent on labor) and the value of these services would sink to zero. Some existing limitation of labor, therefore, is essential to its value.
§ 3. The direction of labor guided by the value of its results. The labor available at any time and place can be turned to securing, improving, and multiplying the amount of any one, or of many different kinds of goods, or it may be distributed among them in any chosen proportion. Thus in a very real sense labor is a potential supply of goods. Within the limits set by materials to work upon and by the indirect agents to work with, the direction of the labor of one period determines the kinds and amounts of the goods of the next period—moment, month, or year. A savage tribe finds game plentiful and kills it; then turns to dressing skins to making canoes or gathering and making flint arrow-heads. At a time of famine the whole tribe gives all its energies to the search for food. In civilized lands men desire in turn the services of the baker, the blacksmith, the paper hanger, the piano tuner, and the dentist. Some of the services yield directly psychic income, and some are embodied in material goods which yield a psychic income. These various ultimate services and incomes have different values from period to period. These values serve as a guide in the application of each kind of labor, which is turned now in this direction, now in that, to render the most valuable ultimate service for which it is fitted. Particular kinds of labor-services therefore differ in desirability at any moment, and tho in a general way these differences persist in large measure, yet they vary constantly in some measure with changing circumstances. These facts explain the constant shifting, and attempts at shifting, of laborers from one occupation to another (as discussed more fully below in section 9 and in Chapter 19, section 3 and section 8).
§ 4. Value of labor to the isolated laborer. Let us now consider the problem of labor-valuation as it might present itself to an isolated laborer, such as Robinson Crusoe on his island. He would have at his disposal a limited fund of material resources, tools, weapons, metal, etc., and a limited fund (let us call it) of labor-services, viz., his own. If he had much more wealth (canoes, house, stock of food, etc.) and were able to work many times harder, he would from the outset be able to gratify his desires much more abundantly. As it is, he is under the necessity of choosing the particular way in which his efforts should be expended. A day’s labor spent in one direction may give a much more valuable result than if spent in another. Crusoe’s first task was to secure the valuable supplies on the wrecked vessel. (See Chapter 2.) Until this was done it would have been folly to begin to build a hut or to till the soil. In this work of salvage the various tasks were performed in a certain order determined by this principle: each hour’s labor is to be applied where its result promises to have the most value. Next he turns his efforts toward his garden, or his domestic animals, or toward building a house or a canoe. At a certain season of the year a day’s labor would be worth far more in the garden than at carpentry.
We perceive thus that, even in the case of the isolated laborer, his labor has no predetermined value which can be transferred to, or put into, its material products; rather the various products have an anticipated, expected value, which serves as a guide in apportioning the labor. Labor has value attributed to it according to the value of its products, now higher and again lower than usual. An hour’s labor even of the same man does not of necessity have the same value in different tasks at the same moment, or in the same task at different times and under different conditions. Much less should we expect the labor of different men to be of equal value when numbers of men meet and trade in a market.
Moreover, labor is applied according to expectation-valuations (a present valuation of the future desirability), and these expectations may be mistaken, being either too large or too small. Some undertakings turn out well, some ill. The weather may be more or less favorable, the insect pest be especially troublesome, while many other turns of good luck or bad luck may give results far out of line with the expectation-valuations which guided the application of labor. Therefore, the products have value not because a certain quantity of labor has been put into them, but rather a certain kind and duration of labor has been put into them because of the expectation that the products will have a certain value.
The play-element and the pleasure-in-work-element likewise enter into the valuation of material products, by increasing the supply of some as compared with others. If Crusoe liked caring for animals better than he liked to dig and plant, he would spend more time with his flocks and less time in his garden than if he liked both kinds of work equally well. He would more or less unconsciously choose his work differently than if he were merely weighing meat against vegetables as kinds of food. He is choosing psychic income rather than mere physical objects, and therefore the value of the objects is still further out of line with the time-amounts of labor put upon the material goods.
In view of these facts it is clear that the values of products of equal periods of one’s own labor (i.e., the part attributable to labor) have very unequal values to the isolated laborer.
§ 5. Rewards and sacrifices incident to occupations. Even those men who are equally fitted for several occupations have many motives besides the material result to choose one calling rather than another. Many of these motives result from differences in purely personal qualities of temperament and habit (we are not considering now differences in ability). One man enjoys being out-of-doors or likes physical exercise, another prefers a sedentary occupation, one delights in esthetic surroundings, another prefers to work with machinery more than do most other men. (See above, section 4, on Crusoe’s choice of the work he liked.) But besides these differences from man to man there are differences inherent in the occupations, which make them more or less attractive to most men apart from the evident labor income that they yield. The material products obtained from labor (or the wages received, see next chapter) are far from representing the net total of desirability of that occupation as a whole.
If now there are two or more occupations that are equally open to men of a certain grade of ability, but that are unequal in attractiveness, the more attractive will be chosen by more men. Therefore in that occupation the supply of labor will be greater, the services more abundant, and the value attributable to the labor must be less than in the other occupation. Thus it often happens that material labor-incomes evidently are unequal in two or more trades calling for the same natural ability; or again two laborers of very unequal ability are getting equal material labor-incomes—indeed the higher income may even go to the less capable man.
A little study of actual conditions usually suffices to clear away our first impression of irrationality in such cases. “Man does not live by bread alone,” neither does one choose his work in life with regard solely to material rewards. The total attractiveness of occupations (as judged by the laborer) depends in part on certain elements of psychic income, plus or minus, on certain costs or deductions which must be taken into account in one trade more than another, and on certain long-time or ultimate advantages or disadvantages attached to the pursuit of particular occupations.
§ 6. Psychic factors in labor-incomes. (a) Occupations differ in strenuousness, or degree of exertion required, some calling for the output of muscular energy to the point of exhaustion, or requiring long hours (mills with twelve-hour shifts), or night work. For the same reward most men would prefer day work, short hours, and only moderate exertion.
(b) Occupations differ in agreeableness. Cleanliness of store, office, or shop, permitting the wearing of clean clothes is valued highly by some men and still more by young women, who therefore (among other reasons) are ready to work at clerical occupations for much lower wages than they could get in mechanical trades or in domestic service. Noise, dust, foul smells, darkness, and lack of ventilation are all things that are avoided by most workers so far as there is any opportunity to choose between these and other conditions without too great a sacrifice of other advantages. Good physical surroundings of rural life make many salaried men content with much smaller incomes than they could get in the city, whereas some laborers cannot be tempted to the country by high wages away from what they deem the greater charms of crowded city streets, the movies, and an occasional glimpse of Coney Island. Congenial companionship is to many natures the greatest need, which outweighs almost any material advantage. The moral conditions in the place of work must accord with one’s standards if the work is not to be distasteful. Likewise the suffering imposed by sickness and accidents reduces the agreeableness of an occupation.
(c) Occupations differ in degree of social esteem or disesteem attached to them, and this is to most men an important element of psychic income (positive or negative) in weighing the net rewards of various callings. The measure of social esteem attached to any occupation is no doubt the result of popular judgment as to the quality of persons who usually follow that occupation. If the ministry, some kinds of teaching, the learned professions generally, social service, banking, music, and art rank high in social esteem, it is because in the long run and on the average the public admires the kind of persons (morally and intellectually) who succeed in such work. But the judgment of an occupation becomes somewhat conventionalized, and often those who are lacking in the full measure of the qualities hope by entering the occupation to shine by reflected glory. In turn, it is in the power of any individual in our democratic society to change appreciably the estimate of an occupation in a community by his standard of achievement and of character.
The average pecuniary or material rewards of an occupation are likely to be less in proportion as it enjoys high social esteem (as compared with occupations requiring the same grade of ability). On the contrary, if the public sentiment against an occupation is strong, those who follow it are often able to get a much larger reward than they could in another calling, as for example, gamblers, a certain type of criminal lawyers, and, in some neighborhoods, saloon keepers and bartenders.
§ 7. Costs and deductions from nominal labor-incomes. (a) The difficulties of preparation for the pursuit of various occupations are very unequal (in themselves, quite apart from the differences in natural fitness as among individuals). Partly the inequality lies in the strenuousness of application required of the learner, partly in the length of time before the preparation is finished, partly in the cost incurred for support, for tools and materials, and for instruction. The greater these difficulties the greater the beginner’s discouragement from choosing this as compared with other occupations. Hence, unless there are enough other offsetting advantages, the occupation with the high cost of preparation must be more highly rewarded, or nobody would choose these occupations; in other words, the expected labor-incomes3 (in material form or as money-wages) must have a value enough higher to offset at the moment of choice the higher cost of preparation.
(b) The clearly apparent rewards of various occupations are often quite different from the real rewards, judged even in material terms (the amounts of goods received). Partly this is due to special costs required in some cases, such as providing tools (carpenters), wearing better clothes (salesmen and saleswomen), which costs are not entirely offset by social esteem; partly it is due to living in a more expensive neighborhood in one case than in another, as a condition of getting the higher income. For example, the higher wages in the Northern States as compared with the Southern, are in part offset by the need of more clothing and fuel, and by higher costs of house rents and food. In general the cost-of-living in the country districts is less than in cities, varying roughly with the size, and real wages in all these cases are much nearer equality than they appear to be. If this were not so, migration would quickly bring about a closer agreement.
§ 8. The long-time and ultimate rewards of labor. (a) Occupations differ on the average in danger to life and limb, and to health, as do also particular establishments in the same occupations, because of differences in lighting, ventilation, dust, fumes, machinery, and methods of safeguarding the workers. Quite apart from the question of agreeableness (treated above, section 6) there are differences in the expectation of income because of medical and other expenses and loss of time from accidents and sickness. This expectation of loss should be, and doubtless is to some degree, offset by a higher wage in a more hazardous occupation, to induce any individual (within the range of his possible choice) to choose it rather than a safe occupation. But it is questionable whether this difference in money-rewards comes anywhere near equaling the chance of loss and danger expressed in money-terms. The reward is definite and present, whereas the danger is distant and vaguely felt. The more needy and improvident the worker the less he can or will estimate the danger and the more relatively (because of his high rate of time-preference) will he value a slight increase in present reward.
(b) Occupations differ in regularity of employment. The short-time rewards in the seasonal trades, such as bricklaying, mason-work, etc., are usually noticeably higher than in the steady occupations that call for the same kind of ability and preparation. But the more irregular the employment the greater the loss from being out of work, and the smaller is the total annual income as compared with the income earned by the hour, day, week, or month. Much of the difference in labor-incomes in such cases is nominal rather than real.
(c) The chance of success or failure in an occupation enters into the calculations of a beginner. The greater certainty of success in one case must be to some extent offset by higher rewards in the other. This element is of course supplemented or neutralized by other considerations; for example, the small chance of success in law is to some extent offset by opportunities in politics, business, and often in social affairs. In salaried positions the greater chance of success appears in the form of opportunities of promotion. Some less provident or less able to wait take the positions that give a living income from the first, but which lead nowhere, and others take the larger, but more distant income.
In all these cases there is an adjustment of rewards through the choice of occupations. If within the range of choice open to a group of individuals there is one occupation that is less attractive than others in all excepting the material reward (or the money wage) fewer will choose that, and more will choose the more attractive occupation; the result must be a rise of the value of services in the one and a fall in the other, until an equilibrium of net advantages is attained, to those entering or free to choose between the various occupations.
§ 9. Rarity of ability limiting choice of occupations. But even if all these psychic factors be duly accounted for, it is still evident that some men obtain a larger income for their services than others do. This is true whether they consume the results of their own labor, or sell them to others, or work for other men for a wage. Moreover, some labor having the highest value is the least strenuous and performed in the midst of the pleasantest surroundings, whereas most of the labor of the least value is the most arduous, disagreeable, and dangerous to health and to life. The laborers with low incomes thus have a motive to shift to more highly rewarded occupations. Why do they not do it? The answer is that they do to the extent of their respective abilities, knowledge, strength of will, and opportunities (limited of course by habit and by valuation of psychic income). But the various laborers have limited abilities and can not change at will and, despite the unfavorable ratio, they may be compelled to continue at the same work.4 Just as fields, plows, machinery for various purposes, grade off from the best to the poorest on the margin of use or already discarded, so men differ in their powers of labor. There are high value, low value, and no-value men and services of men.5 Even were there everywhere entire political freedom, and no legal influence of caste or status hindered the mobility of labor, mobility still would be hindered by the inequality and the rarity of ability. Just as apples can not be changed to peaches or sheep to horses when there is a change in their value, so the unskilled workman can not be changed to a skilled workman quickly, if he ever can. The possibility of workers changing within any brief period to occupations necessitating different, not to say higher, training is very small indeed. The individual laborers are constantly trying to adjust themselves, to get into places where they can earn larger incomes. Some move, some emigrate, some seek practice and education. Especially the workers between the ages of fifteen and twenty-five are at the time of life to choose the callings that promise to each the highest reward. Within limits an adjustment is possible, but these limits are not wide or not quickly shifted, and the incomes of particular laborers and groups of laborers continue to be very unequal in different occupations. Such changes of occupation as are made are far from enough to bring the values of the different services and their results to a common level.
§ 10. Imputation of value to labor and to uses of wealth. Labor does not work with an equipment of free goods even on Robinson Crusoe’s island. (See section 4 above.) Crusoe had a limited stock of cleared land and of other agents, some of which were irreplaceable. His valuation of them was implied in the choice and use made by him of these various agents when used in connection with his labor. A part of the total product of an isolated worker as a matter of value-estimation or imputation is a labor-income. Tho Crusoe had no occasion to apportion exactly the two parts of his divisible income, even a Crusoe in his choices would not attribute the total value of the product to his own labor. He is valuing material agents and labor together in a given economic situation. He might perhaps think and say, “I made this,” or, “I made that,” but he would constantly and necessarily act in a way that imputed a value to scarce material agents no matter whether much or little labor had been put upon them.
Each kind of goods and each act of labor is valued in accordance with the psychic income which it helps to secure. The value of the psychic income is reflected to the agents of production. An isolated laborer, such as Crusoe, would, however, not have as definite and complete a scale of values as that which arises in an exchange economy where money serves as a common denominator of values. The independent farmer, producing on his own farm nearly everything he consumes, is able to think somewhat more clearly of his labor and his wealth as separate sources of income, for he can earn wages by working for some one else and he can let his farm for a money-rent. Moreover, he, like Crusoe, is constantly imputing, in his mode of use, a value to the farm and to his own labor. This being true, the phrase “labor produces” is always misleading, for it suggests that the whole product is the result of labor alone, whereas products result from the combined action of the uses of materials and the services of labor. The total value is reflected back and imputed to the various agents in due proportion. The phrase used should always be “labor helps to produce.”6
[1 ]However, it may easily happen that the laborers may be so numerous, relative to other resources, that the value of labor is lower than it might otherwise be, or than is consistent with general well-being. See on population, Part VI.
[2 ]See ch. 36, sec. 3 on “the lump of labor” notion.
[3 ]But this does not mean that, other things being equal, the difference between the labor-incomes of two occupations must exactly equal the difference in costs of preparation for the two occupations; for the costs are present or in the near future, and the larger labor-incomes are in the more or less distant future, till the end of the probable working life. Hence the problem of time-value enters. The future incomes have a smaller (discounted) value at the present. In many working-men’s families the difficulty of meeting present costs of preparation is so great that a large increase of wages or salary is insufficient to induce the beginner to make the sacrifice. (See above ch. 17, secs. 4, 12, on the importance of preparation.) The rate of time-preference in such families is extremely high. The problem here is in nature that of the active investment of capital (see Part V) and involves a large element of uncertainty. Often the expenses of industrial education are returned many fold in the form of larger labor-incomes to the individual, but in some cases the expense is “thrown away” because of the incapacity or of the moral weakness of the learner.
[4 ]Recall the disparity of talents ch. 16, sec. 12.
[5 ]Recognizing the variety and inequality of human talent, some economists have spoken of the “rent of ability” and of “producers’ rent.” It is true that the difference in the rewards of labor, like land-rent, reflects the difference in the quality of agents; but this expression (the rent of ability) is to be avoided. While possibly it is suggestive in studying some problems, it is at best only an analogy, and on the whole a misleading one, confusing the terminology of rent and wages and dimming the distinction between free workers and owned and exchangeable wealth. See note on various meanings of rent, at end of ch. 14.
[6 ]The “labor theory of value” survives from the time when the workman’s kit of tools was so small that the true labor-income of the handworker was little less than his total receipts. The tinker, the shoemaker, and the tailor, who went from house to house in the old days, thought only in the vaguest way of marking off from their incomes a part to be accounted as the yield of their little outfit of tools. Labor therefore was thought of as the chief and almost the sole cause of the value of goods produced by artisans. The error in this view grew greater and greater with the increase of modern machinery, and it persists in many fallacious notions not only in popular thought but in systematic economics.